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Module-7

Performance

Management &

Appraisal

8/6/2019 Module7 PA


Performance Appraisal :

Performance Appraisal (PA) refers to all those

procedures and standards that are used to evaluate

the personality, performance, potential, of members

and groups.

It is an objective assessment of performance against

well defined benchmarks. Builds employee database

It is directional ,evaluative ,periodical and formal.

Appraisal data is archived and used for

organizational development.

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Performance Management

Performance management involves

designing and executing a set of HR activities to assess and improve

performance.

It is ongoing ,facilitative and less formal.

It improves and employee performance and

development.

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11±4

Nature of Performance

Management Performance Management

Processes used to identify, encourage, measure,

evaluate, improve, and reward employee

performance Provide information to employees about their

performance.

Clarify organizational performance expectations.

Identify the development steps that are needed toenhance employee performance.

Document performance for personnel actions.

Provide rewards for achieving performance

objectives.

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. 11±5

Performance Performance Management Management

Linkage Linkage

Figure 11±1

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11±6

C omponents of EffectiveC omponents of Effective

Performance Performance

Management Management

Figure 11±2

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. 11±7

Difference Between Performance

Management and Performance Appraisals

Performance

Management

Processes used to

identify, encourage,measure, evaluate,

improve, and reward

employee performance.

Performance

Appraisal

The process of evaluating

how well employees perform their jobs and

then communicating that

information to the

employees.

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Relationship between job analysis

and performance appraisal:

Job analysis performance performance

standards appraisal

Describes work

& Personnel

Requirement

Of a particular

job

Translate job

Into levels of

To acceptable

Or unacceptable

performance

Describes the

Job relevant

strengths andweakness of

Each individual

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Characteristics

It is a step by step process

It examines the employee strengths andweaknesses

Scientific and objective study

Ongoing and continuous process Secures information for correct employee

related decision-making.

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Needs and Objectives:

Provides feedback about employees

Helps in building performance database Diagnose the Strengths & Weaknesses of

individuals

Provides coaching, counseling, career

planning to subordinates Develop positive relation building and

reduces grievance

Facilitates research in personnel management

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Appraisal Benefits

Appraisals offer

employees:Direction

Feedback

InputMotivation

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Appraisal Benefits(Contd.) Appraisals offer the company:

Documentation

Employee Development

Feedback

Legal protection

Motivation system

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Why Appraisals Are Important

�Recognize accomplishments

�Guide progress

�Improve performance

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Why Important (cont.)

Review performance

Set goals

Identify problems

Discuss career advancement

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Steps in performance appraisal

Establishing job standards

Designing an appraisal programme

Appraise performance

Performance interview

Use appraisal data

For appropriate purpose

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Process of PASetting

performance

standardsTaking corrective

measures

Discussingresults

Comparing

standards

Measuringstandards

Communicating

standards

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11±17

Uses of Performance Appraisal

organizational planning

Human Resource Planning Organizational Effectiveness

Compensation Management

Placement adjustment decisions

To identify training and development

needs of the employees

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11±18

C onflicting Uses for Performance Appraisal C onflicting Uses for Performance Appraisal

Figure 11±4

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11±19

Developmental Uses of

Performance Appraisal

PerformancePerformance

AppraisalAppraisal

Giving PerformanceGiving Performance

FeedbackFeedback

Administering WagesAdministering Wages

and Salariesand Salaries Identifying StrengthsIdentifying Strengths

and Weaknessesand Weaknesses

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11±20

Ty pical Division of HR Responsibilities: PerformanceTy pical Division of HR Responsibilities: Performance

Appraisal Appraisal

Figure 11±5

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Issues in appraisal system

Appraisal Design

Formal and informal

Whose performance?

Who are the raters?

What problems?

How to solve?

What to evaluate?

When to evaluate?

What methods?

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How PA contribute to firm¶s

competitive advantagesImproving

performance

Making correctdecision

Ensuring legal

competenceMinimizing dissatisfaction

And turnover

Values and behavior

Competitive

advantage

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Problems in performance appraisal

1. Errors In rating

Halo effects Stereotyping

Central tendency

Leniency and Strictness/severity error

Contrast error Personal bias

Recency effect

False attribution

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2. Incompetence

3. Negative approach4. Multiple objectives

5. Resistance

6. Lack of knowledge

Problems in performance appraisal

(Cont¶d)

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Essentials of an effective appraisal system

Mutual trust

Clear objectives

Standardizations Training

Job relatedness

Documentation

Feedback and participation Individual differences

Post appraisal review

Review and appeal

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Appraisals and Discrimination

Appraisal Discrimination Act and other fair

employment Laws are applicable to PA on- Failure to communicate standards

Failure to give timely feedback

Failure to allow employees to correct performance

Inconsistency in measuring performance

Failure to document performance objectively

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Appraisal Forms

Define performance expectations

Describe measurement tools Use a rating system

Cover specific examples

Set measurable goals

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Measure Performance

Measurement systems need to be:

Specific Fair

Consistent

Clear

Useful

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Measure Performance (cont.)

Systems can be:

Numerical Textual

Management by Objective (MBO)

Behavior oriented

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Set Goals«.

Based on job requirements

Realistic Measurable

Observable

Challenging

Prioritized

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Types of feedback

Formal appraisals

Informal appraisals Open communication

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R ecognize Good Performance

Verbal

Public Tangible

Monetary

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Identif y Poor Performance

Act early

Take the right approach Deal with employee reaction

Handle continued poor performance

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Discipline Poor Performance

Recognize problems

Talk with employee Follow company policy

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Performance Appraisal Methods1 .Individual Evaluation Methods

Confidential report

Essay evaluation Critical incidents

Checklists

Graphic rating scale Behaviorally anchored rating scale

MBO

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Methods of Performance Appraisal

Traditional Methods

Graphic R ating Scales(GRS)-Individual performance is compared to an absolutestandard and is recorded on a scale.This method is also known as linear /simple ratingscale.

R anking Method(R M)-Under this method employees are ranked as best or worst on the basis of some characteristics.

Paired Comparison Method(PCM)-It is a simple method under which appraiser compares one employee in the group with other employees one at a time.

Forced Distribution Method(FDM)-Under this method the raters spread their employee evaluations in a prescribed distribution on a bell-shaped curve.

Checklist Methods (Simple,Weighted or forced)-Under this method the rater checksthe checklist consisting of a number of statements concerning employee behaviour.

1. In a simple checklist the employee performance is rated on the basis of the number of positive checks while negative checks are ignored.

2. Weighted checklist involves assigning different weightage to different items in thechecklist in accordance of their importance in comparison to each other

3. Forced choice/checklist It involves preparation of a large number of statements ingroups,each group consisting of four descriptive statements(tetrad) concerning employee behaviour.Two are favourable and the remaining two are unfavourable statements.Therater will not be informed about the favourable and unfavourable statements to avoid

appraiser prejudice

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Methods of Performance Appraisal Critical incident method records the critical incidents of

exceptional or poor performance of the employees incomparison with the preset standards

Essay or free form appraisal ± Under this methodmanagers write short essays describing the performanceof the employees during the rating period.

Group appraisal ± Under this method employee is

appraised by a group of appraisers consisting of supervisor of the employee and other supervisors whohave close contact with the working of the employee.

Confidential R eports ± Under this method the superior ,confidentially appraises the subordinates based on his

observations,judgment and intuitions .

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11±38

360 Degree Performance

Appraisal System

360 degree PA system is a multi-source

appraisal system under which employees

are appraised by -

Superiors

subordinates

Team members/peers

Employees¶ self-appraisal

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11±39

Multisource Appraisal Multisource Appraisal

Figure 11±7

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Critical Incident methodEx: A fire, sudden breakdown, accident

Workers reaction scale

A informed the supervisor immediately 5

B Become anxious on loss of output 4

C tried to repair the machine 3

D Complained for poor maintenance 2

E was happy to forced test 1

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Checklist method

�Simple checklist method

�Weighted checklist method

�Forced choice method

Simple checklist method:Is employee regular Y/ N

Is employee respected by subordinate Y/ N

Is employee helpful Y/ N

Does he follow instruction Y/ N

Does he keep the equipment in order Y/ N

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Weighted checklist method

weights performance rating

(scale 1 to 5 )

Regularity 0.5Loyalty 1.5

Willing to help 1.5

Quality of work 1.5

Relationship 2.0

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Forced choice method

Criteria Rating

1.Regularity on the job Most Least

�Always regular

�Inform in advance for delay

� Never regular

�Remain absent� Neither regular nor irregular

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Graphic R ating Scale� Continuous Rating Scale

� Discontinuous Rating Scale

Employee name_________ Deptt_______

Rater¶s name ___________ Date________

------------------------------------------------------------------------

Exc. Good Acceptable Fair Poor

5 4 3 2 1 _

Dependability

InitiativeOverall output

Attendance

Attitude

Cooperation

Total score Continuous R ating Scale

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Discontinuous R ating Scale

Attitude

No

Interest

Indifferent

Interested

Enthusiastic

Very

enthusiastic

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BARS( Behaviorally Anchored R ating Scale)

Step 1. Identify critical incidents

Step 2. Select performance dimension

Step 3. Retranslate the incidents

Step 4. Assign scales to incidents

Step 5. Develop final instrument

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MBO Process

Set organizational goals

Defining performance target Performance review

feedback

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2.Group Appraisal

Ranking Paired comparison

Forced distribution

Performance tests Field reviewtechnique

Performance Appraisal Methods

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Ranking method

Employee Rank

A 2

B 1

C 3

D 5

E 4

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Paired comparison method

A B C D E Final Rank

A - - - + + 3

B + - - + + 2

C + + - + + 1

D - - - - + 4

E - - - - - 5

No of Positive evaluation

Total no. of evaluation

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Forced Distribution method

10% 20% 40% 20% 10%

poor Below

average

average good Excellent

No.

of

employees

Force distribution curve

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Field review methodPerformance subordinate peers superior customer

Dimension

Leadership ^ ^

Communication ^ ^

Interpersonal skills ^ ^

Decision making ^ ^ ^

Technical skills ^ ^ ^

Motivation ^ ^ ^

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3 .Assessment Center Under this method performance of the individuals is appraised using several

techniques like in basket, role playing,case studies,simulation exercises

,structured in sight, transactional analysis,etc.

4 . Human R esource Accounting

This deals with the cost of the employees and their contributions to the

organizations.Cost of the employees includes cost of manpower

planning,recruitment , selection , induction ,placement ,training

,development, wages and benefits ,etc. and contribution is the money value of

employee service measured in terms of labour productivity.5. Psychological Appraisal

This is conducted to appraise the employee¶s potential.It consists of in-depth

interviews, psychological tests, consultations and discussions with

employees,supervisors,sub-ordinates and peers ,reviews of other evaluations

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Performance criteria for executives

For top managers

Return on capital employed

Contribution to community development

Degree of upward communication from

middle-level executives

Degree of growth and expansion of enterprise.

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For middle level managers

Departmental performance

Coordination among employees

Degree of upward communication from

supervisors

Degree of clarity about corporate goals and

policies

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For supervisors

Quality and quantity of output in a given period

Labor cost per unit of output in a given period

Material cost per unit in a given period Rate of absenteeism and turnover of employees

No of accidents in a given period

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Performance Appraisal System or

Process Establish Performance Standards

Communicate standards/expectations to the employees

Measure actual performance Adjust actual performance to the environmental influence

Compare the adjusted performance with that of previous

performances

Find deviations Communicate actual performance to employees

concerned

Suggest changes in job analysis and standards

Follow-up performance appraisal report.

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Performance Coaching and

Counselling Performance Coaching is a form of directive or non-

directive coaching. Directive Coaching involves the busy

Manager who sometimes acts as a Coach: telling,instructing, giving advice, offering guidance, giving

feedback, making suggestions etc. Non-Directive

Coaching involves helping someone to solve their own

problems.

The directive style of coaching has been adopted as themodel for coaching for performance, such as;

helping provide people with direction, guiding them in

how to master new skills, procedures, tasks and meet

performance goals etc

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Career Planning and

Development Career is a sequence of separate but related work

activities that provide continuity , order and meaning in a

person¶s life. Career planning is the process by which one selects career

goals and path to these goals.

Career development refers to the improvements one

undertakes to achieve a personal career plan.

Career management is the process of designing and

implementing goals, plans and strategies to enable the

organization to satisfy employee needs while allowing

individuals to achieve their career goals.

Process of Career Planning and

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Process of Career Planning and

Development

Analysis of individual skills,knowledge, abilities,aptitudes,etc.

Analysis of career opportunities both within and outside the organization.

Analysis of career demands on the incumbent in terms of

skills,knowledge,abilities,aptitude,etc.and in terms of qualifications,

experience and training received,etc.

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Need for Career Planning To attract competent persons and to retain them in the organization

To provide suitable promotional opportunities

To ensure employee development in order to facilitate them to meet

future challenges

To increase utilization of managerial reserves within an organization

To correct employee placement

To reduce employee dissatisfaction and turnover

To boost the morale of the employees and to motivate them

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Steps involved in Career

Development Assessment of Training needs

Linking the career needs with the

organizational vision.

Preparing an action plan to achieve the

vision

Career development programme should be

integrated with the organizational MDPs in

order to achieve results

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Advantages of CP&D Individuals get career guidance.

It facilitates employees to choose a career to suite their

life-style,family environment and scope of development Helps organizations in identifying internal employees

who can be promoted.

CD boosts the morale of the employees resulting in

increased job satisfaction. Secures employee commitment and loyalty.

Improves employees performance by fulfilling his esteem

needs.

Career Management through

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Career Management through

Internal Mobility

Promotions-It involves advancement of the employees to a

better job with greater responsibility,more prestige or

status,greater skill and increased pay.

Transfer- It is a lateral shift causing movement of individuals from one position to another usually without

involving any marked change in duties, responsibilities,

skills needed or compensation.

Demotion is reassignment of an employee to a lower level

job with delegation of responsibilities and authority

required to perform that lower level job with a lower pay.

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Types of PromotionVertical promotion/Dry Promotion-

Under this method employee is moved to higher level in the

organizational hierarchy with greater responsibility , authority ,pay

and status.

U p gradation- Under this, job is upgraded in the organizational hierarchy

offering employees more salary, higher authority and responsibility.

Bases of Promotion-

Merit-Based on skill knowledge, ability, efficiency and aptitude and

is measured on the basis of educational training and past employment

record.

Seniority- Based on length of service in the same job in the same

organization.

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Advantages and Disadvantages of Merit System

Advantages Disadvantages

Resources of higher order

of employees can be

better utilized.

Difficult to judge merit

Competent employeesare motivated to

contribute to

organizational

efficiency and

effectiveness.

May involve personal biasor prejudice

Golden hand-cuff to stopemployee turnover

Techniques of measurement are

subjective

Facilitates all-round

development of the

employee

Merit denotes past

achievement and does

not ensure future

success.

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Merits and Demerits of Seniority as a basis of Promotion

Merits Demerits

Measuring length of service

is relatively easy

Demotivates young and

more competent employees

Trade Unions support thissystem and it reduces

grievances and conflicts

It kills zeal and interest todevelop as everybody will

get promoted .

No scope for favoritism and

judgment

Un dynamic and old blood

diminishes organizational

effectiveness

There is an element of

certainty regarding

promotions

Distinguishing between job

seniority ,company

seniority,zonal senioriy ,etc

becomes difficult.

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Benefits of Promotion Promotions facilitate better utilization of the skills and knowledge of

the employees

It secures employee commitment

It boosts the morale of the employees thereby increasing their job

satisfaction

It improves organizational health

Problems with PromotionSome employees refuse promotion

Promotions disappoint some employees when favoritism is involved.

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Principles of Promotion Promotion policy should be uniform

It should be fair and impartial

It should be systematic

Should provide equal opportunities to all

It should contain clear cut norms for judging criteria,merit, length of

service,etc

Appropriate authority should be entrusted with the task of making a

final decision

Favoritism should not be taken as a basis for promotion.

It should contain promotional counselling,encouragement,guidance

and follow-up regarding promotional opportunities,etc.

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Types of Transfers Production Transfer-due to changes in production

R eplacement Transfer-due to replacement of long

standing employees in the same place. R otation Transfer- In order to increase the versatility of

the employees

Shift Transfer-Transfer of an employee from one shift to

another. R emedial Transfer-To correct wrong placements

Penal Transfer-initiated as a punishment or in

disciplinary action

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Reasons for Transfer To meet organizational requirements

To satisfy employees¶ needs

To utilize employee skill,knowledge,etc. To correct inter-personal conflicts

To give relief to employees who are indulged in

overburdened work for sometime.

As a measure of punishment to erring employees To minimize fraud or bribery which will result due to

permanent stay and contact of an employee with

customers

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Principles of Demotions Specifying circumstances under which employees will be demoted

like reduction in operations , in disciplinary cases ,etc.

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