Every organization seeks an increasing enrichment in performance to flourish in today’s advanced economy. Improvements in both individual as well as organizational performance are critically important to attain competitive advantage. Organizational and employee assessment is the mechanism through which managers can evaluate the validity of strategic business objectives and their clear cut communication across the organization for successful achievement. Similarly, performance appraisal is one such tool that provides a dynamic linkage to employee recruitment, selection, training and development, compensation and benefits, career planning, health and safety, and industrial relations, to execute an effective strategy. It gives a signal to the managers and employees on what is important, what is not, how to gauge what is important, accountability for performance and results, and how to improve one’s performance.
In this competitive market, the organizational interest in performance management has also increased, as also the influence of human resource management and the individualization of the employee-to-employee relationship. Following are the essentials of performance management
- Creating a shared objective of the strategic objectives of the organization;
- Establishing performance objectives for each activity, and individuals and groups to ascertain their performance to be aligned with business objectives;
- Using a formal performance review process to assess functional, individual and group progress towards achieving organizational goals;
- Creating a linkage between performance assessment and employee development and benefits to encourage and strengthen desired behaviour.
Performance appraisal refers to the overall assessment of organizational effectiveness, including if the organization is able to meet its objectives through the efforts of its employees. In the event of enhanced performance of employees, the organization should elevate its performance. Not all experts work on these assumptions. Nevertheless, performance appraisals of employees remain an important, enduring management activity for the management needs to observe the performance of the employees on continual basis. Such assessment may or may not be formal, but which will directly influence on the employee’s salary increments, promotions/demotions, training, terminations, and so on.
One of the prime objectives of performance appraisal is that it should help the manager make an easy, objective discrimination amongst the employees contributing towards achieving the strategic business objectives of an organization. Underperforming employees should be given the opportunity to improve their performance and the right approach towards accomplishing the same. Disregarding non-performers would send the wrong signal to rest of the employees as well who are, however, performing better. The latter should be acknowledged for their efforts and be rewarded in the form of incentives, bonus and/or perks.
Employee development is another important objective of performance appraisal. An employee’s performance can be enriched through capacity build program, such that the employee’s strengths can be built upon and weaknesses can be overcome. The manager is responsible for removing any hurdles coming in the way of the employees’ performance and motivates them to grow. There also ought to be feedback mechanism adopted by the manager within the employee performance appraisal process.
Managers need to evaluate the performance of their employees and communicate it to them through accurate assessment, by (i) identifying any deficiencies of the employees, (ii) encouraging them on how they can be overcome, for instance, if any special training and development is required to be conducted, and (iii) ensuring that opportunities are created for any new job experiences are needed. A performance appraisal process does not only involve evaluating the employees and providing them with a positive or negative feedback, but also communicating clear-cut expectations to them by their immediate supervisors or as per the organization’s policy. Nevertheless, the person holding the evaluation process should be aware of the job responsibilities of the concerned employee and the performance objectives, and should be able to differentiate between behavioural patterns that produce effective or ineffective performances.
In case of supervisor evaluation, the immediate supervisors undertake performance appraisals. Peer evaluations are frequently used by teams in organizations where the TQM concepts are deployed. There are also organizations that have self-evaluation process undertaken by employees to assess their performances, and this aids in supervisor and peer evaluations.
In addition, subordinate, multisource and team base evaluations are other evaluation techniques adopted by many organizations. Subordinate evaluation, also known as upward performance appraisal system, involves the subordinates assessing their superior performances. In case of multisource evaluation, the employees give their feedback on their colleagues, superiors, subordinates and customers. This is also termed as 360 degree evaluations. Team base evaluations are particularly designed to assess the performance of a team.
Many a times, the managers make small errors in appraising the performance of their employees. Though they can discriminate clearly amongst performing and underperforming employees, they often fail to give proper ratings which may or may not represent their actual judgments. And they often tend to manipulate with their evaluations during the completion of performance appraisal forms. These typical errors could be the halo effect, prejudice, central tendency, relationship effect, strictness, leniency and focus on subjective performance criterion.
Methods of Performance Appraisal
The methods of the performance appraisal can be classified on the following basis
Traditional Methods
Some of the well-known traditional methods of performance appraisal systems are as follows.
Ranking Method: Ranking method enables the manager to rank each of its subordinates as per his or her performance, from “extremely good” to “poor”.
Confidential Report: A descriptive report is usually prepared at the end of the year by the immediate reporting authority of the employee being appraised. In this case the feedback is kept confidential leading to no self-improvement in the employee.
Grading Scales: It involves the assessment of the employee’s performance as against the set grade definitions and thereby allotment of grades to them as per their performances.
Graphic Rating Scale: It is the rating scale through the employee’s performance is evaluated by way of particular employee characteristics or behavioural patterns.
Critical Incidents Method: In case of critical incidences, the manager needs to keep a record of important incidences/occurrences in employee’s behaviour highlighting positive or negative job conduct.
Behaviour-centred Rating Scale: It is the unique method of combining the features of the traditional rating scale with those of critical incidences method.
Paired Comparison Method: In this method the appraiser compares the performance of each employee with the other employee, one at a time. Thereafter the results are summarised in tabular format and a rank is created from the number of times each person is considered to be superior.
Modern Methods
Some of the well-known modern methods of performance appraisal systems are as follows.
HR Accounting Method: This method focuses on finding the relative worth of the employee by measuring the performance in terms of the difference between the contribution towards the organisation and the cost incurred by the organisation on the employee.
Behaviorally Anchored Rating Scale (BARS): The Behaviourally Anchored Rating Scale method utilizes the combination of traditional method of performance appraisal – Critical Incidences method and Rating Scales method. The BARS rating scale form consists of a certain number of dimensions such as customer service skills, job knowledge and interpersonal skills. Each BARS is usually in the form of a seven or nine point bracket (in behavioural terms) vertical scale. Point one on the scale represents unfavourable job performance and the highest scale represents favourable job performance. About six or seven incidents for each performance dimension are used as behavioural anchors, the final BARS instrument consist of a series of vertical scale positioned according to its value.
Management By Objectives: The MBO is a very popular technique in which both the manager and the subordinate together identify shared objectives, delineate the subordinate’s key areas of responsibility and accountability to expected outcomes, and use these as tools to measure the subordinate’s performance.
Assessment Centres: These centres help in identifying high-potential employees, but being costly and time-consuming, this method is rarely used by organizations.
Workplace Scrutiny: This method is used to monitor the performance and job behaviour of employees, but often becomes controversial to be continued to be used as a performance appraisal system in an organization.
360-Degree Appraisal: It is a method of performance appraisal in which the activity of appraisal is performed by top management, immediate superior, peers, subordinates, self and customers. In this case the employee gets a feedback of his performance from the most reliable sources which are in the best position to evaluate him. This method is primarily used to evaluate the performance of the employees but it may also be used to evaluate other qualities such as talents, behaviour, ethics and values, loyalty, temper etc.
