21784749-Performance-Appraisal-With-Casestudy-Project-Report (2)

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15.

EDWARD DEMING ON

PERFORMANCE APPRAISAL

55

16. CHALLENGES OF PERFORMANCE

APPRAISAL

56-60

17. PIRAMYD MEGASTORE - STORY

OUTLINE

61-62

18. HR VISION OF PIRAMYD MEGASTORE 63-64

19. PERFORMANCE APPRAISALMETHODS USED AT PIRAMYD

65-70

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MEASURINGPERFORMANCEV/SACTION

Come appraisal time and one of the most debated aspects of completing the fair-and-

square appraisal revolves around what is 'measured' and what is 'achieved'. And the fable

of the Bees and the Bee Keepers is a very popular paradigm that often gets quoted at such

times. It goes thus:

The Story: Once upon a time there were two beekeepers that each had a beehive.

The beekeepers worked for a company called Bees, Inc. The company's customers loved

its honey and demand for the product was increasing. So Bees, Inc. assigned each

beekeeper a goal for increased honey production. The beekeepers had different ideas

about how to meet their goal and designed different approaches to improve the

performance of their hives.

The first beekeeper established a bee performance management approach that

measured the number of flowers each bee visited. At considerable cost to the beekeeper,

an extensive measurement system was created to count the flowers each bee visited. He

also provided feedback to each bee at mid-season on his individual performance. He also

created special awards for the bees who visited the most number of flowers. However, the

bees were never told about the hive's goal to produce more honey so that the company

could increase honey sales. The second beekeeper also established a bee performance

management approach but this approach communicated to each bee the goal of the hive

for increased honey production. The beekeeper and his bees measured two aspects of

their performance the amount of nectar each bee brought back to the hive and the amount

of honey the hive produced. The performance of each bee and the hive's overall

performance were charted and posted on the hive's bulletin board for all the bees to see.

The beekeeper created a few awards for the bees that gathered the most nectar. But he

also established a hive incentive program that rewarded each bee in the hive based on the

hive's overall honey production the more honey produced, the more recognition each beewould receive.

At the end of the season, the beekeepers evaluated their approaches. The first

beekeeper found that his hive had indeed increased the number of flowers visited ,but the

amount of honey produced by the hive had dropped. The Queen Bee reported that

because the bees were so busy trying to visit as many flowers as possible, they limited the

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amount of nectar they would carry so they could fly faster. Also, since only the top

performers would be recognized, the bees felt they were competing against each other for

awards. As a result, they would not share valuable information with each other that could

have helped improve the performance of all the bees (like the location of the flower filled

fields they'd spotted on the way back to the hive). As the beekeeper handed out the

awards to individual bees, unhappy buzzing was heard in the background. After all was

said and done, one of the high performing bees told the beekeeper that if he had known

that the real goal was to make more honey, he would have worked totally differently. The

second beekeeper, however, had very different results. Because each bee in his hive was

focused on the hive's goal of producing more honey. This Bess had concentrated their

efforts on gathering more nectar in order to produce more honey than ever before. The

bees worked together to determine the highest nectar yielding flowers and to create

quicker processes for depositing the nectar they had gathered. They also worked together

to help increase the amount of nectar gathered by the poorer performers. Tile Queen Bee

of this hive reported that the poor performers either improved their performance or

transferred to hive No.1, because the hive had reached its goal. The beekeeper rewarded

each bee his portion of the hive incentive. The keeper was also surprised to hear a loud,

happy buzz and a jubilant flapping of wings as he rewarded the individual high-

performing bees with special recognition.

Should you measure performance or mere activities of employees? is the one who

does silent work but does not show of himself/herself or the one who puts up a show but

hardly performs to be recognized and rewarded? This and other related questions are

answered in this chapter.

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PERFORMANCE APPRAISAL

An organizations goals can be achieved only when people put in their best efforts. How

to ascertain whether an employee has shown his or her best performance on a given job?

The answer is performance appraisal. Employee assessment is one of the fundamental

jobs of HRM. But not an easy one though. This chapter is devoted to a detailed

discussion of the nature and process of conducting performance appraisal.

Meaning and Definition

In simple terms, performance 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, judgement, 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.

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

employees 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 employees behaviour as part of the assessment.

Behaviour can be active or passive--do something or do nothing. Either way behaviour

affects job results. The other terms used for performance appraisal arc: performance

rating, employee assessment. Employees performance review, personnel appraisal

performance evaluation employee evaluation and (perhaps the oldest of the terms used)

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 as shown in Fig.

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Fig. Relationshipof Performance Appraisal and

Job Analysis

Job analysis sets out requirements, which are translated into performance standards,

which in turn from the basis for performance appraisal.

OBJECTIVES OF PERFORMANCE APPRAISAL

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Performance

StandardsPerformance

Appraisal

Describes work andpersonnel requirement

of a particular job

Describes the job-relevan

strengths and weaknesses of

each individual


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Data relating to performance assessment of employees arc recorded, stored. and

used for seven purposes. The main purposes of employee assessment are:

1. To effect promotions based on competence and performance.

2. To confirm the services of probationary employees upon their completing the

probationary period satisfactorily.

3. To assess the training and development needs of employees.

4. To decide upon a pay raise where (as in the unorganized sector) regular pay scales

have not been fixed.

5. To let the employees know where they stand insofar as their performance is concerned

and to assist them with constructive criticism and guidance for the purpose of their

development.

6. To improve communication. Performance appraisal provides a format for dialogue

between the superior and the subordinate, and improves understanding of personal goals

and concerns. This can also have the effect of increasing the trust between the rater and

the ratee.

7. Finally, performance appraisal can be used to determine whether HR programmes such

a selection, training, and transfers have been effective or not.

Broadly, performance appraisal serves four objectives-

(i) developmental uses,

(ii) administrative uses/decisions,

(iii) organizational maintenance/objectives, and

(iv) documentation purposes

Table below outlines these and specific uses more clearly:-

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Multiple Purposes of Performance Assessment

General Applications Specific PurposeDevelopmental Uses

Administrative Uses/Decisions

Identification of individual needs

Performance feedback

Determining transfers and job assignments

Identification of individual strengths ad

development needs

Salary

Promotion

Retention or termination

Recognition of individual performanceLay-offs

Identification of poor performers

Organizational Maintenance/ Objectives

Documentation

HR planning

Determining organization training needsEvaluation of organizational goal

achievement

Information for goal identificationEvaluation of HR systems

Reinforcement of organizational

development needs

Criteria for validation research

Documentation for HR decisions

Helping to meet legal requirements

PERFORMANCE APPRAISAL AND COMPETITIVE

ADVANTAGE

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The objectives of performance appraisal, listed above, point out the purpose which

such an exercise seeks to meet. What needs emphasis is that performance evaluation

contributes to firm's competitive strength. Besides encouraging high levels

performance, the evaluation system helps identify employees with potential, reward

performance equitably and determine employee's need for training. Specifical

performance appraisal helps an organization gain competitive edge in the following ways

(see Fig below)

Fig: How Performance Appraisal can contribute to Firm's Competitive Advantage?

Improving Performance

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Strategy and

Behavior

Improving

Performance Making correct

decisions

Competitive

Advantage

Minimizingdissatisfaction and

turnover

Ensuring Legal

Compliance

Values and

Behaviour


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An effective appraisal system can contribute to competitive advantage by improving

employee job performance in two ways-by directing employee behaviour towards

organizational goals, as was done by the second beekeeper (see opening case), and by

monitoring that behaviour to ensure that the goals are met.

Making Correct Decisions

As stated above, appraisal is a critical input in making decisions on such issues as pay

raise, promotion, transfer, training, discharges and completion of probationary periods.

Right decision on each of these can contribute to competitive strength of an organization.

If promotion, for example, is made on performance, the promotee feels motivated to

enhance his or her performance.

Ensuring Legal Compliance

Promotions made on factors other than performance might land up a firm in a legal

battle, thus diverting its focus on non-productive areas, as it happened to Williamson

Magar. Organizations can minimize costly performance-related litigation by using

appraisal systems that give fair and accurate ratings.

Minimizing Job Dissatisfaction and Turnover

Employees tend to become emotional and frustrated if they perceive that the ratings

they get are unfair and inaccurate. Such employees find that the efforts they had put in

became futile and obviously get de-motivated.

Dissatisfaction in the job sets in and one of the outcomes of job dissatisfaction is

increased turnover. Fair and accurate appraisal results in high motivation and increased

job satisfaction. An organization having satisfied and motivated employees will have an

edge over its competitors.

Consistency between Organizational Strategy and Behaviour

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An organization needs a strategy consistent with the behaviour of its employees if it

were to realize its goals. A truism of organizational life is that people engage themselves

in behaviours that they perceive will be rewarded. As employees want to be rewarded,

they tend to occupy themselves more with those activities on which the organization

emphasizes. For example, if the focus is on service, employees will behave in ways that

will help them in gaining rewards associated with service delivery. If the focus is on cost

control, employees will seek to control cost and thus be recongnised and rewarded. If the

focus is on rewarding productivity, employees will strive for productivity.

performance appraisal becomes not only a means of knowing if the employees' behaviour

is consistent with the overall strategic focus, but also a way of bringing to the foreany

negative consequence of the strategy- behaviour fit For example, a single poin

productivity focus may include potential negative consequences such as decreased quality

and co-operations. Thus, the performance appraisal system is an important organizational

mechanism to elicit feedback on the consistency of the strategy-behaviour link.

Organizational Strategy and Performance Appraisal

The performance appraisal system serves many organizational objectives and goals.

Besides encouraging high level of performance, the evaluation system is useful in

identifying employees with potential, rewarding performance equitably. And determining

employees' needs for development. These are all the activities that should support the

organizations strategic orientation. Although these activities are clearly instrumental in

achieving corporate plans and long-term growth, typical appraisal systems in most

organizations have been focused on short-term goals.

From the strategic management point of view, organizations can be grouped into three

categories defenders, prospectors and analyzers. Performance appraisal has definite roles

in all the three strategies.

Typically, defenders have a narrow and relatively stable product-market domain.

Because of this narrow focus, these organizations seldom need to make

adjustments in their technology. Structure or methods of operations. They devote primary

attention to improving the efficiency of their existing operations. Because of the

emphasis 011building skills within the organization, successful defenders u

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performance appraisal for identifying training needs. Performance appraisal is usually

more behaviour oriented.

Organizations with a prospector strategy continuously search for different product and

market opportunities. In addition, these organizations regularly experiment with potential

responses to new and emerging environmental trends. Prospectors are often

harbingers of change. Because of the emphasis on skills identification and acquisition of

human resources from external sources, as opposed to skills building wit

organization, prospectors often use the performance appraisal as a means of identifying

staffing needs. The emphasis is on results. Finally, the focus is on division and corporate

performance evaluation as they compare with other companies during the

evaluation period.

Organizations with an analyzer strategy operate in two types of product-.market

domains. One domain is stable while the other is changing. In their more innovative

areas, managers watch their competitors closely and rapidly adopt the ideas that appear

promising. In general, analyzers use cost effective technologies for stable products and

project or matrix technologies for new product. Analyzers tend to emphasize both skill

building and skill i1cquisilion and employ extensive training programmes.

Thus, these organizations attempt to identify both training as well as staffing needs. The

appraisal systems are considered at the individual, group and divisional levels. Finally,

successful analyzers have a tendency to examine current performance with

performance within the organization. Cross-sectional comparisons (comparisons among

'companies) may also occur.

Whatever the category, a performance appraisal system has strategic importance to a

firm in three ways:

1. Feedback mechanism,

2. Consistency between organizational strategy and job behaviour, and

3. Consistency between organizational values and job behaviour.

APPRAISAL PROCESS

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Figure below outlines the performance- appraisal process. Each step in the process is

crucial and is arranged logically. The process as shown in Fig. Below is somewhat

idea1ised. Many organizations make every effort to approximate the ideal process,

resulting in first-rate appraisal systems. Unfortunately, many others fail to consider one

or more of the steps and, therefore, have less-effective appraisal system.

1. Objectives of Appraisal

Objectives of appraisal as stated above include effecting promotions and transfers,

assessing training needs, awarding pay increases, and the like. The emphasis in all these

is to correct problems. Theses objectives are appropriate as long as the approach in

appraisal is individual. Appraisal in future, would assume systems orientations. In the

systems approach, the objectives of appraisal stretch beyond the traditional ones.

In the systems approach, appraisal aims at improving the performance, instead of

merely assessing it. Towards this end, an appraisal system seeks to evaluate opportunity

factors. Opportunity factors include the physical environment such as noise, ventilation

and lightings, available resources such as human and computer assistance and social

processes such as leadership effectiveness. These opportunity variables are m

important than individual abilities in determining work performance.

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Objectives of

Appraisal

Establish jobExpectation

Design an appraisalperformance

Performanceinterview

Use appraisal data forappropriate purposes


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In the systems approach the emphasis is not on individual assessment and rewards or

punishments. But it is on how work the work system affects an individuals.

In the systems approach the emphasis is not on individual assessment and rewards or

punishments. But it is on how the work systems affect an individuals performance. In

order to use a systems approach, managers must learn to appreciate the impact that

systems levels factors have on individual performance and subordinates must adjust to

lack of competition among individuals. Thus, if a systems approach is going to be

successful, the employee must believe that by working towards shared goals, everyone

will benefit.

Not that the role of the individual is undermined. The individual is responsible for a

large percentage of his or her work performance. Employees should not be encouraged to

seek organizational reasons for his failures. The identifications of systems obstacles

should be used to facilitate development and motivation, not as an excuse to poor

performance. The following table displays some of the differences between the traditional

approach and the systems-oriented one.

Traditional Systems

Guiding value

Primary roles

Attribution to individual

Control, documentation

Attribution to systems

Development, problem

solving

Leadership practices

Appraisal frequency

Directional, evaluative

Occasional

Facilitative, coaching

Frequent

Degree of formality

Reward practices

High

Individual orientation

Low

Group orientation

2. Establish Job Expectations

The second step in the appraisal process is to establish job expectations. This includes

informing the employee what is expected of him or her on the job. Normally, a discussion

is held with his or her superior to review the major duties contained in the job place of

formal performance evaluation.

3. Design Appraisal Programme

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PERFORMANCE APPRAISAL SYSTEMS


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Designing an appraisal programme poses several questions which we need to answers.

They are: -

1. Formals versus informal appraisal

2. Whose performance is to be assessed?

3. Who are the raters?

4. What problems are encountered?

5. How to solve the problems?

6. What should be evaluated?

7. When to evaluate?

8. What methods of appraisal are to be used?

1. Whose performance should be rated?To the question as to whose

performance should be rated, the answer is obviousemployees, is it individual

or teams? Specifically the rate may be defined as the individual, work group,

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FormalV/s

Informal

When toevaluate?

What toevaluate?

How to

solve?

Whatproblems

What are

theraters?

Whoseperforman

ce

Whatmethods?

Appraisaldesign


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division, or organizations. It is also possible to define the rate at multiple levels.

For example, under some condition, it may be desirable to appraise performance

both at work-group level for merit-pay increases and at the individual level to

assess training needs. Two conditions necessitate a group level appraisalgroup

cohesiveness and difficulty in identifying individual performance. Description.

Individual should not be expected to begin the job until they understand what is

expected out of them.

2. Formal V/s informal appraisal: - the first step in designing an appraisal

programme is to decide whether the appraisal should be formal or informal.

Formal appraisal usually occurs at specified time periodsonce or twice year.

Formal appraisals are most often required by the organizations for the purposes

of employee evaluation. Informal performance appraisal can occur whenever the

superior feels the need for communication. For example, if the employee has

been consistently meeting or executing standards, an informal appraisal may be

in order to simply recognize this fact. Discussions can take place anywhere in the

organizations, ranging from the managers office to the canteen. But care needs to

be taken to ensure that the discussion is held in private. Many organizations

encourage a mixture of both formal and informal appraisal. The formal appraisal

is most often used as primary evaluation. However, the informal appraisal is very

helpful for more performance feedback. Informal appraisal should not take the

Group cohesiveness refers to shared feeling among work-team members. There is

cooperation and clear understanding to accomplish tasks which a

interdependent. Any attempt to assess individual performance shall undermine

group cohesiveness and tend to promote individualistic or even competitive

orientation. The difficulty in identifying individual contribution is also important

to consider. In some cases, interdependent of tasks is so complete that it isdifficult to identify who has contributed what. There is no other choice but to

view that task as a team effort. But the point to be remembered is that the

performance of all employees must be rated. All must become raters.

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3. Who are Raters? Raters can be immediate supervisors, specialist from the HR

department, subordinates. Peers, committees, clients, self appraisal, or

combination of several.

a. Immediate supervisoris the fit candidate to appraise the performance of

his or her subordinate. There are 3 reasons in support of this choice. No

one is familiar with the subordinates performance than his or her

superior. Another reason is that the superior has the responsibility of

managing a particular unit. When the tasks of evaluating a subordinate is

given to another person, the superior authority may be undermined

seriously. Finally, training and development of subordinate is am portent

element in every mangers job. Since appraisal programme are often

clearly linked to training and development, the immediate superior may

be the legal choice to conduct the performance evaluation.

b. Subordinate can assess the performance of their superiors. The use of this

choice may be useful in assessing an employee ability to communicate,

delegate work, allocate resources, disseminate information, resolve intra-

personal conflict, and deal with employees on a fair basis. But the

problem with the subordinate evaluation is that supervisors tend to

become popular, not by effective leadership, but by mere gimmicks.

c. Peers are in better position to evaluate certain facts of job performance

which the subordinates or supervisors cannot do. Such facts include

contribution skills, reliability and initiative. Closeness of the working

relationships and the amount of personal contacts place peers in a better

position to make accurate assessments. Unfortunately friendship o

animosity may result in distortion of evaluation. Further when rewardallocation is based on peer evaluation, series conflicts among co-workers

may develop. Finally join together to rate each other high.

d. Although clients are seldom used for rating employee performance,

nothing prevents an organization from using this source. Clients may be

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members within the organization who have direct contact with the rate

and make use of an output (goods or services) this employee provides.

Interest, courtesy, dependability and innovativeness are but a few of the

qualities for which clients can offer rating information. Clients, external

to the organization can also offer similar kinds of information. Where

appraisal is made by the superior, peers, subordinates and clients, it is

called the 360-degree system of appraisal. First developed at General

Electric, US in 1992 the system has become popular in our country too.

GE (India). Reliance Industries, Crompton Greaves, Godrej Soaps

Wipro, Infosys, Thermax and Thomas Cook are using the method with

greater benefits. The Arthur Anderson Survey 1997 reveals that 20% of

the organization use 360 degree method. In the 360 degree method,

besides assessing performance. Other attributes of the assesstalents,

behavioral quirks, values, ethical standards, tempers and loyalty are

evaluated by the people who are best placed to do it. Many employees use

rating committees to evaluate employees. These committees are often

composed of the employees immediate supervisor and three or four other

supervisors who come in contact with the employee. This choice is

welcome when an employee in the course of his or her job performs a

variety of tasks in different environment. For e.g. 1supervisor may work

with the employee when technical aspects of a job are being performed

and another supervisor may deal with the same employee in situations

where communications skills are crucial. There are several benefits in

using multiple raters. First there may be objectivity in rating as more than

rater is involved in the assessment. Furthermore where there

differences in the rater ought ratings they usually stem from the fact that

raters at different level in the organization often observe different facetsof an employee performance-the appraisal to reflect these differences.

The disadvantages of committee rating are that it diminishes the role of

the immediate supervisor in the area of training and development.

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e. In self appraisalemployee himself or herself evaluates his or her own

performance. Indian Telephone Industries has been following the self-

appraisal system for executives in grade I to IV. Hewlett-Packard and

Texas Instruments too ask their performance to prepare their own

appraisal. On the positive side it may be stated that in self-appraisal there

is an opportunity to participate in evaluation particularly if it is combine

with goal setti9ng and this should be improve the mangers motivation.

Managers are less defensive in self-evaluation than when supervisors tell

them what they are. Self-appraisal is best suited where execu

development is the main purpose of evaluation as the approach enablers

managers to clearly assess their areas of differences. Unfortunately self-

appraisal falls short almost by any criterion. They tend to be more lenient

compared to other sources of evaluation, even that of peers who are more

lenient than their superiors. Self-appraisal is also more likely to be less

biased and less in agreement with judgment of others. In practice a

combination of methods is followed for employee. For examp

evaluation by self may be followed by a superior, the personal department

or the HR department (following diagram).

Different Raters of Performance- L&T, Bangalore works

PROCEDURE AND SCHEDULE FOR PERFORMANCE APPRAISL PROCESS

Action by/Date Form/Section

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Annual Performance Review

Form 2

Sec:

Form 2

Sec: B, C

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Describes actual results against

objectives set earlier. Not more thanfive

Carries out self-review highlighting

significant contributions and factorsinfluencing performance

Keeps himself or herself ready for

appraisal interview by analyzing his

performance, strengths and weaknessand development needs.

Employee by15.4.1999

Prepares for the appraisal interview byanalyzing results against objectives,

strengths and weakness and recalling

significant incidents. Related to critical

attributes.

Discusses with the employees and

provides feedback on critical attributes

and rate on performance and attributes.

Carries out development planning with

the employee

Carries out performance planning for

1994-1995 with employee, selects anddescribes role related attributes.

Describes strengths and weakness andcomments on potential areas for growth

Records training needs and apecific

developments plans.

Comments on specific developments

plans Makes overall observations on the

employees performance

Forwards the forms if necessary to his

superior to ensure:

1. Covenants are reviewed by a superiors

at least at DGM level2. Superiors/ executives are reviewed by

covenanted officers.

Sec C

Sec D

From 2Sec E


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2. PERIODIC REVIEW (during the year)

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Next superior(s)

By 15.6.1994

Immediate

superior(s)By 15.6.1994

From 2 Notes the comments by the next

superiors and conveys significant

observations to employee

Forwards for convents to HRD depts.and for superiors/executives to

Analyses rating and comments and

furnishes data to all concerned for

necessary actions

Co-ordinates Development Action

Proposals at Respective Group/ unitlevel

Plans training programme and other

actions

Complies Pa data for aggregate analysis

Comments on Pa exercise and send

report to GMs and corporatemanagement

Reviews performance and objectivesand writes comments as necessary

Reviews development action taken

and records status.

Personnel/

HRD dept.By 15.7.1994

HRD dept.By 30.7.1994

Immediate

Superior

From 2

From 2

From 2

From 1

From 3


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Whoever may be the rater two requisites must be fulfilled. First the rater must be free

from bias. Second the rater must have an opportunity to observe the full spectrum of

activities and behavior of the rate over an extended time period.]

4. Problems of Rating: - Performance appraisals are subject to a wide variety of

inaccurate and biases referred to as rating errors. These errors occur in the raters

observations, judgments and information processing and can seriously affect assessment

result. The most common rating errors are leniency or severity, central tendency, halo

effect, primary and recency effects, perceptual set, performance dimension behavior, spill

over effect and status effect.

5. Leniency or Severity: - Leniency or severity on the part of the rater makes the

assessment subjective. Subjective assessments defeat the very purpose of performance

appraisal. Ratings are lenient for the following reasons.

The rater may feel that anyone under his or her jurisdictions who is rated

unfavorably will reflect poorly on his or her own worthiness.

He or she may feel that anyone who could have been rated unfavorably has

already been discharged from the organization

He or she may feel that a derogatory rating will be revealed to the rate to the

determinant of the relations between the rater and rate.

He or she may rate leniently in order to win promotions for the subordinates and

therefore indirectly increase his or her hold over them.

He or she may be projecting

He or she feels it necessary to always approve of others in order to gain approval

for him or herself.

He or she may be operating on the premise, whoever associates with me is

meritorious therefore, and I am meritorious.

He or she may rate leniently because there exists, in the culture, a response set

approve rather than disapprove.

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WC according to a WC according to a lenient rater Severe rater True amount WC

LOW written communication HIGH

Skills (WC)

4. Central tendency: - this occurs when employees are incorrectly rated near the

average or middle of the scale. The attitude of the rate is to play safe. This safe-

playing attitude stems from certain doubts and anxieties which the raters have

while assessing the ratees. Such doubts and anxieties are :

Do I know the man sufficiently well to be able to give a fair assessment of

him?

If I rate him the way I think I should what will be its influence on his

relations with me and on his performance in the future?

If I rate him the way I think I should what will be its effect on my relations

with the others subordinates?

If I rate him the way I think I should what will be its effect on his

relationship within the group or subordinates?

Will I able to be objective in view of pressures from peers, subordinates and

trade union?

If I rate him the way I think I should will be accused to being partial?

How will my boss view the appraisal I make and how will that influences the

way he appraises the man?

What standards will my peers adopt to appreciate their subordinates? And in

view of this am I likely to affect adversely the future of my subordinates?

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Naturally the rates use such expressions as satisfactory and average to describe the

performance of the rates. For example the principal of a college while giving character

certificates to the outgoing students describe the character of each student as satisfactory.

Obviously its become difficult to distinguish between excellent performance and poor

performance. In small organization it is common to label all employees as an average.

But in large companies errors of this type tend to obviate the value of evaluations.

Close to error of central tendency is the problem of range restriction. Range restriction

may involve clustering all employees around any point on a scale, often in combination

with leniency errors at very top. What is distinctive in the error of central tendency and

the error of range restriction is a failure to note real performance differences, either

intentionally or due to insufficient attention.

Halo Error - it takes place when one aspect of an individual performance influences the

evaluation of the entire performance of the individual just as the assessment of the

performance of a student in his or her examination being influence by the opening

paragraph of every answer. If the introductory paragraph is poorly written the chances of

scoring high marks in that answer are diminished however good the subsequent portion

of the essay may be

In an organization a halo error occurs when an emplopuee who work late constantly

might be rated high on productivity and quality of output as well as on motivation.

Similarly an attractive or popular employee might be given a high overall rating. Rating

employees separately can each of a number of performance and encouraging raters to

guard against the halo effect are two ways to reduce halo effect.

Rater effect: this includes favoritism, stereotyping and hostility. Excessively high or low

scores are given only to certain individual or groups based on the raters attitude towards

the rate, not on actual outcomes or behavior. Sex, age, race and friendship biases areexample of this type of error.

Primary and recency effects: - the raters ratings are heavily influenced either by

behavior exhibited by the rate during the early stage of the review period or by outcomes

or behavior exhibited by the rate near the end of the review period (recency). For

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example if a salesperson captures an important contract/ sales just before the completion

of the appraisal the timing of the incident may inflate his or her standing even though the

overall performance of the salesperson may not have been encouraging. Likewise a

blunder committed just before the appraisal period may diminish chance of securing a

favorable rating even if the performance is good.

One way of guarding against such an error is to ask rater to consider the composite

performance of the ratee and not to be influenced by one incident or own achievement.

The rater must also be aware of tendency on the part of the rates to improve odds in their

favors or suppress weak points during the rating period.

Perceptual Set: - this occurs when the raters assessment is influenced by previously

held beliefs. If the supervisors for example have a belief that employee hailing from 1

particular region is intelligent and hard working his subsequent rating of an employee

hailing from that region tends to be favorably high.

Performance Dimension order: 2 or more dimensions on a performance instrument

follows or closely follow each other and both describe or rotate to a similar quality. The

rater rates first dimension accurately and then rates the second dimension similar to the

first because of their proximity. If the dimension had been arranged in a significant

different order the rating might have been different.

Spillover effect:This refers to allowing past performance appraisal ratings

unjustifiably influence current ratings. Past ratings, good or bad result for the period

although the demonstrated behavior does not deserve the rating good or bad.

Status effect: - it refers to overrating of employee in higher-level jobs held in high

esteem, and underrating employees in lower-level-job or jobs held in low esteem.It is not the raters errors alone that are barriers to accurate and valid measurement of

employee performance. Barriers lie deep within the genetic and acquired make-up of all

people concerned with performance appraisal. A wide variety of emotio

psychological, intellectual and physical factors that at first glance may appear to be

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separate and irrelevant may combine in any numbers of ways during the appraisal

process.

Exhibit 10.2

Here is a bizarre case of performance appraisal. A pulp making unit located at Harihae in

Karnataka, hired 40 engineers in 1994, as management trainees. The new hires were fresh

from, REC, Suratkal, and other prestigious institutions. Obviously they were toppers in

their respective branches and institutions.

The management of the plant adopted a freakish policy with regard to performance

appraisal 10 percent of all the employees were to be rated below average. The

management did not want all the employees to be ranked high, notwithstanding their

excellent performance.

The axe fell on the trainees. The raters rated all the 40 trainees below average.

Humiliated, these 40 put in their papers even before their training period expired.

Solving Raters Problems

the best way to overcome the problems is to provide training to the raters. At Hewlett-

Packard, a 2 day training course is organized every year to prepare managers to handle

appraisals better. Not that training is a cure-all for all the ills of appraisal systems. From

a practical point of view, several factors, including the extent which pay is related to

performance ratings, union pressure, turnover rates, time constraints and the need to

justify ratings may be more important than training, influencing the ratings they actually

give. This means that improving rating systems involves not just training the raters but

remedying outside factors such ass union pressure. And it means that rater training, to be

effective, should also add real life problems such as the fact that union representatives

will try to influence supervisors to rate everyone high.

But training can help improve the appraisal system to the extent of distortion that occurs

due to the raters error such as halo, leniency, central tendency and bias. In a typicaltraining, raters are shown a video-tape of jobs being performed and are asked to rate the

workers. Ratings made by each participant are then placed on a flip chart and the various

charts are explained. For e.g., a trainee is rated on all criteria (such as quantity and

quality) about the same, the trainer might explain that halo error had occurred. If, on the

other hand, a trainer rated all video-taped workers very high, this might be explained as a

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leniency error. Typically, the trainer gives the correct rating and then illustrates the rating

errors made.

In effect, training of raters must help strengthen the factors that tend to improve accuracy

of ratings and weaken those that lower the accuracy of the performance measurement.

Factors that help improve accuracy:

1. The rater has observed and is familiar with behaviors to be appraised.

2. The rater has documented the behaviors to improve the recall.

3. The rater has a checklist to obtain and review job-related information.

4. The rater is aware of personal biases and is willing to take action to minimize

their effect.

5. Rating scores by raters of one group or organization are summarized and

compared with those by other raters.

6. The rater focuses attention on performance-related behaviors over which the rater

has better control than in other aspects of evaluation.

7. Higher levels of management are held accountable for reviewing all ratings.

8. The raters own performance ratings are related to the quality of rating given and

the performance of units.

9. Performance factors are properly defined.

Factors that may lower accuracy:

1. The rater rates ratees only when administrative actions are contemplated.

2. The rater tends to inflate ratings when the ratees receive scores and results of

appraisals.

3. The rater tends to recall more behaviours known to be of particular interest to

higher level managers, whether or not they are pertinent, when his or her ratings

are reviewed by such authorities.4. The rater is unable to express him or herself honestly and unambiguously.

5. Appraisal systems, processes and instruments fail to support the rater.

6. The rater has to rate employees on factors that are poorly defined.

7. Finally, the supervisor/rater must be trained to conduct the appraisal interview.

For many raters, this is a difficult task, especially when the appraisal is

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unfavorable to the rater. Favorable or unfavorable rating, it is the job of the rater

to convince the ratee about the appraisal, and advise him or her about the future

course of action the rate should take.

What should be rated?

One of the steps in designing an appraisal programme is to determine the evaluation

criteria. It is obvious that the criteria should be related to the job. The six criteria for

assessing performance are:

1. Quality: The degree to which the result or process of carrying out an activity

approaches perfection in terms of either conforming to some ideal way of

performing the activity, or fulfilling the activitys intended purpose.

2. Quantity: The amount produced, expressed in monetary terms, number of units, or

number of completed activity cycles.

3. Timeliness: the degree to which an activity is completed or a result produced, at

the earliest time desirable from the standpoints of both co-coordinating with the

outputs of others and of maximizing the time available for other activities.

4. Cost Effectiveness: the degree to which the use of the organizations resources

(e.g. human, monetary, technological and material) is maximized in the sense of

getting the highest gain or reduction in loss from each unit or instance of use of a

resource.

5. Need for supervision: the degree to which a job performer can carry out a job

function without either having to request supervisory assistance or requiring

supervisory intervention to prevent an adverse outcome.

6. Interpersonal impact: the degree to which as performer promotes feeling of self-

esteem, goodwill and co-operation among co-workers and sub-ordinates.

These criteria relate to past performance and behavior of an employee. There is also the

need for assessing, as was pointed out earlier, the potential of an employee for futureperformance, particularly when the employee is tipped for assuming gre

responsibilities.

Exhibit 10.3

Appraisal of Potential at Philips

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More and more number of organizations are trying to assess potential of their employees,

particularly at the managerial level. Cadbury India, Sandoz, Pfizer, Mafatlal, Philips,

National Organic Chemical Industries, Glaxo and P&G are a few of the companies which

seek to top managerial potential.

At Philips a 2 by 2 matrix is used to assess performance and potential to perform. The

vertical axis measures potential while the horizontal, actual performance. Both are further

subdivided into parameters high and low resulting in 4 quadrants of classification.

The Philips Model

Low Potential-Low Performance: these employees are categorized as question marks.

The company asks such employees to improve their performance levels. Failure to

improve would result in their planned separation.

High Potential-Low Performance: these are the problem children. In order to help them

improve their performance, these employees are shifted to new locations to work and are

closely monitored. If performance levels do not improve, these employees are reclassified

as question marks and the separation process initiated.

High Potential-High Performance: these are the star performers. They have to be kept

engaged with complex assignments all the time and groomed to take up the top positions.

Otherwise, they might leave.

Low Potential-High Performance: these are called as solid citizens and constitute 70 to

75 % of the total number of employees in any organization. They have skills but lack the

potential to grow beyond their current job-profile. The organization has to constantly

recognize their limitations and take care of their needs.

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Problem

Children Stars

Solid

Citizens

Problem

Separation

High

Low

HighLow

Potential

Performance


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In order to assess employee potential, Philips has adopted the system that prevails at

Philips NV, Holland. The system at Philips NV uses 4 broad attributes conceptual

effectiveness, operational effectiveness, interpersonal effectiveness and achievement

effectiveness and achievement motivation. Each attribute has a 5-point grading scale

excellent, very good, good/adequate, weak and insufficient.

Coming to the six criteria, it may be stated that the first 4 quality, quantity, timeliness

and cost effectiveness are objective in nature; and the last 2 - need for supervision and

interpersonal impact are subjective. Objective measures are quantifiable and are

therefore highly useful in measuring the performance of an employee. But performance

of employees should not always be evaluated against the amount of deposits mobilized

for his or her bank. The effort put in by him/her, the contacts he/she has established, the

image about the bank he/she has created in the eyes of public, and if relationships he/she

has maintained with subordinates speak more reliably about the managers performance.

Here comes the relevance of the subjective criteria. However, as subjective measures are

dependent upon human judgments, they are prone to the kinds of errors we noted earlier

leniency or severity, central tendency, halo and the like. To be useful, subjective

measures must be based on a careful analysis of the behaviors viewed as necessary and

important for job performance.

Of late, there has been a shift in focus of appraisals. This shift is from performance of the

individual to the systems approach. As stated earlier, in the systems approach the

emphasis is on improving ones performance. Work performance of an individual

depends on organizational factors in addition to his or her abilities. The focus in the

systems approach is, therefore, the entire organization.

Timing of Evaluation

How often should an employee be assessed? The general trend is to evaluate once in 3months, or six months, or once in a year. According to a survey conducted in 1997 by

Arthur Anderson, 70 percent of the organizations conduct performance appraisal once a

year. Newly hired employees are rated more frequently than the older ones. Frequent

assessment is better than phased evaluation. Feedback in the latter is delayed and the

advantage of timely remedial measures by the employee is lost. Frequent evaluation gives

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constant feedback to the rate, thus enabling him or her to improve performance if there is

any deficiency. The performance of trainees and probationers should be evaluated at the

end of respective programmes.

METHODS OF APPRAISAL

The last to be addressed in the process of designing an appraisal programme is to

determine methods of evaluation. Numerous methods have been devised to measure the

quantity and quality of employees job performance. Each of the methods discussed

could be effective for some purposes, for some organizations. None should be dismissed

or accepted as appropriate except as they relate to the particular needs of the organization

or of a particular type of employees. Broadly, all the approaches to appraisal can be

identified into (i) past-oriented methods, and (ii) future-oriented methods. Each group has

several techniques as shown in the figure below:

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Appr

aisal

Meth

ods


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Past-Oriented Methods

Rating Scales: This is the simplest and most popular technique for appraising employee

performance; the typical rating-scale system consists of several numerical scales, each

representing a job-related performance criterion such as dependability, initiative, output,

attendance, attitude, co-operation, and the like. Each scale ranges from excellent to poor.

The rater checks the appropriate performance level on each criterion, then computes the

employees total numerical score. The number of points scored may be linked to salary

increases, whereby so many points equal a rise of some percentage.

RATING SCALE

Instructions: For the following performances factors, please indicate on the rating

Scale your evaluation of the employee named below:

Employees Name:

Raters Name

Excellent Good Acc

5 4

1. Dependability ------ ------

2. Initiative ------ -

3. Overall Output ------ ------

4. Attendance ------ ------

5. Attitude ------

6. Co-Operation ------ ------

------ ------

------ ------

------ ------

20. Quality of Work ------ ------

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TOTAL + +

TOTAL SCORE

Rating scales offer the advantages of adaptability, relatively easy use and low cost.

Nearly every type of job can be evaluated in a short time, and the rater does not need any

training to use the scale.

The disadvantages of this method are several. The raters biases are likely to influence

evaluation, and the biases are particularly pronounced on subjective criteria such as co-

operation, attitude and initiative. Furthermore, numerical scoring gives an illusion of

precision that is really unfounded.

Checklist: Under this method a checklist of statements on the traits of the employee and

his or her job is prepared in 2 columns viz., a Yes column and a No column. All that

the rater (immediate superior) should is tick the Yes column if the answer to the

statement is positive and in column No if the answer is negative. A typical checklist is

given in the table below. After ticking off against each item, the rater forwards the list to

the HR department. The HR department assigns certain points to each Yes ticked.

Depending upon the number of Yes the total score is arrived at. When points are

allotted to the checklist, the technique becomes a weighted checklist. The advantages of

as checklist are economy, ease of administration, limited training of rater

standardization. The disadvantages include susceptibility to raters biases (especially the

halo effect), use of personality criteria instead of performance criteria, misinterpretation

of checklist items, and the use of improper weights by the HR department. Another

disadvantage of this approach is that it does not allow the rater to give up relative ratings.

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Table: - Checklist for Operators

SR.

NO.

QUESTIONS YES NO

1. Is the employee really interested in the job? - -

2. Does he or she possess adequate knowledge about the job - -

3. Is his or her attendance satisfactory? - -

4. Does he/she maintain his/her equipment in good condition? - -5. Does he/she co-operate with co-workers? - -

6. Does he/she keep his/her temper? - -

7. Does he/she obey orders? - -

8. Does he/she observe safety precautions? - -

9. Does he/she complete what he/she commences? - -

10. Does he/she evade responsibility? - -

Forced Choice Method: In this, the rater is given a series of statements about an

employee. These statements are arranged in blocks of 2 or more, and the rater indicates

which statement is most or least descriptive of the employee. Typical statements are :

1. Learns fast _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ works hard

2. Work is reliable_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ performance is a good example for

3. Absents often_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ others usually tardy.

As in the checklist method, the rater is simply expected to select the statements that

describe the rate. Actual assessment is done by the HR Department.

This approach is known as the forced choice method because the rater is forced to select

statements, which are readymade. The advantage of this method is the absence ofpersonal bias in rating. The disadvantage is that the statements may not be properly

framed they may not be precisely descriptive of the ratees traits.

Forced Distribution Method: One of the errors in rating is leniency clustering a large

number of employees around a high point on a rating scale. The forced distribution

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method seeks to overcome the problem by compelling the rater to distribute the ratees on

all points on the rating scale.

The method operates under an assumption that the employee performance level conforms

to a normal statistical distribution. Generally, it is assumed that employee performance

levels conform to a bell shaped curve. For example, the following distribution might be

assumed to exist excellent 10 %, good 20 %, average 40 %, below average 20 %, and

unsatisfactory 10 %.

The major weakness of the forced distribution method lies in the assumption that the

employee performance levels always conform to a normal distribution. In organizations

that have done a good job of selecting and retaining only the good performers, the use of

forced distribution approach would be unrealistic, as well as possibly destructive to the

employee morale.

The error of central tendency may also occur, as the rater resists from placing an

employee in the lowest or in the highest group. Difficulties also arise for the rater to

explain to the rate why he or she has been placed in a particular group. One merit of this

approach is that it seeks to eliminate the error of leniency. However, the forced choice

method is not acceptable to raters and ratees, especially, in small groups or when group

members are of high ability.

Critical Incidents Method: The critical incidents method of employee assessment has

generated a lot of interest these days. The approach focuses on certain critical behaviors

of an employee that make all the difference between effective and non-effective

performance of a job. The supervisors as and when they occur record such incidents.

Examples of critical incidents of a plant manager are given in the following table:

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Examples ofCritical Incidents for an Assistant Plant Manager

One of the advantages of the critical incidents methods is that the evaluation is based on

actual job behavior. Further, the approach has descriptions in support of particular ratings

of an employee. Giving job-related feedback to the ratee is also easy. It also reduces the

personal biases, if raters record incidents throughout the rating period. Finally, this

approach can increase the chances that the subordinates will improve because they learn

more precisely what is expected of them. The method however has significant limitations.

These include:

1. Negative incidents are generally more noticeable that positive ones.

2. The recording of incidents is a chore to the supervisor and may be put off an

easily forgotten.

3. Overly close supervision may result.

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CONTINUING

DUTIES

TARGETS CRITICAL

INCIDENTSSchedule Production for Plant Full Utilization of

personnel andmachinery in the plant,

order delivered on time

Instituted new production

scheduling system;decreased late orders by

10% last month;

increased machineutilization in plant by20%

last month

Supervise procurement of raw

materials and inventory control

Minimize inventory

costs while keeping

adequate supplies onhand

Let inventory storage costs

rise 15% last month;

Over Ordered parts Aand B by 20%;Under Ordered part C

by30%

Supervise machinery

maintenance

No shutdowns due to

faulty machinery

Instituted new preventive

maintenance system for

plant;Prevented a machine

breakdown by discovering

faulty part.


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4. Managers may unload a series of complaints about incidents during an annual

performance review session. The feedback may be too much at one time and thus

appearing as a punishment to the rate. More appropriately, the management

should use incidents of poor performance as opportunities for immediate training

and counseling.

Behaviorally Anchored Rating Scales:

Behaviorally Anchored Scales, sometimes called behavioral expectation scales, are rating

scales whose scale points are determined by statements of effective and ineffective

behaviors. They are said to be behaviorally anchored in that the scales represent a range

of descriptive statements of behavior varying from the least to the most effective. A rater

must indicate which behavior on each scale best describes an employees performance.

Behaviorally anchored rating scales (BARS) have the following features:

1. Areas of performance to be evaluated are identified and defined by people who

will use the scales.

2. The scales are anchored by descriptions of actual job behavior that, supervisors

agree, represent specific levels of performance. The result is a set of rating scales

in which both dimensions and anchors are precisely defined.

3. All dimensions of performance to be evaluated are based on observable behaviors

and are relevant to the job being evaluated since BARS are tailor-made for the

job.

4. Since the raters who will actually use the scales are actively involved in the

development process. They are more likely to be committed to the final product. BARS

were developed to provide results which subordinates could use to improve performance.

Superiors would feel comfortable to give feedback to the rates. Further, BARS help

overcome rating errors. Unfortunately, this method too suffers from distortion inherent in

most rating techniques.

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Field Review Method

This is an appraisal by someone outside the, assessors own department. Usually

someone from the corporate office or the HR department. The outsider reviews Employee

records and holds interviews with the ratee and his or her superior.

This method is primarily used for making promotional decision at the managerial level.

Field reviews are also useful when comparable information is needed from employees in

different units or locations. Two disadvantage of this method are:-

1. An "outsider" is usually not familiar with conditions in an employees work

environment which may affect the employee's ability or motivation to perform.

2. An 'outsider' review dose not have the opportunity to observe employee behavior of

performance over a period of time and in a variety of situations. But only in an artificially

structured interview situation which extends over a very short period of time.

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A BARS Scale for the Knowledge and Judgement Dimension of a

Grocery Checker's Job.

Raters, making field reviews normally receive training on how to conduct the interview

and develop their writing skills. Being independent of the work scene they normally have

less bias for or against the ratee than docs the immediate supervisor. Even when a

supervisor or others concerned supply biased information the rater may he able to

pinpoint areas requiring training and development assistance.

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Extremely good

performance

Good

performance

You can expect this checker to be aware of items that

constantly fluctuate in price.

Neither poor

nor good

performance

Slightly poor

performance

Poor

performance

Extremely poor

performance

By knowing the price of items. This checker would be

expected to look for mismarked and unmarked items.7

6

When in doubt. This checker would ask the other clerk i

the item is taxable.

This checker can be expected to verify with another

checker a discrepancy between the shelf and the marked

price before ringing up that Item.

5Slightly good

performance

When operating the quick check. If the lights are flashin

this checker can be expected to check out a customer wi

15 items.

4

3

In order to take a break. this checker can be expected to

block off the check stand while people wait in line.

You could expect this checker to ask the customer the

price of an Item that he or she does not know.

In the daily course of personal relationships, he or she m

be expected to linger in long conversations with a custom

or with another checker.

2

1


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Performance Tests and Observations

With limited number of jobs, employee assessment may be based upon a test of

knowledge or skills. The test may he of the paper-and-pencil variety or an actual

demonstration of skills. The test must he reliable and validated to be useful. Even then,

performance tests are apt to measure potential more than actual performance. In order for

the test to be job related, observations should he made under circumstances likely to be

encountered. Practicality may suffer if costs of test development or administration arc

high.

Confidential RecordsConfidential records arc maintained mostly in government Departments. though its

application in the industry .not ruled out. ITI. for example. had followed this method for a

long time. Called the Annual Confidential Report (ACR). the approach had 14 items-(i)

attendance. (ii) self-expression (written or oral). (iii) ability to work with others. (iv)

leadership. (v) initiative. (vi) technical ability (job knowledge). (vii) ability to understand

new material. (viii) ability to reason, (ix) originality and resourcefulness. (x) areas of

work that suits the person best. (xi) judgement. (xii) integrity. (xiii) responsibility and.

(xiv) and defect-indebtedness. Memo served. etc. Twelve of these were filled on a four-

point grade scale (Excellent. Good. Fair and Poor).

For integrity. there were special instructions from the management. Justification was

required for outstanding or poor rating. Over:!!! rating on a five-point scale was

separately given (Outstanding. Very good. Good. Average, Poor). again with justification

for rating as outstanding or poor. Recommendations for promotion were also given. The

ACR contained recommendations and signature of the rater. the head of the department

and the CMD.

The system was highly secretive and confidential Feedback to the assessee was given

only in case of an adverse entry. The AC'R was highly subjective. Ratings were easily

manipulated because the evaluation was linked to promotion. Even ITI has discontinued

ACR system for these reasons.

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Essay Method

In the essay method the rater must describe the employee within a number of broad

categories such as (i) the rater's overall impression of the employee's performance. (ii),

the promo ability of the employee (iii) the jobs that the employee is now able or qualified

to perform (.iv) the strengths and weaknesses of the employee. and (v)the training and

the development assistance required by the employee. Although this method may be used

independently, it is most frequently found in combination with others. It is extremely

useful in filing information gaps about the employees that often occur in the better

structured checklist method.

The strength of the essay method depends on the writing skills and analytical ability

of the rater.

However many raters do not have good writing skills. They become confused about

what to say. How much they should state and the depth of the narrative The essay method

can consume much time because the rater must collect the information necessary to

develop the essay and then he or she must write it The essay method also depends on the

memory power of the rater.

A problem with this method is that the rate may be rated on the quality of the

appraisals that they give. The quality standard for the appraisal may be unduly influenced

by appearance rather than content. Thus. a 'high quality' appraisal may provide little

useful information about the performance of the rate.

Cost Accounting Method

This method evaluates performance from the monetary returns the employee yields to

his or her organisation. A relationship is established between the cost included in keeping

the employee and the benefit the organization derives from him or her. Performance of

the employee is then evaluated based on the established relationship between the cost and

the benefit.

Comparative Evaluation Approaches

These are a collection of different methods that compare one worker's performance

with that of his/her co-workers. Comparative appraisals are usually conducted by

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supervisors. As these appraisals can result in a ranking from best to worst, they are useful

in deciding merit-pay increases, promotions and organisational rewards. The usual

comparative forms used in this kind of evaluation are the ranking method and the paired

comparison method.

Ranking Method

In this, the superior ranks his or her subordinates in the order of their merit, starting

from the best to the worst. All that the HR department knows is that A is better than B.

The, 'how' and 'why' are not questioned, nor answered. No attempt, is made to

fractionalise what is being appraised into component elements. This method is subject to

the halo and recency effects, although rankings by two or more raters can be averaged to

help reduce biases. Its advantages include ease of administration and explanation.

Paired-comparison Method

Under this method the appraiser compares each employee with every other employee

one at a time. For example there are five employees named A, B. C. D and E. The

performance of A is first compared with the performance of B and a decision is made

about whose performance is better. Then A is compared with C. D and E in that order.

The same procedure is repeated for other employees. The number of comparisons may be

calculated with the help of a formula which reads thus: N(N-1)/ 2 where N stands for

the number of employees to be compared. If there are 10 employees, the number of

comparisons will be 10(10-1)/2 = 45.

After the completion of comparison, the results can be tabulated and a rank is created

from the number of times each person is considered to be superior.

Future-oriented Appraisals

Is it not enough if only the past performance is assessed . How an employee can

perform in the days to come is equally important. This can be assessed by focusing on

employee potential or setting future performance goals. The commonly used future-

oriented techniques are MBO, psychological appraisals, and assessment centres.

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MANAGEMENT BY OBJECTIVES

It was Peter F. Drucker who first gave the concept of MBO to the world way back in

1954 when his The Practice of Managementwas first published. The MBO concept, as

was conceived by Drucker, reflects a management philosophy which values and utilizes

employee contributions. Application of MBO in the field of performance appraisal is a

recent thinking.

Four Steps in the MBO Process

How MBO works can be described in four steps:

The firststep is to establish the goals each subordinate is to attain. In some

organisations, superiors and subordinates work together to establish goals. In others.

Superiors establish goals for subordinates. The goals typically refer to the desired

outcome to be achieved. These goals can then be used to evaluate employee performance.

The secondstep involves setting the performance standard for the subordinates in a

previously arranged time period. As subordinates perform, they know fairly well what

there is to do, what has been done, and what remains to be done.

In the thirdstep, the actual level of goal attainment is compared with the goals agreed

upon. The evaluator explores reasons for the goals that were not met and for the goals

that were exceeded. This step helps determine possible training needs. It also alerts the

superior to conditions in the organization that may affect a subordinate but over which

the subordinate has no control.

The finalstep involves establishing new goals and, possibly new strategies for goals

not previously attained. At this point, subordinate and superior involvement in goal-setting may change. Subordinates who successfully reach the established goals may be

allowed to participate more in the goal setting process the next time. The process is

repeated. As with other approaches. MBO too has been criticised. One comment made

against the approach is that it is not applicable to all jobs in all organisations. Jobs with

little or no flexibility. Such as assembly-line work, are not compatible with MBO. An

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assembly-line worker usually has so little job flexibility that the performance standards

and objectives are already determined. The MBO process seems to be most useful with

managerial personnel 'and employees who have a fairly wide range of flexibility and self-

control in their jobs. Besides, when the result of an MBO system are to be used to

allocate organisational rewards, employees may be less likely to establish challenging

goals-goals they are confident that they can accomplish. Further, the allocation of merit

pay on a semi-annual or annual basis may encourage the setting up of goals with short

time horizons to the disadvantage of important long-term goals.

The performance appraisal presently followed in L&T reflects the principles of MBO.

Psychological Appraisals

Large organization employs full-time industrial psychologists. When psychologists are

used for evaluations. They assess an individuals future potential and past performance.

The appraisal normally consists of in-depth interviews, psycho1ogical tests. Discussions

with supervisors and a review' of other evaluations. The psychologist then write an

evaluation of the employee's intellectual, emotional, motivational and other-related

characteristics that suggest individual potential and may predict future performance. The

evaluation by the psychologist may be for a specific job opening for which the person is

being considered. Or it may be a global assessment of his or her future potential. From

these evaluations. Placement and development decisions may be made to shape the

person's career. Because this approach is slow and costly, it is usually required for bright

young members who, others think. May have considerable potential within

organisation. Since the quality of the appraisal depends largely on the skills of the

psychologists, some employees object to this type of evaluation, especially if cross-

cultural differences exist.

LARSEN AND TOUBRO, HUMAN RESOURCE DEVELOPMENT

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PERFORMANCE APPRAISAL SYSTEM

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CONFIDENTIA

L PA FORM:28NAME EMS. PS. NO CADRE GROUP DEPT.

EXECUTIVES &SUPERVISORS

LARSEN &TOUBRO LIMITED

HUMAN RESOURCE DEVELOPMENT-PERFORMANCE APPRAISAL

SYSTEM

PERFORMANCE ANALYSIS AND REVIEW

APRIL 1993 TO MARCH 1994

NAME DATE SIGNATURE

EMPLOYEE

IMMEDIATE SUPERVISOR

NEXT SUPERIOR 1.

2.

PERSONNEL/ HRD DEPT.

A]PERFORMANCE REVIEW AGAINST

OBJECTIVES

B1] BY IMMEDIATE

SUPERIOR

A1] BY EMPLOYEE

OUTSTANDING

V.GOOD

GOOD

ADEQUATE

INADEQUATE

AGREED

OBJECTIVES ANDTARGETS

RESULTS

ACHIEVED

1.2.

3.

4.

5.


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A2] SELF REVIEW (by employee)

SIGNIFICANT CONTRIBUTORS (JOBS OR PROFESSION RELATED NOT COVERED ABOVE)

IMPORTANT FACTORS FACILITATING PERFORMANCE

IMPORTANT FACTORS HINDERING PERFORMANCE

B2] PERFORMANCE AGAINST OBJECTIVES(BY IMMEDIATE SUPERIOR)

OUTSTANDING V. GOOD GOOD A

C1] Appraisal of Critical Attributes(by immediate

superior)

OU

TSTANDING

V.GOOD

GOOD

ADEQUATE

INADEQUATE

C2] CRITICAL ATTRIBUTES

1.INNOVATIVENESS Ability to think new and better

ways of doing things that results

in introduction of new ideas or

improvements of the systems

and operations.

2.INITIATIVE Ability to determine and initiate

actions that result in improve

handling of jobs, without

waiting to be told.

3. INTERPERSONAL &TEAM RELATIONSHIP

Ability to interact effectivelywith people at all levels to gain

their confidence and respect and

work in a collaborative and

participative manner.

4.RESOURCEFULNESS Ability to muster resources to

achieve desired results and

device ways and means of

solving problems in difficult

situations.

5.COMMUNICATION

SKILLS

Ability to convey thoughts and

feelings clearly both through

oral as well as writtenexpressions for betterunderstanding.

C2] AREAS OF STRENGTH AND IMPROVEMENTS (by immediate superior)

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C3] Potential Areas Of Growth (By Immediate Superior)

D] Recommendations For Training And Development( By Immediate Superior)

D1] IN-COMANT TRAINING PROGRAMMES

Description Code

1.

D2] OTHER TRAINING PROGRAMMES

1.

D3] SPECIFIC DEVELOPMENT PLANS

Proposed action

(tick as applicable)

Job rotaion

Job enlargement

Special assignment

Deputatiomn of other dept

Others(please specify)

E ] COMMENTS BY NEXT SUPERIOR(S)

E1] ON SPECIFIC DEVELOPMENT PLANS STATED ABOVE IN D3

E2] OVERALL OBSERVATIONS:

F] FOR USE BY PERSONNEL/ HRD CO -ORDINATOR

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ASSESSMENT CENTRES

Mainly used for executive hiring, assessment centre are now "being used for evaluating

executive or supervisory potential. An assessment centre is a central location where

managers may come together to have their participation in job-related exercise evaluatedby trained observers. The principal idea is to evaluate managers over a period of time say

one to three days, by observing (and later evaluating) their behaviour across a series of

select exercises or work samples. Assesses are requested to participate in in-basket

exercises, work groups (without leaders), computer simulations, role paying, and other

similar activities which require the same attributes for successful performance, as in the

actual job. After recording their observations of ratee behaviors, the raters meet to discuss

these observations. The decision regarding the performance of each assessee is based

upon this discussion of observations. Self-appraisal and peer evaluation are also thrown

In for final rating.

The characteristics assessed in a typical assessment centre include assertiveness,

persuasive ability, communicating ability, planning and organisational ability, self

confidence, resistance to stress, energy level, decision making, sensitivity to the

feelings of others, administrative ability, creativity and mental alertness. It

formidable list which is quite difficult to measure accurately over three days, though

there would be sizable number of trained observers and psychologists.

First developed in the US and the UK in 1943, the assessment centre is gaining

popularity in our country, Crompton greaves, Facher, HLL and Modi Xerox are using the

technique with results being highly positive.

Assessment Centre - Many Takers

Ranbaxy retained the services of a team of psychologists from the UK-

based Kelly& King to take the executives (of Ranbaxy) through an assessment

center. 20 star manager went through the exercise.

Santrupt Misra, Director- Birla Management Corporation had plans for

a similar exercise to be held at Gyanodaya, the Aditya Birla learning centre. Misra

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first used the assessment centre concept four years ago on 150 middle and senior

level managers.

Old timers like Tata have created their own assessment centers, and so

have the talent centric companies' like Wipro and Cognizant.

SHL, a HR consulting firm has worked with over 100 companies

conducting dose to 1,000 assessment centers.

Consulting firm ECS (formerly known as Eicher Consulting Services)

does a number of assessments in a month for a variety of clients like Tata Steel,

ING Vysya and the host of BPO outfits.

ICICI Bank uses assessment centre as a recruitment and selection tool

to find the best talent, while GE India subsidiary GECIS has used it on 20% of it5

middle managers.

The problem with the assessment centres is their cost Not only are the asses sees away

from their jobs while the company pays for their travel and lodging, but the evaluators are

often company managers who are assigned to the assessment centre fo

21784749-Performance-Appraisal-With-Casestudy-Project-Report (2)

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