In this presentation, we will understand the importance and methods of performance evaluation and appraisal. We will also discuss about Management by Objective Process, its objectives, benefits and disadvantages of MBO. To know more about Welingkar School’s Distance Learning Program and courses offered, visit: http://www.welingkaronline.org/distance-learning/online-mba.html

1. Chapter5
Performance Appraisal
Objectives:
• Understand the importance of Performance
Appraisal.
• Understand why an organization needs
Performance Appraisal.
• Understand the evaluation process.
• Understand various methods of Performance
Appraisal.
• Understand what Career Planning is all about.

2. Chapter5
Performance Appraisal
Structure:
5.1 Introduction
5.2 Evaluation Process
5.3 Performance Appraisal Methods
5.4 Career Planning
5.5 Summary

3. Chapter5
Performance Appraisal
5.1 Introduction
• Performance Appraisal is a process of evaluating
the performance of the employee on the job that
he is employed to do.
• Performance Appraisal was initially said to have
been done during the First World War, and
focused on the operational people only.
• Later on, Performance Appraisal was employed in
areas of work like technical, professional and
managerial performance.

4. Chapter5
Performance Appraisal
•Performance Appraisal has three needs to
fulfill:
a) Promotions, transfers, rewards and
motivation of the employee.
b) Feedback to the employee on his
performance and scope for improvement
c) Understand the gap between his actual
performance and standards and counsel.,
coach or train him to reduce the gap.

5. Chapter5
Performance Appraisal
5.2 The Evaluation Process
It follows the following steps:
1. Establishment of performance standards
2. Communicate the standards to all concerned.
3. Measurement of performance
4. Comparison of actual performance with
standards. Determining the ‘gap’
5. Results of appraisal discussed with the
employees periodically.
6. Initiation of corrective action to minimize the
‘gap’

6. Chapter5
Performance Appraisal
5.3 Performance Appraisal Methods
• Strauss & Styles have classified performance
appraisal methods into traditional methods and
modern methods.
• The traditional methods lay emphasis on the
rating of the individaul’s personality traits such as
initiative, dependablity, drive, drive, etc.
• The modern methods place more emphasis on the
evaluation of work results.

7. Chapter5
Performance Appraisal
Methods of Appraisal & Career Development
• Most traditional methods emphasize either on
task or the worker’s personality while making
appraisal.
• In order to bring about a balance between the
two, modern methods have been developed. Of
such methods the most important are:
1. Management by Objectives (MBO)
2. Assessment Center Method
3. Human Asset Accounting Method
4. Behaviorally Anchored Rating Scales (BARS)

8. Chapter5
Performance Appraisal
1. Management By Objectives (MBO)
• Evolved by Peter Drucker, MBO is an effective,
unique process that minimizes external control
and maximizes internal motivation.
• This is achieved through joint goal-setting
between manager and subordinate and
increasing the subordinate’s control over his
work through active participative management.

9. Chapter5
Performance Appraisal
• MBO could be described as a process whereby:
1. A system’s approach in which those accountable
for managing the organization first determine
where they want to take the organization.
2. A process requiring and encouraging all key
management personnel to contribute their
maximum to achieving the overall objectives.
3. An effort to blend and balance the individaul and
the organizational goals.
4. An evaluation mechanism

10. Chapter5
Performance Appraisal
Objectives of MBO:
• The objective of MBO is to change behaviors and attitudes
towards getting the job done. It is a result-oriented
process steered by personal growth.
• It is a philosophy that stresses on goals rather than
methods.
• It provides responsibility and accountability and recognizes
that employees have the need for achievement and self
fulfillment.
• It meets these needs by providing opportunities for
participation in goal-setting process. Subordinates get
involved in planning their own careers.

11. Chapter5
Performance Appraisal
MBO Process:
There are five basic steps in the MBO process:
a) Setting organizational Goals- clearly
communicated
b) Joint Goal setting- short-term goals to be set
between senior and subordinate.
c) Performance reviews-frequent reviews to ensure
that the path is correct
d) Establish checking points- self monitored control
e) Feedback- specific, relevant and timely for
corrective actions

12. Chapter5
Performance Appraisal
• Summing up, the foundations of MBO are:
a) Goal-setting
b) Feedback
c) Participation
• Through these steps, MBO emphasizes the
present and future rather than the past.
• It focuses attention on the results that are
accomplished and not on personal traits or
operational methodology.

13. Chapter5
Performance Appraisal
Benefits of MBO:
• Increases employee motivation through active participation and
personal commitment with inner drivenness.
• Employees compete with oneself and not with others, thus reducing
conflicts.
• The whole organization is working towards the same objective without
ambiguity. There is a congruence, leading to effectiveness.
• Provides objective appraisal criteria without making it “inhuman”
• Addresses individual and organizational goals, harmoniously.
• Identifies performance deficiencies well in advance and enables timely
corrective actions.
• Promotes personal growth and managerial and leadership
development.

14. Chapter5
Performance Appraisal
Disadvantages of MBO:
• It takes a lot of time to create, test and implement.
Moreover lot of resources need to be invested, in terms of
executive efforts and time and manpower and money.
• It operates effectively only in a space of trust and open
communication.
• Since it is based on human behavior and changes, it gets
difficult to take off. People don’t change behaviors so
easily.
• Targets may be manipulated to suit an alliance between
senior and subordinate.
• Promised rewards may be denied, resulting in distrust and
feeling of betrayal.

15. Chapter5
Performance Appraisal
5.4 Career Planning
• Individual Career Planning is important for
employee motivation and retention.
• It gained importance due to technology,
human needs, increase in training facilities,
aspirations, organizational growth, etc.

16. Chapter5
Performance Appraisal
Meaning of Career Planning
• Career pertains to all the jobs held by an
employee meaningfully during one’s working life.
• Edwin Flippo defines career as a sequence but
related work activities that provides continuity and
order in a person’s life.
• Career Planning is the process by which one
selects career goals and the path to those goals.

17. Chapter5
Performance Appraisal
Need for Career Planning
• To attract competent people and to retain them
• To provide suitable promotional opportunities.
• To enable self development of employees
• To increase the utilization of managerial resources
• To reduce employee dissatisfaction & attrition
• To boost morale and increase motivation.

18. Chapter5
Performance Appraisal
Process of Career Planning
There are steps in Career Planning as follows:
a) Analysis of skills, knowledge, competencies, etc.
b) Analysis of career opportunities both within and outside
the organization.
c) Analysis of career demands like skills, experience, etc
d) Relating jobs with career opportunities
e) Establishing realistic goals.
f) Formulating Career strategy
g) Preparing and implementing action plan.

19. Chapter5
Performance Appraisal
Summary:
• An important function of HRM, Performance
Appraisal was discussed in this chapter
• The Evaluation Process was studied in a step-by-
step manner.
• The methods of Performance Appraisal, the
traditional and the modern methods were studied.
• MBO process was dealt with in detail
• We discussed about Career Planning, its meaning,
the need, and process.

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