Performance Appraisal – MBA Tutorials
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Performance Appraisal

Performance Appraisal is the systematic evaluation of the performance of employees or workers to understand the abilities of a person for future growth and development.

Performance Appraisal Objectives:-

Objectives of performance appraisal are:-

  1. To maintain records in order to determine packages, compensation, salaries raises, wage structure, etc.
  2. To identify the weakness and strength of employees to place right men on right job.
  3. To assess and maintain the potential present in a person for further development and growth.
  4. To provide a feedback to workers regarding their performance and related status.
  5. It serves as a basis for influencing working habits of the workers or employees.
  6. To review the promotional and other training programmes.

Advantages of Performance Appraisal

Performance appraisal is an investment for the firm which can be justified by following advantages:-

  1. Promotion: Performance Appraisal helps the supervisors to do promotion programmes for efficient workers or employees. In this regards, inefficient workers can be demoted or fired in case.
  2. Compensation: Performance Appraisal helps in giving compensation packages to employees. Merit rating is possible by performance appraisal. Compensation packages which includes high salary rates, bonus, extra benefits, pre-requisites and allowances are dependent on performance appraisal. The criteria should be according to merit rather than seniority.
  3. Employees Development: The systematic procedure of performance appraisal helps the supervisors to frame training programmes and policies. It helps to analyse weaknesses and strength of employees so that new jobs can be designed for efficient employees or workers. It also helps in doing future development programmes.
  4. Selection Validation: Performance Appraisal helps the supervisors to understand the importance and validity of the selection procedure. The supervisors come to know the validity and thereby the weaknesses and strength of selection procedure. Changes can be made in selection methods in future in this regard.
  5. Communication: For an firm or organization, effective communication between employers and employees is very important. Through performance appraisal, communication can be easy in the following ways:
    1. Through performance appraisal, the employers can evaluate and accept skills of subordinates.
    2. The subordinates can also understand and create a confidence and trust in superiors.
    3. It also helps in maintaining congenial and cordial labour management relationship.
    4. It develops the spirit of work and motivate employees.
  6. Motivation: Performance appraisal is as a motivation tool. Through evaluating performance of employees, a person’s ability can be determined if the targets are achieved. This very well motivates a employee or worker for better job and helps him to improve his performance in the future.

Performance Appraisal Tools and Techniques

The tools used by the organizations for Performance Appraisals of their employees are:-

  1. Ranking
  2. Paired Comparison
  3. Forced Distribution
  4. Confidential Report
  5. Essay Evaluation
  6. Critical Incident
  7. Checklists
  8. Graphic Rating Scale
  9. BARS
  10. Forced Choice Method
  11. MBO
  12. Field Review Technique
  13. Performance Test

Important tools and techniques among them are:-

  1. Ranking Method – This consists in simply putting a man in a rank order. Under this method, the ranking of an worker or employee in a work group is done against that of another worker or employee. The position of each worker or employee is tested in terms of his numerical rank. Advantages of Ranking Method:-
    1. Employees are ranked according to their levels of performance.
    2. It is easy to rank the worst and the best employee. Limitations of Ranking Method:-
    1. The employee is compared with another employee in this method. It is very difficult to compare individuals doing individual traits.
    2. This method tells only of the position where an worker or employee stands in his group.
    3. It is very difficult to do ranking when there are large number of employees.
    4. There is no as such systematic procedure for ranking individuals in the organization.
  2. Forced Distribution method – This is a ranking technique where raters are required to issue a certain percentage of rates to certain categories (eg:average, above average, superior) or percentiles ( top 20 percent, bottom 30 percent etc). Both the number of categories and percentage of employees to be issued to each category are a function of performance appraisal format and design. The employees of best merit may be placed at top 10 percent of the scale, the rest may be placed as 20 % good. Advantages of Forced Distribution
    1. This method incline to eliminate raters bias.
    2. By forcing the distribution according to fixed percentages, the problem of making use of different raters with different scales is avoided. Limitations of Forced Distribution
    1. In salary administration, it may lead low morale, low productivity and high absenteeism.
    2. Employees who feel that they are productive, but they find themselves in lower grade then they feel frustrated.
  3. Critical Incident techniques -Under this method, the manager prepares lists of effective and ineffective behaviour of an worker or employee. These events or incidents represent the poor or outstanding behaviour of employees or the job. The manager maintains record of each employee. At the end of the rating period, these recorded incidents are used in the evaluation of the employees performance. Advantages of Critical Incident techniques
    1. This provides an objective basis for conducting a overall discussion of an employees performance.
    2. This method help in avoiding recency bias (most recent incidents are too much emphasized) Limitations of Critical Incident techniques
    1. Positive incidents are less noticed than negative incidents.
    2. It results in very close supervision of employees which may not be liked by an worker.
  4. Checklists and Weighted Checklists – In this system, a large number of statements which describe certain job are given. Every statement has a scale or weight value attached to it. While rating an employee the supervisor checks all things that most closely describe the behaviour of the individual employee under assessment. The rating sheet is then scored by the average of weights of all the statements checked by the person who rated them. These statements are then categorized by the judges and weights are given to the statements in accordance with the value given by the judges. Advantages of Checklists and Weighted Checklists
    1. This is the most frequently used method in measuring the employees performance. Limitations of Checklists and Weighted Checklists
    1. This method is very costly and time consuming.
    2. There can be bias in distinguishing the positive and negative questions.
    3. It becomes difficult for the manager to analyze and weigh a number of statements about the employees or worker contributions and behaviours.

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