Definition of Performance Appraisal

Introduction

People differ in their abilities and their aptitudes. There is always some difference between the quality and quantity of the same work on the same job being done by two dif- ferent people. Therefore, performance management and performance appraisal is necessary to understand each employee’s abilities, competencies and relative merit and worth for the organization. Performance appraisal rates the employees in terms of their performance.

Performance appraisal, also known as employee appraisal, is a method by which the job performance of an employee is evaluated (generally in terms of quality, quantity, cost and time).

Why Performance Appraisal?

Performance appraisal is a vehicle to

Validate and refine organizational actions (e.g. selection, training); and

Provide feedback to employees with an eye on improving future performance.

Objectives of Performance Appraisal

Increase motivation to perform effectively

Increase staff self-esteem

Gain new insight into staff and supervisors

Better clarify and define job functions and responsibilities

Develop valuable communication among appraisal participants

Encourage increased self-understanding among staff as well as insight into the kind of development activities that are of value

Distribute rewards on a fair and credible basis

Clarify organizational goals so they can be more readily accepted

Improve institutional/departmental manpower planning, test validation, and development of training programs

Performance Appraisal Process

Performance appraisal comprises the following steps:

Establishing performance standards

Communicating the standards to employees

Measuring actual performance

Comparing the actual with standard performance

Discuss the report with employees

Taking corrective action

Establishing Performance Standards

The first step in the process of performance appraisal is the setting up of the standards which will be used to as the base to compare the actual performance of the employees. This step requires setting the criteria to judge the performance of the employees as successful or unsuccessful and the degrees of their contribution to the organizational goals and objectives.

The standards set should be clear, easily understandable and in measurable terms. In case the performance of the employee cannot be measured, great care should be taken to describe the standards.

Communicating the Standards to Employees

Once set, it is the responsibility of the management to communicate the standards to all the employees of the organization.

The employees should be informed and the standards should be clearly explained to the. This will help them to understand their roles and to know what exactly is expected from them. The standards should also be communicated to the appraisers or the evaluators and if required, the standards can also be modified at this stage itself according to the relevant feedback from the employees or the evaluators.

Measuring Actual Performance

It is a continuous process which involves monitoring the performance throughout the year. This stage requires the careful selection of the appropriate techniques of measurement, taking care that personal bias does not affect the outcome of the process and providing assistance rather than interfering in an employees work.

Comparing the Actual with Standard Performance

The actual performance is compared with the desired or the standard performance. The comparison tells the deviations in the performance of the employees from the standards set.

The result can show the actual performance being more than the desired performance or, the actual performance being less than the desired performance depicting a negative deviation in the organizational performance.

Discuss the Report with Employees

The result of the appraisal is communicated and discussed with the employees on one-to-one basis. The focus of this discussion is on communication and listening. The results, the problems and the possible solutions are discussed with the aim of problem solving and reaching consensus. The feedback should be given with a positive attitude as this can have an effect on the employees’ future performance. The purpose of the meeting should be to solve the problems faced and motivate the employees to perform better.

Taking Corrective Action

The last step of the process is to take decisions which can be taken either to improve the performance of the employees, take the required corrective actions, or the related HR decisions like rewards, promotions, demotions, transfers etc

Methods of Performance Appraisal

Three approaches exist for doing appraisals: employees can be appraised against

Absolute standards

Relative standards, or

Outcomes.

Evaluating Absolute Standards

This means that employees are compared to a standard and their evaluation is independent of any other employees in a work group. It includes the following methods:

Critical incident method, check list method, forced choice, adjective rating scale and behaviorally anchored rating scale.

Critical Incident Methods

In this method of performance appraisal, the evaluator rates the employee on the basis of critical events and how the employee behaved during those incidents. It includes both negative and positive points.

The drawback of this method is that the supervisor has to note down the critical incidents and the employee behavior as and when they occur.

This method provides an objective basis for conducting a thorough discussion of an employee’s performance. This method avoids recency bias (most recent incidents get too much emphasis).

Limitations

Negative incidents may be more noticeable than positive incidents.

The supervisors have a tendency to unload a series of complaints about incidents during an annual performance review session.

It results in very close supervision which may not be liked by the employee.

The recording of incidents may be a chore for the manager concerned, who may be too busy or forget to do it.

Most frequently, the critical incidents technique of evaluation is applied to evaluate the performance of superiors rather than of peers of subordinates.

Checklist Method

Another simple type of individual evaluation method is the checklist. A checklist represents, in its simplest form, a set of objectives or descriptive statements about the employee and his behavior. If the rater believes strongly that the employee possesses a particular listed trait, he checks the item; otherwise, he leaves the item blank. A more recent variation of the checklist method is the weighted list. Under this, the value of each question may be weighted equally or certain questions may be weighted more heavily than others.

The following are some of the sample questions in the checklist.

Is the employee really interested in the task assigned?      Yes/No

Is he respected by his colleagues (co-workers)     Yes/No

Does he give respect to his superiors?     Yes/No

Does he follow instructions properly?        Yes/No

Does he make mistakes frequently?        Yes/No

A rating score from the checklist helps the manager in evaluation of the performance of the employee. The checklist method has a serious limitation. The rater may be biased in distinguishing the positive and negative questions. He may assign biased weights to the questions. Another limitation could be that this method is expensive and time consuming.

Finally, it becomes difficult for the manager to assemble, analyze and weigh a number of statements about the employee’s characteristics, contributions and behaviors. In spite of these limitations, the checklist method is most frequently used in the employee’s performance evaluation.

Forced Choice Method

This method was developed to eliminate bias and the preponderance of high ratings that might occur in some organizations. The primary purpose of the forced choice method is to correct the tendency of a rater to give consistently high or low ratings to all the employees. This method makes use of several sets of pair phrases, two of which may be positive and two negative and the rater is asked to indicate which of the four phrases is the most and least descriptive of a particular worker. Actually, the statement items are grounded in such a way that the rater cannot easily judge which statements apply to the most effective employee. The following box is a classic illustration of the forced choice items in organizations.

Forced Choice Items

The favorable qualities earn a plus credit and the unfavorable ones earn the reverse. The worker gets over plus when the positive factors override the negative ones or when one of the negative phrases is checked as being insignificantly rated.

They overall objectivity is increased by using this method in evaluation of employee’s performance, because the rater does not know how high or low he is evaluating the individual as he has no access to the scoring key. This method, however, has a strong limitation. In the preparation of sets of phrases trained technicians are needed and as such the method becomes very expensive. Further, managers may feel frustrated rating the employees ‘in the dark’. Finally, the results of the forced choice method may not be useful for training employees because the rater himself does not know how he is evaluating the worker. In spite of these limitations, the forced choice techniques is quite popular.

Graphic Rating Scale

The most commonly used method of performance evaluation is the graphic rating scale. In this method, a printed form is used to evaluate the performance of an employee. A variety of traits may be used in these types of rating devices, the most common being the quantity and quality of work. The rating scales can also be adapted by including traits that the company considers important for effectiveness on the job.

A model of a graphic rating scale is given below.

Typical Graphic Rating Scale

Behaviorally Anchored Rating Scales

Also known as the behavioral expectations scale, this method represents the latest innovation in performance appraisal. It is a combination of the rating scale and critical incident techniques of employee performance evaluation. The critical incidents serve as anchor statements on a scale and the rating form usually contains six to eight specifically defined performance dimensions.

How to construct BARS?

Developing a BARS follows a general format which combines techniques employed in the critical incident method and weighted checklist ratings scales. Emphasis is pinpointed on pooling the thinking of people who will use the scales as both evaluators and evaluees.

Step 1: Collect critical incidents: People with knowledge of the job to be probed, such as job holders and supervisors, describe specific examples of effective and ineffective behavior related to job performance.

Step 2: Identify performance dimensions: The people assigned the task of developing the instrument cluster the incidents into a small set of key performance dimensions. Generally between five and ten dimensions account for most of the performance. Examples of performance dimensions include technical competence, relationships with customers, handling of paper work and meeting day-to-day deadlines.

Step 3: Reclassification of incidents: Another group of participants who are knowledgeable about the job is instructed to retranslate or reclassify the critical incidents generated previously. They are given the definition of job dimension and told to assign each critical incident to the dimension that it best describes. At this stage, incidents for which there is not 75 per cent agreement are discarded as being too subjective.

Step 4: Assigning scale values to the incidents: Each incident is then rated on a one-to- seven or one-to-nine scale with respect of how well it represents performance on the appropriate dimension. A rating of one represents ineffective performance; the top scale value indicates very effective performance. The second group of participants usually assigns the scale values. Means and standard deviations are then calculated for the scale values assigned to each incident. Typically incidents that have standard deviations of 1.50 or less (on a 7-point scale) are retained.

Step 5: Producingthefinalinstrument: About six or seven incidents for each performance dimension – all having met both the retranslating and standard deviation criteria – will be used as behavioral anchors. The final BARS instrument consists of a series of vertical scales (one for each dimension) anchored (or measured) by the final incidents. Each incident is positioned on the scale according to its mean value.