Performance appraisal

Meaning & definitionMeaning & definition

““Performance appraisal is a systematic Performance appraisal is a systematic evaluation of individual with respect to evaluation of individual with respect to

his/her performance on the job and his/her his/her performance on the job and his/her potential for development.”potential for development.”

Need for performance appraisalNeed for performance appraisal

Identify developmental needs.Identify developmental needs. To plan training based on feedback To plan training based on feedback To recognize potential/promising employee.To recognize potential/promising employee.

Components of performance appraisalComponents of performance appraisal

Who of appraisalWho of appraisal Immediate supervisorsImmediate supervisors Other supervisorOther supervisor Peers or colleaguesPeers or colleagues SelfSelf SubordinatesSubordinates Personnel managerPersonnel manager External consultantExternal consultant

What of appraisalWhat of appraisal

Human beings time frameHuman beings time frame

Personal traitsPersonal traits

Achieved resultsAchieved results

SpecificsSpecifics

Current performanceCurrent performance

When of appraisalWhen of appraisal

FormalFormal

AnnuallyAnnually

Semi annuallySemi annually

QuarterlyQuarterly

InformalInformal

WeeklyWeekly

DailyDaily

ContinuouslyContinuously

Why of appraisalWhy of appraisal Maintain workforceMaintain workforce

Determine organizational training needs.Determine organizational training needs.

Determine personal development Determine personal development opportunities. opportunities.

Basis for promotion, transfers etc..Basis for promotion, transfers etc..

Basis for pay increase & in recruitment, Basis for pay increase & in recruitment, selection.selection.

Feedback & communication mechanismFeedback & communication mechanism..

Where of appraisalWhere of appraisal

on the jobon the job

Bosses officeBosses office

Subordinate’s place of work Subordinate’s place of work

EverywhereEverywhere

of the jobof the job

Consultants officeConsultants office

Social or recreational settingsSocial or recreational settings

EverywhereEverywhere

Benefits of performance appraisalBenefits of performance appraisal

Human resource planningHuman resource planning Motivation & SatisfactionMotivation & Satisfaction Training & DevelopmentTraining & Development Recruitment & InductionRecruitment & Induction Employee EvaluationEmployee Evaluation Legal ComplianceLegal Compliance

Persons involved are-Persons involved are-

Employees Employees Superior Superior Division headDivision head Peers & colleagues Peers & colleagues

Why is it done?Why is it done? A systematic presentation of roles & responsibilities of the position A systematic presentation of roles & responsibilities of the position To understand why the position is existingTo understand why the position is existing Helps in individual objective setting, performance review & effectivenessHelps in individual objective setting, performance review & effectiveness mappingmapping

What is itWhat is it used for?used for? Competency mappingCompetency mapping Recruitment & transferRecruitment & transfer Position evaluationPosition evaluation

2)2) Performance – objective setting reviewPerformance – objective setting review

This module ensures that the corporate objectives are laid down & individual objectives are simultaneously are laid down in This module ensures that the corporate objectives are laid down & individual objectives are simultaneously are laid down in line with corporate goals. All this is done in the form of dialogue between superior & the employee.line with corporate goals. All this is done in the form of dialogue between superior & the employee.

Why is it done?Why is it done? To fix objective & give weightage to it.To fix objective & give weightage to it. To review objectivesTo review objectives To determine the performance related pay & To determine the performance related pay &

incrementincrement To ensure that the objectives are also as may be To ensure that the objectives are also as may be

applicable for consumer, employee, finance & applicable for consumer, employee, finance & processes.processes.

To give overall performance rating.To give overall performance rating.

Process of Performance Process of Performance Appraisal Step 1Appraisal Step 1

Establish and communicate Establish and communicate expectationsexpectations for performance. for performance. List three to five List three to five major responsibilitiesmajor responsibilities of of

each position.each position. Focus the appraisal on these responsibilities.Focus the appraisal on these responsibilities. Be sure employees know and understand Be sure employees know and understand

what is what is expected expected of them.of them. Employee are most likely to understand and Employee are most likely to understand and

be committed to objectives they be committed to objectives they helped helped developdevelop..

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Step 2Step 2

Establish and communicate Establish and communicate standards standards for measuring for measuring performance.performance. Each expectation should be Each expectation should be

measurablemeasurable.. A supervisor’s task includes deciding A supervisor’s task includes deciding

howhow to measure employees’ to measure employees’ performance and then making sure performance and then making sure employees know employees know what what will be measured.will be measured.

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.17-14

Step 3Step 3

Observe and measure Observe and measure individual individual performanceperformance against standards. against standards. A supervisor should A supervisor should continuouslycontinuously

gather information about each gather information about each employee’s performance.employee’s performance.

When preparing a performance When preparing a performance appraisal, a supervisor compares this appraisal, a supervisor compares this information with the information with the standardsstandards for the for the employee being appraised.employee being appraised.

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.17-15

Step 4Step 4

Reinforce performance or Reinforce performance or provide remedies.provide remedies. Point out to employees where they Point out to employees where they

have have performed wellperformed well.. Asking an employee to help solve a Asking an employee to help solve a

problem is often problem is often more effectivemore effective than than the supervisor simply stating a the supervisor simply stating a remedy.remedy.

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.17-16

Individual Evaluation Individual Evaluation MethodsMethods

Graphic rating scaleGraphic rating scaleThe rater is presented with a set of traitsThe rater is presented with a set of traits The employee is rated on the traitsThe employee is rated on the traitsRatings are assigned points, which are Ratings are assigned points, which are

then computed then computed Raters are often asked to explain each Raters are often asked to explain each

rating with a sentence or two rating with a sentence or two

Forced choice:Forced choice:Was developed because graphic rating scales Was developed because graphic rating scales

allowed supervisors to rate everyone highallowed supervisors to rate everyone high The rater must choose from a set of The rater must choose from a set of

descriptive statements about employeedescriptive statements about employeeSupervisors check the statements that Supervisors check the statements that

describe the employee, or they rank the describe the employee, or they rank the statements from most to least descriptive statements from most to least descriptive

Forced choice can be used by superiors, Forced choice can be used by superiors, peers, subordinates, or a combination of peers, subordinates, or a combination of these these

Essay EvaluationEssay Evaluation The rater is asked to describe the strong and The rater is asked to describe the strong and

weak aspects of the employee’s behaviorweak aspects of the employee’s behavior It can be used by superiors, peers, or It can be used by superiors, peers, or

subordinatessubordinates Essay evaluations are flexible; an evaluator Essay evaluations are flexible; an evaluator

can specifically address the ratee’s skill in can specifically address the ratee’s skill in any areaany area

Comparing essays is difficultComparing essays is difficult Skilled writers can paint a better pictureSkilled writers can paint a better picture

Critical Incident TechniqueCritical Incident TechniqueRaters maintain a log of behavioral incidents that Raters maintain a log of behavioral incidents that

represent effective and ineffective performance for represent effective and ineffective performance for each employeeeach employee

Two factors determine the success of this technique:Two factors determine the success of this technique: The supervisor must have enough time to observe The supervisor must have enough time to observe

subordinates during the evaluation periodsubordinates during the evaluation period The supervisor must record incidents as they are seenThe supervisor must record incidents as they are seen

Logs can help avoid common rating errors and Logs can help avoid common rating errors and facilitate discussions about performance facilitate discussions about performance improvementimprovement

ChecklistsChecklists In its simplest form, the checklist is a set In its simplest form, the checklist is a set

of objectives or descriptive statementsof objectives or descriptive statements If the rater believes that the employee If the rater believes that the employee

possesses a listed trait, the item is possesses a listed trait, the item is checkedchecked

A rating score equals the number of A rating score equals the number of checkschecks

Behaviorally Anchored Rating ScalesBehaviorally Anchored Rating ScalesSmith and Kendall developed the Smith and Kendall developed the

behaviorally anchored rating scale (BARS), behaviorally anchored rating scale (BARS), or the behavioral expectation scale (BES)or the behavioral expectation scale (BES)

The BARS approach uses critical incidents The BARS approach uses critical incidents to anchor statements on a scale to anchor statements on a scale

The rater reads the anchors and places an The rater reads the anchors and places an X at some point on the scale for the rateesX at some point on the scale for the ratees

These scales rate employee performance in These scales rate employee performance in several areas. several areas.

The supervisor selects the statement that The supervisor selects the statement that best describes how the employee performs. best describes how the employee performs.

Each job title in the organization has a Each job title in the organization has a different set of rating statements. different set of rating statements.

A BARS usually contains these A BARS usually contains these features:features: Six to 10 performance dimensions identified Six to 10 performance dimensions identified

and defined by raters and ratees and defined by raters and ratees The dimensions are anchored with positive The dimensions are anchored with positive

and negative critical incidents and negative critical incidents Each ratee is then rated on the dimensions Each ratee is then rated on the dimensions Ratings are fed back using the terms on the Ratings are fed back using the terms on the

form form

It takes two to four days to construct a BARS that is jargon free and closely related to the requirements of the job

Behavioral Observation Scales (BOS)Behavioral Observation Scales (BOS)Developed by Latham and associatesDeveloped by Latham and associates

Like BARS, the BOS uses critical incidentsLike BARS, the BOS uses critical incidents Instead of identifying which behaviors occurred, Instead of identifying which behaviors occurred,

the rater identifies how they occurredthe rater identifies how they occurred The hope was that BARS and BOS would yield The hope was that BARS and BOS would yield

more objective ratings than other scale formatsmore objective ratings than other scale formats Most researchers find that the format of the Most researchers find that the format of the

rating scale has little effect on the quality of a rating scale has little effect on the quality of a performance appraisal systemperformance appraisal system

Work Standards Approach:Work Standards Approach: A A performance appraisal in which the performance appraisal in which the appraiser compares the employee’s appraiser compares the employee’s performance to objective measures of performance to objective measures of what an employee should do.what an employee should do. This type of appraisal requires the This type of appraisal requires the

supervisor to establish objective measures of supervisor to establish objective measures of performance. performance.

A typical work standard would be the quantity A typical work standard would be the quantity produced by an assembly-line worker. produced by an assembly-line worker.

The supervisor then compares the employee’s The supervisor then compares the employee’s actual performance with the standards. actual performance with the standards.

This approach works best with production This approach works best with production workers.workers.

Management by Objectives Management by Objectives (MBO)(MBO) In organizations where MBO is used to set goals and In organizations where MBO is used to set goals and

objectives for objectives for employees, the supervisor will use this approach for employees, the supervisor will use this approach for performance appraisal also. performance appraisal also.

The appraisal is based on whether or not the The appraisal is based on whether or not the employee has met his or her objectives. employee has met his or her objectives.

The advantage is that employees know what to The advantage is that employees know what to expect. expect.

The supervisor focuses on results rather than more The supervisor focuses on results rather than more subjective criteria.subjective criteria.

The The MBOMBO approach emerged from the beliefs of approach emerged from the beliefs of McGregor, Drucker, and OdiorneMcGregor, Drucker, and Odiorne

With MBO, managers and subordinates plan, With MBO, managers and subordinates plan, organize, control, communicate, and debateorganize, control, communicate, and debate

The subordinate has a course to follow and a target The subordinate has a course to follow and a target to shoot forto shoot for

An MBO program follows a systematic An MBO program follows a systematic process:process: Superior/subordinates define tasks and set objectivesSuperior/subordinates define tasks and set objectives The superior, consulting with subordinates, sets The superior, consulting with subordinates, sets

criteria for assessing objective accomplishmentcriteria for assessing objective accomplishment Dates to review progress are agreed upon and usedDates to review progress are agreed upon and used Superior and subordinates make any required Superior and subordinates make any required

modifications in the original objectivesmodifications in the original objectives A final evaluation by the superior is madeA final evaluation by the superior is made The superior meets with the subordinate in a The superior meets with the subordinate in a

counseling, encouraging sessioncounseling, encouraging session Objectives for the next cycle are setObjectives for the next cycle are set

For MBO and other performance For MBO and other performance management programs to work:management programs to work:Both the manager and subordinate must be Both the manager and subordinate must be

actively involved in objective formulationactively involved in objective formulation They must also agree on what measures They must also agree on what measures

will be used to evaluate success and failurewill be used to evaluate success and failure

Agents by Someone Other Agents by Someone Other than the Supervisorthan the Supervisor

360-degree Feedback:360-degree Feedback: Performance appraisal Performance appraisal that combines assessment from several that combines assessment from several sources.sources.

Because the supervisor cannot know all of an Because the supervisor cannot know all of an employee’s behaviors and their impact on employee’s behaviors and their impact on others in the organization, the supervisor may others in the organization, the supervisor may combine his or her appraisal with self-combine his or her appraisal with self-assessments by the employee or with assessments by the employee or with appraisals by peers or subordinates. appraisals by peers or subordinates. Combining several sources of appraisals is called 360-Combining several sources of appraisals is called 360-

degree feedback. degree feedback. The self-assessment may be done before the The self-assessment may be done before the

interview. interview. Then the supervisor and employee can compare the Then the supervisor and employee can compare the

employee’s appraisal with his or her own evaluation. employee’s appraisal with his or her own evaluation.

Multiple-Person Multiple-Person Evaluation MethodsEvaluation Methods

RankingRankingA supervisor is asked to rank subordinates in A supervisor is asked to rank subordinates in

order on some overall criterionorder on some overall criterion It is easier to rank the best and worst employees It is easier to rank the best and worst employees

than average onesthan average ones Alternative rankingsAlternative rankings can help with this difficulty can help with this difficulty

Pick the top employee first, then the bottom onePick the top employee first, then the bottom one The second best is chosen, then the second worstThe second best is chosen, then the second worst Follow this process until everyone has been rankedFollow this process until everyone has been ranked

Paired ComparisonPaired ComparisonThe supervisor reviews a series of cards; The supervisor reviews a series of cards;

each contains two subordinates nameseach contains two subordinates names The higher performerThe higher performer in each pair is in each pair is

chosenchosenFinal ranking is made by counting how Final ranking is made by counting how

many times a given employee was chosen many times a given employee was chosen as the better performeras the better performer

A major limitation is the number of paired A major limitation is the number of paired comparisons that must be made comparisons that must be made

Forced DistributionForced DistributionEmployees are rated on a pre-existing Employees are rated on a pre-existing

distribution of pre-determined categoriesdistribution of pre-determined categoriesThe predetermined distribution must be The predetermined distribution must be

followed, regardless of how well the followed, regardless of how well the employees performedemployees performed

A supervisor with all exceptional A supervisor with all exceptional subordinates will be forced to rate some subordinates will be forced to rate some poorlypoorly A supervisor with mediocre subordinates must A supervisor with mediocre subordinates must

rate some highlyrate some highly

This technique is similar to grading on a curve

Point allocation technique (PAT)Point allocation technique (PAT)A variation of forced distributionA variation of forced distribution Each rater is given a number of points per Each rater is given a number of points per

employee employee The points must then be allocated on a The points must then be allocated on a

criterion basis criterion basis The total number of points cannot exceed The total number of points cannot exceed

the number of points per employee times the number of points per employee times the number of employees evaluated the number of employees evaluated

Which Technique to UseWhich Technique to UseThe most commonly used evaluation The most commonly used evaluation techniques:techniques: The graphic rating scaleThe graphic rating scale The essay methodThe essay method ChecklistsChecklists

Used by about 5 percent of firms:Used by about 5 percent of firms: Forced choiceForced choice, critical incident, BARS, BOS, field , critical incident, BARS, BOS, field

review, MBOreview, MBO

Used by 10 to 13 percent of firms: Used by 10 to 13 percent of firms: Ranking, paired comparisonRanking, paired comparison

Balanced ScorecardBalanced Scorecard

If we succeed, how will we look to our shareholders?

Financial Perspective

To achieve our vision, how must we look to our

customers?

Customer Perspective

To satisfy our customers, which processes must we

excel at?

Internal Perspective

To achieve our vision, how must our organization learn

and improve?

Learning & Growth Perspective

The Strategy

Financial Perspective Financial Perspective

• In private companies, the financial perspective is the

main objective (ultimate goal) – without having to

sacrifice the interests of other relevant stakeholders

(community, environment, government, etc.)

• In the financial perspective, the strategic goal is the

long-term shareholder valuelong-term shareholder value. This goal is driven by

two factors, namely : revenue growthrevenue growth and cost cost

efficiency.efficiency.

Customer PerspectiveCustomer Perspective

• This perspective is very instrumental, because without

customers, how can a company survive?

• Customer perspective covers the following elements:

• Customer acquisition

• Customer retention

• Customer profitability

• Market share

• Customer satisfaction

Internal Process PerspectiveInternal Process Perspective

• This perspective reflects the processes in key business

that should be optimized in order to meet the needs of

the customers.

• There are four main themes in this perspective, namely:

• Operations Management Process

• Customer Management Process

• Innovation Process

• Regulatory and Social Process

Learning & Growth PerspectiveLearning & Growth Perspective

• This perspective reflects the capability that a company

should have, namely:

• Human Capital

• Organization Capital

• Information Capital

• This perspective shows us that good human resource

development system, organizational system and

information system forms a solid foundation for improving

company performance.

The Appraisal InterviewThe Appraisal Interview The purpose of holding an appraisal The purpose of holding an appraisal

interview is to communicate information interview is to communicate information about the employee’s performance.about the employee’s performance.

An interview is an appropriate setting An interview is an appropriate setting because if sets aside time to focus on because if sets aside time to focus on and discuss the appraisal in private.and discuss the appraisal in private.

It is a two-way communication with the It is a two-way communication with the supervisor and employee working supervisor and employee working together to devise ways to improve together to devise ways to improve performance.performance.

The Process of Conducting a The Process of Conducting a Performance Appraisal InterviewPerformance Appraisal Interview

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Guidelines for Conducting the Guidelines for Conducting the InterviewInterview

Begin the interview session by an attempt to Begin the interview session by an attempt to put the employee at ease. put the employee at ease. A refreshment and small talk may help break the A refreshment and small talk may help break the

ice.ice. Review the employee’s self-evaluation first, if Review the employee’s self-evaluation first, if

there is one. there is one. Ask for reasons for the various ratings. Ask for reasons for the various ratings. Then the supervisor describes his or her evaluation Then the supervisor describes his or her evaluation

of the employee. of the employee. Start with an overall impression, then explain the Start with an overall impression, then explain the

contents of the appraisal forms. contents of the appraisal forms. Most employees are waiting for the “bad news,” so it is Most employees are waiting for the “bad news,” so it is

probably most effective to describe areas for probably most effective to describe areas for improvement first. improvement first.

Then describe the employee’s strengths.Then describe the employee’s strengths.

Allow time for the employee to Allow time for the employee to respond to the performance appraisal. respond to the performance appraisal. The employee should be allowed to agree The employee should be allowed to agree

or disagree with the supervisor’s or disagree with the supervisor’s conclusions, as well as to ask questions. conclusions, as well as to ask questions.

It is important for the supervisor to keep It is important for the supervisor to keep an open mind and listen to the employee.an open mind and listen to the employee.

After the interview is over, the supervisor After the interview is over, the supervisor continues to appraise performance.continues to appraise performance.

Training and coaching for improvement Training and coaching for improvement should ensue.should ensue.

The follow-up is an ongoing process.The follow-up is an ongoing process.

Guidelines for Assessing the Guidelines for Assessing the Effectiveness of an InterviewEffectiveness of an Interview

During the interview:During the interview: To what extent did the supervisor really try to To what extent did the supervisor really try to

understand the employee?understand the employee? Were broad and general questions used at the outset?Were broad and general questions used at the outset? Was the supervisor’s feedback clear and specific?Was the supervisor’s feedback clear and specific? Did the supervisor learn some new things—particularly Did the supervisor learn some new things—particularly

about deep feelings and values of the subordinate?about deep feelings and values of the subordinate? Did the subordinate disagree and confront the Did the subordinate disagree and confront the

supervisor?supervisor? Did the interview end with mutual agreement and Did the interview end with mutual agreement and

understanding about problems and goals for understanding about problems and goals for improvement?improvement?

Performance Evaluation Performance Evaluation ProblemsProblems

No technique is perfect;No technique is perfect;they all have limitationsthey all have limitations

Bias in Appraising Bias in Appraising PerformancePerformance

Performance appraisals should be free Performance appraisals should be free of bias, but this is impossible.of bias, but this is impossible. There are several identifiable biases in the There are several identifiable biases in the

performance appraisals by supervisors. performance appraisals by supervisors. Harshness Bias: Harshness Bias: Rating employees more Rating employees more

severely than their performance merits.severely than their performance merits. Leniency Bias: Leniency Bias: Rating employees more Rating employees more

favorably than their performance merits.favorably than their performance merits. Proximity bias, or assigning similar scores Proximity bias, or assigning similar scores

to items that are near each other on a to items that are near each other on a questionnaire, can result in misleading questionnaire, can result in misleading appraisals. appraisals.

Similarity Bias: Similarity Bias: TheThe tendency to judge tendency to judge others more positively when they are like others more positively when they are like oneself.oneself.

The halo effect refers to the tendency to The halo effect refers to the tendency to generalize one positive or negative aspect generalize one positive or negative aspect of a person to the person’s entire of a person to the person’s entire performance, resulting in either a higher performance, resulting in either a higher or lower rating than the employee or lower rating than the employee deserves.deserves.

Use of Performance Use of Performance AppraisalsAppraisals

_ Feedback_ Feedback _ Personnel Training_ Personnel Training _ Wage/Salary Allocation (Compensation)_ Wage/Salary Allocation (Compensation) _ Placement_ Placement _ Promotions_ Promotions _ Discharge/Termination_ Discharge/Termination _ Personnel Research_ Personnel Research _ Legal Defense_ Legal Defense