Performance appraisal is the process of measuring quantitatively and qualitatively an employee’s past or present performance against the background of his expected role performance, the background of his work environment and his future potential for an organization.  Evaluation of performance and personality of each employee is done by his/her immediate superior or some other person trained in the techniques of merit rating.                 

According to Edward Flippo  “Performance Appraisal is the systematic, periodic and impartial rating of an employees’ excellence in matters pertaining to his present job and his potential for a better job”.  

                Performance appraisal is a broader term than merit rating, even though these two terms are used symmetrically. In merit rating, the focus is on judging the caliber of an employee so as to decide salary increment, whereas performance appraisal focuses on the performance and future potential of the employee. Merit rating measures the traits of the individual and performance appraisal measures the performance of the individual.

 SIGNIFICANCE OF PERFORMANCE APPRAISAL

• A performance appraisal provides a document of employees’ performance (Appraisal Forms) over a specific period of time.
• A performance appraisal provides a structure where managers can meet and discuss performance with an employee.
• A performance appraisal provides a structured process for an employee to discuss issues with their managers.
• A performance appraisal can motivate employees if supported by a good merit and compensation system.
• A performance appraisal is a systematic process consisting of a number of steps to be followed for evaluating the strengths and weaknesses of an employee.

PROCESS OF PERFORMANCE APPRAISAL

1. Establishing performance standards:

The employees will have to be rated against the standards set for their performance. There should be some base on which one may say that the performance of a person is good, average or even bad. The standards may be in quantity and quality of production.  For eg:  In case of workers-personality traits like leadership, initiative, imagination in case of executives; and  Files cleared in case of office staff. These standards help in setting standards for evaluation of performance of employees.

• Communicating standards and Expectations:

The standards set for performance should be communicated to the employees. They should know what is expected from them.  Due to lack of knowledge of standards, the employees will keep on guessing. When standards are made know to employees they will try to contribute performance equivalent or above the standards. Even later on they will not resent adverse reports if they fail to achieve certain standards.  It is essential to get feedback from employees whether they have followed the standards as intended by the management.

• Measuring the actual performance:

The next step in evaluation process is to measure actual performance of employees. The performance may be measured through personal observation, statistical reports, oral reports and written reports.

• Comparing Actual performance with Standards:

The actual performance is compared to the standards set earlier for finding out the standing of employees. The employee is evaluated and judged by his potential for growth and advancement. Deviations in performance are also noted at this stage.

• Discussing Results with Employees:

The Assessment reports are periodically discussed with concerned employees. The weak, good points and difficulties are indicated for helping employees improve their performance.  The information received by employees influences their performance, attitude and work in future.

• Decision Making/Taking Corrective measures:

Evaluation process will be useful only when corrective action is taken on the basis of the report. One corrective action may be in form of advice, counsel or even as a warning. Other actions may be in form of additional training, refresher courses, delegation of more authority, special assignments, coaching etc.., These actions will be useful in helping employees to improve their performance in future.

OBJECTIVES OF PERFORMANCE APPRAISAL

1.      Work- Related Objectives:

1. To assess the work of employees in relation to job requirements.
2. To improve efficiency
3. To carry out job evaluation
4. To help management in fixing employees according to their capacity, interest, aptitude and qualifications, i.e.., to ensure a right man is placed on the right job.

• Career Development Objectives:      

                  Career developments by means of formal and informal means the performance appraisal have the objectives to raise the opportunities for career development. On the basis of the results of appraisal, different system and programmes might be introduced for career development, orientation task and training programmes. A few objectives are as below:-

1. To determine career potential.
2. To assess the strong and weak points in the working of the employees and finding remedies for weak points through training.
3. To plan promotions, transfers, layoff and career goals of employees.

• Communication:

                          Performance appraisal provides feedback to their employees about their performance and how they are working, how their efforts are contributing to fulfillment of Organizational objectives. Better performance is achieved when the employees are informed about their past performance and necessary corrective steps are taken to overcome deficiencies. A few objectives of communication of feedback with employees are as below:-

1. To clearly establish goals- what is expected of the employee in terms of performance and future work assignments.
2. To provide feedback to employees so that they come to know where they stand and can improve their job performances.
3. To develop positive superior-subordinate relations and thereby reduce grievances.
4. To provide coaching, counseling, career planning and motivation to employees.

• Organizational Objectives:                                                                                    
       To serve as a basic of promotion or demotion.   To serve as a basis for transfer or termination in case of reduction in staff    strength.To serve as a basis for wage and salary administration and considering pay increases and increments.To serve as basis for planning suitable training and development programmes.

METHODS OF PERFORMANCE APPRAISAL                                                                              

                              Strauss and Sayles have categorized appraisal method into two- Traditional Method and Modern method. While traditional method lays emphasis on rating of an individuals’ personality traits like intelligence, creativity, initiative, dependability, integrity etc.., On the other hand Modern method place more emphasis on evaluation of job achievements. They tend to be more objective and worthwhile.  Performance appraisal is categorized as follows:-

TRADITIONAL METHOD

• Essay appraisal method:
                                Essay appraisal is one of the simplest methods among various other methods. In this method, the rater writes a narrative description on an employee’s strengths, weaknesses, past performance and suggestions for improvement. Essay method is simple and does not require complex formats and specific training to complete it. 
                             However, like other methods, its liberty less from drawbacks. In the absence of a prescribed structure, essays are like to vary widely in terms of length and content. The quality of appraisal depends on the rater’s writing skill than the appraiser’s actual level of performance.  Since essay method is descriptive it only provides qualitative information about the employee. Evaluation suffers from subjectivity due to mitching of quantitative data. Nevertheless, the essay method is a good start and is beneficial also if used in association with other appraisal methods.

• Paired comparison:
                             In this method, each employee is compared to other employees on one-to-one basis, usually based on one trait only. The rater is provided with a bunch of slips each denoting pair of names. The rater puts a tick mark against the employee whom he thinks is better among them based on the quantity and quality of special knowledge about the inner workings of an organization / whom he insider the most among the two.  The number of time this employee is compared as better with others determines his or her final rankings. The no. of. possible pairs for a given number of employees is ascertained from the following  formula:
                           N(N-1)
                                   2

Where, N is the total number of employees to be evaluated.

                Let’s have a look at an example. If  5 teachers are to be evaluated by the V.C of a University namely A, B, C, D, E. Substituting in the above formula the number of possible pairs would be 5*(5-1)/2 that will be 10 pairs. Below are the 10 pairs:-

A with B , A with C , A with D , A with E,  B with C, B with D, B with E, C with D, C with E and D with E.

• Straight ranking method:
                                It is the simplest and oldest formal systematic method of performance appraisal in which employee is compared with all others for the purpose of placing order of worth. The employees are ranked from the highest/best to the lowest/worst.  By doing this the employee who is in the highest on the characteristics and that on the lowest are indicated.  If there are 10 employees to be appraised, there will be 10 ranks from 1 to 10.
                                 However, this method will not tell us how much better or worse one is than the other. The task of ranking individual is tougher when large numbers of employees are rated. It is difficult to compare one individual with others having varying behavioral traits. To antidote these defects paired comparison method of appraisal has been evolved.

• Critical Incident method:
                        In this method the rater focuses his or her attention on those critical behaviors that makes the difference between performing the job effectively or ineffectively. There are three steps involved in appraising employees using this method.  Firstly, a list of remarkable on-the-job behavior of specific incidents is prepared. Secondly, A group of experts assign weights to these incidents depending upon their degree of desirability to perform a job. Thirdly, a final checklist indicating incidents that describe workers as good/bad is forged. Then the checklist is given to the rater for evaluating the workers.
                           The basic concept behind this rating is to intimate the workers who can perform their jobs effectively in critical situations because most people work alike in normal situation. The strength of critical incident method is that it focuses on behavior and judges the performance rather than the personality. However, its drawback is that critical incidents are to be regularly written down which is time consuming and onerous for evaluators.  Well, generally negative incidents are positive ones. It is the raters’ presumption that determines which incidents are critical and which are not to the job performance.
  
  
• Check-list method
                           The basicpurpose of using check-list method is to ease the evaluation burden on the rater. In this method a series of questions with their answers in “YES” or “NO” are prepared by the HR Department. The check-list is then presented to the rater to tick appropriate answers relevant to the appraisee. Each question carries a degree in relationship to their importance.  When the check-list is completed it is sent to the HR department to prepare the final scores for all appraises based on all questions. While preparing the questions an attempt is made to measure the degree of consistency.

MODERN METHOD

• Assessment centre :  Assessment centre is not just a building for assessing a job candidate but instead it’s a process of evaluating the behavior based on multiple evaluation including job related simulations and psychological tests.  Job Simulations are used to evaluate candidates on behaviors relevant to the most critical aspects (or competencies) of the job. Several trained observers and techniques are used. Judgments about behavior are made and recorded. These judgments are pooled in a meeting among the assessors or by an averaging process. In discussion among assessors, comprehensive accounts of behavior, often including ratings, are pooled. The discussion results in evaluations of the performance of the assessee on the dimensions or other variables.

During the assessment process, a set of exercises are designed to simulate the conditions of a work given to the candidate. This helps the assessor to determine whether the candidate possesses the necessary skill set and behavior required for the job. The sole purposes of assessment center are to examine the skills and psychological state of a person in order to determine his or her performance.

• BARS ( Behaviorally Anchored Rating Scale)
  

Behaviorally Anchored Rating Scale is an appraisal method that aims to combine the advantages of narratives, critical incidents and quantified ratings by harbouring a quantified scale with specific narrative examples of good, medium and poor performances.

• 360° performance appraisal.

The 360 degree feedback is an appraisal tool that incorporates feedback from all those who observe and are affected by the performance of a candidate. The feedback received from 360° performance appraisal is generally used to plan training and development.

ETHICAL ISSUES IN PERFORMANCE APPRAISAL

Performance appraisal is used as the basis of so many HR decision s like promotions, dismissals and transfers. The appraisal system is a common target of legal disputes by employees involving charges of unfairness and personal biases. Generally, employees seek legal help to obtain relief from a discriminatory performance appraisal.  Unreasonably rating everyone high/low on the basis of past events are some of the reasons judiciary give for deciding the organizational appraisal processes.  Most employees find that the appraisers can stick to the rules and do lawful performance appraisal reviews yet they fail to provide honest assessments.  Over the years several recommendations have been made to assist the employers to develop fair and legally defensible performance appraisal system. Some of which are as below:-

1. Every organization should have a formal standardized performance appraisal system. All the HR decisions should be based on this system.
2. There should be uniformity in the application of performance appraisal process for all the employees within a job group. The decisions based on these performance appraisals can be monitored for differences in caste, religion or age of the employee.
3. All employees should be given opportunities to review their appraisal results.
4. All employees should be aware of all specific performance standards.
5. There must be a formal appeal process where an employee can question the rating given by the appraiser.
6. All HR decision makers should be well informed about the anti-discrimination laws.
7. Supervisors (Appraisers) should be trained to use the appraisal tools properly. If formal training is not possible then written instructions should be provided to all raters for using rating scales in an unbiased and systematic manner.

BENEFITS OF PERFORMANCE APPRAISAL

                                                             (Source : eduCBA.com)

                                The benefits that justify the existence of a system of performance appraisal in an organization are as follows:

• Performance appraisal provides the management an objective basis for discussing salary increase and special increments of the staff.
• A performance appraisal can be used for transfer or promotion of employees. If the performance of an employee is better than the others, he can be recommended for promotion. But if he is not doing well then, he may be transferred to some other job for which he is best suited.
• An effective system of performance appraisal helps the supervisor to evaluate the performance of his employees periodically and systematically. It helps in placement of employees on the jobs for which they are best suited for.
• Performance appraisal facilitates Human resource planning, career planning and succession planning.
• It provides an incentive to the employees to improve their performance in a bid to better their rating over others.
• Work environment improves when achievements are recognized and rewarded on the basis of objective performance measure.
• A Systematic appraisal of performance helps to develop confidence among employees. It will prevent grievances, if the employees are convinced of the impartial basis of evaluation.

Thus, Performance appraisal is a significant element of information and control system in an organization. Performance appraisal can be put to several uses concerning the entire spectrum of Human Resource Management function.

ERRORS IN PERFORMANCE APPRAISAL                   

     

                                              (Source: Smartchurchmanagement.com)

                The HR managers usually make errors in performance appraisal process. Let’s have a look at those errors. One such error is Rater Error. As you all know the famous saying by Alexander Pope- “To err is human”, it is common for managers to make subconscious errors when assessing employee behavior and preparing a performance appraisal document. These rater errors are pensive of our subconscious biases towards the employee and these biases can give an employee an unfair advantage or disadvantage over others in their peer group. It is important to understand these biases and anticipate while preparing a performance appraisal document.

WHAT ARE RATER ERRORS?                                                                                                                                                  There are six common errors we make while assessing the performance of others. Being conscious about these errors can help the HR to avoid errors.

Halo Effect:  This occurs when a rater’s overall positive or negative impression of an individual employee leads to rating him/her the same across all rating dimensions. This happens when a manager really likes or dislikes an employee and allows their personal feelings about this employee to influence their performance rating on them. Let’s think of that favorite employee you might be comfortable with or that employee with whom you have a personal rivalry with, and ask one-self that- Am I being objective with this assessment?

Never		Sometimes		Always
1	2	3	4
1	2	3	4
1	2	3	4
1	2	3	4
1	2	3	4

1. Leniency error: This error happens when a raters’ tendency is to rate all employees at the positive end of the scale (positive leniency) or at the negative end of the scale (negative leniency). Sometimes, our emotions determine how we rate an employee and this response might not be objective since it is emotional in nature. This usually happens when a manager over emphasizes either positive or negative behaviors.                 
                                                                                 

Never		Sometimes		Always
	2	3	4
	2	3	4
	2	3	4
	2	3	4
	2	3	4

1. Central tendency error:  This error is the rater’s tendency to avoid making “extreme” judgments of employee performance resulting in rating of all employees in middle section of a scale. This happens either when a manager is not comfortable with conflict and avoids low ratings to avoid dealing with behavioral issue or when a manager forces all employees to the middle of the scale.                                                                                                                                                                                     

Never		Sometimes		Always
1	2		4	5
1	2		4	5
1	2		4	5
1	2		4	5
1	2		4	5

1. Recency error:  This error is the rater’s tendency to allow more recent effective or ineffective incidents of employee behavior to carry too much weight in the performance evaluation over an entire rating period. Either an employee completes a major project or an employee may have encountered a negative incident before the performance appraisal process and it is at the cutting edge/front line of the manager’s thoughts about the employee. For this reason it is important to keep accurate records of performance throughout the entire year to refer back to during performance appraisal.

• First Impression Error: This error is the rater’s tendency to let their first impression of an employee’s performance to carry too much weight in the evaluation process over an entire rating period. For e.g. A new employee joins the organization and performing at high levels during their “honeymoon” period and possibly losing some of that initial momentum.

• Similar-to-me Error:
  
  This error happens when the rater’s tendency is biased in performance evaluation towards those employees seen as similar to the raters themselves. We can relate to people who are like us but we cannot let our ability to relate with an individual influence the parameters on which their performance is judged in a professional working environment. Since human biases can easily influence the rating process it is important to create objective measures for rating performance. Observing behaviors and using available technology to track performance can eliminate some of the biases from the rating process.

 CONCLUSION

                                Performance appraisal is very important as it affects the productivity of employees’, their relation with superiors and subordinates which in turn increases the morale of the employees’. Awareness must be spread among employees so that they get to know the importance of performance appraisal.  It is generally found that personal bias creeps in appraising an individual.  An Organization must implement latest techniques of performance appraisal so as to yield better results by improving productivity of the employees since confidence development is the main focus of performance appraisal.  The technique used and what is expected from the employees must be stated clearly.