Performance Appraisal Methods
“It is a systematic evaluation of an individual with respect to performance on the job and individual’s potential for development.”
Definition 2: Formal System, Reasons and Measures of future performance
“It is formal, structured system of measuring, evaluating job related behaviors and outcomes to discover reasons of performance and how to perform effectively in future so that employee, organization and society all benefits.”
Meaning of Performance Appraisals
Performance Appraisals is the assessment of individual’s performance in a systematic way. It is a developmental tool used for all round development of the employee and the organization. The performance is measured against such factors as job knowledge, quality and quantity of output, initiative, leadership abilities, supervision, dependability, co-operation, judgment, versatility and health. Assessment should be confined to past as well as potential performance also. The second definition is more focused on behaviors as a part of assessment because behaviors do affect job results.
Performance Appraisals and Job Analysis Relationship
|Job Analysis à||Performance Standards à||Performance Appraisals|
|Describe the work and personnel requirement of a particular job.||Translate job requirements into levels of acceptable or unacceptable performance||Describe the job relevant strengths and weaknesses of each individual.|
Objectives of Performance Appraisals
Use of Performance Appraisals
3. Training and Development
4. Compensation reviews
5. Competency building
6. Improve communication
7. Evaluation of HR Programs
8. Feedback & Grievances
4 Goals of Performance Appraisals
|General Goals||Specific Goals|
|Developmental Use||Individual needs|
Transfers and Placements
Strengths and Development needs
|Administrative Decisions / Uses||Salary|
Retention / Termination
Poor Performers identification
|Organizational Maintenance||HR Planning|
Organizational Goal achievements
HR Systems Evaluation
Reinforcement of organizational needs
For HR Decisions
Performance Appraisal Process
1. Objectives definition of appraisal
2. Job expectations establishment
3. Design an appraisal program
4. Appraise the performance
5. Performance Interviews
6. Use data for appropriate purposes
7. Identify opportunities variables
8. Using social processes, physical processes, human and computer assistance
Difference between Traditional and Modern (Systems) approach to Appraisals
|Categories||Traditional Appraisals||Modern, Systems Appraisals|
|Guiding Values||Individualistic, Control oriented, Documentary||Systematic, Developmental, Problem solving|
|Leadership Styles||Directional, Evaluative||Facilitative, Coaching|
TECHNIQUES / METHODS OF PERFORMANCE APPRAISALS
Numerous methods have been devised to measure the quantity and quality of performance appraisals. Each of the methods is effective for some purposes for some organizations only. None should be dismissed or accepted as appropriate except as they relate to the particular needs of the organization or an employee.
Broadly all methods of appraisals can be divided into two different categories.
Past Oriented Methods
1. Rating Scales: Rating scales consists of several numerical scales representing job related performance criterions such as dependability, initiative, output, attendance, attitude etc. Each scales ranges from excellent to poor. The total numerical scores are computed and final conclusions are derived. Advantages – Adaptability, easy to use, low cost, every type of job can be evaluated, large number of employees covered, no formal training required. Disadvantages – Rater’s biases
2. Checklist: Under this method, checklist of statements of traits of employee in the form of Yes or No based questions is prepared. Here the rater only does the reporting or checking and HR department does the actual evaluation. Advantages – economy, ease of administration, limited training required, standardization. Disadvantages – Raters biases, use of improper weighs by HR, does not allow rater to give relative ratings
3. Forced Choice Method: The series of statements arranged in the blocks of two or more are given and the rater indicates which statement is true or false. The rater is forced to make a choice. HR department does actual assessment. Advantages – Absence of personal biases because of forced choice. Disadvantages – Statements may be wrongly framed.
4. Forced Distribution Method: here employees are clustered around a high point on a rating scale. Rater is compelled to distribute the employees on all points on the scale. It is assumed that the performance is conformed to normal distribution. Advantages – Eliminates Disadvantages – Assumption of normal distribution, unrealistic, errors of central tendency.
5. Critical Incidents Method: The approach is focused on certain critical behaviors of employee that makes all the difference in the performance. Supervisors as and when they occur record such incidents. Advantages – Evaluations are based on actual job behaviors, ratings are supported by descriptions, feedback is easy, reduces recency biases, chances of subordinate improvement are high. Disadvantages – Negative incidents can be prioritized, forgetting incidents, overly close supervision; feedback may be too much and may appear to be punishment.
6. Behaviorally Anchored Rating Scales: statements of effective and ineffective behaviors determine the points. They are said to be behaviorally anchored. The rater is supposed to say, which behavior describes the employee performance. Advantages – helps overcome rating errors. Disadvantages – Suffers from distortions inherent in most rating techniques.
7. Field Review Method: This is an appraisal done by someone outside employees’ own department usually from corporate or HR department. Advantages – Useful for managerial level promotions, when comparable information is needed, Disadvantages – Outsider is generally not familiar with employees work environment, Observation of actual behaviors not possible.
8. Performance Tests & Observations: This is based on the test of knowledge or skills. The tests may be written or an actual presentation of skills. Tests must be reliable and validated to be useful. Advantage – Tests may be apt to measure potential more than actual performance. Disadvantages – Tests may suffer if costs of test development or administration are high.
9. Confidential Records: Mostly used by government departments, however its application in industry is not ruled out. Here the report is given in the form of Annual Confidentiality Report (ACR) and may record ratings with respect to following items; attendance, self expression, team work, leadership, initiative, technical ability, reasoning ability, originality and resourcefulness etc. The system is highly secretive and confidential. Feedback to the assessee is given only in case of an adverse entry. Disadvantage is that it is highly subjective and ratings can be manipulated because the evaluations are linked to HR actions like promotions etc.
10. Essay Method: In this method the rater writes down the employee description in detail within a number of broad categories like, overall impression of performance, promoteability of employee, existing capabilities and qualifications of performing jobs, strengths and weaknesses and training needs of the employee. Advantage – It is extremely useful in filing information gaps about the employees that often occur in a better-structured checklist. Disadvantages – It its highly dependent upon the writing skills of rater and most of them are not good writers. They may get confused success depends on the memory power of raters.
11. Cost Accounting Method: Here performance is evaluated from the monetary returns yields to his or her organization. Cost to keep employee, and benefit the organization derives is ascertained. Hence it is more dependent upon cost and benefit analysis.
12. Comparative Evaluation Method (Ranking & Paired Comparisons): These are collection of different methods that compare performance with that of other co-workers. The usual techniques used may be ranking methods and paired comparison method.
- Ranking Methods: Superior ranks his worker based on merit, from best to worst. However how best and why best are not elaborated in this method. It is easy to administer and explanation.
- Paired Comparison Methods: In this method each employee is rated with another employee in the form of pairs. The number of comparisons may be calculated with the help of a formula as under.
N x (N-1) / 2
Future Oriented Methods
1. Management By Objectives: It means management by objectives and the performance is rated against the achievement of objectives stated by the management. MBO process goes as under.
- Establish goals and desired outcomes for each subordinate
- Setting performance standards
- Comparison of actual goals with goals attained by the employee
- Establish new goals and new strategies for goals not achieved in previous year.
Advantage – It is more useful for managerial positions.
Disadvantages – Not applicable to all jobs, allocation of merit pay may result in setting short-term goals rather than important and long-term goals etc.
2. Psychological Appraisals: These appraisals are more directed to assess employees potential for future performance rather than the past one. It is done in the form of in-depth interviews, psychological tests, and discussion with supervisors and review of other evaluations. It is more focused on employees emotional, intellectual, and motivational and other personal characteristics affecting his performance. This approach is slow and costly and may be useful for bright young members who may have considerable potential. However quality of these appraisals largely depend upon the skills of psychologists who perform the evaluation.
3. Assessment Centers: This technique was first developed in USA and UK in 1943. An assessment center is a central location where managers may come together to have their participation in job related exercises evaluated by trained observers. It is more focused on observation of behaviors across a series of select exercises or work samples. Assessees are requested to participate in in-basket exercises, work groups, computer simulations, role playing and other similar activities which require same attributes for successful performance in actual job. The characteristics assessed in assessment center can be assertiveness, persuasive ability, communicating ability, planning and organizational ability, self confidence, resistance to stress, energy level, decision making, sensitivity to feelings, administrative ability, creativity and mental alertness etc. Disadvantages – Costs of employees traveling and lodging, psychologists, ratings strongly influenced by assessee’s inter-personal skills. Solid performers may feel suffocated in simulated situations. Those who are not selected for this also may get affected.
Advantages – well-conducted assessment center can achieve better forecasts of future performance and progress than other methods of appraisals. Also reliability, content validity and predictive ability are said to be high in assessment centers. The tests also make sure that the wrong people are not hired or promoted. Finally it clearly defines the criteria for selection and promotion.
4. 360-Degree Feedback: It is a technique which is systematic collection of performance data on an individual group, derived from a number of stakeholders like immediate supervisors, team members, customers, peers and self. In fact anyone who has useful information on how an employee does a job may be one of the appraisers. This technique is highly useful in terms of broader perspective, greater self-development and multi-source feedback is useful. 360-degree appraisals are useful to measure inter-personal skills, customer satisfaction and team building skills. However on the negative side, receiving feedback from multiple sources can be intimidating, threatening etc. Multiple raters may be less adept at providing balanced and objective feedback.
Performance appraisals form an essential part of the HR department as they provide important and useful information for the assessment of employee’s skill, knowledge, ability and overall job performance. These appraisals are not only used to eliminate behavior and productivity issues, but also to motivate employees to contribute more. There are many methods that organisations can implement depending on their preference as most have their specific advantages as well as limitations. Let us have a look at some of them in more detail.
Graphic Rating scale:
A graphic rating scale lists the traits each employee should have and rates workers on a numbered scale for each trait. The scores are meant to separate employees into tiers of performers, which can play a role in determining promotions and salary adjustments. The method is easy to understand and quite user friendly. It allows behaviors to be quantified making appraisal system much easier.
However, the scale has disadvantages that make it difficult to use as an effective management tool. Even with intense training, some evaluators will be too strict. Some will be too lenient, and others may find it hard to screen out their personal agendas. Although it is good at identifying the best and poorest of employees, it does not help while differentiating between the average employees.
Analyse performance of employees working on Project A from April to June 2017
Essay Performance Appraisal method:
Essay Appraisal is a traditional form of Appraisal also known as “Free Form method.” It involves a description of the performance of an employee by his superior which needs to be based on facts and often includes examples to support the information. Under this method, the rater is asked to express the strengths and weaknesses of the employee’s behavior.
This technique is normally used with a combination of the graphic rating scale because the rater can present the scale in more detail by also giving an explanation for his rating. While preparing the essay on the employee, the rater also needs to consider job knowledge, understanding of the company’s policies and objectives, relations with peers, ability to plan and organize, attitude and perception of employee in general.
The Essay evaluation method is a non-quantitative technique and highly subjective. While it provides a good deal of information about the employee, it takes a lot of time of the appraiser which is not always feasible.
|Attribute||Discussion / Comments|
|1||Does the employee pay attention to detail?|
|2||Does the employee work well with the team?|
|3||Is the employee capable of taking initiative?|
Under this method, checklist of statements of traits of employee in the form of Yes or No based questions is prepared. If the rater believes strongly that the employee possesses a particular listed trait, he checks the item; otherwise, he leaves the item blank. Here the rater only does the reporting or checking and the HR department does the actal evaluation. Although it does not allow detailed analysis of the performance.
|Gives complete attention to detail|
|Has complete knowledge of the product|
|Works well with the team|
|Has creative approach to solving problems|
In 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. It provides an objective basis for conducting a thorough discussion of an employee’s performance.
Although this method avoids recency bias, there is a tendency for managers to focus more on the negative incidents than otherwise.
Work Standards Approach:
In this technique, management establishes the goals openly and sets targets against realistic output standards. These standards are incorporated into the organizational performance appraisal system. Thus each employee has a clear understanding of their duties and knows well what is expected of them. Performance appraisal and interview comments are related to these duties. This makes the appraisal process objective and more accurate. It works best in long-term situations which is recommended as it considers performances during that time.
However, it is difficult to compare individual ratings because standards for work may differ from job to job and from employee to employee. It does not allow for reasonable deviations.
Here manager compares an employee to other similar employees, rather than to a standard measurement for the purpose of assessing their worth. The employees are ranked from the highest to the lowest or from the best to the worst. The problem here is that it does not tell that how much better or worse one is than another. Also it cannot be used for large number of employees.
Attention to detail
MBO (management by objectives) methods of performance appraisal are results-oriented. That is, they seek to measure employee performance by examining the extent to which predetermined work objectives have been met. Usually the objectives are established jointly by the supervis:or and subordinate. Once an objective is agreed, the employee is usually expected to self-audit; that is, to identify the skills needed to achieve the objective. Typically they do not rely on others to locate and specify their strengths and weaknesses. They are expected to monitor their own development and progress. The MBO method concentrates on actual outcomes
What makes MBOs efficient is the ability to set SMART Goals i.e. set goals that are Specific, Measurable, Actionable, Relevant and Time-bound.
The problem of judgmental performance evaluation inherent in the traditional methods of performance evaluation led to some organisations to go for objective evaluation by developing a technique known as “Behaviourally Anchored Rating Scales (BARS)” around 1960s. This method of performance appraisal is considered better than the traditional ones because it provides advantages like a more accurate gauge, clearer standards, better feedback, and consistency in evaluation.
The BARS method is designed to bring the benefits of both qualitative and quantitative data to the employee appraisal process. It compares an individual’s performance against specific examples of behaviour that are anchored to numerical ratings.
Although even this methods has its limitations as it is often accused of being subject to unreliability and leniency error.
Performance appraisal is already being considered a necessary evil. Thus companies need to be careful while selecting out of these appraisal methods. The method should be able to provide value to the company as well as the employees and managers.