The Performance Appraisal – The process which evaluates an employee’s work behavior by comparing it with preset standards. The results of the comparison are documented to provide feedback to the employee to show how the employee is performing the job. Performance appraisals are conducted to determine that who needs what training, and who will be promoted, demoted, retained, or fired according to their job behavior.
A performance appraisal can also be referred to as a performance review, performance evaluation, (career) development discussion, or employee appraisal. Performance appraisal can be simply defined as the documentation and evaluation of the employee’s job performance.
Why Performance Appraisals are Important
A performance appraisal is an opportunity for the employee to express their views and for the manager to provide support when needed. The performance appraisal is an opportunity for employees to understand how well they are progressing in their job. They need to know if they are performing well and what areas of their work need to be improved upon. The development of staff is very important for motivation and loyalty. Therefore, the appraisal is a good chance to discuss career development and training needs.
The appraisal can be helpful in identifying certain tasks that an employee s performing buy may not be needed in the eyes of the manager. The appraisal allows both the employee and the manager to collaboratively decide on the work priorities potentially providing an opportunity for manager and employee to bond.
The documentation made by the manager or consultant is used to record the performance of each person and is useful to identify if any training and development are needed.
Additionally, this written documentation can be used as evidence to support the case and help decide upon promotional or disciplinary decisions.
Performance appraisals are also instrumental when making layoff decisions. If you are going to trim your workforce is always best to have an objective way to evaluate your people to make sure you do not take out your highest performers.
The Performance Appraisal Process
Formal performance appraisal should be conducted on a quarterly basis but if you can not manage that you should at least perform an annual review. Many high performing organizations have additional steps in their processes that allow for monthly or ad-hoc meeting less formally but there always needs to be a formal structure as well.
Here are some elements that you should consider in your formal performance appraisal process:
Establishing Performance Standards
It is necessary to evaluate performance; you should first set some standard as a benchmark so that you can compare the actual performance with the standard. The standards set should be clear, easily understandable and in measurable terms.
Communicating the standards
It is the responsibility of the management to communicate the standards to all the employees of the organization. The standards should be clearly explained so that they could be able to perform their roles accordingly.
Measuring the actual Performance
It is a nonstop process which involves monitoring the performance throughout the year. This stage requires the watchful selection of the suitable techniques of measurement, taking care that individual bias does not affect the outcome of the process and providing assistance rather than interfering in an employee’s work.
Here are some methods to measure the employee’s performance.
Rating scales consists of several numerical scales representing job-related performance criterions such as dependability, initiative, output, attendance, attitude, etc. Each scales ranges from excellent to poor. The total numerical scores are computed and final conclusions are derived.
A checklist of statements of behaviors of the employee in the form of Yes or No based questions is prepared. Here the rater only does the reporting or checking and the HR department does the actual evaluation.
Forced Choice Method
The forced-choice method is developed by J. P. Guilford. An arranged series of statements in the blocks of two or more are given and the appraiser indicates which statement is true or false. The appraiser is forced to make a choice. The HR department does the actual assessment.
Forced Distribution Method
This method was evolved by Tiffen to eliminate the central tendency of rating most of the employees at a higher end of the scale. Employees are clustered around a high point on a rating scale. The rater is compelled to distribute the employees on all points on the scale. It is assumed that the performance is confirmed to normal distribution.
Critical Incidents Method
The approach is focused on certain critical behaviors of employee that make the difference between performing a job in a noteworthy manner (effectively or ineffectively). Such types of behaviors are noted by the supervisors when an incident occurs. There are three steps involved in appraising employees using this method. First, a list of noteworthy (good or bad) on-the-job behavior of specific incidents is prepared. Second, a group of experts then assigns weight or score to these incidents, depending upon their degree of desirability to perform a job. Third, finally, a check-list indicating incidents that describe workers as “good” or “bad” is constructed. Then, the check-list is given to the rater for evaluating the workers.
Field Review Method
This is an appraisal done by someone outside the employees’ own department usually from corporate or HR department. This method is useful for managerial level promotions when comparable information is needed.
Performance Tests & Observations
This is based on the test of knowledge or skills. The tests may be written or an actual presentation of skills. Tests must be reliable and valid.
This is a traditional method mostly used by government departments. Evaluation is made by the immediate boss or supervisor for giving effect to promotion and transfer. The confidential report may contain attendance, self-expression, teamwork, leadership, initiative, technical ability, reasoning ability, originality, and resourcefulness, etc.
In this method, the appraiser writes down the employee description in detail within a number of broad categories like overall impression of performance, promotion ability of the employee, existing capabilities and qualifications of performing jobs, strengths and weaknesses and training needs of the employee.
The appraiser compares the performance with other co-workers.
It is the oldest and simplest formal systematic method of performance appraisal in which employee is compared with all others for the purpose of placing order of worth. The employees are ranked from the highest to the lowest or from the best to the worst.
Cost Accounting Method
Performance is evaluated from the monetary benefits the employee yields to the organization. Cost to keep employee, and benefit the organization derives is ascertained. Hence it is more dependent upon cost and benefit analysis.
Consider the following factor when you are evaluating the performance.
- The unit wise average value of production or service
- Quality of product or service
- Overhead cost
- Accidents, damages, errors, spoilage, wastage, wear and tear
- Human relationship
- Cost of the time supervisor spent in appraising
Behaviorally Anchored Rating Scales (BARS)
Statements of effective and ineffective behaviors determine the points. They are said to be behaviorally anchored. The rater is supposed to say, which behavior describes the employee performance. The proponents of BARS claim that it offers better and more equitable appraisals than do the other techniques of performance appraisal
Developing BARS typically involves five steps:
- Generating Critical Incidents
- Developing Performance Dimensions
- Reallocating Incidents
- Scaling Incidents
- Developing Final BARS Instrument
Management by Objectives (MBO)
Peter F. Drucker proposed a new concept, namely, management by objectives (MBO) way back in 1954. MBO is “process whereby the superior and subordinate managers of an organization jointly identify its common goals, define each individual’s major areas of responsibility in terms of results expected of him and use these measures as guides for operating the unit and assessing the contribution of each its members”.
MBO requires the manager to goals with each employee and then periodically discuss his or her progress toward these goals.
An MBO program consists of four main steps:
- Goal Setting
- Performance standard
- Periodic review.
Assessment centers are mainly used for evaluating executive or supervisory potential. By definition, an assessment center is a central location where managers come together to participate in well-designed simulated exercises. They are assessed by senior managers supplemented by the psychologists and the HR specialists for 2-3 days. Assessment centers provide more accurate evaluation, minimum biasedness, right selection and promotion of executives, but the technique is also costly and time-consuming.
360 – Degree Performance Appraisal
This method was first developed and formally used by General Electric Company 1992. This feedback-based method is generally used for determining training and development requirements, rather than for pay increases.
Under 360 – degree appraisal, performance information such as employee’s skills, abilities, and behaviors, is collected “all around” an employee, i.e., from the supervisors, subordinates, peers and even customers and clients.
Some Additional Steps in the Performance Review Process
- Comparing the Actual with the Desired Performance
- Provide Regular Feedback
- Conduct the Performance Appraisal Meeting
- Follow up Action