Projects Performance Appraisal

Performance appraisal

Meaning and definition of performance appraisal and its objectives

In simple terms, appraisal may be understood as the assessment of an individual’s performance in a systematic way, the performance being measured against such factors as job knowledge, quality, and quantity of output, initiative, leadership abilities, supervision, dependability, co-operation, judgment, versatility, health, and the like. Assessment should not be confined to past performance alone. Potentials of the employee for future performance must also be assessed.

DEFINITIONS OF PERFORMANCE APPRAISAL:

A formal definition of performance appraisal is:“It is the systematic evaluation of the individual with respect to his or her performance on the job and his or her potential for development.”

A more comprehensive definition is:“Performance appraisal is a formal, structured system of measuring and evaluating an employee’s job related behaviors and outcomes to discover how and why the employee is presently performing on the job and how the employee can perform more effectively in the future so that the employee, organization, and society all benefit.”

The second definition includes employee’s behavior as part of the assessment. Behavior can be active or passive. Either way behavior affects job results. The other terms used for performance appraisal are: performance rating, employee assessment, employee performance review, personnel appraisal, performance evaluation, employee evaluation, and merit rating. In a formal sense, employee assessment is as old as the concept of management, and in an informal sense, it is probably as old as mankind. Nor performance appraisal is done in isolation. It is linked to job analysis.

TERMS USED IN PERFORMANCE APPRAISAL:

(1) Performance Appraisal: It is the assessment of an individual's performance in asystematic manner in relation to the job assigned.

(2) Appraisal Process: It involves various steps need to be taken in order to completethe appraisal work in an orderly manner.

(3) Ratee: Ratee may be defined as the individual, work group, division or organisationused for appraisal purpose.

(4) Rater: Rater is immediate supervisors, specialists from HR department,subordinates, peers, clients or committees to whom the responsibility of appraisal isassigned.

(5) Performance Interview: It is one step in appraisal process. After completion ofappraisal work, performance interview is arranged. Here, the raters should discussand review the performance with the ratees, so that they will receive feedback fortheir information and self development. Also called post appraisal interview.

PURPOSES OF PERFORMANCE APPRAISAL: Performance appraisal of employees is needed for the following two broad purposes:

(A) Administrative purposes; and (B) Self-improvement/Self-development of employees.

(A) Administrative Purposes:

(1) Promotion and Placement of Employees: One major administrative purpose of performance appraisal is to promote employees as per their competence and performance in the previous period. Quality of performance serves as a base for promotion particularly when promotions are given by merits. Appraisal indicates whether the employee can contribute still more at a higher level job and accordingly decision about his promotion is taken. This promotion on appraisal basis is in the interest of both-the management and employees. Performance appraisal is useful for the selection of right person for the right type of promotion. This is because it clearly distinguishes between effective and ineffective performers of jobs assigned Placement of an employee in the right department and also at the right position is possible through performance appraisal as such appraisal suggests the position at which an employee can give his best performance. Performance appraisal is not useful for initial placement but is certainly useful for subsequent placements or even for job change.

(2) Transfers and Demotions: In an organisation, certain personnel actions such as \transfers, demotions, disciplinary actions and discharges are required to be taken ,by the management. Such actions need to be taken in a fair and impartial manner. ]Here, performance appraisal reports can be used for taking final decisions. Asuitable employee for the transfer can be selected by using the performanceappraisal reports. Performance appraisal is also useful for the identification ofemployees for deputation, for allowing an employee to cross efficiency bar and alsofor the confirmation of the employees in an organisation. Finally, performanceappraisal is useful as a criterion for validating selection devices and trainingprogrammes. In brief, various personnel decisions and actions can be takencorrectly and even justified forcefully when taken on fair and impartial performanceappraisal.

(3) Wage and Salary Payment: Wage/salary payment is normally linked with theperformance appraisal. Wage increase (yearly increment or special increments) isbased on the performance appraisal reports. It also provides the rationalfoundation for the payment of wages, bonus, etc. Wage payment is normally relatedto the contribution of employees at the work place. Better performance at themanagerial level is normally rewarded by additional salary payment. For judgingthe performance of executives, periodical appraisal is essential. It is a fact thatwages are linked with many other factors such as cost of living and profitability of abusiness unit. Along with this, performance appraisal is given due weightage. It isalso useful for allocating rewards to deserving employees.

(4) Training and Manpower Development Programmes: Performance appraisalindicates the strengths and weaknesses of an employee. It acts as a performancefeedback of employees which can be used for different purposes. This informationcan be used fruitfully for formulating a suitable training and manpowerdevelopment programmes to improve the performance of employees in theirpresent jobs. Such appraisals also suggest the areas of skills where numerousemployees are not upto the mark. This enables the management to adjust thetraining programme which will be useful to employees for self-improvement also tothe organisation in raising overall efficiency. Performance appraisal also suggeststhe managers with potentials to learn and develop quickly. Such managers can begiven special training for executive development. They may be even sent tospecialised institutions for training purposes. In brief, performance appraisalreports can be used effectively for purposeful training and manpower/careerdevelopment programmes so as to improve the quality of present labour forceemployed.

(5) Personnel Research: Performance appraisal serves as a feedback to themanagement in the field of personnel research. It serves as a base for the conduct ofresearch activities in personnel management. Various theories regarding incentivesto employees, training of employees, selection of employees and motivation ofemployees developed through such research activities. The appraisal system givesvaluable information which can used purposefully in personnel management.

(6) Favourable Impact on Employees: Performance appraisal creates a favourableimpact on the employees. It serves as an incentive to the employees who feelassured of the management's continued interest in them and of their continuouspossibility to grow/develop. Employees feel that they are given attention by themanagement. They get a feeling that performance appraisal record will be takeninto consideration for their promotion, training, etc., and that injustice will not bedone to them. Sincere and honest employees get a moral support through suchappraisal. Supervisors may be transferred /shifted but the appraisal reports willavoid injustice to employees. In brief, performance appraisal creates a favourableimpact on employees. It raises their morale and offers opportunities of careerdevelopment to officers, executives and supervisors. Performance appraisal acts asfeedback which gives the employee an opportunity to improve his performance andraise his competence for promotion.

(7) Miscellaneous Administrative Purposes:

(a) To confirm the services of probationary employees after the completion ofprobationary period successfully.

(b) To improve internal communication. It provides a format for dialoguebetween the superior and subordinates.

(c) To determine whether HR programmes (selection, training, transfers) havebeen effective or not.

(B) Self Improvement of Employees:

Along with the administrative purposes, performance appraisal facil i tates self

improvement and self development (career development) of an employee. In fact, this

purpose i s more impor tant as i t re la tes to human resource development in an

organisation. Such appraisal suggests the weaknesses and shortcomings of the ratees. It

serves as a feedback to the employee. This is followed by discussion between the rater

and the ratee in a spirit of co-operation and mutual understanding. Counselling of

employees for improving their performance is always through such post appraisal

interviews. This gives opportunity to an employee to overcome his weaknesses and to

improve his skills, abilities, performance, behaviour and so on. Guidance is offered to an

employee for his self-development and also for improving his overall performance in

the job assigned. Thus, performance appraisal is needed for performance

iimprovement of employees. This positive purpose/objective of performance appraisal

important and useful to the employee and the organisation in the long run.

Appraisal report acts as a feedback to the employee. An employee knows where he stands. It also tells him what he has to do to improve his present performance and go up <

in the management hierarchy. In brief, to help an employee to improve, to grow and to develop for higher positions in the organisation is the basic purpose of performance appraisal. It motivates employees to improve and show better performance for higher post, position and salary payment. This purpose has wider significance as compared to administrative purposes of performance appraisal

The purposes of performance appraisal in regard to self-improvement of employees are as noted below:

(1) To assess the critical attributes of the executives.

(2) To highlight the strengths and weaknesses and areas of improvement in the case ofan executive.

(3)

To evaluate and compare the performance of an executive in contrast to other executives.

to identify the development areas of the executives and provide the right kind of opportunities

(5) To discover the latent/hidden skills, talents, etc. available with an executive.

(6) To assess whether the executive is on the right job, right place or not.

(5) To find out how far the executive can grow in the organisation taking hiscapabilities into account.

(6) To find out the kind of job rotation or career opportunities should be provided to anexecutive.

NEED OF PERFORMANCE APPRAISAL:(1)Understanding employee: For understanding the qualit ies, merits and limitations

of an employee working in the organisation.

(2)Monetary benefits: For giving annual increment and other monetary benefits to anemployee.

: (3) Personnel policies: For deciding promotions, transfers and demotions of employees working in an organisation.

(4) Training and development: For selecting employees for training and managementdevelopment programmes.

(5) E m p l o y e e g u i d a n c e : F o r p r o v i d i n g g u i d a n c e t o a n e m p l o y e e t o d e v e l o p h i squalities, abilities and work performance.

(6) Research: For conducting research on personnel management.

(7) Higher morale: Performance appraisa l i s needed for ra is ing the morale ofemployees.

(8) High eff ic iency: For ra is ing the eff ic iency of the whole organisat ion by givingpromot ions (h igher pos i t ions) to most competent employees and a lso by g iv ingopportunities to all employees for their self improvement and development.

WHO SHOULD EVALUATE THE PERFORMANCE?It is already noted that performance of employees is to be evaluated/rated in the

appraisal process. The employee is also called ratee. The ratee may be individual (subordinate or superior), work group, division or specific organisation.

The individuals who are given the responsibility of performance evaluation are called raters. Raters can be immediate supervisors, specialists from the HR department, subordinates, peers, committees, clients, self-appraisals or a combination of several.

Immediate supervisor is the most appropriate candidate to appraise the performance of his/her subordinates. He is closely connected with his subordinates and his familiar with the subordinate's performance than his/her superior. Secondly, the appraisal programmes are often linked to training and development of manpower within the organisation. The immediate superior is useful to the management not only for the performance evaluation of his subordinates but also for their subsequent training and development. He (immediate superior) can give training as per the exact needs of his

subordinates. Thus, immediate supervisor is most suitable for performance evaluation of his subordinate and also for his training and development.

Subordinates can assess the performance of their superiors. This method may be useful in assessing an employee's ability to communicate, delegate work, allocate resources, disseminate information, resolve conflicts and deal with employees on a fair basis. However, in this method, the superiors tend to become more popular, not by providing effective leadership to his subordinates, but by mere gimmicks.

Human Resource Management

Peers are in a better position to evaluate certain facts of job performance which the superiors and subordinates cannot do. Such facts include contribution to workgroup projects, interpersonal effectiveness, reliability, initiative and communication skills, Peers are in a better position to act as raters due to their closeness of the working relationship and the amount of personal contact with the ratee. Sometimes, friendship may result in distortion of evaluation. Secondly, serious conflicts may develop among co-workers when reward allocation is based on peer evaluation. In addition, all the peers may join hands in order to rate each other high.

Clients are seldom used for rating employee performance. Clients may be members within the organisation who have close and direct contact with the ratee and make use of an output (goods or services) this employee provides. Clients can offer rating information in regard to interest, dependability, courtesy, honesty and communication skills of the ratee. Clients can be used as raters in service sector.

360 DEGREE APPRAISAL:

When appraisal is made by superiors, peers, subordinates and clients, it is called the 360 degree system of appraisal. This appraisal system was developed first at General Electric, US in 1992. The system is now popular and used in many companies in India. Reliance Industries, Crompton Greaves, Godrej Soaps, Wipro, Infosys, Thermax and Thomas Cook are some companies which are using this appraisal method with greater benefits. The Arthur Anderson Survey (1997) reveals that 20 per cent of organisations use the 360 degree method of appraisal. This speaks about the utility and popularity of this method. In the 360 degree method, besides assessing performance of an employee, other attributes of the ratee such as talents, behavioural traits, values, ethical standards, tempers and loyalty are evaluated by people (raters) who are best placed to do it.

360 degree appraisal method is broad based and comprehensive and the results available are accurate and useful for different purposes. As a result, large, progressive and professionally managed companies prefer this appraisal system.

Some companies use rating committees to evaluate their employees. The committees consist of supervisors, peers and subordinates. The members of the committee have adequate capacity to intelligently evaluate same aspects of employee's performance. This method is better than giving the entire responsibility of rating to one individual. The benefit of collective wisdom of members is available in this method. In addition, there are some more benefits of this method. For example, there may be objectivity in rating as more than one rater is involved in the assessment process. The combined use of several raters can help to cancel out problems like "bias" as "halo" effect on the part of individual raters. However, the committee sating system reduces the role of the immediate supervisor in the area of training and development.

Finally, self appraisal method is also available. Here, the employee himself evaluates his own performance. Indian Telephone Industries (ITI) has been using the self appraisal system for its executives. There is an opportunity to an employee to participate in the evaluation process. It can improve the manager's motivation. Self appraisal is possible at

the higher levels and not at the lower levels. An individual employee may rate himself excessively high than it would be if he was rated by his superior. There is consistent upward bias in self-appraisals. Such appraisals can be used for counselling and developing subordinates but hot for making salary and promotion decisions.

MERITS OF 360 DEGREE APPRAISAL:

(1) Use of multiple raters: It is assumed that appraisal under 360 degree will be morereliable and free from bias because a number of raters are involved. Their findingsare likely to be more objective.

(2) Systematic data collection: There is systematic collection of performance data fromthe immediate supervisors, peers and the concerned employee. Subordinates orcolleagues can volunteer to give useful information about the ability of theemployee to perform the job.

(3) Potentiality of self-development: 360 degree appraisal provides broaderperspective about an employee's performance. When feedback is provided fromdifferent sources it facilitates self-development to the employee. The employee cancompare his/her perception about the self with the perceptions provided by others.

(4) Formal communication: Only formal communication is entertained in 360 degreeappraisal. Hence the employee feels more accountable to the organisation.

(5) Identifying special traits: 360 degree appraisal is found highly effective to identifyand measure team building skills and interpersonal skills.

DEMERITS/LIMITATIONS OF 360 DEGREE APPRAISAL:

(1) Sense of insecurity: Employees often get frightened with the thought that appraisalwill be obtained from multiple sources. Organisations should work out employee-friendly appraisal system.

(2) Time-consuming: 360 degree appraisal is found time consuming. It is because lot oftime is taken to select the right rater, prepare questionnaire and analyse the data.

(3) Involvement of many raters: When multiple raters are involved it is not possible forevery rater to separate honest observations from personal bias. All raters may not beequally close to the employee.

IMPORTANCE OF PERFORMANCE APPRAISAL: The advantages of performance appraisal (as noted above) also suggest its

importance. Performance appraisal is important as it provides many benefits to the management. For example, introduction of scientific personnel policies, human resource development, cordial labour-management relations, high morale of employees are some important benefits of performance appraisal and they suggest its role and importance. Moreover, performance appraisal is a rational substitute to personal opinion of executives about their subordinates. It is more objective and transparent in character. It makes personnel administration fair and impartial. These special benefits indicate its importance and positive role. Performance appraisal is an essential function of

management by which the actual contributions of company's executives are measured and evaluated. The fact that all enterprises have their own performance appraisal programmes indicates their practical importance.

MERITS/BENEFITS/USES OF PERFORMANCE APPRAISAL:

(1) Suitable Placement: Performance appraisal is useful for evaluating performance ofsubordinates and also for understanding their potentials. This information isavailable progressively and can be used purposefully for assigning duties-toemployees as per their merits and potentials. Thus, placement of staff andperiodical adjustment in the placement can be made scientifically.

(2) Assistance in Self-improvement: Performance appraisal gives the details of pluspoints and weaknesses of employees (performance feedback). In addition, they aregiven guidance for removing their weaknesses and also for making their plus points(i.e., merits) more conspicuous. In brief, performance appraisal assists theemployees in their self-development. This is possible through performancefeedback to every employee periodically.

(3) Incentive to Grow and Develop: Performance appraisal acts as an incentive toemployees to improve their performance, develop new qualities and secure higherpositions in the organisation. The employee with merit (noted through appraisal)may be given special increments or promotion to higher position. This motivatesothers to improve their performance and qualities for similar benefits. In brief,performance appraisal facilitates career development of employees.

(4) Effective Training Programme: Performance appraisal suggests the drawbacks andother weaknesses of employees. It is possible to remove such common weaknessesand deficiencies of employees by adjusting their training programme accordingly.Thus, performance appraisal is useful for suitable modifications in the trainingprogrammes.

(5) Introduction of Sound Personnel Policies: Transfers, promotions, wage rates anddismissal are the different areas of personnel management. These personnel policiesare directly connected with the performance appraisal of employees. Such policiesbecome fair, impartial and acceptable to employees when they are based onperformance appraisal. Thus, performance appraisal facilitates the introduction ofsound personnel policies.

(6) Cordial Employer-Employees Relations: Performance appraisal avoids or at leastminimises grievances of employees as regards promotions, transfers, incrementsand so on. Employees develop a sense of confidence that injustice will not be doneto any employee as performance appraisal system is based on sound principles.Management is also not in a position to make partiality/favouritism whenperformance appraisal records are maintained properly and used when required.

(7) Human Resource Planning and Development: Performance appraisal facilitateshuman resource planning and development. It suggests the type of manpower

available. It is also possible to train or develop the existing manpower as per the future needs of the enterprise. This is possible through training and' executive development programmes. In brief, performance appraisal provides feedback for human resource planning and development.

(8) Employee Communication: Performance appraisal facilitates direct communicationwith the employees through appraisal interview and post-appraisal interviews.Such communication guides employees and also provides more information to themanagement regarding the expectations and feelings of the employees. In brief,appraisal is a two-way communication and is useful to employees andmanagements.

(9) High Employee Morale: Scientific and impartial performance appraisal gets thesupport from the employees. They feel that the management gives due importanceto them and is genuinely interested in their career development and well being.This creates positive impact on the mental make-up of employees. They treatmanagement as their friend, guide and well wisher. This raises the morale ofemployees.

PROCEDURE OF PERFORMANCE APPRAISAL:Performance appraisal involves lengthy procedure process which needs to be

completed in an orderly manner. Such lengthy procedure is necessary in order to evaluate the performance of employees in the light of the standards fixed. This should be followed by informing the employee about his actual performance and finally providing him necessary training facilities so as to enable him to bring about self improvement and self development. The principal steps involved in the performance appraisal procedure/process are shown in the chart given below:

Performance Appraisal

1. ----►

Establishing Performance Standards

2. ----»

Communicating Standards to Employees

3. ----*

Measuring Actual Performance

4. ----►

Comparing Actual Performance with the Standards Set

5. I-----

Discussing Actual Performance with the Employee (Appraisal Interview)

6. ----»

Offering Guidance for Improving Performance (Follow-up Measures)

Each step in the performance appraisal procedure/process is crucial and is arranged logically. The process shown in the chart is somewhat idealised. Organisations can make

minor changes in the process as per their special requirements. Measuring actual performance in the light of performance standards set as well as performance appraisal interview are two important and major steps in the appraisal process. The method used for appraisal should be appropriate and the emphasis in the appraisal interview should be on counselling and self-development of an employee and not on criticism, witch-hunting and buck passing. Every effort should be made to make appraisal interview purposeful and beneficial to the employee (ratee).

ESSENTIALS/REQUIREMENTS OF A GOOD PERFORMANCE APPRAISAL PROCEDURE/SYSTEM:(1) Easy to understand and simple to operate: A good performance appraisal system is

one which is easy to understand and simple to operate. Such system normallycovers all employees and naturally all of them including those at the lowest leveshould be able to understand it easily and quickly. Similarly, the appraisaprocedure should not be too complex or time consuming. Simplicity of appraisasystem gives convenience to all.

(2) Support from the employees: Performance appraisal is for the benefit cemployees. Naturally, they must feel confidence as regards the system. They shoulnot feel it to be too theoretical, unrealistic and partial. In other words, the systeishould not be opposed by the employees. There should be popular supportappraisal system. It is also desirable to discuss the appraisal procedure with tlemployees before finalising the same. In addition, good appraisal system shoualso have the support of all line people/executives who administer it.

(3) Wide publicity: The performance appraisal scheme should be given wide publicfor the information and guidance of employees. This will make them alert about \appraisal procedure and its benefits. The opposition to the scheme will be limilwhen it is given wide publicity through notices and posters. Similarly, employwill support the appraisal system if it is objective and without any bias.

(4) Suitability to the organisation's operations and structure: One uniform systenperformance appraisal may not be suitable to all enterprises/organisations. 'system introduced should be suitable to the organisation structure and operatiiThis will make the appraisal, adaptable. In brief, the appraisal system madaptability to the organisation structure.

(5) Scientific and Reliable: The performance appraisal system should be scientificalso reliable. There should be no scope for partiality/favouritism while ratinjemployees. The system should work in a uniform manner at all times even \the raters change. A reliable system gets support from the employees.

(6) Correctly defined standards of performance: In a good performance appisystem, the standards of performance must be clearly and correctly defined,facilitates easy comparison of actual performance with the established stancThe performance criteria should be clear and divided into objective and subjectivecriteria. Proper weightage should be given to various considerations included

performance criteria. Similarly, performance criteria for different categories of employees should be different. For example, performance criteria for operatives should be like quality and quantity of output in a given period, length of service, amount of training necessary, number of accidents and absents in a given period, etc.

Performance criteria for front-line supervisors include items like quality and quantity of output, total cost per unit of output, absenteeism rate for a given period, manshifts lost due to stoppage of work in a given period and so on. Performance criteria for middle level managers include item like co-ordination among supervisors, extent of upward communication of ideas, rational use of overhead facilities and degree of knowledge among supervisors about corporate goals/ policies, etc. Finally, performance criteria for top managers include return on capital employed, labour productivity indices, degree of knowledge among middle level managers about corporate goals, extent of upward communication and contribution to the socio-cultural values of the environment aspect.

(7) Provision of incentives: The system of performance appraisal should have aprovision of incentives to those who show satisfactory performance of the jobsassigned. The incentive may be even increment or promotion. Such incentive createsfavourable impact on employees and raises their morale. They also show goodperformance in order to secure the benefit of in-built incentive. In brief, in a goodperformance appraisal system, there should be built-in incentives that is, a rewardshould follow satisfactory performance.

(8) Periodical review: A good system of performance appraisal system need notremain the same over a long period. On the other hand, the appraisal system shouldbe reviewed (or evaluated) periodically in order to up-date the same. Necessarychanges should be introduced in the appraisal system as per the changing needsand situations. Flexibility and reliability are essential in a good performanceappraisal scheme. For this, the system should be periodically evaluated in order toensure that it is continuing to meet its goals.

(9) Proper selection of rater: Rater actually study the performance of employees in thelight of standards fixed. He may be superior executive or sectional supervisor.Sometimes, experts are also appointed for the appraisal. However, the rater shouldbe properly qualified so that the rating will be correct. He must be capable and mustbe able to face criticism, if any from the ratee. A rater should be given propertraining and also proper tools for the purpose of appraisal work. In short, in a goodappraisal system, the rater should be properly qualified, trained, experienced andimpartial in his work.

(10)Frequency of appraisal: Performance appraisal is a continuous process. It should bemade frequently. Such frequency of appraisal may change from organisation toorganisation. Yearly appraisal is the normal practice with many companies. Suchfrequency provides better opportunities of self-development to employees

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(11) Emphasis on employee's potential: While appraising an employee, more emphasisshould be on the employee's potential. Potentials include knowledge, skills andattitudes the employee may possess for better performance. Such potential is usefulfor manpower development. Naturally, in a good performance appraisal system,employee's potential should be given special attention.

(12) Effective communication with the Ratee: Performance appraisal is basically for selfimprovement. Naturally, the employee (ratee) should be made a party to theappraisal process. Positive as well as negative rating should be communicated tothe ratee immediately after the completion of rating work by the appraiser (rater).This should be followed by post-appraisal interview and provision of facilities forself improvement of the ratee. Effective communication with the employees isessential for raising the effectiveness of appraisal system. It is a feature of goodappraisal system.

PERFORMANCE APPRAISAL TECHNIQUES/METHODS:

Methods/Techniques of Performance Appraisal

(1)

Confidential Reports: In this method, superiors are asked to prepare confidentialreports on the subordinates assigned to them. Such reports are prepared in the case ofsupervisory staff and managers. Various aspects such as achievements, weaknesses,major mistakes, merits, good work done, etc. are recorded in such reports. This is an old.and popular method of performance appraisal of employees of all categories. It is usedeven at present in government departments and educational institutions, wheresuperiors prepare confidential reports about their subordinates. Such reports are notedin the service books of employees and are even shown to them for self-improvement anddevelopment. Such confidential reports are used for promotion and transfer of theemployees. It is a narrative method of performance appraisal.

Ranking Method: Ranking method is the oldest and also the simplest method ofrating of employees. According to ranking method, each employee is compared with all

(A) (B)

Traditional Methods Modern Methods

Confidential Reports (1) Human Resource Accounting

Ranking Method MethodGrading Method (2) Appraisal by Results orGraphic Rating Scales Management by Objectives

Checklist Method (3) Assessment Centre

Forced Choice Rating Method (4) BARS

Critical Incident MethodEssay Method

Group AppraisalField Review Method

others performing the same job and then is given a particular rank order in the descending scale. It states that A is superior to B, B is superior to C and so on.

ADVANTAGES OF RANKING METHOD:(a) Ranking method is simple to understand and easy to use.

(b) It is less expensive and less time consuming.

(c) Trained raters are not essential as it is simple to operate.

LIMITATIONS OF RANKING METHOD:(a) Ranking method ranks all employees. However, it does not tell us how much one

employee is superior to another.

(b) Ranking method is based on mental assessment. It is not possible to give anobjective proof as to why the rater has ranked one as superior to another.

(c) The performance of individual employee is not compared with the standardperformance decided. Employees are rated on an overall basis with reference totheir job performance and not on the basis of individual assessment of traits. Here,the best is placed first in the rank and the poorest occupies the last position.

(d) There is a possibility of rater's bias, which may make the appraisal defective.

(e) Its use is difficult in large groups when the rater cannot compare several employeessimultaneously.

(f) Ranking method is highly subjective.

In order to remove some deficiencies of ranking method, the paired comparison technique of ranking was introduced. In this paired comparison technique, every employee in a job is compared with every other employee to determine who is the better worker. This paired comparison technique gives more reliable rating than the simple ranking method. In addition, person to person comparison method can be used in place of simple ranking method.

(3) Grading Method: In the grading method, a number of grades or classes are firstestablished and carefully defined. The rater evaluates the performance of an individualemployee against these standards and places him in one of these grades. The grades arerelated to qualities of employees and grades are given to such qualities. The qualitiesmay be like job knowledge, judgement, leadership, cooperative attitude and so on. Thegrades may be like A (for outstanding), B (for very good), C (for good), D (for fair) and E(for poor). The rater judges the performance of an employee and puts him undersuitable category. This method is simple and quick but the rating of employees may

| not be accurate particularly when the rater has to complete the rating of large number of employees within a short period.

(4) Graphic Rating Scale Method: This is one of the oldest and most widely usedmethods of performance appraisal. Here, four to twelve factors are selected, depending^ upon the category to which the employee belongs. Some of these factors are quantity of

others performing the same job and then is given a particular rank order in the descending scale. It states that A is superior to B, B is superior to C and so on.

ADVANTAGES OF RANKING METHOD:(a) Ranking method is simple to understand and easy to use.

(b) It is less expensive and less time consuming.

(c) Trained raters are not essential as it is simple to operate.

LIMITATIONS OF RANKING METHOD:(a) Ranking method ranks all employees. However, it does not tell us how much one

employee is superior to another.

(b) Ranking method is based on mental assessment. It is not possible to give anobjective proof as to why the rater has ranked one as superior to another.

(c) The performance of individual employee is not compared with the standardperformance decided. Employees are rated on an overall basis with reference totheir job performance and not on the basis of individual assessment of traits. Here,the best is placed first in the rank and the poorest occupies the last position.

(a) There is a possibility of rater's bias, which may make the appraisal defective.

(d) Its use is difficult in large groups when the rater cannot compare several employeessimultaneously.

(b) Ranking method is highly subjective.

In order to remove some deficiencies of ranking method, the paired comparison technique of ranking was introduced. In this paired comparison technique, every employee in a job is compared with every other employee to determine who is the better worker. This paired comparison technique gives more reliable rating than the simple ranking method. In addition, person to person comparison method can be used in place of simple ranking method.

(3) Grading Method: In the grading method, a number of grades or classes are firstestablished and carefully defined. The rater evaluates the performance of an individualemployee against these standards and places him in one of these grades. The grades arerelated to qualities of employees and grades are given to such qualities. The qualitiesmay be like job knowledge, judgement, leadership, cooperative attitude and so on. Thegrades may be like A (for outstanding), B (for very good), C (for good), D (for fair) and E(for poor). The rater judges the performance of an employee and puts him undersuitable category. This method is simple and quick but the rating of employees may

■ not be accurate particularly when the rater has to complete the rating of large number of employees within a short period.

(4) Graphic Rating Scale Method: This is one of the oldest and most widely usedmethods of performance appraisal. Here, four to twelve factors are selected, depending

I upon the category to which the employee belongs. Some of these factors are quantity of

Output, quality of output, initiative, integrity, dependability,etc. These factors and their degrees are marked on a graph paper provided in the appraisal form. The rater has merely to check on the scale where he thinks the employee belongs.

Advantages of Graphic Rating Scale Method:

(a) It is simple to understand and easy to operate.

(b) It is also not a time-consuming method.

(c) It is economical and ensures uniformity in the assessment of employees.Comparison among the employees is easy as the details are clearly noted on thepaper by the rater.

Limitations of Graphic Rating Scale Method:

(a) It puts heavy pressure on the rater as he has to consider four to twelve different factors with five degrees for each factor. It is therefore, not possible to guarantee the

accuracy of the rater's decision.

The rater may be biased.

The rater has to do lot of paper work in the graphic rating scale method. He may do marking mechanically, if he has to make appraisal of large number of ratees.

Accurate rating may not be done as there is a very thin gap in between two considerations (e.g., very good and good). The graph paper used in graphic rating scale method is as shown below:

Factors/Considerations -»

Quantity of Output

Quality of Output

Integrity Initiative

Excellent /Very Good /

Good /Average /

Below Average(5) Checklist Method: In the checklist method, a list consisting of a number of

statements about the qualities of employee and his behaviour is prepared. The statements or questions, for example, may be as noted below:

(a) Does the employee work best under tension?............ ( )

(b) Does he make mistakes frequently?........................... ( )

(c) Does he keep ahead of schedule?.............................., ( )

(d) Does he follow the instructions of his superior?....... ( )

Each statement on this list is assigned a value depending upon its importance. While ■ rating an employee, the rater is asked to place a plus sign, a minus sign or a question mark in front of each statement, depending on whether he feels the description applies, does not apply, or there is doubt. The worker's final rating is taken as the average of the scale values of all statements that his superior has checked while rating him. The rating \ of employees, by this method, is impartial as the rater reports only the facts but the j values are assigned separately.

(b)

(c)

(d)

Performance Appraisal 97

Checklist method has certain limitations. It is rather difficult to construct a good checklist. Moreover, a separate checklist is needed for each category of job. The role of the rater in this method is rather passive as he only notes the facts, as he does not know the values given to different statements. This method is also costly and lengthy.

(6) The Forced Choice Rating Method: This method aims at reducing if noteliminating the possibility of bias and prejudice in the rating. It requires him (rater) tochoose between a number of descriptive statements of apparently equal value. He has toselect out of four or five statements only the one, which is most characteristic of theemployee, as well as the one, which is least applicable to him. His evaluation is thenchecked by reference to a secret score key. In this way, the personal bias of the rater issought to be removing from the rating process. As a result, the rating of employees ismore accurate, objective, fair and away from partiality by the rater.

However, this method has many limitations. For example, this method is not useful for self-improvement. The rater is also forced to select one alternative out of four/five alternatives suggested. Effective communication between supervisor and subordinate is not possible, as the supervisor may not know how he has scored the alternatives. This method is expensive to instal. Finally, it is restented by the rater because the assumption behind it is that the rater cannot be trusted to make an impartial evaluation.

(7) The Critical Incident Appraisal Method/Technique: The research scientistsdeveloped the critical incident method with the American Armed Forces during theSecond World War. The theory behind it is that, there are certain key acts of behaviour,which make the difference between success or failure in a job. These acts arise out of theincidents, which occur in the performance of a job. The supervisor is required to makenote of all such critical incidents and as a rater, examine the performance of thecandidate and record his rating. An experienced supervisor knows what type of actionor behaviour leads to success and which leads to failure. Thus, a study of the actions of acandidate in the critical incidents over a period of time enables the supervisor to rate theemployee correctly e.g., an employee who helps a fellow-worker to avoid accident isgiven positive entry in the critical incident book.

In this method, the main difficulty is that significant incidents are to be ordered for appraisal purpose. Such recording may not be done regularly. On many occasions, the employee has neither positive nor negative incidents. If the critical event does not happen, the rating of the employee will not be possible. The supervisor may also find it difficult to decide the incident, which is critical. In addition, human bias may appear while recording the critical incident. The supervisors are accused of spying and carrying a Tjlack-book'.

(8) The Essay Appraisal Method: In this method, a rater is required to write a smallparagraph as regards his subordinate's strengths, weaknesses, potentials and so on. Itneed not be treated as rating in an exact manner but a general opinion of a superior inrelation to his subordinate. Comparison of performance of one employee against that ofanother is not possible under this method.

98 ' Human Resource Management

(9) Group Appraisal: Under this method, a group of evaluators assess employees.The group is composed of: (a) supervisors (b) head of the department and (c) personnelexpert. The group is given free hand to determine the standards of performance,measures actual performance, analyses the causes of poor performance and offerssuggestions for improved work.

(10) Field Review Method: Under this method, a training officer from HRDdepartment interviews line supervisors to appraise the subordinates working underthem. The supervisors are expected to answer the questions prepared by the interviewerin advance. The supervisors have to answer about promotion potential, level ofperformance, progress of work, strengths and weaknesses. The findings are placed inthe service file of employees.

MODERN METHODS:

(1) Human Resource Accounting Method: Human resource is the most invaluableasset of an organisation. This asset can be valued in terms of money. When competentand trained employees leave an organisation, it will cost business in many ways. Thismethod assesses performance in terms of costs and contributions of employees. Costs ofhuman resources consist of expenditure on recruitment, selection, training,remuneration, human resource planning, etc. Contribution of human resource is themoney value of labour productivity. The difference between cost and contributionrepresents the performance of employees. This method is at infant stage with limitedusage.

(2) Appraisal by Results or MBO: It is a modern method of appraisal and has beenevolved by Peter Drucker. In this MBO method, (also called goal setting approach) thesubordinate employees are required to set their own standards of performance alongwith their superiors. Thereafter, the actual performance of subordinates is evaluatedagainst such standards. This is how appraisal is not imposed on the employees but isintroduced with their cooperation and participation. The actual performance may bediscussed personally in an appraisal interview where the superior will explain to thesubordinate his weaknesses and the manner in which they can be removed orminimised.

This method is a participative appraisal method and is a new development based on democratic principles. This technique is now becoming popular. At present, in many companies along with the appraisal by the superior, the employee himself is given self appraisal form and is asked to give the details which are reassessed by the superior along with his own evaluation and the details are discussed in the performance appraisal interview.

MBO method of performance appraisal is better than the other traditional methods discussed before. In these traditional methods, their superiors evaluate workers but their role is passive. However, in MBO he is closely associated with the appraisal process.

(3) Assessment Centre: Assessment centre is a group of employees drawn fromdifferent work units. The selected employees work together on an assignment similar to

Performance Appraisal 99

the one they would be handling when promoted. They participate in job related exercises evaluated by trained observers. Managers are evaluated over a period of time say one day to three days. Their skills and behaviour are carefully observed. The evaluators are experienced managers with ability. They evaluate all participants both individually and collectively by using simulation techniques, role playing, business games, etc. Assessments are done in order to determine employee potential for promotion. The evaluators prepare a summary report. In addition, feedback is administered on a face to face basis to employees who ask for it.

(4) Behaviourally Anchored Rating Scales (BARS): It is a modern method of performance appraisal. Behaviourally anchored scales are rating scales whose scale points are determined by statements of effective and ineffective behaviours. They are said to be behaviourally anchored because scales represent a range of descriptive statements of behaviour varying from the least to the most effective. A rater must indicate which behaviour on each scale best describes the performance of an employee. Main features of BARS are:

(a) Raters who will use the scales identity and define the areas of performance to beevaluated.

(b) The scales are anchored by descriptions of actual job behaviour.

(c) All aspects of performance to be evaluated are based on observable behaviours andare related to the job.

(d) Raters feel comfortable to give feedback to the ratees.

(e) BARS help to remove rating errors.

LIMITATIONS OF PERFORMANCE APPRAISAL TECHNIQUES:

(1) Time-consuming: Performance appraisal is a yearly exercise in many organisations.Superiors have to do this work within the time limit fixed. For such appraisal, formsare to be filled in and various observations are required to be noted. This increasesthe paper work of supervisors.

(2) Limited stress on self-improvement: Performance appraisal is basically for self-improvement and self-development of employees. For this, the evaluation needs tobe systematic and the appraisal interview should be problem solving in character.In many organisations, this aspect is not given adequate attention. As a result, thevery purpose of performance appraisal is defeated.

(3) -Ineffective communication: Information relating to rating needs to becommunicated to the employee soon after the completion of appraisal work.Ineffective and delayed communication between the rater and the ratee is one majorlimitation of performance appraisal.

(4) Absence of uniform standards: The standards used for appraisal purpose are notuniform within the same organisation. The standards used in different departmentsor by different raters vary. As a result, rating becomes unscientific and employees

100 Human Resource Management

suffer. Similarly, the rating is done on the basis of overall impression, which is not proper.

(5) Absence of effective participation of employees: In performance appraisal,effective participation of concerned employee is essential as it is basically for hisimprovement/ development. However, in many appraisal techniques or even in thepost-appraisal interviews, he is given a passive role. His participation is lacking.

(6) Resistance of employees to appraisal: Performance appraisal is resisted by theemployees as well as by the managers and supervisors who are expected toadminister the appraisal system. Employees oppose the system as they feel thesystem is only for showing their defects and for punishing them. The managersresist the system, as they are not willing to criticise their subordinates or identifytheir mistakes.

(7) Halo effect: It refers to the tendency to rate an individual rather consistently high orlow, depending on whether the rater's overall impression is favourable orunfavourable.

(8) Horn effect: It is the tendency of a superior to rate a subordinate lower than hisperformance justifies e.g., the recent failure of the subordinate may wipe out goodwork done in the past many years.

(9) Personal bias: Bias refers to subjective opinion. When a subordinate is closelyknown to the superior, he rates him very high and vice-versa.

(10) Central tendency: The superior is frequently guilty of averaging workcharacteristics in the middle grades. This may be because he knows the ratee toowell and does not want to give very low score. The superior provides 'average'rating because it will not expose his lack of incompetency.

(11) Leniency in rating: The superior provides lenient rating to avoid controversy andgives the benefit of doubt to the subordinate.

(12) Problem of confidentiality: It is not always possible to keep the findings ofperformance appraisal secret. The subordinates come to know about their appraisalreport in advance.

(13) Recency effect: Recency refers to closeness to appraisal period. An employee takeseasy for the whole year. When appraisal time comes, he becomes very active. Thiscreates a wrong impression of high efficiency and influences appraisal decisions.

(14) Primacy effect: The initial impression influences the appraisal report. Firstimpression is the last impression is the most befitting description of this limitation.

SUGGESTIONS FOR RAISING EFFECTIVENESS OF APPRAISAL PROGRAMME:(1) Define objectives clearly: The objectives of performance appraisal should be clearly defined or laid down. This gives clear direction to the performance appraisal process.

(2) Careful selection of appraiser: The appraiser (supervisor or evaluator) should beselected with due care and should be given suitable training so as to avoid variousbiases, central tendency and similar errors. He also should be given suitableguidelines so that the appraisal work will be done systematically and without anyinjustice to employees.

(3) Establish proper standards: The standards in regard to work, performance,achievements/ merits, positive contribution, qualifications acquired, etc. forappraisal purpose should be well defined. They should be given wide publicity.This avoids possible displeasure from the employees.

(4) Use of proper forms: For performance appraisal, suitable forms should be preparedfor uniformity and also for the convenience of appraisers. The appraisal record canbe kept properly with the help of such forms.

(5) Regularity in appraisal: Appraisal of employees should be made regularly andshould be supplemented by post appraisal interview for self-development ofemployees. It should be for their benefit and not for punishing them.

(6) Objectivity in appraisal: There should be high degree of objectivity, impartiality(unbiased approach) and openness in the whole process and procedure ofperformance appraisal.

(7) Mutual trust and confidence: There should be an environment of peace, trust andconfidence in between the superior and subordinates involved in the appraisalprocess.

(8) Selection of suitable method: The method used for rating of employees should begoverned by certain factors such as size, financial resources and the philosophy ofthe organisation.

(9) Quick communication with ratee: The results of performance appraisal should becommunicated to concerned employees immediately for remedial measures.

A NOTE ON POST APPRAISAL INTERVIEW:

The performance appraisal of an employee should be supplemented by an interview which serves as a feedback to him. It is called post-appraisal interview. It is the most difficult part of the entire appraisal process. It is also the most fruitful part of it. For this, the post-appraisal interview should be arranged soon after the appraisal process is over as the interview will be less effective if the time gap between the two is more. The participants in this interview are: the concerned employee (ratee) and his superior (rater). The purpose of such interview is to give details of the appraisal made and also to motivate and guide the employee for self-improvement and self-development. This interview should be arranged soon after the completion of appraisal work so that the feedback supplied to the employee will be fresh and also useful to him. If such interview is not arranged, the appraisal will serve only administrative purpose but the more important purpose i.e., self-improvement of the employee will be neglected. This suggests the importance of post appraisal interview which needs to be conducted in a proper atmosphere and also in the spirit of co-operation and understanding. It should not be a mere formality.

Performance interview has three broad goals/objectives as noted below:

(1) To recognise superior performance of employees so that it will be continued andimprove further by concerned employees.

(2) To maintain the performance of employees whose performance is at theacceptable level.

(3) To improve the performance of employees whose performance does not meetthe standards decided by the organisation.

It may be pointed out that appraisal interview is basically for counselling of subordinates by supervisors. Here, supervisors need proper training as counselling is a difficult activity. Many supervisors are hesitant to initiate appraisal interview (counselling session) as they lack self-confidence or feel that subordinates may raise uneasy questions or there may be heated exchanges leading to spoiling of cordial relations.

According to Norman Maier, there are three types of post appraisal interviews. These are:

(a) Tell and Sell Interview. (Also called Directive Interview)

(b)Tell and Listen Interview.

(c) Problem Solving Interview. (Also called Participative Interview)

(a) Tell and Sell Interview: In this post-appraisal interview, the employee is giveninformation about his performance and he is asked to accept the conclusions drawnregarding his evaluation. In addition, he is given a plan for his improvement and self-development. The superior acts as a judge, gives conclusions and suggests measures forimprovement. He brings the ready-made solutions for the employee. However, theemployee is not taken into confidence. He may or may not agree with the assessmentmade. He may be defensive or may express resentment as regards his performanceappraisal.

Tell and sell interview will be useful if the interviewer has capacity to place his conclusions and suggestions in an impartial and agreeable manner. This method is useful in the case of newly joined employees as they need guidance from their superiors for improvement in their work performance. They take the advisee of superior because of superior's position, experience and maturity. However, this interview is rather one sided with more importance to the interviewer. The participation of employee may be limited. He is not given adequate importance but is told about the remedial measures for' self-improvement in a routine manner.

(b) Tell and Listen Interview: In the tell and listen interview, the interviewer gives,the details of performance appraisal to his subordinate. In the first part of the interview,the weaknesses and strong points about job performance are made clear. In the second part of the interview, the opinions/views of the subordinate about his evaluation are considered.

This method is similar to tell and sell method but only to a limited extent as in both the methods, the evaluation is made clear to the subordinate with the necessary details. However, the interviewer do not dominate the interview process as it happens in the tell and sell interview. Here, the interviewer gives patient hearing to the views of the employee. He even encourages the employee to speak out frankly his opinions as regards the evaluation made. The interviewer acts as a non-directive counsellor of his subordinate.

Tell and listen interview is superior as compared to the tell and sell interview as concerned employee is given adequate opportunity to express his views and the interviewer listens and responds to the feelings and views of the subordinate. This leads to cordial atmosphere and develops trust and confidence in the minds of subordinate. He accepts the suggestions of his superior with an open mind and the interview ends with a favourable attitude towards the superior. The interview is also useful to the management as it gets information about the views, opinions and reactions of subordinates. Such upward communication is useful to the management in different ways. Tell and listen interview do not have adverse effect on the outlook of an employee. He gets the satisfaction that he has communicated his views to the representative of the management. He also takes positive interest in his self-development in the light of his performance appraisal by his superior.

(c) Problem-solving Interview: Problem-solving interview is certainly more positive and constructive in nature. Its purpose is to help the employee in his self-development. Here, the details of appraisal are not directly and clearly communicated to the employee. It is presumed that awareness of weaknesses is not essential for improvement and development in the future period. In brief, in this interview, the details of appraisal are not given much importance. More importance is given to self-development /career development of the employee in the future period.

In the problem solving interview technique, the interviewer acts as a friend and guide of the employee. He do not specify the area where improvement is urgently required. He also do not suggest the direction of remedial measures required to be taken. The interviewer prefers to motivate the subordinate to think independently about his self-development and avoid supplying ready-made solutions. He prefers to look to the viewpoint of the employee. The employee is asked to express his views about the job assigned to him, his contribution, satisfaction and displeasure about the job, his suggestions for innovations, his problems, difficulties and so on. This provides new information to the management and enables the management to help the employees in their self-improvement.

GUIDELINES FOR RAISING EFFECTIVENESS OF POST APPRAISAL INTERVIEW:(1) Free and frank communication: The superior should collect all details and decide

clearly what he wants to communicate to his subordinate through post-appraisal interview. The superior/interviewer should stay calm and should not argue with the person being evaluated (ratee).

(2) Right place for the interview: The place for such interview should be selectedproperly. There should be privacy and absence of any interruption during theinterview.

(3) Right time for the interview: The post appraisal interview should be arranged at aright time i.e. when both are in a good mood. The employee should be given fullopportunity to express his views.

(4) Properly qualified interviewer: The manager conducting post-appraisal interviewshould be properly qualified, trained and matured for the conduct of the interviewin a tactful manner.

(5) Strong backing of management: There should be strong backing of managementfor such post-appraisal interview.

(6) Suitable follow-up: Post appraisal interview should be supported by suitablefollow-up steps. The superior should suggest the ways and means to correct theweaknesses of his subordinates.

(7) Miscellaneous guidelines:

(a) Emphasise positive aspects of the evaluation. Purpose should be improveperformance and not to discipline ratees.

(b) Focus criticism on performance and not on personality characteristics.

(c) Make criticism specific and not general and vague.

(d) Identify specific actions the employee can taken to improve performance.

(e) Emphasise the evaluator's willingness to assist the employee's efforts and toimprove performance.

(f) End the evaluation sessions by stressing the positive aspects of theemployee's performance.

PERFORMANCE APPRAISAL IN INDIAN INDUSTRIES:

The genuine need of performance appraisal technique for administrative purposes and also for improving the quality and productivity of employees is accepted by progressive and professional managements in India. However, the systematic assessment of an employee's performance is a comparatively recent development ir

India. This technique is now used in Indian industries for different purposes such ai promotions and transfers, discovering talented supervisory personnel, finding ou appropriate training needs and finally for informing an employee where he stands. It ii also noticed that in many organisations, performance appraisal continues to be used fo controlling employees rather than for improving/developing them. This means th performance appraisal techniques are not used effectively for career planning c employees or for HRD programmes. The use of performance appraisal technique is nc made for manpower development programmes.

PERFORMANCE APPRAISAL IN INDIAN INDUSTRIES:

The genuine need of performance appraisal technique for administrative purposes and also for improving the quality and productivity of employees is accepted by progressive and professional managements in India. However, the systematic assessment of an employee's performance is a comparatively recent development ir India. This technique is now used in Indian industries for different purposes such ai promotions and transfers, discovering talented supervisory personnel, finding ou appropriate training needs and finally for informing an employee where he stands. It ii also noticed that in many organisations, performance appraisal continues to be used fo controlling employees rather than for improving/developing them. This means th performance appraisal techniques are not used effectively for career planning c employees or for HRD programmes. The use of performance appraisal technique is nc made for manpower development programmes.

In government departments, confidential report method of appraisal is extensively used while in private sector, personality behavioural traits are given special importance. In many organisations, very little feedback is given to the employees and are kept in the dark. This affects their future growth and development. The appraisal fails to provide opportunities of self-improvement and self-development to them. The appraisal only raises their anxiety, lowers their morale and brings down their commitment to work. Public sector enterprises, (ruled by civil servants) normally use bureaucratic approaches to managerial appraisal. However, such approaches are not suitable to enterprises conducting business activities.

Performance appraisal system needs to introduced in all Indian industrial/business units. In addition, the system needs to be implemented purposefully and that too with the co-operation and participation of employees and supervisors. In addition, the appraisal system should be used for the introduction of career planning programmes in the organisation. The appraisal system must give positive results in terms of employee efficiency and productivity. Systematic efforts are necessary in this regard.

While introducing suitable appraisal system in Indian business organisations, the behavioural features of Indian employees (such features are again based on cultural milieu) should be given special attention. Our socio-economic cultural background is different and the methods used in the West may not be suitable to Indian employees.

the following behavioural features of Indian employees need special attention while introducing appropriate appraisal system.

(1) Indian employees find it difficult to accept uncomplimentary judgement:

Employees, in general, feel unhappy and nervous when the appraiser gives his frank views and points out the deficiencies of his appraisee. Due to the interview, the employee feels hurt and that his superior is arbitrary in his judgement. He also feels that he has to accept the decision of his superior as he is the boss. As a result, the employee is dissatisfied and the interview fails to given positive results. The effect on the employee is negative/discouraging. Even the superior (appraiser) feels frustrated as the subordinate fails to understand his honest view for his (employee) benefit. This psychological feature needs special attention in the post appraisal interview.

(2) Indian employee has a tendency to place the blame for mistakes elsewhere: Thisis a common tendency among all categories of Indian employees. Due to thistendency, even the superior is reluctant to inform about adverse appraisals to hissubordinates. Self-improvement efforts are not made due to this tendency.Moreover, it is always easy to blame others rather than accepting it and improve thesituation. The very purpose of post appraisal interview is defeated due to this common tendency among Indian employees.

(3) Indian employees are reluctant to have self appraisal and capacity to accept one'sshortcomings: For self improvement, one has to accept the shortcomings and try toremove them. Self-appraisal is also useful for this purpose. However, Indianemployees are not favourable to these tendencies. This makes post appraisal interviews ineffective.

(4) Indian employees treat promotion as a reward of cordial private (not official)! superior-subordinate relationship and demotion as punishment/revenge:]Employees in India feel that promotion is not because of merits but because of] appeasement of superior through gifts, presents, etc. As a result, they are not) willing to have self-development for promotion even when it is suggested through j post-appraisal interview. They do no accept demotion due to genuine reason and self-improvement for its quick removal. These trends need proper attention while ] introducing appropriate or result-oriented post appraisal system.

CASE STUDY

APPRAISAL LINKED TO ANNUAL INCREMENT:LITCO is the name of a small proprietary concern manufacturing plastic buckets of

different sizes. The concern is doing good business and workers are paid fair wages. Total strength of employees is \ 85 including three supervisors, one assistant manager and one manager. The proprietor Mr. Shinde is a businessman cum politician but ensures that the business unit operates smoothly and make! reasonably good profit. This business unit started operations in the year 1994. The rules and practices are developed gradually with suitable modifications as and when necessary.

The employees of the concern are rated by supervisors by means of graphic scale. The factors to be considered for rating are performance at work, loyalty, dependability, community activity, initiative, regularity, punctuality, potentiality to develop, relations with co-workers and creative ability. The rating factors, method of rating, time of rating, etc. are made clear to workers through notice, circular and departmental meetings. Yearly increment, promotion and annual prizes are based on the performance of workers as per this method.

This system was accepted by workers for a period of six years since its introduction in 1996. There was no criticism or opposition to the scheme till 2001. However, in 2002, the situation changed and the whole performance appraisal system became a cause of conflict in the labour-management relations.

In the year 2002, five employees were denied annual increment due to their low ratings. They, along with few others, met the owner Mr. Shinde and expressed their dissatisfaction with the rating they have received. They argued that some considerations in the ratings are vague and are unfair to workers. They made reference to "community service" and argue that such service is not a part of their normal job and what they do off - the job is none of the employer's business. They also argued that loyalty and relations with co-workers as considerations for rating are confusing. In addition, they argued that annual increment should not be linked with this performance appraisal. Annual increment should be given to all workers as a reward for year's service and for meeting growing expenditure of workers. Workers and their families are very much affected when yearly increment of Rs. 100 is denied to them. For workers, wage payment is the only source of income and yearly increase in the salary is a source of pleasure to them. They get psychological satisfaction because of such increase. Workers urge Mr. Shinde to be sympathetic in this regard. One worker also hinted that workers may be required to form a union if the injustice in regard to performance appraisal is not removed.

This discussion convinced Mr. Shinde and his manager that present rating system was a dangerous source of friction and that its disadvantages out-weighed its advantages.

Mr. Shinde (being a politician also) noted indirect threat of union formation in his unit and was cautious in his approach. He preferred dignified retreat. After few days, he announced the decision to delink annual increment with performance appraisal. However, the rating system was given continuation with some modifications. Moreover, the possibility of promotions were rare, the rating system was not likely to create new problems for workers and employer. This is how Mr. Shinde solved the problem relating to performance appraisal tactfully and also peacefully. Workers were happy and their respect for Mr. Shinde also increased to some extent.Questions:

(1) Do you feel that annual increment should be based on performance appraisal?

(2) What is your opinion about "community activity" as one consideration in rating system?

(3) Do you agree with the decision taken by Mr.Shinde on the disputed issue? Is it a practical decision?

(4) Do you feel that too much importance need not be given to performance appraisal in smallfactories/production units?

(5) What are the possible consequences if Mr. Shinde had refused to amend his performance appraisalmethod?

Possible Answers:(1) At present, annual increment is given in a routine way to all categories of labour force though management

can link it with performance appraisal. Annual increase in the salary has economic, social andpsychological justification. Its refusal affects workers and their family members. It also makes workersangry, dissatisfied and non-co-operative. Hence, annual increment should be given to all workers andshould not be linked with performance appraisal.

(2) "Community Activity" as a consideration in the graphic scale appears to be redundant for appraisalpurpose. This issue is not directly concerned with factory work. Secondly, reliable information on thisconsideration may not be available. Thirdly, majority of workers are not participating in this activity andnaturally their marking will be "below average". Finally, there is opposition to this consideration and maylead to controversy if the management remains adamant on the matter.

(3) The decision taken by Mr. Shinde on the issue was wise and practical. Increment need not be linked withperformance as it is not a normal practice. Similarly, minor adjustment in the appraisal system does notdefeat its purpose. Omitting one or two considerations from the rating system will not make the systemdefective. Moreover, considerations which are ambiguous should not be selected for appraisal purpose.Mr. Shinde's decision is a practical one and also useful for cordial industrial relations.

(4) Performance appraisal is important and offers many benefits particularly in large organisation whichemploys huge manpower. However, in small units, workers are limited, chances of promotion are veryfew and there is limited scope for the use of results of performance appraisal. However, the system shouldbe there as it is one of the rights of the management. Mr.Shinde has continued the system but too muchimportance is not attached to the system. The system is necessary as it keeps a check on the employees.

(5) Mr. Shinde had every right to be firm on the issue of performance appraisal and refuse to accept the viewsexpressed by workers. However, the possible consequences are likely to be serious. Here, workers maystart an agitation or may not offer necessary co-operation in the production work. They may form a unionin order to fight collectively. Outside leadership may also come in the picture. The cordial industrialrelations may be replaced by hostile relations. This is as good as inviting new problems. There may bestoppage of production and profitability may go down. Taking strong stand means paying heavy price onminor issue. Mr. Shinde has avoided this situation.

222 Human Resource and Personnel Management

Exhibit 10.5

Larsen & Toubro, Human Resource Development—Performance Appraisal System

CONFIDENTIA

L PA FORM

ZB

NAME EMP.P.S.No. CADRE GROUP DEPT.

EXECUTIVES & SUPERVISORS

LARSEN & TOUBRO LIMITEDHUMAN RESOURCE DEVELOPMENT—PERFORMANCE APPRAISAL SYSTEM

PERFORMANCE ANALYSIS AND REVIEWAPRIL 1993 TO MARCH 1994

NAME DATE SIGNATURE

EMPLOYEE

IMMEDIATE SUPERIOR

NEXT SUPERIOR

PERSONNEUHRDDEPT.

PERFORMANCE REVIEW AGAINST OBJECTIVESSuprtor

ByEmpfoyM

AGREED OBJECTIVES & TARGETS (Not more than fivs)

RESULTS ACHIEVED

SELF REVIEW (By Employes)

SIGNIFICANT CONTRIBUTORS (JOB OR PROFESSION RELATED-MOT COVERED ABOVE)

IMPORTANT FACTORS FACILITATING PERFORMANCE

IMPORTANT FACTORS HINDERING PERFORMANCE

[51 PERFORMANCE AGAINST OBJECTIVES (By Immediate Superior)D OUTSTANDING D V GOOD D GOOD D ADEQUATE D INADEQUATE

(Contd

Performance Appraisal and Job Evaluation 223

Appraisal of Critical Attributes (By Immediate Superior)

Critical Attributes

INNOVATIVE NESS Ability to think new and better ways of doing things that result in introduction of new ideas or improvements of the systems and operations.

2. INITIATIVE

Ability to determine and initiate actions that result in improved handling of jobs, without waiting to be sold.

INTERPERSONAL & TEAM RELATIONSHIP

Ability to interact effectively with people at all levels to gain their confidence and respect and work in a collaborative and participative manner.

RESOURCEFULNESS Ability to muster resources to achieve desired results and devise ways and means of solving problems in difficult situations.

COMMUNICATION SKILLS

Ability to convey thoughts and feelings clearly both through oral as well as written expressions for better understanding.

Specific role related attributes (Identified in the beginning of the year)

6.

Areas of Strengths & Improvements (By Immediate Superior)

Potential Areas for Growth (By Immediate Superior)

I Recommendations for Training & Development (By Immediate Superior)

IN-COMPANY TRAINING PROGRAMMES

Description Code Description Code

2.

|D2] OTHER TRAINING PROGRAMMES

1.

[551SPECIFIC DEVELOPMENT PLANS

2.

Proposed Action (Tick as applicable

Details of Actions Required

Job Rotation Job Enlargement Special Assignment Deputation to Other Oept. Other {Please Specify)

Comments by Next Supertor(S)

On Specific Development Plans Stated Above in 03 Overall

Observations:

For Use by Pereonnet/HKO Co-ordinrtor