PERFORMANCE

MANAGEMENT
AND
APPRAISAL

NIXON D’MELLO
2021
• Meaning of Performance Appraisal
• Purpose of Performance Appraisal
• Limitations of appraisal system
•Methods of employee appraisals
➢ Assessment Centres
➢ 360 degree Appraisal
➢ Management by Objective (MBO)
➢ Rating scales and BARS
➢ Human resource or human asset accounting
➢ Psychological Appraisals
• Transfers and Promotions – types, basis
 MEANING OF PERFORMANCE APPRAISAL

❑ An organization’s goals can be achieved only when people put in their best
efforts. To ascertain whether an employee has shown her / his best
performance on a job, performance appraisal is used.
❑ Performance appraisal , performance rating, employee assessment, employee
performance review, personnel appraisal, performance evaluation, employee
evaluation and merit rating – these are all common terms
❑ Appraisal is an objective assessment of an individual’s performance against
well-defined benchmarks.
❑ In this process an individual’s performance is assessed in a systematic way
here her / his performance is measured against factors like job knowledge,
quality and quantity of output, initiative, leadership abilities, supervision,
dependability, co-operation, judgement, versatility and health.
 MEANING OF PERFORMANCE APPRAISAL
❑Performance management refers to the entire process of appraising
performances, giving feedback to employee and offering rewards or punishment
to them.
❑ It is a technique of assessing as impartially as possible, the attributes, strengths,
weaknesses, capacity and attitudes of individual employee in relation to her / his
job.

Performance appraisal has three basic functions :

1. It seeks to provide adequate feedback to each individual on her / his
performance
2. It serves as a basis for improving or changing behaviour towards more
effective working habits
3. It provides data to managers with the help of which they may judge future
job assignments and compensation
 PURPOSE / USES OF PERFORMANCE ASSESSEMNT

The data relating to PA of employees are recorded, stored and used for several
purposes.
➢To effect promotion based on competence and performance
➢To confirm the services of probationary employees upon their completing the
probationary period satisfactorily
➢To assess the training & development needs of employees
➢To decide upon a pay rise where regular pay scales have not been fixed
➢To let employees know where they stand as far as their performance is
concerned.
➢To assist employees with constructive criticism and guidance for purpose of their
development
➢It provides a format of dialogue between superior and junior, and improves
understanding of personal goals and concerns.
 contd… PURPOSE / USES OF PERFORMANCE ASSESSEMNT
➢To arrange for record of performance over a period of time
➢It gives manager an opportunity to meet and discuss performance with her /
his team members
➢It provides employees feedback about their performance and how they can
achieve their goals
➢It provides an opportunity for team members to discuss issues, strengths and
weaknesses with their reporting manager / immediate supervisor
➢It gives employees an opportunity for career development and growth
➢Can be motivational for employees to stay longer with a company, with support
of a good reward and compensation
➢It can be used to determine whether HR programmes such as selection, training
& transfers have been effective or not
 LIMITATIONS OF APPRAISALS

A. Leniency or Severity Error

B. Central Tendency Error
C. Halo Effect
D. Rater Effect
E. Primacy and Recency Effects
F. Perpetual Set
G. Spill over Effect
 LIMITATIONS OF APPRAISALS
LENIENCY OR SEVERITY ERROR
❑This makes the assessment very subjective, which defeats the very purpose
of appraisal.
❑Ratings are lenient due to following reasons - rater may feel that anyone
under him / her who is poorly rated will reflect on his / her own credit
worthiness, rater may feel that a poor rating may spoil relations between him
/ her and the ratee, rater may want to indirectly increase his / her hold over
the ratee, rater may be operating on the premise that ‘whoever associates
with me is praiseworthy, therefore I am praiseworthy’.
❑Severity on the other hand refers to being unduly critical of an employee’s
performance.
❑Many firms put a limit on the number of employees being rated as
outstanding.
 LIMITATIONS OF APPRAISALS
CENTRAL TENDENCY ERROR
❖This occurs when employees are incorrectly rated near the average or
middle of the scale.
❖The attitude of the rater is to play safe. This attitude stems out from certain
doubts and anxieties like ‘Do I know that employee sufficiently well, to be able
to give a fair assessment to him?’ or ‘If I rate her / him the way I should, what
will be its effect on my relations with the other subordinates ?’
❖In these circumstances the rater will use expressions as ‘satisfactory’ or
‘average’ to describe performance.
 LIMITATIONS OF APPRAISALS
HALO EFFECT
This error takes place when one aspect of an individual’s performance
influences the evaluation of the entire performance.
For example – an employee who works late constantly might be rated high on
productivity or quality of output.

RATER EFFECT
This includes favouritism, stereotyping and hostility.
Excessive high or low scores are given only to certain employees based on the
rater’s attitude towards them. Not on actual performance.
Gender, age, friendship biases are examples of such errors.
 LIMITATIONS OF APPRAISALS
PRIMACY AND RECENCY EFFECTS
The rater’s ratings are heavily influenced either by ratee’s behaviour during the early
stages of review or during the end of the review period.
For example, if a restaurant manager does good sale just before completion of the
appraisal, the timing of the incident may inflate her standing, even though the overall
sale of the last 6 months may not have been encouraging.

PERPETUAL SET
This occurs when the rater’s assessment is influenced by previously held beliefs.
For example – a belief that employees coming from southern parts of India are more
intelligent and hardworking.
The subsequent rating of an employee hailing from southern part of India tens to be
favourably high.
 LIMITATIONS OF APPRAISALS

SPILLOVER EFFECT
This refers to allowing past performance appraisal ratings to unjustifiably
influence current ratings.
Past ratings good or bad, result in similar rating for the current period
although the demonstrated behaviour does not deserve the rating good or
bad.
 ESSENTIALS OF A SOUND APPRAISAL SYSTEM

A. It must be easy to understand and simple to operate.

B. It should be supported by the employees hence they should have
confidence in the appraisal system. For that purpose it should not be
based on the biasness or partiality. It should also be supported by
those employees who are part of the appraisal committee.
C. It should be scientific and reliable. There cannot be any scope of
favoritism and partiality.
D. It should be transparent and have correct defined standards of
performance against which the performance of eah employee is going
to be measured.
 ESSENTIALS OF A SOUND APPRAISAL SYSTEM

E. It needs to be reviewed periodically and altered as per changes in the

external and internal environment of the business organization.
F. It should have appropriate provisions for incentives linked with
performance.
G. Both the appraiser and the appraisee need to be thoroughly prepared
before the appraisal meeting.
H. The appraiser should be sufficiently trained.
I. There should be clear and effective communication between the
appraiser and the appraise.
J. While appraising an employee, emphasis should be given on his/her
potential.
METHODS OF DOING APPRAISAL
 ASSESSEMENT CENTRES

▪ This technique is a center location where

managers may come together to participate in
training programmes comprising of job related
exercises, games, etc.
▪Besides being used as a tool for selection and
training, these days it is also used for appraisals
to promote managers to higher level.
▪The ratees are subject to various psychological
tests, management games, oral presentations
and other exercises.
▪Based on their performance, the ratees will be
judged.
 360 DEGREE APPRAISALS

➢It is defined as a systematic

collection and feedback of
performance data of an individual or
group, derived from a number of
stakeholders relating to performance.

➢It was pioneered by the General Electric

Company in US in 1992
➢Currently more than 90% of the companies
are using this method for appraisal
➢This technique requires a very strong
support of top management.
➢It is done with the help of a questionnaire
or an interview
 360 DEGREE APPRAISALS

A consolidated report is prepared by the company, this report is based on the ratings
and qualitative comments of all the following stakeholders.
a. Rating done by immediate supervisor
Immediate supervisor of an employee is most appropriate person as she
/ he is closely connected to the employee, knows about the
performance of the employee and hence can evaluate an employee’s
performance appropriately.
Also, the immediate supervisor can prove useful for identifying the
training & developmental needs of the appraisee.

b. Rating done by colleagues / peers

Rating in this case is possible for those jobs where the tasks involve
frequent contribution from peers. This rating shall yield positive results if
the peers have trust in one another and do not give ratings based on
person biases in order to compete for increment or promotion.
 360 DEGREE APPRAISALS

c. Rating done by clients / customer

Customer who frequently interact with the employees can be used for rating
the employees in terms of performance, reliability, courtesy, dependability,
honestly and communication.

d. Rating done by juniors

Subordinates working under a person can be used for rating her / him in
terms of skills (leadership, motivational, administrative), problem solving
ability, delegation of work, etc.
Rating by juniors should eb restricted to people oriented skills only.
Exxon, a US multinational, found out that managers usually do not like being
rated by their juniors
 360 DEGREE APPRAISALS

e. Rating done by self : Here the employee himself / herself will rate his / her
own performance. It gives employee an opportunity to participate in the
evaluation process. There is a possibility that an employee over rates or
under rates himself / herself, which can defeat the basis purpose of this
process of evaluation.

USES
❑ Career development
❑Self development
❑Team building
❑Organizational development
 360 DEGREE APPRAISALS

MERITS DEMERITS
1. An employee’s performance will be 1. If ratings are based on personal biases
judged from multiple angles then the actual purpose is defeated
2. It will give an overall and 2. Conflicting ratings can be confusing and
comprehensive view of employee’s can make process difficult
performance 3. Rater providing feedback is not trained
3. Dealing with the strengths and to give a feedback hence sometimes can
weaknesses will be very easy and if have a negative impact on the
done with a right approach, it will yield employee’s performance
positive results 4. Out of insecurity employees shall resist
4. It will throw light on employee’s special this process of evaluation
skills / traits, which otherwise 5. This process is very time consuming
sometimes is not known easily
 MANAGEMENT BY OBJECTIVE (MBO)

This is not an evaluation method

but a philosophy of managerial
practice.
With MBO, managers and
subordinates plan, organize,
control, communicate and debate.
The subordinate has a course to
follow and a target to shoot for.
A central feature of MBO is
discussion about subordinates’
performance, centered on results.
MANAGEMENT BY OBJECTIVE (MBO)

STEPS
Superior / Superior
The superior, Dates of Superior and
subordinates define A final meets with
consulting with reviewing subordinates
tasks and set limited evaluatio subordinate
subordinates, immediat make any Objectives
number of n by the in a
sets criteria for e progress required for the
objectives. They counseling,
assessing are agreed modifications superior next cycle
should be realistic, encourage
objective upon and in the original is made are set
clear, challenging session at
accomplishment used objectives regular
and comprehensive
intervals

For MBO to work :

- Both, manager and subordinate must be actively involved in objective formulation
- They must also agree on what measures will be used to evaluate success and
failure
 MANAGEMENT BY OBJECTIVE (MBO)
ADVANTAGES ADVANTAGES
1. Facilitates effective utilization of human 1. If too many objectives are set, confusion
resources occurs
2. Helps to set clear and achievable targets
after careful consideration 2. Too much paperwork is involved
3. Promotes overall development of employee 3. It is forced into jobs where setting
objectives is difficult
4. Strengthens the bond between manager
and her / his subordinate 4. Rewards may not be tied to results
sometimes
5. In MBO, as goals are set as per KRA, hence
wasteful activities can be avoided 5. There may be too much emphasis on the
6. Manager can evaluate her / his subordinate short term goals
objectively 6. Superiors are not trained in the MBO
7. In this process there are periodic reviews process
which can be changed to suit the needs of
the company
 RATING SCALES AND BARS

❖ A RATING SCALE is the simplest and most popular technique for appraising
employee’ performance.
❖ Nearly every type of job can be evaluated by using a rating scale.
❖ The rating scale method offers a high degree of structure for appraisals.
❖ Each employee trait or characteristic or performance dimension is rated on
a point scale that usually have criteria ranging from ‘poor’ to ‘excellent’.
❖ The traits and dimensions assessed on these scales include employee
attributes such as cooperation, communications ability, initiative, punctuality
and technical competence (work skills).
❖ The one major provision in selecting traits is that they should be relevant to
the appraisee’s job.
 RATING SCALES AND BARS

➢BARS (Behavioural Anchored Rating

Scales) is one type of rating scale
extensively used by organizations today.
➢It was developed by Smith and Kendall.
➢It is also known as the Behavioural
Expectation Scale (BES).
➢Under this method there are usually 6
to 10 specifically defined performance
dimensions and each dimension has
critical incidents or actual job behaviours
/ traits. These are given weightages.
➢The rater has to decide which behaviour
best describes the respective dimension
of performance in case of a particular
employee.
 HUMAN RESOURCE / ASSET ACCOUNTING

➢It is used in early stages of development.

➢HRA deals with cost of and contribution of human resources to the organization.
➢The cost of an employee includes cost of recruitment, selection, induction, training,
compensation etc.
➢Employee contribution is the monetary value of employee service, which can be
measured by labour productivity or value added by human resources.
➢Employee performance is taken as positive when contribution exceeds the cost.
 PSYCHOLOGICAL APPRAISALS
➢ These appraisals focus on future behaviour and potential, and not on actual past
performance.
➢Industry psychologists are employed for such evaluations.
➢They assess an employee’s future potential though in-depth interviews, psychological tests,
and discussion with supervisors and review of other evaluations.
➢Under this method, the psychologist attempts to get a clear understanding about an
employee’s personality.
➢The psychologists then write an evaluation of an employee’s intellectual, emotional,
motivational, and other characteristics which suggest her / his potential and may predict
future performance.
➢This evaluation could be for a future job opening for which that employee is being
considered.
➢This approach is slow and costly and may be useful for bright young employees who may
have considerable potential. However, quality of these appraisals largely depend upon the
skills of psychologists who perform such evaluation.
 TRANSFERS & PROMOTIONS
•Transfers and Promotions – types, basis
 TRANSFERS AND PROMOTIONS
➢ Based on appraisals, employees are promoted or transferred or sometimes
both.
➢ Promotion implies upgrading an employee to a higher position carrying
higher status, pay and responsibilities.
➢It is advantageous because employees promoted are well acquainted with
the culture, they get motivated and it is cost effective. It further reduces the
requirement of job training.
➢However the disadvantage lies in limiting the choice to few people and
denying the hiring of outsiders who be better qualified and skilled.
➢Also, promotion from among present employees may result in creating
frustration among those who are not promoted.
 TYPES OF PROMOTIONS

❖HORIZONTAL PROMOTION
• when there is an increase in pay and responsibility of an employee and a change
in designation but the nature of job remains the same it is known as Horizontal
Promotion. For example, a junior recruitment manager is promoted to a senior
recruitment manager with a salary hike.
❖VERTICAL PROMOTION
• In vertical promotion, there is a change in pay, status, responsibilities and nature of
job. For example, a Marketing Head is promoted as a General Manger of a
company. Or, a Food & Beverage Manager is promoted as General Manager of a
hotel.

❖DRY PROMOTION
• In this kind of promotion there is an increase in status and responsibility but no
increase in pay or financial benefits. For example, a Professor becomes the HOD.
 TRANSFERS AND PROMOTIONS

▪ Transfer or job rotation refers to shifting an employee from on job to

another with or without any change in the position, status, pay and
responsibilities.
▪When a job is no longer challenging, it is always advisable to rotate an
employee to another job at the same level, which has similar skill
requirements. The company tracks the employee’s performance on every
job and decides where she / he can perform the job in an ideal manner.
▪Based on this, the employee will be appraised and promoted.
▪It provides and employee different skills and a varied base.
 TYPES OF TRANSFERS
PRODUCTION REPLACEMENT VERSATILITY
TRANSFER TRANSFER TRANSFER
When there is excess This kind of transfer is This transfer is effected to
staff in one applied to protect senior give an employee
department, and long serving opportunity to learn new
employees are employees. Such skills involved in different
transferred to other transfer is made when jobs. The purpose is to
departments mainly operations are declining make the employee an
to avoid layoffs and and hence a long all-rounder.
stabilize standing employee
employment. replaces a new
employee.
 contd…..TYPES OF TRANSFERS

SHIFT TRANSFER REMEDIAL TRANSFER PENAL TRANSFER

Such transfer is It is effected to correct a Such transfer is
routine in industries wrong placement of effected to punish
where work is in employee or to shift employees for
progress for 24 hours. inefficient employee undesirable
Such transfer is who are not carrying out performance in their
affected for rotation their jobs satisfactorily. department
basis, but sometimes The wrong placed
for personal reasons employee will be
also. transferred to a more
suitable department.
 BASIS OF PROMOTIONS / REWARDS
✓ Promotion / reward is a double edged weapon.
✓If handled carefully, it contributes to employee satisfaction.
✓If mishandled, it leads to discontentment, frustration, scepticism and bickering among
employees.
✓It finally results in a high rate of turnover. Hence it is the responsibility of the HR manager
to lay down a sound promotional policy to ensure its implementation.
✓The promotion policy must be clear whether promotions are to be filled internally or
externally.
✓Once this decision is taken, it should be decided whether promotions should be made on
the basis of seniority or merit or both.
✓If seniority is the basis for promotion / reward, an employee with longest period of
service will be promoted irrespective of competence.
✓This practice is followed in unionized industrial establishments, government owned
undertakings, and educational institutions.
 MERITS OF INTERNAL
PROMOTION BY SENIORITY DEMERITS OF INTERNAL
PROMOTION BY SENIORITY
✓ It is easy to administer and there is
✓Seniority is no indication of
less scope of biasness in fixing
competence
seniority
✓Young and competent
✓Labour unions welcome such kind of
people get frustrated and
promotions
might leave the organization
✓As seniority and experience go hand
in hand, it is right and proper to make
promotions on this basis
✓Subordinates are more willing to
work under and older boss who has
given many years of service to the
company
✓Loyalty is rewarded
✓ If competence is the basis of promotion / reward, an employee whose
performance is the best, as revealed by the performance appraisal, is
promoted.
✓He / she beats all the others by his / her merit and is rewarded accordingly.

MERITS OF INTERNAL DEMERITS OF INTERNAL

PROMOTION BY COMPETENCE PROMOTION BY COMPETENCE

✓ Efficiency is encouraged, recognized ✓Discontentment among

and rewarded senior employees
✓Competent people are retained as ✓Loyalty and length of the
better prospects are open to them service is not rewarded
✓Productivity increases ✓Opposition from union
leaders
 SUMMARY – PROMOTIONS & TRANSFERS

✓ Thus, seniority and merit as the bases of promotion / reward have their
own merits and demerits.
✓Of the two, MERIT is the better basis because it rewards those who deserve
it, unlike seniority that results in the promotion of senior employee whose
only qualification is that he / she has joined earlier that the others.
✓The best way for promoting employees is to evaluate both aspects before
taking a promotion decision.
 Q&A

Thank You