PERFORMANCE APPRAISAL SYSTEM. HRM Study Material.

PERFORMANCE APPRAISAL SYSTEM.

1.        Performance appraisal includes all the procedures used to evaluate personalities, contributions and potential of groups members in a working organization. It is a continuous process to secure information necessary for making correct and objective decision on employment.* Performance appraisal is a systematic evaluation of the individual with respect to his or her performance on job and his or her potential for development.

2.     * Definition :

3.        Performance appraisal may be formal or informal in nature.* It focuses on seeking information required about the performance of employees.* It is a continuous process where employees performance are periodically evaluated.* It explains employees strength and weakness in terms of job.* It is a systematic process consisting of a number of steps to be followed for evaluating employees strength and weakness.

4.     * Features of performance appraisal system :

3.         Personal development : as PAS information helps in evaluating strength and weakness it becomes easy for manager to develop training programs for employee development which in turn will lead to personal development.* Feedback: as PAS information will be provide to employees it helps them for self evaluation where they can improve I their weaker areas.* Training and development : data available from PAS helps in identifying the gaps between expected and delivered performance where if any employee is lacking any of skill it helps in designing training program for employees as per the requirement.* Promotion decision :it is useful for decisions for job change or promotion. When merit is basis for reward employee doing the best job receives reward. If relevant aspect of job are measured properly, it helps in minimizing feeling of frustration for those who are not promoted.* compensation decision :PAS provides in relevant information to appraiser which helps him to evaluate performance of employees making it easy to decide on increase in pay for employees who have performed better.

* Objectives of performance appraisal system:

5.        Effective PAS helps in motivating employees by recognizing efforts of efficient employees in organization.* PAS facilitates human resource planning, career planning, and succession planning.* Appraisals can be used to analyze training and development needs which in turn helps in designing training program.* Results of PAS may be used by the supervisor in constructively guiding the employees in efficient performance at their job.* An effective PAS system helps the supervisor to evaluate the performance of his employees, which in turn helps in placement of employees on job best suited to them.

6.     * Benefits of performance appraisal system :

PROCESS OF PERFORMANCE APPRAISAL SYSTEM

Establishing standards Communicating standards to employees Measuring actual performance Comparing actual standards Discussing reports with employees Taking corrective actions PAS process cont ………

6.         Comparing actual with standards : actual performance is compared to the standards set earlier for finding out the standing of employees. Employees will be evaluated depending on his contribution towards the job.* Measuring actual performance : in next process employees performance is to be compared with the standards. Employees performance may be measured through various PAS methods.* Communicating the standards : employees should know what is expected from them. Standards set for the performance should be communicated to employees. When standards are communicated to employees they will have an idea as to what should be strategy to achieve given target. It is important to verify weather employees have clear understanding about standards or not.* Establishing standards: employees will have to be rated against the standard set for their performance. Standards help In setting the yardstick for evaluating the performance. The standards may be quantitative as well as qualitative in nature

7.         Taking corrective actions : evaluation process will be complete only when relevant action is taken after evaluation. Corrective action may be in the form of advice, counseling, warning etc. these actions will be useful in helping employees to improve their performance in future.* Discussing the reports with employees: the assessment reports should be discussed with the employees. It will give scope to employees to improve their performance if they are not able to meet the standards and employees whose performance is been good can focus on stabilizing their present performance

8.         attitude* Graphic scale method : in this method employees performance are rated on scale. Rating scale lists traits and range of performance values for each trait. Supervisor rates each subordinate by circling the score that best describes employees performance. Once circling is done total marks given to employees is obtained. rating scale gives major focus on evaluating employees in form of their behavioral traits. E.g. poor fair average good excellent* Confidential reports : relates to performance, ability and character of the employee during the year. This methods focuses on evaluating the employee more then developing them. Appraiser prepares detailed report about performance of employee. Major drawback of this method is appraisal will not be communicated to employees giving no scope to employees to self evaluation their performance.

* TRADITIONAL METHODS :

*METHODS OF PERFORMANCE APPRAISAL  SYSTEM

9.         Grading system: in this method employees are given grades, according to the judgment of the rater. Features like analytical ability, dependability, job knowledge etc. E.g. A- outstanding B- very good C- satisfactory D- average E- below average* Paired comparison method : in this method every person is compared trait wise, with other person, one at a time, number of times one person is compared with others is tallied. These numbers help in yielding rank orders for employees.* Straight ranking method :it is one of simplest method of PAS. Here employees are ranked n sequential order depending upon their performance. It focuses on comparison of all employees an any single rating group regardless of type of work. Major drawback of this method is, it is difficult to compare performance of employees irrespective of nature of their job

10.      Does he follow instruction well ? Yes/ no* Is he regular on the work ? Yes/no* Is the employee hard working ? Yes/no* Check list method : it consist list of statements that describes the characteristics and performance of employees on job. The rater checks to indicate whether the behavior of employee is positive or negative to each statement. Performance of employee is rated on number of positive checks. E.g.* Forced distribution method : raters suffer from constant error as they usually rate employees, good, average or poor. This system minimizes raters bias so that all employees are not rated similarly. Method is based on the assumption that employees can e divided in five categories outstanding, above average ,average, below average, poor etc. main idea in this system is to spread ratings in umber of grades. It eliminates subjective judgment on part of supervisor

11.      Job knowledge§ Free essay method : in this method supervisor writes a free essay about employee which is based o his assessment. Essay is written about employees only after observation of employees performance for relevant period of time. Raters considers following factors during he period of evaluation :* Critical incident technique : this methods attempts to measure workers performance in terms of certain events or incidents that occur in course of work. Basic assumption in this method is that performance of employees on happening of critical incidents determine his success or failure. Supervisor keeps record of al critical incidents at different times and rate him on this basis  &  Employees traits and attitudes§ Employees relation with co- workers§potential of employee

12.      assessment center: is a central location where the managers may come together to participate in job related exercise evaluated by trained observers. Managers are asked in to participate in some of the exercise such as in basket exercise, work groups, computer simulation. Managers performance is evaluated depending upon their performance in these exercise. assessment center is not only used for PAS but is also used as center for training employees.* MODERN METHODS OF PAS :* Group appraisal method : employees are rated by an appraisal group, consisting of their supervisor, subordinates and people in charge of conducting PAS in company. Supervisor explains to the group the nature of his subordinates job. Then experts compare actual with standard performance and given in conclusion

13.      Human resource accounting : in this method human resource are valued in terms of money. This method attaches money value of firms internal human resource and its external customer goodwill. Evaluation is done based on comparison between expenditure incurred on   Develop final instrument : in this step instrument will be developed and employees performance will be evaluated and same will be communicated.* Scale incidents : dimensions on which appraisal will be done will be rated.* Relocate incidents : other experts involved in the process will relate clusters to specific incidents.* Develop performance dimension: cluster of incidents should be formed where 5 to 6 incidents will be combined in group.* Generate critical incidents : this step involves making list of critical incidents which covers effective or ineffective performance during the situation.* Behaviorally anchored rating scale ( BARS ) : this method combines benefit of critical incidents and graphic rating scale. Developing BARS involves five steps :*human resource and income generated by employees in company.

14.      360 degree appraisal system :involves systematic collection of performance data on an individual or groups, derived from a number of stake holders. Technique facilitates greater self development of employees. This provides formalized links between employees and customers. Main objective of this method is better then evaluating employee on individual information, employees performance data should be collected by people working around employee who can assess behavior in much more effective manner.* Steps in MBO• Set organizational goals• Set departmental goals• Discuss departmental goals• Define expected result• Performance reviews• Provide feed back* In this method managers are required to communicate performance expected from the employee which will be used as standard for performance evaluation.* Management by objective ( MBO ):

15.      Merits and demerits of 360 degree PAS : 

Merits Demerits Evaluates method applied to Ignores performance in terms achieve the target. of reaching goal Reveals strength and weakness Colleagues response tend to be in management style biased. Forces inflexible managers to Assesses deny the truth of initiate self charges negative feedback. Creates an atmosphere of System can be used to teamwork and improvement humiliate people

16.      Recency effect :raters gives greater weightage to recent occurrences that earlier performance.* Similarity error : appraiser here will give positive feedback to employee who possess similar trait or have same taste and preference as of appraiser. E.g. if appraiser is aggressive he prefers liking employees who are aggressive in nature.* Leniency or strictness : in this error appraiser rates all employees very leniency or strictly living no scope to differentiate efficient performers for company.* Central tendency : in this error appraiser rates all employees similarly. This mostly happens when appraiser will not have detail data about performance of employees. Appraiser rates all employees equally as he wants to be at safer side. This type of feedback given by appraiser distorts evaluation making data useless for further promotion.* Hallo error : is a tendency to evaluate person on the basis of trait characteristics. An individual may be consistently rated high, average or low. PAS result in this case will be biased if appraiser has informal relationship with an employee

.* LIMITATIONS OF PAS

17.      Psychological errors : effectiveness of PAS n company depends upon the traits of appraiser. If the person in charge is biased then he ay even rate efficient performing employees same as one who are inefficient at workplace.* Faulty assumptions : refers to assumptions of appraiser and employees who build up wrong opinion about PAS system existing in company. E.g. assumption that superior will make impartial assumption of subordinated is not practical. Both show tendency to avoid appraisal processes.* Miscellaneous error : may exist on ground of gender, race, religion, position etc. rater may give high ratings o his group because persons in other groups should not get higher pay.