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CompensationManagement

(As per New Syllabus of VIth Semester BBM, Bangalore University w.e.f. 2012-13)

Prof. A M SarmaFormer Member of the Faculty

Tata Institute of Social SciencesDeonar Mumbai - 400 088.

Email ID: arsola [email protected]

MUMBAI NEW DELHI NAGPUR BENGALURU HYDERABAD CHENNAI PUNE LUCKNOW AHMEDABAD ERNAKULAM BHUBANESWAR INDORE KOLKATA GUWAHATI

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PrefaceLaying down a sound compensation and reward system is one of the most

complex assignments in an industrial organisation. Hence, attempts are to bemade for effective implementation of compensation and benefit plans for thesuccess of an organisation in today’s highly competitive business environment.

The book Compensation Management deals with different aspects ofcompensation and reward systems as they are known today. It contains five unitsand a skill development exercise. Unit 1 deals with job evaluation andperformance appraisal; Unit 2 throws light on compensation management; Unit 3focuses on wage and salary administration; Unit 4 explains rewards and incentivesystems; and Unit 5 gives an account of the role of regulatory bodies incompensation management.

The skill development exercise is in three specified areas: (a) fringe benefitsoffered by two multinational companies; (b) role of regulatory bodies such aswage boards and pay commissions in fixing compensation; and (c) a list ofincentive schemes with specific reference to sales personnel.

The book primarily covers the course contents for BBM 6th Semester ofBangalore University. Obviously, it will be useful to the students pursuing thatcourse. But at the same time, it will be of help to other students desirous oflearning more about compensation and reward management.

A M Sarma

SyllabusObjectives

The objective is to enable the students to understand the various aspects of CompensationManagement.

Unit 1: Job Evaluation and Performance Appraisal 10 HrsJob Evaluation, Definition, Traditional and New Techniques, PerformanceAppraisal, Basic Concepts, Performance Standard, Appraisal methods.

Unit 2: Compensation Management 10 HrsCompensation, Definition, Classification, Types, Incentives, Fringe Benefits

Unit 3: Wage and Salary Administration 20 HrsTheories of Wages, Wage Structure, Wage Fixation, Wage Payment, SalaryAdministration, Difference between Salary and Wages, Basis for CompensationFixation, Components of Wages, Basic Wages, Overtime Wages, DearnessAllowance, Basis for Calculation, Time Rate Wages and Efficiency BasedWages, Incentive Schemes, Individual Bonus Schemes, Group Bonus Schemes,Effect of Various Labour Laws on Wages, Preparation of Pay Roll.

Unit 4: Rewards and Incentives 10 HrsRewards for Sales Personnel, Pay, Commission, Performance-based Pay System,Incentives, Executives Compensation Plan and Packages

Unit 5: Regulatory Bodies for Compensation Management 10 HrsWage Boards, Pay Commission, Compensation Management in Multi-nationalOrganisations.

Skill DevelopmentList out the fringe benefits offered to employees of any two companiesDiscuss the role of regulatory bodies in compensation managementList out various incentives schemes of wage payments

Contents

1. JOB EVALUATION AND PERFORMANCE APPRAISAL 1

2. COMPENSATION MANAGEMENT 29

3. WAGE AND SALARY ADMINISTRATION 47

4. REWARDS AND INCENTIVES 81

5. REGULATORY BODIES FOR COMPENSATIONMANAGEMENT

107

SKILL DEVELOPMENT EXCERCISE 125

APPENDIX A 129

APPENDIX B 142

UNIT

1JOB EVALUATION AND

PERFORMANCE APPRAISAL

JOB EVALUATION

1.1 INTRODUCTION

Just as the job analysis becomes the basis for the job description, so too, the job descriptionbecomes the basis for job evaluation. Simply stated, job evaluation is the process of determiningthe value of a job within a firm relative to all other jobs in that firm. It is a systematic (notscientific) method for the objective determination of the relative worth of a job in comparisonwithin and outside an organisation. It is a procedure for measuring the relative contribution ofeach job and for ranking these jobs in accordance with these measurements. It helps to eliminatewage inequities and to establish a basis for sound salary and wage structure.

Differences in the rates paid for different jobs and skills influence how fairly employeesbelieve they are being treated. In this context, job evaluation assumes great significance. Nomatter how job evaluation is designed, its ultimate use is to help design and manage a work-related, business-focussed, and agreed-upon pay structure.

1.2 MEANING AND CONCEPT

The British Standard Institution (1969) defined job evaluation as “a generic term coveringmethods of determining the relative worth (equity) of jobs.” Job evaluation is a systematic(quantitative and qualitative) method, for determining the relative worth of a job in comparisonwith in and outside organisation. It helps to eliminate job inequities and to establish a basis forsound salary and wage structure.

Job evaluation is a method used to describe, analyse, compare and evaluate jobs within a unit,a branch, or an industry on the basis of the work content and the job requirements in order toplace them under particular wage or salary grades.

2 Compensation Management

The major steps in job evaluation are as follows:

1. Define types of jobs.2. Collect job information and write job descriptions.3. Select relevant factors.4. Define the gradation of the factor degrees.5. Choose benchmark jobs.6. Determine relative value of the factors.7. Determine a point scale for each factor.8. Apply the system to each job or group of jobs.9. Create an internal job hierarchy by giving point scales to all the jobs.

10. Draw wage grades by taking into consideration overlapping and extent of spread.11. Examine market rates to ensure that wage levels would not fall below them.

Job evaluation is a systematic attempt which provides a basis of comparing jobs anddetermines the relevant worth of different jobs in an organisation. It has two basic objectives: (a)to compare jobs and determine their level within each occupational group; and (b) to comparejobs between occupational groups. Achieving the first objective is important for promotions,career planning and personnel development. Achieving the second objective is of interest becauseof wage comparisons. Job evaluation attempts to achieve both objectives by determining the rankorder of all the jobs. It is thus a systematic and orderly process of determining the value of eachjob in relation to other jobs in the organisation. It is the job that is to be rated and not the man. Itis an important tool of personnel administration and has an important role to play in wagedecisions. It provides a systematic framework which may serve as the basis for wagedetermination, but does not entirely solve the problem.

Job evaluation systems are useful in achieving internal equity of pay between different jobsin the organisation. The process of job evaluation uses selected criteria to compare jobs within anorganisation so that they can be ordered for the purpose of assigning differential pay. Jobevaluation systems provide a rational for paying different rates for different jobs. It is the processof analysis and assessment of jobs to ascertain reliably their relative worth, using the assessmentas a basis for a fair and equitable wage structure.

1.3 CHARACTERISTICS

The main characteristics of job evaluation may be summed up as:

1. It is a method with a systematic approach.2. It is an analysis of the work involved in its starting point.3. It is an attempt to determine the requirements of the work involved for any incumbent.

Job Evaluation and Performance Appraisal 3

4. It is a process by which jobs in an organisation are appraised.5. It is a process of analysing and describing positions, grouping them, and determining

their relative value by comparing the duties of different positions in terms of theirdifferent responsibilities and other requirements.

6. It is a system to deal exclusively with assessment of the job and not concerned withemployees assigned to the job.

7. It is designed only to establish wage differentials and is not concerned with the absolutewage level.

1.4 OBJECTIVES

The purposes that are served by job evaluation are multi-fold considering the issues facingthe organisation at a point of time.

Its primary objectives are:

1. to establish wage level of a plan;2. to establish relative wage level in a plan;3. to bring new jobs on relative parity with existing jobs; and4. to facilitate wage negotiations.

Its secondary objectives are:

1. to determine qualities for new jobs for employee selection;2. to determine criterion for merit rating and promotions;3. to analyse wage rates;4. to find scope of automation and improvement; and5. to train new supervisors.

1.5 ADVANTAGES

According to a published study of ILO, job evaluation enjoys the following advantages:

Job evaluation is logical and objective method of ranking jobs relating to one another. Itwould reduce inequalities in existing wage structures and in maintaining sound andconsistent wage differential in a plant or industry.

For new jobs, the method often facilitates fitting them into the existing wage structure. It helps to replace the many accidental factors, occurring in less systematic procedures,

of wage bargaining by more impersonal and objective standards, thus establishing aclear basis for negotiations.


It leads to greater uniformity in wage rates and simplifies wage administration. The information collected in the process of job description and analysis may also be

used for the improvement of selection, transfer and promotion procedures on the basisof comparative job requirements.

Such information also reveals that workers are engaged in jobs requiring less skill andother qualities than they possess, thereby pointing to the possibility of making moreefficient use of plant’s labour force.

Other gains from job evaluation are:

It provides a benchmark for comparing job complexities. It facilitates career planning in an organisation. It streamlines responsibility levels. It helps flatten organisational structures. It ensures that the right people are hired. It can be used to equate pay with jobs for senior managers.

1.6 TECHNIQUES/METHODS

There are four major methods of job evaluation: (1) job ranking, (2) job classification,(3) factor comparison, and (4) point system.

Job ranking. Job ranking systems are the crudest of the job evaluation techniques. Based ontheir relative worth to the organisations, jobs are ranked as a whole from the highest to the lowest.Because the rankings are based on job descriptions, not specific job facts, they are highlysubjective. This procedure can be difficult to implement in a large organisation where many jobsare to be evaluated.

Job classification. This approach involves developing a set of job grades or classes and thenfilling the jobs in the organisation into these classes. First comprehensive grade descriptions arewritten. These descriptions must be written generally so that many different types of jobs can beclassified. Evaluators then examine job descriptions as a whole and match them to the appropriategrade description. Two difficulties with this approach are obvious. The level of generality atwhich grade descriptions are written may encourage individuals to exaggerate and aggrandizetheir duties and responsibilities to obtain higher classifications and hence higher base pay. Second,most jobs will have some duties that are contained in one grade description and some in another.The evaluator is then forced to average or to pick the closest match to the job.

Factor comparison. In factor comparison job evaluations compare jobs with respect to jobdimensions or job requirements that the organisation has deemed to deserve compensation. Theskeleton of the system is formed by selecting key or benchmark jobs for which a prevailing wage


is known. Some systems use the current wage rate for the benchmark jobs rather than prevailingwage. These jobs are then ranked along each compensable factor, and based on these rankings,the prevailing wage is apportioned across the compensable factors.

While cumbersome to develop and explain, this approach is relatively easy to administer aslong as prevailing wage rates are constant. There are two serious weaknesses in this approach,however. First, wage rates for the key jobs must be equitably aligned both internally andexternally to produce useful assessments of relative worth. Second, the apportionment of thewage of the key jobs across factors must be valid since they constitute the foundation for theentire system.

Point system. The point system is the most widely used of the job evaluation approaches.Like the factor comparison approach, compensable factors are first determined. They are givenweights or points reflecting the relative importance of each factor in determining job worth. Thefactors are then divided into degrees and the points associated with that factor allocated acrossthem. The upper end of each factor scale represents the maximum points associated with thatfactor, the lower end either zero or some “base”. The relative worth of the job is reflected, afterusing job descriptions, in the sum of the points awarded for each factor.

While job evaluation approaches are probably the most prevalent methods of establishingbase pay, their usefulness like the usefulness of any management system depends on how wellthey achieve their objectives. Nevertheless, they have a role to play in the administration ofcompensation. It can provide, atleast an internally justifiable wage structure for organisations.

PERFORMANCE APPRAISAL

1.7 INTRODUCTION

Performance appraisal may be defined as a structured formal interaction between asubordinate and a supervisor, that usually takes the form of a periodic interview, annual or semi-annual, in which the work performance of the subordinate is examined and discussed, with a viewto identifying weaknesses and strengths as well as opportunities for improvement and skillsdevelopment. It is a systematic evaluation of present potential capabilities of personnel andemployees by their superiors, superior’s superior or a professional from outside. It is a process ofestimating or judging the value, excellent qualities or status of a person or thing. It is a process ofcollecting, analysing, and evaluating data relative to job behaviour and results of individuals. Theappraisal system is organised on the principle of goals and management by objectives.Management decisions on performance utilise several integrated inputs: goals and plans, jobevaluation, performance evaluation, and individual history. It connotes a two-dimensionalconcept — at one end of the continuum lies the goals set by the authority, and at the other end, theperformance achieved by the individual or any given group.


1.8 MEANING AND CONCEPT

Performance appraisal is not an event, it is a process. In performance appraisal, number ofevents happen in a predictable and sequential fashion, with one completed before the next begins.The links vary from one company to another, but the chain of events in well managed companiesis reasonably typical.

Performance appraisal can be either formal or informal. Usage of former systems scheduleregular sessions in which to discuss an employee’s performance. Informal appraisals areunplanned, often just chance statements made in passing about an employee’s performance. Mostorganisations use a formal appraisal system. Some organisations use more than one appraisalsystem for different types of employees or for different appraisal purposes.

Organisations need to measure employee performance to determine whether acceptablestandards of performance are being maintained. The six primary criteria on which the value ofperformance may be assessed are: quality, quantity, timelineness, cost effectiveness, need forsupervision, and interpersonal impact. If appraisals indicate that employees are not performing atacceptable levels, steps can be taken to simplify jobs, train, and motivate workers, or dismissthem, depending upon the reasons for poor performance.

The results of appraisal are normally used to:

estimate the overall effectiveness of employees in performing their jobs; identify strengths and weaknesses in job knowledge and skills; determine whether a subordinate’s responsibilities can be expanded; identify future training and development needs; review progress toward goals and objectives; determine readiness for promotion; and motivate and guide growth and development.

1.9 OBJECTIVES

Douglas McGregor observes: “Formal performance appraisal plans are designed to meetthree needs, one for the organisation and two for the individual:

They provide systematic judgements to back-up salary increases, promotions, transfersand demotions and sometimes terminations.

They are a means of telling a subordinate how he is doing, and suggesting neededchanges in his behaviour, attitudes, skills, or job knowledge; they let him know “wherehe stands” with the boss.


They are also being increasingly used as a basis for the coaching and counselling of theindividual by the superior.”

Performance appraisal plans are designed to meet the needs of the organisation and theindividual. It is increasingly viewed as central to good human resource management. This ishighlighted in Cumming’s classification of performance appraisal objectives. According toCummings and Schwab (1973), the objectives of performance appraisal schemes can becategorised as either evaluative or developmental. The evaluative purpose have a historicaldimension and are concerned primarily with looking back at how employees have actuallyperformed over the given time period, compared with required standards of performance. Thedevelopmental, a future- oriented performance appraisal is concerned, for example, with theidentification of employees’ training and development needs, and the setting of new targets.

The various objectives of appraisal may be broadly classified into two categories:

1. Administrative or managerial decision-making2. Clinical or self-improvement.

The former covers such objectives of appraisals which help in administrative or managerialdecision-making process, as in the areas of promotion, transfer, termination, salary administration,other personnel actions and other personnel research, whereas the latter covers such objectives asidentifying the training needs, training, development, education, overcoming the weaknesses andcapitalising the strengths, counselling and coaching.

Until recently, the basic purpose of appraisal was often defined as ‘letting people knowwhere they stand’. With the advent of ‘task’ approaches to management, involving target-setting,there has been a significant shift of emphasis in the interpretation of the purpose of performanceappraisal. Now it is generally seen as providing regular opportunities for a superior andsubordinate to consider jointly what must be done to improve performance.

1.10 USES

Some of the common uses of appraisals include:

Determining appropriate salary increases and bonuses for workers based onperformance measure.

Determining promotions or transfers depending on the demonstration of employeestrengths and weaknesses.

Determining training needs and evaluation techniques by identifying areas ofweaknesses.

Promoting effective communication within organisations through the interchange ofdialogue between supervisors and subordinates.


Motivating employees by showing them where they stand, and establishing a data bankon appraisal for rendering assistance in personnel decisions.

Organisations use performance appraisals for three purposes: (i) administrative, (ii) employeedevelopment, and (iii) programme assessment.

1.11 PERFORMANCE STANDARDS

Standards are vital to the success of any communication programme, and a performanceappraisal system is certainly one of the most critical communication programmes in anorganisation. Standards are an integral part of performance appraisal process. Performanceappraisal standards provide both the rater and the rate with a basis for describing work-relatedprogress in a manner that is mutually understandable. Performance standards provide a degree ofuniformity in the non-uniform world of work.

The basic performance measurement problem facing almost all organisations is the difficultyin making jobs uniform, which, in turn, makes it difficult to set standards. In the current workscene, performance standards only become useful when they are commonly understood andvoluntarily acknowledged and accepted. A specific performance standard should have certaincharacteristics, namely,

it should enable the user to differentiate between acceptable and unacceptable results; it should be of some challenge to the employee; it should be realistic and attainable; it should be a statement of the conditions that will exist and will assist in measuring a

job responsibility;

it should relate to or express a time frame for accomplishment; and

it should be observable and offer a means of measuring the performance against therequirements of the standards.

Performance standards can be established for all jobs. In addition to many other jobs, writtenstandards can be established for scientific and technical, professional, supervisory, andmanagerial jobs. The first step in performing standards is to ask a series of questions.Performance standards should be established for each performance dimension, and they shoulddescribe the fully acceptable level of performance, i.e., a level of performance that will fullysatisfy the supervisor’s expectations. Further, performance standards should be written for eachjob, or possibly positioned, but not for a class of jobs. For instance, identical performancestandards cannot be written for all clerk and typist jobs. When developing standards for identicalpositions, caution should be exercised in using the average performance of the group as the levelof acceptable performance. By participating in setting the standards for one’s own position, an


employee is more likely to feel that the standards are fair and will more readily accept personalresponsibility for meeting them. Setting standards should be a continuing process.

F.W. Taylor and his colleagues investigated the world of work from an industrialengineering perspective, and focused their attention on the quality and quantity of output resultingfrom a worker’s efforts. They developed methods, techniques, and procedures for establishingperformance standards for identifying job competency and performance effectiveness. Industrialengineers continue to study jobs to find ways to standardise, simplify, and specialise workprocedures and to establish performance standards. Among the various methods found useful aretime and motion studies, micro-motion analysis, and work measurement.

1.12 APPRAISAL METHODS

The best known performance appraisal methods are as follows:

Essay appraisal. In its simplest form, this technique asks the rater to write a paragraph ormore covering an individual’s strengths, weaknesses, potential, and so on. It also suggests courseof action to remedy the identified problem areas. The advantage of essay method is, it is far lessstructured than the rating scale method. It permits the appraiser to examine almost any relevantissue or attribute of performance. The process is open-ended and very flexible.

The biggest drawback to essay appraisals is their variability in length and content. Moreover,since different essays touch on different aspects of a man’s performance or personal qualifications,essay ratings are difficult to combine or compare. For comparability, some type of more formalmethod, like the graphic rating scale, is desirable. Further, this method does not lend itself to anyform of quantitative expression and tends to be highly subjective. There is no common criteria ofevaluation. Another disadvantage is that the essay method is time-consuming and difficult toadminister. However, this method could be usefully utilised if certain proper guidelines andcriteria are provided for evaluation of employee performance and people are trained to use thissystem.

Graphic rating scale. This technique may not yield the depth of an essay appraisal, but it ismore consistent and reliable. Typically, a graphic scale assesses a person on the quality andquantity of his work (is he outstanding, above average, average, or unsatisfactory?) and on avariety of other factors that vary with the job but usually include personal traits like reliability andco-operation. It may also include specific performance items like oral and written communication.The graphic scale has come under frequent attack, but remains the most widely used ratingmethod.

Strauss and Sayless have classified performance appraisal into three groups: (a) traditionalperformance rating; (b) newer-rating methods; and (c) result-oriented appraisal (modern appraisalsystem). A brief description of each is as follows:


Traditional Performance Rating. Traditional rating involves a completion of a form by theimmediate supervisor of the individual who is being evaluated. In some cases, attempts are madeto accomplish the rating by a committee consisting of the immediate supervisor, the supervisor’ssuperior and one or two more officers of the company who are familiar with the rates. Althoughratings by the committee bring several viewpoints together and overcome the superior’s bias, ifany, they are highly time-consuming. The conventional rating scale form incorporates severalfactors, such as, job knowledge, judgement, organising ability, dependability, creativity, dealingwith people, delegation, and leadership. The rating is assigned by putting a tick mark horizontally.Frequently, descriptive phrases are given in the form to guide the rater while evaluating the rates.This method is very simple to understand and easy to apply. On the basis of ratings on specificfactors, it is possible to identify areas in which the individual requires further development. Theratings on specific factors can be summated to obtain a composite performance score.

The merit-rating scales are frequently criticised from the standpoints of clarity in standards,differing perceptions, excessive leniency or strictness, the central tendency, the halo effect, andthe impact of an individual’s job.

First, there is a divergence of opinion among raters as to what is meant by such standards as“unsatisfactory”, “good” and so on.

Second, there may be divergent perceptions and accordingly, different standards ofjudgements among the raters.

Third, the raters may be susceptible to excessive leniency or strictness error.

Fourth, there is an error of central tendency involving a cluster of ratings near the middle ofthe scale.

Fifth, there is a chance of the occurrence of a halo effect. The halo effect refers to a tendencyof the rater to rate several factors in terms of a general impression which he has on the individuals.Accordingly, the halo effect may occur where the rating on one factor is influenced by the ratingon another factor. If an individual is rated above the average on one factor, he is likely to receivenearly similar ratings on the other factors as well. For example, a fitter, who is rated “very good”on his knowledge of the job, may obtain equally high ratings on other factors such as initiativeand helpfulness, while factually he deserves lower ratings on these factors.

Sixth, there is a tendency on the part of the raters to assign high ratings to individualsholding high-paid jobs.

The basic criticism of the traditional performance rating relates to its emphasis onpersonality traits instead of job performance. Such rating is highly subjective in the absence ofobjective standards.

Newer Rating Methods. Because of several inadequacies in the traditional rating scale,attempts have been made to devise new procedures which are less susceptible to the aboveweaknesses. Among these are included rank order, paired comparison, forced distribution, forced


choice, critical incident bahaviourally anchored rating scales, and field review. These methods arediscussed below:

Rank-order Procedure. It is effective where ten or a lesser number of individuals are to beevaluated. According to this procedure, each individual is assigned such ranks as first, second,third and so on. If the evaluation process involves several traits, the ranking is made separately foreach trait. Although this method is simple to understand and easy to apply, this techniquebecomes cumbersome and difficult when a large number of employees are to be evaluated in theorganisation.

Paired-comparison System. Under this, each individual is compared with every otherindividual. The appraiser is required to put a tick-mark against the name of the individual whomhe considers better on the trait in question. The final ranking is determined by the number oftimes he is judged better than the other.

To illustrate the method, let us say we have five employees: Hari, Gopal, George, Manoj,and Santosh. We list their names on the left-hand side of the sheet. We compare Hari with Gopalon whatever criterion we have chosen, say, present value to the organisation. If we feel Hari ismore valuable than Gopal, we put a tally beside Hari’s name. We then compare Hari with George,with Manoj, and with Santosh. The process is repeated for each individual. The man with themost tallies is the most valuable person, at least in the eyes of the rater; the man with no tallies atall is regarded as the least valuable person.

This method becomes extremely time consuming and cumbersome when the number ofindividuals for evaluation is large.

Forced Distribution Procedure. It is a form of comparative evaluation in which an evaluatorrates subordinates according to a specified distribution. Here judgements are made on a relativebasis, i.e., a person is assessed relative to his performance in the group he works. This procedurecan be used for numerous traits if required by evaluating the individuals separately on each trait.The forced distribution method is primarily used to eliminate rating errors such as leniency andcentral tendency.

Forced Choice Technique. It forces the rater to select from a series of several statements ortraits, the one which best fits the individual and one which least fits, and each of these statementsis assigned a score. Since the appraiser does not know the score value of statements, this methodprevents the rater from deliberately checking only the most favourable trait. Moreover, theappraiser is unable to introduce personal bias into the evaluation process because he does notknow which of the statements is indicative of effective performance. This enhances the overallobjectivity of this procedure. However, it is a costly technique and also difficult for many raters tounderstand. Consequently, the technique is usually limited to middle and lower managementlevels where the jobs are sufficiently similar to make standard or common forms feasible.Moreover, forced-choice forms tend to be of little value and probably have a negative effect whenused in performance appraisal interviews.


Critical Incident Method. This technique of performance appraisal was developed byFlanagan and Burns. Under this procedure, attempts are made to devise for each job a list ofcritical job requirements. Superiors are trained to be on the lookout for critical incidents on thepart of the subordinates in accomplishing the job requirements. The superiors enlist the incidentsas they happen and in the process, tend to build up a record of each subordinate with debit on theminus side and credit on the plus side.

The merit of this procedure is that all evaluations are based on objective evidence instead ofsubjective rating. Over a period of time, this method would provide objective and factual dataregarding the outstanding effective or ineffective performance of an individual.

There are, however, several drawbacks to this approach. It requires that supervisors jot downincidents on a daily or, at the very least, a weekly basis. This can become a chore. Furthermore,the critical incident rating technique need not, but may, cause a supervisor to delay feedback toemployees. And it is hardly desirable to wait six months or a year to confront an employee with amisdeed or mistake. Inspite of its drawbacks, the critical incident method can be used with othermethods to document the reasons why an employee was rated in a certain way.

Behaviourally Anchored Rating Scales (BARS). BARS is an evaluation where actual job-related behaviours are rated along a continuum. It evaluates performance in terms of criticalemployee behaviours. Rating scale uses specific behaviours as anchor points, each of whichreflects a different degree of performance effectiveness. It is developed through careful collectionof observable job behaviours that explicitly describe actual behaviours. It exemplifies variouslevels of performance achievement in a job, both superior and inferior performance. BARScombine elements of rating scales and critical incidents methods that are related to specific jobdimensions. Under this method, effective and ineffective job behaviours are described moreobjectively.

The merits of the BARS method are:

1. High participation and hence acceptance of the technique by superiors and subordinates.2. Differentiates among behaviour, performance and results.3. Technique is valid and reliable as it identifies observable and measurable behaviours of

specific jobs.

The demerits are:

1. Identification of critical behaviours that are activity directed rather than result directed.2. Construction of BARS is expensive and time consuming.3. Research does not support the high gain claims of BARS.

Field Review. It is an appraisal by someone outside the employee’s own department, usuallysomeone from the corporate office or from the employee’s own personal department. The field


review process involves review of employee records, and interviews with the employee, andsometimes with the employee’s superior.

In the interview, the personnel analyst may ask such questions as the following:

1. How is the employee getting along?2. In what way is he good or particularly good?3. What is he doing well?4. Why do you believe that he is good?5. Does he have any weaknesses?6. Is he a definitely outstanding employee?7. In what way is he particularly weak?8. What is he doing poorly?9. Why do you think he does poor work?

10. Has he any good qualities?11. Do you regard him as a satisfactory employee with some weaknesses or a problem

employee?12. Do you believe this employee would be outstanding on other jobs?13. Is he promotable? If so, to what type and level of jobs is he promotable?14. How could this person be helped to improve his performance?15. Is additional training indicated? If so, what kind of training is needed and when could

this training be provided?

After the interviews have been completed, the personnel analyst returns to his office anddictates his notes. The reports are sent to the appraiser who receives them, if necessary, and signsthem to indicate his approval.

Field review as an appraisal method is used primarily in making promotion decisions at themanagerial level. Field reviews are also useful when comparable information is needed fromemployees in the different units or locations. This group-judgement technique tends to be morefair and more valid than individual ratings and permits the central staff to develop an awarenessof the varying degrees of leniency or severity — as well as bias - exhibited by raters in differentdepartments. On the negative side, the process is very time consuming.

Result-Oriented Appraisal. The result-based appraisal relates to future which can beimproved rather than the past over which one has no control. It stresses forward planning whichhelps in overcoming problems beforehand. The superior is no longer a critic but a guide toimprove subordinate’s performance. The subordinates have definite targets and receive feedbackas to where they stand. Thus, knowledge of results leads to improved performance. Thisprocedure provides a framework within which individuals are highly motivated to improve


themselves. However, it is not a panacea for all the ills of an organisation. This method should notbe introduced as a crash programme in organisational settings. Rather, sufficient groundworkshould be accomplished before launching the result-oriented appraisal programme.

A results-based appraisal system has some solid benefits to offer an organisation:

1. It produces improved short and long term planning.2. The focus on results communicates the importance of achieving measurable results to

all members of the organisation.3. The system encourages more effective performance.4. Both appraiser and appraisee accept the approach as fair.5. It results in increased commitment to the organisation.6. Results-based approaches lead to improved clarity of the individual’s role and priorities.7. Results-based systems are highly defensible.

A results-based system does have some limitations and potential problems, too:

1. It may be excessively results-oriented.2. It may be inflexible.3. It is neither easy to create or easy to use.4. The approach may not provide adequate personal incentives to improve performance.5. It may not fit all aspects of a job.

1.13 MODERN APPRAISAL SYSTEMS

MBO

MBO, as expressed by its foremost proponent Dr. George S. Odiorne, is: “Management byobjectives is a process whereby the superior and subordinate managers of an organisation jointlyidentify its common goals, define each individual’s major areas of responsibility in terms of theresults expected of him, and use these measures as guides for operating the unit and assessing thecontribution of each of its members.”

Much of the initial impetus for MBO was provided by Peter Drucker (1954) and by DouglasMcGregor (1960). Drucker first described management by objectives in 1954 in The Practice ofManagement. Drucker pointed to the importance of managers having clear objectives that supportthe purposes of those in higher positions in the organisation. McGregor argues that byestablishing performance goals for employees after reaching agreement with superiors, theproblems of appraisal of performance are minimised. MBO in essence involves the setting outclearly defined goals of an employee in agreement with his superior. Carroll and Tosi (1973), inan extensive account of MBO, note its following characteristics:


1. The establishment of organisational goals.2. The setting of individual objectives in relation to organisational goals.3. A periodic review of performance as it relates to organisational goals.4. Effective goal-setting and planning by top management.5. Organisational commitment.6. Mutual goal-setting.7. Frequent individual performance reviews.8. Some freedom in developing means of achieving objectives.

MBO is, thus, a method of mutual goal-setting, measuring progress towards the goals, takingaction to assure goal attainment, feedback, and participation. It is a result-oriented philosophy,enabling an employee to measure progress toward a goal which the employee often has helped toset. In the goal-setting phase of MBO, a superior and subordinate discuss job performanceproblems and a goal is agreed upon. Along with mutual goal-setting, a major component of MBOis the performance review session between the superior and subordinate, which takes placeregularly to evaluate progress towards specified goals.

The MBO has been designed to overcome certain inherent problems of traditional appraisalsystems. It really constitutes a new way of managing. Its major goal is to enhance the superior-subordinate relationship, strengthen the motivational climate, and improve performance. It helpsto improve managerial performance and effectiveness. It provides a workable framework to themanager, within which he can make decisions which are in the best interests of the organisation.It is thus a way of managing which aims to provide continuing conditions for achievement andgrowth.

The key concepts of MBO are emphasis on results, participation, human relations, and aregular review system. For the successful implementation of MBO, proper training andpreparation are required. To achieve success with MBO, it is necessary to have top management’sfull support and commitment, a realistic time-frame for implementation, adequate training ofpeople who would be involved in the process, and a proper understanding of the role of MBO.

The key features of MBO are as under:

1. Superior and subordinate get together and jointly agree upon the list the principal dutiesand areas of responsibility of the individual’s job.

2. The subordinate sets his own short-term performance goals or targets in co-operationwith his superior.

3. They agree upon criteria for measuring and evaluating performance.4. From time to time, as decided upon, the superior and subordinate get together to

evaluate progress towards the agreed-upon goals. At those meetings, new or modifiedgoals are set for the ensuing period.


5. The superior plays a supportive role. He tries, on a day-today basis, to help thesubordinate achieve the agreed upon goals. He counsels and coaches.

6. In the appraisal process, the superior plays less of the role of a judge and more of therole of one who helps the subordinate attain the organisation goals or targets.

7. The process focuses upon results accomplished and not upon personal traits.

MBO as an approach to management is aimed at improving performance by eliminating, orreducing the following impediments to it:

1. Inappropriate organisation and managerial structure.2. Inefficient controls.3. Inadequate communication.4. Vague or meaningless objectives.5. Ill-defined accountabilities and authority.6. Wasted resources - particularly human talent at all levels.7. Low morale and apathy.

There are four main steps in MBO:

1. Define the job. Review, with the subordinates, his or her key responsibilities and duties.2. Define expected results (set objectives). Here specify in measurable terms what the

person is expected to achieve.3. Measure the results. Compare actual goals achieved with expected results.4. Provide feedback, appraise. Hold periodic performance review meetings with

subordinates to discuss and evaluate the latter’s progress in achieving expected results.

MBO as a mutual goal setting exercise is most appropriate for technical, professional,supervisory, and executive personnel. In these positions, there is generally enough latitude androom for discretion to make it possible for the person to participate in setting his work goals,tackle new projects, and discover new ways to solve problems. This method is generally notapplied for lower categories of workers because their jobs are usually too restricted in scope.There is little discretionary opportunity for them to shape their jobs.

MBO may be viewed as a system of management rather than an appraisal method. Asuccessful installation of MBO requires written mission statements that are prepared at thehighest levels of top management. Mission statements provide the coherence in which top-downand bottom- up goal setting appear sensible and compatible. MBO can be applied successfully toan organisation that has sufficient autonomy, personnel, budget allocation, and policy integrity.Managers are expected to perform so that goals are attained by the organisation. Too often MBOis installed top-down in a dictatorial manner with a little or no accompanying training. If properlyimplemented, it serves as a powerful and useful tool for the success of managerial performance.


MBO is a tool that is inextricably connected with team building so that the workcommitment of team members can be increased and their desire to excel in performance can beinspired. Team MBO enters in where individual setting leaves off. It is important to haveeffective team work among a group of managers or a group of subordinates. The work cannot bedone properly unless people extend themselves to one another and do not take the narrowestpossible view of their own duties. The group of employees or subordinates must be looked uponas a team that needs to be brought together. Goals should be set by manager-subordinate pairs,and also by teams. The basic superior-subordinate relationship in an organisation is in no wayundermined in this concept of team goal setting. Lines of responsibility, authority, andaccountability remain clear.

MBO has many benefits, since it:

1. Provides a way for measuring objectively the performance of subordinates.2. Co-ordinates individual performance with company goals.3. Clarifies the job to be done and defines expectations of job accomplishment.4. Improves superior-subordinate relationships through a dialogue that takes place

regularly.5. Fosters increased competence, personal growth, and opportunity for career development.6. Aids in an effective overall planning system.7. Supplies a basis for more equitable salary determination, especially incentive bonuses.8. Develops factual data for promotion criteria.9. Stimulates self-motivation, self-discipline and self-control.

10. Serves as a device for integration of many management functions.

MBO has certain potential problems, such as:

1. It often lacks the support and commitment of top management.2. Its objectives are often difficult to establish.3. Its implementation can create excessive paperwork if it is not closely monitored.4. It concentrates too much on the short-run at the expense of long-range planning.5. It may lead to excessive time consuming.

MBO is seen by some as an organisational panacea. It is not. It cannot provide all of the datarequired for making valid personnel decisions on compensation, promotion, and training anddevelopment.

360 Degree. Over the years, a new approach has been enunciated by the Westernmanagement gurus, which is known as 360 degree appraisal — a performance management inwhich employees receive performance feedback on a variety of dimensions by an assortment ofindividuals with whom the person interacts, namely, their boss, their colleagues and peers, their


own subordinates, and internal and external customers. The list can grow to include vendors andconsultants, human resource professionals, suppliers and business associates, even friends andspouses. The 360 degree feedback refers to the practice of using multiple raters often includingself-ratings in the assessment of individuals. Other terms used to describe 360 degree appraisalsinclude multi-rater systems, upward feedback, and full-circle feedback. Thus, the feedback comesfrom all around them, 360 degrees.

The steps in the 360 degree assessment includes:

Identify and define the key competencies for organisational success based on theorganisation’s vision, values, and goals.

Express the key competencies as attitudes against which participants can be assessed. Select the persons to be evaluated — peers, customers, subordinates, managers, and so

on.

Compile the results. Feedback is to be kept confidential.

Provide feedback to the individual.

Create an action plan to improve the individual’s performance.

The 360 degree performance assessment has an advantage over the traditional managerassessment process in that the individual receives feedback from multiple relevant sources, notjust one. It helps foster independent partnership and develops team-based organisations. It is alsoa move towards participation and openness. Many American companies are now using 360 degreefeedback. Companies that practice 360 degree appraisals include Motorola, Semco Brazil, BritishPetroleum, British Airways, Central Televisions, and so on.

One important factor for the success of 360 degree performance assessment is to ensure thatthe right people are selected to provide the feedback. Both critics and supporters of the individualshould be selected. Another key factor for its success is avoiding punishment for bad results.Rather, assessment participants must be positively encouraged to improve. Further, raters shouldbe trained to use the rating form properly to help them make accurate appraisals.

This form of performance evaluation can be very beneficial to managers because it typicallygives them a much wider range of performance-related feedback than a traditional evaluation.That is, rather than focusing narrowly on objective performance, such as sales increase orproductivity gains, 360 degree often focuses on such things as interpersonal relations and style.Of course, to benefit from 360 degree feedback, a manager must have thick skin. The manager islikely to hear some personal comments on sensitive topics, which may be threatening. Thus, a 360degree feedback system must be carefully managed so that its focus remains on constructiverather than destructive criticism.


HR Balanced Scorecard

The Balanced Scorecard (BSC) creates a template for measurement of organisationalperformance as well as individual performance. It is a measurement based management system,which enables organisations to clarify vision and strategy before initiating action. It is also amonitoring system that integrates all employees, at all levels in all departments towards acommon goal. BSC translates strategy into performance measures and targets, thus making itoperational and highly effective. It helps cascade corporate level measures to lower level so thatthe employees can see what they must do well to improve organisational effectiveness and helpsfocus the entire organisation on what must be done to create breakthrough performance. BSC wasintroduced in 1992 by Dr. Robert Kaplan and David Nortan and has been successfully adopted bynumerous companies worldwide.

Any business for its success needs a winning game plan and a team with a clearunderstanding of its plans and goals and how they fit in and contribute to the team effort. Thebalanced scorecard is all about creating a business strategy where all moves fit together. It isabout setting goals, measuring performances, communicating actions, and end-results to the teams.

The balanced scorecard is a part of management system of a company that tracks and reportsdata from four critical perspectives: customer, financial, operational, and strategic. The keyinformation that is to be obtained in these areas are:

1. Is the company viewed as a great place to work?2. Is HR viewed as an enabler to attracting and retaining top talent?3. Is HR viewed as providing effective support systems to employees?4. Are the HR plans and programmes competitive?5. Is the HR service delivery cost effective?6. What is the return on investment in people?7. Are the staffing support systems fostering better recruiting and selection?8. Are other HR processes/transactions efficient and effective?9. Is technology used to improve HR efficiency?

10. Is there considerable talent and leadership to meet future requirements?11. How is HR helping to meet the customer needs?12. Is HR creating an environment that encourages integration and shared vision?13. Is the company investing in developing HR capabilities?

1.14 SELF-APPRAISAL/ASSESSMENT

A growing number of organisations are including formal self-appraisal as part of theirperformance evaluation system. Individuals are encouraged to complete appraisals of their own


performance as well as provide information on developmental achievements and plans for theupcoming appraisal period.

One issue arises regarding the timing of self-appraisals. Companies using the approach aredivided in their opinion about when the self-appraisal should be completed and given to thesupervisor. In almost every case, the organisation expects the supervisor to review the appraisalform with the individual in advance, including both work behaviours or performance factors aswell as the goals or objectives. The employee is then asked by the supervisor to complete the self-appraisal.

Some companies do follow self-appraisal and compare the same with the traditionalappraisal of the supervisors. A new approach has been recently enunciated by the Westernmanagement gurus, which is known as 360 degree appraisal, whereby appraisals are required tobe carried out not only by the supervisors, but also by those supervised (subordinates) and peers.This approach also needs a re-look in the context of leadership concepts being practiceduniversally. If one requires to be appraised on how well he performs the leadership role, theappraisal should originate from the followers (bottom to top approach) and not from theirsupervisors alone.

One company identifies twelve specific factors to be assessed for employees with directsupervisory responsibility.

Development or change takes place only if the appraisee is interested in development orchange. Such a desire is normally an outcome of self-review or reflection. It is an opportunity forthe appraisee to recapitulate and list down his accomplishments and failures. The most importantpart of self appraisal is the process of review and reflection through performance analysis.

1. Coaching2. Effective communications3. Encouraging teamwork4. Establishing high standards and getting results5. Effective delegation6. Rewarding performance7. Developing employees8. Building consensus9. Supporting reasonable risk taking

10. Forward thinking11. Improving the organisation12. Managing diversity.


1.15 PERFORMANCE REVIEW AND FEEDBACK

Performance review or evaluation interview is necessary with a view to communicateeffectively with each employee on his performance. Essentially, reviews of performance shouldprovide managers and their subordinates with an opportunity to take stock jointly of work that hasbeen done. As a control process appraisal should be one means by which information about recent,past, or current performance can be used to influence results in the immediate future.

The objectives of performance review are:

1. To let subordinates know where they stand.2. To recognise their good work.3. To point out how and where they can improve.4. To develop them on their present job.5. To develop and train them for higher jobs.6. To let them know how they may progress in the company.7. To serve as a record for assessing the department or unit as a whole, showing where

each person fits into the larger picture.8. To warn some employees that they must do better.

A thorough performance analysis done prior to the review discussion helps in making thereview discussion fruitful. Review discussion aims at making the appraisee and the appraiserunderstand each other better by communicating the performance analysis of the appraisee’sperformance. It is in this discussion that the appraiser should:

1. complement the appraisee for his accomplishments and good qualities;2. understand and appreciate his difficulties and make action plans to help him in the

future;3. understand the appraisee’s perceptions of the situation and correct the perceptions, if

necessary;4. help him to recognise his strong points and weak points;5. communicate the expectations of the appraiser from the appraisee, and6. identify developmental needs of the appraisee and chalk out a course of action for

meeting these needs.

Review Meeting: There are two focus issues in performance review meetings: first, on theemphasis which should be placed on performance improvement as distinct from broaderdevelopmental needs; second, on the degree to which the meeting should look forward rather thanbackward.


Properly planned review meetings allow much more time and space for productiveconversation and communication than is generally available to busy managers. There should beample scope for communication about organisation’s or department’s objectives and howindividuals fit into the picture - the contribution they are expected to make.

The review meeting often presents a good opportunity for upward communication. This isthe time to find out about how people feel about their jobs, their aspirations, and theirrelationships with their peers and their managers.

Box 1.1: Performance Review Meeting - Ten Golden Rules

1. Be prepared2. Create the right atmosphere3. Work to a clear structure4. Use praise5. Let individuals do most of the talking6. Invite self-assessment7. Discuss performance, not personality8. Encourage analysis of performance9. Don’t deliver unexpected criticisms10. Agree measurable objectives and a plan of action.

Source: Armstrong, Michael, Performance Management, pp. 101-102.

Review Discussion

Performance review discussion is frequently the venue in which managerial concerns aboutthe performance of subordinates are first formally brought to their attention. Every performanceimprovement discussion with the employee has two goals, namely, solving problem andmaintaining relationship, both of which need to be achieved if a lasting correction is to occur.

In order to make the discussion more effective, the following steps are essential:

1. Identify the specific gap between desired and actual performance.2. Determine the good business reasons that the problem must be solved.3. Ascertain the consequences the employee will face if he/she fails to correct the situation.4. Determine the appropriate action to be taken.

After thorough discussion of the appraisal document and the rationale behind it, bring thediscussion to a successful conclusion. The easiest way is to follow the past-present-future model:

How well the individual has done over the last twelve months? How much pay change starting from today? What the individual need to do in the next twelve months to maintain and enhance the

current quality of performance?


Performance Review Problems: The main problems which arise in conducting performancereviews, as identified by Clive Fletcher (1993) and others are:

1. Identifying criteria for evaluating performance.2. Collating accurate and comprehensive information about employee performance.3. Resolving conflict between reviewers and the people they review.4. Defensive behaviour exhibited by individuals in response to criticism.

An effective performance review, especially one in which problems of under-performancehave to be discussed, demands considerable skill on the part of the reviewer.

Norman R.F. Maier identifies three types of appraisal interviews each with a specific andslightly different object. They are:

1. Tell and Sell Method2. Tell and Listen Method3. Problem Solving Method

1. The Tell and Sell Method. The initial aim of the Tell and Sell Method is to communicatethe employee’s evaluation to him as accurately as possible. The fairness of the evaluation isassumed and the superior seeks (a) to let the subordinate know how he is doing; (b) to gain hisacceptance of the evaluation; and (c) to follow the plan outlined for his improvement.

2. The Tell and Listen Method. The goal here also is to communicate the evaluation to theemployee and then let him respond to it. The interviewer covers his strengths and weaknessesduring the first part of the interview, postponing points of disagreement until later. The secondpart is devoted to exploring the subordinate’s feelings about the evaluation. Thus, the superiorwhile still in the role of a judge, listens to objections without attempting to refute them. In fact, heencourages the subordinate to disagree because the objective is not only to communicate theappraisal but also drain off any negative feelings that arises.

3. The Problem Solving Approach. In this method, the interviewer assumes the role of ahelper rather than that of a judge as in other methods. The main objective of this method isemployee development. Since the objective is employee development, the interviewer cannotspecify the area for improvement because this would be making a judgement. He must limit hisinfluence to stimulating thinking rather than supplying solutions and be willing to consider allideas on job improvement that the employee brings up. His function is to discover thesubordinate’s interest, respond to them and help the employee examine himself and the job. Hemust forget and try to see the job as the employee sees it. Problem-solving is characterised by theexploration of a variety of solutions. This approach uses non-directive skills similar to those ofTell and Listen method - listening, accepting and responding to feelings. The problem-solvingapproach motivates original thinking because it stimulates curiosity. Also it affords both theparticipants a highly favourable opportunity for learning and communicating.


The main thrust of the review system is to effectively develop the communication processbetween the appraiser and the appraise so that individual strengths and weaknesses are identifiedand necessary corrective actions taken. If the performance of the employee falls short of thestandards set in the process of goal setting, the employee is encouraged to improve hisperformance. Similarly, if the employee has exceeded the standard, he is encouraged to accept ahigher goal.

Evaluation interviews are not easy to conduct, and if they are poorly handled they may leadto hostility and greater misunderstanding. Performance review can be quite beneficial to theorganisation and to the individual involved if done properly. Consequently, many companies havespent a great deal of time and effort on training their supervisors to handle evaluation interviewsmore effectively. To ensure that no essential part of the interview is left out, supervisors are oftenencouraged to follow a standardised outline. For example:

1. The supervisor tells the subordinate the purpose of the interview, and that it is designedto help him do a better job.

2. The supervisor then presents the evaluation, giving the strong points first and then theweak points.

3. Next the supervisor asks for general comments on the evaluation. He anticipates that thesubordinate may show some hostility to negative evaluations and allows him to blow offthe steam.

4. The supervisor then tries to encourage the subordinate to give his own picture of hisprogress, the problems he is meeting, what he can do to solve them, and how hissupervisor can help him.

5. The interview ends with a discussion of what the subordinate can do by himself toovercome his weak points and what the supervisor can do to help. The supervisor triesto accept any criticism or aggression on the part of the subordinate without argument orcontradiction.

Performance Feedback

The success of appraisal depends on effective feedback. To be effective, feedback should be:

Honest Specific - do not beat about the bush It should meet the needs of all parties Meaningful Accurate It could be acted upon Instantly followed up in writing.


Feedback is important in letting the employees know how they are doing. Without feedback,employees tend to assume that their performance is acceptable. If they make the wrongassumption for an extended period of time, a serious performance problem can develop — onethat may be hard to correct.

Performance feedback should be positive in the sense that its aim is to point the way tofurther development and improvement, not simply to tell people where they have gone wrong.But feedback must report on failures as well as successes, although failings should not be dwelton as matters for blame. Instead, they should be treated as opportunities for learning so that theyare less likely to be repeated in the future.

Feedback on performance management should always be factual. It refers to results, events,critical incidents, and significant behaviours which have affected performance in specific ways.The feedback should be recognised and accepted by individuals as a matter of fact, not of opinion.

Guidelines for providing feedback as suggested by Michael Armstrong:

1. Build feedback into the job.2. Provide feedback on actual events.3. Describe, don’t judge.4. Refer to specific behaviours.5. Ask questions.6. Select key issues.7. Focus on improvement in performance.8. Provide positive feedback.

Providing regular feedback is important to demonstrate to your employees that you careabout them. It is also another way to make the human-touch appraisal process an on-goingactivity.

Giving feedback on performance requires an intelligent and diplomatic approach.Overwhelmingly negative feedback often causes genuine stress, demotivation, demoralisation,and even depression, all of which can have a serious impact on how someone does his job.Positive feedback strengthens performance. There are some managers who think that, as long asyou don’t tell an employee there is a problem, the employee should assume that everything is fine.Some of these managers think that giving positive feedback is a sign of weakness. But the fact is,most people are motivated by the desire to achieve specific results, especially established goals.And generally, employees will work to achieve these goals as long as they believe that what theydo is recognised and appreciated.


1.16 STEPS IN AN APPRAISAL INTERVIEW

The following are the steps in an appraisal interview:

1. Setting the stage. A major part of the interview is the employee’s presentation of his orher self-evaluation with respect to each job performance area and performanceexpectation. If the employee is not prepared for that part of the interview, then it wouldbe best to postpone it. If the employee is prepared, then the manager should review thesteps in the interview. That way, both parties will be familiar with the interviewstructure and can use this knowledge to help them get through the interview. This allowsboth parties to focus on specific job performance issues.

2. Employee’s assessment. Once the preliminaries are out of the way, the employeeselects a particular job performance area and performance expectation for review. Theemployee presents his or her own assessment of performance, while the manager asksopen- ended questions in an effort to obtain details and explanations.

3. Manager’s assessment. It is now the manager’s turn to respond to the employee’sperformance. This assessment should centre on how well the specific job performanceexpectations, set at the time of performance planning, have been fulfilled. Themanager’s assessment should cover everything mentioned by the employee, as well asany other factors the manager feels are important.

4. The employee’s reaction. It is unlikely that serious disagreements between managerand employee will emerge during the appraisal interview. However, employeessometimes become upset during the appraisal interviews. An assessor need not agreewith the employee but what he can do is, listen to the employee.

5. Resolving differences. This step involves getting down to a careful review of each jobperformance area and its associated performance expectation. Each area of disagreementshould be discussed and reviewed in detail. The manager and employee must discusshow to resolve the differences. Under no circumstances should the manager allow theappraisal interview to become a negotiating session.

6. Ending the session. The manager wraps things up by summarising the discussion thathas taken place during this session. This summary should include a review of the areasof agreement and listing of any areas of disagreement, along with a review of anyactions planned to resolve the disagreements.


Box 1.2: Appraisal Interview Outline

1. Prepare in advance.2. Establish rapport.3. Let the employee express his/her feelings and reactions.4. Focus on performance and development.5. Be specific about reasons for ratings.6. Get the employee’s views of his/her own performance.7. Discuss the areas of agreement and disagreement.8. Summarise and conclude the discussion.9. Decide on specific steps to be taken for improvement.10. Consider the supervisor’s role in the subordinate’s performance.11. Reinforce desired behaviours.12. Focus on future performance.

1.17 SUMMARY

Job evaluation is the process of systematically determining the relative worth of jobs tocreate a job structure for the organisation.

Job evaluation is based on a combination of factor, such as job content, skills required,value to the organisation, organisational culture, and the external market.

Job evaluation is part of the the process for establishing an internally aligned paystructure.

Job evaluation has evolved into many different forms and methods leading to widevariations in its use and perception.

No matter how job evaluation is designed, its ultimate use is to help design and managea work-related, business-focused, and agreed-upon pay structure.

The performance appraisal system ideally is an organisation designed programmeinvolving both the organisation and the personnel to improve the capability of both.

The elements of performance appraisal include purpose, content, method, appraiser,frequency, and feedback.

The appraisal process involves determining and communicating to an employee how heor she is performing the job and establishing a plan of improvement.

The information provided by performance appraisal is useful in three major areas:compensation, placement, and training and development.


1.18 REVIEW QUESTIONS

1. What is job evaluation? What is its importance?2. Job evaluation is a continuous process. Explain.3. What are the gains of job evaluation?4. Give an account of various methods of job evaluation.5. “Job evaluation determines the worth of a job and not that of the job holder.” Comment.6. How can a job evaluation programme be made more effective?7. Discuss the objectives of performance appraisal.8. Describe the methods used in performance appraisal.9. What is management by objectives (MBO)? What are its key features?

10. What is the purpose and significance of performance review and feedback?

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