Performance appraisal systems face several challenges, including identifying appropriate evaluation criteria and focusing on employee development rather than judgment. Raters must also be chosen carefully based on their expertise and training to conduct impartial assessments. Various cognitive biases can influence ratings, such as only considering recent performance or favoring those similar to the rater, so objectivity and tracking performance data are important. Employees may resist the process if not properly communicated to regarding its aims and standards.

3. Appraisal is the official or formal assessment of
the strengths and weaknesses of someone or
something.
An organization comes across various problems
and challenges Of Performance Appraisal In order
to make a performance appraisal system effective
and successful. The main Performance Appraisal
challenges involved in the performance appraisal
process are:

5.  Identification of the appraisal criteria is one
of the biggest problems faced by the top
management. The performance data to be
considered for evaluation should be carefully
selected . For the purpose of evaluation, the
criteria selected should be in quantifiable or
measurable terms.

7.  The purpose of the Performance appraisal
process is to judge the performance of the
employees rather than the employee. The
focus of the system should be on the
development of the employees of the
organization.

9.  Top management should choose the raters
or the evaluators carefully. They should have
the required expertise and the knowledge to
decide the criteria accurately. They should
have the experience and the necessary
training to carry out the appraisal process
objectively.

10.  1. Halo Effect
Halo Effect is when a rater’s overall positive or negative
impression of an individual employee leads to rating
him/her the same across all rating dimensions . This is
when a manager really likes or dislikes an employee and
allows their personal feelings about this employee to
influence their performance ratings of them.
 2. Leniency Error
Leniency error is when a raters’ tendency is to rate all
employees at the positive end of the scale (positive
leniency) or at the low end of the scale (negative
leniency).This can happen when a manager over-
emphasizes either positive or negative behaviors.

11.  3. Central Tendency Error
Central tendency error is the raters’ tendency to avoid making
“extreme” judgments of employee performance resulting in rating
all employees in the middle part of a scale.
This can happen either when a manager is not comfortable with
conflict and avoids low marks to avoid dealing with behavioral
issues or when a manager intentionally forces all employees to
the middle of the scale.
 4. Recency Error
Recency error is the rater’s tendency to allow more recent
incidents (either effective or ineffective) of employee behavior to
carry too much weight in evaluation of performance over an entire
rating period . This can be extreme on both ends of the
spectrum. Either an employee just finishing a major project
successfully or an employee may have had a negative incident
right before the performance appraisal process and it is on the
forefront of the manager’s thoughts about that employee. It is for
this reason that keeping accurate records of performance
throughout the year to refer back to during performance appraisal
time is so important.

12.  5. First Impression Error
First impression error is the rater’s tendencies to let their
first impression of an employee’s performance carry too
much weight in evaluation of performance over an entire
rating period.
 6. Similar-to-me Error
Similar-to-me error is when the rater’s tendency is
biased in performance evaluation toward those
employees seen as similar to the raters themselves. We
can all relate to people who are like us but cannot let our
ability to relate to someone influence our rating of their
employee performance.
Since human biases can easily influence the rating
process, it is important to create objective measures for
rating performance. Observing behaviors and using
available technology to help track performance can take
some of the biases out of the rating process.

13.  Many errors based on the personal bias like
stereotyping, halo effect (i.e. one trait
influencing the evaluator’s rating for all other
traits) etc. may creep in the appraisal
process. Therefore the rater should exercise
objectivity and fairness in evaluating and
rating the performance of the employees.

15.  The appraisal process may face resistance from
the employees and the trade unions for the fear
of negative ratings. Therefore, the employees
should be communicated and clearly explained
the purpose as well the process of appraisal.
The standards should be clearly communicated
and every employee should be made aware
that what exactly is expected from him/her.

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