Performance appraisal

Meaning and definition of performance appraisal and its objectives

In simple terms, appraisal may be understood as the assessment of an individual’s

performance in a systematic way, the performance being measured against such
factors as job knowledge, quality, and quantity of output, initiative, leadership
abilities, supervision, dependability, co-operation, judgment, versatility, health,
and the like. Assessment should not be confined to past performance alone.
Potentials of the employee for future performance must also be assessed.

DEFINITIONS OF PERFORMANCE APPRAISAL:

A formal definition of performance appraisal is:

“It is the systematic evaluation of the individual with respect to his or her
performance on the job and his or her potential for development.”

A more comprehensive definition is:

“Performance appraisal is a formal, structured system of measuring and evaluating
an employee’s job related behaviors 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.”

The second definition includes employee’s behavior as part of the assessment.

Behavior can be active or passive. Either way behavior affects job results. The
other terms used for performance appraisal are: performance rating, employee
assessment, employee performance review, personnel appraisal, performance
evaluation, employee evaluation, and merit rating. In a formal sense, employee
assessment is as old as the concept of management, and in an informal sense, it is
probably as old as mankind. Nor performance appraisal is done in isolation. It is
linked to job analysis.
TERMS USED IN P E RF OR MA NCE A P P R A IS A L :
(1) Performance Appraisal: It is the assessment of an individual's performance in a
systematic manner in relation to the job assigned.
(2) Appraisal Process: It involves various steps need to be taken in order to complete
the appraisal work in an orderly manner.
(3) Ratee: Ratee may be defined as the individual, work group, division or organisation
used for appraisal purpose.
(4) Rater: Rater is immediate supervisors, specialists from HR department,
subordinates, peers, clients or committees to whom the responsibility of appraisal is
assigned.
(5) Performance Interview: It is one step in appraisal process. After completion of
appraisal work, performance interview is arranged. Here, the raters should discuss
and review the performance with the ratees, so that they will receive feedback for
their information and self development. Also called post appraisal interview.

PURPOSES OF PERFORMANCE APPRAISAL:

Performance appraisal of employees is needed for the following two broad purposes:
(A) Administrative purposes; and (B) Self-improvement/Self-development of
employees.

(A) Administrative Purposes:

(1) Promotion and Placement of Employees: One major administrative purpose of

performance appraisal is to promote employees as per their competence and
performance in the previous period. Quality of performance serves as a base for
promotion particularly when promotions are given by merits. Appraisal indicates
whether the employee can contribute still more at a higher level job and accordingly
decision about his promotion is taken. This promotion on appraisal basis is in the
interest of both-the management and employees. Performance appraisal is useful
for the selection of right person for the right type of promotion. This is because it
clearly distinguishes between effective and ineffective performers of jobs assigned
Placement of an employee in the right department and also at the right position is
possible through performance appraisal as such appraisal suggests the position at
which an employee can give his best performance. Performance appraisal is not
useful for initial placement but is certainly useful for subsequent placements or even
for job change.
(2) Transfers and Demotions: In an organisation, certain personnel actions such as \
transfers, demotions, disciplinary actions and discharges are required to be taken ,
by the management. Such actions need to be taken in a fair and impartial manner. ]
Here, performance appraisal reports can be used for taking final decisions. A
suitable employee for the transfer can be selected by using the performance
appraisal reports. Performance appraisal is also useful for the identification of
employees for deputation, for allowing an employee to cross efficiency bar and also
for the confirmation of the employees in an organisation. Finally, performance
appraisal is useful as a criterion for validating selection devices and training
programmes. In brief, various personnel decisions and actions can be taken
correctly and even justified forcefully when taken on fair and impartial performance
appraisal.

(3) Wage and Salary Payment: Wage/salary payment is normally linked with the
performance appraisal. Wage increase (yearly increment or special increments) is
based on the performance appraisal reports. It also provides the rational
foundation for the payment of wages, bonus, etc. Wage payment is normally related
to the contribution of employees at the work place. Better performance at the
managerial level is normally rewarded by additional salary payment. For judging
the performance of executives, periodical appraisal is essential. It is a fact that
wages are linked with many other factors such as cost of living and profitability of a
business unit. Along with this, performance appraisal is given due weightage. It is
also useful for allocating rewards to deserving employees.

(4) Training and Manpower Development Programmes: Performance appraisal

indicates the strengths and weaknesses of an employee. It acts as a performance
feedback of employees which can be used for different purposes. This information
can be used fruitfully for formulating a suitable training and manpower
development programmes to improve the performance of employees in their
present jobs. Such appraisals also suggest the areas of skills where numerous
employees are not upto the mark. This enables the management to adjust the
training programme which will be useful to employees for self-improvement also to
the organisation in raising overall efficiency. Performance appraisal also suggests
the managers with potentials to learn and develop quickly. Such managers can be
given special training for executive development. They may be even sent to
specialised institutions for training purposes. In brief, performance appraisal
reports can be used effectively for purposeful training and manpower/career
development programmes so as to improve the quality of present labour force
employed.
(5) Personnel Research: Performance appraisal serves as a feedback to
the
management in the field of personnel research. It serves as a base for the
conduct of
research activities in personnel management. Various theories regarding
incentives
to employees, training of employees, selection of employees and motivation
of
employees developed through such research activities. The appraisal system
gives
valuable information which can used purposefully in personnel management.

(6) Favourable Impact on Employees: Performance appraisal creates a

favourable
impact on the employees. It serves as an incentive to the employees who
feel
assured of the management's continued interest in them and of their
continuous
possibility to grow/develop. Employees feel that they are given attention by
the
management. They get a feeling that performance appraisal record will be
taken
into consideration for their promotion, training, etc., and that injustice will not
be
done to them. Sincere and honest employees get a moral support through
such
appraisal. Supervisors may be transferred /shifted but the appraisal reports
will
avoid injustice to employees. In brief, performance appraisal creates a
favourable
impact on employees. It raises their morale and offers opportunities of
career
development to officers, executives and supervisors. Performance appraisal acts
as
feedback which gives the employee an opportunity to improve his performance
and
raise his competence for promotion.

(7) Miscellaneous Administrative Purposes:

(a) To confirm the services of probationary employees after the completion
of
probationary period successfully.
(b) To improve internal communication. It provides a format for
dialogue
between the superior and subordinates.
 (c) To determine whether HR programmes (selection, training, transfers)
have
been effective or not.

(B) Self Improvement of Employees:

Along with the administrative purposes, performance appraisal facilitates
self
improvement and self development (career development) of an employee. In fact,
this
p ur p o s e i s m o r e i m p o r t a n t a s i t r e l a t e s t o h u m a n r e s o u r c e d e v e l o p m e n t i n
an
organisation. Such appraisal suggests the weaknesses and shortcomings of the
ratees. It
serves as a feedback to the employee. This is followed by discussion between the
rater
and the ratee in a spirit of co-operation and mutual understanding.
Counselling of
employees for improving their performance is always through such post
appraisal
interviews. This gives opportunity to an employee to overcome his weaknesses
and to
improve his skills, abilities, performance, behaviour and so on. Guidance is offered
to an
employee for his self-development and also for improving his overall performance
in
the job assigned. Thus, performance appraisal is needed for
performance
iimprovement of employees. This positive purpose/objective of performance
appraisal
important and useful to the employee and the organisation in the long
run.

Appraisal report acts as a feedback to the employee. An employee knows where he

stands. It also tells him what he has to do to improve his present performance and go up <
in the management hierarchy. In brief, to help an employee to improve, to grow and to
develop for higher positions in the organisation is the basic purpose of performance
appraisal. It motivates employees to improve and show better performance for higher
post, position and salary payment. This purpose has wider significance as compared to
administrative purposes of performance appraisal

The purposes of performance appraisal in regard to self-improvement of

employees are as noted below:
(1) To assess the critical attributes of the executives.
(2) To highlight the strengths and weaknesses and areas of improvement in the case of
an executive.
(3)
To evaluate and compare the performance of an executive in contrast to other
executives.

to identify the development areas of the executives and provide the right kind of
opportunities
(5) To discover the latent/hidden skills, talents, etc. available with an executive.
(6) To assess whether the executive is on the right job, right place or not.
(7) To find out how far the executive can grow in the organisation taking his
capabilities into account.
(8) To find out the kind of job rotation or career opportunities should be provided to an
executive.

NEED OF PERFORMANCE APPRAISAL:

(1) U n d e r s t a n d i n g e m p l o yFe oe :r u n d e r s t a n d i n g t h e q u a l i t i e s , m e r i t s a n d l i m i t a t i o n s
o f an e m p lo y e e w o rk in g in th e o rg an isatio n .
(2) M o n e t a r y b e n e f i tFs o: r g i v i n g a n n u a l i n c r e m e n t a n d o t h e r m o n e t a r y b e n e f i t s t o a n
em ployee.
: ( 3 ) P e r s o n n e l p o l i c i eFso:r d e c i d i n g p r o m o t i o n s , t r a n s f e r s a n d d e m o t i o n s o f e m p l o y e e s
w o rk in g in an o rg an isatio n .
(4) T r a i n i n g a n d d e v e l o p m eFnotr: s e l e c t i n g e m p l o y e e s f o r t r a i n i n g a n d m a n a g e m e n t
developm ent program m es.
(5) E m p l o y e e g u i d a n cFeo: r p r o v i d i n g g u i d a nt co e a n e m p l o y e e t o d e v e l o p h i s
q u alities, a b ilities an d w o rk p e rfo rm an ce .
(6) R e s e a r c h F: o r c o n d u c t i n g r e s e a r c h o n p e r s o n n e l m a n a g e m e n t .
(7) H i g h e r m o r a l eP:e r f o r m a n c e a p p r a i s a l i s n e e d e d f o r r a i s i n g t h e m o r a l e o f
em p lo y ees.
(8) H i g h e f f i c i e n c yF :o r r a i s i n g t h e e f f i c i e n c y o f t h e w h o l e o r g a n i s a t i o n b y g i v i n g
p ro m o tio n s (h ig h er p ositio n s) to m o st co m p eten t em p lo y ees an d also b y g iv in g
o p p o rtu n ities to all em p lo y ees fo r th eir self im p ro v em en t an d d ev elo p m en t.
WHO SHOULD EVALUATE THE PERFORMANCE?
It is already noted that performance of employees is to be evaluated/rated in the
appraisal process. The employee is also called ratee. The ratee may be individual
(subordinate or superior), work group, division or specific organisation.
The individuals who are given the responsibility of performance evaluation are called
raters. Raters can be immediate supervisors, specialists from the HR department,
subordinates, peers, committees, clients, self-appraisals or a combination of several.
Immediate supervisor is the most appropriate candidate to appraise the performance
of his/her subordinates. He is closely connected with his subordinates and his familiar
with the subordinate's performance than his/her superior. Secondly, the appraisal
programmes are often linked to training and development of manpower within the
organisation. The immediate superior is useful to the management not only for the
performance evaluation of his subordinates but also for their subsequent training and
development. He (immediate superior) can give training as per the exact needs of his
subordinates. Thus, immediate supervisor is most suitable for performance evaluation of
his subordinate and also for his training and development.
Subordinates can assess the performance of their superiors. This method may be
useful in assessing an employee's ability to communicate, delegate work, allocate
resources, disseminate information, resolve conflicts and deal with employees on a fair
basis. However, in this method, the superiors tend to become more popular, not by
providing effective leadership to his subordinates, but by mere gimmicks.
 Human Resource Management

Peers are in a better position to evaluate certain facts of job performance which the
superiors and subordinates cannot do. Such facts include contribution to workgroup
projects, interpersonal effectiveness, reliability, initiative and communication skills,
Peers are in a better position to act as raters due to their closeness of the working
relationship and the amount of personal contact with the ratee. Sometimes, friendship
may result in distortion of evaluation. Secondly, serious conflicts may develop among
co-workers when reward allocation is based on peer evaluation. In addition, all the
peers may join hands in order to rate each other high.
Clients are seldom used for rating employee performance. Clients may be members
within the organisation who have close and direct contact with the ratee and make use
of an output (goods or services) this employee provides. Clients can offer rating
information in regard to interest, dependability, courtesy, honesty and communication
skills of the ratee. Clients can be used as raters in service sector.

360 D EGREE A PPRAISAL :

When appraisal is made by superiors, peers, subordinates and clients, it is called the
360 degree system of appraisal. This appraisal system was developed first at General
Electric, US in 1992. The system is now popular and used in many companies in India.
Reliance Industries, Crompton Greaves, Godrej Soaps, Wipro, Infosys, Thermax and
Thomas Cook are some companies which are using this appraisal method with greater
benefits. The Arthur Anderson Survey (1997) reveals that 20 per cent of organisations
use the 360 degree method of appraisal. This speaks about the utility and popularity of
this method. In the 360 degree method, besides assessing performance of an employee,
other attributes of the ratee such as talents, behavioural traits, values, ethical standards,
tempers and loyalty are evaluated by people (raters) who are best placed to do it.
360 degree appraisal method is broad based and comprehensive and the results
available are accurate and useful for different purposes. As a result, large, progressive
and professionally managed companies prefer this appraisal system.
Some companies use rating committees to evaluate their employees. The committees
consist of supervisors, peers and subordinates. The members of the committee have
adequate capacity to intelligently evaluate same aspects of employee's performance.
This method is better than giving the entire responsibility of rating to one individual.
The benefit of collective wisdom of members is available in this method. In addition,
there are some more benefits of this method. For example, there may be objectivity in
rating as more than one rater is involved in the assessment process. The combined use of
several raters can help to cancel out problems like "bias" as "halo" effect on the part of
individual raters. However, the committee sating system reduces the role of the
immediate supervisor in the area of training and development.
Finally, self appraisal method is also available. Here, the employee himself evaluates
his own performance. Indian Telephone Industries (ITI) has been using the self appraisal
system for its executives. There is an opportunity to an employee to participate in the
evaluation process. It can improve the manager's motivation. Self appraisal is possible at
the higher levels and not at the lower levels. An individual employee may rate himself
excessively high than it would be if he was rated by his superior. There is consistent
upward bias in self-appraisals. Such appraisals can be used for counselling and
developing subordinates but hot for making salary and promotion decisions.
M ERITS OF 360 DEGREE APPRAISAL:
(1) Use of multiple raters: It is assumed that appraisal under 360 degree will be more
reliable and free from bias because a number of raters are involved. Their findings
are likely to be more objective.
(2) Systematic data collection: There is systematic collection of performance data from
the immediate supervisors, peers and the concerned employee. Subordinates or
colleagues can volunteer to give useful information about the ability of the
employee to perform the job.
(3) Potentiality of self-development: 360 degree appraisal provides broader
perspective about an employee's performance. When feedback is provided from
different sources it facilitates self-development to the employee. The employee can
compare his/her perception about the self with the perceptions provided by others.
(4) Formal communication: Only formal communication is entertained in 360 degree
appraisal. Hence the employee feels more accountable to the organisation.
(5) Identifying special traits: 360 degree appraisal is found highly effective to identify
and measure team building skills and interpersonal skills.
DEM ERITS/LIM ITATIONS OF 360 DEG REE APPRAISAL:
(1) Sense of insecurity: Employees often get frightened with the thought that appraisal
will be obtained from multiple sources. Organisations should work out employee-
friendly appraisal system.
(2) Time-consuming: 360 degree appraisal is found time consuming. It is because lot of
time is taken to select the right rater, prepare questionnaire and analyse the data.
(3) Involvement of many raters: When multiple raters are involved it is not possible for
every rater to separate honest observations from personal bias. All raters may not be
equally close to the employee.
IMPORTANCE OF PERFORMANCE APPRAISAL:
The advantages of performance appraisal (as noted above) also suggest its
importance. Performance appraisal is important as it provides many benefits to the
management. For example, introduction of scientific personnel policies, human resource
development, cordial labour-management relations, high morale of employees are some
important benefits of performance appraisal and they suggest its role and importance.
Moreover, performance appraisal is a rational substitute to personal opinion of
executives about their subordinates. It is more objective and transparent in character. It
makes personnel administration fair and impartial. These special benefits indicate its
importance and positive role. Performance appraisal is an essential function of
management by which the actual contributions of company's executives are measured
and evaluated. The fact that all enterprises have their own performance appraisal
programmes indicates their practical importance.
MERITS/B ENEFITS/USES OF PERFORMANCE APPRAISAL:
(1) Suitable Placement: Performance appraisal is useful for evaluating performance of
subordinates and also for understanding their potentials. This information is
available progressively and can be used purposefully for assigning duties-to
employees as per their merits and potentials. Thus, placement of staff and
periodical adjustment in the placement can be made scientifically.
(2) Assistance in Self-improvement: Performance appraisal gives the details of plus
points and weaknesses of employees (performance feedback). In addition, they are
given guidance for removing their weaknesses and also for making their plus points
(i.e., merits) more conspicuous. In brief, performance appraisal assists the
employees in their self-development. This is possible through performance
feedback to every employee periodically.
(3) Incentive to Grow and Develop: Performance appraisal acts as an incentive to
employees to improve their performance, develop new qualities and secure higher
positions in the organisation. The employee with merit (noted through appraisal)
may be given special increments or promotion to higher position. This motivates
others to improve their performance and qualities for similar benefits. In brief,
performance appraisal facilitates career development of employees.
(4) Effective Training Programme: Performance appraisal suggests the drawbacks and
other weaknesses of employees. It is possible to remove such common weaknesses
and deficiencies of employees by adjusting their training programme accordingly.
Thus, performance appraisal is useful for suitable modifications in the training
programmes.
(5) Introduction of Sound Personnel Policies: Transfers, promotions, wage rates and
dismissal are the different areas of personnel management. These personnel policies
are directly connected with the performance appraisal of employees. Such policies
become fair, impartial and acceptable to employees when they are based on
performance appraisal. Thus, performance appraisal facilitates the introduction of
sound personnel policies.
(6) Cordial Employer-Employees Relations: Performance appraisal avoids or at least
minimises grievances of employees as regards promotions, transfers, increments
and so on. Employees develop a sense of confidence that injustice will not be done
to any employee as performance appraisal system is based on sound principles.
 Management is also not in a position to make partiality/favouritism when
performance appraisal records are maintained properly and used when required.
(7) Human Resource Planning and Development: Performance appraisal facilitates
human resource planning and development. It suggests the type of manpower
 available. It is also possible to train or develop the existing manpower as per the
future needs of the enterprise. This is possible through training and' executive
development programmes. In brief, performance appraisal provides feedback for
human resource planning and development.
(8) Employee Communication:Performance appraisal facilitates direct communication
with the employees through appraisal interview and post-appraisal interviews.
Such communication guides employees and also provides more information to the
management regarding the expectations and feelings of the employees. In brief,
appraisal is a two-way communication and is useful to employees and
managements.
(9) High Employee Morale:Scientific and impartial performance appraisal gets the
support from the employees. They feel that the management gives due importance
to them and is genuinely interested in their career development and well being.
This creates positive impact on the mental make-up of employees. They treat
management as their friend, guide and well wisher. This raises the morale of
employees.
PROCEDURE OF PERFORMANCE APPRAISAL:
Performance appraisal involves lengthy procedure process which needs to be
completed in an orderly manner. Such lengthy procedure is necessary in order to
evaluate the performance of employees in the light of the standards fixed. This should
be followed by informing the employee about his actual performance and finally
providing him necessary training facilities so as to enable him to bring about self
improvement and self development. The principal steps involved in the performance
appraisal procedure/process are shown in the chart given below:
Performance Appraisal

1. ---- Establishing Performance Standards

►
2. ---- Communicating Standards to Employees
»
3. ---- Measuring Actual Performance
*
4. ---- Comparing Actual Performance with the Standards Set
►
5. I Discussing Actual Performance with the Employee (Appraisal Interview)
-----

6. ---- Offering Guidance for Improving Performance (Follow-up Measures)

»
Each step in the performance appraisal procedure/process is crucial and is arranged
logically. The process shown in the chart is somewhat idealised. Organisations can make
minor changes in the process as per their special requirements. Measuring actual
performance in the light of performance standards set as well as performance appraisal
interview are two important and major steps in the appraisal process. The method used
for appraisal should be appropriate and the emphasis in the appraisal interview should
be on counselling and self-development of an employee and not on criticism, witch-
hunting and buck passing. Every effort should be made to make appraisal interview
purposeful and beneficial to the employee (ratee).
ESSENTIALS/REQUIREMENTS OF A GOOD PERFORMANCE APPRAISAL PROCEDURE/SYSTEM:
(1) Easy to understand and simple to operate: A good performance appraisal system is
one which is easy to understand and simple to operate. Such system normally
covers all employees and naturally all of them including those at the lowest leve
should be able to understand it easily and quickly. Similarly, the appraisa
procedure should not be too complex or time consuming. Simplicity of appraisa
system gives convenience to all.
(2) Support from the employees: Performance appraisal is for the benefit c
employees. Naturally, they must feel confidence as regards the system. They shoul
not feel it to be too theoretical, unrealistic and partial. In other words, the systei
should not be opposed by the employees. There should be popular support
appraisal system. It is also desirable to discuss the appraisal procedure with tl
employees before finalising the same. In addition, good appraisal system shou
also have the support of all line people/executives who administer it.
(3) Wide publicity: The performance appraisal scheme should be given wide public
for the information and guidance of employees. This will make them alert about \
appraisal procedure and its benefits. The opposition to the scheme will be limil
when it is given wide publicity through notices and posters. Similarly, employ
will support the appraisal system if it is objective and without any bias.
(4) Suitability to the organisation's operations and structure: One uniform systen
performance appraisal may not be suitable to all enterprises/organisations. '
system introduced should be suitable to the organisation structure and operatii
This will make the appraisal, adaptable. In brief, the appraisal system m
adaptability to the organisation structure.
(5) Scientific and Reliable: The performance appraisal system should be scientific
also reliable. There should be no scope for partiality/favouritism while ratinj
employees. The system should work in a uniform manner at all times even \
the raters change. A reliable system gets support from the employees.
(6) Correctly defined standards of performance: In a good performance appi
system, the standards of performance must be clearly and correctly defined,
facilitates easy comparison of actual performance with the established stanc
The performance criteria should be clear and divided into objective and subjective
criteria. Proper weightage should be given to various considerations included
 performance criteria. Similarly, performance criteria for different categories of
employees should be different. For example,performance criteria for operatives
should be like quality and quantity of output in a given period, length of service,
amount of training necessary, number of accidents and absents in a given period,
etc.
Performance criteria for front-line supervisorsinclude items like quality and
quantity of output, total cost per unit of output, absenteeism rate for a given period,
manshifts lost due to stoppage of work in a given period and so on. Performance
criteria for middle level managersinclude item like co-ordination among
supervisors, extent of upward communication of ideas, rational use of overhead
facilities and degree of knowledge among supervisors about corporate goals/
policies, etc. Finally, performance criteria for top managersinclude return on
capital employed, labour productivity indices, degree of knowledge among middle
level managers about corporate goals, extent of upward communication and
contribution to the socio-cultural values of the environment aspect.
(7) Provision of incentives:The system of performance appraisal should have a
provision of incentives to those who show satisfactory performance of the jobs
assigned. The incentive may be even increment or promotion. Such incentive creates
favourable impact on employees and raises their morale. They also show good
performance in order to secure the benefit of in-built incentive. In brief, in a good
performance appraisal system, there should be built-in incentives that is, a reward
should follow satisfactory performance.
(8) Periodical review:A good system of performance appraisal system need not
remain the same over a long period. On the other hand, the appraisal system should
be reviewed (or evaluated) periodically in order to up-date the same. Necessary
changes should be introduced in the appraisal system as per the changing needs
and situations. Flexibility and reliability are essential in a good performance
appraisal scheme. For this, the system should be periodically evaluated in order to
ensure that it is continuing to meet its goals.
(9) Proper selection of rater:Rater actually study the performance of employees in the
light of standards fixed. He may be superior executive or sectional supervisor.
Sometimes, experts are also appointed for the appraisal. However, the rater should
be properly qualified so that the rating will be correct. He must be capable and must
be able to face criticism, if any from the ratee. A rater should be given proper
training and also proper tools for the purpose of appraisal work. In short, in a good
appraisal system, the rater should be properly qualified, trained, experienced and
impartial in his work.
(10) Frequency of appraisal: Performance appraisal is a continuous process. It should
be
made frequently. Such frequency of appraisal may change from organisation to
organisation. Yearly appraisal is the normal practice with many companies. Such
frequency provides better opportunities of self-development to employees
94 Human Resource Management

(11) Emphasis on employee's potential: While appraising an employee, more emphasis

should be on the employee's potential. Potentials include knowledge, skills and
attitudes the employee may possess for better performance. Such potential is useful
for manpower development. Naturally, in a good performance appraisal system,
employee's potential should be given special attention.
(12) Effective communication with the Ratee: Performance appraisal is basically for self
improvement. Naturally, the employee (ratee) should be made a party to the
appraisal process. Positive as well as negative rating should be communicated to
the ratee immediately after the completion of rating work by the appraiser (rater).
This should be followed by post-appraisal interview and provision of facilities for
self improvement of the ratee. Effective communication with the employees is
essential for raising the effectiveness of appraisal system. It is a feature of good
appraisal system.
PERFORMANCE APPRAISAL TECHNIQUES/METHODS:

(A) (B)
Traditional Methods Modern Methods

Confidential Reports (1) Human Resource Accounting

Ranking Method Method
Grading Method (2) Appraisal by Results or
Graphic Rating Scales Management by Objectives
Checklist Method (3) Assessment Centre
Forced Choice Rating Method (4) BARS
Critical Incident Method
Essay Method
Group Appraisal
Field Review Method

Methods/Techniques of Performance Appraisal

 (1) Confidential Reports: In this method, superiors are asked to prepare confidential
reports on the subordinates assigned to them. Such reports are prepared in the case of
supervisory staff and managers. Various aspects such as achievements, weaknesses,
major mistakes, merits, good work done, etc. are recorded in such reports. This is an old.
and popular method of performance appraisal of employees of all categories. It is used
even at present in government departments and educational institutions, where
superiors prepare confidential reports about their subordinates. Such reports are noted
in the service books of employees and are even shown to them for self-improvement and
development. Such confidential reports are used for promotion and transfer of the
employees. It is a narrative method of performance appraisal.

Ranking Method: Ranking method is the oldest and also the simplest method of
rating of employees. According to ranking method, each employee is compared with all
others performing the same job and then is given a particular rank order in the
descending scale. It states that A is superior to B, B is superior to C and so on.
ADVANTAGES OF RANKING METHOD:
(a) Ranking method is simple to understand and easy to use.
(b) It is less expensive and less time consuming.
(c) Trained raters are not essential as it is simple to operate.
LIMITATIONS OF RANKING METHOD:
(a) Ranking method ranks all employees. However, it does not tell us how much one
employee is superior to another.
(b) Ranking method is based on mental assessment. It is not possible to give an
objective proof as to why the rater has ranked one as superior to another.
(c) The performance of individual employee is not compared with thestandard
performance decided. Employees are rated on an overall basis with reference to
their job performance and not on the basis of individual assessment of traits. Here,
the best is placed first in the rank and the poorest occupies the last position.
(d) There is a possibility of rater's bias, which may make the appraisal defective.
(e) Its use is difficult in large groups when the rater cannot compare several employees
simultaneously.
(f) Ranking method is highly subjective.
In order to remove some deficiencies of ranking method, the paired comparison
technique of ranking was introduced. In this paired comparison technique, every
employee in a job is compared with every other employee to determine who is the better
worker. This paired comparison technique gives more reliable rating than the simple
ranking method. In addition, person to person comparison method can be used in place
of simple ranking method.
(3) Grading Method: In the grading method, a number of grades or classes are first
established and carefully defined. The rater evaluates the performance of an individual
employee against these standards and places him in one of these grades. The gradesare
related to qualities of employees and grades are given to such qualities. The qualities
may be like job knowledge, judgement, leadership, cooperative attitude and so on. The
grades may be like A (for outstanding), B (for very good), C (for good), D (for fair) and E
(for poor). The rater judges the performance of an employee and puts him under
suitable category. This method is simple and quick but the rating of employees may
| not be accurate particularly when the rater has to complete the rating of large number of
employees within a short period.
(4) Graphic Rating Scale Method: This is one of the oldest and most widely used
methods of performance appraisal. Here, four to twelve factors are selected, depending
^ upon the category to which the employee belongs. Some of these factors are quantity of
others performing the same job and then is given a particular rank order in the
descending scale. It states that A is superior to B, B is superior to C and so on.
ADVANTAGES OF RANKING METHOD:
(a) Ranking method is simple to understand and easy to use.
(b) It is less expensive and less time consuming.
(c) Trained raters are not essential as it is simple to operate.
LIMITATIONS OF RANKING METHOD:
(a) Ranking method ranks all employees. However, it does not tell us how much one
employee is superior to another.
(b) Ranking method is based on mental assessment. It is not possible to give an
objective proof as to why the rater has ranked one as superior to another.
(c) The performance of individual employee is not compared with the standard
performance decided. Employees are rated on an overall basis with reference to
their job performance and not on the basis of individual assessment of traits. Here,
the best is placed first in the rank and the poorest occupies the last position.
(d) There is a possibility of rater's bias, which may make the appraisal defective.
(e) Its use is difficult in large groups when the rater cannot compare several employees
simultaneously.
(f) Ranking method is highly subjective.
In order to remove some deficiencies of ranking method, the paired comparison
technique of ranking was introduced. In this paired comparison technique, every
employee in a job is compared with every other employee to determine who is the better
worker. This paired comparison technique gives more reliable rating than the simple
ranking method. In addition, person to person comparison method can be used in place
of simple ranking method.
(3) Grading Method: In the grading method, a number of grades or classes are first
established and carefully defined. The rater evaluates the performance of an individual
employee against these standards and places him in one of these grades. The grades are
related to qualities of employees and grades are given to such qualities. The qualities
may be like job knowledge, judgement, leadership, cooperative attitude and so on. The
grades may be like A (for outstanding), B (for very good), C (for good), D (for fair) and E
(for poor). The rater judges the performance of an employee and puts him under
suitable category. This method is simple and quick but the rating of employees may
■ not be accurate particularly when the rater has to complete the rating of large number
of employees within a short period.
(4) Graphic Rating Scale Method: This is one of the oldest and most widely used
methods of performance appraisal. Here, four to twelve factors are selected, depending
I upon the category to which the employee belongs. Some of these factors are quantity of
Output, quality of output, initiative, integrity, dependability,etc. These factors and their
degrees are marked on a graph paper provided in the appraisal form. The rater has
merely to check on the scale where he thinks the employee belongs.
Advantages of Graphic Rating Scale Method:
(a) It is simple to understand and easy to operate.
(b) It is also not a time-consuming method.
(c) It is economical and ensures uniformity in the assessment of employees.
Comparison among the employees is easy as the details are clearly noted on the
paper by the rater.
Limitations of Graphic Rating Scale Method:
(a) It puts heavy pressure on the rater as he has to consider four to twelve different
factors with five degrees for each factor. It is therefore, not possible to guarantee the
accuracy of the rater's decision.
(b) The rater may be biased.
(c) The rater has to do lot of paper work in the graphic rating scale method. He may
do marking mechanically, if he has to make appraisal of large number of ratees.
(d) Accurate rating may not be done as there is a very thin gap in between two
considerations (e.g., very good and good). The graph paper used in graphic rating
scale method is as shown below:
Factors/Considerations Quantity of Quality of Integrity Initiative
-» Output Output
Excellent /
Very Good /
Good /
Average /
Below Average
(5) Checklist Method: In the checklist method, a list consisting of a number of
statements about the qualities of employee and his behaviour is prepared. The
statements or questions, for example, may be as noted below:
(a) Does the employee work best under tension?............ ( )
(b) Does he make mistakes frequently?........................... ( )
(c) Does he keep ahead of schedule?.............................., ( )
(d) Does he follow the instructions of his superior?....... ( )
Each statement on this list is assigned a value depending upon its importance. While
■ rating an employee, the rater is asked to place a plus sign, a minus sign or a
question mark in front of each statement, depending on whether he feels the description
applies, does not apply, or there is doubt. The worker's final rating is taken as the
average of the scale values of all statements that his superior has checked while rating
him. The rating \ of employees, by this method, is impartial as the rater reports only
the facts but the j values are assigned separately.
Performance Appraisal 97
Checklist method has certain limitations. It is rather difficult to construct a good
checklist. Moreover, a separate checklist is needed for each category of job. The role of
the rater in this method is rather passive as he only notes the facts, as he does not know
the values given to different statements. This method is also costly and lengthy.
(6) The Forced Choice Rating Method: This method aims at reducing if not
eliminating the possibility of bias and prejudice in the rating. It requires him (rater) to
choose between a number of descriptive statements of apparently equal value. He has to
select out of four or five statements only the one, which is most characteristic of the
employee, as well as the one, which is least applicable to him. His evaluation is then
checked by reference to a secret score key. In this way, the personal bias of the rater is
sought to be removing from the rating process. As a result, the rating of employees is
more accurate, objective, fair and away from partiality by the rater.
However, this method has many limitations. For example, this method is not useful
for self-improvement. The rater is also forced to select one alternative out of four/five
alternatives suggested. Effective communication between supervisor and subordinate is
not possible, as the supervisor may not know how he has scored the alternatives. This
method is expensive to instal. Finally, it is restented by the rater because the
assumption behind it is that the rater cannot be trusted to make an impartial evaluation.
(7) The Critical Incident Appraisal Method/Technique: The research scientists
developed the critical incident method with the American Armed Forces during the
Second World War. The theory behind it is that, there are certain key acts of behaviour,
which make the difference between success or failure in a job. These acts arise out of the
incidents, which occur in the performance of a job. The supervisor is required to make
note of all such critical incidents and as a rater, examine the performance of the
candidate and record his rating. An experienced supervisor knows what type of action
or behaviour leads to success and which leads to failure. Thus, a study of the actions of a
candidate in the critical incidents over a period of time enables the supervisor to rate the
employee correctly e.g., an employee who helps a fellow-worker to avoid accident is
given positive entry in the critical incident book.
In this method, the main difficulty is that significant incidents are to be ordered for
appraisal purpose. Such recording may not be done regularly. On many occasions, the
employee has neither positive nor negative incidents. If the critical event does not
happen, the rating of the employee will not be possible. The supervisor may also find it
difficult to decide the incident, which is critical. In addition, human bias may appear
while recording the critical incident. The supervisors are accused of spying and carrying
a Tjlack-book'.
(8) The Essay Appraisal Method: In this method, a rater is required to write a small
paragraph as regards his subordinate's strengths, weaknesses, potentials and so on. It
need not be treated as rating in an exact manner but a general opinion of a superior in
relation to his subordinate. Comparison of performance of one employee against that of
another is not possible under this method.
98 ' Human Resource Management

(9) Group Appraisal: Under this method, a group of evaluators assess employees.
The group is composed of: (a) supervisors (b) head of the department and (c) personnel
expert. The group is given free hand to determine the standards of performance,
measures actual performance, analyses the causes of poor performance and offers
suggestions for improved work.
(10) Field Review Method: Under this method, a training officer from HRD
department interviews line supervisors to appraise the subordinates working under
them. The supervisors are expected to answer the questions prepared by the interviewer
in advance. The supervisors have to answer about promotion potential, level of
performance, progress of work, strengths and weaknesses. The findings are placed in
the service file of employees.
MODERN METHODS:
(1) Human Resource Accounting Method: Human resource is the most invaluable
asset of an organisation. This asset can be valued in terms of money. When competent
and trained employees leave an organisation, it will cost business in many ways. This
method assesses performance in terms of costs and contributions of employees. Costs of
human resources consist of expenditure on recruitment, selection, training,
remuneration, human resource planning, etc. Contribution of human resource is the
money value of labour productivity. The difference between cost and contribution
represents the performance of employees. This method is at infant stage with limited
usage.
(2) Appraisal by Results or MBO: It is a modern method of appraisal and has been
evolved by Peter Drucker. In this MBO method, (also called goal setting approach) the
subordinate employees are required to set their own standards of performance along
with their superiors. Thereafter, the actual performance of subordinates is evaluated
against such standards. This is how appraisal is not imposed on the employees but is
introduced with their cooperation and participation. The actual performance may be
discussed personally in an appraisal interview where the superior will explain to the
subordinate his weaknesses and the manner in which they can be removed or
minimised.
This method is a participative appraisal method and is a new development based on
democratic principles. This technique is now becoming popular. At present, in many
companies along with the appraisal by the superior, the employee himself is given self
appraisal form and is asked to give the details which are reassessed by the superior
along with his own evaluation and the details are discussed in the performance
appraisal interview.
MBO method of performance appraisal is better than the other traditional methods
discussed before. In these traditional methods, their superiors evaluate workers but their
role is passive. However, in MBO he is closely associated with the appraisal process.
(3) Assessment Centre: Assessment centre is a group of employees drawn from
different work units. The selected employees work together on an assignment similar to
Performance Appraisal

99

the one they would be handling when promoted. They participate in job related
exercises evaluated by trained observers. Managers are evaluated over a period of time
say one day to three days. Their skills and behaviour are carefully observed. The
evaluators are experienced managers with ability. They evaluate all participants both
individually and collectively by using simulation techniques, role playing, business
games, etc. Assessments are done in order to determine employee potential for
promotion. The evaluators prepare a summary report. In addition, feedback is
administered on a face to face basis to employees who ask for it.
(4) Behaviourally Anchored Rating Scales (BARS): It is a modern method of
performance appraisal. Behaviourally anchored scales are rating scales whose scale
points are determined by statements of effective and ineffective behaviours. They are
said to be behaviourally anchored because scales represent a range of descriptive
statements of behaviour varying from the least to the most effective. A rater must
indicate which behaviour on each scale best describes the performance of an employee.
Main features of BARS are:
(a) Raters who will use the scales identity and define the areas of performance to be
evaluated.
(b) The scales are anchored by descriptions of actual job behaviour.
(c) All aspects of performance to be evaluated are based on observable behaviours and
are related to the job.
(d) Raters feel comfortable to give feedback to the ratees.
(e) BARS help to remove rating errors.
LIMITATIONS OF PERFORMANCE APPRAISAL TECHNIQUES:
(1) Time-consuming: Performance appraisal is a yearly exercise in many organisations.
Superiors have to do this work within the time limit fixed. For such appraisal, forms
are to be filled in and various observations are required to be noted. This increases
the paper work of supervisors.
(2) Limited stress on self-improvement: Performance appraisal is basically for self-
improvement and self-development of employees. For this, the evaluation needs to
be systematic and the appraisal interview should be problem solving in character.
In many organisations, this aspect is not given adequate attention. As a result, the
very purpose of performance appraisal is defeated.
(3) -Ineffective communication: Information relating to rating needs to be
communicated to the employee soon after the completion of appraisal work.
Ineffective and delayed communication between the rater and the ratee is one major
limitation of performance appraisal.
(4) Absence of uniform standards: The standards used for appraisal purpose are not
uniform within the same organisation. The standards used in different departments
or by different raters vary. As a result, rating becomes unscientific and employees
100 Human Resource
Management

suffer. Similarly, the rating is done on the basis of overall impression, which is not
proper.
(5) Absence of effective participation of employees: In performance appraisal,
effective participation of concerned employee is essential as it is basically for his
improvement/ development. However, in many appraisal techniques or even in the
post-appraisal interviews, he is given a passive role. His participation is lacking.
(6) Resistance of employees to appraisal: Performance appraisal is resisted by the
employees as well as by the managers and supervisors who are expected to
administer the appraisal system. Employees oppose the system as they feel the
system is only for showing their defects and for punishing them. The managers
resist the system, as they are not willing to criticise their subordinates or identify
their mistakes.
(7) Halo effect: It refers to the tendency to rate an individual rather consistently high or
low, depending on whether the rater's overall impression is favourable or
unfavourable.
(8) Horn effect: It is the tendency of a superior to rate a subordinate lower than his
performance justifies e.g., the recent failure of the subordinate may wipe out good
work done in the past many years.
(9) Personal bias: Bias refers to subjective opinion. When a subordinate is closely
known to the superior, he rates him very high and vice-versa.
(10) Central tendency: The superior is frequently guilty of averaging work
characteristics in the middle grades. This may be because he knows the ratee too
well and does not want to give very low score. The superior provides 'average'
rating because it will not expose his lack of incompetency.
(11) Leniency in rating: The superior provides lenient rating to avoid controversy and
gives the benefit of doubt to the subordinate.
(12) Problem of confidentiality: It is not always possible to keep the findings of
performance appraisal secret. The subordinates come to know about their appraisal
report in advance.
(13) Recency effect: Recency refers to closeness to appraisal period. An employee takes
easy for the whole year. When appraisal time comes, he becomes very active. This
creates a wrong impression of high efficiency and influences appraisal decisions.
(14) Primacy effect: The initial impression influences the appraisal report. First
impression is the last impression is the most befitting description of this limitation.
SUGGESTIONS FOR RAISING EFFECTIVENESS OF APPRAISAL PROGRAMME:
(1) Define objectives clearly: The objectives of performance appraisal should be clearly
defined or laid down. This gives clear direction to the performance appraisal
process.
(2) Careful selection of appraiser:The appraiser (supervisor or evaluator)
should be
selected with due care and should be given suitable training so as to avoid
various
biases, central tendency and similar errors. He also should be given
suitable
guidelines so that the appraisal work will be done systematically and without
any
injustice to employees.
(3) Establish proper standards:The standards in regard to work,
performance,
achievements/ merits, positive contribution, qualifications acquired, etc.
for
appraisal purpose should be well defined. They should be given wide
publicity.
This avoids possible displeasure from the employees.
(4) Use of proper forms:For performance appraisal, suitable forms should be
prepared
for uniformity and also for the convenience of appraisers. The appraisal record
can
be kept properly with the help of such forms.
(5) Regularity in appraisal:Appraisal of employees should be made regularly
and
should be supplemented by post appraisal interview for self-development
of
employees. It should be for their benefit and not for punishing them.
(6) Objectivity in appraisal:There should be high degree of objectivity,
impartiality
(unbiased approach) and openness in the whole process and procedure
of
performance appraisal.
(7) Mutual trust and confidence:There should be an environment of peace, trust
and
confidence in between the superior and subordinates involved in the
appraisal
process.
(8) Selection of suitable method:The method used for rating of employees should
be
governed by certain factors such as size, financial resources and the
philosophy of
the organisation.
(9) Quick communication with ratee:The results of performance appraisal should
be
communicated to concerned employees immediately for remedial measures.
A NOTE ON POST APPRAISAL INTERVIEW:
The performance appraisal of an employee should be supplemented by an
interview which serves as a feedback to him. It is called post-appraisal interview.
It is the most difficult part of the entire appraisal process. It is also the most fruitful
part of it. For this, the post-appraisal interview should be arranged soon after the
appraisal process is over as the interview will be less effective if the time gap
between the two is more. The participants in this interview are: the concerned
employee (ratee) and his superior (rater). The purpose of such interview is to give
details of the appraisal made and also to motivate and guide the employee for self-
improvement and self-development. This interview should be arranged soon after
the completion of appraisal work so that the feedback supplied to the employee
will be fresh and also useful to him. If such interview is not arranged, the appraisal
will serve only administrative purpose but the more important purpose i.e., self-
improvement of the employee will be neglected. This suggests the importance of
post appraisal interview which needs to be conducted in a proper atmosphere and
also in the spirit of co-operation and understanding. It should not be a mere
formality.

Performance interview has three broad goals/objectives as noted below:

(1) To recognise superior performance of employees so that it will be continued and
improve further by concerned employees.
(2) To maintain the performance of employees whose performance is at the
acceptable level.
(3) To improve the performance of employees whose performance does not meet
the standards decided by the organisation.
It may be pointed out that appraisal interview is basically for counselling of
subordinates by supervisors. Here, supervisors need proper training as counselling is a
difficult activity. Many supervisors are hesitant to initiate appraisal interview
(counselling session) as they lack self-confidence or feel that subordinates may raise
uneasy questions or there may be heated exchanges leading to spoiling of cordial
relations.
According to Norman Maier, there are three types of post appraisal interviews. These
are:
(a) Tell and Sell Interview. (Also called Directive Interview)
(b)Tell and Listen Interview.
(c) Problem Solving Interview. (Also called Participative Interview)
(a) Tell and Sell Interview: In this post-appraisal interview, the employee is given
information about his performance and he is asked to accept the conclusions drawn
regarding his evaluation. In addition, he is given a plan for his improvement and self-
development. The superior acts as a judge, gives conclusions and suggests measures for
improvement. He brings the ready-made solutions for the employee. However, the
employee is not taken into confidence. He may or may not agree with the assessment
made. He may be defensive or may express resentment as regards his performance
appraisal.
Tell and sell interview will be useful if the interviewer has capacity to place his
conclusions and suggestions in an impartial and agreeable manner. This method is
useful in the case of newly joined employees as they need guidance from their superiors
for improvement in their work performance. They take the advisee of superior because
of superior's position, experience and maturity. However, this interview is rather one
sided with more importance to the interviewer. The participation of employee may be
limited. He is not given adequate importance but is told about the remedial measures for'
self-improvement in a routine manner.
(b) Tell and Listen Interview: In the tell and listen interview, the interviewer gives,
the details of performance appraisal to his subordinate. In the first part of the interview,
the weaknesses and strong points about job performance are made clear. In the second
part of the interview, the opinions/views of the subordinate about his evaluation are
considered.
This method is similar to tell and sell method but only to a limited extent as in both the
methods, the evaluation is made clear to the subordinate with the necessary details.
However, the interviewer do not dominate the interview process as it happens in the tell
and sell interview. Here, the interviewer gives patient hearing to the views of the
employee. He even encourages the employee to speak out frankly his opinions as
regards the evaluation made. The interviewer acts as a non-directive counsellor of his
subordinate.
Tell and listen interview is superior as compared to the tell and sell interview as
concerned employee is given adequate opportunity to express his views and the
interviewer listens and responds to the feelings and views of the subordinate. This leads
to cordial atmosphere and develops trust and confidence in the minds of subordinate.
He accepts the suggestions of his superior with an open mind and the interview ends
with a favourable attitude towards the superior. The interview is also useful to the
management as it gets information about the views, opinions and reactions of
subordinates. Such upward communication is useful to the management in different
ways. Tell and listen interview do not have adverse effect on the outlook of an
employee. He gets the satisfaction that he has communicated his views to the
representative of the management. He also takes positive interest in his self-
development in the light of his performance appraisal by his superior.
(c) Problem-solving Interview: Problem-solving interview is certainly more positive
and constructive in nature. Its purpose is to help the employee in his self-development.
Here, the details of appraisal are not directly and clearly communicated to the employee.
It is presumed that awareness of weaknesses is not essential for improvement and
development in the future period. In brief, in this interview, the details of appraisal are
not given much importance. More importance is given to self-development /career
development of the employee in the future period.
In the problem solving interview technique, the interviewer acts as a friend and guide
of the employee. He do not specify the area where improvement is urgently required.
He also do not suggest the direction of remedial measures required to be taken. The
interviewer prefers to motivate the subordinate to think independently about his self-
development and avoid supplying ready-made solutions. He prefers to look to the
viewpoint of the employee. The employee is asked to express his views about the job
assigned to him, his contribution, satisfaction and displeasure about the job, his
suggestions for innovations, his problems, difficulties and so on. This provides new
information to the management and enables the management to help the employees in
their self-improvement.
GUIDELINES FOR RAISING EFFECTIVENESS OF POST APPRAISAL INTERVIEW:
(1) Free and frank communication: The superior should collect all details and decide
clearly what he wants to communicate to his subordinate through post-appraisal
interview. The superior/interviewer should stay calm and should not argue with
the person being evaluated (ratee).
(2) Right place for the interview: The place for such interview should be selected
properly. There should be privacy and absence of any interruption during the
interview.
(3) Right time for the interview: The post appraisal interview should be arranged at a
right time i.e. when both are in a good mood. The employee should be given full
opportunity to express his views.
(4) Properly qualified interviewer: The manager conducting post-appraisal interview
should be properly qualified, trained and matured for the conduct of the interview
in a tactful manner.
(5) Strong backing of management: There should be strong backing of management
for such post-appraisal interview.
(6) Suitable follow-up: Post appraisal interview should be supported by suitable
follow-up steps. The superior should suggest the ways and means to correct the
weaknesses of his subordinates.
(7) Miscellaneous guidelines:
(a) Emphasise positive aspects of the evaluation. Purpose should be improve
performance and not to discipline ratees.
(b) Focus criticism on performance and not on personality characteristics.
(c) Make criticism specific and not general and vague.
(d) Identify specific actions the employee can taken to improve performance.
(e) Emphasise the evaluator's willingness to assist the employee's efforts and to
improve performance.
(f) End the evaluation sessions by stressing the positive aspects of the
employee's performance.
PERFORMANCE APPRAISAL IN INDIAN INDUSTRIES:
The genuine need of performance appraisal technique for administrative purposes
and also for improving the quality and productivity of employees is accepted by
progressive and professional managements in India. However, the systematic
assessment of an employee's performance is a comparatively recent development ir
India. This technique is now used in Indian industries for different purposes such ai
promotions and transfers, discovering talented supervisory personnel, finding ou
appropriate training needs and finally for informing an employee where he stands. It ii
also noticed that in many organisations, performance appraisal continues to be used fo
controlling employees rather than for improving/developing them. This means th
performance appraisal techniques are not used effectively for career planning c
employees or for HRD programmes. The use of performance appraisal technique is nc
made for manpower development programmes.

PERFORMANCE APPRAISAL IN INDIAN INDUSTRIES:

The genuine need of performance appraisal technique for administrative purposes
and also for improving the quality and productivity of employees is accepted by
progressive and professional managements in India. However, the systematic
assessment of an employee's performance is a comparatively recent development ir
India. This technique is now used in Indian industries for different purposes such ai
promotions and transfers, discovering talented supervisory personnel, finding ou
appropriate training needs and finally for informing an employee where he stands. It ii
also noticed that in many organisations, performance appraisal continues to be used fo
controlling employees rather than for improving/developing them. This means th
performance appraisal techniques are not used effectively for career planning c
employees or for HRD programmes. The use of performance appraisal technique is nc
made for manpower development programmes.
In government departments, confidential report method of appraisal is extensively used
while in private sector, personality behavioural traits are given special importance. In
many organisations, very little feedback is given to the employees and are kept in the
dark. This affects their future growth and development. The appraisal fails to provide
opportunities of self-improvement and self-development to them. The appraisal only
raises their anxiety, lowers their morale and brings down their commitment to work.
Public sector enterprises, (ruled by civil servants) normally use bureaucratic approaches
to managerial appraisal. However, such approaches are not suitable to enterprises
conducting business activities.
Performance appraisal system needs to introduced in all Indian
industrial/business units. In addition, the system needs to be implemented
purposefully and that too with the co-operation and participation of employees
and supervisors. In addition, the appraisal system should be used for the
introduction of career planning programmes in the organisation. The appraisal
system must give positive results in terms of employee efficiency and productivity.
Systematic efforts are necessary in this regard.
While introducing suitable appraisal system in Indian business organisations,
the behavioural features of Indian employees (such features are again based on
cultural milieu) should be given special attention. Our socio-economic cultural
background is different and the methods used in the West may not be suitable to
Indian employees.

the following behavioural features of Indian employees need special attention

while introducing appropriate appraisal system.
(1) Indian employees find it difficult to accept uncomplimentary judgement:
Employees, in general, feel unhappy and nervous when the appraiser gives
his frank views and points out the deficiencies of his appraisee. Due to the
interview, the employee feels hurt and that his superior is arbitrary in his
judgement. He also feels that he has to accept the decision of his superior as he
is the boss. As a result, the employee is dissatisfied and the interview fails to
given positive results. The effect on the employee is negative/discouraging.
Even the superior (appraiser) feels frustrated as the subordinate fails to
understand his honest view for his (employee) benefit. This psychological
feature needs special attention in the post appraisal interview.
(2) Indian employee has a tendency to place the blame for mistakes elsewhere:
This
is a common tendency among all categories of Indian employees. Due to
this
tendency, even the superior is reluctant to inform about adverse appraisals to
his
subordinates. Self-improvement efforts are not made due to this
tendency.
Moreover, it is always easy to blame others rather than accepting it and improve
the
situation. The very purpose of post appraisal interview is defeated due to
this common tendency among Indian employees.
(3) Indian employees are reluctant to have self appraisal and capacity to accept
one's
shortcomings: For self improvement, one has to accept the shortcomings and
try to
remove them. Self-appraisal is also useful for this purpose. However,
Indian employees are not favourable to these tendencies. This makes post
appraisal interviews ineffective.
(4) Indian employees treat promotion as a reward of cordial private (not official)!
superior-subordinate relationship and demotion as punishment/revenge:]
Employees in India feel that promotion is not because of merits but because of]
appeasement of superior through gifts, presents, etc. As a result, they are not)
willing to have self-development for promotion even when it is suggested through j
post-appraisal interview. They do no accept demotion due to genuine reason and
self-improvement for its quick removal. These trends need proper attention while ]
introducing appropriate or result-oriented post appraisal system.
 CASE STUDY

APPRAISAL LINKED TO ANNUAL INCREMENT:

LITCO is the name of a small proprietary concern manufacturing plastic buckets of
different sizes. The concern is doing good business and workers are paid fair wages. Total
strength of employees is \ 85 including three supervisors, one assistant manager and one
manager. The proprietor Mr. Shinde is a businessman cum politician but ensures that the
business unit operates smoothly and make! reasonably good profit. This business unit
started operations in the year 1994. The rules and practices are developed gradually with
suitable modifications as and when necessary.
The employees of the concern are rated by supervisors by means of graphic scale. The
factors to be considered for rating are performance at work, loyalty, dependability,
community activity, initiative, regularity, punctuality, potentiality to develop, relations
with co-workers and creative ability. The rating factors, method of rating, time of rating,
etc. are made clear to workers through notice, circular and departmental meetings. Yearly
increment, promotion and annual prizes are based on the performance of workers as per
this method.
This system was accepted by workers for a period of six years since its introduction in
1996. There was no criticism or opposition to the scheme till 2001. However, in 2002,
the situation changed and the whole performance appraisal system became a cause of
conflict in the labour-management relations.
In the year 2002, five employees were denied annual increment due to their low ratings.
They, along with few others, met the owner Mr. Shinde and expressed their dissatisfaction
with the rating they have received. They argued that some considerations in the ratings are
vague and are unfair to workers. They made reference to "community service" and argue
that such service is not a part of their normal job and what they do off - the job is none of
the employer's business. They also argued that loyalty and relations with co-workers as
considerations for rating are confusing. In addition, they argued that annual increment
should not be linked with this performance appraisal. Annual increment should be given
to all workers as a reward for year's service and for meeting growing expenditure of
workers. Workers and their families are very much affected when yearly increment of Rs.
100 is denied to them. For workers, wage payment is the only source of income and yearly
increase in the salary is a source of pleasure to them. They get psychological satisfaction
because of such increase. Workers urge Mr. Shinde to be sympathetic in this regard. One
worker also hinted that workers may be required to form a union if the injustice in regard to
performance appraisal is not removed.
This discussion convinced Mr. Shinde and his manager that present rating system was a
dangerous source of friction and that its disadvantages out-weighed its advantages.
Mr. Shinde (being a politician also) noted indirect threat of union formation in his unit
and was cautious in his approach. He preferred dignified retreat. After few days, he
announced the decision to delink annual increment with performance appraisal. However,
the rating system was given continuation with some modifications. Moreover, the
possibility of promotions were rare, the rating system was not likely to create new
problems for workers and employer. This is how Mr. Shinde solved the problem relating
to performance appraisal tactfully and also peacefully. Workers were happy and their
respect for Mr. Shinde also increased to some extent.
Questions:
(1) Do you feel that annual increment should be based on performance appraisal?
(2) What is your opinion about "community activity" as one consideration in rating system?
(3) Do you agree with the decision taken by Mr.Shinde on the disputed issue? Is it a practical decision?
(4) Do you feel that too much importance need not be given to performance appraisal in small
factories/production units?
(5) What are the possible consequences if Mr. Shinde had refused to amend his performance appraisal
method?

Possible Answers:
(1) At present, annual increment is given in a routine way to all categories of labour force though management
can link it with performance appraisal. Annual increase in the salary has economic, social and
psychological justification. Its refusal affects workers and their family members. It also makes workers
angry, dissatisfied and non-co-operative. Hence, annual increment should be given to all workers and
should not be linked with performance appraisal.
(2) "Community Activity"as a consideration in the graphic scale appears to be redundant for appraisal
purpose. This issue is not directly concerned with factory work.Secondly, reliable information on this
consideration may not be available.Thirdly, majority of workers are not participating in this activity and
naturally their marking will be"below average". Finally,there is opposition to this consideration and may
lead to controversy if the management remains adamant on the matter.
(3) The decision taken by Mr. Shinde on the issue was wise and practical. Increment need not be linked with
performance as it is not a normal practice. Similarly, minor adjustment in the appraisal system does not
defeat its purpose. Omitting one or two considerations from the rating system will not make the system
defective. Moreover, considerations which are ambiguous should not be selected for appraisal purpose.
Mr. Shinde's decision is a practical one and also useful for cordial industrial relations.
(4) Performance appraisal is important and offers many benefits particularly in large organisation which
employs huge manpower. However, in small units, workers are limited, chances of promotion are very
few and there is limited scope for the use of results of performance appraisal. However, the system should
be there as it is one of the rights of the management. Mr.Shinde has continued the system but too much
importance is not attached to the system. The system is necessary as it keeps
a check on the employees.
(5) Mr. Shinde had every right to be firm on the issue of performance appraisal and refuse to accept the views
expressed by workers. However, the possible consequences are likely to be serious. Here, workers may
start an agitation or may not offer necessary co-operation in the production work. They may form a union
in order to fight collectively. Outside leadership may also come in the picture. The cordial industrial
relations may be replaced by hostile relations. This is as good as inviting new problems. There may be
stoppage of production and profitability may go down. Taking strong stand means paying heavy price on
minor issue. Mr. Shinde has avoided this situation.
222 Human Resource and Personnel Management

Exhibit Larsen & Toubro, Human Resource Development—Performance Appraisal

10.5 System

CONFIDENTIA NAME EMP.P.S.No. CADRE GROUP DEPT.

L PA FORM
ZB

EXECUTIVES &
SUPERVISORS

LARSEN & TOUBRO LIMITED

HUMAN RESOURCE DEVELOPMENT—PERFORMANCE APPRAISAL SYSTEM
PERFORMANCE ANALYSIS AND REVIEW
APRIL 1993 TO MARCH 1994
NAME DATE SIG N A TU R E
EMPLOYEE

IMMEDIATE SUPERIOR

NEXT SUPERIOR

PERSONNEUHRDDEPT.

PERFORMANCE REVIEW AGAINST OBJECTIVES

Suprtor

ByEmpfoyM

AGREED OBJECTIVES & TARGETS RESULTS ACHIEVED

(Not more than fivs)

S E L F R E V IE W (B y E m p lo y es)
SIGNIFICANT CONTRIBUTORS (JOB OR PROFESSION RELATED-MOT COVERED ABOVE)

IMPORTANT FACTORS FACILITATING PERFORMANCE

IMPORTANT FACTORS HINDERING PERFORMANCE

[51 PERFORMANCE AGAINST OBJECTIVES (By Immediate Superior)

D OUTSTANDING D V GOOD D GOOD D ADEQUATE D INADEQUATE

(C o n td
 Performance Appraisal and Job Evaluation 223

Appraisal of Critical Attributes (By Immediate Superior)

Critical Attributes
INNOVATIVE NESS Ability to think new and better ways of doing things
that result in introduction of new ideas or
improvements of the systems and operations.
2. INITIATIV Ability to determine and initiate actions
E that result in improved handling of jobs,
without waiting to be sold.
INTERPERSONAL & Ability to interact effectively with people at all
TEAM RELATIONSHIP levels to gain their confidence and respect and work
in a collaborative and participative manner.
RESOURCEFULNESS Ability to muster resources to achieve desired
results and devise ways and means of solving
problems in difficult situations.

COMMUNICATION Ability to convey thoughts and feelings clearly both

SKILLS through oral as well as written expressions for better
understanding.
Specific role related attributes (Identified in the beginning of the year)

6.

Areas of Strengths & Improvements (By Immediate Superior)

Potential Areas for Growth (By Immediate Superior)

I Recommendations for Training & Development (By Immediate Superior)

IN-COMPANY TRAINING PROGRAMMES
Description Code Description Code
2.
|D2] OTHER TRAINING PROGRAMMES
1. 2.
[551
SPECIFIC DEVELOPMENT PLANS
Proposed Action Details of Actions Required
(Tick as applicable
Job Rotation Job Enlargement Special
Assignment Deputation to Other Oept.
Other {Please Specify)
Comments by Next Supertor(S)
On Specific Development Plans Stated Above in 03 Overall
Observations:
For Use by Pereonnet/HKO Co-ordinrtor