Performance Appraisal

1. Performance Appraisal

2. Definition • Once the employees have been selected, trained and motivated, they are then appraised for their performance. • PA is the step where the management finds out how effective it has been at hiring and placing employees. • If any problems are identified, steps are taken to communicate with employees and to remedy them.

3. Definition • Performance appraisal is a process of evaluating an employee’s performance of a job in terms of its requirements. • It is the process of evaluating the performance of employees, sharing that information with them and searching for ways to improve their performance, coaching for improved performance and distribution of economic rewards.

4. Steps of Performance Appraisal • Performance appraisal is a process involving such steps as: • Setting performance standard • Communicating performance expectations to employees • Measuring actual performance • Comparing actual performance with the standards • Discussing the appraisal results • Initiatingcorrective actions, if necessary. Contd.

5. Steps of Performance Appraisal Step-1: Setting performance standard: The performance process begins with the establishment of performance standards in accordance with the organization’s strategic goals. Performance standards serves as a benchmark against which performance is measured. Step-2: Communicating performance expectations to employees: Once performance standards are set, it is necessary to communicate these expectations. It should not be part of the employee’sjob to guess what is expected of them. Employees can be involved in setting standards. Contd.

6. Steps of Performance Appraisal Step-3:Measurement of Actual performance: The next step in the appraisal process is the measurement of performance. To determine, what actual performance is, it is necessary to acquire information about it. We should be concerned with how we measure and what we measure. some common sources of information are frequently used by managers regarding how to measure actual performance: personal observation, oral reports, and written reports.

7. Steps of Performance Appraisal Step-4: Comparing actual performance with standards: The point of this step is to note deviations between standard performance and actual performance so that we can proceed to the fifth step in the process- the discussion of the appraisal with the employees. Step-5: Discussing the appraisal result: A necessary requirement of the appraisal process is employee feedback through an evaluation interview. Evaluation interviews are performance review sessions that give employees essential feedback about their past performance or future potential. Contd.

8. Steps of Performance Appraisal • Without feedback, improvement in human behavior is not likely and the HR department will not have accurate records in its HR information system on which to base decisions ranging from job design to compensation. Step-6: Initiating corrective actions, if necessary: The final step in the appraisal is the identification of corrective action where necessary. Corrective actions can be of two types: one is immediate and deals with symptoms, and the other is basic, which deals with causes.

9. Uses or Benefits of performance appraisal Performance appraisals are about employee performance and accountability. In a globally competitive world, companies need high performance. At the same time, employees need feedback on their performance as a guide to future behavior. Appraising employee performance is useful for development and administrative purposes. Performance appraisals have many uses, such as • Motivating and allocating rewards to employees such as promotion and salary increases. • Coaching and developing employees.

10. Uses or Benefits of performance appraisal •  Identifying areas where development efforts are needed. Performance appraisal is a major tool to identify employee skill and knowledge deficiencies. •  Giving employee feedback about their work. •  Maintaining fair relationships within groups.  McGregor says, “ Formal PA plans are designed to meet three needs, one of the organization and the other two of the individual, namely: • Providing systematic judgment to back up salary increases, transfer, demotions or terminations. • Telling a subordinate how he is doing and suggestions needed to change in his behavior, attitudes and skills of job knowledge. • Using as a base for coaching and counseling the individual by the superior.

11. Who conduct performance Appraisal? Performance appraisal can be done by anyone familiar with the performance of individual employees. Possibilities include the following: • The immediate supervisor: He or she is probably most familiar with the individual's performance and, in most jobs, has had the best opportunity to observe actual job performance. The immediate supervisor is probably best able to relate the individual’s performance to organizational objectives.

12. Who conduct performance Appraisal? • The peer: Employees’ co- workers, explicitly familiar with the jobs involved, conduct peer evolutions mainly because they too are doing the same thing. They are the ones most aware of co-worker's day-to-day work behavior and should be given the opportunity to provide the management with some feedback. Here coworkers provide input into the employee’s performance. • Group Appraisals: In- group appraisal, the judgment of the immediate superior is supplemented by the different slants of other executives.

13. Who conduct performance Appraisal? • Appraisals by subordinates: Here the subordinates evaluate their superiors. Subordinates know firsthand the extent to which the supervisor actually delegates, how well he or she communicates, the type of leadership style he or she is most comfortable with and, the extent to which, he or she plans and organizes. Large firms use it, where managers have many subordinates. In the small firm, where manager have few subordinates, however, it is easy to identify who said what. Thus considerable openness is necessary before subordinate appraisals can pay off.

14. Who conduct performance Appraisal? • Multiple Raters: In multiple appraisals, the subordinate personnel are appraised independently by several other qualified officers. Staff personnel generally consolidate results of such multiple evaluation .If a person has ten supervisors, nine having rated him excellent and one poor; we can discount the value of the one poor evaluation. • Self-appraisal: Self-evaluation is the best method of performance appraisal if it can be systematically introduced. It means the way in which an individual views him.

15. Who conduct performance Appraisal? • 360- degree appraisal or feedback: It is a process in which supervisors, peers, subordinates, customers and the like evaluate the individual.

16. Rating Errors • Recency error: The recency effect occurs when a rater gives greater weight to recent events when appraising an individual’s performance. Recent actions- either good or bad- is more likely to be remembered by the rater. • Central tendency error: Appraisers, who rate all employees within a narrow range, usually the middle or average, commit a central tendency error. It is the reluctance to make extreme ratings in either direction, the inability to distinguish between and among ratees.

17. Rating Errors • Leniency error: Every evaluator has his own value system, which acts as standard against which appraisals are made. Some evaluators mark high and others low. The former is referred to as positive leniency error and the latter as negative leniency error or strictness. • Halo effect: The halo effect occurs when a manager rates an employee high or low on all items because of one characteristic. • Contrast error: This error is the tendency to rate people relative to other people rather than to performance standards.

18. Rating Errors • Similarity error: When evaluators rate other people in the same way that the evaluators perceive themselves, they are making a similarity error. Based on the perception that evaluators have themselves, they project those perceptions onto others. •  Personal prejudice: A rater’s dislike for a group or class of people may distort the ratings those people receives. Discrimination may occur in terms of age, gender, religion, and country of origin, etc.

19. Methods of performance Appraisal • Past-oriented appraisal methods • Essay Appraisal The rater writes a narrative describing an employee’s strengths, weaknesses, past performance, potential and suggestions for improvement. It is simple and requires no complex forms or extensive training to complete. It can provide a good deal of information about employee.

20. Methods of performance Appraisal • Rating scales It requires the rater to provide a subjective evaluation of an employee’s performance along a scale from low to high (from poor to excellent). The evaluation is solely based on the opinion of the rater. In most cases, the criteria are not directly related to job performance. Rather evaluation is based on traits- qualities that employee shows in his work. He is judged on such things as knowledge of the job, reliability, initiative and sense of responsibility.

21. Methods of performance Appraisal FactorsOutstanding Very good Good Average Poor • Knowledge of the job • Reliability • Cooperation • Initiatives • Quality of work • Sense of responsibility • Productivity • Punctuality

22. Methods of performance Appraisal • Checklists This method requires the rater to select statements or words that describe the employee’s performance and characteristics. He does not evaluate employee performance. The rater is usually the immediate supervisor. He just supplies report about PA and the final rating is done by the personnel department. But without rater’s knowledge, the personnel department may assign weights to different items on the checklists according to each item’s importance. The result is called a weighted checklist. The weight is the average score of the raters prior to use the checklist. The weights allow the rating to be quantified so those total scores can be determined.

23. Methods of performance Appraisal Examples Statements Weights • Is a decisive decision-maker. 10.0 • Seems to be focused in addressing problems 8.0 • Tactfully correct poor quality work of technicians 6.00 • Is sensitive to the needs of the fellow workers 10.00

24. Methods of performance Appraisal • Critical Incident method This method requires the rater to record the statements that describe extremely good or bad employee behavior related to performance. The statements are called critical incidents. The supervisor records these incidents during the evaluation period for each employee. Both positive and negative incidents are recorded.

25. Methods of performance Appraisal • Field Review Method In this method, a skilled representative of the human resources department goes into the field and assists supervisors with their ratings. The personnel specialists solicit from the immediate supervisor specific information about the employee’s performance. Then the experts prepare an evaluation based on this information. The evaluation is sent to the supervisor for review, changes, approval and discussion with employee who was rated.

26. Methods of performance Appraisal • Behaviorally Anchored Ratings Scales (BARS) Smith and Kendall developed BARS. BARS rely on the use of critical incidents to serve as anchor statements on a scale. Anchored Rating Scales (BARS) combine major elements from the critical incident and graphic rating scale approaches. Here supervisors construct rating scale with associated behavioral anchors. They identify relevant performance dimensions and then generate anchors- specific, observable behaviors typical of each performance level.

27. Methods of performance Appraisal B. Comparative Evaluation Approaches Comparative evaluation approaches are a collection of different methods that compare one employee’s performance with that of coworkers. The supervisor conducts usually comparative appraisal techniques. The most common forms of comparative evaluation are ranking method, forced distribution, point allocation and paired comparisons. Usually they are based on rater’s overall subjective evaluation of employee’s performance.

28. Ranking method Under this method the rater places each employee in order from best to worst. All the personnel department knows is that certain employees are better than others are. It does not know by how much. This method is subject to halo and recency effect, although rankings by two or more raters can be averaged to help reduce biases. • Forced Distribution Forced distributions require the rater to sort employees into different classifications. Usually a certain portion must be put in each category. A rater may classify ten subordinates into five classes namely, top 10% of subordinates, next 20% of subordinates, middle 40% of subordinates, next 20% of subordinates and lowest 10% of subordinates.

29. Point allocation method. It requires the rater to allocate a fixed number of points among employees in the group. The rater allocates 100 points to all employees according to their relative worth. The employee with the maximum point is the best employee. Good performers are given more points than poor performers. The rater can recognize the relative differences between employees.

30. Paired comparisons Paired comparisons force the raters to compare each employee with all other employees who are being rated in the same group. It ranks each employee in relationship to all others on a one-to-one basis. The basis for comparison is usually overall performance.

31. C. Future- Oriented Appraisals. Future –oriented appraisals focus on future performance by evaluating employee potential or setting future performance goals. Included here are four techniques used: • Self-appraisal. This method is used to further self-development. When employees evaluate themselves, defensive behavior is less likely to occur. Employee is getting involved in identifying his development needs.

32. Assessment centers. Assessment centers are a standardized employee appraisal that relies on multiple types of evaluation and multiple raters. The assessment center is usually applied to managers who appear to have potential to perform more reasonable jobs. Employees are evaluated at a separate place usually at a hotel, which is away from the jobsite. During this time, the psychologists and managers who do the rating attempt to estimate the strengths, weaknesses and potential of each attendee at the center. They then pool their estimates to come to a conclusion about each member of the group. A report is prepared on each attendee.

33. MBO: MBO is a process by which managers and subordinates work together in identifying goals and setting up objectives and making plan together in order to achieve these objectives. MBO is a process of collaborative goal setting by a manager and subordinate; the extent to which goals are accomplished is a major factor in evaluating and rewarding the subordinate’s performance. • It is based on a person’s performance and how well he or she is achieving in a given period of time. The focus is on results, not personality traits.

34. The purpose of MBO is to give subordinate a voice in the goal setting process and to clarify for them what they are expected to do in a given time span. Thus MBO is concerned with goal setting for individual managers and their work groups.

35. Process of MBO Step-1: Set the organizational goals at the top. Establish an organization-wide plan for next year and set goals. The goal will provide specific standards of performance. Thus MBO starts at the top of the organization. Top management must set the overall goals of the organization. Step-2: Set departmental goals. Department heads and their superiors jointly set goals for their departments. Step-3: Discuss departmental goals. Department heads discuss the department’s goals with all subordinates in the department (often a department wide meeting) and ask them to develop their own individual goals

36. Process of MBO Step-4: Define expected results (set individual goals). Here department heads and their subordinates set short- term performance goals. Goals must be verifiable and specify a time span for their accomplishment. Employees must be educated about what MBO is and what their roles in it will be. Step-5: Performance review: measure the results. Department heads compare the actual performance of each employee with expected results.

37. Process of MBO Step-6: Provide feedback. Department heads hold periodic performance review meetings with subordinates to discuss and evaluate the latter’s’ progress in achieving expected results. The reasons for both success and failure are explored and the employee is rewarded on the basis of goal accomplishment.