Performance Appraisals are the processes by which you can evaluate an employee’s work behavior by comparing it to preset standards. The results of the comparison are documented to provide feedback to the employee to show that how the employee is performing the job. Performance appraisals are conducted to determine that who needs what training, and who will be promoted, demoted, retained, or fired according to their job behavior.
Performance appraisals are also referred to as performance reviews, performance evaluations, (career) development discussions, or employee appraisals. Performance appraisals can be simply defined as the documentation and assessment of an employee’s job performance.
Why Performance Appraisals are Important
It provides an opportunity for the employee to express their views and for the manager to provide support when needed. Performance appraisals are an opportunity for employees to understand how well they are progressing in their job. They need to know if they are performing well and what areas of their work tey need to improve. The development of staff is critical for motivation and loyalty. Therefore, the performance appraisal is a good chance to discuss career development and training needs.
Performance appraisals can be helpful in revealing the particular tasks that don’t make any sense in the eye of manager but being undertaken by the employee. Therefore, the appraisal allows both the employee and the manager to decide mutually the work priorities. Performance evaluation also builds closer relationships between manager and employee as well as with the whole team.
The documentation made by the manager or any consultant hired by the organization is used to record the performance of each person and is crucial when a promotion or dismissal arises. This written documentation can be used as evidence to support the case and help decide upon the most appropriate action such as which employee needs additional training and development for the same job and which employee needs promotion and also training for promoted post.
Performance appraisals are essential when making layoff decisions. You can find the weakest performer and can be laid him off, If there is no performance appraisal, then there are chances that the best persons in the department may be laid off. The performance appraisals are also important because they identify the employee who deserves compensation and incentives on the basis of their performance. A performance appraisal helps in aligning the employee’s goals with those of the organization.
The Performance Appraisal Process
Performance appraisals should be conducted at least once in a year. Ideally, they should be held quarterly. The performance appraisal process consists of the following steps:
1. Establishing Performance Standards
It is necessary to evaluate performance; you should first set some standard as a benchmark so that you can compare the actual performance with the norm. The standards laid down should be clear, easily understandable and in measurable terms.
2. Communicating the standards
It is the responsibility of the management to communicate the standards to all the employees of the organization. The criteria should be clearly explained so that they could be able to perform their roles accordingly.
3. Measuring the actual Performance
It is a continuous process which involves monitoring the performance throughout the year. This stage requires the careful selection of the suitable techniques of measurement, taking care that individual bias does not affect the outcome of the process and providing assistance rather than interfering in an employees work.
Following are the methods to measure the employee’s performance.
Traditional Performance Appraisal Methods
Rating scales consists of several numerical scales representing job-related performance criterions such as dependability, initiative, output, attendance, attitude, etc. Each scale should range from excellent to poor. The total numerical scores are computed, and final conclusions are derived.
A list of statements of behaviors of an employee in the form of Yes or No based questions is prepared. Here the evaluating person only does the reporting or scoring and HR department does the actual evaluation.
c) Forced Choice Method
The forced-choice method is an arranged series of statements where the appraiser indicates which statement is true or false of the employee. The reviewer is forced to make a choice. HR department does an actual assessment.
d) Forced Distribution Method
This method was evolved by to eliminate the central tendency of rating most of the employees at a higher end of the scale. Employees are clustered around a high point on a rating scale. The evaluating manager is compelled to distribute the employees on all points on the scale. It is assumed that the performance is confined to a normal distribution.
e) Critical Incidents Method
The approach is focused on certain critical behaviors of employee that make the difference between performing a job in a noteworthy manner (effectively or ineffectively). Such types of actions are noted by the supervisors when any incident occurs. There are three steps involved in appraising employees using this method. First, a list of the noteworthy (good or bad) on-the-job behavior of specific incidents is prepared. Second, a group of experts then assigns weight or scores to these events, depending upon their degree of desirability to perform a job. Third, finally, check-list indicating incidents that describe workers as “good” or “bad” is constructed. Then, the checklist is given to the manager for evaluating the employees.
f) Field Review Method
This is an appraisal done by someone outside employees’ department usually from corporate or HR department. This method is useful for managerial level promotions when comparable information is needed.
g) Performance Tests & Observations
This is based on the test of knowledge or skills. The tests may be written or an actual presentation of competencies. Tests must be reliable and valid.
h) Confidential Records
This is a traditional method mostly used by government departments. Evaluation is made by the immediate boss or supervisor for giving effect to promotion and transfer. The confidential report may contain attendance, self-expression, teamwork, leadership, initiative, technical ability, reasoning ability, originality, and resourcefulness, etc.
i) Essay Method
In this method, the appraiser writes down the employee description in detail within some broad categories like overall impression of performance, promote the ability of employee, existing capabilities and qualifications of performing jobs, strengths and weaknesses and training needs of the employee.
j) Paired Comparisons
Appraiser compares the performance with other co-workers.
k) Ranking Methods
It is the oldest and simplest formal systematic method of performance appraisal in which employee is compared with all others for the purpose of placing an order of worth. The employees are ranked from the highest to the lowest or from the best to the worst.
Modern Performance Appraisal Methods
a) Cost Accounting Method
Performance is evaluated from the monetary benefits the employee yields to the organization. The cost to keep the employee, and benefit the organization derives is ascertained. Hence, it is more dependent upon cost and benefit analysis.
Consider the following factor when you are evaluating the performance.
- Unit wise average value of production or service
- Quality of product or service
- Overhead cost
- Accidents, damages, errors, spoilage, wastage, wear and tear
- Human relationship
- Cost of the time supervisor spent in appraising
b) Behaviorally Anchored Rating Scales (BARS)
Statements of efficient and ineffective behaviors determine the points. They are said to be behaviorally anchored. The manager is supposed to say, which response describes the employee performance. The proponents of BARS claim that it offers better and more equitable appraisals than do the other techniques of performance appraisal
Developing BARS typically involves five steps:
- Generating Critical Incidents
- Developing Performance Dimensions
- Reallocating Incidents
- Scaling Incidents
- Developing Final BARS Instrument
c) Management by Objectives (MBO)
Peter F. Drucker proposed a new concept, namely, management by objectives (MBO) way back in 1954. MBO is “process whereby the superior and subordinate managers of an organization jointly identify its common goals, define each individual’s major areas of responsibility regarding results expected of him and use these measures as guides for operating the unit and assessing the contribution of each its members”.
MBO requires the manager to goals with each employee and then periodically discuss his or her progress toward these goals.
An MBO program consists of four main steps:
- Goal Setting
- Performance standard
- Periodic review.
d) Assessment Centers
Assessment centers are mainly used for evaluating executive or supervisory potential. By definition, an assessment center is a central location where managers come together to participate in well-designed simulated exercises. They are assessed by senior executives supplemented by the psychologists and the HR specialists for 2-3 days. Assessment centers provide more accurate evaluation, minimum biasedness, right selection and promotion of executives, but the technique is also costly and time-consuming.
e) 360 – Degree Appraisal
This method was first developed and formally used by General Electric Company of USA in 1992. This feedback based method is used for determining training and development requirements, rather than for pay increases.
Under 360 – degree appraisal, performance information such as employee’s skills, abilities, and behaviors, is collected “all around” an employee, i.e., from the supervisors, subordinates, peers and even customers and clients.
- Comparing the Actual with the Desired Performance
- Provide Regular Feedback
- Conduct the Appraisal Meeting
- Follow-up Action