PERFORMANCE APPRAISAL and CASE STUDY

BY

Akhil Ravula

Devathi Manmohan (Leader)

Aditya Shubhanayan

Kiran Kumar

Manjusha

Vikranth Singh

Yaswanth Harish

PRINCIPLES OF MANAGEMENT

(HU302)

GROUP - 7

Contents

Brief view on the Topic

Case Study on Microsoft Coperation

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Intro

Problem & Limitations

Solution and methods

Conclusion

Improvements / Recommendations

About

Process

Methods / Techniques

Advantages and Disadvantages

PERFORMANCE APPRAISAL

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One of the step in Staffing

Performance Appraisal ??

▸ Performance appraisal is the systematic evaluation of the individual with regard to his or

her performance on the job and their potential for development”_ BEACH.

▸ According to DALE YODGER,” Performance appraisal to all formal procedures aimed

working organization to evaluate personalities and contribution of one potential group

members”.

▸ EDWIN B.FILIPPO, defined has the term performance appraisal as “ A systematic

,periodic and so far as humanly possible , an impartial rating of an employee’s

excellence in matters pertaining to his present to his present job and his potentialities for

a better job “.

▸ According to JOHN A. SHUBIN defined as “Merit rating is a systematic appraisal of the

employee's personality and performance on the job and is designed to determine his

contribution and relative worth to the firm”.

▸ In the words of L. A. LARKIN, “Performance appraisal is the systematic assessment by

merit factors of the behaviour and /or ability of workers in their work and a means

whereby each worker may be rewarded a percentage in addition to his wage according

to his assessed merit value”.

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Definition

▸It 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’’.

▸Performance appraisal is also known as “merit

rating” or “efficiency rating”.

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Performance Appraisal ?? Meaning

▸ To review the performance of the employees.

▸ To judge the gap between the actual and the

desired performance.

▸ To help the management in exercising

organizational control.

▸ To diagnose the training and development needs of

the future.

▸Provide information to assist in the HR decisions like

promotions, transfers etc.

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Purpose

▸Provide clarity of the expectations and

responsibilities of the functions to be performed by the

employees.

▸ To judge the effectiveness of the other human

resource functions.

▸ To reduce the grievances of the employees.

▸ Helps to strengthen the relationship and

communication between superior –subordinates and

management – employees

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Purpose Cont…

Factors in evaluating the performance and progress

of an employee:

1. Knowledge of work 8. Honesty

2. Initiative 9. Ambition

3. Quality of work 10. Crisis Management

4. Target attainment 11. Discipline5. Aptitude 12. Punctuality etc.6. Degree of skill

7. Extent of co-operation with colleagues and superiors.

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Factors

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Process

Setting Performance

Standards

Communicating Standards

Measuring Standards

Comparing Standards

Discussing Results

Taking Corrective Measures

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Methods of Performance Appraisal

Traditional Methods

• Graphic Rating Scales

• Ranking Method

• Paired Comparison Method

• Forced Choice Description Method

• Forced distribution Method

• Checklist Method

• Essay or free form Appraisal

• Confidential Reports

• Group Appraisal

• Field Review Method

Modern Methods

• Assessment Center

• Human Resources Accounting Method

• Management by Objectives

• Productivity Measures

• Balance Score Card

• Psychological Appraisal

• Results Method

• Productivity Measures

• 3600 Appraisal

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Advantages / Benefits of using Performance Appraisal

Benefit for the Individual

•Gaining a better understanding of their role

• Understanding more clearly how and where they fit in within the wider picture

• A better understanding of how performance is assessed and monitored

•Getting an insight

•Improving understanding of their strengths and weaknesses and developmental needs

•Identifying ways in which they can improve performance

• Providing an opportunity to discuss and clarify developmental and training needs

• Understanding and agreeing their objectives for the next year

• An opportunity to discuss career direction and prospects.

Benefit to Team Leader / Manager

•hear and exchange views and opinions away from the normal pressure of work

• to identify any potential difficulties o weaknesses

•An improved understanding of the resources available

• to plan for and set objectives for the next period

• to think about and clarity their own role

• to plan for achieving improved performance

•to plan for further delegation and coaching

• to motivate members of the team

Benefit to Organisation

•A structured means of identifying and assessing potential

•Up-to-date information regarding the expectations and aspirations of employees

•Information on which to base decisions about promotions and motivation

•An opportunity to review succession planning

•Information about training needs which can act as a basis for developing training plans

•Updating of employee records (achievements, new competencies, etc)

•Career counselling

•Communication of information

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Disadvantages of using Performance Appraisal

Subject to Rater errors and biases

Very time Consuming

Halo Effect

Central Tendency

Recency error

Negative Approach and Resistance

Case Study on

MICROSOFT ORGANISATION

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MICROSOFT ORGANISATION

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Microsoft??15

▸Computer hardware and software industry , most

reliable and progressive computer software company

in the world.

▸Established in 1975 by bill Gates.

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▸During the 1990s, it could be recalled that the world’s

computer software and hardware industry was being

dominated by IBM, while Microsoft was still way behind but

nonetheless was already providing excellent competition. At

present, the situation has completely reversed.

▸During the height of its success, IBM decided to neglect the

development of its organizational culture and its employees

and concentrate more on efforts to sustain their profitability.

They invested heavily in research and development activities

to find out the most important computer products that were

being needed by the people.

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▸On the part of Microsoft, instead of worrying so

much about maximizing their profits, Bill Gates

prioritized on strengthening the organizational culture

of the company.

▸ He helped instill the values, mission and vision that

would remain as the solid foundations of achieving

success in Microsoft. Bill Gates focused more in

addressing the needs of the employees and making

sure that they would be working in an environment that

can bring out the best in their capabilities and skills.

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▸Such was the vision of Bill Gates that he knew that

profitability and progress would eventually come if he took

care of Microsoft’s organizational culture first.

▸He did not worry about the big lead that IBM was having

during the 1980s because he knew that Microsoft’s time to

dominate the computer hardware and software industry would

come.

▸He was not worried about the slow results because Gates

realized that as the employees and leaders of Microsoft are

given adequate time to understand the purpose and objectives

of the company, the more productive and profitable the

company is going to be in the long run.

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▸The prophecy of Bill Gates turned out to be correct as the strong and solid organizational culture of Microsoft that took years to establish eventually proved to be the winning formula for Microsoft to go ahead of IBM in the computer hardware and software industry.▸ However, it is important to know that there were plenty of challenges that Microsoft had to face especially in its human resource management prior to achieving an excellent organizational culture.

Problem and Limitations

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Problem 21

Discrimination:

Some Black American employees of Microsoft complained of

unfair practices being done to them by the management which led them

to eventually file cases. They were mentioning about their low salaries

as compared to white Americans who were experiencing bonuses and

incentives out of their performances. Black Americans also frequently

did not get any high ratings during performance assessments that

essentially prevented them from getting accepted with regard to their

applications for higher office. These poor performance assessment

scores also were usually used as basis for the management of Microsoft

to expel what they believed were underperforming employees from their

workforce and replace them more competent workers.

LIMITATIONS22

▸ Many factors from the internal and external business environment

impact the performance appraisal process.

▸ As key external factors may be considered the employee unions and

the law, whereas as internal factors may be considered the culture of

the company and the increasing use of teams for the work execution.

▸ In Microsoft , there are no employee unions as a multinational

enterprise is extremely careful to any legal issues. The culture of the

company, although it emphasizes employee initiatives and team

work, it could be said that it is rather strict and the employee has to

follow the hierarchy instead of taking independent decisions. This

actually is a hindrance to employee empowerment.

LEGAL RESTRICTIONS

▸The form of assessment chosen by the company

should be reliable, accurate and above all legal.

▸ Otherwise, the conclusions would not be a sound

basis for decisions on matters relating to personnel

and potentially laws such as equal employment

opportunities may be affected. Such issues arise when

an employee is dismissed, demoted or his/her

promotion is not realized.

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LEGAL RESTRICTIONS

▸Microsoft is particularly careful on issues

such as racial, religious and sex

discrimination.

▸However, it is noticed that top management

positions are mostly occupied by white males.

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Cont…

ERROR OF CENTRAL TENDANCY

▸Some reviewers do not wish to present employees

as fully effective or ineffective, and so they rate

everyone near the accepted average, something that

is the case in Microsoft.

▸ The findings provide assessments that are not

comparable with themselves, and they are unsuitable

for statistical analysis or other purposes.

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INTERCULTURAL EFFECTS

▸Everyone expects others to develop responses and

attitudes based on his/her own culture. Problems

appear in the cases where people from different

nationalities have to work together.

▸Microsoft is a multinational company and people

from different nationalities have to cooperate.

▸ So far, there has not been a particular programme

aiming at training people to work with people from

other cultures.

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PERSONAL BIAS

▸Negative perceptions of an evaluator for a group of

people can distort the rating they receive.

▸For example, it has been observed that some male

supervisors are unfair to women subordinates who

hold traditionally male jobs.

▸The phenomenon of discrimination between men

and women is something that still exists to a lesser

degree than before.

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Evaluators' prejudices

▸ The problem with subjective methods is the possible

influence of the outcome by the evaluators and the

personality traits, ideas and opinions that they have, or

even the kind of relationships they have with the

evaluated employee.

▸The training of managers that carry out assessments

will help to reduce subjectivity.

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Evaluators' prejudices

▸So far, only the Managing Directors of all

subsidiaries have received training on employee

performance appraisal and although subjectivity is not

reduced, it was eliminated to a large extent.

▸The training should be expanded to the other

managerial positions since it has been noticed that

subjectivity played a crucial role in subordinates'

performance appraisal.

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Cont…

Grace and Rigor

▸In the first case, the assessor makes the

assessment with relative ease and ranks

favorably while the opposite happens with the

manager that seeks to appear 'tough' and is

negative in appraising employee performance.

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Grace and Rigor

▸Effects of grace and hardness are extreme, causing

grievances and problems and are usually presented in

companies with vague ideal performance levels.

▸This is also the case with some qualitative jobs in

Microsoft where as the performance levels were

vague, the line of responsibility was also vague and

the employee was subject to the assessors' personal

grace or rigor.

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Cont…

Solution and Methods of Performance Appraisal

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Solution33

Solution implemented was the change of the performance appraisal

system from the forced ranking system towards other methods based on

working conditions.

▸ The problem with the forced ranking system was that it was a biased

process of determining the employees that are going to get the

incentives for excellent performance.

Methods they came with 34

▸ Rating scales

▸ Critical incident method

▸ Balanced scorecard

▸ 360 degree feedback

▸ Field review method

Rating scales35

▸ It is the oldest and most frequently occurring performance appraisal

method that requires the existence of an evaluator who gives a score for

the performance of each employee based on a scale ranging from the

lowest to the highest level.

▸The responses of the assessor can be linked to numerical values

allowing this way to export average scores for each employee which can

then be compared. This is directly related to the reward system and

salary increase.

Rating scales36

▸ Advantages of this method is the low development and

management cost, the evaluators do not require significant training or a

lot of time to complete the relevant criteria form as well as that it can be

applied to a large number of employees.

▸The disadvantages are also pretty. Prejudices, perceptions and

personality traits of the head may affect the assessment to be made as

well as the relationship s/he has with each subordinate.

▸ This is the performance appraisal used for all Microsoft subs.

Cont…

Critical incident method37

▸The evaluator observes and records very good and bad behaviours of the respective employee that occur during the period the appraisal takes place.

▸ The observations are grouped based on the criterion on which such cooperativity, work quality, consistency, etc. and then conclusions for the employee are drawn, his/her strong points as well as the points that need improvement.

▸ Employers often use this method in addition to the method of rating scales method. This ensures that the supervisor thinks of the subordinate throughout the year because these events have to be accumulated.

Critical incident method38

▸ The most useful feature of this method is to draw conclusions directly related to the job and benefit particularly the employee. In addition, it further reduces the effect of personal bias of the head.

▸ The main disadvantage is that the assessors record events in the beginning of the appraisal period, followed by a blank space where they neglect their duties and when the time of appraisal comes, they observe and record behaviours. In this case, the assessor is affected by the events of the recent past and the result can not be objective.

Cont…

Critical incident method39

▸The method of critical incidents consumes much of

supervisor's time.

▸ Of course, since many reviewers find difficult to

remember all the facts relating to each employee throughout

the assessment period, a calendar of critical events can be

a very useful support tool for the other assessment

methods.

▸This method has been used in Microsoft UK in

combination with the rating scales method, mostly for

qualitative jobs.

Cont…

Balanced Scorecard40

▸ Customers' perspective

▸ Internal perspective

▸ Leadership and learning perspective

▸ Economic perspective

360 Degree Feedback

▸It is an appraisal form where someone is appraised

by assessors from different hierarchical levels,

departments.

▸The results of the assessors are grouped aiming at

seeing what others think on specific points of our

performance in relation to what it is believed by the

employee and his/her supervisor.

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Field review method

▸ A specialized executive visits the workplace and

assists supervisors in the performance appraisal

process.

▸ The appraisal report is sent to the supervisor, who

makes changes, comments or notes as accepts it as it

is and then communicates it to the employee.

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Conclusion

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Problem Case

▸Brutal Performance appraisal:

The management also demanded their workers to provide

explanations especially with regard to their actions related to their

responsibilities. Everybody received positive and negative

feedbacks, and even those employees who were performing well

were asked not to celebrate but to bring their efforts to even

higher levels. Those underperforming employees were being

threatened to be expelled from the company if their performances

and outputs did not improve within a certain period.

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Adverse Effects

▸ In order to find immediate replacements for the terminated Black

Americans, Microsoft recruited contractual workers, but they too were not

able to perform their responsibilities according to the standards of the

company.

▸ Many contractual workers did not even bother to finish their contracts

out of their disappointing experiences with Microsoft.

▸ An enjoyable and challenging place to work for eventually transformed

into a frustrating, pressure-packed office where the leaders were very

eager to find the faults and weaknesses of the employees

▸ Brought down their morale and motivation to work hard, promoted

backstabbing within colleagues

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Solutions by CEO Steve Ballmer46

Improving communication lines

Improved performance appraisal and compensation system

Increase in employee benefits

New Workplace Setups

Improved performance appraisal and compensation system

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▸ Change of the performance appraisal system from the forced ranking system towards commitment rating▸ Problem with the forced ranking system was that it was a biased process of determining the employees that are going to get the incentives for excellent performance▸ In the commitment rating, all employees of Microsoft will have equal opportunities to get incentives particularly in the management of their stocks in the company depending on their performance▸ Put to rest those issues and controversies regarding its unfair performance evaluation process that even led to some Black American employees filing lawsuits against Microsoft

Suggestions from our group 48

Microsoft needs to focus more on their workers instead of thinking about their profits

Microsoft has to focus to try and reduce its perfectionist organizational culture in an effort to lessen the pressure that is always being felt by their employees

Performance appraisal needs to be more lenient and allow workers to have room for improvement and freedom

Microsoft needs to give better benefits to their outstanding employees other than stock options

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THANKS!