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Methods of Performance Appraisal

The document describes 16 different methods for performance appraisal used in organizations. These include traditional past-oriented methods like graphic rating scales, checklists, forced choice, and forced distribution which evaluate past performance based on ratings. More modern future-oriented methods also discussed are management by objectives (MBO), psychological appraisals, assessment centers, 360 degree feedback, and human resource accounting (HRA) which aim to evaluate potential and development needs. Key factors evaluated vary between methods but include traits, behaviors, goals, competencies and contributions to assess and improve employee performance.
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100% found this document useful (2 votes)
282 views46 pages

Methods of Performance Appraisal

The document describes 16 different methods for performance appraisal used in organizations. These include traditional past-oriented methods like graphic rating scales, checklists, forced choice, and forced distribution which evaluate past performance based on ratings. More modern future-oriented methods also discussed are management by objectives (MBO), psychological appraisals, assessment centers, 360 degree feedback, and human resource accounting (HRA) which aim to evaluate potential and development needs. Key factors evaluated vary between methods but include traits, behaviors, goals, competencies and contributions to assess and improve employee performance.
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Methods of

Performance
Appraisal
Prepared by: Soumya Sharma
Roll No. 07
M.Com (Sem IV)

1. Graphic Rating Scales


. Employee may be assessed by superiors, colleagues,
subordinates or customers, depending upon the type of
job.

. The rating is given for every appraisal trait (attitude,


regularity, accountability, sincerity etc) on a scale of,
say, 1 to 10.

. 1 indicates negative feedback. 10 indicates a positive


feedback.

. Employee who scores more points is treated as top


performer.

. Least scoring employee is treated as a non-performer.


Advantages Adaptability, low cost, no formal training.
Disadvantage Raters bias

2. Checklist
. Contains descriptive statements about the employee
and his behavior.

. The rater puts a check against the trait the employee


possesses; otherwise, the item is left blank.

. A variant of this method is the weighted checklist, in


which the value of each question may be weighted
equally or certain questions are weighted more
heavily than others.
Advantages Economy, ease of administration, limited
training
required, standardization.
Disadvantages Raters bias, use of improper weights
by HR, no relative ratings.

3. Forced Choice Method


. A series of statements arranged in such a manner that
the rater is forced to choose as to which statement is
true or false.

. The actual assessment is done by the HR department.


Advantage Absence of personal bias
Disadvantage Statements may be wrongly framed

4. Field Review Method


. Appraisal is done by someone outside the employees
own department.
Advantage Useful for managerial level promotions.
Disadvantage Raters unfamiliarity with
employees work environment

5. Forced Distribution Method


. Rater is compelled to distribute ratings for the
employees
distribution.

into

pre-specified

performance

. The performance distribution is chosen to reflect the


normal curve.

. A relatively small percentage of employees are placed in


the extremes (best and worst performers) and a large
percentage of employees are placed in the categories
toward the middle of the performance distribution.
Advantages Managers are forced to identify the most and
least talented members of the workgroup.
Disadvantages

Increases cut-throat competitiveness,


discourages teamwork spirit, harms
morale

The company used one of the most well-known forced


ranking systems.

Managers placed employees into one of the three


categories: A for the top 20 percent, B for the middle 70
percent, and C for the bottom 10 percent.

The bottom 10 percent are usually either let go or put on a


performance plan.

The top 20 percent are given more responsibility, even


promoted.

In 2006, GE reinvented its stringent system to remove


references to the 20/70/10 split.

The curve now serves as a guideline, giving greater


freedom to managers to distribute employees in a less
stringent manner.

6. Critical Incidents Method


. Focus is on certain critical behaviors of employees
that make a difference in their performance.

. Manager maintains logs on employees.


. The periodically recorded critical incidents or events
of employees behavior are used in performance
evaluation at the end of the rating period.
Advantages Evaluation is based on actual job behavior,
easy feedback, reduce recency bias.
Disadvantages Negative incidents may be prioritized,
close supervision may be disliked by
employee, manager may forget to record
incidents.

7. Confidential Reporting
. Superior observes the job performance of the subordinate,
then proceeds to write a confidential report
performance as well as behavior in the organization.

about

. The confidential reports are forwarded to the top management


for taking decisions regarding the employee, especially in
case of promotions and transfer in the government sector.

. Key factors assessed include character and conduct of the


employee, absenteeism, knowledge, quality of work, integrity,
honesty, punctuality, complaints against the employee etc.
Advantage Effective tool, popularly used by the government
sector in India
Disadvantage Subjective analysis of the superior can be
questioned.

8. Essay Evaluation
.Rater is asked to express strong as well as weak
points of the employees behavior.

.Normally combined with rating scale method for


effective evaluation.

.The rater, while preparing the essay, considers a


number of factors, such as job knowledge and
potential, understanding of the companys policies,
procedures and objectives, relations with co-workers,
attitudes and perceptions.
Advantage Provides a great deal of information about
the employee
Disadvantages Highly subjective, rater may not be an
effective writer, time consuming.

9. Performance Tests and Observations


.The method is based on the test of knowledge or skills.
.The test may be written or require an actual
presentation of skills.
Advantage Aptly measures potential as compared to
actual performance
Disadvantage Costs of test development or administration
may be high.

10.Behaviorally Anchored Rating Scales (BARs)


.Based on making rates on behaviors to determine the
effectiveness or ineffectiveness of work performance.

.The rater describes which behavior describes employee


performance.
Advantage Helps overcome rating errors
Disadvantage Distortions inherent in rating techniques.

11. Comparative Evaluation Method


a) Ranking Method
.Superior ranks workers based on merit, from
best to worst.

.Easy to administer and explain.


b) Paired Comparison Method
.Each employee is rated with other employees in
the form of pairs, one at a time.

.The employees are given final rankings on the


basis of overall comparisons.

12.Management by Objectives (MBO)


.Performance is rated against the achievement of
the stated objectives of the management.

.The MBO process includes:


a) Establish goals and desired outcomes for each
subordinate.

b) Setting performance standards.


c) Comparison of actual goals with goals attained.
d) Establish new goals and new strategies for
unattained goals.

.Systematic and rational technique that produces


maximum results from available resources.

An objective must satisfy the SMART conditions


Specific,
Measurable,
Achievable,
Relevant, and
Time-Specific.
Advantage Emphasis is on the future, not on the past.
Disadvantages Not applicable to all jobs, policy of
merit pay may result in setting shortterm goals rather than important, longterm goals.

13. Psychological Appraisals


. Assesses employees potential for future performance,
rather than past performance.

. Conducted

in the form of in-depth interviews,


psychological tests, discussion with supervisors and
review of other evaluations.

. Places greater emphasis on the emotional, intellectual,


motivational and other personal characteristics of the
employees.
Advantage Useful for evaluating the potential of young
employees.
Disadvantages Slow, expensive, dependent on the skills of
the psychologists conducting the evaluation.

14. Assessment Centers


. Emphasis is on observation of behaviors across a series of
select exercises or work samples.

. Managers are evaluated by trained observers in respect of


their participation in job-related exercises, such as work
groups, computer simulations, role playing.

. Characteristics assessed can be assertiveness, persuasive


ability, communicating ability, planning and organizational
ability, resistance to stress, energy level, self-confidence,
creativity, mental alertness etc.
Advantages Achieve better forecasts of future performance and
progress; high degree of reliability and predictive ability;
clearly defined criteria for selection and promotion.
Disadvantages Expensive, ratings influenced by interpersonal
skills of those being evaluated, good performers may
feel suffocated in simulated environment.
The method is adopted by the RBI for assessment of its officers.

15. 360-Degree Feedback


.Requires employees to give confidential and
anonymous assessments on their colleagues.

.Involves systematic collection of performance data


from immediate supervisors,
customers, colleagues and self.

team

members,

.Objective is to assess training and development


needs
and
information.

.Concentrates

to

provide

competence-related

on subjective areas,
teamwork, character and leadership.

such

as

.Four components - self appraisal, subordinate


appraisal, peer appraisal and superiors appraisal.

Advantages

Comprehensive view of employee


performance, high credibility, accurate
assessment, motivation to improve.

Disadvantages Complex, time-consuming, may create


an environment of suspicion, brews
tensions among staff.

This method is popularly used by Wipro, Infosys, HCL,


Maruti Udyog Ltd.

16.Human Resource Accounting (HRA) Method


.Process of assigning, budgeting and reporting the
cost of human resource incurred in an organization

.Measures

the
effectiveness
of
personnel
management activities and the use of people in an
organization.

.Performance of employees is judged in terms of


their cost and contribution.

.Cost

of
employees
includes
expenses
on
compensation, recruitment and selection, induction
and training etc. contribution includes the total
value added (in monetary terms).

.The difference between the cost and contribution is


the performance of the employee.

Advantages

Information for manpower planning,


making
personnel
policies;
proper
placements,
increases
morale
and
motivation,
designing
training
and
development programs

Disadvantages Employee mobility, lack of uniform


standards, no specific guidelines for
valuation.

Bases of Classification

Past-Oriented (Traditional) Methods

Future-Oriented (Modern) Methods

Rating Scales

Management by Objectives
(MBO)

Checklist

Psychological Appraisals

Forced Choice Method

Assessment Centers

Forced Distribution Method

360 Degree Feedback

Critical Incidents Method

HR Accounting

Behaviorally Anchored Rating


Scales (BARs)
Field Review Method
Performance Tests and
Observations
Confidential Records
Essay Method
Comparative Evaluation
Method

Traditional and Modern:


A Comparison
Categories

Traditional
Appraisals

Modern Appraisals

Guiding Values

Individualistic,
Control oriented,
Documentary

Systematic,
Developmental,
Problem solving

Leadership Styles

Directional,
Evaluative

Facilitative, Coaching

Frequency

Occasional

Frequent

Formalities

High

Low

Rewards

Individualistic

Grouped,
Organizational

Absolute Standards

Essay Appraisal
Critical Incidents Methods
Checklist
Graphic Rating Scales
Forced Choice
BARs

Relative Standards
Group Order Ranking
Individual Ranking
Objectives
MBO

Individual
Evaluation
Methods

MultiPerson
Evaluation
Methods

Essay Evaluation
Confidential Reports
Ranking
Checklists
Graphic Rating Scales Paired Comparison
Forced Distribution
BARs
Forced Choice
MBO

Others
Performance Tests
Field Review
Techniques

Bottom level management (includes all workers and


employees)
Peers Rating Checklist Method
Supervisor Rating Rating Method, Forced Distribution Method
Self Appraisal

Middle level management (consists of managers and


supervisors)
Superior Rating Graphic Rating Scales, Critical Incidents
Employee Rating Supervisor - BARs
Peers Rating Checklist Method
Self Appraisal MBO

Top level management (consists of CEO, MD, VP, GM)


Self Appraisal MBO
Managers Rating Supervisors BARs
Peers Rating Checklist Method

Application in the Real


World

The methods of appraisal used by the company are:

1) 180 Degree Feedback


. Involves appraisal by subordinates and immediate
supervisor.

. Promotes self-growth and self-development.


. Improves communication within the organization
. Raises the level of understanding of behaviors needed
to modify organizational and personal effectiveness.

2) Performance Ranking Method


.Individual performance is evaluated on a scale of 1
to 5.
.5 points for MUCH BETTER
.4 points for SLIGHTLY BETTER
.3 points for EQUAL
.2 points for SLIGHTLY WORST
.1 point for MUCH WORST

.Manager compares performance of one employee


with another in order to give ranking.

3) Behaviorally Anchored Rating Scales (BARs)


. Combination of rating scale and critical incidents
technique.

. Identify behavioral traits, which serve as indicators


for effective or ineffective performance.

. Provide a rating against each trait, on a scale of 1 to


7:
.Extremely poor (1 point)
.Poor (2 points)
.Below average (3 points)
.Average (4 points)
.Above average (5 points)
.Good (6 points)
.Extremely good (7 points)

4) Forced Ranking Method


. Employees are placed in three categories:
. 10 or 20 % in the top category (high potential employees)
. 70 or 80 % in the middle, and
. 10 % at the bottom.

. Employees at the top rank are mostly targeted for leadership


development programs and for a more rapid career.

. Employees who rank at the bottom are denied pay increases


and bonuses. They are given time i.e. probationary period to
improve performance.

5) Management by Objectives (MBO)


.Objectives are classified into three broad categories:

) Functional Objectives
) Corporate Objectives
) Individual Objectives

.The objectives should satisfy the SMART conditions.


Specific,
Measurable,
Achievable,
Relevant, and
Time-Specific.

.The method supports the employee in knowing his/her


capabilities more accurately and better than anyone else.

The performance appraisal programme is conducted


annually and in two stages:
Stage 1: Appraisal by Immediate Supervisor
The reporting officer assesses performance in the light of
the targets set at the commencement of the reporting
year.
Stage 2: Self Appraisal by Employee

Academic and professional achievement during the


year

Training course attended during the year


Brief resume of work done during the year

The performance appraisal exercise consists of the


following two methods:

1) Self Evaluation
.Engineers usually take a day or two to complete the
exercise.

.Focus is on major accomplishments since last


review.

2) Peer Evaluation
.Employee chooses the peers who shall evaluate
him/her.

.The number of peers is usually 3 to 8.

Thank You.

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