Prof. N. N. PANDA
Performance Appraisal is the systematic evaluation of
the performance of employees and to understand the
abilities of a person for further growth and
The process by which
a manager or consultant (1) examines and evaluates
an employee's work behavior by comparing it with
preset standards, (2) documents the results of the
comparison, and (3) uses the results
to provide feedback to the employee to show
where improvements are needed and why.
Performance appraisals are employed to determine
who needs what training, and who will be
promoted, demoted, retained, or fired.
Performance appraisal is generally done in systematic
ways which are as follows:
a. The supervisors measure the pay of employees and
compare it with targets and plans.
b. The supervisor analyses the factors behind work
performances of employees.
c. The employers are in position to guide the
employees for a better performance.
Objectives of Performance Appraisal
Performance Appraisal can be done with
following objectives in mind:
1. To maintain records in order to determine
compensation packages, wage structure, salaries
2. To identify the strengths and weaknesses
of employees to place right men on right job.
3. To maintain and assess the potential
present in a person for further growth and
4. To provide a feedback to employees
regarding their performance and related status.
5. To provide a feedback to employees
regarding their performance and related status.
6. It serves as a basis for influencing working
habits of the employees.
7. To review and retain the promotional and
other training programmes.
Broadly, all the approaches to appraisal can be
I) Traditional methods
II) Modern methods
Graphic Rating scales
Management by objectives
Forced distribution method
Critical incident method
Field review method
Performance tests and
Cost accounting Method
Annual confidential reports
Comparative evaluation approach
1. Graphic Rating scale: Rating scales offer the
advantages of adaptability, relatively easy use and low
cost. Nearly every type of job can be evaluated with the
rating scale, the only requirement being that the jobperformance criteria should be changed. This way, a
large number of employees can be evaluated in a short
time, and the rater does not need any training to use
The disadvantages of this method are several. The
rater’s biases are likely to influence evaluation, and the
biases are particularly pronounced on subjective
criteria such as cooperation, attitude and initiative,
furthermore, numerical scoring gives an illusion of
precision that is really unfounded.
2. Checklist: Here a checklist of behaviour descriptions
is prearranged and each person is evaluated against
such list. Rater merely record the list and a separate
group can allocate weight ages for each list and finally
arrive at total points or marks obtained.
Checklist reduces subjectively because recording is
done by someone else act as the rater. Rater, at the end
put weightages and adds marks.
Normally confined to staff of personnel department.
Difficult for all jobs.
3. Straight Ranking Method –
Under this method the employees are ranked from
best to worst on some characteristics. The rater first
finds the employee with the highest performance &
the employees with the lowest performance in that
particular job category and rates the former as the
best and the latter as the poorest. Then the rater
selects the next highest and lowest and so on until
he rates all the employees in that group.
4. Critical incidents method:
The critical incidents method of employee
assessment has generated a lot of interest these days.
The approach focuses on certain critical behaviours of
an employee that make all the difference between
effective and non-effective performance of a job.
The critical incidents method of performance
appraisal is based on managers' spending time during
the year observing and gathering behavioral data on
their employees, while looking extra carefully for
those critical incidents.
5. Field review method:
This is an appraisal by someone outside the
assessee’s own department, usually someone
from the corporate office or the HR Dept. The
outsider reviews employee records and holds
interviews with the ratee and his or her
supervisor. The method is primarily used for
making promotional decision at the managerial
level. Field reviews are also useful when
comparable information is needed form
employees in different units or locations.
6. Essay method:
In the essay method, the rater must describe the
employee within a number of broad categories, such as
(i) the rater’s overall impression of the employee’s
performance, (ii) the profitability of the employee, (iii)
the jobs that the employee is now able or qualified to
perform, (iv) the strengths and weakness of the
employee, and (v) the training and the development
assistance required by the employee. Although this
method may be used independently, it is most
frequently found in combination with others. It is
extremely useful in filing information gaps about the
employees that often occur in the better-structured
7. Confidential Records:
Confidential records are maintained mostly in
government departments, though its application in
the industry is not ruled out.
It is descriptive in nature.
Prepared at the end of the year.
Prepared by the superior authorities which shows
strength and weakness of employees.
8. Performance Tests and observations:
With a limited number of jobs, employee
assessment may be based upon a test of
knowledge or skills. The test may be of the
paper-and-pencil variety or an actual
demonstration of skills. The test must be reliable
and validated to be useful. Even then,
performance tests are apt to measure potential
more than actual performance. In order for the
test to the job related, observations should be
made under circumstances likely to be
9. Paired Comparison Method
In this method, each employee is
compared with the other on one-to-one
basis. This method makes judgment
easier as compared to ranking method.
The number of times the employee is
rated as better in comparisons with
others determines his or her final
The total number of comparison can be ascertained
by the following formula :
where N stands for number of employees to be
The concept can be illustrated with the help of the
If the following five students Ashok (A), Bina (B),
Chitra (C), Dinesh (D), Eillen (E) have to be
evaluated for the best student award, the total
number of comparison would be = 10
A with B
A with C
A with D
A with E
B with C
B with D
B with E
C with D
C with E
D with E
The number of times a student gets a better score,
would be the basis for selecting the Best Student.
This method is not appropriate if a large number of
students are required to be evaluated.
10. Forced Distribution Method
The method under the operation that an
employees performance can be plotted in a bellshaped curve. Here 10% of the employees are
given excellent grade, 20% are given good grade,
40% are given average grade, next 20% are given
below average grade and last 10% are given
The modern techniques of performance are1. Management by Objectives (MBO)
MBO can be described as "a process whereby
the superior and the immediate subordinate of
an organisation jointly identify the common
goals, define each individual's major areas of
responsibility in terms of results expected of him
and use these measures as guides for operating
the unit and assessing the contribution of each
of its members."
In this method emphasis is laid on stating
objectives for Key Result Areas (KRAs) in
MBO is used as a performance appraisal
technique, as it is easy to measure whether the
stated objectives have been achieved or not.
• To change behaviour and attitude towards getting
the job done.
• It is management system and philosophy that stress
goals rather than method.
• It provides responsibility and accountability.
• To meet these needs by providing opportunities for
participation in goal-setting process.
On the basis of these factors rater’s especially HR
department used to make appraisal of the employees
in the organization.
2. 360-Degree Method –
The 360-degree technique is understood as
systematic collection of performance data on an
individual or a, group derived from a number of
stakeholders—the stakeholders being the
immediate, team members customers peers and
The 360-degree appraisal provides a broader
perspective about an employee’s performance.
In addition, the technique facilitates greater selfdevelopment of the employees.
Besides, the 360-degree appraisal provides
formalized communication links between an
employee and his or her customers. It makes the
employee feel much more accountable to his or
her internal or external customers.
The technique is particularly helpful in assessing
soft skills possessed by employees. By design,
the 360-degree appraisal is effective in
identifying and measuring interpersonal skills,
customer satisfaction, and team-building skills.
3. Psychological Appraisals
Large organizations employ full-time industrial
psychologists. When psychologists are used for
evaluations, they assess and individual’s future
potential and not past performance. The
appraisal normally consists of in-depth
interviews, psychological tests, discussions with
supervisors and a review of other evaluations.
The psychologists writes an evaluation of the
employee’s intellectual, emotional, motivational and
other related characteristics that suggest individual
potential and may predict future performance.
Because this approach is slow and costly, it is usually
required for bright young members who, think, may
have considerable potential within the organization.
Since the quality of the appraisal depends largely on
the skills of the psychologists, some employees object
to this type of evaluation, especially if cross-cultural
4. Assessment Centres
This method was used to appraise army officers
in Germany way back in 1930s. The concept was
adapted from army to business arena in 1960s.
In India, the concept has been adopted by
organisations such as Crompton Greaves, Eicher,
Hindustan Lever and Modi Xerox recently.
This method is mainly used to evaluate executive
and supervisory potential. Here employees are
taken to a place away from work and a series of
tests and exercises are administered. For example,
assesses are asked to participate in; in-basket
exercise, simulations, group exercise and role plays.
Performance of the employee is evaluated in
each of these tests and feedback is provided to the
ratee, in terms of strengths and weaknesses.
5. BARS (Behaviourally Anchored Rating Scale)
In order to overcome the problem of judgmental
evaluation, this method was conceived by some
organisations. This method combines the
benefits of Essay Method, Critical Incident and
In this method the employee's behaviour and
performance dimensions are analysed and used for
evaluating the performance of the employee.
The HR department is involved in the process of
preparing the BARS. Based on the Employee's
performance and behaviour, employees are
anchored in different slots of good, average and
poor. The rater is required to give corresponding
ratings to the employee.
HE HAS COMMOND OVER THE SUBJECT
HE HAS LATEST INFORMATION
HE IS DEPENDABLE
HE HAS SUBJECT KNOWLEDGE
HE IS NOT UP-TO-DATE
HE IS NOT VERY DEPENDABLE
HE HAS NO SUBJECT KNOWLEDGE
HE HAS NO LATEST INFORMATION
HE IS NOT DEPEDNABLE
6. Cost Accounting method/ Human asset
This method evaluates an employee's
performance in relation to the contribution of
an employee in monetary terms. Here
the rater evaluates the employee in terms of
cost of retaining the employee and the
benefits the organisation derives from him/her.
The following factors are taken into account in this
(1) Cost of training the employee.
(2) Quality of product or service rendered.
(3) Accidents, damages, errors, spoilage, wastages,
(4) The time spent in appraising the employee.