Introduction

Performance refers to an employee’s accomplishment of assigned tasks and Performance

Appraisal is the systematic description of the job relevant strengths and weaknesses of an
individual or group. The definition of performance appraisals is not limited to one-on-one
situations where a supervisor discusses with an employee areas deserving recognition and
areas where improvement is needed. A performance appraisal is any personnel decision
that affects the status of employees regarding their retention, termination, promotion,
demotion, transfer, salary increase or decrease, or admission into a training program.

A properly developed appraisal instrument serves as a contract between the organization

and an employee in that it makes explicit what is required of that individual. Appraising
performance is necessary because it serves as an audit for the organization about the
effectiveness of each employee. Such a control system, based on key job behaviors that
serve as standards, enables a manager to specify what the employee must start doing,
continue doing, or stop doing.

Appraisals and Performance Management

Performance appraisal plays a vital role in performance management. Performance

Management is the total process of observing an employee’s performance in relation to
job requirements over a period of time (i.e. clarifying expectations, setting goals,
providing on the job coaching, storing and recalling information about performance) and
then making an appraisal of it. Information gained from the process may be fed back via
an appraisal interview to determine the relevance of individual and work-group
performance to organizational purposes, to improve the effectiveness of the unit, and to
improve the work performance of employees.

The Key Role of Appraisals

Selection, performance appraisals, training and motivation principles are four key
systems necessary for ensuring the proper management of an organization's human
resources. Of these four systems, an argument can be made that performance appraisal is
the most important because it is the prerequisite for establishing the other three.

The efficient use of organization's human resources begins with selection, choosing the
right person for the job. However, before a selection test can be developed for predicting
who will be the right person for the job, the word right must be defined. That is the
correct on the job behavior must be defined. The core of performance appraisal process is
the definition of effective employee behavior. A valid selection test cannot be developed
until the organization agrees upon an acceptable definition of employee behavior. This is
because the validity of the test is determined by measuring the performance of the people
on the test and measuring the performance of the same people on important aspects of the
job. If there is significant correlation between these two measures the selection procedure
is valid.

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Once a person has been selected, the problem becomes one of monitoring and
maintaining high level of performance. Again, this is where performance appraisals play
a critical role.

To the extent that a person has both the knowledge and skill to do the job, but is doing it
in an unsatisfactory manner, the problem may be one of motivation. The key components
of effective motivation strategies include feedback that allows an employee to learn how
well he or she is doing, goal setting that specifies what the person should be doing, team
building that allows the employee to participate with peers and the supervisor in solving
problems that impede their productivity, and monetary incentives that reward good
performance.

Performance appraisal lies at the heart of motivation because it is through the appraisal
interview that the employees receive feedback from the manager and peers regarding job
performance. In addition, goals are set in relation to this feedback, problems that surface
are resolved through manager-employee discussions, and monetary rewards can be
contingent upon satisfactory performance.

In short, performance appraisal is a fundamental requirement for improving the

productivity of an organization’s human resources, because it is through an appraisal that
each individual’s productivity is evaluated. It serves as a basis for counseling and
developing an individual to maintain and increase productivity.

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 Purposes of Performance Appraisal

a) Management Development

It provides a framework for future employee development by identifying and preparing

individuals for increased responsibilities.

b) Performance Measurement

It establishes the relative value of an individual contribution to the company and helps
evaluate individual accomplishment.

c) Performance Improvement

It encourages continued successful performance and eliminates individual weaknesses to

make employees more effective and productive so that organizations can successfully
implement their strategies, such as quality enhancement.

d) Compensation

It helps determine appropriate pay for performance and equitable salary and incentives
based on merit or results.

e) Identification of potential

It identifies candidates for promotion.

f) Feedback

It identifies actual levels of performance and evaluates them against what is expected
from the employees.

g) Communication

It provides a format for dialogue between superior and subordinate and improves
understanding of personal goals and concerns. It also has a effect of increasing trust
between the rater and the rate.

h) Training and Development Needs

Poor performance evaluation indicates the areas where employees need training and good
performance evaluation indicates untapped potential that should be developed.

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i) Placement Decisions

Promotions, transfers, and demotions are usually based on past and anticipated
performance. Often promotions are the rewards for past performance.

j) Career Planning and Development

Performance feedback guides career decisions about specific career paths one should
investigate.

k) Feedback to HRM

Poor performance may indicate errors in job analysis information, human resource plans,
and other parts of HRM. Reliance on inaccurate information may have led to
inappropriate hiring, training, or counseling decisions.

l) Other Purposes
• Increase motivation to perform effectively
• Increase staff self-esteem
• Gain new insight into staff and supervisors
• Better clarify and define job functions and responsibilities
• Develop valuable communication among appraisal participants
• Encourage increased self-understanding among staff as well as insight into the
kind of development activities that are of value
• Distribute rewards on a fair and credible basis
• Clarify organizational goals so they can be more readily accepted
• Improve institutional/departmental manpower planning, test validation, and
development of training programs

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Relationship Of Performance Evaluation With Other HR Functions

Performance evaluation provides basis for

Judging effectiveness of recruitment efforts.

RECRUTMENT
Quality of applicants being recruited determines
performance standards that are feasible.

Performance evaluation provides basis

validating selection function.

P
Selection should produce personnel who SELECTION
E are best able to meet job requirements.
R
F
O
R Performance evaluation provides basis for
M determining trainings need.
A
N TRAINING AND
DEVELOPMENT
C Training and development aids in the achievement
of performance standards.
E

E
V Performance evaluation can be a factor in
A determining pay.

L
U COMPENSATION
Level of compensation can effect evaluation MANAGEMENT
A of performance.
T
I
O
N Performance evaluation provides basis for
defending personnel actions.

LABOR
RELATIONS
Evaluation methods and standards may be
subject to negotiation.

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 The Appraisal Process

The appraisal process begins with the establishment of performance standards in

accordance with the organization’s strategic goals. These performance standards should
be clear and objective enough to be understood and measured. Too often, these standards
are articulated in ambiguous phrases that tell us little, such as “a full day’s work” or “a
good job”. What is “a full day’s work” or “a good job”? The expectations a supervisor
has in terms work performance by his employees must be clear enough in his mind so
that he will be able to, at some later date, communicate these expectations to his
employees, mutually agree to specific job performance measures, and appraise their
performance against these established standards.

Once performance standards are established, it’s necessary to communicate these

expectations; it should not be part of the employees’ job to guess what is expected of
them. Too many jobs have vague performance standards, and the problem is compounded
when these standards are set in isolation and do not involve the employees. It is important
to note that communication is a two-way street: mere transference of information from
the supervisor to the employees regarding expectations is not communication!

The third step in the appraisal process is the measurement of performance. To determine
what actual performance is, it is necessary to acquire information about it. We should be
concerned with how we measure and what we measure. Four common sources of
information are frequently used by managers regarding how to measure actual
performance: personal observation, statistical reports, oral reports and written reports.
Each has its strengths and weaknesses; however, a combination of them increases both
the number of inputs and the probability of receiving reliable information.

The forth step in appraisal process is the comparison of actual performance with
standards. The point of this step is to note deviations between standard performance and
actual performance so that we can proceed to the fifth step in the process – discussion of
appraisal with the employees.

One of the most challenging tasks facing appraisers is to present an accurate assessment
to the employees. The impression that employees receive about their assessment has a
strong impact on their self-esteem and, very importantly, on their subsequent
performance. Conveying good news is considerably less difficult for both the appraiser
and the employee than conveying a bad news that performance has been below
expectations.

The final step in the appraisal is the identification of corrective action where necessary.
Corrective action can be of two types: one is immediate and deals with symptoms, and
the other is basic and deals with the causes. Immediate corrective action can often be
described as “putting off fires,” whereas basic corrective action gets to the source of
deviation and seeks to adjust the difference permanently. Immediate action corrects
something right now and gets things back on track. Basic action asks how and why

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performance deviated. Good supervisors recognize that taking a little time to analyze the
problem today may prevent the problem from getting worse tomorrow.

Appraisal Process

1. Establish performance standards with employees.

2. Mutually set measurable goals.

3. Measures actual performance.

4. Compare actual performance with standards.

5. Discuss the appraisal with the employee.

6. If necessary, initiate corrective action.

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 Sources of Performance Appraisals

There are six alternative sources of performance appraisals:

• the supervisor
• the employee
• peers
• subordinates
• a person or persons outside the employee's work environment
• 360 degree appraisals

The key criteria for qualifying as a source for appraising an employee's performance are
being aware of the objectives of the employee's job, frequently observing employee on
the job, and being capable of determining whether the observed behavior is satisfactory.

Supervisor Appraisal

It is generally observed that 95% of the appraisals conducted at the lower and middle
management levels are performed by individual's immediate supervisor. There are several
reasons for this trend.

First, the management hierarchy of most organizations reinforces the right of the
supervisor to make both evaluative and development decisions concerning subordinates.
Second, the supervisor generally controls the magnitude and scheduling of the rewards
and punishments that can be administered to subordinates. Since performance is
enhanced when rewards are based on performance, it is logical that the appraisals be
conducted by the person who generally administers the rewards. If this were not the case,
it is likely that in many organizations the employees might view appraisal process as
having little or no importance. Third, it is commonly felt that of all the various sources of
evaluation, the immediate supervisor is in a best position to observe a subordinate's
behavior, and judge the relevance of that behavior to job objectives and organizational
goals.

Despite this logic, performance appraisals conducted by supervisors have a drawback. In

such appraisals employees' evaluations depends heavily on how each supervisor thinks
the work should be performed rather than how well it is actually performed by the
employee. It simply means that managerial evaluations are frequently loaded with
subjectivity and bias. Alternative sources to supervisory appraisals are always needed
when the supervisor seldom sees the employee on the job.

Self- Appraisals

In the self-appraisals the employees complete the appraisal form. An investigation was
conducted about the self-rating appraisal process at General Electric Company in which
this approach was compared with the traditional managerial appraisals conducted at GE.
The results indicated that: (1) the self-appraisals were rated as more satisfying and

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constructive by the managers than the traditional supervisory-prepared appraisals; (2)
there was less defensiveness on the part of subordinates regarding the appraisal; (3) the
discussions based on self-rating more often resulted in superior on-the-job performance
than did the traditional appraisal; and (4) low rated employees were especially likely to
show an improvement in performance, as rated by the manager, after a self-review
discussion.

Peer Appraisals

Peer evaluations are conducted by the employees' coworkers i.e. people who are
explicitly familiar with the behaviors involved in their jobs. The main advantages of peer
appraisals are that (1) there is a tendency in the coworkers to offer more constructive
insight to each other so that, as a unit, each will improve; (2) their recommendations tend
to be more specific regarding job behaviors.

Subordinate Appraisals

There are circumstances when subordinate appraisals can be valuable to an employee and
to the organization. For instance, a program was started at Exxon in 1959 called "Rate
your supervisor." The program provided each supervisor with a computer printout
showing the average anonymous subordinate ratings, and how the manager was rated
relative to other supervisors. As a result of this program: (1) 25% of the subordinates said
they had seen lasting changes in their supervisors, (2) 88% of the supervisors said they
had tried to change their behavior after receiving the report, and (3) 60% of the
supervisors and the subordinates agreed that productivity had increased as a result of the
program.

Research on the effectiveness of subordinate appraisals is limited at this time. Questions

concerning their reliability and validity have yet to be answered.

Appraisal by Outsiders

Some organizations use persons outside the immediate work environment to conduct
performance appraisals. These sources include:
• assessors in an assessment center
• field reviews conducted by people in the personnel department
• evaluations from trainers

360 Degree Performance Appraisal

Performance appraisal process in which supervisors, peers, employees, customers, and

the like evaluate the individual.

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 APPRAISAL METHODS

Three different approaches exist for doing appraisals: employees can be appraised against
(1) absolute standards, (2) relative standards, or (3) objectives.

Absolute Standards Methods

This means employees are compared to a standard; and their evaluation independent of
any othe1 employee in a work group. Included in this group are the following methods:

The Essay Appraisal

Probably the simplest method of appraisal is to have the appraiser write a narrative
describing an employee’s strengths, weaknesses, past performance, potential, and
suggestions for improvement. The strength of the essay appraisal lies in its simplicity.

However, inherent in this method are several weaknesses. Because essays are
unstructured, they are likely to vary widely in terms of length and contest this makes it
difficult to compare individuals across the organization. And of course, some raters are
better writers than others. So a “good” or “bad’ evaluation may be determined as much
by the rater’s writing skill as by the employer’s actual level of performance. This method
also provides only qualitative data. HRM decisions generally improve when useful
quantitative data is obtained because it enables employees to be compared and ranked
more objectively.

The Critical Incident Appraisal

Critical incident appraisal focus the rater’s attention on those critical or key behaviors
that make the difference between 1oin a job effectively and doing it ineffectively The
appraiser write down anecdotes describing what the employee did that was especially
effective or ineffective.
Note that with this approach to appraisal, specific behaviors are cited, not vaguely
defined individual traits. A behavior-based appraisal such as this should, be more valid
than trait-based appraisals because it is clearly more job related.

Critical incidents, with their focus on behaviors, judge performance rather than
personalities.
Yes No
Are supervisor’s orders usually followed?
Does the individual approach customers promptly?
Does the individual suggest additional merchandise to customers?
Does the individual keep busy when not servicing a customer?
Does the individual lose his or her temper in public?
Does the individual volunteer to help other employees?

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The Checklist Appraisal

In the checklist appraisal, the evaluator uses a list behavioral descriptions and checks off
those behaviors that apply to the employee. Once the checklist is complete, it is usually
evaluated by the HRM staff not the appraiser completing the checklist. The checklist
appraisal reduces some bias in the evaluation process since the rater and the scorer are
different.

The Adjective Rating Scale Appraisal

One of the oldest and most popular methods of appraisal is the adjective rating scale.
Rating scales can because to assess factor such as quantity and. quality of work job
knowledge, cooperation, loyalty, dependability, attendance, honesty, integrity, attitudes,
and Initiative However, this method is most valid when abstract traits like loyalty or
integrity are avoided, unless they can be defined in more specific behavioral terms.

To use the adjective rating scale, the assessor goes down the List of factors and notes the
point along the scale or continuum that best describes the employee.

Although they do not provide the depth of information that essays or critical incidents do,
they are less time-consuming to develop and administer, they also provide a quantitative
analysis that is useful for comparison purpose.

The Forced-Choice Appraisal

The forced-choice appraisal is a special type pf performance am type checklist where the
rater must choose between two or more statement Each statement may be favorable or
unfavorable The appraiser’s job is to identify which statement is most (or in some cases
least) descriptive of the individual being evaluated.

The Behaviorally Anchored Rating Scales

These scales combine major elements from the critical incident and adjective rating scale
approaches. The appraiser rates the employees based on items along a continuum, but the
points are examples of actual behavior on the given job rather than general descriptions
or trait.

Behaviorally anchored rating scales specify definite, observable, and measurable job
behavior. Examples of job-related behavior and performance dimensions are generated
by asking participants to give specific illustrations of effective behavior regarding each
performance dimension.

The results of these processes are behavioral descriptions, such as anticipates, plans,
executes, solves immediate problems, carries out orders, or handles emergency situations.

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Relative Standards Methods

Group Order Ranking

Group order ranking requires the evaluator
classification, such as “top 20 percent. But
employees, raters deal with all their employees
has 20 employees, only four can be in the top
relegated to the bottom fifth.
to place employees into a particular
when used by appraisers to evaluate
in their area. So, for example, if a rater
fifth; and, of course, four also must be

Paired Comparison

The paired comparison method is calculate by taking the total of [N(N-1)] /2 comparison.
If 10 employees are being evaluated, the first person is compared, one by one, with each
of the other nine, and the number of times this person is preferred in any Of the nine pairs
is tabulated.

How Objectives can be used to evaluate performance

Management by Objectives

Management by objectives is a performance appraisal method that includes mutual

objective setting and evaluation based on the attainment of specific objectives. Here,
employees are evaluated on how well they accomplished a specific set of objective that
has been determined to be critical in the successful completion of their job.

Management by objectives is a process that converts organizational objectives into

individual objectives. It consists of four steps: (1) goa1 setting, (2) action planning, (3)
self control and (4) periodic reviews.

In goal setting, the organization’s overall objectives are used as guidelines from which
departmental and individual objectives are set. At the individual level, the supervisor and
employee jointly identify those goals that are critical to fulfilling the requirements of the
job. These goals are agreed on amid then become the standards by which the employee’s
results will be evaluated. In action planning, the means are determined for achieving the
ends established in goal setting; that is, realistic plans are developed to attain the
objectives.

Self-control refers to the systematic monitoring and measuring of performance—ideally,

by having the employee review his or her own performance. Finally, with periodic
progress reviews, corrective action is initiated when behavior deviates from the standards
established in the goals setting phase. Again, consistent with the MBO philosophy, these
supervisory employee reviews are conducted in a constructive rather than punitive means.
Reviews are not meant to degrade the employee but to aid in future performance.

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 FACTORS THAT CAN DISTORT APPRAISALS

A completely error-free performance appraisal is only an ideal we can aim for. In reality,
most appraisals fall short o this ideal, this is often due to one or more actions that can
significantly impede objective evaluation.

Leniency Error

Every evaluator has his or her own value system that acts as a standard against which
appraisals arc made, Relative to the true or actual performance an individual exhibits,
some evaluators mark high, while others mark low. The former is referred to as positive
leniency error, and the latter as negative leniency error. When evaluators are positively
lenient in their appraisal, an individual’s performance becomes overstated. In doing so,
the performance is rated higher than it actually should be. Similarly, a negative leniency
error understates performance, giving the individual a lower appraisal.

If all individuals in an organization were appraised by the same person, there would he no
problem. Alth9ugh there wol4ld be an error factor, it would be applied equally to
everyone. The difficulty arises when we have different raters with different leniency
errors making judgments. For example, assume a situation where both Jones and Smith
are performing the same job for a different supervisor, with absolutely identical job
performance. If Jones’s supervisor tends to err toward positive leniency while Smith’s
supervisor errs toward negative leniency, we might be confronted with two dramatically
different evaluations.

Halo Error

The halo error or effect is a “tendency to rate high or low on all factors due to the
impression of a high or low rating on some specific factor.” For example, if an employee
tends to be conscientious and dependable, we might become biased toward that
individual to the extent that we will rate him or her positively on many desirable
attributes.

Similarity Error

When evaluators rare other people in the same way that the evaluator perceive
themselves, they are making a similarity error. Based on the perception that evaluators
have of themselves, they project those perceptions onto other for example, the evaluator
who perceives himself or herself as aggressive may evaluate others by looking for
aggressiveness. Those who demonstrate this characteristic tend to benefit, while others
who lack it may be penalized.

Low Appraiser Motivation

If the evaluator knows that a poor appraisal could significantly hurt the employees future-
particularly opportunities for promotion or a salary increase—the evaluator may be

13
reluctant to give a realistic appraisal. There is evidence that it is more difficult to obtain
accurate appraisals when important rewards depend on the results.

Central Tendency

It is possible that regardless of who the appraiser evaluates and what traits and used, the
pattern of evaluation remains the same. It is also possible that the evaluator’s ability to
appraise objectively and accurately has been impeded by a failure to use the extremes of
the scale. When this happens, we call the action central tendency. Central tendency is
“the reluctance to make extreme ratings (in either direction); the inability to distinguish
between and among ratees; a form of range restriction. Raters who are prone to the
central tendency error are those who continually rate all employees as average.

Inappropriate Substitutes for Performance

It is the unusual job where the definition of performance is absolutely clear and direct
measures are available for appraising the incumbent. In many jobs it is difficult to get
consensus on what is “a good job,” and it is even more difficult to get agreement on what
criteria will determine performance. For a salesperson the criteria are affected by factors
such as economic conditions and actions of competitors—factors outside the
salesperson’s control. As a result, the appraisal is frequently made by using substitutes
for performance—criteria that, it is believed, closely approximate performance and act in
its place. Many of these substitutes are well chosen and give a good approximation of
actual performance. However, the substitutes chosen are not always appropriate. It is not
unusual, for example, to find organizations using criteria such as effort, enthusiasm,
neatness, positive attitudes, conscientiousness, promptness, and congeniality as
substitutes for performance. In some jobs, one or more of these criteria are part of
performance. Obviously, enthusiasm does enhance the effectiveness of a teacher: you are
more likely to listen to and be motivated by a teacher who is enthusiastic than by one
who is not; and increased attentiveness and motivation typically lead to increased
learning. But enthusiasm may in no way be relevant to effective performance for many
accountants, watch repairers, or copy editors. So example of how one what may be an
appropriate substitute for performance in one may be totally inappropriate in another.

Attribution Theory

There is a concept in management literature called attribution theory. According to this

theory, employee evaluations are directly affected by a “supervisor’s perceptions of who
is believed to be in control of the employee’s performance—the employer or the
manager.” Attribution theory attempts to differentiate between those things that the
employee controls (internal) versus those that the employee cannot control (external). For
example, if an employee fails to finish a project that he has had six months to complete, a
supervisor may view this negatively if he or she believes that the employee did not
manage either the project or his time well (internal control). Conversely, if the project is
delayed because top management requested that something else be given a higher

14
priority, a supervisor may see the incomplete project in more positive terms (external
control).

One research study found support for two key generalizations regarding attribution:
• When appraisers attribute an employee’s poor performance to internal control the
judgment is harsher than when the same poor performance is a attributed to
external factors.
• When an employee is performing satisfactorily, appraisers will evaluate the
employee more favorably if the performance is attributed to the employee’s own
efforts than if the performance is attributed to outside forces.

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 Performance Evaluation Programs

Performance evaluation is a major function of human resource management in most

organizations. A performance evaluation program benefits both the organization and the
employees whose performance is being appraised. For the organization, performance
evaluation is the information system that provides input into all aspects of human
resource management. For the individual, it provides feedback about performance.

Development of an Evaluation Program

The human resource management has the primary responsibility for overseeing and
coordinating the evaluation program. However, manager from the operating departments
also should be actively involved in it, particularly in helping to establish the objectives
for the program.

a) Objectives of an Evaluation Program

Some of the important objectives are the following:

• To provide employees with adequate feedback concerning their performance
• To serve as a basis for modifying or changing behavior toward more effective
work basis
• To provide managers with data which they may use to judge future job
assignments and compensation

Performance appraisals are most widely used as a basis for making compensation
decisions and planning individual performance improvement programs.

b) Qualifications of evaluators

Managers and supervisors traditionally have served as evaluators of their subordinates. In

most instances they are in the best position to perform this function but not necessarily
qualified to do so. In order to be qualified there are certain criteria that they should meet.
These are:
• Opportunity to observe: the appraiser must be in a position to collect relevant
information about the person being evaluated through personal observation,
reviewing records or talking with others who have direct knowledge of the person.
• Understanding of job requirements: a clear understanding of job requirements and
standards of satisfactory performance.
• Having an appropriate point of view: one’s point of view influences which
observed performance is considered desirable and undesirable.

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c) Training the Evaluators:

A weakness of many evaluation programs is that managers and supervisors are not
adequately trained for the task of evaluation and provide little meaningful feedback of
their evaluations to their subordinates. Evaluators should be made aware of various
factors that may influence their evaluations. Studies indicate that a supervisor’s
evaluations are influenced by the proportion of workers in the unit who are considered as
having “poor attitudes”. It was found that the greater the proportion of subordinates
manifesting poor attitudes, the more favorable the performance ratings for those with
good attitudes. Training should also be stressed in development of interviewing skills. A
training program should also cover ethical considerations in employee appraisal.

d) Selection of Performance Criteria:

Before any evaluation occurs, the criteria against which employees are to be evaluated
should be clearly defined. These criteria must be based on job requirements. In selecting
performance criteria there are three basic considerations:
• Relevance: this refers to the extent to which criteria relate to the objectives of the
job.
• Freedom from contamination: a comparison of performance among production
workers, for example, should not be contaminated by the fact that some have
newer machines than others.
• Reliability: the reliability of a criterion refers to its stability or consistency. It
refers to the extent to which individuals tend to maintain a certain level of
performance overtime.

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 CREATING MORE EFFECTIVE PERFORMANCE
MANAGEMENT SYSTEMS

The fact that evaluators frequently encounter problems with performance appraisals
should not lead us to throw up our hands and give upon the concept. There are things that
can be done to make performance appraisals more effective.

Use Behavior-based Measures

The evidence favors behavior-based measures over those developed around traits. Any
traits often considered to be related to good performance may, in fact, have little or no
performance relationship. Traits like loyalty, initiative, courage, reliability, and self-
expression are intuitively appealing as desirable characteristics in employees. But the
relevant question is: Are individuals who rate high on those traits higher performers than
those who rate low? Of course we can’t definitively answer this question. We know that
there are employees who rate high on these characteristics and are poor performers. Yet,
we can find others who are excellent performers b do not score well on traits such these.
Our conclusion is that traits like loyalty and initiative may be prized by appraisers, but,
there is no evidence to support the notion that certain traits will be adequate synonyms
for performance in a large cross section of jobs.

A second weakness in traits is the judgment itself. What is “loyalty”? When is an

employee “reliable”? What you consider loyalty,” we may not. So traits suffer from weak
inter-rater agreement. Behavior-derived measures can deal with both of these objections.
Because they deal with specific examples of performance—both good and bad—we
avoid the problem of using inappropriate substitutes. Additionally, because we are
evaluating specific behaviors, we increase the likelihood that two or more evaluators will
see the same thing. You might consider a given employee as “friendly” while we might
perceive her as “standoffish.” But when asked to rate ‘her in terms of specific behaviors,
we might both agree that in terms of specific behaviors, she “frequently says ‘Good
morning to customers,” “willingly gives advice or assistance to coworkers,” and
consolidates her cash drawer at the end of her work day.

Combine Absolute and Relative Standards

Use appraisal methods that combine both absolute and standards. For example, you might
want to use the adjective rating scale and the individual ranking method. This dual
method of appraisal, incidentally, has been instituted at some universities to deal with the
problem of grade inflation. Students get an absolute grade-—A, B, C, D, or F—and next
to it is a relative and showing how this student ranked in the class.

Provide Ongoing Feedback

“The best surprise a no surprise.” This phrase clearly applies to performance appraisals.
Employees like to know how they are doing. The appraiser should share with the
employee both expectations and disappointments on a frequent basis. By providing the

18
employee with repeated opportunities, to discuss performance before any reward or
punishment consequences occur, there will be no ‘surprises at the time of the formal
annual review. In fact, where ongoing feedback has been provided the formal sitting
down step shouldn’t be particularly traumatic for either party.

Have Multiple Raters

As the number of raters increases, the probability of attaining more accurate information
increases. If a person has had 10 supervisors, nine of whom rated him or her excellent
one poor, then ‘we must investigate what went into that one. May be this rater was the
one who identified an area of weakness where training is needed, or an area to be avoided
in future job assignments. Therefore, by moving employee about within the organization
to gain a number of evaluations, we increase the probability of achieving more valid and
reliable evaluations

Peer Evaluations

Peer evaluations (Peer evaluations are conducted by the employees’ coworkers— people
explicitly familiar with the behavior involved in their jobs.

The main advantage of peer evaluation is that (1) there is a tendency for coworkers to
offer more constructive insight to each other so that, as a unit, each will improve; and (2)
their recommendations tend to be more specific regarding job behaviors.

A slight deviation from peer assessments is a process called the upward appraisal.
Upward appraisals permit employees to offer frank and constructive feedback to their
supervisors on such areas as leadership and communication skills.

36O-Degree Appraisals

Research studies into the effectiveness of 360-degree performance appraisal are reporting
positive results. These stem from having more accurate feedback empowering employees,
reducing the subjective factors in the evaluation process and developing leadership in an
organization.

Rate Selectively

It has been suggested that appraisers should rate only in those areas in which they have
significant job knowledge. If raters make evaluations on only those, dimensions for
which they are in a good position to rate, we can increase the inter-rater agreement and
make the evaluation a more valid process.

In general therefore, we recommend that, in terms of organizational level, appraisers

should be as close as possible to the individual being evaluated: Conversely, the evaluator
levels separating the evaluator and employee, the less opportunity the evaluator has to

19
observe the individual’s work behavior and, not surprisingly, the greater the possibility
for inaccuracies.

Train Appraisers

If you cannot find good raters the alternative is to make good raters, Evidence indicates
that the training of appraisers can make them more accurate raters, Common errors such
as halo and leniency can be minimized or eliminated workshops where supervisors can
practice observing and rating behaviors. Why should we bother to train these individuals?
Because a poor appraisal is worse than no appraisal at all. These negative effects can
manifest themselves as demoralizing employees, decreasing productivity, and making the
company “liable for wrongful termination damages.

20
 Components of Appraising Employee Performance

Other HR Activities
Job analysis
Selection Last
Compensation Consideration
Training & Performance
development Standards
Job Requirements Performance
Appraisal
Purposes
Feedback
Internal Environment
Improvement
Top management
Employee Research
goals & values Performance Criteria
Behavior Promotion
Organizational
Training
strategy
Transfer
Corporate culture
Termination
Layoff
Legal Consideration Performance Compensation
Appraisal Planning
External Environment Approaches
Competitors
Appraisal Process &
Data Gathering
Sources
Interview &
feedback errors

21
 RESEARCH METHODOLOGY

Sampling

A convenience sample is used when you simply stop anybody in the street who is ready
to respond, or when you wander round a business, a shop, a restaurant, a theatre or
whatever, asking people you meet whether they will answer your questions. In other
words, the sample comprises of subjects who are simply available in a convenient way to
the researcher.

However, this method is often the only feasible one, particularly for students or others
with restricted time and resources, and can legitimately be used provided its limitations
are clearly understood and stated.

I have used convenience sampling for the purpose of doing the surveys. Convenience
sampling is used when the population and the sample are chosen on their relative ease of
access. I visited two organizations i.e. National Bank of Pakistan and Muslim
Commercial Bank and asked for filling in the questionnaires whoever was willing to do
so. I have been able to receive response from 12 respondents.

Library Research:

Since it is a basic research I have taken major from the books available in the library of
our department. I studied several books in which useful material was found with the help
of which I have been able to prepare this report. A few of them are:
• Increasing productivity through performance appraisal by Gary p. Latham
and Kenneth N. Wexley
• Managing Human Resources by Randall S. Schuler
• Managing for Performance by Ivancevich, Donnelly, and Gibson
• Employee Development Practice by Jim Stewart

Questionnaires

A questionnaire is a self-administered statistical survey. Questionnaires have advantages

over some other types of surveys in that they are cheap, do not require as much effort
from the questioner as verbal or telephone surveys, and often have standardized answers
that make it simple to compile data. However, such standardized answers may frustrate
users. Questionnaires are also sharply limited by the fact that respondents must be able to
read the questions and respond to them. Thus, for some demographic groups conducting a
survey by questionnaire may not be practical.

I have made questionnaires containing close ended questions. The questions are pertinent
to topic of this research i.e. “Role of Performance appraisals in managing and

22
improving employee performance” I have included 15 questions in the questionnaire and
I have tried to be to the point while asking the questions. I have avoided wordy questions
and the response options are uniform throughout the questionnaire as to facilitate quick
responses. A sample of the questionnaire is annexed with report.

23
 INTRODUCTION to ORGANIZATIONS

National Bank of Pakistan

National Bank of Pakistan (NBP) was established on November 9, 1949 under the
National Bank of Pakistan Ordinance, 1949 in order to cope with the crisis conditions,
which were developed in1949. The nature of responsibilities of the Bank is different and
unique from other banks/financial institutions. The Bank acts as the agent to the State
Bank of Pakistan for handling Provincial/Federal Government Receipts and Payments on
their behalf. The Bank has also played an important role in financing the country’s
growing trade. Today the Bank finances import/export business to the total of Rs. 52.7
billion, whereas in 1960 financing under this head was only Rs. 1.54 billion.

Muslim Commercial Bank

MCB is one of the leading banks of Pakistan with a deposit base of about Rs. 230 billion
and total assets of around Rs.300 billion. Incorporated in 1947, MCB soon earned the
reputation of a solid and conservative financial institution managed by expatriate
executives. In 1974, MCB was nationalized along with all other private sector banks.
This led to deterioration in the quality of the Bank’s loan portfolio and service quality.
Eventually, MCB was privatized in 1991.
During the last fifteen years, the Bank has concentrated on growth through improving
service quality, investment in technology and people, utilizing its extensive branch
network, developing a large and stable deposit base and managing its non-performing
loans via improved risk management processes.

24
 Data Representation

Q.no.1) Do you value performance appraisal system?

a) Yes
b) No
c) To some extent.

BANK NAME NO. OF OPTIONS

A B C
NBP 5 0 1
MCB 4 0 2
No. of Respondents

6
NBP
4
MCB
2

0
A B C
No. of Options

Analysis:

As shown in the diagram 83% of the respondents at NBP strongly agreed that
performance appraisal is an important management function. Respondents at NBP
asserted that performance appraisal is more effective than the traditional ACR system and
that through an appraisal system management is in a better position to control and
manage employee performance since performance is being evaluated at short intervals of
time rather than once in a year, as is the case in ACR system. At MCB 100% of the
respondents were in strong agreement that they recognize appraisal system as an
important management function and show no doubt on the usefulness of the appraisal
system

25
Q.no.2) Is employee performance affected by performance evaluation?
a) Yes
b) No
c) To some extent.

BANK NAME NO. OF OPTIONS

A B C
NBP 5 0 1
MCB 6 0 0
No. of Respondents

6
NBP
4
MCB
2

0
A B C
No. of Options

Analysis:

83% of the respondents at NBP strongly agreed that performance evaluations have an
impact on employee performance whereas 16% were agreed to some extent. People at
MCB strongly agreed that performance is affected by the regular check and control from
the management side and is usually kept at high level and the response was 100% in
strong agreement.

So, it is concluded that positive evaluations increase employee performance and negative
evaluations adversely affect employee performance.

26
Q.no.3) Performance appraisals have a positive impact on employee
performance.
a) Yes
b) No
c) To some extent.

BANK NAME NO. OF OPTIONS

A B C
NBP 5 0 1
MCB 4 0 2
No. of Respondents

6
5
4
NBP
3
2 MCB
1
0
A B C
No. of Options

Analysis:

At NBP since the management has recently switched from ACRs to appraisals, the
impact of this development has been very positive, so 83% of the respondents strongly
agreed that performance is better managed and controlled through appraisals whereas
16% ere agreed to some extent. 67% of the respondents at MCB strongly agreed that
performance evaluations have a positive impact on performance but for the few of the
respondents it is just the measurement of actual performance and it may or may not
increase employee performance.

So, it is concluded on the basis of the above analysis that performance appraisals have a
positive impact on employee performance.

27
Q.no.4) Performance evaluations make the workers more responsible in
their jobs.
a) Yes
b) No
c) To some extent.

BANK NAME NO. OF OPTIONS

A B C
NBP 5 0 1
MCB 6 0 0
No. of Respondents

6
NBP
4
MCB
2

0
A B C
No. of Options

Analysis:

83% of the respondents at NBP strongly agreed that a continuous check on employees
through the appraisal system makes them more responsible in their job whereas 16% of
the respondents were agreed that this is the case to some extent. At MCB 100% of the
respondents were in strong agreement that performances evaluations make employees
more responsible in their jobs. Since the employee performance is continuously measured
again performance standards the employees are not in a position to deviate from or lag
behind the set targets. If the actual performance of an employee lags behind the standard
performance his status of performance is instantly discovered by the management
through the appraisal process and he is made answerable to the management for the
situation.

So, it is concluded that performance appraisals keep the employees on the track and they
do no deviate from what is expected of them.

Q.no.5) Do performance appraisals affect employee motivation?

28
 a) Yes
b) No
c) To some extent.

BANK NAME NO. OF OPTIONS

A B C
NBP 5 0 1
MCB 6 0 0
No. of Respondents

6
NBP
4
MCB
2

0
A B C
No. of Options

Analysis:

83% of the respondents at NBP strongly agreed that positive feedback from management
increases employee motivation whereas negative feedback decreases motivation to work.
At MCB the response was 100% in agreement with the statement that employees
motivation can be kept high by reinforcing the things done right.

So, it is concluded that performance appraisals directly affects motivation of employees.

29
Q.no.6) Performance appraisals give employees a sense of importance
that the management realizes their contribution and pays attention to
the work they do.
a) Yes
b) No
c) To some extent.

BANK NAME NO. OF OPTIONS

A B C
NBP 4 0 2
MCB 5 0 1
No. of Respondents

6
5
4
NBP
3
2 MCB
1
0
A B C
No. of Options

Analysis:

67% of the respondents at NBP were strongly in agreement with the statement that
Performance appraisals give employees a sense of importance that the management
realizes their contribution and pays attention to the work they do and 33% were in the
middle of the two extreme responses that appraisals give a sense of recognition to the
employees to some extent. The respondents at MCB were in the level of strong
agreement to the extent of 83% while 17% were of the opinion that it gives employees a
sense of importance to some extent.

So, it is concluded that appraisal gives employees a sense of recognition and importance.

30
Q.no.7) Do performance appraisals have an impact on compensation?
a) Yes
b) No
c) To some extent.

BANK NAME NO. OF OPTIONS

A B C
NBP 5 1 0
MCB 6 0 0
No. of Respondents

6
NBP
4
MCB
2

0
A B C
No. of Options

Analysis:

83% of the respondents at NBP strongly agreed that performance evaluation has an
impact on compensation while 16% strongly disagreed. However, at MCB the level of
strong agreement was 100% that the compensation packages are designed after
evaluating the performance of the employees. If the employees perform well he is paid
more than the one whose evaluation is poor.

So, on the basis of majority of responses it is concluded that performance appraisals have
an impact on compensation.

31
Q.no.8) Are the increments in pay based on performance evaluation?
a) Yes
b) No
c) To some extent.

BANK NAME NO. OF OPTIONS

A B C
NBP 3 2 1
MCB 5 0 1
No. of Respondents

6
5
4
NBP
3
2 MCB
1
0
A B C
No. of Options

Analysis:

50% of the respondents at NBP strongly agreed that increments are given when the
evaluations are favorable and 33% strongly disagreed with the statement while 16%
responded that to some extent increments are based on performance evaluations. At MCB
83% of the responses were in strong agreement with the statement while 16% of the
responses were agreed to some extent.

So, it is concluded that at NBP increment are some times based on evaluations and
sometimes they are not while at MCB increments are based on evaluations.

32
Q.no.9) Are performance appraisals good indicator of employee
efficiency?
a) Yes
b) No
c) To some extent.

BANK NAME NO. OF OPTIONS

A B C
NBP 5 0 1
MCB 3 0 3
No. of Respondents

6
5
4
NBP
3
2 MCB
1
0
A B C
No. of Options

Analysis:

83% of the respondents at NBP strongly agreed that performance appraisals are good
indicator of employee efficiency while 16% were agreed to some extent. At MCB 50% of
the respondents were in strong agreement of the statement and 50% were agreed to some
extent. None of the respondents in both the organizations strongly disagreed that
performance appraisals are not good indicator of employee efficiency.

So, it is concluded that performance appraisals indicate explicitly how good an employee
is performing and where is he lacking.

33
Q.no.10) Does positive feedback on employee performance increase
employee efficiency?
a) Yes
b) No
c) To some extent.

BANK NAME NO. OF OPTIONS

A B C
NBP 5 0 1
MCB 6 0 0
No. of Respondents

6
NBP
4
MCB
2

0
A B C
No. of Options

Analysis:

At NBP 83% of the responses were in strong agreement that the positive feedback from
the management motivates the employees to perform even better which eventually
increases their efficiency while 16% of the responses were in favor of the statement to
some extent. At MCB 100% of the responses were in strong agreement that whenever
there is positive feedback from the management it increases employee efficiency.

So, it is concluded on the basis of majority of responses that when the management gives
positive reinforcement on the things done right it further boosts employee efficiency.

34
Q.no.11) Are training decisions made after evaluating employee
performance?
a) Yes
b) No
c) To some extent.

BANK NAME NO. OF OPTIONS

A B C
NBP 4 2 0
MCB 5 0 1
No. of Respondents

6
5
4
NBP
3
2 MCB
1
0
A B C
No. of Options

Analysis:

At NBP 67% of the respondents expressed strong agreement that training is imparted
after the evaluation of the employees in the areas where they are lacking and are in
need of training to perform well. While 33% of the respondents were in strong
disagreement that training decisions are made after evaluating employee performance.
At MCB 83% expressed strong agreement that training decision are made after
evaluating employee performance in the areas where they are not doing up to the
mark. While 16% were agreed with the statement to some extent.

So, on the basis of majority of responses it is concluded that training decisions are
mostly made as per the evaluation of the employees. The areas in which the
employees are lagging behind as shown in the appraisals they are given training in
those are so that there performance may meet the set performance standards.

35
Q.no.12) Are transfer decisions made after evaluating employee
performance?
a) Yes
b) No
c) To some extent.

BANK NAME NO. OF OPTIONS

A B C
NBP 2 2 2
MCB 2 3 1
No. of Respondents

3
NBP
2
MCB
1

0
A B C
No. of Options

Analysis:

At NBP 33% of the respondents were in strong agreement with the statement that
employees are transferred from job to another if their evaluation in the current job is not
good enough. While 33% strongly disagreed with this statement and 33% were agreed to
some extent. At MCB 33% respondents were in strong agreement while 50% were in
strong disagreement and 16% were agreed to some extent.

So, it is concluded on the basis of the above analysis that transfer of employees from
department to another is not made on the basis of performance evaluation.

36
Q.no.13) Are promotion decisions made after evaluating employee
performance?
a) Yes
b) No
c) To some extent.

BANK NAME NO. OF OPTIONS

A B C
NBP 5 1 0
MCB 6 0 0
No. of Respondents

6
NBP
4
MCB
2

0
A B C
No. of Options

Analysis:

83% of the respondents at NBP were in strong agreement that promotion in entirely based
on employee evaluation and 16% were strongly disagreed. At MCB 100% of the
respondents were in strong agreement that promotion decisions are made by the
management for those whose evaluation is favorable.

So, it is concluded on the basis of majority of responses that promotion is given to those
employees who are rated high performers in evaluation.

37
Q.no.14) Are termination decisions made as per evaluation of
employees?
a) Yes
b) No
c) To some extent.

BANK NAME NO. OF OPTIONS

A B C
NBP 3 3 0
MCB 5 0 1
No. of Respondents

6
5
4
NBP
3
2 MCB
1
0
A B C
No. of Options

Analysis:

50% of the respondents at NBP were of the opinion that if the evaluation is poor an
employee is terminated from the organization and 50% were in strong disagreement
on this statement. The reason for the disagreement, as elucidated by the V.P. of the
organization, is that the termination in government organization is a very difficult and
lengthy process so on the basis of poor evaluation we cannot terminate the employee
from the organization. At MCB 83% of the respondents strongly agreed that if an
employee is consistently rated as a poor performer he may be terminated from the
organization while 16% were agreed to some extent.

So, it is concluded on the basis of the above analysis in public organization

termination is not possible on the basis of poor evaluation very easily but sometimes
when employees stop doing well they are terminated. While in private organizations a
poor performer is readily terminated.

38
Q.no.15) Performance appraisals help the human resource management
to define and identify what is expected of the employees?
a) Yes
b) No
c) To some extent.

BANK NAME NO. OF OPTIONS

A B C
NBP 5 0 1
MCB 6 0 0
No. of Respondents

6
NBP
4
MCB
2

0
A B C
No. of Options

Analysis:

At NBP 83% of the respondents strongly agreed that performance appraisals help the
human resource management to identify and define and define what expected
employee performance is while 16% agreed to some extent. At MCB 100% of the
employees agreed that human resource management through the appraisal system set
the standard performance.

So, it is concluded that performance appraisal assist the human resource management
in defining and identifying the expected standard performance.

Research Findings

39
Concludingly, it can be said that Performance Appraisal is a critical activity of Human
Resource Management. Its goal is to provide an accurate picture of past and future
employee performance. To achieve this, certain performance standards are established by
the management or mutually by both the management and the employees. These
standards are based on the job related criteria that best determine successful job
performance. In the performance appraisal system, wherever possible, actual performance
is measured directly and objectively against the set performance standards. From a wide
variety of appraisal techniques, specialists select the methods that most effectively
measure employee performance against the previously set standards.

Performance appraisals are used both to review the past performance and to anticipate
performance in future. They are used as “the quality control check.” Many HR decisions
are made after evaluating employee performance. If the appraisal process indicates that
poor performance is wide spread many employees are excluded from the placement
decision. Wherever the problem lies, HR specialists need to monitor the results of the
organizations performance appraisal process. These results serve as the barometer of the
entire human resource functions i.e. training, promotion, demotion, lay off, pay raise,
bonus, etc.

To further support the study i.e. “Role of Appraisals in managing and improving
employee performance” I also conducted a survey i.e. questionnaires in the head offices
of National Bank of Pakistan and Muslim Commercial Bank. The conclusions that I
drew from both the organizations were very much similar. The organizations have a well
established system of performance appraisal system; however, NBP has recently
introduced the system back in 2005 but the management seemed very much satisfied
from the new system in comparison with the traditional annual confidential report
system. While talking to the Senior Vice President of NBP Muhammad Ishaque Abbasi I
recorded him saying that “now the management is in a better position to evaluate
employee performance at regular short intervals of time, we have set a list of tasks to be
accomplished by each employee i.e. the standard performance and we measure each
employee’s actual performance against these standards and if there are any weaknesses
being pointed out in the appraisal sheet i.e. the performance activity report, they are later
discussed by the S.V.P with the employee i.e. the appraisal interview.” MCB has a very
effective system of performance appraisal. Since it is a private organization the
performance evaluations can even lead to the termination of a poor performer but that is
not the case at NBP, although promotion, demotion, training decisions are based as per
the evaluation of the employee but termination can not be justified just on the basis of
performance evaluation.

All the questions asked from the respondents support the study that performance
appraisal plays an important role in managing and improving employee performance.
Performance is managed and improved through training, transfers, quality control,
incentives, rewards, increased motivation, etc. the decisions of HR that are made on the
basis of performance evaluations.
Bibliography

40
• Davis, Keith & Werther, William B., Human Resource and Personnel
Management, McGraw Hill, New York, 1996, PP. 341- 344, 368-370.
• Decenzo, David A. & Robbins, Stephen P., Human Resource Management,
Replika Press, India, 2000, PP. 272-288.
• Latham, Gary P. & Wexley, Kenneth N., Increasing Productivity Through
Performance Appraisal, Wesley Publishing Company, Philippines, 1982, PP. 3-11,
79-96.
• Dessler, Gary, Human Resource Management, Prentice Hall of India, New Dehli,
1996, PP. 82-112
• Noe, Raymond A., Training and Development, McGraw Hill, New York, 1999,
PP. 382-390.
• Schuler, Randall S., Managing for Performance, New York University Press, New
York, 1994, PP. 226, 231-243.
• Graham, H.T. & Bennett, Roger, Human Resource Management, Pitman
Publisher, London, 1994.
• Stewart, Jim, Employee Development Practice, Pitman Publisher, London, 1998,
PP. 179-185.

QUESTIONNAIRE

41
Dear Respondent,

I am a student of MPA (Final) in the Department Of Public Administration,

University of Karachi. I am conducting a research on:

“Role of Performance Appraisals in managing and improving employee

performance”

I need your co-operation in this study. This is purely an academic research

and the information provided by you shall be kept secret.

Respondent’s Identity

Name: __________________________________________________
Designation: ______________________________________________
Organization: _____________________________________________
Signature: _______________________________________________

M. ZAKIR HUSSAIN
MPA (Final) previous
University of Karachi.

Instructions: Mark one of the options given below each question.

42
Q.no.1) Do you value performance appraisal system?
d) Yes
e) No
f) To some extent.

Q.no.2) Is employee performance affected by performance evaluation?

d) Yes
e) No
f) To some extent.

Q.no.3) Performance appraisals have a positive impact on employee

performance.
d) Yes
e) No
f) To some extent.

Q.no.4) Performance evaluations make the workers more responsible in

their jobs.
d) Yes
e) No
f) To some extent.

Q.no.5) Do performance appraisals affect employee motivation?

d) Yes
e) No
f) To some extent.

Q.no.6) Performance appraisals give employees a sense of importance

that the management realizes their contribution and pays attention to
the work they do.
d) Yes
e) No
f) To some extent.

Q.no.7) Do performance appraisals have an impact on compensation?

43
 d) Yes
e) No
f) To some extent.

Q.no.8) Are the increments in pay based on performance evaluation?

d) Yes
e) No
f) To some extent.

Q.no.9) Are performance appraisals good indicator of employee

efficiency?
d) Yes
e) No
f) To some extent.

Q.no.10) Does positive feedback on employee performance increase

employee efficiency?
d) Yes
e) No
f) To some extent.

Q.no.11) Are training decisions made after evaluating employee

performance?
d) Yes
e) No
f) To some extent.

Q.no.12) Are transfer decisions made after evaluating employee

performance?
d) Yes
e) No
f) To some extent.

Q.no.13) Are promotion decisions made after evaluating employee

performance?

44
 d) Yes
e) No
f) To some extent.

Q.no.14) Are termination decisions made as per evaluation of

employees?
d) Yes
e) No
f) To some extent.

Q.no.15) Performance appraisals help the human resource management

to define and identify what is expected of the employees?
d) Yes
e) No
f) To some extent.

THANK YOU FOR YOUR SUPPORT

45