The document discusses performance appraisal, its definitions, purposes, methods, advantages, and disadvantages, with a focus on a case study of Microsoft Corporation. It highlights the challenges faced by Microsoft in its performance appraisal system, including discrimination and biases, as well as the company's transition from a forced ranking system to more equitable appraisal methods. The document concludes with recommendations for improving employee relations and performance evaluation processes to foster a more supportive organizational culture.

1. PERFORMANCE
APPRAISAL and
CASE STUDY BY
Akhil Ravula
Devathi Manmohan (Leader)
Aditya Shubhanayan
Kiran Kumar
Manjusha
Vikranth Singh
Yaswanth Harish
PRINCIPLES OF MANAGEMENT
(HU302)
GROUP - 7

2. Contents
 Brief view on the Topic
 Case Study on Microsoft Coperation
2
 Intro
 Problem & Limitations
 Solution and methods
 Conclusion
 Improvements / Recommendations
 About
 Process
 Methods / Techniques
 Advantages and Disadvantages

3. PERFORMANCE
APPRAISAL
3
One of the step in Staffing

4. Performance Appraisal ??
▸ Performance appraisal is the systematic evaluation of the individual with regard to his or
her performance on the job and their potential for development”_ BEACH.
▸ According to DALE YODGER,” Performance appraisal to all formal procedures aimed
working organization to evaluate personalities and contribution of one potential group
members”.
▸ EDWIN B.FILIPPO, defined has the term performance appraisal as “ A systematic
,periodic and so far as humanly possible , an impartial rating of an employee’s
excellence in matters pertaining to his present to his present job and his potentialities for
a better job “.
▸ According to JOHN A. SHUBIN defined as “Merit rating is a systematic appraisal of the
employee's personality and performance on the job and is designed to determine his
contribution and relative worth to the firm”.
▸ In the words of L. A. LARKIN, “Performance appraisal is the systematic assessment by
merit factors of the behaviour and /or ability of workers in their work and a means
whereby each worker may be rewarded a percentage in addition to his wage according
to his assessed merit value”.
4
Definition

5. ▸It is a process of evaluating an employee’s
performance of a job in terms of its requirements.
▸It is the process of evaluating the performance of
employees, sharing that information with them and
searching for ways to improve their performance’’.
▸Performance appraisal is also known as “merit
rating” or “efficiency rating”.
5
Performance Appraisal ?? Meaning

6. ▸ To review the performance of the employees.
▸ To judge the gap between the actual and the
desired performance.
▸ To help the management in exercising
organizational control.
▸ To diagnose the training and development needs of
the future.
▸Provide information to assist in the HR decisions like
promotions, transfers etc.
6
Purpose

7. ▸Provide clarity of the expectations and
responsibilities of the functions to be performed by the
employees.
▸ To judge the effectiveness of the other human
resource functions.
▸ To reduce the grievances of the employees.
▸ Helps to strengthen the relationship and
communication between superior –subordinates and
management – employees
7
Purpose Cont…

8. Factors in evaluating the performance and progress
of an employee:
1. Knowledge of work 8. Honesty
2. Initiative 9. Ambition
3. Quality of work 10. Crisis Management
4. Target attainment 11. Discipline
5. Aptitude 12. Punctuality etc.
6. Degree of skill
7. Extent of co-operation
with colleagues and superiors.
8
Factors

9. 9
Process
Setting
Performance
Standards
Communicating
Standards
Measuring
Standards
Comparing
Standards
Discussing
Results
Taking
Corrective
Measures

10. 10
Methods of Performance Appraisal
Traditional
Methods
• Graphic Rating Scales
• Ranking Method
• Paired Comparison
Method
• Forced Choice Description
Method
• Forced distribution Method
• Checklist Method
• Essay or free form
Appraisal
• Confidential Reports
• Group Appraisal
• Field Review Method
Modern
Methods
• Assessment Center
• Human Resources
Accounting Method
• Management by
Objectives
• Productivity Measures
• Balance Score Card
• Psychological Appraisal
• Results Method
• Productivity Measures
• 3600 Appraisal

11. 11
Advantages / Benefits of using Performance Appraisal
Benefit for the Individual
•Gaining a better understanding of their
role
• Understanding more clearly how and
where they fit in within the wider picture
• A better understanding of how
performance is assessed and monitored
•Getting an insight
•Improving understanding of their
strengths and weaknesses and
developmental needs
•Identifying ways in which they can
improve performance
• Providing an opportunity to discuss and
clarify developmental and training needs
• Understanding and agreeing their
objectives for the next year
• An opportunity to discuss career
direction and prospects.
Benefit to Team Leader / Manager
•hear and exchange views and opinions
away from the normal pressure of work
• to identify any potential difficulties o
weaknesses
•An improved understanding of the
resources available
• to plan for and set objectives for the
next period
• to think about and clarity their own role
• to plan for achieving improved
performance
•to plan for further delegation and
coaching
• to motivate members of the team
Benefit to Organisation
•A structured means of identifying and
assessing potential
•Up-to-date information regarding the
expectations and aspirations of
employees
•Information on which to base decisions
about promotions and motivation
•An opportunity to review succession
planning
•Information about training needs which
can act as a basis for developing
training plans
•Updating of employee records
(achievements, new competencies, etc)
•Career counselling
•Communication of information

12. 12
Disadvantages of using Performance Appraisal
Subject to Rater errors and biases
Very time Consuming
Halo Effect
Central Tendency
Recency error
Negative Approach and Resistance

13. Case Study on
MICROSOFT
ORGANISATION
13

14. MICROSOFT
ORGANISATION
14

15. Microsoft??
15
▸Computer hardware and software industry , most
reliable and progressive computer software company
in the world.
▸Established in 1975 by bill Gates.

16. 16
▸During the 1990s, it could be recalled that the world’s
computer software and hardware industry was being
dominated by IBM, while Microsoft was still way behind but
nonetheless was already providing excellent competition. At
present, the situation has completely reversed.
▸During the height of its success, IBM decided to neglect the
development of its organizational culture and its employees
and concentrate more on efforts to sustain their profitability.
They invested heavily in research and development activities
to find out the most important computer products that were
being needed by the people.

17. 17
▸On the part of Microsoft, instead of worrying so
much about maximizing their profits, Bill Gates
prioritized on strengthening the organizational culture
of the company.
▸ He helped instill the values, mission and vision that
would remain as the solid foundations of achieving
success in Microsoft. Bill Gates focused more in
addressing the needs of the employees and making
sure that they would be working in an environment that
can bring out the best in their capabilities and skills.

18. 18
▸Such was the vision of Bill Gates that he knew that
profitability and progress would eventually come if he took
care of Microsoft’s organizational culture first.
▸He did not worry about the big lead that IBM was having
during the 1980s because he knew that Microsoft’s time to
dominate the computer hardware and software industry would
come.
▸He was not worried about the slow results because Gates
realized that as the employees and leaders of Microsoft are
given adequate time to understand the purpose and objectives
of the company, the more productive and profitable the
company is going to be in the long run.

19. 19
▸The prophecy of Bill Gates turned out to be correct
as the strong and solid organizational culture of
Microsoft that took years to establish eventually
proved to be the winning formula for Microsoft to go
ahead of IBM in the computer hardware and software
industry.
▸ However, it is important to know that there were
plenty of challenges that Microsoft had to face
especially in its human resource management prior to
achieving an excellent organizational culture.

20. Problem and
Limitations
20

21. Problem
21
Discrimination:
Some Black American employees of Microsoft complained of
unfair practices being done to them by the management which led them
to eventually file cases. They were mentioning about their low salaries
as compared to white Americans who were experiencing bonuses and
incentives out of their performances. Black Americans also frequently
did not get any high ratings during performance assessments that
essentially prevented them from getting accepted with regard to their
applications for higher office. These poor performance assessment
scores also were usually used as basis for the management of Microsoft
to expel what they believed were underperforming employees from their
workforce and replace them more competent workers.

22. LIMITATIONS
22
▸ Many factors from the internal and external business environment
impact the performance appraisal process.
▸ As key external factors may be considered the employee unions and
the law, whereas as internal factors may be considered the culture of
the company and the increasing use of teams for the work execution.
▸ In Microsoft , there are no employee unions as a multinational
enterprise is extremely careful to any legal issues. The culture of the
company, although it emphasizes employee initiatives and team
work, it could be said that it is rather strict and the employee has to
follow the hierarchy instead of taking independent decisions. This
actually is a hindrance to employee empowerment.

23. LEGAL RESTRICTIONS
▸The form of assessment chosen by the company
should be reliable, accurate and above all legal.
▸ Otherwise, the conclusions would not be a sound
basis for decisions on matters relating to personnel
and potentially laws such as equal employment
opportunities may be affected. Such issues arise when
an employee is dismissed, demoted or his/her
promotion is not realized.
23

24. LEGAL RESTRICTIONS
▸Microsoft is particularly careful on issues
such as racial, religious and sex
discrimination.
▸However, it is noticed that top management
positions are mostly occupied by white males.
24
Cont…

25. ERROR OF CENTRAL TENDANCY
▸Some reviewers do not wish to present employees
as fully effective or ineffective, and so they rate
everyone near the accepted average, something that
is the case in Microsoft.
▸ The findings provide assessments that are not
comparable with themselves, and they are unsuitable
for statistical analysis or other purposes.
25

26. INTERCULTURAL EFFECTS
▸Everyone expects others to develop responses and
attitudes based on his/her own culture. Problems
appear in the cases where people from different
nationalities have to work together.
▸Microsoft is a multinational company and people
from different nationalities have to cooperate.
▸ So far, there has not been a particular programme
aiming at training people to work with people from
other cultures.
26

27. PERSONAL BIAS
▸Negative perceptions of an evaluator for a group of
people can distort the rating they receive.
▸For example, it has been observed that some male
supervisors are unfair to women subordinates who
hold traditionally male jobs.
▸The phenomenon of discrimination between men
and women is something that still exists to a lesser
degree than before.
27

28. Evaluators' prejudices
▸ The problem with subjective methods is the possible
influence of the outcome by the evaluators and the
personality traits, ideas and opinions that they have, or
even the kind of relationships they have with the
evaluated employee.
▸The training of managers that carry out assessments
will help to reduce subjectivity.
28

29. Evaluators' prejudices
▸So far, only the Managing Directors of all
subsidiaries have received training on employee
performance appraisal and although subjectivity is not
reduced, it was eliminated to a large extent.
▸The training should be expanded to the other
managerial positions since it has been noticed that
subjectivity played a crucial role in subordinates'
performance appraisal.
29
Cont…

30. Grace and Rigor
▸In the first case, the assessor makes the
assessment with relative ease and ranks
favorably while the opposite happens with the
manager that seeks to appear 'tough' and is
negative in appraising employee performance.
30

31. Grace and Rigor
▸Effects of grace and hardness are extreme, causing
grievances and problems and are usually presented in
companies with vague ideal performance levels.
▸This is also the case with some qualitative jobs in
Microsoft where as the performance levels were
vague, the line of responsibility was also vague and
the employee was subject to the assessors' personal
grace or rigor.
31
Cont…

32. Solution and
Methods of Performance Appraisal
32

33. Solution
33
Solution implemented was the change of the performance appraisal
system from the forced ranking system towards other methods based on
working conditions.
▸ The problem with the forced ranking system was that it was a biased
process of determining the employees that are going to get the
incentives for excellent performance.

34. Methods they came with
34
▸ Rating scales
▸ Critical incident method
▸ Balanced scorecard
▸ 360 degree feedback
▸ Field review method

35. Rating scales
35
▸ It is the oldest and most frequently occurring performance appraisal
method that requires the existence of an evaluator who gives a score for
the performance of each employee based on a scale ranging from the
lowest to the highest level.
▸The responses of the assessor can be linked to numerical values
allowing this way to export average scores for each employee which can
then be compared. This is directly related to the reward system and
salary increase.

36. Rating scales
36
▸ Advantages of this method is the low development and
management cost, the evaluators do not require significant training or a
lot of time to complete the relevant criteria form as well as that it can be
applied to a large number of employees.
▸The disadvantages are also pretty. Prejudices, perceptions and
personality traits of the head may affect the assessment to be made as
well as the relationship s/he has with each subordinate.
▸ This is the performance appraisal used for all Microsoft subs.
Cont…

37. Critical incident method
37
▸The evaluator observes and records very good and bad
behaviours of the respective employee that occur during the
period the appraisal takes place.
▸ The observations are grouped based on the criterion on which
such cooperativity, work quality, consistency, etc. and then
conclusions for the employee are drawn, his/her strong points as
well as the points that need improvement.
▸ Employers often use this method in addition to the method of
rating scales method. This ensures that the supervisor thinks of
the subordinate throughout the year because these events have
to be accumulated.

38. Critical incident method
38
▸ The most useful feature of this method is to draw conclusions
directly related to the job and benefit particularly the employee. In
addition, it further reduces the effect of personal bias of the head.
▸ The main disadvantage is that the assessors record events in
the beginning of the appraisal period, followed by a blank space
where they neglect their duties and when the time of appraisal
comes, they observe and record behaviours. In this case, the
assessor is affected by the events of the recent past and the
result can not be objective.
Cont…

39. Critical incident method
39
▸The method of critical incidents consumes much of
supervisor's time.
▸ Of course, since many reviewers find difficult to
remember all the facts relating to each employee throughout
the assessment period, a calendar of critical events can be
a very useful support tool for the other assessment
methods.
▸This method has been used in Microsoft UK in
combination with the rating scales method, mostly for
qualitative jobs.
Cont…

40. Balanced Scorecard
40
▸ Customers' perspective
▸ Internal perspective
▸ Leadership and learning perspective
▸ Economic perspective

41. 360 Degree Feedback
▸It is an appraisal form where someone is appraised
by assessors from different hierarchical levels,
departments.
▸The results of the assessors are grouped aiming at
seeing what others think on specific points of our
performance in relation to what it is believed by the
employee and his/her supervisor.
41

42. Field review method
▸ A specialized executive visits the workplace and
assists supervisors in the performance appraisal
process.
▸ The appraisal report is sent to the supervisor, who
makes changes, comments or notes as accepts it as it
is and then communicates it to the employee.
42

43. Conclusion
43

44. Problem Case
▸Brutal Performance appraisal:
The management also demanded their workers to provide
explanations especially with regard to their actions related to their
responsibilities. Everybody received positive and negative
feedbacks, and even those employees who were performing well
were asked not to celebrate but to bring their efforts to even
higher levels. Those underperforming employees were being
threatened to be expelled from the company if their performances
and outputs did not improve within a certain period.
44

45. Adverse Effects
▸ In order to find immediate replacements for the terminated Black
Americans, Microsoft recruited contractual workers, but they too were not
able to perform their responsibilities according to the standards of the
company.
▸ Many contractual workers did not even bother to finish their contracts
out of their disappointing experiences with Microsoft.
▸ An enjoyable and challenging place to work for eventually transformed
into a frustrating, pressure-packed office where the leaders were very
eager to find the faults and weaknesses of the employees
▸ Brought down their morale and motivation to work hard, promoted
backstabbing within colleagues
45

46. Solutions by CEO Steve Ballmer
46
Improving communication lines
Improved performance appraisal
and compensation system
Increase in employee benefits
New Workplace Setups

47. Improved performance appraisal and compensation
system
47
▸ Change of the performance appraisal system from the forced ranking system
towards commitment rating
▸ Problem with the forced ranking system was that it was a biased process of
determining the employees that are going to get the incentives for excellent
performance
▸ In the commitment rating, all employees of Microsoft will have equal
opportunities to get incentives particularly in the management of their stocks in
the company depending on their performance
▸ Put to rest those issues and controversies regarding its unfair performance
evaluation process that even led to some Black American employees filing
lawsuits against Microsoft

48. Suggestions from our group
48
Microsoft needs to focus more on their workers instead of thinking
about their profits
Microsoft has to focus to try and reduce its perfectionist
organizational culture in an effort to lessen the pressure that is
always being felt by their employees
Performance appraisal needs to be more lenient and allow
workers to have room for improvement and freedom
Microsoft needs to give better benefits to their outstanding
employees other than stock options

49. 49
THANKS!