Appraising and Managing Performance Human Resource

7/29/2019 Appraising and Managing Performance Human Resource

1/46

PART IPERFORMANCE APPRAISAL

An organisation's goals can be achieved only when people put in their best efforts.

How to ascertain whether an employee has shown his or her best performance on a

given job? The answer is performance appraisal. Employee assessment is one of the

fundamental jobs of HRM, but not an easy one though.

Nature of Performance Appraisal

In simple terms, performance appraisal may be understood as the assessment of an

individual's performance in a systematic way, the performance being measured against

such factors as job knowledge, quality and quantity of output, initiative, leadership

abilities, supervision, dependability, co-operation, judgement, versatility, health, and

the like. Assessment should not be confined to past performance alone. Potentials of

the employee for future performance must also be assessed.

The other terms used for performance appraisal are: performance rating, employee

assessment, employee performance review, personnel appraisal, performance evalua-

tion, employee evaluation and (perhaps, the oldest of the terms used) merit rating. In a

formal sense, employee assessment is as old as the concept of management, and, in an

informal sense, it is probably as old as mankind. Nor performance appraisal is done in

isolation. It is linked to job analysis as shown in Fig 10.1.

Job analysis sets out requirements, which are translated into performance standards,

which in turn form the basis for performance appraisal.

Relationship of Performance Appraisal and Job Analysis

Performance management refers to the entire process of appraising performances,


2/46

giving feedback to the employees, and offering rewards or punishments to them.

Objectives of Performance Appraisal

Data relating to performance assessment of employees are recorded, stored, and used

for several purposes. The main purposes of employee assessment are:

1. To effect promotions based on competence and performance.

2. To confirm the services of probationary employees upon their completing the

probationary period satisfactorily.

3. To assess the training and development needs of employees.

4. To decide upon a pay raise where (as in the unorganised sector) regular pay

scales have not been fixed.

5. To let the employees know where they stand insofar as their performance is

concerned and to assist them with constructive criticism and guidance for the

purpose of their development.

6. To improve communication. Performance appraisal provides a format for

dialogue between the superior and the subordinate, and improves understanding

of personal goals and concerns. This can also have the effect of increasing the

trust between the rater and the ratee.

7. Finally, performance appraisal can be used to determine whether HR

programmes such as selection, training, and transfer have been effective ornot)

Broadly, performance appraisal serves four objectives(i) developmental uses, (ii)

administrative uses decisions, (iii) organisational maintenance/objectives, and (iv)

documentation purposes. Table 10.1 outlines these and specific uses more clearly.


3/46

Table Multiple Purposes of Performance Assessment

General Applications Specific

Development Uses Identification of individual needs

Performance feedback

Determining transfers and job assignments

identification of individual strengths and

developmental needs

Administrative Uses-Decisions Salary

Promotion

Retention or termination

Recognition of individual performance

Lay-offs

Identification of poor performers

Organisational

Maintenance/Objectives

HR planning

Determining organisation training needs

Evaluation of organisational goal achievement

Information for goai Identification

Evaluation of HR systems .

Reinforcement of organisational development

needs

Documentation Criteria for validation research Documentation

for HR decisions Helping to meet legal

requirements

Source: Cynthia D. Fisher, et al., Human Resource Management, Houghton Mifflin,

1997, p. 455.

Performance Appraisal and Competitive Advantage

The objectives of performance appraisal, listed above, point out the purposes which

such an exercise seeks to meet. What needs emphasis is that performance evaluation

contribute to firm's competitive strength. Besides encouraging high levels of perfor-

mance, the evaluation system helps identify employees with potential, reward perfor-

mance equitably and determine employee's need for training. Specifically, perfor-

mance appraisal helps an organisation gain competitive edge in the following ways

(see Fig. 10.2)


4/46

How Performance Appraisal can Contribute to Firm's Competitive Advantage

Improving Performance An effective appraisal system can contribute to

competitive advantage by improving employee job performance in two waysby

directing employee behaviour towards organisational goals, as was done by the

second beekeeper (see opening case), and by monitoring that behaviour to ensure

that the goals are met;

Making Correct Decisions As stated above, appraisal is a critical input in making

decisions on such issues as pay raise, promotion, transfer, training, discharges and

completion of probationary periods. Right decision on each of these can contribute

to competitive strength of a firm. If promotion, for example, is made on

performance, the promotee feels motivated to enhance his or her performance.

Ensuring Legal Compliance Promotions made on factors other than performance

might land up a firm in a legal battle, thus diverting its focus on non-productive areas,as it happened to Williamson Magar. Companies can minimise costly performance

related litigation by using appraisal systems that give fair and accurate ratings.

Minimising Job Dissatisfaction and Turnover Employees tend to become

emotional and frustrated if they perceive that the ratings they get are unfair and

inaccurate. Such employees find that the efforts they had put in became futile and

obviously get demotivated.


5/46

Dissatisfaction in the job sets in and one of the outcomes of job dissatisfaction is

increased turnover. Fair and accurate appraisal results in high motivation and

increased job satisfaction. An organisation having satisfied and motivated employees

will have an edge over its competitors.

Consistency Between Organisational Strategy and Behaviour An organisation

needs a strategy consistent with the behaviour of its employees if it were to realise

its goals. A truism of organisational life is that people engage themselves in

behaviours that they perceive will be rewarded. As employees want to be rewarded,

they tend to occupy themselves more with those activities on which the organisation

emphasises. For example, if the focus is on service, employees will behave in waysthat will help them in gaining rewards associated with service delivery. If the focus

is on cost control, employees will seek to control cost and thus be recongnised and

rewarded. If the focus is on rewarding productivity, employees will strive for

productivity. The performance appraisal becomes not only a means of knowing if

the employees' behaviour is consistent with the overall strategic focus, but also a

way of bringing to the fore any negative consequence of the strategybehaviour

fit. For example, a single point productivity focus may include potential negative

consequences such as decreased quality and co-operation. Thus, the performance

appraisal system is an important organisational mechanism to elicit feedback on the

consistency of the strategy-behaviour link.

Organisational Strategy and Performance Appraisal The performance appraisal

system serves many organisational objectives and goals. Besides encouraging high

level performance, the evaluation system is useful in identifying employees with

potential rewarding performance equitably, and determining employees' needs for-

development. These are all the activities that should support the organisation's

strategic orientation. Although these activities are clearly instrumental in achieving

corporate plans and long-term growth, typical appraisal systems in most

orgnisations have been focused on short-term goals.

From the strategic management point of view, organisations can be grouped into


6/46

three categories defenders, prospectors and analysers. Performance appraisal has

definite roles in all the three strategies.

Typically, defenders have a narrow and relatively stable product-market domain.

Because of this narrow focus, these organisations seldom need to make major

adjustments in their technology, structure or methods of operations. They devote

primary attention to improving the efficiency of their existing operations. Because

of the emphasis on building skills within the organisation, successful defenders use

performance appraisal for identifying training needs. Performance appraisal is

usually more behaviour oriented.

Organisations with a prospector strategy continuously search for different

product and market opportunities. In addition, these organisations regularly

experiment with potential responses to new and emerging environmental trends.

Prospectors are often the harbingers of change. Because of the emphasis on skills

identification and acquisition of human resources from external sources, as opposed

to skills building with the organisation, prospectors often use the performance

appraisal as a means of identifying staffing needs. The emphasis is on results.Finally, the focus is on division and corporate performance evaluation as they

compare with other companies during the same evaluation period.

Organisations with an analyser strategy operate in two types of product-market

domains. One domain is stable while the other is changing. In their more innovative

areas, managers watch their competitors closely and rapidly adopt the ideas that

appear promising. In general, analysers use cost-effective technologies for stable

products and project or matrix technologies for new product. Analysers tend to

emphasise both skill building and skill acquisition and employ extensive training

programmes. Thus, these organisations attempt to identify both training as well as

staffing needs. The appraisal systems are considered at the individual, group and

divisional levels. Finally, successful analysers have a tendency to examine current

performance with past performance within the organisation. Cross-sectional

comparisons (comparisons among companies) may also occur.


7/46

Whatever the category, a performance appraisal system has strategic importance to

a firm in three ways:

1. Feedback mechanism,

2. Consistency between organisational strategy and job behaviour, and

3. Consistency between organisational values and job behaviour.

APPRAISAL PROCESS

Figure 10.3 outlines the performance-appraisal process. Each step in the process is

crucial arid is arranged logically. The process as shown in Fig. 10.3 is somewhat

idealised. Many organisations make every effort to approximate the ideal process,

resulting in first-rate appraisal systems. Unfortunately, many others fail to consider

one or more of the steps and, therefore, have less-effective appraisal system.

The Performance Appraisal Process

1. Objectives of Appraisal

Objectives of appraisal, as stated above, include effecting promotions and transfers,


8/46

assessing training needs, awarding pay increases, and the like. The emphasis in all

these is to correct the problems. These objectives are appropriate as long as the

approach in appraisal is individual. Appraisal, in future, would assume systems

orientation. In the systems approach, the objectives of appraisal stretch beyond the

traditional ones.

In the systems approach, appraisal aims at improving the performances/instead of

merely assessing it. Towards this end, appraisal system seeks to evaluate opportunity

factors. Opportunity factors include the physical environment such as noise,

ventilation and lightings, available resources such as human and computer

assistance; and social processes such as leadership effectiveness. These opportunityvariables are more important than individual abilities in determining work

performance.

In the systems approach, the emphasis is not on individual assessment and rewards

or punishments. But it is on how the work system affects an individual's

performance. In order to use a systems approach, managers must learn to appreciate

the impact that the system level factors have on individual performance, andsubordinates must adjust to the lack of competition among individuals. Thus, if a

systems approach is going to be successful, the employee must believe that by

working towards shared goals, everyone will benefit.

Not that the role of the individual is undermined. The individual is responsible for

a large percentage of his or her work performance. Employees should not be

encouraged to seek organisational reasons for their failures. The identification of

systems obstacles should be used to facilitate development and motivation, not as an

excuse to poor performance. Table 10.2 displays some of the differences between the

traditional approach and the systems-oriented one.

Table Performance Appraisal Systems

Traditional Systems

Guiding value Attribution to individual Attribution to system

Primary goals Control documentation Development, problem

solving


9/46

Leadership frequency Directional, evaluative Facilitative, coaching

Appraisal frequency Occasional Frequent

Degree of formality High Low

Reward practices Individual orientation Group

Source: William P. Anthony, et al., Strategic Human Resource Management,p. 442.

2. Establish Job Expectations

The second step in the appraisal process is to establish job expectations.. This

includes informing the employee what is expected of him Or her on the job.

Normally, a discussion is held with his or her superior to review the major duties

contained in the job description. Individuals should not be expected to begin the job

until they understand what is expected of them.

3. Design Appraisal Programme

Designing an appraisal programme poses several questions which need answers. They

are, (i) Formal versus informal appraisal (ii) Whose performance is to be assessed?

(iii) Who are the raters? (iv) What problems are encountered? (v) How to solve the

problems? (vi) What should be evaluated? (vii) When to evaluate? (viii) What

methods of appraisal are to be used?

Issues in Appraisal Design

Formal Versus Informal Appraisal The first step in designing an appraisal

programme is to decide whether the appraisal should be formal or informal. tEprmalappraisals usually occur at specified time periodsonce or twice, a year. Formal


10/46

appraisals are most often required by the organisation (for the purpose of employee

evaluation. Informal performance appraisal can occur whenever the supervisor feels

the need for communication. For example, if the employee has been consistently

meeting or executing standards, an informal appraisal may be in order to simply

recognise this fact. Discussions can take place anywhere in the firm, ranging from the

manager's office to the canteen. But care needs to be taken to ensure that the

discussion is held in private.

Many organisations encourage a mixture of both formal and informal appraisals.

The formal appraisal is most often used as primary evaluation. However, the informal

appraisal is very helpful for more performance feeback.7

Informal appraisals shouldnot take the place of formal performance evaluation.

WhosePerformance Should be Rated? To the question as to whose performance

should be rated, the answer is obviousemployees. When we say employees, is it

individuals or tearns. Specifically, the ratee may be defined as the individual, work

group, division, or organisation. It is also possible to define the ratee at multiple

levels. For example, under some conditions, it may be desirable to appraiseperformance both at the work-group level for merit-pay increases and at the individual

level to assess training needs.

Two conditions necessitate a group-level appraisalgroup cohesiveness and

difficulty in identifying individual performance. Group cohesiveness refers to the

shared feeling among work-team members. There is co-operation and clear

understanding to accomplish tasks which are interdependent. Any attempt to assess

individual performance shall undermine group cohesiveness and tend to promote

individualistic or even competitive orientation. The difficulty in identifying individual

contribution is also important to consider. In some cases, interdependence of tasks is

so complete that it is difficult to identify who has contributed what. There is no other

choice but to view that task as a team effort. But the point to be remembered is that

the performance of all employees must be rated. All must become ratees.

Who are Raters? Raters can be immediate supervisors, specialists from the HR


11/46

department, subordinates, peers, committees, clients, self-appraisals, or a

combination of several.

Immediate supervisor is the most fit candidate to appraise the performance of

his or her subordinates. There are three reasons in support of this choice. No one is

more familiar with the subordinate's performance than his or her superior. Another

reason is that the superior has the responsibility of managing a particular unit.

When the task of evaluating a subordinate is given to another person, the superior

authority may be undermined seriously. Finally, training and development of

subordinates is an important element in every manager's job. Since appraisal

programmes are often clearly linked to training and development, the immediatesupervisor may be the logical choice to conduct the performance evaluation.

Subordinates can assess the performance of their superiors. The use of this

choice may be useful in assessing an employee's ability to communicate, delegate

work, allocate resources, disseminate information, resolve intra-personal conflict,

and deal with employees on a fair basis. But the problem with subordinate

evaluation is that the supervisors tend to become more popular, not by effectiveleadership, but by mere gimmicks.

Peers are in a better position to evaluate certain facts of job performance which

the subordinates or supervisors cannot do. Such facts include contribution to

workgroup projects, interpersonal effectiveness, communication skills, reliability

and initiative. Closeness of the working relationship and the amount of personal

contacts place peers in a better position to make accurate assessments.

Unfortunately, friendship or animosity may result in distortion of evaluation.

Further, when reward allocation is based on peer evaluation, serious conflicts

among co-workers may develop. Finally, all the peers may join together to rate

each other high.

Although clients are seldom used for rating employee performance.nothing

prevents an organisation from using this source. Clients may be members within

the organisation who have direct contact with the ratee and make use of an output


12/46

(goods or service) this employee provides. Interest, courtesy, dependability and

innovativeness are but a few of the qualities for which clients can offer rating

information. Clients, external to the organisation, can also offer similar kinds of

information.

Where appraisal is made by superiors, peers, subordinates and clients, it is called

the 360-degree system of appraisal. First developed at General Electric, US in

1992the system has become popular in our country too. GE (India), Reliance

Industries, Crompton Greaves, Godrej Soaps, Wipro, Infosys, Thermax and Thomas

Cook are using the method with greater benefits. The Arthur Anderson Survey (1997)

reveals that 20 per cent of the organisations use the 360-degree method. In the 360-degree method, besides assessing performance, other attributes of the assessee

talents, behavioural quirks, values, ethical standards, tempers and loyalty are

evaluated by people who are best placed to do it.

Many employers use rating committees to evaluate employees. These committees

are often composed of the employee's immediate supervisor an3 three or four other

supervisors who come in contact with the employee. This choice is welcome when anemployee, in the course of his or her job, performs a variety of tasks in different

environments. For example, one supervisor may work with the employee when

technical aspects of a job are being performed and another supervisor may deal with

the same employee in situations where communication skills are crucial. There are

several benefits in using multiple raters. First, there may be objectivity in rating as

more than one rater is involved in the assessment. Furthermore, where there are

differences in the raters' ratings, they usually stem from the fact that raters at different

levels in the organisation often observe different facets of an employee's performance

the appraisal ought to reflect these differences.12 The disadvantage of committee

rating is that it diminishes the role of the immediate supervisor in the area of training

and development.

In self-appraisal, the employee himself or herself evaluates his or her own

performance. Hewlett-Packard and Texas Instruments ask their employees to prepare


13/46

their own appraisals. On the positive side, it may be stated that in self-appraisal there

is an opportunity to participate in evaluation, particularly if it is combined with goal

setting (as in Management By Objectives or MBO) and this should improve the

manager's motivation.

Managers are less defensive in self-evaluation than when superiors tell them what

they are. Self-appraisal is best suited where executive development is the main

purpose of evaluation, as the approach enables managers to clearly assess their areas

of differences. Unfortunately, self-appraisals fall short almost by any criterion. They

tend to be more lenient compared to other sources of evaluation, even that of peers,

who are more lenient than their superiors.13

Self-appraisals are also more likely to beless viable, more biased and less in agreement with the judgement of others.

In practice, a combination of methods is followed for employee assessment. For

example, evaluation by self may be followed by a superior, the personnel department,

or by the HR department.

Whoever may be the rater, two requisites must be fulfilled.First, the rater must

be free from bias. Second, the rater must have an opportunity to observe the full

spectrum of activities and behaviour of the ratee over an extended time period.

Problems of Rating Performance appraisals are subject to a wide variety of

inaccuracies and biases referred to as 'rating errors. These errors occur in the rater's

observations, judgment, and information processing and can seriously affect

.assessment results,. The most common rating errors are leniency or severity, central

tendency, halo effect, rater effect, primacy and recency effects, perceptual set,

performance dimension behaviour, spill over effect, and status effect.

Leniency or Severity Leniency or severity on the part of the rater makes the

assessment subjective. Subjective assessment defeats the very purpose of performance

appraisal. Ratings are lenient for the following reasons:

1. The rater may feel that anyone under his or her jurisdiction who is rated

unfavourably will reflect poorly on his or her own worthiness.


14/46

2. He or she may feel that anyone who could have been rated unfavourably has

already been discharged from the company.

3. He or she may feel mat a derogatory rating will be revealed to the ratee to the

detriment of the relations between the rater and the rate.

4. He or she may rate leniently in order to win promotions for the subordinates

and, therefore, indirectly increase his or her hold over them.

5. He or she may be projecting.

6. He or she may feel it necessary to always approve of others in order to gain

approval for himself or herself.

7. He or she may be operating on the premise, "whoever associates with me is

meritorious, therefore, I am meritorious".

8. He or she may rate leniently because there exists, in the culture, a response set

to approve rather than disapprove.

Graphically, the distribution of ratings resulting from leniency or severity is shown

in Fig.

Fig. Distribution of Lenient and Severe Raters

Source: Wayne F. Cascio and Elias M. Awad,Human Resource Management,

Central Tendency This occurs when employees are incorrectly rated near the average

or middle of the scale. The attitude of the rater is to play safe. This safe-playing

attitude stems from certain doubts and anxieties which the raters have while assessing

the ratees. Such doubts and anxieties are:


15/46

1. "Do I know the man sufficiently well to be able to give a fair assessment of him?"

2. "If I rate him the way I think I should, what will be its influence on his relations

with me and on his performance in the future?"

3. "If I rate him the way I think I should, what will be its effect on my relations with

the other subordinates?"

4. "If I rate him the way I think I should, what will be its effect on his relationship

within the group or subordinates?"

5. "Will I be able to be objective in view of pressures from peers, superiors and trade

unions?"

6. "If I rate him the way I think I should, will I be accused to being partial?"

7. "How will my boss view the appraisal I make and how will that influence the way

he appraises the man?"

8. "What standards will my peers adopt to appreciate their subordinates? And in

view of this, am I likely to affect adversely the future of my subordinates?"

Naturally, the raters use such expression as 'satisfactory' and 'average' to describe

the performance of the ratees. For example, the principal of a college while giving

character certificates to the outgoing students describes the character of each

student as 'satisfactory'. Obviously, it becomes difficult to distinguish between

excellent performance and poor performance. In small organisations, it is common

to label all employees as average. But in large companies, errors of this type tend to

obviate the value of evaluations.

Close to the error of central tendency is the problem ofrange restriction. Range

restriction may involve clustering all employees around any point on a scale, oftenin combination with leniency errors at the very top. What is distinctive in the error

of central tendency and the error of range restriction is a failure to note real

performance differences, either intentionally or due to insufficient attention.

Halo Error A halo error takes place when one aspect of an individual's

performance influences the evaluation of the entire performance of the individual,

just as the assessment of the performance of a student in his or her examinationbeing influenced by the-'opening paragraph of every answer. If the introductory


16/46

paragraph is poorly written, the chances of scoring high marks in that answer are

diminished, however good the subsequent portion of the essay may be.

In an organisation, an halo error occurs when an employee who works late

constantly might be rated high on productivity and quality of output as well as on

motivation. Similarly, an attractive or popular employee might be given a high

overall rating. Rating employees separately on each of a number of performance

measures and encouraging raters to guard against the halo effect are the two ways

to reduce the halo effect.

Rater EffectThis includes favouritism, stereotyping, and hostility. Excessively high

or low scores are given only to certain individual or groups based online rater's

attitude toward the rate, not on actual outcomes or behaviours. Sex, age, race and

friendship biases are examples of this type of error.

Primacy and Recency Effects The rater's ratings are heavily influenced either by

behaviour exhibited by the ratee during the early stages of the review period

(primacy) or by outcomes or bejavopir exhibited by the ratee near the end of the

review period (recency)). For example, if a salesperson captures an important

contract/sale just before the completion of the appraisal, the timing of the incident

may inflate his or her standing, even though the overall performance of the sales-

person may not have been encouraging. Likewise, a blunder committed just before

the appraisal period may diminish chances of securing a favourable rating, even if

the overall performance is good.

One way of guarding against such an error is to ask rater to consider the

composite performance of the ratee and not to be influenced by one incident or one

achievement. The rater must also be aware of the tendency on the part of the ratees

to improve odds in their favour or suppress weak points during the rating period.

Perceptual Set This occurs when the rater's assessment is influenced by previously

held belief? If the supervisor, for example, has a belief that employees hailing from

one particular region are intelligent and hard working, his subsequent rating of an


17/46

employee hailing from that region tends to be favourably high.

Performance Dimension Order Two or more dimensions on a performance

instrument follow or closely follow each other and both describe or rotate to a

similar quality. The rater rates the first dimension accurately and then rates the

second dimension similar to the first because of their proximity. If the dimensions

had been arranged in a significantly different order, the ratings might have been

different.

Spillover Effect This refers to allowing past performance appraisal ratings to

unjustifiably influence current ratings. Past ratings, good or bad, result in similar

rating for the current period although the demonstrated behaviour does not deserve the

rating, good or bad.

Status Effect It refers to overrating of employees in higher-level job or jobs held in

high esteem, and underrating employees in lower-level job or jobs held in low esteem.

It is not the rater's errors alone that are barriers to accurate and valid measurement

of employee performance. Barriers lie deep within the genetic and acquired makeupof all people concerned with performance appraisal. A wide variety of emotional,

psychological, intellectual and physical factors that, at the first glance, may appear to

be separate and irrelevant may combine in any number of ways during the appraisal

process to completely neutralise or nullify any programme designed to measure

employee performance (read also Exhibit 10.2).

Solving Rater's Problems The best way to overcome the problems is to providetraining to the raters. At Hewlett-Packard, a two-day training course is organised

every year to prepare managers to handle appraisals better. Not that training is a 'cure-

all' for all the ills of appraisal systems. From a practical point of view, several factors,

including the extent to which pay is related to performance ratings, union pressure,

turnover rates, time constraints and the need to justify ratings may be more important

than training, influencing the ratings they actually give. This means that improving

rating systems involves not just training the raters but remedying outside factors such


18/46

as union pressure. And it means that a rater training, to be effective, should also

address real-life problems such as the fact that union representatives will try to

influence supervisors to rate everyone high.

But training can help improve the appraisal system to the extent of distortion that

occurs due to the rater's errors such as halo, leniency, central tendency and bias. In a

typical training, raters are shown a video-tape of jobs being performed and are asked

to rate the worker. Ratings made by each participant are then placed on a flip chart

and the various errors are explained. For example, if a trainee is rated on all criteria

(such as quantity and quality) about the same, the trainer might explain that halo error

had occurred. If, on the other hand, a trainer rated all video-taped workers very high,this might be explained as a leniency error. Typically, the trainer gives the correct

rating and then illustrates the rating errors made.

In effect, training of raters must help strengthen the factors that tend to improve

accuracy of ratings and weaken those that lower the accuracy of the performance

measurement.Factors that help improve accuracy:

1. The rater has observed and is familiar with behaviours to be appraised,

2. The rater has documented behaviours to improve the recall.

3. The rater has a checklist to obtain and review job-related information.

4. The rater is aware of personal biases and is willing to take action to minimise

their effect.

5. Rating scores by raters of one group or organisation are summarised and

compared with those by other raters.

6. The rater focuses attention on performance-related behaviours over which the

rater has better control than in other aspects of evaluation.

7. Higher levels of management are held accountable for reviewing all ratings.

8. The rater's own performance ratings are related to the quality of rating given

and the performance of units.

9. Performance factors are properly defined.

Factors that may lower accuracy:1. The rater rates ratees only when administrative actions are contemplated.


19/46

2. The rater tends to inflate ratings when the ratees receive scores and results of

appraisals.

3. The rater tends to recall more behaviours known to be of particular interest to

higher-level managers, whether or not they are pertinent, when his or her ratings

are reviewed by such authorities.

4. The rater is unable to express himself or herself honestly and unambiguously.

5. Appraisal systems, processes and instruments fail to support the rater.

6. The rater is unaware of causes of rating errors.

7. The rater has to rate employees on factors that are poorly defined.

8. Finally, the supervisor/rater must be trained to conduct the appraisal interview.

For many raters, this is a difficult task, especially when the appraisal is

unfavourable to the rater. Favourable or unfavourable rating, it is the job of the

rater to convince the ratee about the appraisal, and advise him or her about the

future course of action the ratee should take.

What should be Rated? One of the steps in designing an appraisal programme is to

determine the evaluation criteria. It is obvious that the criteria should be related to the

job. The seven criteria for assessing performance are:22

1. QualityThe degree to which the process or result of carrying out an activity

approaches perfection in terms of either conforming to some ideal way of performing

the activity, or fulfilling the activity's intended purpose.

2. QuantityThe amount produced, expressed in monetary terms, number of units,

or number of completed activity cycles.

3. Timeliness The degree to which an activity is completed or a result produced,

at the earliest time desirable from the standpoints of both co-ordinating with the

outputs of others and of maximising the time available for other activities.

4. Cost effectivenessThe degree to which the use of the organisation's resources

(e.g. human, monetary, technological and material) is maximised in the sense of

getting the highest gain or reduction in loss from each unit or instance of use of a

resource.

5. Need for supervisionThe degree to which a job performer can carry out a job


20/46

function withooi either having to request supervisory assistance or requiring

supervisory intervention to prevent an adverse outcome.

6. Interpersonal impact The degree to which a performer promotes feeling of

self-esteem, goodwill and co-operation among co-workers and subordinates.

7. Community service Firms are increasingly emphasising on employees'

community involvement. This is particularly true in educational institutions. One of

the criteria for accreditation by National Assessment and Accreditation Council

(NAAC) of any college or university is the involvement of staff in social activities.

Mind Tree Consulting has a system in place where social activities are

considered in assessing employee performance. Every employee in the

company is evaluated on 100 points. While 60 of these come from his or her

job performance, 40 points are given to how an employee is faring with respect

to CLASS (caring, learning, achieving, sharing, and social conscience).

Employees fill a self-appraisal form and demonstrate through anecdotes and

personal experiences how they have acted on some of the values.

These criteria relate to past performance and behaviour of an employee. There is

also the need for assessing, as was pointed out earlier, the potential of an employee for

future performance, particularly when the employee is tipped for assuming greater

responsibilities. (Read Exhibit 10.3 for an illustration of assessing potentials).

Appraisal of Potential at Philips

More and more number of organisations are trying to assess potential of their

employees, particularly at the managerial level. Cadbury India, Sandoz, Pfizer,

Mafatlal, Philips, National Organic Chemical Industries, Glaxo and P&G are a

few of Inc companies which seek to tap managerial potential.

At Philips a two-by-two matrix is used to assess performance and potential to

perform. The vertical axis measure potential while the horizontal,, actual

performance (see Fig.). Both are further subdivided into parametershigh and

lowresulting in four quadrants of classification.


21/46

Low potential-low performance. Jlw.se employees are categorised as question

marks. The company asks such employees to improve their performance levels.

Failure to improve performance would result in their

planned separation. .

High potential-low performance. These are the problem children. In order to help

them improve their performance, these employees are shifted to new locations to

work and are closely rnonitored. If performance levels do not improve, these-

employees are reclassified as question marks and the separation process initiated.

High potential-high performance. These are the star performers. They have

to be kept engaged with complex assignments all the time and groomed to takeup the top positions. Otherwise, they might leave.

Low potential-high performance. These are called solid citizens arid constitute 70

to 75 per cent of the total number of employees in any organisation. They have

ski!!', but lack the potential to grow beyond their

current job-profile. The organisation has to constantly recognise their limitations

and take care of their.

In order to assess employee potential, Philips has adopted the system that

prevails a! Philips NV, Holland. The system at Philips; NV, uses four broad

attributes-conceptual effectiveness, operational effectiveness, interpersonal

effectiveness and achievement motivation. Each attribute has a five point grading

scale excellent, very good,, good/adequate, weak and insufficient

While his final grade is based on what Philips calls shared understanding, the

employee is also appraised by the management development review team, which

consists of the functional heads with whom the appraise has close interaction in

the normal course of his/her job.


22/46

The Philips Model

Source: Business Today, Jan. 7-12, 1996.

Coming to the six criteria, it may be stated that the first fourquality, quantity,

timeliness and cost effectivenessare objective in nature; and the last twoneed

for supervision and interpersonal impact are subjective. Objective measures are

quantifiable and are therefore highly useful in measuring the performance of an

employee. But performance of employees should not always be evaluated against

quantifiable measures. The performance of the manager of a bank, for example,

should not always be evaluated against the amount of deposits mobilised for his or

her bank. The effort put in by him/her, the contacts he/she has established, the

image about the bank he/she has created in the eyes of public, and relationships

he/she has maintained with subordinates speak more reliably about the manager's

performance. Here comes the relevance of the subjective criteria. However, as

subjective measures are dependent upon human judgements, they are prone to the

kinds of errors we noted earlierleniency or severity, central tendency, halo, and

the like. To be useful, subjective measures must be based on a careful analysis of

the behaviours viewed as necessary and important for effective job performance.

Of late, there has been a shift in focus of appraisals. The shift is from

performance of the individual to the systems approach. As stated at the beginning of

this chapter, in the systems approach the emphasis is on improving one's

performance. Work performance of an individual depends on organisational factors

in addition to his or her abilities. The focus in the systems approach is, therefore,

the entire organisation.

Timing Of Evaluation How often should an employee be assessed? The general trend

is to evaluate once in three months, or six months, or once in a year. According to a

survey conducted in 1997 by Arthur Anderson, 70 per cent of the organisations

conduct performance appraisal once a year. Newly hired employees are rated more


23/46

frequently than the older ones. Frequent assessment is better than phased evaluation.

Feedback in the latter is delayed and the advantage of timely remedial measures by

the employee is lost. Frequent evaluation gives constant feedback to the ratee, thus

enabling him or her to improve performance if there is any deficiency. The

performance of trainees and probationers should be evaluated at the end of

respective programmes.

Methods Of Appraisal The last to be addressed in the process of designing an

appraisal programme is to determine method(s) of evaluation. Numerous methods

have been devised to measure the quantity and quality of employee's job

performance. Each of the methods discussed could be effective for some purposes,for some organisations. None should be dismissed or accepted as appropriate except

as they relate to the particular needs of the organisation or of a particular type of

employees. Broadly, all the approaches to appraisal can be classified into (i) past-

oriented methods, and (ii) future-oriented methods. Each group has several

techniques as shown in Fig.

Fig. Methods of Performance Appraisal

Past oriented Methods

Rating Scales This is the simplest and most popular technique for appraising

employee performance. The typical rating-scale system consists of several numericalscale, each representing a job-related performance criterion such as dependability,


24/46

initiative, output, attendance, attitude, co-operation and the like. Each scale ranges

from excellent to poor. The rater checks the appropriate performance level on each

criterion, then computes the employee's total numerical score (see Exhibit). The

number of points scored may be linked to salary increases, whereby so many point

equal a rise of some percentage.

Rating scales offer the advantages of adaptability, relatively easy use and low cost.

Nearly every type of job can be evaluated with the rating scale, the only

requirement being that the job-performance criteria should be changed. This way, a

large number of employees can be evaluated in a short time, and the rater does not

need any training to use the scale.

The disadvantages of this method are several. The rater's biases are likely to

influence evaluation, and the biases are particularly pronounced on subjective

criteria such as co-operation, attitude and initiative. Furthermore, numerical scoring

gives an illusion of precision that is really unfounded.

Checklist Under this method, a checklist of statements on the traits of the employee

and his or her job is prepared in two columnsviz., a 'Yes' column and a 'No'

columns. All that the rater (immediate superior) should do is tick the 'Yes' column

if the answer to the statement is positive and in column 'No' if the answer is

negative. A typical checklist is given in Table 10.3. After ticking off against each

item, the rater forwards the list the HR department where the actual assessment of

the employee takes place. In other words, the rater only does the reporting, while

actual evaluation is done by the HR department. The HR department assigns certain

points to each 'Yes' ticked. Depending on the number of 'Yes' the total score is

arrived at. When points are allotted to the checklist, the technique becomes a

weighed checklist. The advantages of a checklist are economy, ease of

administration, limited training of rater, and standardisation. The disadvantages

include susceptibility to rater's biases (especially the halo effect), use of personality

criteria instead of performance criteria, misinterpretation of checklist items, and the

use of improper weights by the HR department. Another disadvantage of this


25/46

approach is that is does not allow the rater to give up relative ratings.

Table Checklist for Operators

Yes No

1. Is the employee really interested in the job? 2. Does he or she possess adequate knowledge

about the job?

3. Is his or her attendance satisfactory?

4. Does he or she maintain his or her equipment in

good condition?

5. Does he or she co-operate with co-workers?

6. Does he or she keep his/her temper?

7. Does he or she obey orders?

8. Does he or she observe safety precautions? 9. Does he or she complete what he or she

commences?

1

0

Does he or she evade responsibility?

Choice Method :- In this, the rater is given a series of statemnents about

an employee. These statements are arranged in blocks of two or more, and the

rater indicates which^statement isjnost or least descriptive of the employee],Typical statements are:

1. Learns fast-----------------works hard.

2. Work is reliable---------------performance is a good example for.

3. Absents often ------------------------ others usually tardy.

As in the checklist method, the rater is simply expected to select the statements

that describe the ratee. Actual assessment is done by the HR department.

This approach is known as the forced choice method because the rater is forced to

select statements which are readymade. The advantage of this method is the

absence of personal bias in rating. The disadvantage is that the statements may not

be properly may not be precisely descriptive of the ratee's traits.

Forced Distribution Method One of the errors in rating is leniencyclustering a

large number of mployees around a high point on a rating scale. The forced


26/46

distribution method seeks to overcome the problem by compelling the rater to

distribute the ratees on all points on the rating scale.

The method operates under an assumption that the employee performance level

conforms to a normal statistical distribution. Generally, it is assumed that employee

performance levels conform to a bell-shaped curve. For example, the following

distribution might be assumed to existexcellent 10 per cent, good 20 per cent,

average 40 per cent, below average 20 per cent, and unsatisfactory 10 per cent. Figure

10.8 illustrates the distribution.

Fig. Forced Distribution on a Bell-shaped Curve.

The major weakness of the forced distribution method lies in the assumption

that employee performance levels always conform to a normal (or some other)

distribution. In organisations that have done a good job of selecting and retaining

only the good performers, the use of forced distribution approach would beunrealistic, as well as possibly destructive to the employee morale

The error of central tendency may also occur, as the rater resists from placing an

employee in the lowest or in the highest group. Difficulties also arise for the rater to

explain to the ratee why he or she has been placed in a particular group. One merit

of this approach is that it seeks to eliminate the error of leniency. However, the

forced choice method is not acceptable to raters and ratees, especially, in smallgroups or when group members are all of high ability.


27/46

Critical Incidents Method The critical incidents method of employee assessment

has generated a lot of interest these days. The approach focuses on certain critical

behaviours of an employee that make all the difference between effective and non-

effective performance of a job. Such incidents are recorded by the superiors as and

when they occur. Examples of critical incidents of a plant manager are given in

Table 10.4.

Table Examples of Critical Incidents for an Assistant Plant Manager

Continuing Duties Targets Critical Incidents

Schedule production for

plant

Full utilisation of

personnel and machinery

in the plant; order delivered on time

Instituted new production

scheduling system;

decreased late orders by10% last month:

increased machine

utilisation in plant by

20% last month

Supervise procurement of

raw materials and

inventory control

Minimise inventory

costs while keeping

adequate supplies on

hand

Let inventory storage

costs rise 15% last

month; over-ordered parts

"A" and fcB" by 20%.

under-ordered part "C" by30%

Supervise machinery

maintenance

No shutdowns due to

faulty machinery

Instituted new

preventative maintenance

system for plant;

prevented a machine

breakdown by

discovering faulty part

One of the advantages of the critical incidents method is that the evaluation is

based on actual job behaviour. Further, the approach has descriptions in support of

particular ratings of an employee. Giving job-related feedback to the ratee is also

easy. It also reduces the recency bias, if raters record incidents throughout the rating

period. Finally, this approach can increase the chances that the subordinates will

improve because they learn more precisely what is expected of them. The method,

however has significant limitations. These include:

1. Negative incidents are generally more noticeable than positive ones.2. The recording of incidents is a chore to the supervisor and may be put off and


28/46

easily forgotten.

3. Overly close supervision may result.

4. Managers may unload a series of complaints about incidents during an annual

performance review session. The feedback may be too much at one time and

thus appear as a punishment to the ratee. More appropriately, the management

should use incidents of poor performance as opportunities for immediate

training and counselling.

Behaviourally Anchored Rating Scales Behaviourally anchored scales, sometimes

called behavioural expectation scales, are rating scales whose scale points are deter-

mined by statements of effective and ineffective behaviours. They are said to be

behaviourally anchored in that the scales represent a range of descriptive statements

of behaviour varying from the least to the most effective. A rater must indicate which

behaviour on each scale best describes an employee's performance. Behaviourally

anchored rating scales (BARS) have the following features:

1. Areas of performance to be evaluated are identified and defined by the people

who will use the scales.

2. The scales are anchored by descriptions of actual job behaviour that, supervisors

agree, represent specific levels of performance. The result is a set of rating scales

in which both dimensions and anchors are precisely defined.

3. All dimensions of performance to be evaluated are based on observable

behaviours and are relevant to

the job being evaluated since BARS are tailor-made for the job.

4. Since the raters who will actually use the scales are actively involved in the

development process, they are more likely to be committed to the final product.Figure 10.9 is an example of BARS.

Extremely good performance 7

By knowing the price of items, this checker

would be expected to look for mismarked and

unmarked items.

Good performance 6

You can expect this checker to be aware ofitems that constantly fluctuate in price.


29/46

You can expect this checker to know the various

sizes of canNo. 303, No. 2, No. 2.

Slightly good performance 5

When in doubt, this checker would ask the other

clerk if the item is taxable.

This checker can be expected to verify with

another checker a discrepancy between the shelf

and the marked price before ringing up that

item.

Neither poor nor good

performance

4

When operating the quick check, if the lights are

flashing this checker can be expected to check

out a customer with 15 items.

Slightly poor performance 3

You could expect this checker to ask the

customer the price of an item that he or she does

not know.

In the daily course of personal relationships, he

or she may be expected to linger in longconversations with a customer or with anotherchecker.

Poor performance 2

In order to take a break, this checker can be

expected to block off the check stand while

people wait in line.

Extremely poor performance 1Fig. A BARS Scale for the Knowledge and Judgement Dimension of a Grocery

Checker's Job

Source: C. Hulin Fogh, and M.R. Blood, "Development of first-level Behavioural Job

Criteria."Journal of Applied Psychology, 1971, 55 (1), pp. 3-8.

BARS were developed to provide results which subordinates could use to improve

performance. Superiors would feel comfortable to give feedback to the ratees.


30/46

Further, BARS help overcome rating errors. Unfortunately, this method too suffers

from distortions inherent in most rating techniques.31

Field Review Method

This is an appraisal by someone outside the assessee's own department, usually

someone from the corporate office or the HR department The outsider reviews

employee records and holds interviews with the ratee and his or her superior. The

method is primarily used for making promotional decisions at the managerial level.

Field reviews are also useful when comparable information is needed from employees

in different units or locations. Two disadvantages of this method are:

1. An "outsider" is usually not familiar with conditions in an employee's work

environment which may affect the employee's ability or motivation to perform.

2. An 'outsider' review does not have the opportunity to observe employee

behaviour of performance over a period of time and in a variety of situations, but

only in an artificially structured interview situation which extends over a very short

period of time.

Raters making field reviews normally receive training on how to conduct the

interview and develop their writing skills. Being independent of the work scene,

they normally have less bias for or against the ratee than does the immediate

supervisor. Even when a supervisor or others concerned supply biased information,

the rater may be able to pinpoint areas requiring training and development

assistance.

33

Performance Tests and Observations With a limited number of jobs, employee

assessment may be based upon a test of knowledge or skills. The test may be of

the paper-and-pencil variety or an actual demonstration of skills. The test must

be reliable and validated to be useful. Even then, performance tests are apt to

measure potential more than actual performance. In order for the test to be job

related, observations should be made under circumstances likely to be

encountered.34 Practicality may suffer if costs of test development or


31/46

administration are high.

Confidential Records Confidential records are maintained mostly in government

departments, though its application in the industry is not ruled out. A typical

Confidential Report (ACR) shall have 14 items(i) attendance, (ii) self-expression

(written or in oral), (iii) ability to work with others, (iv) leadership, (v) initiative, (vi)

technical ability (job knowledge), (vii) ability to understand new material, (viii) ability

to reason, (ix) originality and resourcefulness, (x) areas of work that suits the person

best, (xi) judgement, (xii) integrity, (xiii) responsibility and, (xiv) and indebtedness,

memo served, etc. Twelve of these may be filled on a four-point grade scale

(Excellent, Good, Fair and Poor). For integrity, there shall be special instructions fromthe management. Justification is required for outstanding or poor rating. Overall rating

on a five-point scale may be separately given (Outstanding, Very good, Good,

Average, Poor), again with justification for rating as outstanding or poor.

Recommendations for promotion may be also given. The ACR to contain

recommendations and signature of the rater, the head of the department and the CMD.

The confidential reports, as the name itself suggests, are highly secretive. Assuch they have no relevance now.

Essay Method In the essay method, the rater must describe the employee within a

number of broad categories, such as (i) the rater's overall impression of the

employee's performance, (ii) the promotability of the employee, (iii) the jobs that

the employee is now able or qualified to perform, (iv) the strengths and weaknesses

of the employee and (v) the training and the development assistance required by

the employee. Althoughthis method may be used independently, it is most

frequently found in combination with others. It is extremely useful in filing

information gaps about the employees that often occur in the better structured

checklist method.

The strength of the essay method depends on the writing skills and analytical

ability of the rater. However, many raters do not have good writing skills. They

become confused about what to say, how much they should state and the depth


32/46

of the narrative. The essay method can consume much time because the rater

must collect the information necessary to develop the essay and then he or she

must write it. The essay method also depends on the memory power of the rater.

A problem with this method is that the ratees may be rated on the quality of the

appraisals that they give. The quality standard for the appraisal may be unduly

influenced by appearance rather than content. Thus, a 'high quality' appraisal may

provide little useful information about the performance of the ratee.

Cost Accounting Method This method evaluates performance from the monetary

returns the employee yields to his or her company. A relationship is established

between the cost included in keeping the employee and the benefit the firm derives

from him or her. Performance of the employee is then evaluated based on the

established relationship between the cost and the benefit. Cost accounting method of

evaluation has vast potential as increasingly firms are converting their training

departments into profit centres. Profit-centre concept demands cost-benefit analysis.

Comparative Evaluation Approaches These are a collection of different methods

that compare one worker's performance with that of his/her co-workers. Comparative

appraisals are usually conducted by supervisors. As these appraisals can result in a

ranking from best to worst, they are useful in deciding merit-pay increases,

promotions and organisational rewards. The usual comparative forms used in this

kind of evaluation are the ranking method and the paired comparison method.

Ranking Method In this, the superior ranks his or her subordinates in the order of

their merit, starting from the best to the worst. All that the HR department knows is

that A is better than B. The 'how' and 'why' are not questioned, nor answered. No

attempt is made to fractionalize what is being appraised into component elements,

(This method is subject to the halo and recency effects, although rankings by two

or more raters can be averaged to help reduce biases. Its advantages include ease of

administration and explanation.

Paired-Comparison Method Under this method, the appraiser compares each


33/46

employee with every other employee, one at a time. For example (there are five

employees named A, B, C, D and E. The performance of A is first compared with

the performance of B and a decision is made about whose performance is better.

Then A is compared with C, D and E in that order) The same procedure is repeated

for other employees. The number of comparisons may be calculated with the help

of a formula which reads thus:

N (N1)/2 whereNstands for the number of employees to be compared. If there are

10 employees, the

10(10-1)

number of comparisons will be ----------- = 45.

2After the completion of comparison, the results can be tabulated, and a rank is

created from the number of times each person is considered to be superior.

Future-oriented Appraisals Is it not enough if only the past performance is

assessed. How an employee can perform in the days to come is equally important.

This can be assessed by focussing on employee potential or setting future

performance goals. The commonly used future-oriented techniques are MBO,psychological appraisals, and assessment centres.

Management by Objectives It was Peter F. Drucker who first gave the concept of

MBO to the world way back in 1954 when his The Practice of Managementwas

first published. The MBO concept, as was conceived by Drucker, reflects a

management philosophy which values and utilizes employee contributions.

Application of MBO in the field of performance appraisal is a recent thinking.


34/46

Four Steps in the MBO Process

How MBO works can be described in four steps:

The first step is to establish the goals each subordinate is to attain, in some

organisations, superiors and subordinates work together So establish goals. In others,

superiors establish goals for subordinates. The goals typically refer to the desired

outcome to be achieved. These goals can then by used to evaluate employee

performance.

The secondstep involves setting the performance standard for the subordinates

in a previously arranged time period. As subordinates perform, they know fairly well

what there is to do, what has been dons, and what remains to be done.

In the thirdstep, the actual level of goal attainment is compared with the goals

agreed upon. The evaluator explores reasons for the goals that were not met and for

the goals that were exceeded. This step helps determine possible training needs. St.

also alerts the superior to conditions in the organisation that may affect a subordinate

but over which the subordinate has no control.

The finalstep involves establishing new goals and, possibly, new strategies for

goals not previously attained. At this point, subordinate and superior involvement in

goal-setting may change. Subordinates who successfully reach the established goals

may be allowed to participate more in the goal setting process the next time The

process is repeated.

As with other approaches, MBO too has been criticised. One comment made

against the approach is that it is not applicable to all jobs in all organisations. Jobs

with little or no flexibility, such as assembly-line work, are not compatible with

MBO. An assembly-line worker usually has so little job flexibility that the

performance standards and objectives are already determined. The MBO process

seems to be most useful with managerial personnel and employees who have a fairly

wide range of flexibility and self-control in their jobs.39

Besides, when the results of

an MBO system are to be used to allocate organisational rewards, employees may be


35/46

less likely to establish challenging goalsgoals they are confident that they can

accomplish. Further, the allocation of merit pay on a semi-annual or annual basis may

encourage the setting up of goals with short term horizons to the disadvantage of

important long-term goals.

The performance appraisal presently followed in L&T reflects the principles

of MBO. Exhibit 10.5 illustrates the method used by the engineering giant.

Psychological Appraisals Large organisations employ full-time industrial

psychologists. When psychologists are used for evaluations, they assess an

individual's future potential and not past performance. The appraisal normally consists

of in-depth interviews, psychological tests, discussions with supervisors and a review

of other evaluations. The psychologist then writes an evaluation of the employee's

intellectual, emotional, motivational and other-related characteristics that suggest

individual potential and may predict future performance. The evaluation by the

psychologist may be for a specific job opening for which the person is being

considered, or it may be a global assessment of his or her future potential. From these

evaluations, placement and development decisions may be made to shape the person'scareer. Because this approach is slow and costly, it is usually required for bright

young members who, others think, may have considerable potential within the

organisation. Since the quality of the appraisal depends largely on the skills of the

psychologists, some employees object to this type of evaluation. especially if cross-

cultural differences exist.

Assessment Centres Mainly used for executive hiring, assessment centres are now

being used for evaluating, executive or supervisory potential. An assessment centre is

a central location where managers may come together to have their participation in

job-related exercises evaluated by trained observers? The principal idea is to evaluate

managers over a period of time, say one to three days, by observing (and later evaluat-

ing) their behaviour across a series of select exercises or work samples. Assessees are

requested to participate in in-basket exercises, work groups (without leaders),

computer simulations, role paying, and other similar activities which require the same


36/46

attributes for successful performance, as in the actual job. After recording their

observations of ratee behaviours, the raters meet to discuss these observations. The

decision regarding the performance of each assessee is based upon this discussion of

observations. Self-appraisal and peer evaluation are also thrown in for final rating.

The characteristics assessed in a typical assessment centre include assertiveness,

persuasive ability, communicating ability, planning and organizational ability, self-

confidence, resistance to stress, energy level, decision-making, sensitivity to the

feelings of others, administrative ability, creativity, and mental alertness. It is a formi-

dable list which is quite difficult to measure accurately over three days, though there

would be sizeable number of trained observers and psychologists.

First developed in the US and the UK in 1943, the assessment centre is gaining

popularity in our country. Crompton Greaves, Eicher, HUL and Modi Xerox are using

the technique with results being highly positive (Also see Exhibit 10.6).

The problem with the assessment centres is their cost. Not only are the

assessees away from their jobs while the company pays for their travel and lodging,

but the evaluators are often company managers who are assigned to the assessment

centre for short durations. These managers are often supplemented by psychologists

and HR specialists who run the centre and also make evaluations. Hence this approach

is cost-effective only in large organisations.

Assessment-centre staff are often influenced by subjective elements, such as

personality of the candidates. Raters tend to evaluate the quality of the individual's

social skills rather than the quality of the decisions he/she makes. Assessment-centre

ratings seem to be strongly influenced by the participant's interpersonal skills.

The approach also involves real hazards. One of the most obvious is the

examination-taking syndrome. Solid performers in day-to-day operations feel

suffocated in the simulated environment. Another drawback is its potential adverse

effect on those not selected to participate in the exercise.

Employees who receive a poor report from the centre may react in negative ways.


37/46

Ideally, a rejected employee would return to his or her former job, satisfied that he or

she would not be promoted to a job he or she could not handle. However, a good

performer at one level may leave the organisation in order to remove the bad

assessment report from his or her work record. Thus, a poor report can demoralise an

employee who was once an asset.42

Other problems includestrong and unhealthy sense of competition among the

assessees; difficulty of conducting the test frequently; and the possibility of

overemphasising the test performance.

But a well-conducted assessment centre can and does achieve better forecasts of

future performance and progress than other methods of appraisal. Also, reliability,

content validity, and predictive validity are said to be high in the assessment centres.

The test also makes sure that the wrong people are not hired or promoted. Finally,

the assessment-centre test clearly defines the criteria for selection and promotion.

360-Degree Feedback As stated earlier, where multiple raters are involved in

evaluating performance, the technique is called 360-degree appraisal.(The 360-degree technique is understood as systematic collection of performance data on an

individual or group, derived from a number of stakeholdersthe stakeholders being

the immediate supervisors, team members, customers, peers, and self. In fact, anyone

who has useful information on 'how an employee does the job' may be one of the

appraisors.

The 360-degree appraisal provides a broader perspective about an employee'sperformance. In addition, the technique facilitates greater self-development of the

employees. For one's development, multi-source feedback is highly useful. It enables

an employee to compare his or her perceptions about self with perceptions of others.

Besides, the 360-degree appraisal provides formalised communication links between

an employee and his or her customers. It makes the employee feel much more

accountable to his or her internal or external customers. The technique is particularly

helpful in assessing soft skills possessed by employees. By design, the 360-degree


38/46

appraisal is effective in identifying and measuring interpersonal skills, customer

satisfaction, and team-building skills.

However, there are drawbacks associated with the 360-degree feedback.

Receiving feedback on performance from multiple sources can be intimidating. It

is essential that the organisation create a non-threatening environment by

emphasising the positive impact of the technique on an employee's performance

and development. Further, firms that use the technique take a long time on

selecting the rater, designing questionnaires, and analysing the data. In addition,

multiple raters are less adept at providing a balanced and objective feedback than

the supervisors who are sought to be replaced. Raters can have enormousproblems separating honest observations from personal differences and biases.

Pitfalls notwithstanding, more and more number of firms are using the 360-

degree appraisal technique to assess the performance of their employees. (Also see

Appendix 1)

4. Appraise the Performance:-

The next step in the appraisal process is to measure the performance. We revert

to the moral of the story narrated in the beginning of this chapter. The moral taught

us that we need to measure the performance and not mere activities.

What then is performance? Performance is essentially what an employee does

or does not do. Employee performance common to most jobs include the

following elements:

Quantity of output

Quality of output

Timeliness of output

Presence at work

Cooperativeness..

In addition to these, other elements that deserve assessment, as told in the


39/46

beginning of this chapter, are job knowledge, leadership abilities, judgement,

supervision, versatility and health. Assessment should also include one's potential

to perform and not just actual performance.

Performance measurement needs to be based on the benchmarks listed above.

These benchmarks vary from job to job. The job of a professor needs to be

assessed against parameters that are different to those used to evaluate the

performance of a sales representative.

5. Performance Management

Performance appraisal provides feedback about employee job performance. Getting

feedback is not enough. Three more activities need to be undertaken to complete the

process:' performance interview, archiving performance dataj and use of appraisal

data. These three activities constitute the core of performance management.

Performance Interview Performance interview is another step in the appraisal process

(Fig. 10.2). Once appraisal has been made of employees, the raters should discuss and

review the performance with the ratees, so that they will receive feedback about where

they stand in the eyes of superiors. Feedback is necessary to effect improvement in

performance, especially when it is inadequate. Specifically, performance interview has

three goals: (i) to change behaviour of employees whose performance does not meet

organisational requirements or their own personal goals. (ii) to maintain the behaviour

of employees who perform in an acceptable manner, and (iii) to recognise superior

performance behaviours so that they will be continued.

Raters offer feedback to the ratees through several methodstell and sell, tell

and listen, problem solving and mixed. In tell and sell, also called directive

interview, the interviewer lets assessees know how well they are doing and sells

them on the merits of setting specific goals for improvement, if needed. The tell

and listen interview provides the subordinates with chances to participate and

establish a dialogue with their superiors. Its purpose is to communicate the rater's

perceptions about the ratee's strength and weaknesses and let the subordinates


40/46

respond to those perceptions. In the problem-solvingor participative interview, an

active and open dialogue is established between the superior and the subordinate.

Not only are perceptions shared, but also solutions to problems are presented,

discussed, and sought. Mixed interview is a combination of tell and sell and

problem-solving interviews.

Whatever be the approach followed, the emphasis in the interview should be on

counselling and development and not on criticism, witch-hunting and buck passing.

Because of the significance of appraisal interview, every effort must be made to

make it effective. Guidelines given in Table 10.5 will help make the interview

successful.

Table - Guidelines for Effective Appraisal Interview

Select a good time

Minimise interruptions

Welcome, set at ease

Start with something positive

Ask open-ended questions to encourage discussion

Listen

Manage eye contact and body language

Be specific

Rate behaviour not personality '

Layout development plan

Encourage subordinate participation

Complete form

Set mutually agreeable goals for improvement

End in a positive, encouraging note.

Set time for any follow- up meetings

6. Archiving Performance Data

Organisations need to archive or store the appraisal data so that at any point in


41/46

future, the information can be retrieved and used. For example, if an employee has

been told that he or she was not promoted because of below average performance

and he or she would be considered favourably for a jump in status and

remuneration provided the performance improves!] The HR manager should have

those details to convince the employee concerned when he or she joins issue with

the management on matters relating to promotion. Other issues such as pay hike,

confirmation of probationary services, affirmative actions and the like deserve

reference to the past information. Archiving appraisal data is not just desirable but

essential too.

7. Use of Appraisal Data

The final step in the evaluation process is the use of evaluation data. The data and

information generated through performance evaluation must be used by the HR

department.

It may be recollected that the most significant rewards employers offer to

employees are:

1. Money to purchase goods and services required not only for current and future

survival, but also for the luxuries modern life has to offer.

2. The opportunity to use innate and learned skills and talents in a productive

manner that the individual and his or her managers and co-workers recognise as

valuable.

3. Opportunities to interact with other people in a favourable working

environment.

4. Opportunities to learn, grow, and make full use of their potential.

5. A sense of performance and stability through the continuing existence of the

organisation and the job.

6. The opportunity to perform work assignments within an environment

that not only protects, but promotes physiological, emotional and

psychological health.

In one way or another, data and information outputs of a performance-appraisal


42/46

programme can critically influence these coveted employer-employee reward

opportunities.49 Specifically, the data and information will be useful in the

following areas of HRM:

1. Remuneration administration

2. Validation of selection programmes

3. Efnployee training and development programmes

4. Promotion, transfer and lay-off decisions

5. Grievance and discipline programmes

6. HR planning

EDWARD DEMING ON PERFORMANCE APPRAISAL

Towards the end of this section, it is worthwhile to note Edward Deming's views on

performance evaluation. Deming is opposed to employee assessment, because it:

1. Rewards people for manipulating the system rather than improving it,

2. Is often self-defeating,

3. Is inconsistent with team-work,

4. Acts as a substitute for proper management, and

5. Is inherently unfair.

His alternatives to performance appraisal are:

1. Meticulous selection of leaders,

2. Educating workers about their obligations, and improved training and

education after selection,

3. Getting leaders to function as colleagues rather than as judges,

4. Subordinate performance to be assessed using statistical data,

5. Three to four hours interview annually, with subordinates aimed at support and

encouragement, and

6. Accommodation to lone workers.

CHALLENGES OF PERFORMANCE APPRAISAL


43/46

With the increased significance of performance appraisal, challenges confronting the

system are mounting. One serious challenge facing the performance appraisal system

relates to assessment of self-managed teams. Popularly called empowered teams, these

self-managed teams create special challenges for performance appraisalempowered

teams perform without supervisors. Historically, if one recalls, it is the supervisor who

assesses the performance of his or her subordinates. Another challenge is that both,

individual and team performance, need to be measured. A suitable device needs to be

developed to assess the performance of empowered teams because more and more

firms use such teams to enhance productivity. Figure 10.10 contains a typical model

of team appraisal.

Fig. Appraising Teams

Table contains other challenges of performance appraisal.

Table Challenges of Appraisal

Create a culture of excellence that inspires every employee to improve and lend

himself or herself to be assessed

Align organisational objectives to individual aspirations

Clear growth paths for talented individuals

Provide new challenges to rejuvenate careers that have reached the plateau

stage

Forge a partnership with people for managing their careers


44/46

Empower employees to make decisions without the fear of failing.

Embed teamwork in all operational processes

Debureaucratise the organization structure for ease of flow of information

LEGAL ISSUES ASSOCIATED WITH PERFORMANCE APPRAISAL

Performance appraisal data, as stated earlier, are used to make many important HR

decisions (e.g. pay, promotion, training, transfer, and termination). The appraisal

Date post:	03-Apr-2018
Category:	Documents
Upload:	issa-vandana
View:	224 times
Download:	0 times

Appraising and Managing Performance Human Resource

Documents