PERFORMANCE

APPRAISAL
 A performance appraisal is a regular and structured method of assessing
an employee's job performance with predetermined job expectations.

 It involves a subjective analysis of the individual's strengths and areas for

improvement, their value to the organization, and their potential for future
growth and development.
 A performance appraisal is a regularly scheduled formal process evaluating
an employee’s overall performance and contribution to the company with
the goal of improving that performance. It can also be referred to as the
performance review, performance evaluation, or employee appraisal.

 Performance appraisals are a platform to provide feedback, offer a formal

moment in time to evaluate job performance, and help distribute raises
and bonuses among employees. Usually, this happens once or twice a
year, taking place at the start of the year and around the half-year point.
These are formal sit-downs in which the direct manager or supervisor
evaluates performance on the main tasks and responsibilities of the
employee.
 HR is typically responsible for outlining the performance appraisal process,
which is then executed by managers. Employees’ active involvement
creates the buy-in necessary to make the improvements that the
performance appraisal is set up for in the first place.

 Identifying opportunities for improvement based on pre-determined goals

and metrics is a key goal of performance appraisals. For example,
employees or departments might need specific training to perform better.
 What is job performance?
 Job performance is the degree to which an employee fulfills the tasks of
their job description. This includes achieving objectives and meeting
performance criteria, and is also known as in-role performance.

 Employees can also help their organization through behaviors that are not
directly related to their task functions such as helping colleagues and
contributing to the organization beyond job duties. This is called extra-role
performance, contextual performance, or organizational citizenship
behaviors.

 In assessing performance, both in-role and extra-role behaviors should be

considered.
 Employee Performance Appraisal
 The employee performance appraisal process is crucial for organizations to
boost employee productivity and improve their outcomes. Performance
appraisals are an annual process where an employee’s performance and
productivity is evaluated against a predetermined set of objectives.

 Performance management is super important, not only because it is the

determining factor in an employee’s wage rise and promotion but also
because it can evaluate an employee’s skills, strengths, and shortcomings
accurately.
 Six modern performance appraisal methods
 With the right performance appraisal method, organizations can enhance
employee performance within the organization. A good employee
performance review method can make the whole experience effective and
rewarding.
 1. Management by Objectives (MBO)
 Management by objectives (MBO) is the appraisal method where managers
and employees together identify, plan, organize, and communicate
objectives to focus on during a specific appraisal period. After setting clear
goals, managers and subordinates periodically discuss the progress made
to control and debate on the feasibility of achieving those set objectives.

 This performance appraisal method is used to match the overarching

organizational goals with objectives of employees effectively while
validating objectives using the SMART method to see if the set objective is
specific, measurable, achievable, realistic, and time-sensitive.
 At the end of the review period (quarterly, half-yearly, or annual),
employees are judged by their results. Success is rewarded with promotion
and a salary hike whereas failure is dealt with transfer or further training.
This process usually lays more stress on tangible goals and intangible
aspects like interpersonal skills, commitment, etc. are often brushed under
the rug.
 2. 360-Degree Feedback
 360-degree feedback is a multidimensional performance appraisal method
that evaluates an employee using feedback collected from the employee’s
circle of influence namely managers, peers, customers, and direct reports.
This method will not only eliminate bias in performance reviews but also
offer a clear understanding of an individual’s competence.
 This appraisal method has five integral components like:

 1. Self-appraisals
 Self-appraisals offer employees a chance to look back at their performance
and understand their strengths and weaknesses. However, if self-appraisals
are performed without structured forms or formal procedures, it can
become lenient, fickle, and biased.

 2. Managerial reviews
 Performance reviews done by managers are a part of the traditional and
basic form of appraisals. These reviews must include individual employee
ratings awarded by supervisors as well as the evaluation of a team or
program done by senior managers.
 3. Peer reviews
 As hierarchies move out of the organizational picture, coworkers get a unique perspective on
the employee’s performance making them the most relevant evaluator. These reviews help
determine an employee’s ability to work well with the team, take up initiatives, and be a
reliable contributor. However, friendship or animosity between peers may end up distorting
the final evaluation results.

 4. Subordinates Appraising manager (SAM)

 This upward appraisal component of the 360-degree feedback is a delicate and significant
step. Reportees tend to have the most unique perspective from a managerial point of view.
However, reluctance or fear of retribution can skew appraisal results.

 5. Customer or client reviews

 The client component of this phase can include either internal customers such as users of
product within the organization or external customers who are not a part of the company but
interact with this specific employee on a regular basis.

 Customer reviews can evaluate the output of an employee better, however, these external
users often do not see the impact of processes or policies on an employee’s output.
 Advantages of using 360-degree feedback:

 Increase the individual’s awareness of how they perform and the impact it
has on other stakeholders
 Serve as a key to initiate coaching, counselling, and career development
activities
 Encourage employees to invest in self-development and embrace change
management
 Integrate performance feedback with work culture and promote
engagement
 Ideal for:
 Private sector organizations than public sector organisations as peer
reviews at public sector organizations are more lenient.

 Common reason for failure:

 Leniency in review, cultural differences, competitiveness, ineffective

planning, and misguided feedback

 Did you know?

 Top private organizations like RBS, Sainsbury’s, and G4S are using 360-
degree, multi-rater performance feedback to measure employee
performance.
 3. Assessment Centre Method
 The concept of assessment centre was introduced way back in 1930 by the
German Army but it has been polished and tailored to fit today’s
environment. The assessment centre method enables employees to get a
clear picture of how others observe them and the impact it has on their
performance. The main advantage of this method is that it will not only
assess the existing performance of an individual but also predict future job
performance.

 During the assessment, employees are asked to take part in social-

simulation exercises like in-basket exercises, informal discussions, fact-
finding exercises, decision-making problems, role-play, and other exercises
that ensure success in a role. The major drawback of this approach is that it
is a time and cost intensive process that is difficult to manage.
 Advantages of the assessment centre method:

 Enhance a participant’s knowledge, boost his/her thought process, and

improve employee efficiency
 Can be tailored to fit different roles, competencies, and business needs
 Offer an insight of the employee’s personality (ethics, tolerance, problem-
solving skill, introversion/extroversion, adaptability, etc.)
 Guidelines to implement assessment centre practice:

 Use job analysis to determine the components of effective performance

 Identify performance metrics that can be measured using this assessment
center
 Classify meaningful and relevant candidate behavior in the assessment
process
 Find assessment techniques that can ideally elicit ideal behavioral
information
 Spot assessors and assessee’s excluding immediate supervisors
 4. Behaviorally Anchored Rating Scale (BARS)
 Behaviorally anchored rating scales (BARS) bring out both the qualitative
and quantitative benefits in a performance appraisal process. BARS
compares employee performance with specific behavioral examples that
are anchored to numerical ratings.
 Each performance level on a BAR scale is anchored by multiple BARS
statements which describe common behaviors that an employee routinely
exhibits. These statements act as a yardstick to measure an individual’s
performance against predetermined standards that are applicable to their
role and job level.

 The first step in BARS creation is generation of critical incidents that depict
typical workplace behavior. The next step is editing these critical incidents
into a common format and removing any redundancy. After normalization,
the critical instances are randomized and assessed for effectiveness.
Remaining critical incidents are used to create BARS and evaluate
employee performance.
 Advantages of using BARS:

 Enjoy clear standards, improved feedback, accurate performance analysis,

and consistent evaluation
 Eliminate construct-irrelevant variance in performance appraisal ratings by
emphasis more on specific, concrete, and observable behaviors
 Decrease any chance for bias and ensure fairness throughout the appraisal
process
 Ideal for:

 Businesses of all sizes and industries can use BARS to assess the
performance of their entire workforce from the entry level agent to c-suite
executives
 5. Psychological Appraisals

 Psychological appraisals come in handy to determine the hidden potential of

employees. This method focuses on analyzing an employee’s future
performance rather than their past work. These appraisals are used to analyze
seven major components of an employee’s performance such as interpersonal
skills, cognitive abilities, intellectual traits, leadership skills, personality traits,
emotional quotient, and other related skills.

 Qualified psychologists conduct a variety of tests (in-depth interviews,

psychological tests, discussions, and more) to assess an employee effectively.
However, it is a rather slow and complex process and the quality of results is
highly dependent on the psychologist who administers the procedure.

 Specific scenarios are taken into account while performing psychological

appraisal. For instance, the way in which an employee deals with an aggressive
customer can be used to appraise his/her persuasion skills, behavioral
response, emotional response, and more.
 Advantages of psychological appraisals:

 Extract measurable, objective data about not just an employee’s

performance but also potential
 Can be deployed easily when compared with other performance appraisal
methods
 Offer introverted or shy employees a platform to shine and prove their
potential
 6. Human-Resource (Cost) Accounting Method
 Human resource (cost) accounting method analyses an employee’s
performance through the monetary benefits he/she yields to the company.
It is obtained by comparing the cost of retaining an employee (cost to
company) and the monetary benefits (contributions) an organization has
ascertained from that specific employee.

 When an employee’s performance is evaluated based on cost accounting

methods, factors like unit-wise average service value, quality, overhead
cost, interpersonal relationships, and more are taken into account. Its high-
dependency on the cost and benefit analysis and the memory power of the
reviewer is the drawback of human resources accounting method.
 A future-focused employee performance appraisal method
 Choosing the right performance appraisal method is more critical than ever
since it reflects what you think of your employees and how much you care
about employee morale. Once you’ve found an ideal performance review
method for your needs, the next step is implementing it properly to
eliminate critical performance gaps and address pressing issues that
impact ROI.