By Yashu Bansal, Chanakya National Law University, Delhi
“Editor’s Note:This paper discusses the concept of performance appraisal. Performance Appraisal is a structured method of evaluating an employee’s performance in an organisation. The concept is important as it helps identify the strengths and weaknesses of employees, assists in succession planning and also serves as a tool for motivating the employees. There are several techniques for conducting a performance appraisal, some of which include rating scales and confidential information report. The paper then goes on to highlight the pitfalls of performance appraisal and suggests solutions to make it effective.”
Dulewicz says “A basic human tendency is to make judgments about those one is working with, as well as about oneself.” 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. 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! There is, 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.
Performance appraisal is a formal, structured system of measuring and evaluating an employee’s job, related behavior and outcome to discover how and why the employee is presently performing on the job and how the employee can perform more effectively in the future so that the employee, organization and society are all benefited. In today’s world, it is very important to the manpower development because it reveals the strength and weakness of an employee and a development plan for each employee. The appraised employee will thus strive to work harder, attaining a fresh motive and will qualify himself for more responsibility, higher targets and promotion. Performance appraisal is a great skill of human resource management as satisfied employees create a friendly environment in the work place and a healthy environment in turn benefits the organization and the society in a large scale. It serves as an auditing and control function. Information obtained from performance appraisal is used for promotion and transfer, training and development, feedback, discerning supervisory personnel, compensation and follow up interviews. It is a very essential function of management as it motivates the employees to work harder which in turn benefits the organization. Therefore, improving the performance appraisal for everyone should be among the highest priorities of contemporary organisations.
Uses Of Performance Appraisal
Performance appraisal is the process by which an organization obtains feedback on performance. It serves as an auditing and control function. Information obtained from performance appraisal is used for promotion and transfer, training and development, feedback, discerning supervisory personnel, compensation and follow up interviews. It is a very essential function of management as it motivates the employees to work harder which in turn benefits the organization.
Performance appraisal has several uses in an organization. Some of its main uses can be described as follows.
- Performance appraisal is essential for the effective management and evaluation of staff. Appraisals help develop individuals, improve organizational performance, and feed into business planning. Formal performance appraisals are generally conducted annually for all staff in the organization. Each staff member is appraised by their line manager. Directors are appraised by the CEO, who is appraised by the chairman or company owners, depending on the size and structure of the organization. It also has a 360 degree appraisal approach which means that the subordinated is rated by the superior, the superior is rated by the subordinate and the peers also rate their colleagues.
- Annual performance appraisals enable management and monitoring of standards, agreeing expectations and objectives, and delegation of responsibilities and tasks. Staff performance appraisals also establish individual training needs and enable organizational training needs analysis and planning. If the performance is carried on well, the employees can be analyzed well and delegated responsibilities. The company becomes aware of the needs of the employees and further decides which employee needs individual training.
- Performance appraisals also typically feed into organizational annual pay and grading reviews, which commonly also coincide with the business planning for the next trading year. Performance appraisals generally review each individual’s performance against objectives and standards for the trading year, agreed at the previous appraisal meeting. Performance appraisals provide a formal, recorded, regular review of an individual’s performance, and a plan for future development. They basically set a standard of achievement for the employee and a standard for evaluation by the organization.
- Performance appraisals are also essential for career and succession planning – for individuals, crucial jobs, and for the organization as a whole. Every individual has his own goals and future plans. He has to face every stage in the career phase. Performance appraisal gives him the strength to move on with his career in a positive way.
- Performance appraisals are important for staff motivation, attitude and behavior development, communicating and aligning individual and organizational aims, and fostering positive relationships between management and staff. These all are the basic uses of performance appraisal. An optimist employee with a good link with its peers, receiving good appraisal is a very bright hope for any organization.
Job performance appraisals are therefore vital for managing the performance of people and organizations. It has some drawbacks as well but these drawbacks can be treated. Performance appraisal is a very essential tool for an organization and if handled carefully, the system of performance appraisal can work wonders. With time, it is gaining more and more popularity since every individual has become ambitious and strives for betterment.
System Of Performance Appraisal
The criteria for appraisal can be qualitative or quantitative. Quantitative criteria are objective and numbered, like the production criteria, absenteeism, accidents, etc. Qualitative criteria are subjective because they are based on human judgment, like ability to communicate, interpersonal skills, teamwork, etc. Objective criteria are easy to set but are more relevant for lower level employees. As one moves up the hierarchy, jobs become more complex and unprogrammed. It becomes difficult to set quantitative objectives. There are several systems to appraise employees. In this project, a few of them will be discussed in this topic.
- Confidential Report: This is a very old system of appraising in which the employees are rated by their subordinates without them being informed. A confidential report on their performance, attitude, behaviour and their ability to get along with others is maintained by the immediate senior who is in regular contact with his subordinate. The employees are given no feedback on their appraisal until and unless the remarks are unsatisfactory. This report is given once a year. This system has several drawbacks since it is highly impressionistic and subjective. The evaluator is free to use his own criteria for judgment. Thus, this system is not much in use nowadays.
- Rating Scales: This system is an improvement over the confidential report as it is more objective and measures the magnitude of performance and characteristics. A rating scale may be a 3 point, a 5 point or even more. This system is very easy to use. However, there is one negative aspect of this system. The appraisers tend to give an average marking. Another drawback is that the evaluator tends to get influenced by one or two dimensions of the employee and marks the other dimensions accordingly. This system is also very rarely used nowadays due to its flaws and drawbacks.
- Ranking Method: The simple ranking method is the simplest method of performance appraisal. The manager evaluates all his subordinates by rank ordering them from exceptional to poor performers. This forces the manager to make man to man comparisons. If there are multiple superiors, rankings from all superiors may be obtained and an average rank will be calculated for the employee. Paired comparison is another system of appraising in which the superior is given two names of subordinates and he has to decide which among them a better performer is. In this way, all possible comparisons are made. The final ranks are then obtained by counting the number of times an employee has been evaluated as better than the other. The forced distribution is also a kind of ranking method in which the superior is forced to distribute all employees working under him on a normal distribution scale. The performance increases from poor, satisfactory, average to good and then excellent.
- Critical Incident Technique: This is a very interesting system. In this, the superiors records noteworthy critical incidents in a diary. The incidents can be exceptionally good behaviour or it can be a exceptionally poor behaviour. A checklist of all such notes is prepared and it is then used for employee evaluation. However, constructing a checklist is a difficult task.
These are few of the several systems of performance appraisal. If used skillfully, this is a very important tool to bring prosperity and development in an organization. This project will next discuss the factors of performance appraisal.
Factors Of Performance Appraisal
Performance appraisal is the process by which an organization obtains feedback on performance. It serves as an auditing and control function. Information obtained from performance appraisal is used for promotion and transfer, training and development, feedback, discerning supervisory personnel, compensation and follow up interviews. There are several factors on which the performance appraisal of an employee mainly depends. The five main factors are as follows:
- Concept: This dimension includes duties, responsibilities, behaviour and traits. There are basically two types of people involved in this. The appraiser, one who does the appraisal and the appraisee, one who gets apprised. The appraisee expects to know what his duties and responsibilities are and the appraiser should prepare the job description. The appraisee expects to know what is expected of him and whether the expectations are reasonable and the appraiser should facilitate appraise to set goals. The appraisee expects to know how he is doing and the appraiser should analyze results with the appraisee. The appraisee expects to have the appraiser’s help when required and the appraiser should advise, guide, coach and counsel. The appraisee expects to be rewarded for his performance and the appraiser should reward good performers.
- Criteria: Performance measures like output, quality, punctuality, cost control contribution, job knowledge, discretion, initiative, teamwork, resourcefulness, honesty and leadership qualities are usually reckoned as criteria against which performance is assessed. Many a times, these words carry double meaning. For instance, a resourceful employee is to have resource in the job context only, not in attending the personal chores of the superiors like obtaining a driving license. In most cases, the criterion involves a combination of personal data, output data and judgemental data. These factors need to be dealt with in a very careful and judicious way since it concerns the qualities of an individual and thus requiring a subjective approach.
- Context: The top management philosophy values and believes that the organization influences the notions about people in the organization and the types of control, motivation and communication systems. The employees, who do not hold a positive attitude about the work culture, may tend to perpetuate a system of management of control because of their habits. These employees are handed over targets and appraisal is done to the individuals. On the other hand, the employees who have a positive notion about the work culture in the organization are involved into discussions and agreements and are then appraised as a joint review with a problem solving approach.
- Culture: Studies and commentaries on Indian organizations seem to to point to a pattern where the loyalties of employees are more to the people than to the tasks or to organizations. People are power centered in the sense that those in authority like to influence their subordinates and the subordinates in their own interests are willing to accept a dependency syndrome. This factor is dangerous since the system o appraisal turns out to be personal than professional.
- Contingency: The most important aspect of any information and control mechanism in any organization is the use it is put to and how? Unless there is a systematic effort to link performance appraisal to other sub-systems of human resource management such that all personnel decisions use the performance appraisal data as a critical input, it becomes difficult to impart seriousness to the system. The result would be apathy on the point of both the appraisee and the appraiser to the entire process which would eventually become a mere ritual. Therefore extra ordinary work should be rewarded in an extra ordinary manner.
These are some basic categories of the factors on which the appraisal of an employee depends.
Pitfalls Of Performance Appraisal
What are pitfalls? Pitfalls are the problems being faced in a certain process or method. There are several pitfalls in the method of performance appraisal as well. Some of the major pitfalls are:
- ‘Straight Ticket’ Error: The straight ticket error is the tendency to rate people using only the middle of the scale. As a result, a majority of ratings are “Meets Expectations”, “Competent” or “Average”. This tendency is typically caused by managers who are too cautious or conservative in making evaluations. They do not want to either praise or criticize, or they may not be able to effectively distinguish between varying levels of performance. Impact: Employees do not have a clear sense of their strengths. They are de-motivated because they see performance evaluation as meaningless and gain no feedback on how they can improve.
- Halo Effect: The Halo Effect refers to the tendency to rate an employee high on all areas of performance. If an employee is good in one area they are, in turn, good in all areas. For instance, if an employee is punctual in submitting his work and meeting deadlines, he is rated high even in being creative. This bias may be the result of a manager’s inability to identify areas for improvement, or a desire to present the performance of team members in a positive light. Impact: If given all high ratings, employees will not be able to apply energy toward changing behavior or learning new skills and will not see any reason to improve. Having little incentive to develop can cause the employee to become disengaged.
- Reverse Halo or “Horns” Effect: While less common than the Halo Effect, the Reverse Halo Effect is the tendency to rate a person low across all areas of performance. Similar to the Halo Effect, if an employee is struggling or not performing up to expectation in one area they are, in turn, a poor performer in all areas. . For instance, if a creative employee is unpunctual in submitting his work and meeting deadlines, he is rated low even in his creativity. This tendency is typically caused by personal bias or the inability of a manager to see past a particular performance incident or issue. Impact: An employee is very likely to perceive the performance appraisal process as unfair if they are not recognized for the strengths that they do offer the organization. The feeling of an unfair treatment will certainly impact performance and employee engagement.
Other basic problems in performance appraisal are as follows:
- Not assessing actual performance: Most of the assessment that managers complete focuses on “the person,” including characterizations of their personal “traits” (i.e. commitment), knowledge (i.e. technical knowledge) or behaviors (i.e. attendance). While these factors may contribute to performance, they are not measures of actual output. If you want to assess the person, call it “person appraisal.” Performance is output quality, volume, dollar value, and responsiveness.
- Infrequent feedback: If the primary goal of the process is to identify and resolve performance issues, executing the process annually is unreasonable. A quality assessment/control program anywhere else in the business would operate in real time. At the very minimum, formal feedback needs to be given regularly. Delay in feedback reports bring in a very negative outlook of the system of performance appraisal.
- Non-data-based assessment: Most processes rely 100% on the memory of those completing the assessment because pre-populating the forms with data to inform decisions would be too difficult (cynicism). In addition, most assessment criteria are “fuzzy” and subjective. Many a times, there is no accurate data to rate the employees. Rating is done very casually without any specific data. This results to be a great problem therefore.
- No integration: The process of performance appraisal is supposed to be fully integrated with compensation, performance management, development, or staffing (internal movement). A lack of integration and coordination leads to duplication and missed opportunity. This creates a great problem since an employee rated well may not be compensated well. The integration in the system is a must.
- Each year stands alone: Each performance appraisal by definition covers a finite period of time. However, if the goal is to assess potential and identify patterns, an employee’s performance must be assessed over multiple years. An employee whose performance may have been poor in a certain year may have performed in an excellent manner in the next year. Degrading his rank due to his performance in the earlier year is complete injustice.
- The factors are all equal: Most forms treat all assessment factors as if they are of equal importance. Instead, they should be weighted based on their relative importance in a particular job. For instance a janitor’s customer service rating should be weighted lower than for a salesperson. This equal approach is not very much helpful for the improvement of the employees in all sections of work.
- Managers are not trained: In most organizations, managers are not trained on how to assess and give honest feedback. If the process includes a career development component, it is even more likely that managers will not know how to enhance the career path of their employees. To rate a person, the one rating should be well aware of the factors and have sufficient knowledge about the field of work.
- Corporate culture issues: Subjective appraisals can restrict cultural change in organizations. In some organizations, there are cultural norms and values that influence performance appraisals. For example, in one organization new hires were automatically given an average rating for their first year, regardless of their actual performance. It is not essential that all fresh employees are average performers and all old ones are brilliant performers.
- Inconsistency across managers: Some managers are naturally “easy raters” while others are not. As a result, employees working under easy managers have a better chance of promotion due to their higher scores. In firms that rely heavily on the narrative portion of the assessment, having a manager with poor writing skills may hamper an employee’s career. Without “benchmark” numbers to set as a standard, inconsistency is guaranteed in large organizations.
- High anxiety: Because the process is so subjective and no benchmark performance numbers are set in advance, uncertainty can cause many employees high levels of anxiety weeks before the process. Managers may also be anxious because of the uncertainty related to an employee’s reaction. I know one employee who sincerely thought she was going to be fired prior to her assessment but ended up being the highest rated employee on the team. Employees should have an accurate idea of their assessment long before any meeting is scheduled.
- One-way communication: Some managers simply give the employee the form to quickly sign and they don’t even solicit feedback. Many employees are intimidated by managers and the process, and as a result, they say nothing during or after the appraisal. Lack of communication thus becomes a great pitfall in the system of performance appraisal.
- Self-assessment is not possible: If an ambitious employee wanted to self-assess their performance midstream (in order to improve), most processes do not provide access to the instrument. Providing each employee with a virtual assessment scoreboard and performance management process would be an ideal solution.
- A time-consuming process: Most of the forms are incredibly long and time-consuming. As a result, some managers routinely recycle “last year’s” evaluations. If the HR manager is required to sit in on the sessions, the amount of wasted time increases significantly. Therefore, if seen with an open mind, the process of performance appraisal may seem to be wastage of time.
- Managers don’t know the employee: Managers of large and global organizations, as well as newly hired and “transferred in” managers may be forced to do appraisals on employees they barely know. Recently promoted managers may be forced to assess their former friends and colleagues. Following a merger, managers are likely to be confused about whether to focus on the whole year or just “post-merger” work. All these drawbacks of management are very harmful for the appraisal of the employees.
- Disconnected from job descriptions: In many cases, the factors on the form are completely different from the factors on an employee’s job description, bonus criteria, or yearly goals. This can confuse employees and cause them to lose focus. This detachment from the job description is a major flaw in the system of performance appraisal.
These are some of the most important and basic flaws in the system of performance appraisal in an organization. These problems should be dealt with in the best possible way and as fast as possible because performance appraisal is a very essential tool which can be used to improve the personnel stock of an organization.
Solutions To The Problems
Where there are problems, there definitely exist solutions as well. These are some of the solutions which if followed properly can avoid the problems in performance appraisal.
- The performance factors and criteria should be well defined. An appraiser should be well aware of the grounds on which he is supposed to rate an employee. He should follow the job description factors and rate the subordinates thereby. He should himself be a trained employee and know that his ratings will affect the career of the employee.
- The employees should be rated by the superiors who know them. The appraiser should be well aware and familiar with his subordinate. The subordinate superior relationship should be strong and close.
- The appraisers should prepare a checklist of the actions of their employees whom they are to rate. This will help them to avoid the halo effect and the attitude of giving an average score.
- Personal bias should completely be removed by evaluating the subordinates. Many a times, the superiors rate the employees as per their personal views. If an employee is of his relation, he gets appraised earlier. This is totally unfair and unjust to the other employees. This practice should be ignored.
- Faster feedback is yet another important solution for the betterment of the performance appraisal. If the employees are informed about their performance in time, a positive aspect of the system is built in the minds of the employees and of the organization as well.
These are some of the basic solutions of the the pitfalls of performance appraisal. If followed well, these can make the system function well.
Performance appraisal is a formal, structured system of measuring and evaluating an employee’s job, related behavior and outcome to discover how and why the employee is presently performing on the job and how the employee can perform more effectively in the future so that the employee, organization and society are all benefited. In today’s world, it is very important to the manpower development because it reveals the strength and weakness of an employee and a development plan for each employee. The appraised employee will thus strive to work harder, attaining a fresh motive and will qualify himself for more responsibility, higher targets and promotion. The criteria for appraisal can be qualitative or quantitative. Quantitative criteria are objective and numbered, like the production criteria, absenteeism, accidents, etc. Qualitative criteria are subjective because they are based on human judgment, like ability to communicate, interpersonal skills, teamwork, etc. Objective criteria are easy to set but are more relevant for lower level employees. As one moves up the hierarchy, jobs become more complex and unprogrammed. It becomes difficult to set quantitative objectives. There are several factors on which the performance appraisal of an employee mainly depends.
However, there are certain problems which hinder the way to successful appraisal. Problems like halo effect, reverse effect and straight ticket error avoid the managers from appraising their subordinates in a just and fair method. These problems have their solutions as well. Keeping an open mind, well communicated relations between superiors and subordinates and regular feedback are the solutions to solve the problems. Performance appraisals are important for staff motivation, attitude and behavior development, communicating and aligning individual and organizational aims, and fostering positive relationships between management and staff. These all are the basic uses of performance appraisal. . Performance appraisal is a very useful technique to motivate the employees of an organization. It should be executed in a fair and just manner so that the employees can be kept satisfied and happy as an organization is made up of employees and happy employees contribute to the prosperity of the organization.
Edited by Kudrat Agrawal
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- Forced Distribution, available at http://www.ehow.com/about_6711372_definition-forced-distribution-performance-appraisals.html