2.1.1.

Literature survey and details on Performance appraisal

Performance appraisal is a formal structured system of measuring and evaluating an employee’s
job related behaviours and outcomes to discover how and why the employee is presently
performing on the job and how the employee can perform more effectively in the future so that
the employee organization and society all benefit [4]
According to Flippo “performance appraisal is the systematic, periodic and an impartial rating of
an employee’s excellence in the matters pertaining to his present job and his potential for a better
job."[4] The work performance of the subordinate is examined and discussed in the form of a
periodic interview with a structured formal interaction between a subordinate and supervisor to
identify weaknesses and strengths of the subordinate as well as opportunities for improvement
and skills development. The performance of each and every individual employee plays a major
role to achieve organization goals and to sustain its growth in the present competitive world. The
employee’s performance should assess continuously to make their contribution to higher extend.
Objectives of Performance Appraisal [4]
➢ To review the performance of the employees over a given period of time.
➢ To judge the gap between the actual and the desired performance.
➢ To help the management in exercising organizational control and provides feedback to the
employees regarding their past performance.
➢ To help strengthening the relationship and communication between superior and
subordinates, management and employees.
➢ To diagnose the strengths and weaknesses of the individuals so as to identify the training and
development needs of the future, it also helps to reduce the grievances of the employees
➢ Provide information to assist in the other personal decisions in the organization.
➢ Provide clarity of the expectations and responsibilities of the functions to be performed by
the employees. It helps to judge the effectiveness of the other human resource functions of
the organization such as recruitment, selection, training and development.
The sources of performance appraisal are [4]
➢ Manager and Supervisor Appraisal
➢ Self-Appraisal
➢ Subordinate Appraisal
➢ Peer Appraisal and Team Appraisal

➢ Customer Appraisal
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Figure 2.3 Locating Performance appraisals in Figure 2.4 Performance

HRM process [5] appraisal process [5]

Performance appraisal methods [5]

1. Traditional Methods 2. Modern Methods

1. Unstructured Method 1. BARS – Behavioural Anchored

2. Straight ranking method
3. Paired comparison method
4. Man to man comparison
method
5. Grading method
6. Graphic rating method
7. Forced choice method
8. Check list method
9. Weight check list method
10. Free essay method
11. Critical incidents method
12. Field
Table review method
2.1 Traditional appraisal methods
13. Confidential reports
Rating Scale method
2. Result Oriented Appraisal or
MBO method
3. Assessment centre method
4. Human Resource Accounting
Method
5. Psychological Appraisal method
6. 360 Degree appraisal
Table 2.2 Modern appraisal methods

Performance Appraisal and Competitive advantage [4]

1. Improving Performance – By directing employee behaviour towards organizational goals
and by monitoring that behaviour to ensure that the goals met, are the two ways through
which an effective appraisal system can contribute to competitive advantage
2. Making correct decisions – Appraisal is a critical input in making decisions on different
issues such as pay raise, promotion, transfer, training, discharges and completion of
probationary periods. Right decision on the above issues can contribute to competitive
strength of an organization.
3. Ensuring Legal compliance –By using appraisal systems that give fair and accurate
ratings, organization can minimize costly performance-related litigation. Promotions
which is not based on performance but based on other factors might land up a firm in a
legal battle, thus diverting its focus on non-productive areas.
4. Minimizing Job dissatisfaction and Turnover – When dissatisfaction in the job sets in,
and as a result it leads to increased turnover. High motivation and increased job
satisfaction are the achievements of fair and accurate appraisal. An organization having
satisfied and motivated employees will have an edge over its competitors.
5. Consistency between organizational strategy and behaviour – The strategy consistent
with the behaviour of its employees is needed by an organization to realize its goals. A
person engaging themselves in behaviours that they perceive will be rewarded is a truism
of organizational life. Employees tend to occupy themselves with more of those activities
on which the organization emphasizes as they wanted to be rewarded.
6. Organizational strategy and performance appraisal – The performance appraisal system
serves many organizational objectives and goals. The evaluation system is useful in
identifying employees with potential, rewarding performance equitably and determining
employee’s needs for development. These above activities support the organization’s
strategic orientation. These activities are used for achieving corporate plans and long-
term growth, typical appraisal systems in most of the organizations are focused on short-
term goals. According to the strategic management, organizations can be grouped into
three categories defenders, prospectors and analyzers. Performance appraisal plays
definite roles in all the three strategies.
Performance appraisal systems [5]
Traditional System oriented
Guiding value Attribution to individual Attribution to systems
Primary roles Control, documentation Development, problem solving

Leadership practices Directional, evaluative Facilitative, coaching

Appraisal frequency Occasional Frequent

Degree of formality High Low

Reward practices Individual orientation Group orientation

Table 2.3 Performance appraisal systems

Global Trends in Performance appraisal programs [7]
1. 360 degree appraisal
2. Team performance appraisal
3. Rank and yank strategy(up-out policy)
Conclusion
In performance appraisal, there will be systematic way of reviewing, assessing the performance
of an employee and planning for his future during a given period of time. Measuring and
improving the actual performance of the employee and the future potential of the employee is the
aim of performance appraisal. It mainly focuses to measure what an employee does.