Lecture 4 - Performance Appraisal System | Human Resource Management - Business Basics PDF Download

 Page 1


Performance Appraisal System 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NME-ICT 
Paper: Human Resource Management 
Lesson: Performance Appraisal System 
Lesson Developer: Dr. Vibhash Kumar 
College/Dept: Ramanujan College 
University of Delhi 
Reviewer: Prof. Anand Prakash 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Page 2


Performance Appraisal System 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NME-ICT 
Paper: Human Resource Management 
Lesson: Performance Appraisal System 
Lesson Developer: Dr. Vibhash Kumar 
College/Dept: Ramanujan College 
University of Delhi 
Reviewer: Prof. Anand Prakash 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Performance Appraisal System 
 
 
Table of Contents: 
1. Learning Outcomes 
2. Introduction 
3. Uses of Performance Appraisal  
4. Methods of Performance Appraisal 
4.1 Ranking 
4.2 Graphic Rating Scale 
4.3 Checklist 
4.4 Management by Objectives 
4.5 360 Degree Appraisal 
4.6 Behaviorally Anchored Rating Scales 
5. Employee Counseling 
6. Potential Appraisal 
7. Factors that Distort Appraisal 
8. Appraisal Interview 
9. Transfer and Promotion 
Summary  
Exercises 
Glossary 
References 
Quiz 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Page 3


Performance Appraisal System 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NME-ICT 
Paper: Human Resource Management 
Lesson: Performance Appraisal System 
Lesson Developer: Dr. Vibhash Kumar 
College/Dept: Ramanujan College 
University of Delhi 
Reviewer: Prof. Anand Prakash 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Performance Appraisal System 
 
 
Table of Contents: 
1. Learning Outcomes 
2. Introduction 
3. Uses of Performance Appraisal  
4. Methods of Performance Appraisal 
4.1 Ranking 
4.2 Graphic Rating Scale 
4.3 Checklist 
4.4 Management by Objectives 
4.5 360 Degree Appraisal 
4.6 Behaviorally Anchored Rating Scales 
5. Employee Counseling 
6. Potential Appraisal 
7. Factors that Distort Appraisal 
8. Appraisal Interview 
9. Transfer and Promotion 
Summary  
Exercises 
Glossary 
References 
Quiz 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Performance Appraisal System 
 
1. Learning Outcomes: 
After reading this chapter, you should be able to:  
? explain the concept of Performance Appraisal system, 
? understand the approaches that are used for performance appraisal, 
? differentiate  between performance appraisal and potential appraisal, 
? appreciate  the concept of 360 degree appraisal, 
? develop the knowledge, regarding employee?s counselling, 
? comprehend the importance of appraisal interview, 
? analyse the difference between transfer and promotion, 
? apply the knowledge of performance appraisal at the organizational level. 
 
 
2. Introduction 
 
Performance appraisal systems have become a necessity of all the organizations 
worldwide. The necessity becomes more glaring when the organization is large and has 
numerous employees. Performance appraisal system refers to the assessment of the 
employees of an organization at the end of a period of time (a year, or half-year), in 
order to gauge their contribution to the organization in terms of their performance in the 
job. Such evaluation is done in the pretext to identify the performance of the employees. 
Performance identification is done in order to assess and compare the outstanding 
performance or below par performance, to take the extremes. The next step is to reward 
the employees who have been outstanding or good in the assigned roles. On the 
contrary, the employees who have not performed well or have demonstrated below par 
performance, according to the industry?s standards, are summoned in for detailed 
control evaluation. A good performance appraisal system is a great morale booster for 
the employees, who may feel that the organization rewards the meritorious 
performances. However, sometimes the problem with large organisations? performance 
appraisals is that they try to be a 'one size fits all' and are too general. Such 
performance appraisals are, therefore, of no real use. The best performance appraisal 
systems are those which are able to measure the performance of the employees in a 
succinct manner and consequently reward/punish the employees accordingly. As far as 
organization is concerned, performance appraisal system can be utilised to enhance an 
employee?s performance, and take corrective actions, when desired. So, basically, a 
good performance appraisal is akin to a good corrective measure, in place, for an 
organization.  
 
Figure 1: Employee Performance  
 
 
Source: Wikimedia: http://commons.wikimedia.org/wiki/File:Employee_performance.jpg 
 
For placing a good performance appraisal system, the organizations need to first identify 
what suits them the most. „One size fits all? seldom works in these dynamic 
environments. Devising the best performance appraisal system can be done only when 
proper research is taken up by the management in order to understand what works well 
Page 4


Performance Appraisal System 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NME-ICT 
Paper: Human Resource Management 
Lesson: Performance Appraisal System 
Lesson Developer: Dr. Vibhash Kumar 
College/Dept: Ramanujan College 
University of Delhi 
Reviewer: Prof. Anand Prakash 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Performance Appraisal System 
 
 
Table of Contents: 
1. Learning Outcomes 
2. Introduction 
3. Uses of Performance Appraisal  
4. Methods of Performance Appraisal 
4.1 Ranking 
4.2 Graphic Rating Scale 
4.3 Checklist 
4.4 Management by Objectives 
4.5 360 Degree Appraisal 
4.6 Behaviorally Anchored Rating Scales 
5. Employee Counseling 
6. Potential Appraisal 
7. Factors that Distort Appraisal 
8. Appraisal Interview 
9. Transfer and Promotion 
Summary  
Exercises 
Glossary 
References 
Quiz 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Performance Appraisal System 
 
1. Learning Outcomes: 
After reading this chapter, you should be able to:  
? explain the concept of Performance Appraisal system, 
? understand the approaches that are used for performance appraisal, 
? differentiate  between performance appraisal and potential appraisal, 
? appreciate  the concept of 360 degree appraisal, 
? develop the knowledge, regarding employee?s counselling, 
? comprehend the importance of appraisal interview, 
? analyse the difference between transfer and promotion, 
? apply the knowledge of performance appraisal at the organizational level. 
 
 
2. Introduction 
 
Performance appraisal systems have become a necessity of all the organizations 
worldwide. The necessity becomes more glaring when the organization is large and has 
numerous employees. Performance appraisal system refers to the assessment of the 
employees of an organization at the end of a period of time (a year, or half-year), in 
order to gauge their contribution to the organization in terms of their performance in the 
job. Such evaluation is done in the pretext to identify the performance of the employees. 
Performance identification is done in order to assess and compare the outstanding 
performance or below par performance, to take the extremes. The next step is to reward 
the employees who have been outstanding or good in the assigned roles. On the 
contrary, the employees who have not performed well or have demonstrated below par 
performance, according to the industry?s standards, are summoned in for detailed 
control evaluation. A good performance appraisal system is a great morale booster for 
the employees, who may feel that the organization rewards the meritorious 
performances. However, sometimes the problem with large organisations? performance 
appraisals is that they try to be a 'one size fits all' and are too general. Such 
performance appraisals are, therefore, of no real use. The best performance appraisal 
systems are those which are able to measure the performance of the employees in a 
succinct manner and consequently reward/punish the employees accordingly. As far as 
organization is concerned, performance appraisal system can be utilised to enhance an 
employee?s performance, and take corrective actions, when desired. So, basically, a 
good performance appraisal is akin to a good corrective measure, in place, for an 
organization.  
 
Figure 1: Employee Performance  
 
 
Source: Wikimedia: http://commons.wikimedia.org/wiki/File:Employee_performance.jpg 
 
For placing a good performance appraisal system, the organizations need to first identify 
what suits them the most. „One size fits all? seldom works in these dynamic 
environments. Devising the best performance appraisal system can be done only when 
proper research is taken up by the management in order to understand what works well 
Performance Appraisal System 
 
for the organization. The main objective however for any appraisal system is to improve 
or enhance the employee?s performance and this can be achieved by being very specific 
to the needs. Whatever the system used or procedure followed, it is important to bear in 
mind that it is the discussion and communication with the employee about performance 
and how to improve it that brings the benefit. It is about creating an atmosphere of 
working together, understanding the employees, knowing the areas of competence of 
each employee, instilling a feeling in employees of doing better every time and thereby 
getting the employee whatever they want in order to boost their morale, to do better is 
what performance appraisal is really all about, not filling out the forms! Relevance is 
another criterion which is basically an extension of being precise. The system can be 
augmented and improved from any particular situation if the organizations focus more 
on being specific and identifying and thereby assigning those works which are relevant 
for the team members. 
Value Addition 1: Points to Ponder 
Steps in the Performance Appraisal Process 
Following are the steps used in appraising the performance of employees: 
1. Identify the specific performance appraisal goals. 
2. Establish job expectations (job analysis). 
3. Examine work performed. 
4. Appraise performance. 
5. Discuss appraisal with employee. 
 
Source: http://www.websukat.com/HRM-performance-appraisal.htm  
 
 
 
Value Addition 2: Did You Know? 
How to Develop a Performance Management System? 
Click on the link below to know how a performance management system can be 
developed to help everyone in the organisation work to their full potential. It also 
involves identifying the strengths and weaknesses of employees and helping them in 
becoming more efficient employees. 
Source: http://www.wikihow.com/Develop-a-Performance-Management-System 
 
 
3. Uses of Performance Appraisal: 
 
Performance appraisal system can be put to several uses, concerning the entire range of 
human resource management?s functions. Following are some of the common uses of 
performance appraisal: 
 
? It helps a supervisor to evaluate the performance of the organization?s employees, in 
a systematic and periodic manner. By using this system, the supervisor gets to know 
the strengths and weaknesses of the employees, which helps him in assigning the 
work to the best suited employees. This action is akin to the concept of „square peg 
in the square hole?. 
 
? It is indeed a very useful system which provides valuable information, regarding pay 
increment, promotion, demotion, transfer, and termination of the employees. It is 
used as a basis, while deciding about the increments and promotions of the 
employees. It is also a medium to communicate to the employees about their 
performance in the organization, and what the management really seeks from each 
employee. 
 
Page 5


Performance Appraisal System 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NME-ICT 
Paper: Human Resource Management 
Lesson: Performance Appraisal System 
Lesson Developer: Dr. Vibhash Kumar 
College/Dept: Ramanujan College 
University of Delhi 
Reviewer: Prof. Anand Prakash 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Performance Appraisal System 
 
 
Table of Contents: 
1. Learning Outcomes 
2. Introduction 
3. Uses of Performance Appraisal  
4. Methods of Performance Appraisal 
4.1 Ranking 
4.2 Graphic Rating Scale 
4.3 Checklist 
4.4 Management by Objectives 
4.5 360 Degree Appraisal 
4.6 Behaviorally Anchored Rating Scales 
5. Employee Counseling 
6. Potential Appraisal 
7. Factors that Distort Appraisal 
8. Appraisal Interview 
9. Transfer and Promotion 
Summary  
Exercises 
Glossary 
References 
Quiz 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Performance Appraisal System 
 
1. Learning Outcomes: 
After reading this chapter, you should be able to:  
? explain the concept of Performance Appraisal system, 
? understand the approaches that are used for performance appraisal, 
? differentiate  between performance appraisal and potential appraisal, 
? appreciate  the concept of 360 degree appraisal, 
? develop the knowledge, regarding employee?s counselling, 
? comprehend the importance of appraisal interview, 
? analyse the difference between transfer and promotion, 
? apply the knowledge of performance appraisal at the organizational level. 
 
 
2. Introduction 
 
Performance appraisal systems have become a necessity of all the organizations 
worldwide. The necessity becomes more glaring when the organization is large and has 
numerous employees. Performance appraisal system refers to the assessment of the 
employees of an organization at the end of a period of time (a year, or half-year), in 
order to gauge their contribution to the organization in terms of their performance in the 
job. Such evaluation is done in the pretext to identify the performance of the employees. 
Performance identification is done in order to assess and compare the outstanding 
performance or below par performance, to take the extremes. The next step is to reward 
the employees who have been outstanding or good in the assigned roles. On the 
contrary, the employees who have not performed well or have demonstrated below par 
performance, according to the industry?s standards, are summoned in for detailed 
control evaluation. A good performance appraisal system is a great morale booster for 
the employees, who may feel that the organization rewards the meritorious 
performances. However, sometimes the problem with large organisations? performance 
appraisals is that they try to be a 'one size fits all' and are too general. Such 
performance appraisals are, therefore, of no real use. The best performance appraisal 
systems are those which are able to measure the performance of the employees in a 
succinct manner and consequently reward/punish the employees accordingly. As far as 
organization is concerned, performance appraisal system can be utilised to enhance an 
employee?s performance, and take corrective actions, when desired. So, basically, a 
good performance appraisal is akin to a good corrective measure, in place, for an 
organization.  
 
Figure 1: Employee Performance  
 
 
Source: Wikimedia: http://commons.wikimedia.org/wiki/File:Employee_performance.jpg 
 
For placing a good performance appraisal system, the organizations need to first identify 
what suits them the most. „One size fits all? seldom works in these dynamic 
environments. Devising the best performance appraisal system can be done only when 
proper research is taken up by the management in order to understand what works well 
Performance Appraisal System 
 
for the organization. The main objective however for any appraisal system is to improve 
or enhance the employee?s performance and this can be achieved by being very specific 
to the needs. Whatever the system used or procedure followed, it is important to bear in 
mind that it is the discussion and communication with the employee about performance 
and how to improve it that brings the benefit. It is about creating an atmosphere of 
working together, understanding the employees, knowing the areas of competence of 
each employee, instilling a feeling in employees of doing better every time and thereby 
getting the employee whatever they want in order to boost their morale, to do better is 
what performance appraisal is really all about, not filling out the forms! Relevance is 
another criterion which is basically an extension of being precise. The system can be 
augmented and improved from any particular situation if the organizations focus more 
on being specific and identifying and thereby assigning those works which are relevant 
for the team members. 
Value Addition 1: Points to Ponder 
Steps in the Performance Appraisal Process 
Following are the steps used in appraising the performance of employees: 
1. Identify the specific performance appraisal goals. 
2. Establish job expectations (job analysis). 
3. Examine work performed. 
4. Appraise performance. 
5. Discuss appraisal with employee. 
 
Source: http://www.websukat.com/HRM-performance-appraisal.htm  
 
 
 
Value Addition 2: Did You Know? 
How to Develop a Performance Management System? 
Click on the link below to know how a performance management system can be 
developed to help everyone in the organisation work to their full potential. It also 
involves identifying the strengths and weaknesses of employees and helping them in 
becoming more efficient employees. 
Source: http://www.wikihow.com/Develop-a-Performance-Management-System 
 
 
3. Uses of Performance Appraisal: 
 
Performance appraisal system can be put to several uses, concerning the entire range of 
human resource management?s functions. Following are some of the common uses of 
performance appraisal: 
 
? It helps a supervisor to evaluate the performance of the organization?s employees, in 
a systematic and periodic manner. By using this system, the supervisor gets to know 
the strengths and weaknesses of the employees, which helps him in assigning the 
work to the best suited employees. This action is akin to the concept of „square peg 
in the square hole?. 
 
? It is indeed a very useful system which provides valuable information, regarding pay 
increment, promotion, demotion, transfer, and termination of the employees. It is 
used as a basis, while deciding about the increments and promotions of the 
employees. It is also a medium to communicate to the employees about their 
performance in the organization, and what the management really seeks from each 
employee. 
 
Performance Appraisal System 
 
? It helps in analysing the effectiveness of recruitment, selection and placement 
procedure. This analysis helps the supervisor to find out the gap between the job 
requirements and the employee?s performance; and provides information to the 
supervisor about the training and developmental needs of the employees. 
 
? It can be judiciously employed, as a mechanism, to give feedback to the employees, 
about their performance. The supervisor can give the feedback to the employees how 
they have been working and whether some improvement is required or not. 
Supervisor can also suggest the employees to change their behaviour, attitude, work 
style, mould a set pattern, which does not go well by organization?s standards. 
 
? It helps in improving the productivity of the organization, by providing a positive 
work environment to the employees. For instance, if a supervisor gives recognition or 
reward to an employee, on his good performance, it would boost the morale of the 
employee as well as create a positive work environment which may encourage the 
employee to excel in the entrusted job, and simultaneously, improve the work 
environment of the organization. 
 
? It helps in developing confidence among the employees. It makes an impact on the 
employees that the good work, which they are catering to, is not going unheeded; 
and the organization really cares for good performances. Once this thought process is 
instilled in the employees, they will always excel and speak well of their organization.  
Also, this system is useful in reducing the grievances of the employees, if any. The 
employees will be able to know directly where the actual fault or lacunae is. A good 
performance appraisal brings best from an employee, curtailing the inadequacies, 
and makes the employee aware of the particular aspect in which the improvement is 
required. So, instead of cribbing about the unknown reason of a salary cut or 
promotion stalled, the employee would directly know the shortfalls and do well to 
improve it upon. 
 
? It helps in analysing the potential of the employees. The supervisor, while appraising 
the performance of the employees, may get to know about their capabilities as well. 
It is often said that a performance can be augmented, if provided a suitable 
environment. A supportive supervisor, while appraising the employee, knows about 
the hidden talents of the employee, and does well to bring it to the fore. 
 
Interactive 1 
 
Value Addition 3: Video 
Performance Appraisal 
In this instructional video, the speaker explains, in a detailed manner, about the 
performance evaluation. The speaker talks about the whole evaluation process, 
featuring administration, development, written assessment, face to face interactions, 
and 360 degree performance appraisal. The speaker also talks about the continuous 
feedback throughout the year and not just at the end of the year. The emphasis is also 
laid on the politics, associated with the performance appraisal, which has detrimental 
effect for the organization. 
Source: https://www.youtube.com/watch?v=lR-SgpO0W8c  
 
4. Methods of Performance Appraisal: 
 
There are several methods and techniques to evaluate the performance of the 
employees, but few of them are common to all the organizations. These are classified 
into two categories- Traditional methods and Modern methods.