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com

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Performance Apprais

Chapte

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 Performance appraisal is a systematic and objective

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evaluating both work related behaviour and potent

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employees.
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Features of performance appraisal

 It is a systematic process, essentially involving three ste

work standards, assess employee's performance
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to these standards, and offer feedback to the emplo

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that he or she can eliminate deficiencies and improve

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performance
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The appraisal is carried out periodically according to a

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plan
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 It is not a past oriented activity. The intention is not to

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poor performers in a spot. Instead, it shows emp

where things have gone wrong, how to set things
order and deliver superior performance using their pot
fully
 The focus of appraisals is on employee growth and
development. It forces managers to be coaches rath
judges.

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Objectives

 Compensation decisions
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 Promotion decisions
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 Training and development programmes

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 Feedback to the employee

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Personal growth and development

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
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Benefits of performance appraisal

Employer perspective [Administrative uses]

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 Despite imperfect measurement techniques, individual differ

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performance can make a difference to company performanc

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 Documentation of performance appraisal and feedback may

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required for legal defence.

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 Appraisal offers a rational basis for constructing a bonus or

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system.
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 Appraisal dimensions and standards can help to implement s

goals and clarify performance expectations.
Employee perspective [developmental purposes]
 Individual feedback helps people to rectify their mistakes an
ahead, focusing more on their unique strengths.
 Assessment and reorganisation of performance levels can m
employees to improve their performance.

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The Performance Appraisal Process

 Establish performance standards

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These are benchmarks against which performance is measured.

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They should relate to the desired results of each job

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They must be clear to both the appraiser and the appraisee.

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Good performance goals should speak about

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v What is the task to be accomplished?

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v What will it look like when it is accomplished?

v When must it be completed?
v What are the cost considerations?
v What are the likely payoffs to the employee?

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 Communicate the standards

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 The Appraiser should prepare job descriptions clearly

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Help the appraisee set own goals and targets

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v Analyse results objectively

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v Offer coaching and guidance

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 The Appraisee should be clear about what he is doing and why he is doin

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 Measure actual performance

 Use reliable and dependable performance measures
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 These must be easy to use and report on critical behaviours that d

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performance
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 These would generally include: personal observation, statistical rep

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reports and written reports

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These may be objective or subjective

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 Objective measures are generally quantitative, and include

production, degree of training needed, accidents in a give
absenteeism, length of service etc. Such measures are used for
lower level jobs
 Subjective measures are based on opinions of those doing evalu
are not verifiable by others; generally used for evaluating mi
positions
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 Compare actual performance with stand

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and discuss the appraisal

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Not an easy job

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Emotional factors to be taken into account

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Affects the self esteem of the appraisee

Criteria likely to be questioned, if the appraisal tu
out to be negative

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 Take corrective action, if necessary

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Put out the fires

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Set things in order

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Arrive at new goals for achieving superior perfor

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Essential Characteristic of an Effective Appraisal

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System.
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 Clear Objectives
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 Reliable and Valid

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 Standardisation
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 Training
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 Fob Relatedness
 Mutual Trust
 Feedback and Participation
 Help Focus
 Recognition of Differences

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Methods of Performance Appraisal

Past-oriented methods
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Rating scale
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
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 Confidential report
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 Essay evaluation
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 Critical incident method

 Checklists
 Forced choice method
 Behaviourally anchored rating scale
 Ranking

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Past-oriented Methods Contd.

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 Paired comparison method

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 Forced distribution method

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Field review technique

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Future-oriented Methods
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 Management by objective
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 360o Feedback Method

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 Psychological Appraisals

 Assessment Centre

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 Rating scale: The rating scale consist of several nu

scales, each representing a job related performance c
om
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such as dependability, initiative, output, atte

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attitude, co-operation and the like

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 Confidential Report-
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Ø Prepared by the employee’s immediate supervisor

Ø The report highlights the strengths and weaknesses of employe
Ø Prepared in Government organizations
Ø Does not offer any feedback to the employee

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Essay Evaluation Method om

The rater is asked to express the strong as well as weak point

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employee’s behavior
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The rater considers the employee’s :

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§ Job knowledge and potential

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§ Understanding of company’s programs, policies, objectives e

§ Relation with co-workers and supervisors
§ Planning, organizing and controlling ability
§ Attitude and perception

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Critical Incident Technique

 Manager prepares lists of statements of very effect

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ineffective behavior of an employee

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 These critical incidents represent the outstanding o

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behavior of the employees

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The manager periodically records critical incidents

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employee’s behavior
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Checklist
 Checklist contains a list of statements on the basis
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which the rater describes the on job performance

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employees
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Example:
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
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Is employee regular Y/N

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
 Is employee respected by subordinate Y
 Is employee helpful Y
 Does he follow instruction Y
 Does he keep the equipment in order Y

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Behaviorally Anchored Rating Scale

 BARS represent a range of descriptive statements

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behavior varying from the least to the most effectiv

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 In this a rater is expected to indicate which behavi

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each scale best describes an employee’s performan

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Forced Choice Method

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Ø In the forced choice method the rater is forced to select statem

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which are readymade

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The rater is asked to indicate which of the phrases is the most

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Ø
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descriptive of a particular worker

Ø Favorable qualities earn plus credit and unfavorable ones earn t

reverse

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Paired comparison method

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 For several traits paired comparisons are made, tab

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and then rank is assigned to each worker

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 No. of comparisons is calculated by the formula: N

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1)/2
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 This method is not applicable when the group is lar



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Ranking method
 The evaluator rates the employee from highest to lowest on
overall criteria. In this “how” and “why” are not questioned
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answered
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Employee Rank
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A 2
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B 1
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 C 3

 D 5

 E 4

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Field Review Method

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 The appraiser goes to the field and obtains the

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information about work performance of the emplo

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way of questioning the said individual, his peer grou

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his superiors
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Management by Objectives (MBO)

 First step: MBO emphasizes collectively set goals th

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tangible, verifiable, and measurable

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 Second step: setting the performance standard for

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subordinates
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Third step: the actual level of goal attainment is co

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
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with the goals agreed upon

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 Final step: involves establishing new goals and poss

new strategies for goals not previously achieved

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360o Feedback Method

om

 It is a systematic collection and feedback of perform

r.c
ke

data on an individual or group, derived from a num

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stakeholders
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Data is gathered and fed back to the individual part

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
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in a clear way designed to promote understanding,

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acceptance and ultimately behavior

 It makes the employee feel much more accountabl

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Psychological Appraisals
 It focuses on the future potential of an employee
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 past performance or the actual performance is not

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into consideration
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 Evaluation is based on employee’s intellectual, emo

motivational and other related characteristics

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Assessment Centres
 An assessment centre is a central location where
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managers may come together to have their partici

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in job-related exercises evaluated by trained obser

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COMPENSATION ADMINISTRATION

 Compensation is what employees receive in excha

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their contribution to the organization. Generally sp

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employees offer their services for three types of re

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        Base pay

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        Variable pay

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        Benefits
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The most important objective of any pay system is fa

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or equity, generally expressed in three forms

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 Internal equity: where more difficult jobs are paid m

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 External equity: where jobs are fairly compensated

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comparison to similar jobs in labour market

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 Individual equity: where equal pay is ensured for eq

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work

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Objectives of compensation plann

 Attract talent
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 Retain talent
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 Ensure equity
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 Reward appropriately(loyalty, commitment, experi

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risk raking and other desired behaviours)

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 Control costs
 Comply with legal rules
 Ease of operation

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Components of Pay Structure

 The two essential components of pay structure a

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basic wages and dearness allowance .the basic wage

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is fixed taking the skill needs of the job, experienc

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needed, difficulty of work, training required,

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responsibilities involved and the hazardous nature

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job. Dearness allowance it paid to employees in or

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compensate them for the occasional or regular rise

price of essential commodities.

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Components of pay structure in India

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 Under the Workmen's Compensation Act

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Wages for leave period, holiday pay, overtime pay, b

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attendance bonus and good conduct bonus

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 Under the Payment of Wages Act

Retrenchment compensation, payment in lieu of noti
gratuity payable on discharge

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Components of Pay Structure

 Bonus
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 Payments made under a profit sharing scheme

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 Value of house accommodation

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 Medical allowances
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Travelling allowances
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 Any other sum paid to defray special expenses incu

by the worker
 Contribution to pension, provident fund
 Any amenity or service excluded from the comput
wages

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Wage And Salary Administration

 It is the process of managing a company’s compens

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(base compensation as well as supplementary)

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programme Base compensation, here, refers to mo

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payments to employees in the form of wages and s

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It is a fixed, non-incentive kind of payment calculat

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the basis of time spent by an employee on the job.

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Supplementary compensation signifies incentive pay

based on the actual performance of an employee.

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v Objectives
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v To establish a fair and equitable remuneration

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v To attract competent personnel

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v To retain present employees

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v To control labour cost

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v To improve motivation and morale of employees

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v To project a good image of the company

v Principles
v Wage and salary plans be sufficiently flexible
v Job evaluation being done scientifically
v Wage and salary plans be always consistent with o
plansa
v Wage and salary plans being responsive to changi
conditions
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Factors affecting compensation levels

 Job needs
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 Ability to pay
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 Cost of living
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 Prevailing wage rates

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Unions
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
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 Productivity
 State regulation
 Demand and supply of labour

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Wage Policy In India

A wage policy offers certain guidelines for determining a

structure. The term wage structure refers to various pay
om
r.c

showing rages of pay within each grade. Three important

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elements of wage policy in India need to be elaborated he

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 Minimum wage: Wage sufficient to sustain and preserv

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efficiency of the worker and offer basic amenities of life

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 Fair wage: It is above the minimum wage but below the

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wage. It is fixed, taking into account factors such as the

productivity of labour, prevailing wage rates, level of na
income and its distribution, the employer’s capacity to
 Living wage: This is the highest amount of wages propo
the government, offering basic amenities of life and sati
the social needs of worker.

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Executive compensation: Private sector

Public sector
 In a well publicised front page news sometime back The Eco
Times mentioned about the miserable salary levels of top ex
om

in public sector units in India. For example the State Bank o

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ke

chief is paid 10% of HDFC Bank Managing Director, BHEL's

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getting about Rs.10 to 12 lakhs per year as against ABB's MD

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nearly Rs.40 to 50 lakhs; Indian Oil Corporation's chief getti

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to 15 lakhs per annum as against Reliance Industries' Amban

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getting a package of over Rs.10 crore per annum. Salary leve

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'hot' private sector such as BPO, hospitality, biotechnology

IT, Telecommunications, Oil, Automobiles and Insurance ar
above the packages offered to executives in public sector fo
reasons such as: overstaffing, inefficient processes, pressure
margins due to competition, appointment of people without
requisite skills at the top level, political interference especia
pricing the products or services, legal constraints etc.

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Managerial Compensation In India

Executive compensation is built around three factors in India

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v Job complexity
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v Employers’ ability to pay

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v Managerial productivity
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How to retain talent?

 Improving communication
om

 Changing work rules

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ke

 Increasing pay and incentives

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tR

 Ego massaging services

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Non-poaching agreements
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
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 Opportunities to upgrade skills and knowledg

 Offering jobs with stretch, pull and challenge

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