Performance_Appraisal

BRIEF HISTORY The history of performance appraisal is quite brief. Its roots in the early 20th century can be traced to Taylor's pioneering Time and Motion studies. But this is not very helpful, for the same may be said about almost everything in the field of modern human resources management. As a distinct and formal management procedure used in the evaluation of work performance, appraisal really dates from the time of the Second World War - not more than 60 years ago. Yet in a broader sense, the practice of appraisal is a very ancient art. In the scale of things historical, it might well lay claim to being the world's second oldest profession! Performance appraisal systems began as simple methods of income justification. That is, appraisal was used to decide whether or not the salary or wage of an individual employee was justified. The process was firmly linked to material outcomes. If an employee's performance was found to be less than ideal, a cut in pay would follow. On the other hand, if their performance was better than the supervisor expected, a pay rise was in order. There is, says Dulewicz (1989), "... a basic human tendency to make judgments about those one is working with, as well as about oneself." Appraisal, it seems, is both inevitable and universal. In the absence of a carefully structured system of appraisal, people will tend to judge the work performance of others, including subordinates, naturally, informally and arbitrarily. The human inclination to judge can create serious motivational, ethical and legal problems in the workplace. Without a structured appraisal system, there is little chance of ensuring that the judgments made will be lawful, fair, defensible and accurate. INTRODUCTION People differ in their abilities and aptitudes. These differences are natural to great extent and cannot be eliminated even by giving the same basic education and training to them. There will be some differences in the quality and quantity of work done by different employees even on the same job. Therefore, it is necessary for the management to know the differences so that the employees having better abilities may be rewarded and the wrong placements of employees may be rectified through transfers. Performance appraisal, also known as employee appraisal, or merit rating is a method by which the job performance of an employee is evaluated (generally in terms of quality, quantity, cost and time). Performance appraisal is a part of career development. MEANING Performance appraisal is the process of obtaining, analyzing and recording information about the relative worth of an employee. The focus of the performance appraisal is measuring and improving the actual performance of the employee and also the future potential of the employee. Its aim is to measure what an employee does. DEFINITION BY SOME AUTHORS: According to Flippo, A prominent personality in the field of Human resources, “performance appraisal is the systematic, periodic and an impartial rating of an employee’s excellence in the matters pertaining to his present job and his potential for a better job." Performance appraisal is a systematic way of reviewing and assessing the performance of an employee during a given period of time and planning for his future. According to Dale Yoder: “Performance Appraisal includes all formal procedures used to evaluate personalities and contributions and potentials of group members in a working organization. It is a continuous process to secure information necessary for making correct and objective decision on employees.” According to C. Heigal: “Performance Appraisal is the process of evaluating the performance and qualifications of the employees in terms of the requirements of the job for which he is employed for purposes of administration including placement, selection for promotion, proving financial rewards and other actions which require differential treatment among the members of a group as distinguished from actions affecting all members equally.” According to Dale .S. Beach: “Performance Appraisal is the systematic evaluation of the individual with respect to his or her performance on the job and his or her potential for development.” Thus: It is a powerful tool to calibrate, refine and reward the performance of the employee. It helps to analyze his achievements and evaluate his contribution towards the achievements of the overall organizational goals. By focusing the attention on performance, performance appraisal goes to the heart of personnel management and reflects the management’s interest in the progress of the employees. OBJECTIVES Performance Appraisal can be carried out with various objectives in mind and these objectives can be classified under four heads: a) Work –Related Objectives 1. To assess the work of employees in relation to job requirements. 2. To improve efficiency. 3. To help management in fixing employees according to their capacity, interest, aptitudes and qualifications. 4. To carry out job evaluation. b) Career Development Objectives 1. To assess the strong and weak points in the working of the employees and finding remedies for weak points through training. 2. To determine career potential. 3. To plan promotions, transfers, lay offs etc. of the employees. 4. To plan career goals. c) Communication 1. To provide feedback to employees so that they come to know where they stand and can improve their job performance. 2. To provide coaching, counseling, career planning and motivation to employees. 3. To develop positive superior – subordinate relations and thereby reduce grievances. 4. To clearly establish goals. d) Organizational objectives 1. To serve as a basis for promotion or demotion. 2. To serve as a basis for wage and salary administration and considering pay increases and increments. 3. To serve as a basis for planning suitable training and development programmes. 4. To serve as a basis for transfer or termination in case of reduction in staff strength. IMPORTANCE Performance Appraisal Process • Establishing Standards • Communicating standards to employees • Measuring actual performance • Comparing actual with standards • Discussing reports with employees • Taking corrective action Performance appraisal should be done on the basis of certain standards or criterion fixed in advance. The employees should also have the knowledge of the yardsticks to be used for evaluating them. Following process is used for merit rating: 1. Establishing Standards; the employees will have to be rated against the standards set for their performance. There should be some base on which one may say that the performance of a person is good, average, bad etc. the standards may be in quantity and quality of production. These standards will help in setting yardsticks for evaluating performance. 2. Communicating standards to employees : The standards set for performance should be communicated to the employees. They should know what is expected from them. In the absence of any knowledge of standards, the employees will keep on guessing only. It is essential to get feedback from employees whether they have followed the standards as is intended by the management. 3. Measuring Actual Performance ; The next step in evaluation process is to measure actual performance of employees. The performance may be measured through personal observation, statistical reports, oral reports, written reports. Etc. 4. Comparing Actual With Standards : The actual performance is compared to the standards set earlier for finding out the standing of employees. The employee is evaluated and judged by his potential for growth and advancement. 5. Discussing Reports With Employees: The assessment reports are periodically discussed with concerned employees. The weak points, good points and difficulties are indicated for helping employees to improve their performance. It may be easy to convey good reports but it requires tact to discuss adverse reports. 6. Taking Corrective Action : Evaluation process will be useful only when corrective action is taken on the basis of reports. One corrective action may be in the form of advice, counsel, warning etc., other action may be in the form of additional training, refresher courses, coaching. Methods of Performance Appraisal . TRADITIONAL METHODS: Under the Traditional methods of merit rating, employees are evaluated one at a time without comparing them with other employees in the organization. (a) Confidential report: In most of government organizations and public enterprises, performance appraisal is done through Annual conference reports. It is a descriptive report prepared, generally at the end of every year, by the employee’s immediate superior. The report highlights the strengths and weaknesses of the subordinate. The report is not data based. The impressions of the superior about the subordinate are merely recorded there. It does not offer any feedback to the appraisee. The appraisee is not very sure about why his ratings have fallen despite his best efforts, why others are rated high when compared to him, how to rectify his mistakes, if any; on what basis he is going to be evaluated next year, etc. Since the report is generally not made public and hence no feedback is available. In recent years, due to pressure from courts and trade unions, the details of a negative confidential report are given to the appraisee. (b) Essay evaluation: Under this method, the rater is asked to express the strong as well as weak points of the employee’s behavior. This technique is normally used with a combination of the graphic rating scale because the rater can elaborately present the scale by substantiating an explanation for his rating. While preparing the essay on the employee, the rater considers the following factors: (i) Job knowledge and potential of the employee (ii) Employee understands of the company’s programmes, policies, objectives, etc. (iii) The employee’s relations with co-workers and superiors (iv) The employee’s general planning, organizing and controlling ability (v) The attitudes and perceptions of the employee, in general. Essay evaluation is a non-quantitative technique. This method is advantageous in at least one sense, i.e., the essay provides a good deal of information about the employee and also reveals more about the evaluator. The essay evaluation method however suffers from the following limitations: It is highly subjective; the supervisor may write a biased essay. Some evaluators may be poor in writing essays on employee performance. Others may be superficial in explanation and use flowery language which may not reflect the actual performance of the employee. It is very difficult to find effective writers nowadays. C) Straight Ranking Method: Every employee is judged as a whole without distinguishing the rates from his performance. A list is then prepared for ranking the workers in order of their performance on the job so that an excellent employee is at the top and poor at the bottom. It permits the comparison of all employees in any single rating group regardless of the types of work. The difficulty of this method is that it is very difficult to compare persons on the whole when they differ in qualities, attitudes, etc. This method only tells us about the standing of various persons and not the actual difference among them. This method is suitable only when there are limited persons in an organization. d)Paired Comparison Method: In this method every person is compared trait wise , with other persons , one at time , the number of times one person is compared with others is tallied on a piece of paper. These numbers help in yielding in rank orders of employees. For Example: If there are five persons to be compared. A’s performance is first compared with that of B to find out who has better performance , then A is compared with C , D and E in turn and performance is recorded. . Then B is compared to C, D and E , since he has already been compared with A . In turn C is compared with D and E and so on. The number of rank order in this would be n(n-2) where n represents the number of persons to be compared. This method is more reliable rating and it will be suitable only when the number of persons is small. e) Grading System: Under this system certain features like analytical ability, co-cooperativeness, job knowledge etc, are selected for evaluation. The employees are given grades according to the judgement of the rater. The grades may be such as: A – Outstanding B – Very Good C – Satisfactory D – Average E – Below Average The actual performance of every employees is rated with various grades in mind . (f) Critical incident technique: Under this method, the manager prepares lists of statements of very effective and ineffective behavior of an employee. These critical incidents or events represent the outstanding or poor behavior of employees on the job. The manager maintains logs on each employee, whereby he periodically records critical incidents of the workers behavior. At the end of the rating period, these recorded critical incidents are used in the evaluation of the workers’ performance. An example of a good critical incident of a sales assistant is the following: July 20 – The sales clerk patiently attended to the customer’s complaint. He is polite, prompt, and enthusiastic in solving the customers’ problem. On the other hand the bad critical incident may appear as under: July 20 – The sales assistant stayed 45 minutes over on his break during the busiest part of the day. He failed to answer the store manager’s call thrice. He is lazy, negligent, stubborn and uninterested in work. This method provides an objective basis for conducting a thorough discussion of an employee’s performance. This method avoids recency bias (most recent incidents get too much emphasis). This method suffers however from the following limitations: Negative incidents may be more noticeable than positive incidents. Most frequently, the critical incidents technique of evaluation is applied to evaluate the performance of superiors rather than of peers of subordinates. (g) Checklists and weighted checklists: Another simple type of individual evaluation method is the checklist. A checklist represents, in its simplest form, a set of objectives or descriptive statements about the employee and his behavior. If the rater believes strongly that the employee possesses a particular listed trait, he checks the item; otherwise, he leaves the item blank. A more recent variation of the checklist method is the weighted list. Under this, the value of each question may be weighted equally or certain questions may be weighted more heavily than others. The following are some of the sample questions in the checklist. l Is the employee really interested in the task assigned' Yes/No l Is he respected by his colleagues (co-workers) Yes/No l Does he give respect to his superiors' Yes/No l Does he follow instructions properly' Yes/No l Does he make mistakes frequently' Yes/No A rating score from the checklist helps the manager in evaluation of the performance of the employee. The checklist method has a serious limitation. The rater may be biased in distinguishing the positive and negative questions. He may assign biased weights to the questions. Another limitation could be that this method is expensive and time consuming. Finally, it becomes difficult for the manager to assemble, analyze and weigh a number of statements about the employee’s characteristics, contributions and behaviors. In spite of these limitations, the checklist method is most frequently used in the employee’s performance evaluation. (h) Graphic rating scale: The graphic rating scale is the simplest and most popular method for appraising performance. A rating scale lists traits and a range of performance values for each trait. The supervisor rates each subordinate by circling or checking the score that best describes his performance for each trait. Rating scales are of two types: • continuous • discontinuous In continuous scale the degree of a trait are measured in numbers ranging from 0 to 5 whereas in a discrete or discontinuous scale, appropriate boxes or squares are used. The following figures contain the rating scales: Quantity of work: Volume of work under normal working conditions Unsatisfactory 0 Fair 1 Satisfactory 2 Good 3 Outstanding 4 Quality of work: Neatness, thoroughness and accuracy of work Knowledge of job 0 1 2 3 4 Job Knowledge :A clear understanding of the factors connected with the job 0 1 2 3 4 Attitude: Exhibits enthusiasm and cooperativeness on the job Dependability: Conscientious, thorough, reliable, accurate, with respect to attendance, relief’s, lunch breaks, etc. Cooperation: Willingness and ability to work with others to produce desired goals. CONTINUOUS RATING SCALE DISCONTINUOUS RATING SCALE For instance if the employee has serious gaps in technical-professional knowledge (knows only rudimentary phases of job); lacks the knowledge to bring about an increase in productivity; is reluctant to make decisions on his own (on even when he makes decisions they are unreliable and substandard); declines to accept responsibility; fails to plan ahead effectively; wastes and misuses resources; etc., then it can safely be inferred that the standards of the performance of the employee are dismal and disappointing. The rating scale is the most common method of evaluation of an employee’s performance today. One positive point in favor of the rating scale is that it is easy to understand, easy to use and permits a statistical tabulation of scores of employees. The graphic rating scale may however suffer from a long standing disadvantage, i.e., it may be arbitrary and the rating may be subjective. Another pitfall is that each characteristic is equally important in evaluation of the employee’s performance and so on. i) Forced choice method: This method was developed to eliminate bias and the preponderance of high ratings that might occur in some organizations. The primary purpose of the forced choice method is to correct the tendency of a rater to give consistently high or low ratings to all the employees. This method makes use of several sets of pair phrases, two of which may be positive and two negative and the rater is asked to indicate which of the four phrases is the most and least descriptive of a particular worker. Actually, the statement items are grounded in such a way that the rater cannot easily judge which statements apply to the most effective employee. The following box is a classic illustration of the forced choice items in organizations. Table: Forced Choice Items 1. Least Most A Does not anticipate difficulties A B Grasps explanations easily and quickly B C Does not waste time C D Very easy to talk to D 2. Least Most A Can be a leader A B Wastes time on unproductive things B C At all times, cool and calm C D Smart worker D The favorable qualities earn a plus credit and the unfavorable ones earn the reverse. The worker gets over plus when the positive factors override the negative ones or when one of the negative phrases is checked as being insignificantly rated. They overall objectivity is increased by using this method in evaluation of employee’s performance, because the rater does not know how high or low he is evaluating the individual as he has no access to the scoring key. This method, however, has a strong limitation. Further, managers may feel frustrated rating the employees ‘in the dark’. Finally, the results of the forced choice method may not be useful for training employees because the rater himself does not know how he is evaluating the worker. In spite of these limitations, the forced choice technique is quite popular. The spread out of ratings in the form of a normal distribution curve is shown in the following figure: (j) Group Appraisal: Under the group appraisal method, employees are rated by an appraisal group, consisting of their supervisor, and three or four other person who have some knowledge of their performance. The supervisor explains to the group the nature of his subordinates duties. The group then discusses the standards of performance for that job, the actual performance of the employees and offers suggestions for future improvements, if any. This method is devoid of personal bias, since appraisal is done by multiple judges and it is very time consuming. (h) Field Review Method: Under this method an expert from the personnel department interviews line supervisors to evaluate their respective subordinates. The expert questions the supervisor and obtains all the important information on each employee and takes notes in his notebook. The appraisal is conducted by a person outside the concerned department, usually from the HR department. Field reviews are usually conducted in matters of promoting an executive to the managerial level. The advantage of the field review method is that since the rater in an "outsider" the chances of bias are reduced. The rater is usually extensively trained to conduct the appraisal interview. Disadvantage of the field review method is that the "outsider" may not be aware of the job requirements, work culture and work environment. The outsider has not observed the employee at work and does not know his on-field behavior and performance, except from the report submitted by the employee's supervisor, which may be biased. This method is also time consuming. MODERN METHODS: A) Human Resource Accounting: Human resources are valuable assets for every organization. Human resource accounting method tries to find the relative worth of these assets in the terms of money. In this method the performance of the employees is judged in terms of cost and contribution of the employees. The cost of employees include all the expenses incurred on them like their compensation, recruitment and selection costs, induction and training costs etc whereas their contribution includes the total value added (in monetary terms). The difference between the cost and the contribution will be the performance of the employees. Ideally, the contribution of the employees should be greater than the cost incurred on them. b) Assessment Center: General Simoniet of the German Army first developed this concept during the 1930’s. The purpose was to test candidates in social situations using a number of raters or assessors and through a variety of procedures. The crux of the assessment center is job related simulations. These simulations involve characteristics that employees feel are important to the success of the job. Some key features of the assessment center method are: • The use of situational exercises such as in basket exercise , business game , role playing and group discussions. • Selection of evaluators from experienced senior managers • Evaluation of all employees both individually as well as collectively. The procedure for an assessment center program can be undertaken in the following lines; Step 1: establish a leadership group. Each member should support and assume a predetermined position arrived at by group consensus. So every member feels comfortable and ‘at home’ about the position he chosen. Step 2: Appointing a leader to decide the course of action. This would help in bringing out the intricacies of group dynamics. Step 3: Using simulations management games and in basket exercises to test organizational and planning activities. Step 4: Providing feedback by the participants through oral report , projective tests and through pencil tests to judge intellectual ability. Step 5: Finally participants and the center are evaluated against the success criterion. It must be carefully borne in mind that the assessment center approach of performance appraisal helps evaluators to judge the quality of the individual’s social skills rather than the quality decisions taken by them. ASSESSMENT CENTER FLOWCHART C) Management by Objectives (MBO): Management by Objectives requires the managers to set specific goals with each employee and then periodically discuss his progress towards these goals .MBO can be a modest scale with subordinates and superiors jointly setting goals and periodically providing feedback. However MBO almost always refers to a comprehensive, organization wise goal setting and appraisal programme that consists of the following steps: 1) Set the organizational goals: establish an organization wise plan for next year and set goals. 2) Set departmental Goals : in this step departmental heads and their superiors jointly set goals for their departments 3) Discuss departmental goals: it discuss goals with all the subordinates in the department and ask them to develop their own individual goals. 4) Define expected results; in this step, department heads and their subordinates set short term performance targets. 5) Performance reviews: measure the results: department heads compare the performance of each employee with expected results. 6) Provide Feed Back: department heads hold periodic performance review meetings with subordinates to discuss and evaluate the latter’s progress in achieving expected results. MBO has many advantages: • It redefines the role of manger from a judge to that of a helper, facilitator. • It focuses on what the employees produce as a result of their performance increasing their acceptance. • It shifts the orientation of the employees toward future actions instead of past behaviors. Managers must remember that to make appraisal effective through MBO it is necessary that there is full commitment of top management towards it. Also the managers should be ready to spend that extra time in developing performance targets with their subordinates. d) Behaviorally Anchored Rating Scale (BARS): Also known as the behavioral expectations scale, this method represents the latest innovation in performance appraisal. It is a combination of the rating scale and critical incident techniques of employee performance evaluation. The critical incidents serve as anchor statements on a scale and the rating form usually contains six to eight specifically defined performance dimensions. The following chart represents an example of a sales trainee’s competence and a behaviorally anchored rating scale. Table: An Example of Behaviorally Anchored Rating Scale (BARS) Performance Points Behavior Extremely good 7 Can expect trainee to make valuable suggestions for increased sales and to have positive relationships with customers all over the country. Good 6 Can expect to initiate creative ideas for improved sales. Above average 5 Can expect to keep in touch with the customers throughout the year. Average 4 Can manage, with difficulty, to deliver the goods in time. Below average 3 Can expect to unload the trucks when asked by the supervisor. Poor 2 Can expect to inform only a part of the customers. Extremely poor 1 Can expect to take extended coffee breaks and roam around purposelessly. Developing a BARS follows a general format which combines techniques employed in the critical incident method and weighted checklist ratings scales. It involves following steps: Step 1: Collect critical incidents: People with knowledge of the job to be probed, such as job holders and supervisors, describe specific examples of effective and ineffective behavior related to job performance. Step 2: Identify performance dimensions: The people assigned the task of developing the instrument cluster the incidents into a small set of key performance dimensions. Generally between five and ten dimensions account for most of the performance. Step 3: Reclassification of incidents: Another group of participants who are knowledgeable about the job is instructed to retranslate or reclassify the critical incidents generated (in Step II) previously. They are given the definition of job dimension and told to assign each critical incident to the dimension that it best describes. Step 4: Assigning scale values to the incidents: Each incident is then rated on a one-to-seven or one-to-nine scale with respect of how well it represents performance on the appropriate dimension. A rating of one represents ineffective performance; the top scale value indicates very effective performance. The second group of participants usually assigns the scale values. Means and standard deviations are then calculated for the scale values assigned to each incident. Step 5: Producing the final instrument: About six or seven incidents for each performance dimension – all having met both the retranslating and standard deviation criteria – will be used as behavioral anchors. The final BARS instrument consists of a series of vertical scales (one for each dimension) anchored (or measured) by the final incidents. Each incident is positioned on the scale according to its mean value. Developing a suitable BARS can be very time consuming. Many groups may be required for reallocation of incidents unless a sufficient percentage (say60%) of the incidents get clustered in the same cluster as the previous group did. E) 360 –Degree feedback; 360 degree feedback, also known as 'multi-rater feedback', is the most comprehensive appraisal where the feedback about the employees’ performance comes from all the sources that come in contact with the employee on his job. 360 degree respondents for an employee can be his/her peers, managers (i.e. superior), subordinates, team members, customers, suppliers/ vendors - anyone who comes into contact with the employee and can provide valuable insights and information or feedback regarding the "on-the-job" performance of the employee. 360 degree appraisal has four integral components: • Self appraisal • Superior appraisal • Subordinate appraisal • Peer appraisal Self appraisal gives a chance to the employee to look at his/her strengths and weaknesses, his achievements, and judge his own performance. Superior’s appraisal forms the traditional part of the 360 degree performance appraisal where the employees’ responsibilities and actual performance is rated by the superior. Self assessment is an indispensable part of 360 degree appraisals and therefore 360 degree Performance appraisal have high employee involvement and also have the strongest impact on behavior and performance. It provides a "360-degree review" of the employees’ performance and is considered to be one of the most credible performances Appraisal methods 360 degree performance appraisal is also a powerful developmental tool because when conducted at regular intervals (say yearly) it helps to keep a track of the changes others’ perceptions about the employees. A 360 degree appraisal is generally found more suitable for the managers as it helps to assess their leadership and managing styles. This technique is being effectively used across the globe for performance appraisals. Some of the organizations following it are Wipro, Infosys, and Reliance Industries etc