Performance and Potential Appraisal - unext.inunext.in/assets/Pu18HR1006/lecture notes/HRM Lecture 4...

Performance and Potential Appraisal

Prof. K.B. AkhileshDept. of Management Studies

Indian Institute of Science, Bangalore

Unit 3.1

Learning Objectives

• By the end of this session, you must have learnt and understood:– The concept and definition of Performance

Appraisal.– The history of Appraisal. Objectives of Appraisal.– The Performance Appraisal process.– Performance Appraisal methods

• Traditional• Modern

Learning Objectives (Contd.)

– The methods of Performance Appraisal.– Components of Performance Appraisal. – Benefits of Performance Appraisal.– Common mistakes in Performance

Appraisal.

Performance Appraisal

• DefinitionPerformance Appraisal is the

systematic evaluation of the individual with respect to his or her performance in the job and his or her potential for development.

Performance Appraisal

• Performance appraisal– the assessment of an employee’s job

performance– two basic purposes

• Administrative - provides information for making salary, promotion, and layoff decisions

• Developmental - diagnoses training needs and enables career planning

What do you appraise?

Trait appraisals - subjective judgments about employee performance

often leads to personal bias

may not be suitable for obtaining useful feedback

Performance Appraisal (cont.)

Performance Appraisal (cont.)• What do you appraise? (cont.)

– Behavioral Appraisals - focus on more observable aspects of performance

• help ensure that all parties understand what the ratings are really measuring

– Results’ Appraisals - tend to be more objective• focus on production data

Management By Objectives(MBO) - subordinate and supervisor agree on specific performance goals

develop a plan for attaining the goals

identify criteria for determining whether goals have been reached


useful when managers want to empower employees

may focus on short-term achievement and ignore long-term goals


Example Of BARS Used For Evaluating Quality

Uses measures of quality and well-definedprocesses to achieve project goals.Defines quality from the client’s perspective.

Look for/identifies ways to continually improve the process.

Clearly communicates quality management to others.Develops a plan that defines how the team will participate in quality.

Appreciates TQM as an investment.

Has measures of quality that define tolerance levels.

Views quality as costly.Legislates quality.

Focuses her/his concerns only on outputs anddeliverables, ignoring the underlying process.

Blames others for absence of quality.Gives lip service only to quality concerns.

7

6

5

4

3

2

1

Outstanding

Average

Poor

Guidelines For Choosing An Appraisal System

Evaluate onspecific

behaviors

Documentthe processcarefully

Attend tolegal

considerations

AppraisalSystem

Use job analysisfor performance

standards

Develop a formalappeal process

Use more thanone rater where

possible

Communicateperformance

standards


• Who should do the appraisal?– Managers and supervisors - traditional source

of appraisal information– Peers and team members - best at identifying

leadership potential and interpersonal skills

Subordinates - provide feedback to supervisors

Internal and external customers

internal customers include anyone inside the organization who depends upon an employee’s work output


Self-appraisals - increases worker’s involvement in appraisal

360 degree appraisal - uses multiple sources to gain comprehensive perspective of one’s performance


Performance Appraisal (cont.)• How do you give employees feedback?

– performance feedback is a stressful task for all parties.

• most difficult interviews are with employees who are performing poorly

– no “one best way” to perform the appraisal interview

– follow-up meetings may be necessary

History of Performance Appraisal

• The history of performance appraisal is quite brief. Its roots in the early 20th century can be traced to Taylor's pioneering Time and Motion studies.


• As a distinct and formal management procedure used in the evaluation of work performance, appraisal really dates from the time of the Second World War - not more than 60 years ago.


• Performance Appraisal systems began as simple methods of income justification.

• The process was firmly linked to material outcomes.

• Little consideration, if any, was given to the developmental possibilities of appraisal.


• In the 1950s in the United States, the potential usefulness of appraisal as a tool for motivation and development was gradually recognized.

• The general model of Performance Appraisal, as it is known today, began from that time.

Modern Appraisal

• A structured formal interaction between a subordinate and supervisor.

• It usually takes the form of a periodic interview (annual or semi-annual), in which the work performance of the subordinate is examined and discussed.

Modern Appraisal

• Appraisal results are used to identify the poor performers who may require some form of counseling, or in extreme cases, demotion, dismissal or decreases in pay.

Modern Appraisal

• The view is to identify weaknesses and strengths as well as opportunities for improvement and development of skills.

Modern Appraisal

• Whether this is an appropriate use of Performance Appraisal - the assignment and justification of rewards and penalties - is a very uncertain and contentious matter.

Appraisal Involves

• A review of actual performance over the period covered by the appraisal and a discussion of improvements required in the performance, if appropriate.

• A statement of present skills and abilities of the appraisee.

Appraisal Involves

• A statement of the objectives and goals for the next period, including criteria by which performance will be measured.

• Identification of the best way to develop from existing level of skill and experience.

Objectives of Performance Appraisal

1. To effect promotion based on competence and performance.

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


3. To confirm the services of probationary employees upon their completion of the probationary period satisfactorily.


4. To decide upon a pay raise where regular pay scales have not been fixed.


5. Can be used to determine whether HR programmes such as selection, training, and transfers have been effective or not.

Performance Appraisal Process

1. Establish performance standards2. Communicate performance expectation

to employees3. Measure actual performance

Performance Appraisal Process

4. Compare actual performance with standards

5. Discuss the appraisal with employee6. If necessary, initiate corrective action

Establish Performance Standards

o The process of Performance Appraisal begins with establishment of performance standards.


o At the time of designing a job and formulating a job description, performance standards are usually developed for the position.


o These standards should be clear and objective enough to be understood and measured.


o These standards should be discussed with the supervisors to find out which different factors are to be incorporated.

Communicate Performance Expectation to Employees

o The next step is to communicate these standards to the employees.

o Otherwise, the employees would find it difficult to guess what is expected of them.

Communicate Performance Expectation to Employees

o Satisfactory feedback ensures that the information communicated by the manager has been received and understood in the way it was intended.

Measure Actual Performance

o It determines what actual performance is; it is necessary to acquire information about it.

Measure Actual Performance

o Four sources of information frequently used to measure actual performance

i. Personal observationii. Statistical reportsiii. Oral reportsiv. Written reports

Compare Actual Performance with Standards

o In this step, actual performance is compared with standards.

o The employee is appraised and judged of his/her potential for growth and advancement.

Compare Actual Performance with Standards

o Attempts are made to note deviation between standard performance and actual performance.

Discuss The Appraisal with The Employee

o In this step, the results of appraisal are discussed periodically with the employee.

o Here, good points, weak points, and difficulties are indicated and discussed so that performance is improved.

Initiate Corrective Action

o The final step is initiation of corrective action when necessary.

o There are two types of corrective action,they are Immediate corrective action and Basic corrective action.

Formal Appraisal Schemes

• There should be a clearly defined approach to appraisal.

• To ensure fairness, appraisal should be monitored throughout the company.

• Appraisals should be done on a regular basis.

Formal Appraisal Schemes

• Both the appraiser and the appraisee should have sufficient notice to prepare properly for the appraisal.

• The appraisal interview is documented using appraisal form.

The Appraisal Form

• Most companies develop their own forms based on the type of workforce.

• The purpose of an appraisal form is to provide an agenda for the subsequent interview.

The Appraisal Form

• It provides a record of the interview, since it should be filled in during the interview and signed off by both the parties.

• It should be used in conjunction with good interview.

The Appraisal Interview

• Appraisal process will include at least one interview carried out between the appraisee and his/her first-line manager, the appraiser.

• The interview should have a defined agenda and should concentrate on reviewing actual performance and discussion of required improvements.


• The basic agenda for an appraisal interview would be:– Review of performance.– Discussion of improvements.– Discussion of potential.– Setting of objectives.


• Some appraisal schemes also use second interview where the appraisee has a discussion with a person at a higher level in the organization than one’s own manager.


• This interview is not intended to duplicate the initial interview but to cover other aspects of the employee’s job, in particular a discussion of the wider company objectives.

Linking Appraisal to Pay Review

• Many companies link appraisal interview to pay interview.

• This can be cost-effective for the company as it means that only one process has to be administered.


• It can provide a fair basis on which to divide the salary budget by awarding merit points for performance and giving salary increases on the basis of points achieved.


• It can also increase employee motivation to reach company objectives.

• But, it will increase the amount of defensive behavior and reluctance to admit faults on the part of the appraisee.


• It can also cause people to use the appraisal as an opportunity to justify why their salary should increase, thus leading to a conflict between the appraiser and the appraisee.

Methods of Performance Appraisal

• The Methods of Performance Appraisal are

o Traditional Methods

o Modern Methods

Traditional Methods

1. Straight Ranking Method2. Man to Man Comparison Method3. Paired Comparison Method4. Grading5. Graphic Rating Scales

Traditional Methods

6. Forced Choice Description Method7. Forced Distribution Method8. Check Lists9. Free Form Essay Method

Traditional Methods

10. Critical Incidents11. Group Appraisal12. Field Review Method

Modern Methods

o Appraisal by Results.o Assessments Center Method.o Human Asset Accounting Method.o Behaviorally Anchored Rating Scales.

Straight Ranking Method

o Oldest and simplest method of Performance Appraisal.

o Employees are ranked from best to worst on some characteristics.

o The rater first finds the employees with the highest performance and the lowest performance in a job.

Paired Comparison Method

o Under this method, the appraiser ranks the employees by comparing one employee with all other employees in the group, one at a time.

Grading Method

o Under this approach, the rater considers certain features and marks them accordingly to a scale.

o Certain categories of worth are first established and carefully defined.

o The selected features :o Analytical abilityo Cooperativenesso Dependabilityo Self-expression

Grading Method (Contd.)

o Job knowledgeo Judgmento Leadership and Organizing Ability


o This type of grading is done in semester examinations and in selecting candidates by Public Service Commission.


Graphic Rating Scale

o Graphic Rating Scales compare individuals’

performance to an absolute standard.o Judgments about performance are recorded

on a scale.

Graphic Rating Scale (Contd.)

o Oldest and widely used technique.o Known as linear rating scale.

Forced Choice Description Method

o Under this method, a large number of statements in groups are prepared.

Forced Choice Description Method (Contd.)

o Each group consists of four descriptive statements concerning employee behaviour.

o Two statements are most descriptive (favorable) and two are least descriptive(unfavorable).

Check List

o In this method, rater does not evaluate employee performance.

o He supplies reports about them and the final rating is done by the personnel department.

Check List (Contd.)

o Series of questions regarding the employee and his behavior.

o The rater, then, checks to indicate if the answer to a question about an employee is positive or negative.

Check List (Contd.)

o The value of each question may be weighed equally or certain questions may be weighed more heavily than others

o For e.g., is the employee really interested in his job? Yes/No

Critical Incident Method

o The supervisor continuously records the critical incidents of the employee performance.

Critical Incident Method (Contd.)

Each employee’s behaviour is noted in a specially designed notebook.

The superior rates the performance of his subordinates on the basis of notes taken by him.

Group Appraisal Method

o Under this method, employees are rated by an appraisal group, consisting of their supervisor .

Group Appraisal Method (Contd.)

o The immediate supervisors may act as subordinates for the group activities.

o This method involves multiple judges.

Field Review Method

o Under this method, a trainer employee from the personnel department interviews line supervisors.

o Line supervisors evaluate their respective subordinates.

Field Review Method (Contd.)

o The trainer is fully equipped with definite test questions.

o The questions are asked and answered verbally.

o The success depends on the interviewer.

Free Form Essay Method

o This method requires the manager to write a short essay describing each employee’s performance during the rating period.

Free Form Essay Method (Contd.)

o This format emphasizes evaluation of overall performance, based on strengths/weaknesses of employees, rather than specific job dimension.

Forced Distribution Methodo The rater may rate his employees at the

higher or at the lower end of the scale under the earlier methods.

o This method is developed to prevent the raters from rating too high or low.

Forced Distribution Method (Contd.)

o Forced distribution requires the raters to spread their employee evaluation in a prescribed distribution.

Appraisal By Results or

Management By Objectives (MBO)

o MBO has been evolved by Peter Ducker.o MBO is potentially a powerful philosophy

of managing and an effective way for operationalizing the evaluation process.

Appraisal By Results or

Management By Objectives (MBO)(Contd.)

o MBO can be defined as “a process whereby the superior and subordinate manager of an organization jointly, identify their common goals, define each individuals’ major areas”

Assessment Center Method

o This method of appraising was first applied in German Army in 1930.

o It is a system or organization where assessment of several individuals is done by various experts by using various techniques.

Assessment Center Method (Contd.)

o In this approach, individuals from various departments are brought together to spend two or three days working on an individual or group assignment .

Assessment Center Method (Contd.)

o These assignments are similar to the ones they would be managing when promoted.

Human Asset Accounting Method

o It deals with cost and contribution of human resources to the organization.

Human Asset Accounting Method (Contd.)

o Cost of employee includes cost of manpower planning, recruitment, selection, training, placement.

o Cost of human resource may be taken as the standard employee performance.

Human Asset Accounting Method (Contd.)

o Employee performance can be taken as positive when contribution is more than the cost.

o Employee performance can be taken as negative when contribution is less than the cost.

Behaviorally Anchored Rating Scales(BARS)

o BARS method combines elements of the traditional rating scales and critical incidents method.

Behaviorally Anchored Rating Scales(BARS)…(Contd.)

o The method employs individuals who are familiar with a particular job to identify its major components.

Behaviorally Anchored Rating Scales(BARS)…(Contd.)

o They then rank and validate specific behavior for each of the components.

Components of Performance Appraisal

• Components of Performance Appraisal are

o “Who” of Appraisal ?o “What” of Appraisal ?

Components of Performance Appraisal (Contd.)

o “When” of Appraisal ?o “Where” of Appraisal ?o “How” of Appraisal ?

“Who” of Appraisal?

o These issues state “who should be rated, and who should do the rating”.

“Who” of Appraisal? (Contd.)

o The answer for this issue is that all employees of an organization should be appraised, right from the operator to the top level management, for one reason or the other.

“What” of Appraisal

o The Performance Appraisal consists of appraising non-supervisory employees for their current performance, and managers for future potential.

o It also includes evaluation of human traits.

“Why” of Appraisalo It is concerned with creating and

maintaining a satisfactory level of performance of employees in their present jobs.

o Highlighting employees’ needs and opportunities for personal growth and development

“When” of Appraisal

o It answers the query about the frequency of appraisal.

o In most organizations, employees are formally evaluated once a year.

“Where” of Appraisal

o “Where” indicates the location where an employee may be evaluated.

o It is usually done in the place of work or office of the supervisor.

“How” of Appraisal

o “How” the company must decide and what different methods are available and which of these may be used for Performance Appraisal.

“How” of Appraisal (Contd.)

o On the basis of comparative advantages and disadvantages, it is decided which method would suit the purpose best.

Benefits of Performance Appraisal

1. Performance Improvement : Performance feedback allows the employee, manager, and personnel specialist to intervene with appropriate action to improve performance.

Benefits of Performance Appraisal (Contd.)

2. Compensation Adjustments : Performance evaluation helps decision-makers determine who should receive pay raises.


3. Placement decision:o Promotion, transfer, and demotion are

usually based on past or anticipated performance.


o Appraisal data can be used to monitor the success of the organization's recruitment and induction practices. For example, how well are the employees performing who were hired in the past two years?


• Appraisal data can also be used to monitor the effectiveness of changes in recruitment strategies.

• By following the yearly data related to new hires (and given sufficient numbers on which to base the analysis) it is possible to assess whether the general quality of the workforce is improving, staying steady, or declining.


4. Training and development needs:

o Poor performance may indicate the need for retraining.


o During the discussion of an employee's work performance, the presence or absence of work skills can become very obvious - even to those who habitually reject the idea of training them!


o Performance Appraisal can make the need for training more pressing and relevant by linking it clearly to performance outcomes and future career aspirations.


5. Career planning and development : Performance feedback guides career decision about specific career paths one should investigate.


6. Motivation and Satisfaction: Performance Appraisal can have a profound effect on levels of employee motivation and satisfaction - for better as well as for worse.


• Performance Appraisal provides employees with recognition for their work efforts.

• The power of social recognition as an incentive has been long noted.


• In fact, there is evidence that human beings will even prefer negative recognition in preference to no recognition at all.

Common Mistakes

• Where Performance Appraisal fails to work as well as it should, lack of support from the top levels of management is often cited as a major contributing reason.

Common Mistakes (Contd.)

• Opposition may be based on political motives, or more simply, on ignorance or disbelief in the effectiveness of the appraisal process.

• It is crucial that top management believes in the value of appraisal and expresses its visible commitment to it.


• Fear of Failure– There is a stubborn suspicion among many

appraisers that a poor appraisal result tends to reflect badly upon them also, since they are usually the employee's supervisors.


– Many appraisers have a vested interest in making their subordinates "look good" on paper.

Common Mistakes (Contd.)• Judgment Aversion

– Many people have a natural reluctance to "play judge" and create a permanent record which may affect an employee's future career.

– This is the case especially where there may be a need to make negative appraisal remarks.

Common Mistakes (Contd.)– Training in the techniques of constructive

evaluation (such as self-auditing) may help.– Appraisers need to recognize that problems

left unchecked could ultimately cause more harm to an employee's career than their early detection and correction.

Common Mistakes (Contd.)• Appraiser Preparation

– The bane of any Performance Appraisal system is the appraiser who wants to "play it by ear".

– Such attitudes should be actively discouraged by stressing the importance and technical challenge of good Performance Appraisal.

Common Mistakes (Contd.)• Employee Participation

– Employees should participate with their supervisors in the creation of their own performance goals and development plans.

– Mutual agreement is a key to success.

Common Mistakes (Contd.)• Performance Management

– One of the most common mistakes in the practice of Performance Appraisal is to perceive appraisal as an isolated event rather than an ongoing process.

Summary

• In this lecture, we have seen the following:– The methods of Performance Appraisal.– Components of Performance Appraisal.– Benefits of Performance Appraisal.– Common mistakes in Performance Appraisal.

Summary• In this lecture, we have had a close look at the

following:

– The concept and definition of Performance Appraisal.– The history of appraisal.– Objectives of appraisal.– The performance appraisal process.– Performance Appraisal methods

» Traditional» Modern» The methods of Performance Appraisal.

– Components of Performance Appraisal.– Benefits of Performance Appraisal.– Common mistakes in Performance Appraisal.

In the next session

• In the next session, we will have a close look at the concept, definition and methods of Employee Training and Development.

Performance and Potential Appraisal - unext.inunext.in/assets/Pu18HR1006/lecture notes/HRM Lecture 4...

Documents

Transcript of Performance and Potential Appraisal - unext.inunext.in/assets/Pu18HR1006/lecture notes/HRM Lecture 4...