Performance appraisal


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A very important HR function - Performance Appraisal

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Performance appraisal

  1. 1. Human Resource Planningand Human Resource AuditTopic: Performance AppraisalSubmitted to: Mr. Ravi PoonachaSubmission date: 07/09/2011 Submitted by: Siddhesh Vijay Lakhan MMS 3rd Semester (HR) Roll No. 13 SIBM, Mumbai
  2. 2. PERFORMANCE APPRAISALPeople differ in their abilities and their aptitudes. There is always some difference betweenthe quality and quantity of the same work on the same job being done by two differentpeople. Performance appraisals of Employees are necessary to understand each employee’sabilities, competencies and relative merit and worth for the organization. Performanceappraisal rates the employees in terms of their performance.Performance appraisals are widely used in the society. The history of performance appraisalcan be dated back to the 20th century and then to the second world war when the merit ratingwas used for the first time. An employer evaluating their employees is a very old concept.Performance appraisals are an indispensable part of performance measurement.Performance appraisal is necessary to measure the performance of the employees and theorganization to check the progress towards the desired goals and aimsMeaning and definition:Definition of Performance appraisalPerformance appraisal, also known as employee appraisal, is a method by which the jobperformance of an employee is evaluated (generally in terms of quality, quantity, cost andtime). Performance appraisal is a part of career development.Definition of Performance appraisal of Washington University:Any system of determining how well an individual employee has performed during a periodof time, frequently used as a basis for determining merit increases.The latest mantra being followed by organizations across the world being – "get paidaccording to what you contribute" – the focus of the organizations is turning to performancemanagement and specifically to individual performance. Performance appraisal helps to ratethe performance of the employees and evaluate their contribution towards the organizationalgoals. If the process of performance appraisals is formal and properly structured, it helps theemployees to clearly understand their roles and responsibilities and give direction to theindividual’s performance. It helps to align the individual performances with theorganizational goals and also review their performance.Performance appraisal takes into account the past performance of the employees and focuseson the improvement of the future performance of the employees.
  3. 3. Objectives of performance appraisal• Improve performance effectiveness and feedbacks: the whole company.• Plan human resources: promotion, especially in management, overtaking.• Recruitment and selection: Score tabulation allows forecasting employee’swork accomplishment possibility and measuring the effectiveness of tests.• Development of human resources: Show the demand for training, education anddevelopment; identify employee’s imperfections to be corrected.• Career plan and development: Identify employee’s potential imperfections; help them tocarry out the plan.• Salary and treatment: Decision of salary increase, bonus increase.• Inferior personnel tie: Promotion, reduction in grade, contract termination, work suspension,transfer.• Employee potential appraisal: Based on employees’ work accomplishment, examine pastactivities to forecast future performance. Common mistake is made when one of highprofessional capacity is promoted lacking leading capacity. The evaluated object needs to bespecified so that an objective appraisal is guaranteed.Purpose of performance appraisalWhy you do performance appraisal? Purpose of performance appraisal include elements asfollows:1. Career Development• This provides an opportunity for discussion of career objectives, and creation of a strategydesigned to maximize career potential.• To provide an opportunity for career counseling• To help in succession planning.• To assess training needs• To plan for career development• To assess and develop individual abilities• To provide an objective basis on which to base decisions about training and promotion2. Feedback
  4. 4. • As well, feedback is encouraged in both directions: as such, employees are encouraged toprepare ratings of their supervisors.• To provide constructive feedback to the individual regarding how their performance is seen.• This provides a structured format for the discussion of performance issues• on a regular basis.• Feedback either reinforces performance strengths, or provides the opportunity to discussresolution of performance deficiencies.3. Administrative Uses of Performance appraisal• Salary• Promotion• Retention/termination• Recognition of performance• Layoffs• Identification of poor performers4. Performance History• This provides a performance history which is not dependent upon human memory, andwhich may be useful in the full range of personnel decisions, including compensationdecision-making.• To review past and present performance, identifying strengths and weaknesses.5. Organizational Goals• To clarify, for the individual, organizational expectations• This provides an opportunity to view one’s performance in the context of broaderorganizational goals.• To assess future promotion prospects and potential• To set objectives for the next period6. Job StandardsThis provides an opportunity for clearer articulation and definition of performanceexpectations.7. Documentation use of of Performance appraisal• Documentation for HR decisions• Helping to meet legal requirements
  5. 5. Performance appraisal methods(Tools of ) Performance appraisal methods include 11 appraisal methods / types as follows:1. Critical incident methodThis format of performance appraisal is a method which is involved identifying anddescribing specific incidents where employees did something really well or that needsimproving during their performance period.2. Weighted checklist methodIn this style, performance appraisal is made under a method where the jobs being evaluatedbased on descriptive statements about effective and ineffective behavior on jobs.3. Paired comparison analysisThis form of performance appraisal is a good way to make full use of the methods of options.There will be a list of relevant options. Each option is in comparison with the others in thelist. The results will be calculated and then such option with highest score will be mostlychosen.4. Graphic rating scalesThis format is considered the oldest and most popular method to assess the employee’sperformance.In this style of performance appraisal, the management just simply does checks on theperformance levels of their staff.5. Essay Evaluation methodIn this style of performance appraisal, managers/ supervisors are required to figure out thestrong and weak points of staff’s behaviors. Essay evaluation method is a non-quantitativetechnique. It is often mixed with the method the graphic rating scale.6. Behaviorally anchored rating scalesThis formatted performance appraisal is based on making rates on behaviors or sets ofindicators to determine the effectiveness or ineffectiveness of working performance. Theform is a mix of the rating scale and critical incident techniques to assess performance of thestaff.7. Performance ranking methodThe performance appraisal of ranking is used to assess the working performance ofemployees from the highest to lowest levels.
  6. 6. Managers will make comparisons of an employee with the others, instead of makingcomparison of each employee with some certain standards.8. Management By Objectives (MBO) methodMBO is a method of performance appraisal in which managers or employers set a list ofobjectives and make assessments on their performance on a regular basis, and finally makerewards based on the results achieved. This method mostly cares about the results achieved(goals) but not to the way how employees can fulfill them.9. 360 degree performance appraisalThe style of 360 degree performance appraisal is a method that employees will giveconfidential and anonymous assessments on their colleagues. This post also information thatcan be used as references for such methods of performance assessments of 720, 540, 180…10.Forced ranking (forced distribution)In this style of performance appraisal, employees are ranked in terms of forced allocations.For instance, it is vital that the proportions be shared in the way that 10 or 20 % will be thehighest levels of performances, while 70 or 80% will be in the middle level and the rest willbe in the lowest one.11. Behavioral Observation ScalesThe method based on the scales of observation on behaviors is the one in which importanttasks that workers have performed during their working time will be assessed on a regularbasis.
  7. 7. Process of Performance Appraisal ESTABLISHING PERFORMANCE STANDARDS The first step in the process of performance appraisal is the setting up of the standards which will be used to as the base to compare the actual performance of the employees. This step requires setting the criteria to judge the performance of the employees as successful or unsuccessful and the degrees of their contribution to the organizational goals and objectives. The standards set should be clear, easily understandable and in measurable terms. In case the performance of the employee cannot be measured, great care should be taken to describe the standards. COMMUNICATING THE STANDARDS Once set, it is the responsibility of the management to communicate the standards to all the employees of the organization.This will help them to understand their roles and to know what exactly is expected fromthem. The standards should also be communicated to the appraisers or the evaluators and ifrequired, the standards can also be modified at this stage itself according to the relevantfeedback from the employees or the evaluators.*Figure: Process of performance appraisal (Flowchart)
  8. 8. MEASURING THE ACTUAL PERFORMANCEThe most difficult part of the Performance appraisal process is measuring the actualperformance of the employees that is the work done by the employees during the specifiedperiod of time. It is a continuous process which involves monitoring the performancethroughout the year. This stage requires the careful selection of the appropriate techniques ofmeasurement, taking care that personal bias does not affect the outcome of the process andproviding assistance rather than interfering in an employees work.COMPARING THE ACTUAL WITH THE DESIRED PERFORMANCEThe actual performance is compared with the desired or the standard performance. Thecomparison tells the deviations in the performance of the employees from the standards set.The result can show the actual performance being more than the desired performance or, theactual performance being less than the desired performance depicting a negative deviation inthe organizational performance. It includes recalling, evaluating and analysis of data relatedto the employees’ performance.DISCUSSING RESULTSThe result of the appraisal is communicated and discussed with the employees on one-to-one basis. The focus of this discussion is on communication and listening. The results, theproblems and the possible solutions are discussed with the aim of problem solving andreaching consensus. The feedback should be given with a positive attitude as this can have aneffect on the employees’ future performance. The purpose of the meeting should be to solvethe problems faced and motivate the employees to perform better.DECISION MAKINGThe last step of the process is to take decisions which can be taken either to improve theperformance of the employees, take the required corrective actions, or the related HRdecisions like rewards, promotions, demotions, transfers etc.
  9. 9. Latest Changes in Performance Appraisal:Performance Appraisals as Career Development Performance appraisal is a part of career development. The latest mantra being followed by organizations across the world being – "get paid according to what you contribute" – the focus of the organizations is turning to performance management and specifically to individual performance. Performance appraisal helps to rate the performance of the employees and evaluate their contribution towards the organizational goals. Performance appraisal as Career Development leads to the recognition of the work done by the employees, many a times by the means of rewards and appreciation etc. It plays the role of the link between the organization and the employees’ personal career goals. Potential appraisal, a part of Performance appraisal, helps to identify the hidden talents and potential of the individuals. Identifying these potential talents can help in preparing the individuals for higher responsibilities and positions in the future. The performance appraisal process in itself is developmental in nature. Performance appraisal is also closely linked to other HR processes like helps to identify the training and development needs, promotions, demotions, changes in the compensation etc. A feedback communicated in a positive manner goes a long way to motivate the employees and helps to identify individual career developmental plans. Based on the evaluation, employees can develop their career goals, achieve new levels of competencies and chart their career progression. Performance appraisal encourages employees to reinforce their strengths and overcome their weaknesses.Approaches to Performance Development Performance appraisal - Traditional approach Traditionally, performance appraisal has been used as just a method for determining and justifying the salaries of the employees. Than it began to be used a tool for determining rewards (a rise in the pay) and punishments (a cut in the pay) for the past performance of the employees. This approach was a past oriented approach which focused only on the past performance of the employees i.e. during a past specified period of time. This approach did not consider the developmental aspects of the employee performance i.e.
  10. 10. histraining and development needs or career developmental possibilities. The primary concern of the traditional approach is to judge the performance of the organization as a whole by the past performances of its employees Therefore, this approach is also called as the overall approach. In 1950s theperformance appraisal was recognized as a complete system in itself and the Modern Approach to performance appraisal was developed. Performance appraisal - Modern approach The modern approach to performance development has made the performance appraisal process more formal and structured. Now, the performance appraisal is taken as a tool to identify better performing employees from others, employees’ training needs, career development paths, rewards and bonuses and their promotions to the next levels.Appraisals have become a continuous and periodic activity in the organizations. The resultsof performance appraisals are used to take various other HR decisions like promotions,demotions, transfers, training and development, reward outcomes. The modern approach toperformance appraisals includes a feedback process that helps to strengthen the relationshipsbetween superiors and subordinates and improve communication throughout the organization.The modern approach to Performance appraisal is a future oriented approach and isdevelopmental in nature. This recognizes employees as individuals and focuses on theirdevelopment.Performance ManagementPerformance management is the systematic process by which an agency involves itsemployees, as individuals and members of a group, in improving organizational effectivenessin the accomplishment of agency mission and goals. Employee performance management includes: planning work and setting expectations, continually monitoring performance, developing the capacity to perform, periodically rating performance in asummary fashion, and rewarding good performance.
  11. 11. 1. Planning In an effective organization, work is planned out in advance. Planning means setting performance expectations and goals for groups and individuals to channel their efforts toward achieving organizational objectives. Getting employees involved in the planning process will help them understand the goals of the organization, what needs to be done, why it needs to be done, and how well it should be done. The regulatory requirements for planning employees performance include establishing the elements and standards of their performance appraisal plans. Performance elements and standards should be measurable, understandable, verifiable, equitable, and achievable. Through critical elements, employees are held accountable as individuals for work assignments or responsibilities. Employee performance plans should be flexible so that they can be adjusted for changing program objectives and work requirements. When used effectively, these plans can be beneficial working documents that are discussed often, and not merely paperwork that is filed in a drawer and seen only when ratings of record are required2. Monitoring In an effective organization, assignments and projects are monitored continually. Monitoring well means consistently measuring performance and providing ongoing feedback to employees and work groups on their progress toward reaching their goals. Regulatory requirements for monitoring performance include conducting progress reviews with employees where their performance is compared against their elements and standards. Ongoing monitoring provides the opportunity to check how well employees are meeting predetermined standards and to make changes to unrealistic or problematic standards. And by monitoring continually, unacceptable performance can be identified at any time during the appraisal period and assistance provided to address such performance rather than wait until the end of the period when summary rating levels are assigned.3. Developing In an effective organization, employee developmental needs are evaluated and addressed. Developing in this instance means increasing the capacity to perform through training, giving assignments that introduce new skills or higher levels of responsibility, improving work processes, or other methods. Providing employees with training and developmental opportunities encourages good performance, strengthens job-related skills and competencies, and helps employees keep up with changes in the workplace, such as the introduction of new technology. Carrying out the processes of performance management provides an excellent opportunity to identify developmental needs. During planning and monitoring of work, deficiencies in performance become evident and can be addressed. Areas for improving good performance also stand out, and action can be taken to help successful employees improve even further.4. Rating From time to time, organizations find it useful to summarize employee performance. This can be helpful for looking at and comparing performance over time or among various employees. Organizations need to know who their best performers are. Within the context of formal performance appraisal requirements, rating means evaluating employee or group performance against the elements and standards in an employees performance plan and assigning a summary rating of record. The rating of
  12. 12. record is assigned according to procedures included in the organizations appraisal program. It is based on work performed during an entire appraisal period. The rating of record has a bearing on various other personnel actions, such as granting within- grade pay increases and determining additional retention service credit in a reduction in force. Note: Although group performance may have an impact on an employees summary rating, a rating of record is assigned only to an individual, not to a group. 5. Rewarding In an effective organization, rewards are used well. Rewarding means recognizing employees, individually and as members of groups, for their performance and acknowledging their contributions to the agencys mission. A basic principle of effective management is that all behavior is controlled by its consequences. Those consequences can and should be both formal and informal and both positive and negative. Good performance is recognized without waiting for nominations for formal awards to be solicited. Recognition is an ongoing, natural part of day-to-day experience. A lot of the actions that reward good performance — like saying "Thank you" — dont require a specific regulatory authority. Nonetheless, awards regulations provide a broad range of forms that more formal rewards can take, such as cash, time off, and many nonmonetary items. The regulations also cover a variety of contributions that can be rewarded, from suggestions to group accomplishments.Managing Performance EffectivelyIn effective organizations, managers and employees have been practicing good performancemanagement naturally all their lives, executing each key component process well. Goals areset and work is planned routinely. Progress toward those goals is measured and employeesget feedback. High standards are set, but care is also taken to develop the skills needed toreach them. Formal and informal rewards are used to recognize the behavior and results thataccomplish the mission. All five component processes working together and supporting eachother achieve natural, effective performance management.Role of HRP in Performance appraisal:HRP make performance appraisal more meaningful. Since feedback is provided inperformance appraisal and employee is informed about his future chances in same company,the employee is motivated to work better. Information for all this is collected from HRPprocess.