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Concept of Human Resource Development (HRD)
Coined by Leonard Nadler in his book “Developing Human Resources”
published in 1970, the term Human Resources Development (HRD) may
be understood as a framework for the expansion of human capital within an
organization through the development of both the organization and the
individual. It may also be defined as a systematic approach to proactively
deal with issuesrelated to individual employees, teams, organizations and a
movement to develop organizational capability to manage change and
challenge.
The only animate andactive resource of an organization is the human
resource. Other resources remain inactive unless there are competent
people to utilize the available resources for the production of goods and
services. A human brain has limitless energy to think and act in a
productive way. Hence, competent and qualified human resource is a key
factor of organizational success. In this regard, the emergence of human
resource development (HRD) plays a vital role in enhancing the
entrepreneurial skill of people.
Human Resource Development (HRD) is a process of developing skills,
competencies, knowledge, and attitudes of people in an organization. The
people become human resource only when they are competent to perform
organizational activities. Therefore, HRD ensures that the organization has
such competent human resource to achieve its desired goals and
objectives. HRD imparts the required knowledge and skill in them through
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an effective arrangement of training and development programs. HRD is an
integral part of Human Resource Management (HRM) which is more
concerned with training and development, career planning and
development and the organization development. The organization has to
understand the dynamics of HR and attempt to cope with changing the
situation in order to deploy its HR effectively and efficiently. And HRD helps
to reach this target.
Hence, HRD is a conscious and proactive approach applied by employers
which seek to capacitate employees through training and development to
give their maximum to the organization and to fully use their potential to
develop themselves.To summarize it can be said that Human Resource
Development refers to an organization’s focus on improving the knowledge,
ability, skills, and other talents of their employees. It is the integrated use of
training, organization and career development efforts to improve individual,
group, and organizational effectiveness.
Definitions of HRD
1. Human Resource Development (HRD) is the process of helping
people to acquire competencies and skills so as to ensure their
usefulness to the organization in terms of both present and future
organizational conditions.
2. Human Resource Development may also be defined as fostering long-
term work related learning capacity at individual, group and
organizational level.
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3. The American Society for Training and Development defines HRD as
the process of increasing the capacity of the human resource through
development. It is thus the process of adding value to individuals,
teams or an organization as a human system.
HRM Vs HRD
Human resource development is not the same thing as Human resources
management. These concepts are easy to confuse. Management is geared
towards maintenance while development focuses on education
Human Resource Management (HRM) is a branch of management; that is
concerned with making best possible use of the enterprise’s human
resources, by providing better working conditions, to the employees. It
involves those activities that arrange and coordinate the human resources
of an entity. Further, it aims at maintaining good relations at various levels
of management.
On the other extreme, Human Resource Development (HRD) is a wing of
HRM that keeps focusing on the growth and development part of the
organization’smanpower. There are many people, to whom HRM and HRD
convey the same meaning, but this is not true.
Comparison Chart
BASIS FOR
COMPARISON HRM HRD
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BASIS FOR
COMPARISON HRM HRD
Meaning Human Resource
Management refers to
the application of
principles of
management to
manage the people
working in the
organization.
Human Resource
Development means a
continuous development
function that intends to
improve the performance of
people working in the
organization.
What is it? Management function. Subset of Human Resource
Management.
Function Reactive Proactive
Objective To improve the
performance of the
employees.
To develop the skills,
knowledge and competency
of employees.
Process Routine Ongoing
Dependency Independent It is a subsystem.
Concerned
with
People only Development of the entire
organization.
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Features of HRD
1. Systematic Approach
HRD is a systematic and planned approach through which the
efficiency of employees is improved. The future goals and objectives
are set by the entire organization, which are well planned at individual
and organizational levels.
2. Continuous Process
HRD is a continuous process for the development of all types of skills of
employees such as technical, managerial, behavioral and conceptual.
Till the retirement of an employee sharpening of all these skills is
required.
3. Multi-disciplinary Subject
HRD is a multi-disciplinary subject which draws inputs from behavioral
science, engineering, commerce, management, economics, medicine,
etc.
4. All pervasive
HRD is an essential subject everywhere, be it a manufacturing
organization or service sector industry.
5. Techniques
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HRD embodies with techniques and processes such as performance
appraisal, training, management development, career planning,
counseling, workers’ participation and quality circles.
Objectives of HRD
The prime objective of human resource development is to facilitate an
organizational environment in which the people come first. The other
objectives of HRD are as follows:
1. Equity
Recognizing every employee at par irrespective of caste, creed, religion
and language, can create a very good environment in an organization.
HRD must ensure that the organization creates a culture and provides
equal opportunities to all employees in matters of career planning,
promotion, quality of work life, training and development.
2. Employability
Employability means the ability, skills, and competencies of an
individual to seek gainful employment anywhere. So, HRD should aim
at improving the skills of employees in order to motivate them to work
with effectiveness.
3. Adaptability
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Continuous training that develops the professional skills of employees
plays an important role in HRD. This can help the employees to adapt
themselves to organizational change that takes place on a continuous
basis.
Goals of HRD
The goals of HRD are to develop
The capabilities of each employee as an individual
The capabilities of each individual in relation to his or her present role
The capabilities of each employee in relation to his or her expected
future role(s)
The dyadic relationship between each employee and his or her
supervisor
The team spirit and functioning in every organizational unit
Collaboration among different units of the organization
The organization’s overall health and self-renewing capabilities
which, in turn, increase the enabling capabilities of individuals, dyads,
teams, and the entire organization.
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HRD Functions
HRD functions include the Following
1. Employee training and development,
2. Career planning and development,
3. Succession planning,
4. Performance appraisal,
5. Employee’s participation in management,
6. Quality circles,
7. Organization change and organization development.
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Benefits of HRD
Organizations that place great emphasis on HRD tend to see the
rewards. These can be in profits, but they go far beyond just this one
aspect.
Activities of human resources development teach necessary on-the-
job skills for employees across departments thus tending to improve
output.
It also helps to make the employees feel that the organization is
invested in them, along with their growth. This creates a more loyal
and productive workforce.
In addition, workers are more accepting of change when they are
exposed to HRD activities on a regular basis. They see that
improvements can come from new practices instead of feeling
threatened or worried.
When efforts are made to provide growth opportunities for
employees, team spirit, and work atmosphere are also improved.
People simply feel better when they are given positive opportunities
and an interest is taken in them. Staff members feel pride in their jobs
and organizations for this reason, as well.
When proper training is continuously provided, efficient workflow
occurs, increasing productivity. Customer service is also made better
through regular training and by employees who are more satisfied.
HRD is an integral part of any successful organization. This arm of the
Human Resources department reaches all aspects of a business, company
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or agency to ensure better working conditions, enhanced staff
development, and higher productivity, among so many other advantages.
Human resource development provides benefits that pay the employer
back in a multitude of ways
Following techniques may be used for the development of Human
Resources in an organization:
Performance Appraisal
It helps employees in self-appraisal and they can review their performance
in relation to the objectives and other behaviors. It must be checked by
superiors and send summary information for central storage and use.
Potential Appraisal
It is to be done through a thorough appraisal of the employee functioning
once in three years.
Career Planning and Development
It is necessary to make employees familiar with the general phases of their
development in the company. For this Plan should be made with senior
employees’ career path.
Employee Training
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Having assessed training needs of different groups of employees, it must
be developed in the organization strategy including pre-training and post-
training activities. Training packages and modules should be prepared.
With the help of own and outside resources the organization should
organize specific programmes as well as general development
programmes. After that evaluation work is to be done.
Social and Cultural Programmes
Social and culturalprogrammes make employees strong and fulfill their
social needs. These programmes have impact on efficiency of employees.
Team spirit
Team work spirit should be inspired among employees this will result good
impact on productivity of company.
Workers’ Participation in Management
Workers’ Participation in Management enables both the management’s and
workers’ representatives to share and exchange their ideas and viewpoints
in the process of joint decision-making. This collaborative decision-making
process creates a platform for mutual learning and development. Thus,
Human Resource Development managers should encourage the workers’
to participate in management
Monetary Rewards
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Monetary Awards should be attractive because these awards motivate the
employees to improve their performance further. This results in self-
commitment of the employees to learn further, acquire latest skills and
knowledge and to develop their human resources.
Grievance Mechanism
Strong industrial Relation Machinery should be formed for prompt
settlement of employee grievances.It would lead to job satisfaction and
satisfied employees are encouraged to enrich their resources with a view to
enhance their contributions to the organization.
Apart from the above mentioned main HRD techniques, several other
techniques as per the suitability to the organization can be adopted.
Performance Appraisal
Performance Appraisal is the systematic evaluation of the performance of
employees and to understand the abilities of a person for further growth
and development. Performance appraisal is generally done in systematic
ways which are as follows:
1. The supervisors measure the pay of employees and compare it with
targets and plans.
2. The supervisor analyses the factors behind work performances of
employees.
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3. The employers are in position to guide the employees for a better
performance.
Objectives of Performance Appraisal
Performance Appraisal can be done with following objectives in mind:
1. To maintain records in order to determine compensation packages,
wage structure, salaries raises, etc.
2. To identify the strengths and weaknesses of employees to place right
men on right job.
3. To maintain and assess the potential present in a person for further
growth and development.
4. To provide a feedback to employees regarding their performance and
related status.
5. To provide a feedback to employees regarding their performance and
related status.
6. It serves as a basis for influencing working habits of the employees.
7. To review and retain the promotional and other training programmes.
Advantages of Performance Appraisal
It is said that performance appraisal is an investment for the company
which can be justified by following advantages:
1. Promotion
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Performance Appraisal helps the supervisors to chalk out the
promotion programmes for efficient employees. In this regards,
inefficient workers can be dismissed or demoted in case.
2. Compensation
Performance Appraisal helps in chalking out compensation packages
for employees. Merit rating is possible through performance appraisal.
Performance Appraisal tries to give worth to a performance.
Compensation packages which include bonus, high salary rates, extra
benefits, allowances and pre-requisites are dependent on
performance appraisal. The criteria should be merit rather than
seniority.
3. Employees Development
The systematic procedure of performance appraisal helps the
supervisors to frame training policies and programmes. It helps to
analyses strengths and weaknesses of employees so that new jobs
can be designed for efficient employees. It also helps in framing future
development programmes.
4. Selection Validation
Performance Appraisal helps the supervisors to understand the
validity and importance of the selection procedure. The supervisors
come to know the validity and thereby the strengths and weaknesses
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of selection procedure. Future changes in selection methods can be
made in this regard.
5. Communication
For an organization, effective communication between employees and
employers is very important. Through performance appraisal,
communication can be sought for in the following ways:
a) Through performance appraisal, the employers can understand
and accept skills of subordinates.
b) The subordinates can also understand and create a trust and
confidence in superiors.
c) It also helps in maintaining cordial and congenial labour
management relationship.
d) It develops the spirit of work and boosts the morale of
employees.
All the above factors ensure effective communication.
6. Motivation
Performance appraisal serves as a motivation tool. Through
evaluating performance of employees, a person’s efficiency can be
determined if the targets are achieved. This very well motivates a
person for better job and helps him to improve his performance in the
future.
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One of the most important things to remember about performance
appraisals is that its effectiveness will be highly influenced by its purpose.
For example, a programme, which is developed, to focus on employee
development and training needs may not be suitable for making major
decisions about salaries. Likewise, it is possible that the organization,
management and employee may all have different goals for the
performance appraisal process. Performance appraisal involves
‘identifying, evaluating and developing employees’ work performance with
the dual purpose of achieving the organization’s goals and objectives whilst
also ensuring that the employee receives recognition, feedback and
development’.
The process of performance appraisal starts with employee planning and
ends with an evaluation of employee progress. The process of performance
appraisal consists of two steps. First, complete the performance appraisal
form; secondly, participate in a performance appraisal interview and
discussion. These two stages comprise the following levels in the
appraising process:
1. Establish Performance Standards or Goals– The appraisal process
begins with the establishment of performance standards. The
evaluators must determine what outputs, accomplishments and skills
will be evaluated. These standards should have evolved out of job
analysis and job description. These performance standards should be
clear and objectives are to be understood and measured.
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2. Communicate Performance Expectations to Employees– Once the
performance standards are established, this need to be
communicated to the respective employees so that they come to know
what expected of them. Past experience indicates that not
communicating standards to the employees compounds the appraisal
problems. Here, it must be noted that mere transference of
information from the evaluator to the staff is not communication. It
becomes communication only when the transference of information
has taken place and has been received and understood by the staff.
The feedback from the staff on the standards communicated to them
must be obtained. If required, the standards may be modified or
revised in the light of feedback obtained from the employees.
3. Measure Actual Performance – This is the third step involved in the
appraisal process. In this stage, the actual performance of the
employees is measured on the basis of information available from
various sources such as personal observation, statistical reports, oral
reports, and written reports. The evaluator’s feeling should not
influence the performance measurements of the staff. Measurement
must be objective based on facts and findings. This is because what
we measure is more critical and important to the evaluation process
than bow we measure.
4. Compare Actual Performance with Standards – In this stage, the
actual performance is compared with the predetermined standards.
Such a comparison may reveal the deviation between standard
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performance and actual performance and will enable the evaluator to
proceed to the fifth step on the process i.e. Review and discussion of
the appraisal with the concerned staff.
5. Discuss and Review the Appraisal with the Staff – The fifth step in
the appraisal process is to communicate to and discuss with the
employees the results of the appraisal. This is one of the most
challenging tasks the evaluators face to present an accurate appraisal
to the staff and then make them accept the appraisal in a constructive
manner. A discussion on appraisal enables employees to know their
strengths and weaknesses. This has, in turn, impact on their future
performance. The impact may be positive or negative depending upon
how the appraisal is presented and discussed with the employees.
6. Initiate Corrective Action – The final step in the appraisal process is
the initiation of corrective action when it is necessary. The areas
needing improvement are identified and then, the measures to correct
or improve the performance are identified and initiated.
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Performance Appraisal Tools and Techniques
A more widely used classification of appraisal methods into two categories,
viz., traditional methods and modern methods, is given by Strauss and
Sayles. While traditional methods lay emphasis on the rating of the
individual’s personality traits, such as initiative, dependability, drive
,creativity, integrity, intelligence, leadership potential, etc.; the modern
methods, on the other hand, place more emphasis on the evaluation of
work results, i.e., job achievements rather than the personal traits. Modern
methods tend to be more objective and worthwhile. The various methods
included in each of the two categories are described briefly.
Traditional Methods
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Ranking Method
It is the oldest and simplest formal systematic method of performance
appraisal in which employee is compared with all others for the purpose of
placing order of worth. The employees are ranked from the highest to the
lowest or from the best to the worst.
In doing this the employee who is the highest on the characteristic being
measured and also the one who is L lowest, are indicated. Then, the next
highest and the next lowest between next highest and lowest until all the
employees to be rated have been ranked. Thus, if there are ten employees
to be appraised, there will be ten ranks from 1 to 10.
However, The Greatest Limitations Of This Appraisal Method Are
That:
1) It does not tell that how much better or worse one is than another,
2) The task of ranking individuals is difficult when a large number of
employees are rated, and
3) It is very difficult to compare one individual with others having varying
behavioral traits. To remedy these defects, the paired comparison
method of performance appraisal has been evolved.
Paired Comparison
In this method, each employee is compared with other employees on one-
on one basis, usually based on one trait only. The rater is provided with a
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bunch of slips each coining pair of names, the rater puts a tick mark against
the employee whom he insiders the better of the two. The number of times
this employee is compared as better with others determines his or her final
ranking.
The number of possible pairs for agiven number of employees is
ascertained by the following formula:
N (N-1)/2
Where N = the total number of employees to be evaluated.
Thus, the pairs so ascertained give the maximum possible permutations
and combinations. The number of times a worker is considered better
makes his/her score. Such scores are determined for each worker and
he/she is ranked according to his/her score. One obvious disadvantage of
this method is that the method can become unwieldy when large numbers
of employees are being compared.
Grading Method
In this method, certain categories of worth are established in advance and
carefully defined. There can be three categories established for employees:
outstanding, satisfactory and unsatisfactory. There can be more than three
grades. Employee performance is compared with grade definitions. The
employee is, then, allocated to the grade that best describes his or her
performances.
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One of the major drawbacks of this method is that the rater may rate most
of the employees on the higher side of their performance.
Forced Distribution Method
This method was evolved by Tiffin to eliminate the central tendency of
rating most of the employees at a higher end of the scale. The method
assumes that employees’ performance level confirms to a normal statistical
distribution i.e., 10,20,40,20 and 10 per cent. This is useful for rating a
large number of employees’ job performance and promo ability. It tends to
eliminate or reduce bias.
It is also highly simple to understand and easy to apply in appraising the
performance of employees in organizations. It suffer from the drawback
that improve similarly, no single grade would rise in a ratings.
Forced-Choice Method
The forced-choice method was developed by J. P. Guilford. It contains a
series of groups of statements, and rater rates how effectively a statement
describes each individual being evaluated. Common method of forced-
choice method contains two statements, both positive and negative.
Examples of Positive Statements Are
Gives good and clear instructions to the subordinates.
Can be depended upon to complete any job assigned.
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A Pair of Negative Statements May Be As Follows
Makes promises beyond his limit to keep these.
Inclines to favor some employees.
Each statement carries a score or weight, which is not made known to the
rater. The human resource section does rating for all sets of statements
both positive and negative. The final rating is done on the basis of all sets
of statements. Thus, employee rating in this manner makes the method
more objective. The only problem associated with this method is that the
actual constructing of several evaluative statements also called ‘forced-
choice scales’, takes a lot of time and effort.
Check-List Method
The basic purpose of utilizing check-list method is to ease the evaluation
burden upon the rater. In this method, a series of statements, i.e.,
questions with their answers in ‘yes’ or ‘no’ are prepared by the HR
department .The check-list is, then, presented to the rater to tick
appropriate answers relevant to the appraise. Each question carries a
weight-age in relationship to their importance.
When the check-list is completed, it is sent to the HR department to
prepare the final scores for all appraises based on all questions. While
preparing questions an attempt is made to determine the degree of
consistency of the rater by asking the same question twice but in a different
manner. However, one of the disadvantages of the check-list method is that
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it is difficult to assemble, analyses and weigh a number of statements
about employee characteristics and contributions From a cost stand point
also, this method may be inefficient particularly if there are a number of job
categories in the organization, because a check-list of questions must be
prepared for each category of job. It will involve a lot of money, time and
efforts.
Critical Incidents Method
In this method, the rater focuses his or her attention on those key or critical
behaviors that make the difference between performing a job in a
noteworthy manner (effectively or ineffectively). There are three steps
involved in appraising employees using this method.
First, a list of noteworthy (good or bad) on-the-job behaviour of specific
incidents is prepared. Second, a group of experts then assigns weightage
or score to these incidents, depending upon their degree of desirability to
perform a job. Third, finally a check-list indicating incidents that describe
workers as “good” or “bad” is constructed. Then, the check-list is given to
the rater for evaluating the workers.
The basic idea behind this rating is to apprise the workers who can perform
their jobs effectively in critical situations. This is so because most people
work alike in normal situation. The strength of critical incident method is
that it focuses on behaviors and, thus, judge’s performance rather than
personalities.
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Its drawbacks are to regularly write down the critical incidents which
become time-consuming and burdensome for evaluators, i.e., managers.
Generally, negative incidents are positive ones. It is rater’s inference that
determines which incidents are critical to job performance. Hence, the
method is subject to all the limitations relating to subjective judgments.
Graphic Rating Scale Method
The graphic rating scale is one of the most popular and simplest
techniques for appraising performance. It is also known as linear rating
scale. In this method, the printed appraisal form is used to appraise each
employee.
The form lists traits (such as quality and reliability) and a range of job
performance characteristics (from unsatisfactory to outstanding) for each
trait. The rating is done on the basis of points on the continuum. The
common practice is to follow five points scale.
The rater rates each appraise by checking the score that best describes his
or her performance for each trait all assigned values for the traits are then
totaled.
This method is good for measuring various job behaviours of an employee.
However, it is also subjected to rater’s bias while rating employee’s
behaviourat job. Occurrence of ambiguity in design- mg the graphic scale
results in bias in appraising employee’s performance.
Essay Method
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Essay method is the simplest one among various appraisal methods
available. In this method, the rater writes a narrative description on an
employee’s strengths, weaknesses, past performance, potential and
suggestions for improvement. Its positive point is that it is simple in use. It
does not require complex formats and extensive/specific training to
complete it.
However, essay method, like other methods, is not free from drawbacks. In
the absence of any prescribed structure, the essays are likely to vary
widely in terms of length and content. And, of course, the quality of
appraisal depends more upon rater’s writing skill than the appraiser’s actual
level of performance.
Moreover, because the essays are descriptive, the method provides only
qualitative information about the employee. In the absence of quantitative
data, the evaluation suffers from subjectivity problem. Nonetheless, the
essay method is a good start and is beneficial also if used in conjunction
with other appraisal methods.
Field Review Method
When there is a reason to suspect rater’s biasedness or his or her rating
appears to be quite higher than others, these are neutralised with the help
of a review process. The review process is usually conducted by the
personnel officer in the HR department.
The Review Process Involves The Following Activities:
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Identify areas of inter-rater disagreement.
Help the group arrive at a consensus.
Ensure that each rater conceives of the standard similarity.
However, the process is a time-consuming one. The supervisors generally
resent what they consider the staff interference. Hence, the method is not
widely used.
Confidential Report
It is the traditional way of appraising employees mainly in the Government
Departments. Evaluation is made by the immediate boss or supervisor for
giving effect to promotion and transfer. Usually a structured format is
devised to collect information on employee’s strength weakness,
intelligence, attitude, character, attendance, discipline, etc. report.
Modern Methods
Management by Objectives (MBO)
Most of the traditional methods of performance appraisal are subject to the
antagonistic judgments of the raters. It was to overcome this problem;
Peter F. Drucker propounded a new concept, namely, management by
objectives (MBO) way back in 1954 in his book “The Practice of
management”. The concept of MBO as was conceived by Drucker, can be
described as a “process whereby the superior and subordinate managers
of an organization jointly identify its common goals, define each individual’s
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major areas of responsibility in terms of results expected of him and use
these measures as guides for operating the unit and assessing the
contribution of each its members”.
In fact, MBO is not only a method of performance evaluation. It may be
viewed as a philosophy of managerial practice because it is a method by
which managers and subordinates plan, organize, communicate, control
and debate.
An MBO programme consists of four main steps: goal setting, performance
standard, comparison, and periodic review. In goal-setting, goals are set
which each individual agrees to attain. The superior and subordinate jointly
establish these goals. The goals refer to the desired outcome to be
achieved by each individual employee.
In performance standards, the standards are set for the employees as per
the previously arranged time period. When the employees start performing
their jobs, they come to know what is to be done, what has been done, and
what remains to be done.
In the third step the actual level of goals attained are compared with the
goals agreed upon. This enables the evaluator to find out the reasons
variation between the actual and standard performance of the employees.
Such a comparison helps devise training needs for increasing employees’
performance it can also explore the conditions having their bearings on
employees’ performance but over which the employees have no control.
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Finally, in the periodic review step, corrective measure is initiated when
actual performance deviates from the slandered established in the first
step-goal-setting stage. Consistent with the MBO philosophy periodic
progress reviews are conducted in a constructive rather than punitive
manner.
Limitation of MBO
MBO is not a cure for all organizationalproblems.Aswith other methods,it
also suffers from some limitations as follows:
(i) Setting Un-measurable Objectives
(ii) Time-consuming
(iii)Tug of War
Setting objectives with the subordinates sometimes turns into a tug of
war in the sense that the manager pushes for higher quotas and the
subordinates push for lower ones. As such, goals so set are likely to be
unrealistic.
(iv) Lack of Trust
Behaviorally Anchored Rating Scales (BARS)
The problem of judgmental performance evaluation inherent in the
traditional methods of performance evaluation led to some organizations to
go for objective evaluation by developing a technique known as
“Behaviorally Anchored Rating Scales (BARS)” around 1960s. BARS are
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descriptions of various degrees of behavior with regard to a specific
performance dimension.
It combines the benefits of narratives, critical incidents, and quantified
ratings by anchoring a quantified scale with specific behavioral examples of
good or poor performance. The proponents of BARS claim that it offers
better and more equitable appraisals than do the other techniques of
performance appraisal we discussed so far.
Developing BARS Typically Involves Five Steps
1. Generating Critical Incidents
Critical incidents (or say, behaviors) are those which are essential for
the performance of the job effectively Persons who are knowledgeable
of the job in question (jobholders and/or supervisors) are asked to
describe specific critical incidents of effective and ineffective
performance. These critical incidents may be described in a few short
sentences or phrases using the terminology.
2. Developing Performance Dimensions
The critical incidents are then clustered into a smaller set of
performance dimensions, usually five to ten. Each cluster, or say,
dimension is then defined.
3. Reallocating Incidents
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Various critical incidents are reallocated dimensions by another group
of people who also know the job in question. Various critical incidents
so reallocated to original dimensions are clustered into various
categories, with each cluster showing similar critical incidents. Those
critical incidents are retained which meet 50 to 80% of agreement with
the cluster as classified in step 2.
4. Scaling Incidents
The same second group as in step 3 rates the behaviour described in
each incident in terms of effectiveness or ineffectiveness on the
appropriate dimension by using seven to nine points scale. Then,
average effectiveness ratings for each incident are determined to
decide which incidents will be included in the final anchored scales.
5. Developing Final BARS Instrument
A subset of the incidents (usually six or seven per cluster) is used as a
behavioral anchor for the final performance dimensions. Finally, a
BARS instrument with vertical scales is drawn to be used for
performance appraisal.
BARS method of performance appraisal is considered better than the
traditional ones because it provides advantages like a more accurate
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gauge, clearer standards, better feedback, and consistency in evaluation.
However, BARS is not free from limitations.
The research on BARS indicates that it too suffers from distortions inherent
in most rating scales. The research study concluded that “it is clear that
research on BARS to date does not support the high promise regarding
scale independence In short, while BARS may outperform conventional
rating techniques, it is clear that they are not a panacea for obtaining high
interpreter reliability”
Assessment Centers
The introduction of the concept of assessment centres as a method of
performance method is traced back in 1930s in the Germany used to
appraise its army officers. The concept gradually spread to the US and the
UK in 1940s and to the Britain in 1960s.
The concept, then, traversed from the army to business arena during
1960s. The concept of assessment center is, of course, of a recent origin in
India. In India, Crompton Greaves, Eicher, Hindustan Lever and Modi
Xerox have adopted this technique of performance evaluation.
In business field, assessment centers are mainly used for evaluating
executive or supervisory potential. By definition, an assessment center is a
central location where managers come together to participate in well-
designed simulated exercises. They are assessed by senior manager’s
supple-mented by the psychologists and the HR specialists for 2-3 days.
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Assesse is asked to participate in in-basket exercises, work groups,
simulations, and role playing which are essential for successful
performance of actual job. Having recorded the assessesbehavior the
raters meet to discuss their pooled information and observations and,
based on it, they give their assessment about the assesse. At the end of
the process, feedback in terms of strengths and weaknesses is also
provided to the assesses.
The distinct advantages the assessment centers provide include more
accurate evaluation, minimum bias, right selection and promotion of
executives, and so on. Nonetheless, the technique of assessment centers
is also plagued by certain limitations and problems. The technique is
relatively costly and time consuming, causes suffocation to the solid
performers, discourages the poor performers (rejected), breeds unhealthy
competition among the assesses, and bears adverse effects on those not
selected for assessment.
360 – Degree Appraisal
Yet another method used to appraise the employee’s performance is 360 –
degree appraisal. This method was first developed and formally used by
General Electric Company of USA in 1992. Then, it travelled to other
countries including India. In India, companies like Reliance Industries,
Wipro Corporation, Infosys Technologies, Thorax, Thomas Cook etc., have
been using this method for appraising the performance of their employees.
This feedback based method is generally used for ascertaining training and
development requirements, rather than for pay increases.
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Under 360 – degree appraisal, performance information such as
employee’s skills, abilities and behaviors, is collected “all around” an
employee, i.e., from his/her supervisors, subordinates, peers and even
customers and clients.
In other words, in 360-degree feedback appraisal system, an employee is
appraised by his supervisor, subordinates, peers, and customers with
whom he interacts in the course of his job performance. All these
appraisers provide information or feedback on an employee by completing
survey questionnaires designed for this purpose.
All information so gathered is then compiled through the computerized
system to prepare individualized reports. These reports are presented to
the employees being rated. They then meet the appraiser—be it one’s
superior, subordinates or peers—and share the information they feel as
pertinent and useful for developing a self-improvement plan.
In 360 – degree feedback, performance appraisal being based on feedback
“all around”, an employee is likely to be more correct and realistic.
Nonetheless, like other traditional methods, this method is also subject to
suffer from the subjectivity on the part of the appraiser. For example, while
supervisor may penalize the employee by providing negative feedback, a
peer, being influenced by ‘give and take feeling’ may give a rave review on
his/her colleague.
Cost Accounting Method
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This method evaluates an employee’s performance from the monetary
benefits the employee yields to his/her organization. This is ascertained by
establishing a relationship between the costs involved in retaining the
employee, and the benefits an organization derives from Him/her.
While evaluating an employee’s performance under this method, the
following factors are also taken into consideration
Unit wise average value of production or service.
Quality of product produced or service rendered.
Overhead cost incurred.
Accidents, damages, errors, spoilage, wastage caused through
unusual wear and tear.
Human relationship with others.
Cost of the time supervisor spent in appraising the employee.
Communicating Performance Appraisals
Performance appraisals enable superiors to know what their team
members are up to, evaluate their performances and also give them correct
feedbacks so that they know where they are lacking and work on their
shortcomings.
The term “Performance Appraisal” generally causes anxiety among
employees. There is definitely a certain way appraisals need to be
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communicated among employees. There are organizations where
management tends to create unnecessary hype about performance
appraisal. In such a scenario, the employees think only about their
appraisals and find it extremely difficult to concentrate on their routine
affairs.
The rating procedure, appraisal form or any other related information ought
to be sent to each and every individual separately. One should not mark a
common mail to everyone. If the appraiser does not want to take the pain of
sending separate mails to everyone, a common login id should be created
where each and every individual can register using their passwords and
pull out the appraisal form. The appraisal form generally has information
about employee’s designation, grade, level in the hierarchy, responsibilities
and thus must be kept confidential.
Counseling needs to be done on a one on one basis. Queries, confusions
should be addressed in private. Appraisal being a very sensitive subject
should be handled gracefully. It is unethical to discuss one’s performance
or salary in public.
Once the appraisals are done, communicating the same to the employees
is another big challenge. The increment letters or appraisal letters should
be handed over to the employees either by the functional head or human
resource team personally.
Employee attrition is one of the major problems faced by organizations
after performance appraisal. Employees who work only for money quit after
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a salary hike to negotiate further with any other organization. Individuals
who do not get satisfactory appraisal in any case get demotivated and look
for a change. Any employee who does not agree to his/her appraisal or feel
has not got what he/she deserves needs to be addressed at the earliest.
Empathetic concern with the individual concerned is desirable to make
him/her understand as to why he/she has got a certain rating. Employees
cannot always be wrong. If the appraiser feels that an employee deserves
slightly more than what he has got, kind reconsideration of the decision
should be done. It is always better to give a decent salary hike to talented
employees than losing them. After all, if they leave, the organization will
have to spend time and energy searching for a replacement.
Employees need to be motivated after their appraisals. Appraisers should
congratulate each and every one irrespective of their salary hike or
promotion. Appreciating everyone for being consistent and loyal towards
the organization is a good practice in the long run. It should also be made
sure that no one feels left out. Concerned managers should sit with the
employees, give them new realistic targets and guide them as to how can
they work together, come out with more innovative ideas and show better
performances in the years to come.
Performance appraisal should not be the only method to evaluate or
acknowledge employee’s performance. It is not advisable to be rude to
employees who did not perform well. It is absolutely okay to handhold them
and give a second chance.
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Importance of Performance Appraisals and How to Conduct them
Effectively
People work in organizations for monetary and nonmonetary reasons.
While monetarily, employees look forward to increasing pay and perks,
they also look for job satisfaction and fulfillment in their jobs. Thus, the
motivators that determine whether a particular employee would stick to the
job or leave the organization are based on the monetary and nonmonetary
incentives.
For instance, monetarily, they might be expecting a pay rise every year in
addition to healthy bonuses. In the same manner, they expect recognition
for their work as well as job satisfaction through challenging assignments.
As all these aspects are determined during the appraisal process where not
only the pay and perks but also the chances for promotion and being given
more fulfilling work are decided.
Thus, it is clear that performance appraisals must be taken seriously in
addition to being accorded the importance they deserve. Indeed,
performance appraisals can be thought of the most important time in an
employee’s stint with the organization and hence, they must also be
conducted with care and caution.
In addition, given the fact that managers also share feedback, performance
appraisals can be occasions for letting the employee know where they are
doing well and which aspects they need to improve their performance.
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Why Performance Appraisals Must be Conducted with Care and
Caution
Given these reasons and factors that deem how important performance
appraisals are, most organizations have well-defined processes in place to
conduct and review employee performance. While some organizations
conduct performance appraisals every six months, the others do an annual
review of performance.
Apart from this, the performance appraisals also involve multiple levels of
employees wherein the immediate manager and the manager’s manager
usually take part in the reviews along with the concerned employee.
Further, some organizations also require the Human Resources Manager
to take part in the reviews in addition to the designated people manager for
that particular project. Indeed, while this is not the norm in all organizations,
the presence of the HR manager is required when the employees have to
be told about placing them on performance improvement plans and other
enhancing initiatives so that such programs can be reviewed and their work
monitored for compliance or noncompliance.
Apart from this, performance appraisals usually entail multiple rounds of
discussion wherein the concerned employee first uploads his or her
perceptions about how well he or she did on the HR portal and then, the
manager and the manager’s manager share their feedback which is
followed by face to face discussions and the final closure is given after all
parties agree to the contents of the review.
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Indeed, most multinational organizations have a policy of requiring the
consent of the employee with regards to the rating and the feedback, and
this is the reason, the presence of the HR manager helps in cases where
the employee refuses to give his or her consent.
Moreover, performance appraisals are usually tied to the financial or the
operational year so that pay and bonuses, as well as promotions, can be
linked to these timelines. Indeed, many multinational organizations conduct
performance appraisals in the calendar year-end whereas Indian firms
usually conduct such reviews in the financial year-end.
Apart from this, the other reason why performance appraisals are so
important is that the recognition of employee performance and the
subsequent rewards and incentives system follows the review wherein the
top performers usually are given awards during the organizational In-House
and Town Hall gatherings.
In other words, the review and the ratings are followed by such rewards for
the top performers in addition to placing them on the premium or fast-track
career paths that are usually confidential between the HR manager and the
line manager.
Given these aspects, performance appraisals must be conducted with care
and caution. While good reviews and top performers usually have a
pleasant discussion with their managers, it is the middle ranked employees
who often lead to the most intense and difficult discussions.
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Although performance appraisals can be biased, there are certain
steps that can be taken to improve the evaluations and reduce the
margin of errors through the following:
• Training - Bringing awareness to the potential for bias by training the
Evaluators to be aware of the difference of skills and abilities between
employees and how to subjectively consider these traits.
• Providing Feedback to Raters - Trained raters provide managers
who evaluated their subordinates with feedback, including information
on ratings from other managers. This has the potential to reduce
leniency errors.
Subordinate Participation-By allowing employee participation in the
evaluation process, there is employee-supervisor reciprocity in the
discussion for any discrepancies between self-ratings and supervisor
ratings, thus, increasing job satisfaction and motivation
Professionalism -Performance appraisals form a crucial and critical
part of the employee experience and hence, it is better to conduct
them as professionally and as diligently as possible.
Potential Appraisal
Potential appraisal is a part of performance appraisal that helps to identify
the hidden talents and potential of the individuals. Identifying these
potential talents helps in preparing the individuals for higher responsibilities
and positions in the future. It focuses primarily on identifying the
employee’s likely future roles within the organization.Potential Appraisal is
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a future oriented appraisal whose main objective is to identify and evaluate
the potential of the employees to assume higher positions and
responsibilities in the organizational hierarchy. Many organizations
consider and use potential appraisal as a part of the performance appraisal
processes.
What is Potential?
Potential can be defined as ‘a latent but unrealized ability’. Potential
includes the possible knowledge, skills, and attitudes the employee may
possess for better performance There are many people who have the
desire and potential to advance through the job they are in and wanting the
opportunity to operate at a higher level of competence in the same type of
work. The potential is the one that the appraiser should be able to identify
and develop because of the knowledge of the job. This requires an in-depth
study of the positions which may become vacant, looking carefully at the
specific skills that the new position may demand and also taking into
consideration the more subjective areas like ‘qualities’ required. There may
be areas where the employee has not had a real opportunity to
demonstrate the potential ability and there may be areas with which you, as
the appraisers are not familiar.
Indicators of Potential
• A Sense of Reality -This is the extent to which a person thinks and
acts objectively, resisting purely emotional pressures but pursuing
realistic projects with enthusiasm.
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• Imagination - The ability to let the mind range over a wide variety of
possible causes of action, going beyond conventional approaches to
situations and not being confined to ‘This is the way it is always being
done!’
• Power of Analysis - The capacity to break down, reformulate or
transform a complicated situation into manageable terms.
• Breadth of Vision: The ability to examine a problem in the context of
a much broader framework of reference; being able to detect, within a
specific situation, relationships with those aspects which could be
affecting the situation.
• Persuasiveness - The ability to sell ideas to other people and gain a
continuing commitment, particularly when the individual is using
personal influence rather than ‘management authority’.
Potential Appraisal Vs Performance Appraisal
Potential Appraisal is forward looking process whether performance
appraisal is backward looking process. Any good or worse assessment
results of performance appraisal may not be a good factor for potential
appraisal. But current performance of an employee could show evidence
somewhere whether he/she is flexible for new working conditions.
The Purposes of Potential Appraisal are
To inform employees of their future prospects
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To enable the organization to draft a management succession
programme;
To update training and recruitment activities;
To advise employees about the work to be done to enhance
their career opportunities
To help employees to move upwards in the organization
Components of Potential Appraisal System
1. Role Description - A good potential appraisal system would be
based on clarity of roles and functions associated with the different
roles in an organization. This requires extensive job descriptions to
be made available for each job. These job descriptions should spell
out the various functions involved in performing the job.
2. Qualities Required - Besides job descriptions, it is necessary to
have a detailed list of qualities required to perform each of these
functions. These qualities may be broadly divided into four
categories:
Technical knowledge and skills
Managerial capabilities and qualities
Behavioural capabilities
Conceptual capabilities.
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3. Indicators of Qualities - A good potential appraisal system besides
listing down the functions and qualities would also have various
mechanisms for judging these qualities in a given individual. Some of
the mechanisms for judging these qualities are:
Rating by others
Psychological tests
Simulation games and exercises
Performance appraisal records.
4. Organizing the System - Once the functions, the qualities required
performing these functions, indicators of these qualities, and
mechanisms for generating these indicators are clear, the
organization is in a sound position to establish and operate the
potential appraisal system. Such establishment requires clarity in
organizational policies and systematization of its efforts.
5. Feedback - If the organization believes in the development of human
resources it should attempt to generate a climate of openness. Such
a climate is required for helping the employees to understand their
strengths and weaknesses and to create opportunities for
development. A good potential appraisal system should provide an
opportunity for every employee to know the results of assessment.
He should be helped to understand the qualities actually required for
performing the role for which he thinks he has the potential, the
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mechanisms used by the organization to appraise his potential, and
the results of such an appraisal.
A good potential appraisal system provides continuous opportunities for the
employee to know his strengths and weaknesses. These are done through
periodic counseling and guidance sessions by either the personnel
department or the managers concerned. This should enable the employee
to develop realistic self-perceptions and plan his own career and
development.
Techniques of Potential Appraisal
1. Self – appraisals
2. Peer appraisals
3. Superior appraisals
4. MBO
5. Psychological and psychometric tests
6. Management games like role playing
7. Leadership exercises etc.
The advantages of a thoroughly carried out potential appraisal are
many.Some of them may be said to be as follows:
• The organizations are able to identify individuals who can take higher
responsibilities.
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• The organizations can convey the message that people are not
working in static positions and jobs in the organization.
• The organizations can identify employee potential to ensure the
availability of people to do different jobs to serve organizational
needs.
Sources
1. www.whatishumanresource.com/potential-appraisal
2. www.yourarticlelibrary.com/performance-appraisal/performance-
appraisal-methods
3. www.yourarticlelibrary.com/human-resource-
development/human-resource-development.
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