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Chapter 1

INTRODUCTION: CONCEPTUAL FRAMEWORK

I. Background:

1. The concept of Performance Appraisal dates back to the First World Warand was then called Merit Rating Programme. Over a period of time, thisconcept has been through an ocean of change. The areas of evaluationhave also changed.

2. Once an employee has been selected, trained and embarked on hisduties, it is time for performance appraisal. What is performanceappraisal? Why do companies need to take up this task?

3. According to Carl Heyel, author/editor on management, philosopher andteacher,it is the process of evaluating the performance and qualificationsof the employees in terms of job requirements, for administrative purposessuch as placement, selection and promotion, to provide financial rewardsand other actions which require differential treatment among the membersof a group as distinguished from actions affecting all members equally.

II. An integral part of performance management system:

1. Effective performance management requires a good deal of face-to-facesupervisor-employee interaction. By knowing the subordinates, asupervisor can steer them onto a path of greater productivity andoptimized output. Long-term successful business owners viewperformance appraisal as a process of getting to know the people whowork for them. It is the most significant and indispensable tool for anorganization. It provides information, which helps in taking importantdecisions for the development of an individual and the organization.

2. Thus, one phase of the annual performance management cycle isperformance appraisal, the process of reviewing employee performancevis--vis the set expectations in a realistic manner, documenting thereview, and delivering the review verbally in a face-to-face meeting, to

raise performance standards year over year through honest andconstructive feedback. In the process management expects to reinforcethe employees strengths, identify improvement areas so that one canwork on them and also set stretched goals for the coming year.

3. It is composed of the following two processes both of which are qualitativesubject to human bias a. observation andb. judgment

4. The parameters of performance are a combination of technical expertiseand behavioural attributes. The latter scores a high degree of relevancewith regard to potential appraisal.

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III. Concept Of Performance Appraisal:

The concept of Performance Appraisal can be explained with the analogyillustrated below:

The head of the key represents the uniqueness of the employee. No two

employees are alike. The ring represents the managements requirement -the job content.

The shaft represents the communication between the employee and thecompany, the transmission of the task and the response from theperformer.

IV. Change:

1. A few decades ago, the employee used to be appraised by his departmenthead. The department head used to communicate his feedback andcomments only to the immediate superior of the employee. Thus thefeedback was kept confidential in nature. As time passed by, theimmediate superior started appraising his subordinates performance andsending his confidential report to the department head. These were theperiods when the employee was not included in his appraisal process. Thedecisions used to be taken by his superiors relating to his pay hike,promotion etc. Thus the system was non-transparent.

2. The current process of performance appraisal is much more open andgives some scope for self-appraisal by the employee. The self-appraisal isfollowed by a joint discussion with superior and then a decision is taken by

the department head on his promotion, pay hike etc. The feedback relatingto his performance is directly given to the employee. Thus performanceappraisal process has gone through the phase of non-transparencyto transparency.

3. In this transparency phase, a performance appraisal can be definedas a structured formal interaction between a subordinate andsupervisor, that usually takes the form of a periodic interview (annualor bi-annual), in which the work performance of the subordinate isexamined and discussed, with a view to identifying weaknesses andstrengths as well as opportunities for improvement and skills

development.

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4. Whether an organization accepts or not the usefulness of PerformanceAppraisal, whether it adopts a formal appraisal system or not, topmanagement is constantly appraising the performance of its subordinatemanagers in day-to-day interaction. The latter are doing the same to theirown subordinates. They are doing so because Performance Appraisal,

formal or informal, lies at the heart of art of managing.

5. Managing is a dynamic process, concerned almost entirely with thepresent and the future, whereas Performance Appraisal, as generally usedhas been a static rating of an employee related almost entirely with thepast. Recently, as some managements were recognizing that rating byitself had very limited utility, they began to appreciate that managing hadevolved into an art. They saw that management by hunch could notlonger be tolerated, and that measurements-no matter how vague wereessential for the future development of the art of managing.

6. The need for measurements gave birth to several systems of managingwhich attempted to apply measurements of various sorts to the differentaspects and elements of the managers job. A number of these systemsleaned on the better Performance Appraisal methods for their measuringdevices or at least for a starting point for measurement. In someinstances, these systems expanded or broadened the meaning ofPerformance Appraisal from a mere rating to include the whole concept ofmanagement with all its elements.

What sets the foundation of Performance Appraisal? The same has beencovered in the following Chapter 2.

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Chapter 2

FOUNDATIONS OF PERFORMANCE APPRAISAL

Performance Appraisal assesses how well people have been doing their jobs and

what they must do to be better in their jobs. It deals with the content of the job andwhat they are expected to achieve in each aspect of their work. Following are thefoundations in Performance Appraisal process:

I. Job Profile:Job description concentrates more on the definition of tasks the jobholder hasto accomplish. It includes details of reporting relationship and normally coversthe overall purpose of the job. It indicates how an individuals job willcontribute to the achievement of objectives of a team or a department and,ultimately the mission of the organization.

II. Objectives:An objective describes something, which has to be accomplished. Objectivesdefine what organizations, functions, departments, teams and individuals areexpected to achieve.

There are two types of objectives:

i. Work or Operational Objectives:It refers to the results to be achieved or the contribution to be made tothe accomplishment of team, departmental and corporate objectives.

ii. Developmental objectives:It is concerned with what individual should do and learn to improve theirperformance and/or their knowledge, skills and competencies (trainingand personal development plans).

III. Competencies:Competencies refer to the behavioral dimensions of a role. It is the behaviorrequired of people to carry out their work satisfactorily. Competencies arewhat people bring to a job in the form of different types and levels of behavior.They govern the process aspects of job performance.

IV. Values:Increasingly, organizations are setting out the core values that they thinkshould govern the behavior of all their employees. Value statements may beprepared which define core values in areas such as care for customers,concern for people, competitiveness, excellence, growth, innovation.

What are the essential steps that set the foundation for an effectivePerformance Appraisal? These steps have been covered in Chapter 3.

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Chapter 3

THREE ESSENTIAL STEPS FOR EFFECTIVE PERFORMANCE

APPRAISAL

The process of getting to know the people who work for the organization involvesthree essential steps viz. training, evaluation and review.

I. Training:Successful training is the implementation of a system in which everyone inthe workplace is geared towards improvement. It involves a hands onapproach in which the employee is encouraged to evaluate himself or herselfunder the guidance of the appraiser.

How it works?First, the appraiser includes the employee in the appraisal process. When an

employee knows that his or her opinion of other workers is taken into account,he or she also realizes that everyone elses opinion matters just as much. Thisnot only empowers the employee and improves relations in the workplace, butit encourages higher productivity as well. This interactive approach is madecomplete with the leadership of the appraiser. Carefully administering praisecoupled with constructive criticism keeps the workforce on its toes.

II. Evaluation:The best methods for employee evaluation are based on results andbehavior. While conducting performance appraisal based on employeescharacteristic traits is quite common, the results are often subjective and

unsatisfactory. A results-based approach to performance appraisal is by farthe cleanest, most objective method of tackling the complex task of evaluation.It uses a rating system to measure productivity within a given timescale. If anemployee makes a certain number of sales in a certain week, he or she can berated by sheer worth as well as ranked against other employees. The study ofbehavior is closely tied to productivity. The pace of work, willingness to put inovertime and ability to work with others all contribute to overall productivity.

III. Review:The review process should, again, employ the techniques of interactivity.Before sitting down together, the appraiser should give the employee a chanceto review himself or herself. This not only empowers the employee, but alsosaves a lot of time and possible contention during the actual discussion.Initially the appraiser should walk the employee through the process. Thesuccessful supervisor starts out with an overview of why the review session isneeded. Then the supervisor takes the employee down a point-by-point list ofevery aspect of the job. In each case, the employee should be given a chanceto describe his or her achievements and shortcomings. The supervisor shouldalways supplement this with added insight. While praising and applyingcriticism, the supervisor maintains authority throughout the review and indeed,the entire appraisal process.

How this entire interaction and review process is beneficial to the organization as awhole and what are the objectives of performance appraisal? These have beenjotted down in the succeeding Chapter 4.

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Chapter 4

OBJECTIVES AND BENEFITS

The objectives and benefits of Performance Appraisal system can be summarized asunder:

I. Objectives:

Data relating to Performance Appraisal of employees are recorded, stored andused for several purposes like:

Let the employees know where they stand in so far as their performance isconcerned and to assist them with constructive criticism and guidance forthe purpose of their development.

Assessment of skills within an organization.

Set targets for future performance.

Effect promotions based on competence and performance.

Strengthen relationship between superior and subordinate.

Assess the training and development needs of employees.

Identify the strengths and weaknesses of employees.

Decide upon a pay raise (increments).

Improve communication as it not only provides a system for dialoguebetween the superior and the subordinate, but also improvesunderstanding of personal goals and concerns. This can also have theeffect of increasing the trust between the appraiser and appraisee.

Determine whether human resource programs such, as selection, trainingand transfers have been effective or not.

II. Benefits:

The following are the benefits of a successful appraisal system:

1. For the Organization:

Improved performance throughout the organization due to: Effective communication of organizations objectives and values.

Increased sense of cohesiveness and loyalty.

Managers are better equipped to use their leadership skills andto develop their staff.

Improved overview of tasks performed by each member of a group. Identification of ideas for improvement. Creation and maintenance of a culture of continuous improvement. Communication to people that they are valued.

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2. For the appraiser:

Opportunity to develop an overview of individual jobs.Opportunity to identify strengths and weaknesses of appraisees. Increased job satisfaction.Opportunity to link team and individual objectives with department &

organizational objectives.

Opportunity to clarify expectations that the manager has from teamsand individuals.

Opportunity to re-prioritize targetsMeans of forming a more productive relationship with staff based on

mutual trust and understanding.

Due to all above Increased sense of personal value

3. For the appraisee: Increased motivation and job satisfaction.Clear understanding of what is expected and what needs to be done

to meet expectations.Opportunity to discuss aspirations and any guidance, support or

training needed to fulfill these aspirations. Improved working relationships with the superior.Opportunity to overcome the weaknesses by way of counseling and

guidance from the superior Increased sense of personal value as he too is involved in the

appraisal process

In line with the objectives of Performance Appraisal, to reap its benefits, this systemhas to be effective failing which it may mar the very purpose of performanceappraisal.

How to make the appraisal process effective is what has been covered in thesubsequent Chapter.

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Chapter 5

EFFECTIVE APPRAISAL PROCESS

When it comes to performance appraisal, managers and employees agree about one

thing: They hate going through them. Employees, managers and HR experts agreethat fear, guilt, responsibility and resentment are the real reasons why mostemployees dread the appraisal process. Besides some think that it is a ritual that ismandatory to follow.

An effective review process helps organizations in three areas:

1. evaluation and improving personnel selection and training systems;

2. preventing wrongful termination; and

3. increasing real employee diversity

I. Good appraisals start with information from multiple sources, and theyevaluate employees at all levels from top to bottom.

II. This system requires both the appraisee and appraiser to jointly assess theemployees ability to complete the duties and achieve the goals set forth in theprevious appraisal.

III. HR professionals should consider the following steps and make the appraisalprocess simple yet effective:

The performance Appraisal form should reflect the strategic objectives ofthe company. Many organizations use a form that contains several

sections.

The results and impact section should address accomplishments relatedto job responsibilities, goals and projects. It is a review of pastperformance.

A skills and abilities section should discuss the ways those results wereaccomplished. By listing the core competencies for each job classification and for the entire organization this section can address the kinds ofbehavior that are critical for success.

IV. Appraisal results, either directly or indirectly, determine reward outcomes. Thebetter performing employees may get the majority of available merit payincreases, bonuses and promotions, while the poorer performers may requiresome form of counseling or in extreme cases no increases in pay. Theassignment and justification of rewards and penalties through performanceappraisal is a very uncertain and controversial matter and conveys bothsatisfaction as well as dissatisfaction with an employees job performance.Whatever is the case, organizations should foster a feeling that performanceappraisals are positive opportunities that provide for overall development ofthe employee, in order to get the best out of the people and the process.Hence performance appraisals should be positive experiences and itshould never be used to handle matters of discipline.

Performance review needs goals to be set first. Identification of Key ResultAreas i.e. Goal Setting has been explained in the Chapter 6.

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Chapter 6

IDENTIFICATION OF KEY RESULT AREAS (KRAS)

GOAL SETTING

Setting of Key Result Areas i.e. goals is one of the various parameters ofperformance evaluation. These are also known as the Targets or PerformanceIndicators (PI). Target setting is the first step in the appraisal process, based onwhich the employee is appraised.

I. The Purpose or Objective of Target Setting

Ensure that each individual is working towards clearly stated objectives thattie into the division goals.

Provides a sound basis to improve performance.

Encourages open communication concerning expected results and progress

towards results.

Helps the individual know How he/she is doing compared to what his/hermanager expects.

Encourages comparison on individual objectives to identify overlapping oromitted objectives.

Helps in salary review, and self-development.

The recent trend from a focus on traits or behavior to a results-orientedapproach has seen the emergence of objectives setting as a key issue.However, managers should attempt to agree objectives with their staff rather

than setting them themselves for the forthcoming period during appraisaldiscussion. These objectives or targets should comply with the mnemonicSMART i.e. Specific, Measurable, Achievable, Realistic and Time-bound.

II. SMART criteria for performance goals

SMART PerformanceGoals

Criteria Checklist

Specific

Does it specify

- Improved level of quality, quantity, time or useof resources.

- A new/innovative result, faster time line, or

- An improved behavioral outcome?

States in clear termswhat outcome, result or

behaviour is to beachieved.

Does it have a clearly stated singular result?

Measurable

Will you know from information, data orobservation when it is achieved?

Includes measurableresults or a description ofthe desired outcome.

Does it specify-What? How much? How well?

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SMART PerformanceGoals

Criteria Checklist

Achievable

Are resources, authority level, and requisiteskills in place?

A realistic expectation, giventime and resources

Does it require a stretch of effort?

Realistic

Will it matter when it is done?

Does the objective support relevant goals?

There is a clear tie to goalsof the department, divisionetc.

Does it deal with a key aspect of the job?

Time Bound

When are the goals to be completed?There is a time limit or

deadline by which theobjective must be achievedand there may be a timeframe to track phases ofcompletion in an action plan.

Is there a timetable for milestones orcheckpoints?

III. Type of Goals:

One may have to set multiple goals combining goals at different levels viz. thelong-term goal, the short-tem goal and the minimum or standard goal.

1. The long-term goal:The long-term goals are the level of performance sought over a period ofone to two years. Usually this level is significantly better than currentperformance. In some cases, the long-term goals are the ultimate level ofperformance, such as zero defects or zero absenteeism. Unlike the othertwo goals (described below), the long-term goals can be dictated bymanagement without regard to past performance or to whether the long-termgoals is currently perceived as attainable.

2. The short-term goal:

The short-term goals is the level of performance desired and perceived asbeing attainable with some effort within a period ranging from three monthsto one year. At the end of that time, short-term goals are re-evaluatedbased upon performance. The expectation is that when the short-term goalis consistently being met, it will be moved closer to the long-term goal.

It must be less than or equal to the long-term goal

It cannot be better than the best performance ever achieved; and

It must be better than the current average or typical performance. Short-term goals are negotiated. Usually employees and lower level managersrecommend and develop short-term goals subject to approval bymanagement.

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3. The Minimum or Standard goal:

The minimum or standard goal is the cut-off point for signaling the existenceof or potential for a performance problem. Like short-term goals, minimumstandards are set for a limited period but for longer duration perhaps oneto two years. Minimums/standards are negotiated like short-term goals and

must conform to the following criteria:

They must be less than or equal to current average/typical performance;and

They cannot be worse than the worst performance for any previousperiod.

IV. To aid goal setting the following steps may be adopted:

1. Consider the job on the following areas:- Routine responsibilities

- Problem solving responsibilities

- Innovative responsibilities

- Development responsibilities

2. Locate key tasks in each of the above areas.

3. Periodic Progress ReviewThe intent of this review is to provide a reconfirmation of direction tomaintain commitment for the balance year. Targets, though should bestable over the performance period, should be flexible enough for revisionwhen changes in priorities or responsibilities lead to the expectation of

different results.

V. Key Steps to Goal Setting:

1. The appraiser should:

in advance, review notes on employees performance;

discuss targets, praise achievements and identify causes of targets notbeing met;

discuss performance skills, reinforce good performance and identifycauses for skills not being met;

agree on the plan for corrective actions to be taken by both;

where necessary, revise targets;

create a non-threatening climate and express confidence.

2. Joint Accountability:

Management must recognize that most results are achieved through thecorporate efforts of two or more people. Therefore, the management stylemust encourage maximum individual contribution in co-operation withothers.

Decision on pay hike, promotion and development is outcome of target

achievement and the same has been detailed in following Chapter 7.

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Chapter 7

PERFORMANCE, PAY AND DEVELOPMENT

The outcome of the appraisal is either in the form of reward by way of increase in

pay, additional bonus or incentive and/or promotion, or by way of not effecting anyincrease in pay, denying promotion etc. This gives emergence to the concept ofPerformance Related Pay (PRP).

I. Performance related pay is not an easy option. Before embarking on itsintroduction the following factors should be taken into account.

1. Matching the Culture:

Successful PRP schemes need to match the culture and core values ofthe organization. It is only by understanding and working with the culture

that it is possible to develop schemes.

2. Linking PRP to the Performance Management process:

The focus when relating pay to performance needs to be one of the issueswhich emerge from the business planning process such as profitability,productivity, cost control, research initiatives, product and marketdevelopment and generally increasing stakeholder value.

3. Balancing performance measures:

The performance measures used as a basis for rating must include abalanced mix of both input factors (skills and competences) and output

factors (performance and contribution). The assessment upon which paydecisions are made should be based not only on performance in achievingobjectives, contribution to organizational success and the levels of skilland competence achieved, but also on the degree to which the behavior ofindividuals support corporate values in such areas as teamwork, totalquality management, customer services, innovation, etc.

4. Flexibility:

PRP arrangements should allow for some flexibility in the criteria forreward and the method of payment.

5. Teamwork:

Poor PRP schemes can produce a lot of single-minded individuals. Theimportance of teamwork should be recognized in structuring the schemeand in defining critical success factors and performance indicators.Individuals should be aware that achieving their targets at the expense ofothers is not considered competent performance.

6. Avoiding Short-termism:

To avoid the danger of PRP focusing attention on short-term results at theexpense of more important longer-term objectives, long-term as well asshort-term goals should be set wherever appropriate and short-termobjectives should be discussed in their overall context.

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7. Involvement in the design process:

The design of PRP schemes is usually an iterative process- trying andtesting ideas on measures and structure with those who will eventually beinvolved in the scheme. It is also a valuable learning process, which canthrow up fundamental strategic and business issues. Those due to

participate in the scheme should have an input into agreeing criticalsuccess factors and performance indicators both for themselves and theorganization.

8. Getting the message across:

PRP provides a very powerful form of communication. To get the rightmessages across, the following question will have to be dealt with:

a. Assess reasons for PRP

Why do we want to introduce PRP?

What, realistically, do we expect to get out of it?

b. Assess readiness for PRP

Is PRP right for our culture?

Do we have the Performance Management and other processesin place required for successful PRP?

Are the attitudes of management and other employees in favourof PRP? (An attitude survey can be conducted to establishopinions).

Do the people concerned with managing PRP have the required

skills and resources? Is PRP likely to make a significant enough impact on

performance to justify the costs of developing, introducing andoperating the scheme?

c. Decide whether or not to introduce PRP

Does the result of the above assessment indicate that PRP isright for the organization?

If no, what are the alternatives? There are many: Considerperformance-related team pay, organization-wide profit sharing orprofit-related pay plans, gain sharing, the use of incentive or bonus

schemes, concentrating more on the motivational aspects ofPerformance Management, job re-design to increase motivation,performance-related training more intensive management coachingand training to improve leadership abilities, process re-engineering toimprove organizational performance and productivity.

d. Brief, consult and involve employees

How should employees be informed of the organizationsobjectives and intentions concerning the introduction of PRP?

How do we minimize concerns about PRP through this briefingprocess?

To what extent and how should we consult and involveemployees?

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e. Design scheme

What criteria should be used for determining PRP awards? Itcan be an appropriate mix of:

Input criteria related to the skills and knowledge brought tobear on fulfilling role responsibilities

Process criteria related to the behavioral competencies usedsuccessfully in achieving results

Output performance indicators related to the achievement ofobjectives and meeting performance requirements as set outin statements of principal accountabilities or main tasks

Outcome contribution indicators which measure how outputscontribute to the achievement of team, departmental andorganizational objectives and how the behavior of individualssupport corporate values

To what extent will it be possible to define the criteria in the key

jobs for which PRP will operate?Are performance measures available for these criteria, whichwill enable fair and consistent assessment to be made?

What form of rating system should be used?

How are we going to ensure that ratings are fair and consistent?

What are our policies be on the size of payments in relation toperformance, contribution, skill and competence?

What should our policies to be on the rate of progression andany limits to progression within pay ranges?

Does the organization want to make provision for performance-related lump sum bonuses for special achievement or sustainedhigh-level performance at the top of a range?

Should PRP reviews be separated in time from performancereviews conducted as part of the Performance Managementprocess?

What rating, pay increase and budget guidelines are going to beissued to managers implementing PRP in their departments?

Should performance matrices be used? If so, how should theybe constructed?

How PRP will be monitored and its effectiveness be evaluated?

How the cost of PRP would be controlled?

What is the program for developing and introducing PRP?

f. Brief and train

How the organization is going to brief and train line managerson the PRP scheme?

How the organization is going to brief employees in general onPRP so that they understand how it will operate and how theywill benefit?

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g. Implement

How the process should be started? Even after due care someunforeseeable problem will arise. It is often advisable to startwith a pilot scheme, probably at management level so that they

understand the principles, benefits and problem before applyingPRP to the people for whom they are responsible.

How to monitor the introductory stages? It is essential to keepclosely in touch with how things are going so that problems canbe anticipated or dealt with swiftly when they arise.

h. Evaluate

Have clear objectives been established for the scheme theprogress towards which can be measured and evaluated?

How to carry out a continuing monitoring and evaluation

process?Who is responsible for evaluation and taking any correctiveaction that may be required?

What points should be covered?

9. Evaluating Performance Related Pay

It is essential to evaluate the acceptability and cost effectiveness of PRP.The following questions should be answered:

To what extent have the defined objectives of PRP been achieved?

How much have been paid out under the scheme?

What differentials have emerged between high/average performersover, say, 2-3 years?

What measurable benefits has PRP produced in the shape ofimproved organizational, team and individual performance?

How do managers regard PRP? Do they, for example, believe that itis operating fairly?

To what extent have rewards been linked to key and measurableareas of performance? Are rewards meeting peoples expectations?

Do Performance Management processes provide adequate supportfor PRP?

Do the organization want to retain PRP in its present form? If not,what are the alternatives?

10. Performance Related Pay (PRP) in practice

There is no doubt the system of PRP must be made to fit the culture of theorganization. This either means that the existing culture can be receptiveto the competitive and individual elements of PRP or the culture has to bechanged. PRP can be used as part of the change process but, on its own,it is unlikely to be powerful enough to prove successful.

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11. Performance Related Pay (PRP) a judgment?

Does Performance Related Pay work? Most experience in the UnitedStates is that greater use of performance pay results in improvedorganizational performance as measured by return on capital employed,particularly when applied to managerial pay. In the United Kingdom, the

few studies have been largely negative or inconclusive.

Finally, all research has confirmed that employees regard positively theconcept of PRP but deny quite strongly that it acts as a motivator for themin practice, and are mostly critical of the resulting procedural anddistributive justice. It can be concluded that employees may work harder,in a more focused way and get better results through a PRP system whichis under printed by a robust performance management scheme butemployees may do this through a mixture of necessity and fear, ratherthan a genuine desire to do so.

Employees need to be developed for superior performance. PRP helps inidentifying the development areas for an employee and where he needs tobe counseled. The concept of counseling is discussed hereafter.

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THE COUNSELING PROCESS

Counseling is an act of providing professional guidance. It involves the long-termdevelopment and realization of the potential of an employee through the technique of

advising. Performance management counseling is a valuable tool for superiors touse, particularly when subordinates show substandard performance.

I. The main objectives of counseling are:

helping appraisee to realize his potential

helping appraisee to understand himself i.e. his strengths and weaknesses

providing appraisee an insight into his behavior.

helping appraisee to have better understanding of the environment

identifying performance problems or obstacles

encouraging appraisee to generate alternatives for dealing with variousproblems

II. The counseling process consists of three stages:

Recognition and Understanding : Recognizing and understanding theIndications of problems and issues.

Empowering : Enabling the employee to recognize hisown problem or situation andencouraging him to express it.

Resourcing : Managing the problems, this will include

the decision on who is best able to actas counselor the manager or aspecialist.

III. Approaches to Counseling:

The following are different approaches to counseling:

1. The Tell and Sell Approach:

Appraiser lets appraisee know how he/she is doing. Gets appraisees acceptance of the evaluation. Gets appraisee follow a plan outlined for improvement.

2. The Tell and Listen Approach:

Appraiser lets appraisee know his performance. Appraiser allows the appraisee to respond. Appraisee is allowed to think and decide what needs to be done.

3. The Problem Solving Approach:

Appraiser encourages appraisee to identify problem areas. Appraisee discusses with appraiser in deciding what should be done

about the problems.

Steps are taken to solve problems.

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Of the three approaches discussed above, the problem solving approach is thebest approach. The below comparison justifies how:

The Tell and SellApproach

The Tell andListen Approach

The Problem Solving Approach

Requiresconsiderable skill toget people to acceptcriticism

Requires skills onthe part ofappraiser inlistening

Encourages appraisee to review hisown performance and identifyproblem areas thus motivatingappraisee

Is more of a one-way communicationprocess, indicatingauthoritarianism

Better than the`tell and sellapproach since itinvolvesappraisee

Appraiser does not impose hisdecision but discusses problemswith appraisee

Such approach maynot motivate theappraisee or evenmay turn counter-productive

Appraiser doesnot play a veryactive role

This also requires skills but is themost effective method of counselingwhere both appraiser and appraiseeenjoy confidence of each other andwork together in the direction offinding out solutions.

IV. Counseling is an art and requires skills, which are difficult to acquire in thenormal course of work. It is, therefore, suggested that appraisers should beprovided with special training by experts in counseling skills.

Counseling skills required by a good appraiser are:

Problem identification : recognizing that the problem exists.

Probing : probing by open-ended, non-directingquestions to make the appraisee morecomfortable.

Listening : ability to listen attentively by probing,evaluating, interpreting and supporting.

Sensitivity : sensitivity to individual beliefs and values.

Reflecting : being able to restate the problem fromappraisees point of view.

Empathy : having regard for feelings and anxieties of theindividual.

Impartiality : ability to remain impartial.

Sincerity : having a genuine attitude of interest andopenness to the individuals problems.

Belief : having the belief that individuals have theresources to solve their own problem, withsome help and guidance.

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V. Follow-up of completed appraisal:

Post appraisal is very crucial for helping employee and the immediate superiori.e. appraiser playing the role of a Facilitator and Developer.

Enough time (say one week) should be given for the appraisee as well asappraiser to prepare for Post-Appraisal discussion.

This discussion should be devoted uninterrupted and sufficient time, say anhour or so.

Appraisee should be put at ease and allowed to first speak on hisperformance.

The appraiser should listen attentively without interruption with patience.

Appraiser should be supportive and objective on performance evaluation ofthe employee.

Appraiser should discuss the training and development needs with theappraisee.

Finally, the meeting should conclude wherein the appraisee leaves with afeeling of empowerment.

The subsequent chapter gives guidelines on Designing an Appraisal Process.

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Chapter 8

DESIGNING AN APPRAISAL PROCESS

Before understanding the process of appraisal, the following terms are revised:

Performance refers to an employees accomplishment of assigned tasks.

Performance Appraisal is the systematic description of the job-relevantstrengths and weaknesses of an individual or a group.

Appraisal period is the length of time during which an employees jobperformance is observed in order to make a formal report of it.

Performance Management is the total process of observing an employees

performance in relation to job requirements over a period of time (i.e. clarifyingexpectations, setting goals, providing on-the-job coaching, storing and recallinginformation about performance) and then making an appraisal of it. Informationgained from the process may be fed back via an appraisal interview to determinethe relevance of individual and work-group performance to organizationalpurposes, improve the effectiveness of unit and improve work performance ofemployees.

Designing an appraisal program poses several questions, which need answers.They are:

1. Whose performance is to be assessed?2. Who are the appraisers?

3. What should be evaluated?

4. When to appraise?

5. What problems are encountered?

6. How to solve the problems?

7. What methods of appraisal are to be used?

1. Whose performance should be assessed?

The answer is obvious employees. When we say employees, it is individualor teams? Specifically, the appraisee may be defined as the individual, workgroup, division or organization.

2. Who are the appraisers?

Appraisers can be immediate superiors, specialists from the human resourcedepartment, subordinates, peers, committees, clients, self-appraisals or acombination thereof.

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3. What should be evaluated?

One of the steps in designing an appraisal program is to determine theevaluation criteria. It is obvious that the criteria should be related to the job.The criteria for assessing performance can be:

a. Quality & Quantityb. Timeliness

c. Cost Effectiveness

d. Need for supervision

e. Interpersonal impact

f. Innovation & Creativity

g. Problem Analysis

h. Customer orientation

i. Market Orientation

j. Entrepreneurial Drivek. Negotiation skills etc.

This is not an exhaustive list, but several other parameters too can be addeddepending on job requirements and organizational needs.

4. When to appraise/rate?

The most frequent rating schedules are semi-annual and annual. Newemployees are rated more frequently than older ones. Some practices call forratings:

Annually as per company practice

After first 6 months of employment

Upon promotion or within 3 months after promotion

When the job occupied has been reevaluated upward

Upon special request, as when the employees salary is below theaverage pay

5. What are the problems related to Performance Appraisal?

An ideal Performance Appraisal is done when the evaluation is free from biases

and idiosyncrasies of the evaluator. There are many factors of appraisal thatlead to failure of the system:

a. Negative attitude towards Performance Appraisal:

There is a large population of managers who are hostile or indifferent tothe Performance Appraisal processes and/or do it badly if they do it at all.

i. Hostility from the appraiser:

The appraiser reacts indifferently to the appraising system becausehe believes that it is a waste of time. At times they feel that the

scheme has nothing to do with their own needs and it exists to feedthe personnel database.

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ii. Hostility from the appraisee:

Hostility from the people at the receiving end arises because theyfeel Performance Appraisal is simply another method in the hands ofthe managers to exercise their command and control prerogatives.They feel that the data collected will be utilized as evidence against

them. In some cases appraisees even have a feeling that theoutcome of the performance evaluation is predetermined by themanagement or their superiors and the process is completed only asa formality, due to which appraisees lack interest in the entireappraisal process.

b. Halo Error:

Under this type of error, one marked characteristic or latest achievementor failure of the appraisee (either favourable or unfavourable) may beallowed to dominate the appraisal for the entire year.

c. Logical Error:

This is a dangerous pitfall for the inexperienced appraiser. He is veryoften inclined to arrive at similar assessments in respect of qualities thatseem logically related.

d. Constant Error:

When two appraisers rate an appraisee their ratings may be different.One may show consistent leniency by giving him high scores, the other myconsistently rate him by giving low scores.

e. Central Tendency:

It is also called as Average Ratings. Here, the appraiser tends to avoid

giving frank views to the question asked or the appraiser is in doubt or hehas inadequate information or he simply wants to play safe and dontdisplease anyone.

f. Mirror-Image Error or Projection Error:

This error arises when an appraiser expects his own qualities, skills, andvalues in an appraisee. The appraiser may falsely believe that if theappraisee is good he has to be like him (appraiser) because the appraiserconsiders himself as the standard.

g. Contrast Error:

This error occurs in the sequencing of ratings. If superior performers arerated first, average performers are rated down, if poorer performers comefirst, the average performers will be rated more highly.

h. Biases of position, Sex, Race, Religion & Nationality:

There is a tendency to rate the occupant at a higher position morefavorably than the person in a lower position. Similarly rating can bebiased based on sex, religion and nationality too.

i. Lack of Skill in conducting Appraisal discussion:

Conducting Performance Appraisal discussions require certain skills andtraining.

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6. How to solve the appraisers problems?

The best way to overcome the problem is to give training to the appraiser.Training can help improve the appraisal system to the extent that distortionoccurring due to appraiser errors such as halo, leniency, central tendency andbias are minimized.

a. Factors that help to improve accuracy:

The appraiser has observed and is familiar with behaviors to beappraised.

The appraiser has documented behaviors calling for improvement.

The appraiser has a checklist to obtain the review on job-relatedinformation.

The appraiser is aware of personal biases and is willing to take action

to minimize their effects.Rating scores by appraisers of one group or organization aresummarized and compared with those by other appraisers.

The appraiser focuses attention on performance related behaviors overwhich he has better control than on other aspects of evaluation.

Higher levels of management are held accountable for reviewing allratings.

b. Factors that may lower accuracy:

The appraiser rates only when administrative actions arecontemplated.

The appraiser is unable to express herself/himself honestly andunambiguously.

Appraisal systems, processes and instruments fail to support theappraiser

The appraiser is unaware of causes of rating errors.

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

7. Techniques/methods of appraisal to be used?

There are different types of systems for measuring the excellence of anemployee. Each type has its own advantages and disadvantages. The earlierdeveloped methods, still being used, are Traditional Methods that are non-transparent in nature. While other newer methods are transparent in nature.Each of the method has its own format of appraisal form.

The various techniques and processes have been explained in theforthcoming chapters.

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Chapter 9

TRADITIONAL METHODS OF APPRAISAL

As explained in Chapter 1 Performance Appraisal is an exercise of observation andjudgment, a feedback process, and an organizational intervention. It is ameasurement process as well as an intensely emotional process. Above all, it is aninexact, human process. While it is fairly easy to prescribe how the process shouldwork, descriptions of how it actually works in practice are rather discouraging.

Some of the traditional methods of appraisal are explained below:

1. Ranking

In this, the superior ranks his/her subordinates in order of their merit, from bestto worst.

- It is done in a competitive group.

- It is done by placing the appraisee on numerical scales i.e. 1st, 2nd, 3rd etc.in the total group.

- Ranking of an appraisee on his job performance/traits against that ofanother member.

2. Person-to-Person/Paired Comparison

Under this method the appraiser compares each employee with every otheremployee, one at a time.

- Certain key performance areas/traits are developed. E.g.: Leadership,Creativity, Initiative etc.

- A scale for each factor is designed.

- A scale of people is also created for each factor.

- Each Appraisee is compared to every other person on the scale.

- Certain scores for each factor are awarded to the appraisee.

3. Grading

- Certain categories of traits/performance criteria, which are worth ofappraising, are established. E.g. cooperativeness, self-expression,dependability, job knowledge etc.

- The actual performance (Key performance area) of an employee is thencompared to the predetermined grade definitions.

- Appraisee is allotted with the grade, which describes his performance inthe best possible manner.

- Any grade that is selected should be well defined.

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4. Graphic Scales

- A printed form, one for each person to be rated is used.

- The factors included in the form are Employee characteristics such asleadership, cooperativeness, enthusiasm, loyalty etc. or Employee

contribution which includes quantity and quality of work, specific goalsachieved, regularity of attendance, responsibility assumed etc.

- The traits can be evaluated on continuous scale the appraiser places amark along a continuum (range).

- The best method to use is the multiple type of scale wherein one has totick off the box, which suits the description of an appraiseesperformance.

- Certain types of graphs are prepared based on these derived ratings.

5. Checklist

-A series of questions are presented concerning an appraisees behavior.

- The appraiser has to reply to the questions in either negative or positivetone- (Yes/No).

- The value of each question may be weighted i.e. one can havepredetermined scale and scoring to those questions.

6. Essay

- A blank form is given to the appraiser.

- The form contains main heading such as employees characteristics,attitudes, job knowledge, potential etc.

- The appraiser is asked to put in words his impressions about theemployee.

- It contains factual and concrete knowledge.

- It gives specific information about the employee.

7. Confidential Reporting

- It is the most traditional way of appraising employees performance. Thebasic assumption here is that since the superior is in direct contact heknows his subordinates better than any other and hence his appraisal

would be more appropriate.- The superior writes a paragraph or so about his subordinates strengths,

weaknesses, intelligence, attitude to work, attendance, conduct andcharacter, work efficiency, etc.

8. Critical Incident Method

- Initially a set of noteworthy (good or bad) on-the-job behaviours isprepared. This is usually in the form of incidents.

- These incidents are given to a group of experts who assign scale valuesdepending upon the degree of desirability for the job.

-

This checklist is used by superiors for evaluating the employees.

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- This method helps in identifying the key areas where the employees areweak or strong.

- It emphasizes rating on objective evidence and helps in counseling.

9. Forced Choice Technique

- In forced choice system the appraiser is forced to choose one from amonga group of 4 statements that best fits the individual being rated and onewhich least fits him.

- Each statement is given a value or a score.- The evaluator does not know the score value of statements; hence he

cannot show any favor towards the appraisee.- The method of arranging the traits involves a long process from getting the

description of good or bad employees to establishing their validity andreliability.

10. Behaviourally Anchored Rating Scales (BARS)- Behaviourally Anchored Rating Scales (BARS) are anchored with

descriptive alternative behaviors.

- For every given category of behavior or performance, statements areordered in an ascending or descending order of excellence.

- Although these scales represent job-relevant dimensions of performance,they still pose problems in determining which actually, observedbehaviours match with specifically anchored performance scales.

- Despite this difficulty, BARS are a significant improvement, since theyrequire less inference on the appraisers part as against traditional rating

approaches.

The above methods are non-transparent in nature, as the appraisee or the employeeis not involved in the process of his appraisal. The rating is done entirely by hissuperiors.

The other methods wherein employee is appraised not only by his superiorsbut also by the appraisee himself, and in some cases with involvement of thirdparties are newer methods and detailed in Chapters 10 and 11.

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Chapter 10

RELATIVELY TRANSPARENT METHODS OF APPRAISAL

As time has progressed, there have been advancements in the appraisal system. As

against the earlier traditional methods, the newer methods include self-appraisal bythe appraisee. After having discussed the appraisal with the appraisee, the appraiserforwards his recommendation to the management for further decision on rewardgiving.

Some of the relatively transparent methods have been detailed below:

I. Appraisal Discussion Dialogue Method of Appraisal

1. An appraiser and appraisee get together to engage in a dialogue about theappraisees performance and development. It is like a meeting in whichviews are exchanged so that an agreed conclusion can be reached. Theformal appraisal meeting is referred as discussion because there is a free-flowing affair in which both parties are fully involved.

2. The appraisal discussion provides the means through which the five keyelements of Performance Appraisal can be achieved. These are:

a. Measurement: It assesses results against agreed targets andstandards.

b. Feedback: It gives the appraisee information on how he or she has

been doing.c. Positive reinforcement: It emphasizes what has been done so that it

will be done even better in the future. A constructive criticism is donei.e. points that help in improving performance are given.

d. Exchange of views: It ensures that the discussion involves a full, freeand frank exchange of views about what has been achieved, whatneeds to be done to achieve more, what appraisees think about theirwork, the way they are guided and managed and their aspirations.

e. Agreement: Both parties jointly arrive at an understanding about whathas to be done in order to improve performance and overcome any

work problems raised during the discussion.

3. Opening the Discussion

During the discussion the appraiser should build up good trust level withthe appraisee and should take following steps to open a discussion:

a. He should start by reminding the appraisee of the purpose of thediscussion, stressing that this is not to dwell unduly on the past but tolook to the future.

b. The appraisee should be made aware of the time set aside for thediscussion to demonstrate that he is not going to rush through it.

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c. Continue by explaining that the aim is to come to an agreement onwhat has been achieved since the last meeting and what is to beachieved in the future.

d. This should be followed by a brief exchange in which each partyitemizes the key points they want to discuss setting the agenda.

e. The discussion can then begin, probably with an invitation from theappraiser to the appraisee to talk generally about the progress he orshe has been making during the year with reference to notes madeprior to the meeting or a completed preparation form.

4. General Guidelines

There are a number of general guidelines on how the appraisal discussionmay be conducted. Each of them should be applied according to thecircumstances in which the discussion is taking place and the personalitiesof those involved there is no one right way to conduct an appraisaldiscussion.

a. Let the appraisee do most of the talking.

b. Encourage self-appraisal

c. Keep the whole period under review

d. No surprises i.e. discuss issues at the time they take place.

e. Recognize achievements and reinforce strengths

f. Criticize constructively

g. Adopt a joint problem-solving approach

h. Asking the right questions

5. There are four basic types of questions:

a. Open Questions: Open questions help to create an atmosphere ofcalm and friendly inquiry. It can be expressed quite informally, and canbe put in a tell me form. E.g.: How do you think things have beengoing?

b. Probing Questions: Probing questions ask for specific information onwhat has happened and why it has happened. They examine closelythe steps that need to be taken to put things right, do better in thefuture and avoid repeating a mistake.

c. Closed Questions: When there is a need to obtain or confirm specificfactual data, a closed question, which severely restricts the reply tosupplying the information, is asked. E.g. How many times has thishappened?

d. Leading Questions: Leading questions are those which supply their

own right answer, e.g. Do you agree that .?

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A typical appraisal discussion contains a mix of open, probing and closedquestions. While the conversation should be kept going with openquestions, one needs to identify the real issues with probing questions andget the facts with closed questions. Leading questions should be avoided.

6. Listen carefully

An appraisal discussion is a dialogue. Both parties are communicatinginformation and ideas to one another to achieve the purpose of themeeting.

Good listeners concentrate on the speaker. They respond quickly topoints made by the speaker, ask questions frequently to elucidatemeaning, give the speaker an opportunity to rephrase or underline a point,comment on the points made by the speaker without interrupting the flowof conversation.

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II. COMPETENCY BASED APPRAISAL SYSTEM

What is Competency?

Competency is an underlying characteristic of an individual, which is casuallyrelated to effective or superior performance.

Competence based appraisals can be defined as a method of appraisingpeople wholly or partly by reference to the level of competence theydemonstrate in carrying out their roles.

One of the problems surrounding the concept of competence or competency isthat the term is used to refer to the ability to perform a job or task competentlyand also to how people ought to behave in order to carry out a role withcompetence.

Competence should be used to refer to areas of work in which the person iscompetent.

Competency should be used to refer to the dimensions of behaviour lyingbehind competent performance.

1. Competence based appraisal must depend on some method ofmeasuring competence. To do this, it is useful to distinguish between theinput, process and output aspects of performance and how competence canbe measured under each heading.

a. As an input, competence can be measured by the capacity withinpeople to do their work well. Capacity refers to what people bring totheir work in the form of knowledge, skills and personal attributes.

b. As a process, competence can be measured in terms of the behaviourrequired of people in order to effectively convert inputs into outputs.

c. As an output, competence is measured by the outcomes of thebehaviour of people in making the best use of their knowledge, skillsand attributes.

2. Appraisals can be related to competence in two ways:

as a people-based process which links assessment to the level ofcompetence attained by individuals; or

as a job-based process which uses competence headings wholly orpartly to evaluate jobs or roles.

Both levels of competence and levels of performance in achievingobjectives, should be taken into, on the reasonable grounds that they shouldbe assessed not only for how people perform (competence inputs) but alsofor what they achieve (outputs).

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3. Advantages of competence based Appraisal System

High-performance organizations need high levels of competence andhence employees should be appraised according to their level ofcompetence and the contribution they therefore make to the success ofthe business.

Performance-linked appraisals help companies in performanceenhancement of employees. Hence competence is important.

Competences add value and predict success and hence attributes thatlead to successful performance should be appraised.

It can provide for the alignment of rewards with core values.

It can support a culture devoted to learning, growth and continuousdevelopment.

It can deliver messages to people about the behaviour expected of

them in such aspects of work as team membership, flexibility,continuous improvement, customer relations.

It can focus attention on the competences required in knowledge-based

organizations which are selling services or solutions, not products, andare therefore people rather than task or product oriented.

Competences are geared to sustained performance and are betterpredictors of future performance than what people happen to havedone in the past.

It is recognized that it is necessary to assess and reward what peoplebring to a role in the shape of their knowledge, skills, attributes and

competences as well as the results they achieve.

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III. POTENTIAL APPRAISAL

Assessment Center Method

Under this method, many evaluators i.e. appraisers join together to judgeemployee performance in several situations by using variety of criteria Themost important feature of this method is job-related simulations. Thesesimulations involve characteristics that managers feel are important for the jobsuccess. The evaluators observe and evaluate participants as they performactivities commonly found in these higher-level jobs. It involves a paper-and-pencil test, interviews and exercises.

1. Features:

The use of situational exercise (such as in-basket exercise, businessgame, a role-playing incident and leaderless group discussion);

Evaluators are drawn from experienced managers with proven ability atdifferent levels of management;

They evaluate all employees, both individually and collectively.

A summary report is prepared by the members, and a feedback on aface-to-face basis is administered to all the candidates who ask for it.

2. Purpose:

a. It is used to:

Measure potential for first level supervision, sales and uppermanagement positions; and also for higher levels of managementfor development purposes.

Determine individual training and development needs ofemployees.

Select freshers for entry-level positions.

Provide more accurate human resource planning information.

Assist in implementing affirmative action goals.

b. It generally measures interpersonal skills and other aspects such as:

organizing and planning; interpersonal competence (getting along withothers), quality of thinking, resistance to stress, orientation (motivation)to work, dependence on others and creativity. The ability to organize,plan and make decisions, as in-basket simulations and scores obtainedon paper and pencil, psychological tests, are important to the overallassessment score.

The duration of Assessment Center Program varies depending on thelevel of appraisee. For example, centers designed for selection of first linesupervisors, sales personnel, and management trainees generally last fora day or less; while those used for higher-level managers may run for two

or three days or longer if used for developmental and not for selectionpurposes.

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3. Problems:

The ratings are generally influenced by the participants interpersonalskills; judges tend to evaluate the quality of the individuals social skillsrather than quality of the decisions themselves. Further, the organizingand decision-making abilities are measured by in-basket exercises,verbal ability and personal traits.

Solid performers in day-to-day operations suddenly choke in simulatedenvironment.

Unreasonably high cost of assessing an individual in a particular joblevel.

There are potential bad effects on those not selected to participate inthe exercise.

Usually immediate supervisors nominate participants. Employees whoare curious, independent, aggressive and intelligent may never beselected because such traits, though important at higher levels, are notaccepted by lower level supervisors.

Poorly rated appraisee may react in negative ways and might getdemoralized.

To make Assessment Center Program successful, strong emphasis must beplaced on clear statement of goals, obtaining commitment of top management,job analysis, appraiser training, program audit and evaluation.

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IV. PERFORMANCE AND DEVELOPMENT PLANNING

Performance and Development Planning (PDP):

PDP is a process for managers that aligns individual performance with

company goals and ensures focus on the development of talent company-wide.PDP is an important step in their corporate effort to engage and enableemployees to deliver their contribution to their business. Also, PDP serves toenable employees to identify and realize personal opportunities fordevelopment that are aligned to current and future business challenges.

PDP process enables each employee to understand his true value-addedto the organization.

1. Steps for successful implementation of PDP:

Schedule the PDP meeting and define pre-work with the appraisee. The appraisee does self-appraisal, writes business and personal

developmental goals on the PDP form and gathers neededdocumentation, including 360 feedback results, when available.

The appraiser prepares for the PDP meeting by clearly defining themost important outcomes needed from the appraisees job within theframework of the organization's strategic plan.

The appraiser writes business and personal developmental goals onthe PDP form in preparation for the discussion.

The appraiser gathers data including work records and reports andinput from others familiar with the apprasiees work.

Both the appraiser and the appraisee examine how the appraisee isperforming against all criteria, and think about areas for potentialdevelopment.

The appraiser develops a plan for the PDP meeting that includesanswers to all questions about the PDP process with examples,documentation, and so on.

Recognize that this process takes place quarterly and that the mosttime and work are invested in the first PDP meeting.

The rest of the quarterly PDP goals, maybe for years, are updates tothe initial goals.

So, while seemingly time consuming on the front end, the PDPprocess, with a formal, effective foundation of solid personal andbusiness goals, is less time consuming as quarters pass. The PDPcontinues to create business and employee success and value duringits lifetime. With quarterly updates, the PDP process contributes intothe future.

2. PDP Process:

The PDP process has been explained with the help of a chart asAnnexure I. A sample format of PDP form is attached as Annexure II and

the PDP form overview is explained in brief as Annexure II (a). All theseAnnexures have been included at the end of the report.

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As part of a relatively transparent method of appraisal, a sample form designed andused by a reputed pharmaceutical company for appraising its employees at juniormanagement level is shown as Annexure III at the end of this report.

The latest trend of appraising the performance of an employee involves two or more

of any of the above detailed techniques including traditional methods.

The subsequent chapter details the new frontiers to performance appraisal.

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Chapter 11

NEW FRONTIERS TO PERFORMANCE APPRAISAL

In recent years the system of performance appraisal is becoming more and more

transparent wherein the employee, who is being appraised, is involved in theprocess. The objectives or targets are set with mutual understanding between theappraisee and his immediate superior. The feedback regarding his performance isgiven to the appraisee with areas of improvement by disclosing his strengths andweakness and the opportunities available. I will take you into details of these newfrontiers to Performance Appraisal viz:

I. Management by Objectives (MBO)

II. Balanced Scorecard

III. 360 Feedback

I. MANAGEMENT BY OBJECTIVES

1. Management by Objectives is basically a process whereby the superiorand the subordinate managers of an enterprise jointly identify its commongoals, define each individuals major areas of responsibility in terms of theresults expected of him and use these measures as guides for operatingthe unit and assessing the contribution of each of its members.Management by Objectives is primarily to change the behaviour andattitude towards getting an activity or assignment completed in a mannerthat it is beneficial for the organization. Management by objectives is a

result-oriented process, wherein emphasis is on results and goals ratherthan a prescribed method. A number of companies have had significantsuccess in broadening individual responsibility and involvement in workplanning at the lowest organizational levels.

2. The concept rests on a philosophy of management that emphasizesintegration between external control (by managers) and self-control (bysubordinates). It can apply to any manager or individual no matter whatlevel or function, and to any organization, regardless of size.

For instance, the number of quality articles to be churned out in a week ata publishing house is, lets say, five. This is the goal of the organization.This goal has to be set in coordination with the writers. The emphasishere again would be on accomplishing this task flawlessly over the weekrather than the setting of a method to accomplish the same. You aregiving them a free hand to decide as to how they want to work in order toaccomplish target. This gives the employee both responsibility as well asauthority to do a job. The employees are now responsible for its successor failure and it is their baby. It is a VERY SMART MANAGEMENT TOOLwhere the employee is involved in the decision making process.

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3. Management by Objectives is a five-sutra process having following basicsteps:

i. Set Organizational Goals:

This envisages that organizational goals and business strategies are

expressed clearly, concisely and accurately. They are periodicallyreviewed. They should be challenging enough to motivate theemployee. Clear and attainable goals help channel energies towardsdesired behaviour and let the employee know the basis on which hewill be rewarded. At this time, any appropriate changes in theorganization structure should be made: changes in titles, duties,relationships, authority, responsibility, span of control and so forth.

ii. Joint Goal Setting:

This step establishes short-term goals, which are performance

oriented, between the management and the employee. Theresponsibilities are clarified to the employees through organizationalcharts and job description. The goals decided by the employee need tocomplement the goals of the management. They also need to beflexible to accommodate new ideas without losing individualresponsibilities. Moreover they should be easily quantifiable. Forexample:

To prepare, process and transfer to the office superintended, allaccount payable vouchers within three working days from thereceipt of the voucher.

To hold weekly meetings with all employees. To use program evaluation and review technique (pert) for all new

plant layouts.

iii. Performance Reviews:

This step suggests frequent performance reviews between themanager and the employees. During the initial stages the meetings beheld once a month and later could be quarterly. For maximum benefitthese meetings should be scheduled for more than once a year.

iv. Set check posts:

Establishment of major check posts to measure progress. This ismerely to check that the employee surges towards his premeditated(planned) goal without any disruptions. These check levels should behigher in the initial stages and then gradually reduce. This demandsthat the manager should be on constant alert and exercise soundjudgment.

v. Feedback:

The employees who receive frequent feedback about their performanceare highly motivated than those who do not. However, one has to

ensure that the feedback is relevant and specific. This helps theemployee and the manager understand where they stand.

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The five-sutra process of management by objectives ensures that themanager and the employee define and establish goals and objectives foran employee to be achieved within a prescribed period of time. Theemployee is to be supervised and evaluated, periodically. To this extent, a

frequent feedback and superior-employee interaction model must beevolved.

4. Throughout the time period what is to be accomplished by the entireorganization should be compared with what is being accomplished;necessary adjustments should be made and inappropriate goalsdiscarded. At the end of the time period a final mutual review of objectivesand performance takes place. If there is discrepancies between the two,efforts are initiated to determine what steps can be taken to overcomethese problems. This sets the stage for the determination of objectives forthe next period.

5. Benefits of MBO Program

a. Helps and increases employee motivation because it relates overallgoals to the individuals goals; and help to increase an employeesunderstanding of where the organization is and where it is heading.

b. Managers are more likely to compete within themselves than withother managers. This kind of evaluation can reduce internal conflictsthat often arise when managers compete with each other to obtainscarce resources.

c. Results in a means-ends chain. Management at succeedinglylower levels in the organization establishes targets, which areintegrated with those at the next higher level. Thus, it can help ensurethat everyones activity is ultimately aimed toward organizations goals.

d. Reduces role conflict and ambiguity. Role conflict exists when aperson is faced with conflicting demands from two or more supervisors;and role ambiguity exists when a person is uncertain as to how he willbe evaluated, or what he has to achieve. Since MBO aims at providingclear targets and their order or priority, it reduces both these situations.

e. Provides more objective appraisal criteria. The targets that emerge

from the ` process provide a sound set of criteria for evaluating themanagers performance.

f. Forces and aids in planning. By forcing top management to establisha strategy and goals for the entire organization, and by requiring othermanagers to set their targets and plan how to reach them.

g. Identifies problems better and early. Frequent performance reviewsessions make this possible.

h. Identifies performance deficiencies. It enables the management andemployees to set individualized self-improvement goals and thusproves effective in training and development of people.

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i. Helps the individual manager to develop personal leadership,especially the skills of listening, planning, counseling, motivatingand evaluating. This approach to managing instills a personalcommitment to respond positively the organizations major concerns aswell as to the development of human assets. Such a manager has a far

greater chance to move ahead within the management hierarchy.

A blank format of Management by Objectives Appraisal form is reproduced asAnnexure IV at the end of this report.

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II. 360 FEEDBACK

With the movement in the eighties to find new strengths and productivitythrough employee empowerment came the idea of performance appraisals fromsubordinates, their superiors, their peers and themselves 360 feedback.

1. The 360 Feedback process is called multi-source assessment, taps thecollective wisdom of those who work most closely with the employee,superiors, colleagues (peers), direct reports and possibly internal and oftenexternal customers. The collective intelligence these people provide oncritical competencies or specific behaviours and skills gives the employee aclear understanding of personal strengths and areas ripe for development.Employees also view this performance information from multipleperspectives as fair, accurate, credible, and motivating. Employees areoften more strongly motivated to change their work behaviours to attain theesteem of their coworkers than to win the respect of their supervisor alone.

2. As the 360 Feedback process better serves the needs of employees, itserves the changing needs of their organizations too. Organizations arereducing hierarchy by removing layers of management and putting moreemphasis on empowerment, teamwork, continuous learning, individualdevelopment, and self-responsibility. The 360 Feedback Model aligns withthese organizational goals to create opportunities for personal and careerdevelopment and for aligning individual performance expectations withcorporate values.

3. Diagram showing the key stakeholders in a 360 Feedback Process

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4. Benefits to Key Stakeholders

The 360 Feedback process offers extensive and diverse benefits to keystakeholders in the organization and the organization too:

a. Customers: The process gives customers a chance to strengthen thecustomer-supplier relationship. The 360 Feedback captures therelevant and motivating information from internal and externalcustomers while giving them a voice in the assessment process.

b. Employees: By participating in a process that has tremendous impacton their careers, employees may help select what evaluation criteriawill be used to judge their performance and who will provide feedback.Participation plays a critical role for employees as they determine thefairness of the process.

c. Team members: The only option for identifying team and individualmembers effectiveness is 360 Feedback. Failing feedback frommultiple sources, team members lack the information necessary foreffective individual development and teamwork. With no teamevaluation, accountability may evaporate, and performance may falter(weaken).

d. Supervisors: This process expands supervisors insight regarding theperformance of each direct report by providing them morecomprehensive and detailed performance information than they usuallyhave access to. Also, the process typically reduces by half, or more,the supervisors time spent on evaluating individual employees.

e. Leaders and Managers: The process provides leaders and managersan opportunity to tap information from the organization that mayotherwise not be shared with them for fear of reprisal.

f. Organizations: Organizations can gain access to credible,quantitative information to understand organizational strengths andweaknesses, leadership gaps, and training needs more fully. Thisinformation is much more useful than relying on intuitive judgment orresponding to those who are making the most noise.

5. Why are Organizations adopting these systems?Structure and cultural factors and employees relations have motivatedorganizations to begin experimenting with 360 Feedback systems. Forexample, as organizations remove layers of management, flatten theirstructure, and begin using self-directed teams, the only practical option forperformance feedback is from multiple sources. As organizations changetheir culture to align with their vision and values, 360 Feedback becomes anideal choice to communicate the new competencies required by the newvalues.

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6. Structure changes

Organizational structures have changed substantially since the mid-1980s.The 360 Feedback process offers support for these structural changes,such as growth in supervisors span of control, the increased use oftechnical or knowledge workers, and introduction of matrix and projectmanagement organization design, and the move to working in teams.

a. Increased span of control: A typical manager used to supervisethree to nine employees. Today production and service companieshave moved from traditional span of control to one supervisor for asmany as seventy or more direct reports. Classic supervisors with alarge number of reporting relationships lack the opportunity to observemany individual performance actions.

b. Knowledge workers: A supervisor may not have enough technical orexpert knowledge to provide credible performance feedback onemployees in positions requiring highly specialized knowledge, like MISmanagers or scientists. Many organizations have adopted a multi-source system to provide accurate assessments by coworkers withsimilar expertise.

c. Matrix and Project Management: Many organizations have adopted360 Feedback systems because their employees work in matrix orproject management situations, with employees often reporting to morethan one supervisor during a project.

Matrix organization structures occur as a result of the need to deployhuman assets at high velocity. People move quickly from project to

project and may only occasionally interact directly with their supervisor.Project management designs require information from multiple sourcesbecause no one person has sufficient information to provide a completeperformance picture of the individual.

d. Team: When the organizational structure has moved from classicsupervisory designs to work teams, with leadership dispersedthroughout the team, team members offer highly credible performancefeedback.

7. Change in Organizational Culture

Revolutionary changes in organization cultures have made traditional single-source assessments illogical and impractical. Among these changes are:

a. Participative Leadership: Organizations have given employees avoice in organizational decision processes and have adopted 360Feedback systems to drive culture change and align individualbehaviours with organizational values and objectives. Leaders whobest empower employees are recognized and rewarded when thosethey lead provide excellent performance feedback.

b. Empowerment: The 360 Feedback process communicates theappropriate actions needed from employees to support this culture

change, and these actions are then recognized and rewarded.

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c. Customer Services: The improved communication through 360Feedback can translate to better customer service.

d. Quality Focus: The 360 Feedback systems provide the bestmeasures for competencies. This logical application for individualperformance measurement meshes with the organizations qualityphilosophy.

e. Reengineering: Reengineering or the reinvention of work processesoften requires new methods to obtain accurate performance measures.Reengineering actions focus on redesigning the way employees workin order to improve individual, team, and organizational productivity.Since 360 Feedback systems improve the quality of information, thesesystems logically support the reengineering effort at organizations.

f. Competency-Based Reward: Information from multiple sourcesoffers the best method for measuring competencies. Traditional,single-source measures are deficient at assessing competenciesbecause supervisors seldom have sufficient opportunity to observeeach employees full range of work behaviours.

g. Team-Based Rewards: 360 Feedback systems are the mostappropriate ways to evaluate individual performance and contribution.Team assessment provides these organizations with a credibleinformation source for recognition and rewards.

h. End of Entitlements: Multi-source performance measures moreclearly distinguish among levels of performance than do single-sourcemeasures. Multi-source assessments are substantially better at

distinguishing high, medium, and low performers, enabling appropriaterecognition and rewards and an end to automatic entitlements.

8. Employee Relations

No other information has more impact on an employees career thaninformation on his or her performance. Hence, the accuracy, fairness andusefulness of performance measures are critical factors to employees.

a. Career Development: The 360 Feedback process yields specific andquantitative information for each employee to use in making intelligentcareer decisions.

b. Fair Reward Decisions: Managers and employees want pay andpromotion decisions to be fair. Research across large sets ofemployee groups indicates that users perceive 360 Feedback to befairer than single-rate processes.

c. Accurate Performance Measures: Assessment by multiple coworkersis more reliable and objective than information gained from a singleperson because they have the best opportunity to observe workbehaviours.

d. Valid Performance Measures: Assessment information whenprovided by the individuals work associates; the employee tends to

perceive the results as having for more credibility as against a single-source assessment.

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e. Non-performance: Supervisors must document, justify and confrontnon-performance. 360 Feedback systems helps in identifying non-performers or poor-performers as co-workers and team members arerarely reluctant to identify them if they are not sufficiently contributing tothe teams efforts and try to push them if they need help.

f. Diversity Management: Multi-source performance measuresmoderate adverse discrimination against older employees, presumablyrecognizing the great experience level; are generally neutral to womenas against single-source assessment which are often biased.

g. Legal Protection: Multi-source assessments offer stronger legalprotection, resembling the jury system because the model combinesmultiple perspectives.

9. Pitfalls of 360 Feedback

a. 360 feedback has produced some real successes; but when not doneartfully, including internal preparation, it can rebound. Colleagues andsubordinates are good judges of behaviour and managerial style butare not best judges of a managers job performance. Hence the ratingsshould be used with caution in decisions for pay and promotions.

b. In practical, peers and subordinates tend to give negative feedbackabout a manager due to bias or for setting scores. Such feedback mayget undue importance when only selected few peers and subordinatesappraise a manager.

c. Also, at times, the organizational culture is unable to accept the

system.

10. Options for implementation

There are three common ways of getting 360 degree feedback each morecomprehensive and powerful in promoting change, both organizational andpersonal:

i. using an outside consultant, minimizing any personal friction within theorg

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