Performance Appraisal Performance appraisal systems are designed to serve the company's and employee's interests.

They are used to inventory the abilities and resources of employees and to let an employee know where he stands so that he will be stimulated to improve his performance. Employee motivation can be enhanced and performance improved with the monitoring of employees' performance level and the use of feedback to advise those employees about their effectiveness. Performance feedback exchanges can be ongoing and informal, on a day-to-day coaching basis or on a formal basis, annually or biannually. This chapter covers the fundamental concepts of performance appraisal. The practice of performance appraisal is described in this chapter and its process and its features along with the differences between performance management and appraisal. Introduction Performance appraisal is a universal phenomenon in which the organization is making judgment about one is working with and about oneself. It serves as a basic element of effective work performance. Performance appraisal is essential for the effective management and evaluation of staff. It aims to improve the organizational performance as well as individual development. 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. But this is not very helpful, for the same may be said about almost everything in the field of modern human resources management. 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 appraisals have been increasingly implemented by most modern organization as a tool for employee assess. The meaning of the word appraisal is to fix a price or value for something. This is used in finance in terms such as project appraisal or financial appraisal where a value is attached to a project. Similarly performance appraisal is a process in which one values the employee contribution and worth to the organisation. Objectives Performance appraisals provide a means for informing employees of the quality of their work and identifying areas of performance that may need improvement. Performance appraisals consist of assessing the staff member's adequacy to perform tasks, to fulfill responsibilities, to meet behavioral and conduct standards, and to perform other job requirements at desired levels of

competence. Performance appraisals help supervisors maintain control of the work and make the most effective use of their staff resources. Further, performance appraisal documents provide a supportable basis for making personnel decisions including, but not limited to, training needs, merit pay adjustments, promotions, transfers, continued employment, or terminations.

The objectives of performance appraisal are: 1. 2. 3. 4. 5. To help better current performances To help in development of the employee. To determine training and development needs. To give employee feedback and counsel them To review performance for salary purposes.

Employees across the entire organisation are apprised of their performance. This could be done annually, twice a year, periodically depending on the need of the organization. Types of Appraisal Systems The various kinds of performance appraisal systems are: Personality based performance appraisal system: Here the appraiser is supposed to rate the personality traits of the person being appraised. This is not in much in organisations as it very subjective and judgmental. It could also be biased and prejudiced. Competence based performance appraisal system: Here the job analysis is used and the employee is appraised for the skills he exhibits. For e.g. if his job entails dealing with the clients then he is judged foe his effectiveness in dealing with them. This enables both the organisation and the employee as to what deficiencies are to be overcome and can be useful in providing training to the employee to better his performance.

Result based performance appraisal system: This system concentrates on the final results achieved by the employee irrespective of his personality or deficiencies. This is totally related to the job and concentrates on the end results that are more important to the organisation. The performance appraisal system has to be transparent and the employee should be taken into full confidence. In many cases employees themselves are given a chance to conduct a self-appraisal. Performance appraisal is a case of joint problem solving by the organisation and the employee. However

the organisation must also take care of future potential and not get bogged down by current performance. Normally the immediate supervisor does the appraisal. Some organisations also have a peer group performance appraisal where colleagues rate the performance. The HR person must also ensure that line managers are properly trained for carrying out the appraisal including interviewing techniques and on how to give feedback. The managers must also be trained to look at the cases objectively outside of their personal opinion of the candidate. Elements in the Performance Appraisal Process At one stage performance appraisal relied mainly on assessment of personality characteristics. Subordinates were being appraised by their superiors on the extent to which they exhibited characteristics like tact, willingness, enthusiasm, and maturity. Managers were being put in the position of psychologists and required to make subjective ratings without any point of reference except their own opinion. More recent thinking has resulted in an approach which says that there are two important aspects in performance appraisal namely inputs and outputs Inputs: What the individual brings to the job in terms of attributes, behavior, skills and knowledge are inputs. Outputs: The results achieved in terms of outputs or outcomes are referred to as outputs. Expectations are expressed in terms of objectives, standards, standards, targets or competence and appraisal is made on the basis of inputs and outputs. Types of Appraisal Systems Performance is an employee's accomplishment of assigned work as specified in the critical elements and as measured against standards of the employee's position. The term Performance Appraisal is concerned with the process of valuing a persons worth to an organization with a view to increasing it. Traditional Appraisal system Performance appraisal is developed as a simple method of income justification. Appraisal used to decide whether the salary of an individual was justified or not. The decrease or increase in pay depends upon employees performance. Modern Appraisal System Performance appraisal is defined as a structured formal interaction between a subordinate and a supervisor that usually takes the form of a periodic interview, in which the work performance of the subordinate is examined and discussed

with a view to identify weakness, strength and opportunities for improvement and skills development. Performance-Based Actions are the reduction in grade or removal of an employee based solely on performance at the unacceptable level. Performance Plans are the documentation of performance expectations communicated to employees from supervisors. Plans define the critical elements and the performance standards by which an employee's performance will be evaluated. Performance Standards are statements of the expectations or requirements established by management for a critical element at a particular rating level. A performance standard may include, but is not limited to, factors such as quality, quantity, timeliness, and manner of performance. Performance Award is a one-time cash payment to recognize the contributions of an employee and is based on the rating of record. A performance award does not increase basic pay. Performance Improvement Plans (PIP) are developed for employees at any point in the appraisal cycle when performance becomes Level 1 (unacceptable) in one or more critical elements. This plan affords an employee the opportunity to demonstrate acceptable performance and it is developed with specific guidance provided by a servicing human resources office. Performance Management is the integrated process by which an agency involves its employees in improving organizational effectiveness in the accomplishment of agency mission and strategic goals. Performance Management consists of: performance planning, monitoring employee performance, employee development, evaluating employee performance, and recognition. Performance appraisal system describes how agency will identify performance standards and core competencies and communicate them to employees. Periodical appraisal helps the company to compare employees performance and to take apt decisions for further improvement. A structured business planning depends on the performance of the employee and it will be successful only when the employees are analyzing their work performance individually. The formal performance appraisal in a company is conducted annually for all staff and each staff member is appraised by their line manager. Generally employees are appraised based on the structure of the company Annual performance appraisals evaluate the role of the employee in the organizational development and also monitoring the standard, expectations, objectives, efficiency in handling task and responsibilities in a period of time. Appraisal also helps to analyze the individual training needs of the employee and planning of future job allocation. It also help to adopt appropriate strategy based

on organizational training needs. Performance appraisal analyzes employees performance and which utilize to review the grades and modify the annual pay. It generally reviews each individual performance against the objectives and standard of the organization. Performance management creating a work environment and it is enabling the employees to perform best of their abilities. Through performance management companies are hiring efficient people .Then the company building up their skills and talents through employee development programmes. The tools like performance appraisal, performance review, and appraisal forms create the process of nurturing employee developments. Effective appraisal considers increase in staff productivity, knowledge and contribution. Formal management procedure used the evaluation of work performance. Effective appraisal helps the employer in providing increased productivity, knowledge and contribution from the staff. These resources increase the ability to do performance consulting, measure performance improvement, and provide resultant training using internal staff, which increases self-sufficiency in performance consulting and improvement. Providing feed back about employees job performance and the contribution of reward for their work is very essential in the smooth functioning of an organization. Performance appraisal tries to: Give feedback to employees to improve subsequent performance. Identify employee-training needs. Document criteria used to allocate organizational rewards. Form a basis for personnel decisions-salary (merit) increases, disciplinary actions, etc. Provide the opportunity for organizational diagnosis and development. Facilitate communication between employee and administrator. Performance Feed Back The human resource objective of a dairy manager should be to maintain a productive, stable, and committed workforce. Performance feedback to employees is one of the essential keys to making that elusive objective a reality. Most people are uncomfortable with uncertainty. When employees are uncertain about their work performance and job security, they cannot be as satisfied and productive as possible. Feedback reduces employee uncertainty and provides direction about how well an individual is performing and how he or she can improve. Being motivated to do a good job is hard if you dont know what good is or what the expectations are. Employees appreciate feedback on their performance and constructive criticism that helps them to gain success. If coaches never offered any advice on how to hit the ball, run faster, or jump higher, think how

frustrated players would be in trying to improve their performance. Your employees feel the same way when they get little to no feedback about how they are performing. Six Characteristics of Useful Feedback Specific Feedback should be specifically related to recognizable elements of performance or particular incidents that can be easily understood by both the employee and supervisor. Whenever possible, feedback should include objective information. Relevant Feedback should focus on behaviors or attitudes that have a direct impact on performance. Issues or opinions unrelated to job performance have no place in job feedback Credible Feedback should come from a trusted source that has a developed rapport with the employee. The source of feedback needs to be in a position to observe employee performance. In other words, a milking supervisor who never visits the night crew cannot credibly provide them with feedback. Frequent Feedback needs to be frequent enough to provide direction that helps employees shape their performance. Limiting feedback to formal reviews once or twice a year is not enough to help employees improve. Lessexperienced employees need feedback more frequently, but even experienced people need to hear it often enough to stay motivated and feel valued. Timely Feedback need to occur close enough in time to performance so that it has meaning. Feedback about a critical incident in particular needs to come almost immediately after the incident takes place. Otherwise, the meaning and importance of the incident for learning begins to decline rapidly. One should never wait for a formal review to provide feedback on a critical incident and should provide informal feedback right away. Linked to a Source of Help Feedback should not end with the employee wondering what to do next. Negative feedback, especially, should always conclude with a series of positive steps that the employee can take toward improvement. The steps might be some specific recommendations (like from a coach), direction toward a source of further training, or plans for a change in the work system that limits performance. Feed back of Performance provides an opportunity to discuss strength and resolution of performance deficiencies of an employee, which also encouraged preparing ratings of their supervisors. Performance appraisal allows a person to grow in whatever the direction he wants to move. Employers promote positive attitude, advancement, and motivation to make the employee to understand their own special potential, and find roles that really fit well. Developing the whole-person is also an important aspect of modern corporate responsibility, and separately whole-person development is a crucial advantage in the employment

market; in which all employers compete to attract the best recruits, and to retain the best staff. Usually performance appraisal used for developmental purpose which also helps to identify the eligible person for reward. It stimulates the performance and making promotions, transfer and discharge decisions. Formal Performance Feedback Periodic, formal feedback about performance for individuals is known by many names: performance review, annual evaluation, performance appraisal, and so forth. Its usually carried out on an annual or twice-yearly basis and is often associated with pay adjustments. The purpose of the performance review is to help employees improve their work and develop a plan for gaining new skills. Although the documentation needed to terminate an employee with chronic performance problems may start here, the goal of the review process is not discipline or punishment, but rather constructive feedback for improvement. Employees appreciate formal feedback on their performance and constructive criticism that helps them to succeed. Informal Feedback In order for feedback to help improve group or individual performance, it must be received on a regular and frequent basis. Informal feedback fills this need. Informal feedback might simply be a pat on the back when the supervisor notices that a job was particularly well done. It might be a problem solving session for the herdsperson and breeder when the records indicate that reproductive efficiency is declining. Any communication about performance that is carried out in an informal setting is informal feedback. When a dairy farm manager is carrying out the role of supervisor, informal feedback and coaching make up the largest and most important parts of that role. Good supervisors maintain open communication with their subordinates. They listen closely to their ideas and concerns and are always offering feedback on their performances. By offering ideas and direction toward improvement whenever feedback is negative, supervisors act as a coach to help their subordinates grow and improve. Providing feedback, both positive and negative, is an important part of every managers responsibility. People need to know specifically what parts of the job they do well and what parts they need to improve. A yearly or twice-yearly performance review that may be linked to pay raises is a good way to provide formal feedback and help employees to develop but does not replace the daily

communication about work performance. An incentive program can be a useful tool for motivating and rewarding key employees, but it should be used in combination with both informal and formal feedback for the best overall outcome.

Performance Appraisal and Performance Management It is sometimes assumed that performance appraisal is the same thing as performance management. But there are significant differences. Performance appraisal can be defined as the formal assessment and rating of individuals by their managers at, usually, an annual review meeting. In contrast, performance management is a continuous and much wider, more comprehensive and more natural process of management that clarifies mutual expectations, emphasizes the support role of managers who are expected to act as coaches rather than judges, and focuses on the future. Performance appraisal has been discredited because too often it has been operated as a top-down and largely bureaucratic system owned by the Human Resource department rather than by line managers. It has been perceived by many commentators such as Townley as solely a means of exercising managerial control. Performance appraisal tended to be backward looking, concentrating on what had gone wrong, rather than looking forward to future development needs. Performance appraisal schemes existed in isolation. There was little or no link between them and the needs of the business. Line managers have frequently rejected performance appraisal schemes as being time-consuming and irrelevant. Employees have resented the superficial nature with which appraisals have been conducted by managers who lack the skills required, tend to be biased and are simply going through the motions. As Armstrong and Murlis assert, performance appraisal too often degenerated into a dishonest annual ritual. The differences between them as summed up by Armstrong and Baron are set out in the following table: Performance Appraisal Top down assessment Annual appraisal meeting Use of ratings Monolithic system Focus on quantified objectives Often linked to pay Bureaucratic complex paperwork Owned by HR managers Performance Management Joint process through dialogue Continuous review with one or two formal reviews Ratings less common Flexible process Focus on values and behaviours as well as objectives Less likely to be a direct link to pay Documentation kept to minimum Owned by line managers

Performance

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evaluations are critical linchpins for human resources management. Appraisal ratings may be criteria in decisions to retain employees during layoffs, to assess the quality of training programs, to measure equitable treatment of different groups of employees, to increase employees' pay, and to promote or terminate employees. Appraisals may help poor performers improve performance by giving specific feedback about needs for development and appraisals may help employees who excel continue to excel by giving positive reinforcement. This type of feedback is essential to improve performance of employees at all levels and to assess the accomplishments of the organisation overall. Employee performance and productivity data are becoming more important as more government agencies; federal, state, and local ; engage in strategic planning and try to meet accountability standards of statutes like the Government Performance and Results Act. Governments at all levels are trying to verify that their agencies and departments are doing more with less. If a smaller number of employees will be expected to accomplish more, then it is critical to use all available tools and techniques for maximizing each employee's productivity. Effective performance management systems are among the tools for measuring and improving productivity. The costs of failing to develop adequate performance appraisal systems, though difficult to measure, would surely exceed the benefits of developing and implementing an effective system. Organisations lacking performance appraisal systems risk costly litigation when they are unable to support decisions to terminate or lay off employees. In the absence of a valid system for assessing the performance of all employees, managers risk suboptimum promotion decisions and they may promote one employee and increase his or her pay when another employee's performance would be superior and give a higher return on the salary investment. Employees who excel and who do not receive positive feedback may become frustrated and leave, resulting in recruitment costs for the employer. The performance gap that is the gap between desired performance and actual performance also increases costs. Some organisations overspend, trying to close the performance gap by investing in advanced technology, by redesigning the workplace, and by improving job efficiency rather than focusing on human performance systems that determine productivity. Many elected officials believe pay-for-performance, based on appraisal ratings, will give employees incentives to improve productivity. One problem in federal, state, and local government is insufficient funding for such systems. Even when appropriations are adequate, a successful pay-for-performance system must be

carefully designed and implemented by well-trained managers in an organisation with sound management practices and policies. Aspects of Job Analysis Job Analysis is a process to identify and determine in detail the particular job duties and requirements and the relative importance of these duties for a given job. Job Analysis is a process where judgments are made about data collected on a job. Information regarding duties and tasks, Environment, tools and equipments, external and internal relationships and the minimum requirements to perform the job are considered under job analysis. Modern Appraisal The human inclination to judge can create serious motivational, ethical and legal problems in the workplace. Without a structured appraisal system, there is little chance of ensuring that the judgments made will be lawful, fair, defensible and accurate. Performance appraisal systems began as simple methods of income justification. That is, appraisal was used to decide whether or not the salary or wage of an individual employee was justified. The process was firmly linked to material outcomes. If an employee's performance was found to be less than ideal, a cut in pay would follow. On the other hand, if their performance was better than the supervisor expected, a pay rise was in order. Little consideration, if any, was given to the developmental possibilities of appraisal. If was felt that a cut in pay, or a rise, should provide the only required impetus for an employee to either improve or continue to perform well. Sometimes this basic system succeeded in getting the results that were intended; but more often than not, it failed. For example, early motivational researchers were aware that different people with roughly equal work abilities could be paid the same amount of money and yet have quite different levels of motivation and performance. These observations were confirmed in empirical studies. Pay rates were important, yes; but they were not the only element that had an impact on employee performance. It was found that other issues, such as morale and selfesteem, could also have a major influence. As a result, the traditional emphasis on reward outcomes was progressively rejected. In the 1950s in the United States, the potential usefulness of appraisal as tool for motivation and development was gradually recognized. The general model of performance appraisal, as it is known today, began from that time.

Performance appraisal may be defined as a structured formal interaction between a subordinate and supervisor, that usually takes the form of a periodic interview (annual or semi-annual), in which the work performance of the subordinate is examined and discussed, with a view to identifying weaknesses and strengths as well as opportunities for improvement and skills development. In many organizations - but not all - appraisal results are used, either directly or indirectly, to help determine reward outcomes. That is, the appraisal results are used to identify the better performing employees who should get the majority of available merit pay increases, bonuses, and promotions. By the same token, appraisal results are used to identify the poorer performers who may require some form of counseling, or in extreme cases, demotion, dismissal or decreases in pay. (Organizations need to be aware of laws in their country that might restrict their capacity to dismiss employees or decrease pay.) Whether this is an appropriate use of performance appraisal - the assignment and justification of rewards and penalties - is a very uncertain and contentious matter. Basic Purposes of Appraisal Effective performance appraisal systems contain two basic systems operating in conjunction: an evaluation system and a feedback system. The main aim of the evaluation system is to identify the performance gap (if any). This gap is the shortfall that occurs when performance does not meet the standard set by the organization as acceptable. The main aim of the feedback system is to inform the employee about the quality of his or her performance. (However, the information flow is not exclusively one way. The appraisers also receive feedback from the employee about job problems, etc.) One of the best ways to appreciate the purposes of performance appraisal is to look at it from the different viewpoints of the main stakeholders: the employee and Employee Viewpoint From the employee viewpoint, the purpose of performance appraisal is four-fold: Tell me what you want me to do Tell me how well I have done it, Help me improve my performance Reward me for doing well. Organizational Viewpoint the organization.

From the organization's viewpoint, one of the most important reasons for having a system of performance appraisal is to establish and uphold the principle of accountability. For decades it has been known to researchers that one of the chief causes of organizational failure is "non-alignment of responsibility and accountability." Non-alignment occurs where employees are given responsibilities and duties, but are not held accountable for the way in which those responsibilities and duties are performed. What typically happens is that several individuals or work units appear to have overlapping roles. The overlap allows - indeed actively encourages - each individual or business unit to "pass the buck" to the others. Ultimately, in the severely non-aligned system, no one is accountable for anything. In this event, the principle of accountability breaks down completely. Organizational failure is the only possible outcome. In cases where the non-alignment is not so severe, the organization may continue to function, albeit inefficiently. Like a poorly made or badly tuned engine, the non-aligned organization may run, but it will be sluggish, costly and unreliable. One of the principal aims of performance appraisal is to make people accountable. The objective is to align responsibility and accountability at every organizational level. Appraisal Methods In a landmark study, Locher & Teel found that the three most common appraisal methods in general use are rating scales (56%), essay methods (25%) and results- oriented or MBO methods (13%). For a description of each, follow the button links on the left. Certain techniques in performance appraisal have been thoroughly investigated, and some have been found to yield better results than others. Encourage Discussion: Research studies show that employees are likely to feel more satisfied with their appraisal result if they have the chance to talk freely and discuss their performance. It is also more likely that such employees will be better able to meet future performance goals. Employees are also more likely to feel that the appraisal process is fair if they are given a chance to talk about their performance. This especially so when they are permitted to challenge and appeal against their evaluation. Constructive Intention: It is very important that employees recognize that negative appraisal feedback is provided with a constructive intention, i.e., to help them overcome present difficulties and to improve their future performance. Employees will be less anxious about criticism, and more likely to find it useful, when they believe that the appraiser's intentions are helpful and constructive. In contrast, other studies have reported that "destructive criticism" - which is vague, ill-informed, unfair or harshly presented - will lead

to problems such as anger, resentment, tension and workplace conflict, as well as increased resistance to improvement, denial of problems, and poorer performance. Set Performance Goals: It has been shown in numerous studies that goalsetting is an important element in employee motivation. Goals can stimulate employee effort, focus attention, increase persistence, and encourage employees to find new and better ways to work. The useful of goals as a stimulus to human motivation is one of the best supported theories in management. It is also quite clear that goals which are "...specific, difficult and accepted by employees will lead to higher levels of performance than easy, vague goals (such as do your best) or no goals at all." Appraiser Credibility: It is important that the appraiser (usually the employee's supervisor) be well-informed and credible. Appraisers should feel comfortable with the techniques of appraisal, and should be knowledgeable about the employee's job and performance. When these conditions exist, employees are more likely to view the appraisal process as accurate and fair. They also express more acceptances of the appraiser's feedback and a greater willingness to change. Rating Methods The rating scale method offers a high degree of structure for appraisals. Each employee trait or characteristic is rated on a bipolar scale that usually has several points ranging from "poor" to "excellent" (or some similar arrangement). The traits assessed on these scales include employee attributes such as cooperation, communications ability, initiative, punctuality and technical (work skills) competence. The nature and scope of the traits selected for inclusion is limited only by the imagination of the scale's designer, or by the organization's need to know. The one major provision in selecting traits is that they should be in some way relevant to the appraisee's job. The traits selected by some organizations have been unwise and have resulted in legal action on the grounds of discrimination. Advantages The greatest advantage of rating scales is that they are structured and standardised. This allows ratings to be easily compared and contrasted - even for entire workforces. Each employee is subjected to the same basic appraisal process and rating criteria, with the same range of responses. This encourages equality in treatment for all appraisees and imposes standard measures of performance across all parts of the organization. Rating scale methods are easy to use and understand. The concept of the rating scale makes obvious sense; both appraisers and appraisees have an intuitive

appreciation for the simple and efficient logic of the bipolar scale. The result is widespread acceptance and popularity for this approach.

Disadvantages Trait Relevance Are the selected rating-scale traits clearly relevant to the jobs of all the appraisees? It is inevitable that with a standardised and fixed system of appraisal that certain traits will have a greater relevance in some jobs than in others. For example, the trait "initiative" might not be very important in a job that is tightly defined and rigidly structured. In such cases, a low appraisal rating for initiative may not mean that an employee lacks initiative. Rather, it may reflect that fact that an employee has few opportunities to use and display that particular trait. The relevance of rating scales is therefore said to be contextsensitive. Job and workplace circumstances must be taken into account. Systemic Disadvantage Rating scales, and the traits they purport to measure, generally attempt to encapsulate all the relevant indicators of employee performance. There is an assumption that all the true and best indicators of performance are included, and all false and irrelevant indicators are excluded. This is an assumption very difficult to prove in practice. It is possible that an employee's performance may depend on factors that have not been included in the selected traits. Such employees may end up with ratings that do not truly or fairly reflect their effort or value to the organization. Employees in this class are systemically disadvantaged by the rating scale method. Perceptual Errors This includes various well-known problems of selective perception (such as the horns and halos effect) as well as problems of perceived meaning. Selective perception is the human tendency to make private and highly subjective assessments of what a person is "really like", and then seek evidence to support that view (while ignoring or downplaying evidence that might contradict it). This is a common and normal psychological phenomenon. All human beings are affected by it. In other words, we see in others what we want to see in them. An example is the supervisor who believes that an employee is inherently good (halo effect) and so ignores evidence that might suggest otherwise. Instead of correcting the slackening employee, the supervisor covers for them and may even offer excuses for their declining performance.

On the other hand, a supervisor may have formed the impression that an employee is bad (horns effect). The supervisor becomes unreasonably harsh in their assessment of the employee, and always ready to criticize and undermine them. The horns and halo effect is rarely seen in its extreme and obvious forms. But in its more subtle manifestations, it can be a significant threat to the effectiveness and credibility of performance appraisal. Perceived Meaning Problems of perceived meaning occur when appraisers do not share the same opinion about the meaning of the selected traits and the language used on the rating scales. For example, to one appraiser, an employee may demonstrate the trait of initiative by reporting work problems to a supervisor. To another appraiser, this might suggest an excessive dependence on supervisory assistance - and thus a lack of initiative. As well, the language and terms used to construct a scale such as "Performance exceeds expectations" or "Below average skill" - may mean different things to different appraisers. Rating Errors The problem here is not so much errors in perception as errors in appraiser judgement and motive. Unlike perceptual errors, these errors may be (at times) deliberate. The most common rating error is central tendency. Busy appraisers, or those wary of confrontations and repercussions, may be tempted to dole out too many passive, middle-of-the-road ratings (e.g., "satisfactory" or "adequate"), regardless of the actual performance of a subordinate. Thus the spread of ratings tends to clump excessively around the middle of the scale. This problem is worsened in organizations where the appraisal process does not enjoy strong management support, or where the appraisers do not feel confident with the task of appraisal. Essay Method In the essay method approach, the appraiser prepares a written statement about the employee being appraised. The statement usually concentrates on describing specific strengths and weaknesses in job performance. It also suggests courses of action to remedy the identified problem areas. The statement may be written and edited by the appraiser alone, or it be composed in collaboration with the appraisee. Advantages

The essay method is far less structured and confining than the rating scale method. It permits the appraiser to examine almost any relevant issue or attribute of performance. This contrasts sharply with methods where the appraisal criteria are rigidly defined. Appraisers may place whatever degree of emphasis on issues or attributes that they feel appropriate. Thus the process is open-ended and very flexible. The appraiser is not locked into an appraisal system the limits expression or assumes that employee traits can be neatly dissected and scaled. Disadvantages Essay methods are time-consuming and difficult to administer. Appraisers often find the essay technique more demanding than methods such as rating scales. The techniques greatest advantage - freedom of expression - is also its greatest handicap. The varying writing skills of appraisers can upset and distort the whole process. The process is subjective and, in consequence, it is difficult to compare and contrast the results of individuals or to draw any broad conclusions about organizational needs.

Result Method Management By Objectives (MBO) The use of management objectives was first widely advocated in the 1950s by the noted management theorist Peter Drucker. MBO (management by objectives) methods of performance appraisal are results-oriented. That is, they seek to measure employee performance by examining the extent to which predetermined work objectives have been met. Usually the objectives are established jointly by the supervisor and subordinate. An example of an objective for a sales manager might be: Increase the gross monthly sales volume to $250,000 by 30 June. Once an objective is agreed, the employee is usually expected to self-audit; that is, to identify the skills needed to achieve the objective. Typically they do not rely on others to locate and specify their strengths and weaknesses. They are expected to monitor their own development and progress. Advantages The MBO approach overcomes some of the problems that arise as a result of assuming that the employee traits needed for job success can be reliably identified and measured. Instead of assuming traits, the MBO method concentrates on actual outcomes. If the employee meets or exceeds the set objectives, then he or she has demonstrated an acceptable level of job performance. Employees are judged

according to real outcomes, and not on their potential for success, or on someone's subjective opinion of their abilities. The guiding principle of the MBO approach is that direct results can be observed, whereas the traits and attributes of employees (which may or may not contribute to performance) must be guessed at or inferred. The MBO method recognizes the fact that it is difficult to neatly dissect all the complex and varied elements that go to make up employee performance. MBO advocates claim that the performance of employees cannot be broken up into so many constituent parts - as one might take apart an engine to study it. But put all the parts together and the performance may be directly observed and measured. Disadvantages MBO methods of performance appraisal can give employees a satisfying sense of autonomy and achievement. But on the downside, they can lead to unrealistic expectations about what can and cannot be reasonably accomplished. Supervisors and subordinates must have very good "reality checking" skills to use MBO appraisal methods. They will need these skills during the initial stage of objective setting, and for the purposes of self-auditing and self-monitoring. Unfortunately, research studies have shown repeatedly that human beings tend to lack the skills needed to do their own "reality checking". Nor are these skills easily conveyed by training. Reality itself is an intensely personal experience, prone to all forms of perceptual bias. One of the strengths of the MBO method is the clarity of purpose that flows from a set of well-articulated objectives. But this can be a source of weakness also. It has become very apparent that the modern organization must be flexible to survive. Objectives, by their very nature, tend to impose certain rigidity. Of course, the obvious answer is to make the objectives more fluid and yielding. But the penalty for fluidity is loss of clarity. Variable objectives may cause employee confusion. It is also possible that fluid objectives may be distorted to disguise or justify failures in performance. 360 DEGREE FEEDBACK 360-Degree Feedback is also known as full-circle feedback, multirater feedback, multi-level feedback, upward appraisal, and peer review. Where 'regular' performance appraisals provide 'single-source' (top-down) feedback, i.e. normally from an employee's direct line manager only, 360-degree feedback appraisals are 'multi-source' - involving behavioral feedback from a variety of sources such as Peers, Direct Reports ('subordinates'), Customers

(internal and/or external) as well as Managers. These are called Rater Groups, consisting of three or more Raters per Rater Group (except for the Rater Group 'Manager/s' where an employee may only have one line manager). The employee receiving the feedback (called 'Appraisee'), gets rated by 360 Raters (also called 'Multiraters'). Only Raters having worked with the Appraisee for a period of minimum three months should be asked to provide behavioral feedback to the Appraisee. The Appraisee also fills out a self-rating that includes the same questions that Rater Groups receive in their questionnaires. Need It is harder to discount the views of several of your colleagues or customers than the views of just one person. The 360 process also provides a much more complete and richer picture of an employee's performance. In addition, it gives people an opportunity to provide anonymous feedback to a colleague, which they might otherwise be uncomfortable to give face-to-face. Some of the benefits of receiving 360-degree feedback from others are: Increased self-awareness, by understanding how your behavior is perceived by others, and comparing this perception with your own self-assessment of your own work behavior. To identify and build upon the strengths that you are currently exhibiting. To identify priority areas where you might change your behavior in order to improve your work performance and organizational effectiveness. More focused learning and development activities, and increased individual ownership for self-development. Feedback is essential in facilitating performance improvement. It informs employees of their actions that create problems for others, and what behavioral changes may be necessary to improve working relationships, team synergy, performance outputs and customer service. Received in a positive, open-minded, non-defensive spirit, 360-feedback can play a major role in employees' personal and professional growth, and job satisfaction. It can serve as a strong spur for personal development and behavior change. 360 feedback from peers and direct reports is frequently the only way that senior executives can get feedback on their performance, as there may just not be anybody else to do it.

When managers are new to the organization, and especially if they have many direct reports, it will normally take a while to get to know them well. 360

feedback could be the ideal process to use to gather behavioral information on them very fast and effectively. The data gathered from 360-degree feedback throughout the organization can be very useful in providing insight into organization-wide behaviors and competency (or the lack thereof), and what development and other interventions may be necessary to address weaknesses.

NOTE: Because of its very power as a behavior modification tool, 360-degree feedback - if not implemented sensitively and professionally - can do a lot of harm to both individuals and the organization. For it to be successful there must be a mature organizational culture of openness, honesty, and mutual trust.

Balance Scorecard The balanced scorecard is a strategic planning and management system that is used extensively in business and industry, government, and nonprofit organizations worldwide to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organization performance against strategic goals. It was originated by Drs. Robert Kaplan (Harvard Business School) and David Norton as a performance measurement framework that added strategic non-financial performance measures to traditional financial metrics to give managers and executives a more 'balanced' view of organizational performance. While the phrase balanced scorecard was coined in the early 1990s, the roots of the this type of approach are deep, and include the pioneering work of General Electric on performance measurement reporting in the 1950s and the work of French process engineers (who created the Tableau de Bord literally, a " dashboard" of performance measures) in the early part of the 20th century. The balanced scorecard has evolved from its early use as a simple performance measurement framework to a full strategic planning and management system.

The new balanced scorecard transforms an organizations strategic plan from an attractive but passive document into the "marching orders" for the organization on a daily basis. It provides a framework that not only provides performance measurements, but helps planners identify what should be done and measured. It enables executives to truly execute their strategies. This new approach to strategic management was first detailed in a series of articles and books by Drs. Kaplan and Norton. Recognizing some of the weaknesses and vagueness of previous management approaches, the balanced scorecard approach provides a clear prescription as to what companies should measure in order to 'balance' the financial perspective. The balanced scorecard is a management system (not only a measurement system) that enables organizations to clarify their vision and strategy and translate them into action. It provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results. When fully deployed, the balanced scorecard transforms strategic planning from an academic exercise into the nerve center of an enterprise. Kaplan and Norton describe the innovation of the balanced scorecard as follows: "The balanced scorecard retains traditional financial measures. But financial measures tell the story of past events, an adequate story for industrial age companies for which investments in long-term capabilities and customer relationships were not critical for success. These financial measures are inadequate, however, for guiding and evaluating the journey that information age companies must make to create future value through investment in customers, suppliers, employees, processes, technology, and innovation."

Adapted from The Balanced Scorecard by Kaplan & Norton Perspective The balanced scorecard suggests that we view the organization from four perspectives, and to develop metrics, collect data and analyze it relative to each of these perspectives: The Learning & Growth Perspective This perspective includes employee training and corporate cultural attitudes related to both individual and corporate self-improvement. In a knowledgeworker organization, people -- the only repository of knowledge -- are the main resource. In the current climate of rapid technological change, it is becoming necessary for knowledge workers to be in a continuous learning mode. Metrics can be put into place to guide managers in focusing training funds where they can help the most. In any case, learning and growth constitute the essential foundation for success of any knowledge-worker organization. Kaplan and Norton emphasize that 'learning' is more than 'training'; it also includes things like mentors and tutors within the organization, as well as that ease of communication among workers that allows them to readily get help on a problem when it is needed. It also includes technological tools; what the Baldrige criteria call "high performance work systems."

The Business Process Perspective This perspective refers to internal business processes. Metrics based on this perspective allow the managers to know how well their business is running, and whether its products and services conform to customer requirements (the mission). These metrics have to be carefully designed by those who know these processes most intimately; with our unique missions these are not something that can be developed by outside consultants. The Customer Perspective Recent management philosophy has shown an increasing realization of the importance of customer focus and customer satisfaction in any business. These are leading indicators: if customers are not satisfied, they will eventually find other suppliers that will meet their needs. Poor performance from this perspective is thus a leading indicator of future decline, even though the current financial picture may look good. In developing metrics for satisfaction, customers should be analyzed in terms of kinds of customers and the kinds of processes for which we are providing a product or service to those customer groups. The Financial Perspective Kaplan and Norton do not disregard the traditional need for financial data. Timely and accurate funding data will always be a priority, and managers will do whatever necessary to provide it. In fact, often there is more than enough handling and processing of financial data. With the implementation of a corporate database, it is hoped that more of the processing can be centralized and automated. But the point is that the current emphasis on financials leads to the "unbalanced" situation with regard to other perspectives. There is perhaps a need to include additional financial-related data, such as risk assessment and cost-benefit data, in this category. Strategy Mapping Strategy maps are communication tools used to tell a story of how value is created for the organization. They show a logical, step-by-step connection between strategic objectives (shown as ovals on the map) in the form of a causeand-effect chain. Generally speaking, improving performance in the objectives found in the Learning & Growth perspective (the bottom row) enables the organization to improve its Internal Process perspective Objectives (the next row up), which in turn enables the organization to create desirable results in the Customer and Financial perspectives (the top two rows). Performance Appraisal Preparation

Appraisal systems should be job-related, have standards, be practical, and use dependable measures. Considering that progression along pay scales might be effected by appraisal outcomes, any such system must be perceived to be (and actually be) fair and objective. Some characteristics to look for in an appraisal process are: Objectivity / measurability Work relatedness of measures Measures are within the appraisee's control Measures are attainable Contains an appeal mechanism Management commitment to the entire process -- training provided where necessary Be simple and not take appraisers nor appraisees unduly away from their core tasks Be sophisticated enough to ensure appraisees' perceptions of fairness Measuring clear competencies only Provides a feedback mechanism with a link to training and development Problems in Performance Appraisal The problem with subjective measure is the rating which is not verifiable by others and has the opportunity for bias. The rate biases include: (a) halo effect (b) the error of central tendency, (c) the leniency and strictness biases (d) personal prejudice, and (e) the recent performance effect (a) Halo Effect: It is the tendency of the raters to depend excessively on the rating of one trait or behavioral consideration in rating all others traits or behavioral considerations. One way of minimizing the halo effect is appraising all the employees by one trait before going to rate on the basis of another trait. (b) The error of Central Tendency: Some raters follow play safe policy in rating by rating all the employees around the middle point of the rating scale and they avoid rating the people at both the extremes of the scale. They follow play safe policy because of answerability to management or lack of knowledge about the job and person he is rating or least interest in his job. (c) The Leniency and Strictness: The leniency bias crops when some raters have a tendency to be liberal in their rating by assigning higher rates consistently. Such ratings do not serve any purpose. Equally damaging one is assigning consistently low rates. (d) Personal Prejudice: If the rater dislikes any employee or any group, he may rate them at the lower end, which may distort the rating purpose and affect the career of these employees.

(e) The Recent performance Effect: The raters generally remember the recent actions, of the employee at the time of rating and rate on the basis of these recent actions favorable or unfavorable than on the whole activities. Other factors that are considered as problems are: Failure of the superiors in conducting performance appraisal and post Most part of the appraisal is based on subjectivity. Less reliability and validity of the performance appraisal techniques. Negative ratings affect interpersonal relations and industrial relations Influence of external environmental factors and uncontrollable internal Feedback and post appraisal interview may have a setback on production. Management emphasizes on punishment rather than development of an Some ratings particularly about the potential appraisal are purely based performance appraisal interview.

system. factors.

employee in performance appraisal. on guess work. The other problems of performance appraisal reported by various studies are: Relationship between appraisal rates and performances after promotions Some superiors completed appraisal reports within a few minutes. Absence of inter-rater reliability. The situation was unpleasant in feedback interview. Superiors lack that tact of offering the suggestions constructively to Supervisors were often confused due to too many objectives of was not significant.

subordinates. performance appraisal. Performance Appraisal A Case Study Carter Cleaning Company After spending several weeks on the job, Jennifer was surprised to discover that her father had not formally evaluated any employees performance for all the years that he had owned the business. Jacks position was that he had hundred higher-priority things to attend to, such as boosting sales and lowering costs, and, in any case, many employees didnt stick around long enough to be appraisable any way. Furthermore, contended jack, manual workers such as those doing the pressing and the cleaning did periodically get positive feedback in terms of praise from Jack for a job well done, or criticism, also from Jack, if things did not look right during one of his swings through the stores. Similarly,

Jack was never shy about telling his managers about store problems so that they, too, got some feed-back on where they stood. This informal feedback notwithstanding, Jennifer believes that a more formal appraisal approach is required. She believes that there are criteria such as quality, quantity, attendance, and punctuality that should be evaluated periodically even if a worker is paid on piece rate. Furthermore, she feels quite strongly that the managers need to have a list of quality standards for matters such as store cleanliness, efficiency, safety and adherence to budget on which they know they are to be formally evaluated. Questions 1. Is Jennifer right about the need to evaluate the workers formally? The managers? Why or why not? 2. Develop a performance appraisal method for the workers and managers in each store. Appraising the Secretaries At Sweetwater U Rob Winchester, newly appointed vice president for administrative affairs at sweet water State University, faced a tough problem shortly after his university career began. Three weeks after he came on board in September, Sweetwaters president, Robs boss, told Rob that one of his first tasks was to improve the appraisal systems used to evaluate secretarial and clerical performance at Sweetwater U. Apparently, the main difficulty was that the performance appraisal was traditionally tied directly to salary increases given at the end of the year. So, most administrators were less than accurate when they used the graphic rating forms that wee the basis of the clerical staff evaluation. In fact, what usually happened was that each administrator simply rated his or her clerk or secretary as excellent. This cleared the way for all support staff to receive a maximum pay increase every year. But the current university budget simply did not include enough money to fund another maximum annual increase for every staffer. Furthermore, Sweetwaters president felt that the custom of providing invalid feedback to each secretary on his or her years performance was not productive, so he had asked the new vice president to revise the system. In October, Rob sent a memo to all administrators telling them that in the future no more than half the secretaries reporting to any particular administrator could be appraised as excellent. This move, in effect, forced each supervisor to begin ranking his or her secretaries for quality of performance. The Vice Presidents memo met widespread resistance immediately from administrators, who were afraid that many met widespread resistance immediately from administrators, who were afraid that many of their secretaries would begin leaving for more lucrative jobs in private industry; and

from secretaries, who felt that the new system was unfair and reduced each secretarys chance of receiving a maximum salary increase. A handful of secretaries had begun quietly picketing outside the presidents home on the university campus. The picketing, caustic remarks by disgruntled administrators and rumors of an impending slowdown by the secretaries (there were about 250 on campus) made Rob Winchester wonder whether he had made the right decision by setting up forced ranking. He knew, however, that there were a few performance appraisal experts in the school of business, so he decided to set up an appointment with them to discuss the matter. He met with them the next morning. He explained the situation as he had found it: The present appraisal system had been set up when the university first opened 10 years earlier, and the appraisal form had been developed primarily by a committee of secretaries. Under that system, Sweetwaters administrators filled out forms of appraisal. This once a year appraisal (in March) had run into problems almost immediately, since it was apparent from the start that administrators varied widely in their interpretations of job standards, as well as in ho conscientiously they filled out the forms and supervised their secretaries. Moreover, at the end of the first year it became obvious to everyone that each secretarys salary increase was tied directly to the March appraisal. For example, those rated excellent received the maximum increases, those rated good received smaller increases, and those given rather rating received only the standard across the board past of living increase. Since university in general and Sweetwater in particular have paid secretaries somewhat lower salaries than those prevailing in private industry, some secretaries left in a huff that first year. From that time on, more administrators simply waited all secretaries excellent in order to reduce staff turnover, thus ensuring each a maximum increase. In the process, they also avoided the hard feeling aroused by the significant performances differences otherwise highlighted by the administrators. To Sweetwater experts agreed to consider the problem and in two weeks they came back to the Vice president with the following recommendations. First, the form used to rate the secretaries was grossly insufficient. It was unclear what Excellent or Quality of work meant, for example. They recommended instead a form of sample graphic rating method. In addition, they recommend that the vice president rescind his earlier memo and no longer attempt to force university administrators to arbitrarily rate at least half the secretaries as something less than excellent. The two consultants pointed out that this was, in fact, an unfair procedure since it was quite possible that any particular administrator might have staffers who were all or virtually all excellent - or conceivable, although less likely, all below standard, The experts said that the way to get all the administrators to take the appraisal process more seriously was to stop trying it

to salary increases. In other words, they recommended that every administrator fill out a form of sample graphic rating method for each secretary at least once a year and then use this form as the basis of a counseling session. Salary increases would have to be made on some basis other than the performance appraisal, so that administrators would no longer hesitate to fill out the rating forms honestly. Rob thanked the two experts and went back to his office to ponder their recommendations. Some of the recommendations such as substituting the new rating form for the old) seemed to make sense. Nevertheless, he still had serious doubts as to the efficacy of any graphic rating form, particularly if he were to decide in favour of his original forced ranking salary increases made sense but raised at least one very practical problem: If salary increases were not to be based on performance appraisals, on what were they to be based? He began wondering whether the experts recommendations werent simply based on ivory tower theorizing. Questions Do you think that the experts recommendations will be sufficient to get most of the administrators to fill out the rating form properly? Why? Why not? What additional actions (if any) do you think will be necessary? Do you think that Vice president Winchester would be better off dropping graphic rating forms, substituting instead one of the other techniques we discussed in this chapter, such as a ranking method? Why? What performance appraisal system would you develop for the secretaries if you were Rob Winchester? Defend your answer. Key Terms Performance Appraisal: This means evaluating an employees current Performance Management: This is a process that consolidates goal setting, and/or past performance relative to his or her performance standards. performance appraisal and development into a single common system, the aim of which is to ensure that the employees performance is supporting the companys strategic aims. Graphic Rating Scale Method: This is the simplest and most popular Paired Comparison Method: This method helps in making the ranking Forced Distribution Method: This is similar to grading on a curve. With this method for appraising performance. method more precise. method you place pre-determined percentages of rates into several performance categories.

MBO: Management set specific measurable goals with each employee and Balance Score Card: The balanced scorecard is a strategic planning and

then periodically discuss the latters progress toward these goals. management system that is used extensively in business and industry, government, and nonprofit organizations worldwide to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organization performance against strategic goals. Halo Effect: It is the influence of a raters general impression on ratings of Appraisal Interview: Here, supervisor and sub-ordinates review the Rating Methods: The rating scale method offers a high degree of structure specific qualities. appraisal and make plans to remedy deficiencies and reinforce strengths. for appraisals. Each employee trait or characteristic is rated on a bipolar scale that usually has several points ranging from "poor" to "excellent" (or some similar arrangement).

Essay Methods: In the essay method approach, the appraiser prepares a

written statement about the employee being appraised. The statement usually concentrates on describing specific strengths and weaknesses in job performance.

360 degree Feedback: Here ratings are collected all around an

employee, from supervisors, subordinates, peers and internal or external customers. This method is used for development rather than for pay increases. Further Reading o o Strebler, M. (2004) Tackling Poor Performance. IES Report 406. For a detailed discussion of the role of competencies in performance

management and a large number of examples, see Chapter 5 of Williams, R. (1998) Performance Management: Perspectives on Employee Performance. Thomson Business Press. o o o o A more detailed discussion on the major issues around performance Managing Performance. CIPD. A practical guide to carrying out the The Appraisal Discussion. IPD; Moon, P. (1997) Appraising Your Staff. A variety of approaches to performance management systems is given in management is set out in Chapter 3 of Armstrong, M. and Baron, A. (2005) appraisal is given in Gillen, T. (1998) Kogan Page. Hartle, F.(1997) Transforming the Performance Management Process. Kogan Page.

For a summary and discussion of American PM systems, see Lawler, E. and M. (2003) Current Performance Management Practices,

McDermott,

WorldatWork Journal, Spring, 4960. Websites A http://www.pmn.net/index.html http://www.pmassoc.com/links.html list of performance management links compiled by Performance The website of the Performance Management network.

Management Associates Inc.