Performance Appraisal

Performance appraisal, also known as employee appraisal, is a method by which the job performance of an employee is evaluated (generally in terms of quality, quantity, cost and time). Performance appraisal is a part of career development.
Performance appraisals are regular reviews of employee performance within organizations
Performance appraisal


Performance appraisal is the process of obtaining, analyzing and recording information about the relative worth of an employee. The focus of the performance appraisal is measuring and improving the actual performance of the employee and also the future potential of the employee. Its aim is to measure what an employee does.According to Flippo, a prominent personality in the field of Human resources, “performance appraisal is the systematic, periodic and an impartial rating of an employee’s excellence in the matters pertaining to his present job and his potential for a better job." Performance appraisal is a systematic way of reviewing and assessing the performance of an employee during a given period of time and planning for his future.It is a powerful tool to calibrate, refine and reward the performance of the employee. It helps to analyze his achievements and evaluate his contribution towards the achievements of the overall organizational goals.By focusing the attention on performance, performance appraisal goes to the heart of personnel management and reflects the management’s interest in the progress of the employees.

OBJECTIVES of Performance Appraisal
To review the performance of the employees over a given period of time.
To judge the gap between the actual and the desired performance.
To help the management in exercising organizational control.
Helps to strengthen the relationship and communication between superior – subordinates and management – employees.
To diagnose the strengths and weaknesses of the individuals so as to identify the training and development needs of the future.
To provide feedback to the employees regarding their past performance.
Provide information to assist in the other personal decisions in the organization.
Provide clarity of the expectations and responsibilities of the functions to be performed by the employees.
To judge the effectiveness of the other human resource functions of the organization such as recruitment, selection, training and development.
To reduce the grievances of the employees.

Generally, the aims of a performance appraisal are to:
Give feedback on performance to employees.
Identify employee training needs.
Document criteria used to allocate organizational rewards.
Form a basis for personnel decisions: salary increases, promotions, disciplinary actions, etc.
Provide the opportunity for organizational diagnosis and development.
Facilitate communication between employee and administrator.
Validate selection techniques and human resource policies to meet federal Equal Employment Opportunity requirements.

Purpose Of Performance Appraisal

Performance Appraisal is being practiced in 90% of the organisations worldwide. Self-appraisal and potential appraisal also form a part of the performance appraisal processes. Typically, Performance Appraisal is aimed at:
· To review the performance of the employees over a given period of time.
· To judge the gap between the actual and the desired performance.
· To help the management in exercising organizational control.
To diagnose the training and development needs of the future.Provide information to assist in the HR decisions like promotions, transfers etc.
Provide clarity of the expectations and responsibilities of the functions to be performed by the employees.
To judge the effectiveness of the other human resource functions of the organization such as recruitment, selection, training and development.
To reduce the grievances of the employees.
Helps to strengthen the relationship and communication between superior – subordinates and management – employees.


Common approach to assessing performance -
A common approach to assessing performance is to use a numerical or scalar rating system whereby managers are asked to score an individual against a number of objectives/attributes. In some companies, employees receive assessments from their manager, peers, subordinates and customers while also performing a self assessment. This is known as 360° appraisal.
The most popular methods that are being used as performance appraisal process are:
Management by objectives
360 degree appraisal
Behavioral Observation Scale
Behaviorally Anchored Rating Scale

Management by Objectives (MBO)
It is a process of agreeing upon objectives within an organization so that management and employees agree to the objectives and understand what they are in the organization.

Essence of MBO
The essence of MBO is participative goal setting, choosing course of actions and decision making. An important part of the MBO is the measurement and the comparison of the employee’s actual performance with the standards set. Ideally, when employees themselves have been involved with the goal setting and the choosing the course of action to be followed by them, they are more likely to fulfill their responsibilities.

Unique features and advantage of MBO
The principle behind Management by Objectives (MBO) is to create empowered employees who have clarity of the roles and responsibilities expected from them, understand their objectives to be achieved and thus help in the achievement of organizational as well as personal goals.

Some of the important features and advantages of MBO are:
Motivation – Involving employees in the whole process of goal setting and increasing employee empowerment, increases employee job satisfaction and commitment.
Better communication and Coordination – Frequent reviews and interactions between superiors and subordinates helps to maintain harmonious relationships within the enterprise and also solve many problems faced during the period.
Clarity of goals – With MBO, came the concept of SMART goals i.e. goals that are:
Specific
Measurable
Achievable
Realistic, and
Time bound.
The goals thus set are clear, motivating and there is a linkage between organizational goals and performance targets of the employees.
The focus is on future rather than on past. Goals and standards are set for the performance for the future with periodic reviews and feedback.
Some objectives are collective, for a whole department or the whole company, others can be individualized.

Limitations
There are several limitations to the assumptive base underlying the impact of managing by objectives, including:
1. It over-emphasizes the setting of goals over the working of a plan as a driver of outcomes.
2. It underemphasizes the importance of the environment or context in which the goals are set.
3. Companies evaluated their employees by comparing them with the "ideal" employee. Trait appraisal only looks at what employees should be, not at what they should do.
4. It did not address the importance of successfully responding to obstacles and constraints as essential to reaching a goal.

360-degree feedback
In human resources or industrial/organizational psychology, 360-degree feedback, also known as "multi-rater feedback," "multisource feedback," or "multisource assessment," is feedback that comes from all around an employee.
"360" refers to the 360 degrees in a circle, with an individual figuratively in the center of the circle. Feedback is provided by subordinates, peers, and supervisors. It also includes a self-assessment and, in some cases, feedback from external sources such as customers and suppliers or other interested stakeholders. It may be contrasted with "upward feedback," where managers are given feedback by their direct reports, or a "traditional performance appraisal," where the employees are most often reviewed only by their managers.
The results from 360-degree feedback are often used by the person receiving the feedback to plan their training and development. Results are also used by some organizations in making administrative decisions, such as pay or promotion. When this is the case, the 360 assessment is for evaluation purposes, and is sometimes called a "360-degree review." However, there is a great deal of controversy as to whether 360-degree feedback should be used exclusively for development purposes, or should be used for appraisal purposes as well. There is also contraversy regarding whether 360-degree feedback improves employee performance, and it has even been suggested that it may decrease shareholder value

Current Global Trends In Performance Appraisal Program

The performance appraisal process has become the heart of the human resource management system in the organisation. Performance appraisal defines and measures the performance of the employees and the organisation as a whole. It is a tool for accessing the performance of the organisation.The important issues and points concerning performance appraisal in the present world are:
 The focus of the performance appraisals is turning towards career development relying on the dialogues and discussions with the superiors.
 Performance measuring, rating and review systems have become more detailed, structured and person specific than before.

 Performance related pay is being incorporated in the strategies used by the organisation.
 Trend towards a 360-degree feedback system
 The problems in the implementation of the performance appraisal processes are being anticipated and efforts are being made to overcome them.
 In India, the performance appraisal processes are faced with a lot of obstacles, the most prominent being the lack of quantifiable indicators of the performance.

GLOBAL TRENDS
The emergence of following concepts and the following trends related to Performance appraisal can be seen in the global scenario:
360 Degree Appraisal
360 degree feedback, also known as 'multi-rater feedback', is the most comprehensive appraisal where the feedback about the employees’ performance comes from all the sources that come in contact with the employee on his job. Organisation are increasingly using feedback from various sources such as peer input, customer feedback, and input from superiors. Different forms with different formats are being used to obtain the information regarding the employee performance.
Team Performance AppraisalWith the number of teams increasing in the organisation, it becomes difficult to measure and appraise the performance of the team. The question is how to separate the performance of the team from the performance of the employees. A solution to this problem that is being adopted by the companies is to measure both the individual and the team performance. Sometimes, team based objectives are also included in the individual performance plans.
Rank and Yank Strategy Also known as the “Up or out policy”, the rank and yank strategy refers to the performance appraisal model in which best-to-worst ranking methods are used to identify and separate the poor performers from the good performers. Then the action plans and the improvement opportunities of the poor performers are discussed and they are given to improve their performance in a given time period, after which the appropriate HR decisions are taken. Some of the organisation following this strategy are Ford, Microsoft and Sun Microsystems.



Challenges Of Performance Appraisal

In order to make a performance appraisal system effective and successful, an organization comes across various challenges and problems. The main challenges involved in the performance appraisal process are:
 Determining the evaluation criteriaIdentification of the appraisal criteria is one of the biggest problems faced by the top management. The performance data to be considered for evaluation should be carefully selected. For the purpose of evaluation, the criteria selected should be in quantifiable or measurable terms
 Create a rating instrument The purpose of the Performance appraisal process is to judge the performance of the employees rather than the employee. The focus of the system should be on the development of the employees of the organization.
 Lack of competence Top management should choose the raters or the evaluators carefully. They should have the required expertise and the knowledge to decide the criteria accurately. They should have the experience and the necessary training to carry out the appraisal process objectively.
 Errors in rating and evaluation Many errors based on the personal bias like stereotyping, halo effect (i.e. one trait influencing the evaluator’s rating for all other traits) etc. may creep in the appraisal process. Therefore the rater should exercise objectivity and fairness in evaluating and rating the performance of the employees
 ResistanceThe appraisal process may face resistance from the employees and the trade unions for the fear of negative ratings. Therefore, the employees should be communicated and clearly explained the purpose as well the process of appraisal. The standards should be clearly communicated and every employee should be made aware that what exactly is expected from him/her.

http://www.4shared.com/file/102778595/99f3ec10/performance_evaluation.html