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Without a structured appraisal system, there

is little chance of ensuring that the judgments
made will be lawful, fair, defensible and
Performance appraisal is a systematic &
objective way of judging the relative worth of
ability of an employ in performing his task.
A process of evaluating an employee’s
current and past performance relative to
performance standards
An appraisal involves:
 Setting work expectations/standards
 Assessing actual performance vs. these standards

 Providing feedback to the employee

 Help improve his performance


Compensating for performance

Training and development programmes
Feedback & Personal development
Common Performance System
Dimensions of Performance

quality quantity

Impact as in change

Helping/hindering factors

Shift from control oriented performance appraisal

system to behavioral oriented system.
Isolated Appraisal System to the business – linked
From closed (Confidential types) to open dialogue
and discussion based system.
From elaborate to Simple System.
From rigid System to flexible and growth –growth
oriented one.
From Personnel owned system to Line owned
From result oriented system to process
oriented system
From Individual to Team performance.
From complacency to experimentation
through continuous change.
From boss oriented feedback to 360
feedback involving customers (internal and
external), peers, team members,
subordinates etc. in addition to supervisors.
PA processes
Establish performance standards
Communicate, communicate discuss &
monitor the performance– periodic review
Measure actual performance (annual stock
Feedback, counseling& corrective actions
Methods of performance appraisal
1. Confidential report
2. Essay evaluation
3. Critical incidence
4. Check list
5. Graphic rating scale
6. Behavioral anchored rating scale
7. Forced choice method
8. MBO
9. Ranking
10. Paired comparison
11. Forced distribution
12. Group Appraisal
13. Human resource accounting
14. Assessment centre
15. Field review
16. 360 degree appraisal
Appraisal Process (MBO): Sequential steps
 1st.Establish performance standards(Jointly? Too many?)
 (Cascading goals)
 2nd.Communicate performance expectations to employees.
 (Received and understood)
 3rd. Measure actual performance.
 4th.Compare actual performance with standards
 5th.Employee Counseling(Enhance capability/performance)
 6th.Action plan\ Implement \Review- Support
Components of performance
2. Key performance area (KPAs)/Key
Result Areas (KRAs)
3. Tasks/targets/objectives;
4. Self appraisal
5. Performance analysis
5. Performance Ratings
6. Performance review, discussion or
7. Identification of training /development needs
8. Ratings/assessment by appraiser
9. Assessment /review by reviewing authority
10. Potential appraisal.
Potential Appraisal
(Latent but unrealized ability)
3. Ability to see future
4. consistency
5. Ability to take risk
6. Attributes like analytical power, creativity,
leadership skill, initiative etc
7. Level headedness
8. IQ, EQ, SQ (value)
Tapping potentiality at work

performance stars

deadwood Problem
Stars are the people with high potential and
high performance therefore they lead the
organisations. Work Horses perform highly
but normally it is due to threat or pressure
since their potential is limited. Problem
Children are those people who have
immense potential but this is not properly
channelised into performance for better
development. Dead Wood is that kind of
people who neither have potential nor are
able to perform therefore need to be
eliminated at the earlist.
Task is not defined clearly.
Accountability / Responsibility not
defined clearly.
Too many tasks and objectives.
Level of performance not discussed.
Employee perform without any
Output influenced by factors e.g.
Working conditions/ superior’s efforts
and guidance; group characteristics;
Lack of Supporting Data
Difficult to remember and correlate with
past record during appraisal exercise.
Creates vagueness.
Lack of Regular review
Keeps both the appraiser and the
appraisees in dark
Leads to surprises at the end.
Addresses following Issues

Tell me clearly what you expect from me.

Give me the wherewithal to perform.
How am I doing?
Guide me when I need it.
How can I grow?
Reward fairly.
Manager should
Walk the job.
Regular meetings and reviews. Pre-
set dates.
Ask right questions. Listen actively.
Look not only for negative variance,
but also for positive variance. Build
on success.
“We expect people to succeed and if
they don’t, we help them succeed.”
Give people the control information
to monitor their own performance
Some problems with performance appraisal
1.Judgment errors
First impressions (primacy effect)
Horn effect
Central tendency
Spill-over effect
2. Poor appraisal forms
3. Lack of rater preparedness
4. Ineffective organizational policies &
Effective appraisal system
Linked with organisational objective
Open & transparent
Developmental & correctiveness
suggesting compensation for performance
Emphasis on potential appraisal
Performance appraisal In India
National panasonic– this japanese white-
goods major has developed a
performance-assessment system driven
by key result areas(KRAs). KRAs describe
performance goals-business, functional,
and behavioural ones- with defined time-
frames and are decided jointly by the
employee and the manager at the
beginning of the year.
Larsen & Toubro– Engineering major
Larsen & Toubro has developed a
competency matrix which lists 73
competencies– that vary across
managerial levels– to measure
performance and gauges development
needs of its employees. Each listed
competency has associated knowledge,
skills, and attributes. The company
appraises individual employees in the
listed competencies, and zeroes in on
the functional, managerial and
behavioural skills gaps.
Pepsi Co. India– Beverage giant Pepsi Co.
(India) employs an annual appraisal process
that is (numerical) target driven. As a large
part of Pepsi’s compensation package
comprises performance pay in the form of
bonuses- varying from 15 percent at junior
levels to 60 plus per cent at senior rungs- the
manager’s performance is determined on
three key parameters: volume growth, market
share , and net operating profit, to compute
the variable component to compensation.
The challenges in Performance management
Create a culture of excellence that motivates
employees at all levels.
Match organisational objectives with individual
Equip people with requisite skills to discharge their
duties well.
Clear growth paths for talented employees
Empower employees to take decisions without
fear of failing
Encourage teamwork and team spirit and open
The performance appraisal system should be practice
to serve following purposes:
They can help each employee to understand more
and more about his role and become clear about his
They can be instruments in helping each employee to
They can help in identifying the developmental needs
of each employee with respect to his role and
They can increase mutuality between each employee
and his supervising officer.
They can be mechanisms of increasing
communication between the employee and his
supervising officer so that each employee gets to
know the expectations of his boss from him and each
boss also gets to know the difficulties.
They can be instruments to provide an
opptunity for the employee for self-reflection
and individual goal-setting so that individually
planned and monitored development takes
They can play a role in helping every
employee internalize the culture norms and
values of the organisation so that an
organisation identity and commitment is
developed through out the organisation.
They can be instrument in the creation of a
positive and healthy climate in the
In addition they can assist in a variety of
personnel decisions by generating data about
each employee periodically.