CHAPTER 1.

INTRODUCTION
1.1 WHAT IS PERFORMANCE APPRAISAL A performance appraisal, performance review, performance evaluation, (career) development discussion, employee appraisal is a method by which the job performance of an employee is evaluated. Performance appraisals are a part of career development and consist of regular reviews of employee performance within organizations. A performance appraisal is a systematic and periodic process that assesses an individual employees job performance and productivity in relation to certain pre-established criteria and organizational objectives. Other aspects of individual employees are considered as well, such as organizational citizenship behaviour, accomplishments, potential for future improvement, strengths and weaknesses, etc. To collect Performance Appraisal data, there are three main methods: objective production, personnel, and judgmental evaluation. Judgmental evaluations are the most commonly used with a large variety of evaluation methods. Historically, PA has been conducted annually (long-cycle appraisals), however many companies are moving towards shorter cycles (every six months, every quarter), and some have been moving into short-cycle (weekly, bi-weekly) PA. The interview could function as providing feedback to employees, counselling and developing employees, and conveying and discussing compensation, job status, or disciplinary decisions. Performance appraisal is often included in performance management systems. Performance Appraisal helps the subordinate answer two key questions; first, "What are your expectations of me?" second, "How am I doing to meet your expectations?" Performance management systems are employed to manage and align" all of an organization's resources in order to achieve hi ghest possible performance. How performance is managed in an organization determines to a large extent the success or failure of the organization. Therefore, improving Performance Appraisal for everyone should be among the highest priorities of contempora ry organizations. Some applications of Performance Appraisal are compensation, performance improvement, promotions, termination, test validation, and more. While there are many potential benefits of Performance Appraisal, there are also some potential drawbacks. For example, Performance Appraisal can help facilitate management-employee communication; however, Performance

Appraisal may result in legal issues if not executed appropriately as many employees tend to be unsatisfied with the Performance Appraisal process. Performance Appraisals created in and determined as useful in the United States are not necessarily able to be transferable crossculturally.

1.2 NEED OF PERFORMANCE APPRAISAL A central reason for the utilization of performance appraisals is performance improvement initially at the level of the individual employee, and ultimately at the level of the organization. Other fundamental reasons include as a basis for employment decisions (e.g. promotions, terminations, transfers), as criteria in research (e.g. test validation), to aid with communication (e.g. allowing employees to know how they are doing and organizational expectations), to establish personal objectives for training programs, for transmission of objective feedback for personal development, as a means of documentation to aid in keeping track of decisions and legal requirements and in wage and salary administration. Additionally, Performance appraisals can aid in the formulation of job criteria and selection of individuals who are best suited to perform the required organizational tasks. A Performance Appraisals can be part of guiding and monitoring employee career development.

Performance Appraisals can also be used to aid in work motivation through the use of reward systems.

1.3 ADVANTAGES OF PERFORMANCE APPRAISAL There are a number of potential benefits of organizational performance management conducting formal performance appraisals (PA). There has been a general consensus in the belief that Performance Appraisals lead to positive implications of organizations. Furthermore, PAs can benefit an organizations effectiveness. One way is PAs can often lead to giving individual workers feedback about their job performance. From this may spawn several potential benefits such as the individual workers becoming more productive. Facilitation of communication: communication in organizations is considered an essential function of worker motivation. It has been proposed that feedback from PAs aid in minimizing employees perceptions of uncertainty. Fundamentally, feedback and management-employee communication can serve as a guide in job performance. Enhancement of employee focus through promoting trust: behaviours, thoughts, and/or issues may distract employees from their work, and trust issues may be among these distracting factors. Such factors that consume psychological energy can lower job performance and cause workers to lose sight of organizational goals. Properly constructed and utilized PAs have the ability to lower distracting factors and encourage trust within the organization. Goal setting and desired performance reinforcement: organizations find it efficient to match individual workers goals and performance with organizational goals. PAs provide room for discussion in the collaboration of these individual and organizational goals. Collaboration can also be advantageous by resulting in employee acceptance and satisfaction of appraisal results. Well-constructed PAs can be valuable tools for communication with employees as pertaining to how their job performance stands with organizational expectations. At the organizational level, numerous studies have reported positive relationships between human resource management (HRM) practices" and performance improvement at both the individual and organizational levels.

Determination of training needs: Employee training and development are crucial components in helping an organization achieve strategic initiatives. It has been argued that for PAs to truly be effective, post-appraisal opportunities for training and development in problem areas, as determined by the appraisal, must be offered. PAs can especially be instrumental for identifying training needs of new employees. Finally, PAs can help in the establishment and supervision of employees career goals.

1.4 DISADVANTAGES OF PERFORMANCE APPRAISAL Despite all the potential advantages of formal performance appraisals (PAs), there are also potential drawbacks. It has been noted that determining the relationship between individual job performance and organizational performance can be a difficult task. Generally, there are two overarching problems from which several complications spawn. One of the problems with formal PAs is there can be detrimental effects to the organization(s) involved if the appraisals are not used appropriately. The second problem with formal PAs is they can be ineffective if the PA system does not correspond with the organizational culture and system. Detrimental to quality improvement: it has been proposed that the use of PA systems in organizations adversely affect organizations pursuits of quality performance. It is believed by some scholars and practitioners that the use of PAs is more than unnecessary if there is total quality management. Negative perceptions: Quite often, individuals have negative perceptions of PAs. Receiving and/or the anticipation of receiving a PA can be uncomfortable and distressful and potentially cause tension between supervisors and subordinates. If the person being appraised does not trust their employer, appraiser or believe that they will benefit from the process it may become a "tick box" exercise. Errors: Performance appraisals should provide accurate and relevant ratings of an employees performance as compared to pre-established criteria/goals (i.e. organizational expectations). Nevertheless, supervisors will sometimes rate employees more favourably than that of their true performance in order to please the employees and avoid conflict. Inflated ratings are a common malady associated with formal PA.

Legal issues: when PAs are not carried out appropriately, legal issues could result that place the organization at risk. PAs are used in organizational disciplinary programs as well as for promotional decisions within the organization. The improper application and utilization of PAs can affect employees negatively and lead to legal action against the organization. Performance goals: performance goals and PA systems are often used in association. Negative outcomes concerning the organizations can result when goals are overly challenging or overemphasized to the extent of affecting ethics, legal requirements, or quality. Moreover, challenging performance goals can impede on employees abilities to acquire necessary knowledge and skills. Especially in the early stages of training, it would be more beneficial to instruct employees on outcome goals than on performance goals. Derail merit pay or performance-based pay: some researchers contend that the deficit in merit pay and performance-based pay is linked to the fundamental issues stemming from PA systems.

1.5 WAYS TO IMPROVE PERFORMANCE APPRAISAL Although performance appraisals can be so easily biased, there are certain steps that can be taken to improve the evaluations and reduce the margin of errors through the following: Training - Creating an awareness and acceptance in the people conducting the appraisals that within a group of workers, they will find a wide range in difference of skills and abilities. Providing Feedback to Raters - Trained raters provide managers who evaluated their subordinates with feedback, including information on ratings from other managers. This reduces leniency errors. Subordinate Participation - By allowing employee participation in the evaluation process, there is employee-supervisor reciprocity in the discussion for any discrepancies between self ratings and supervisor ratings, thus, increasing job satisfaction and motivation. Performance appraisal processes are one of the central pillars of the performance management which is directly related to the organizational performance and have a direct impact on it. Employee performance ultimately affects the organizational performance and objectives.

1.6 RELATIONSHIP BETWEEN APPRAISAL AND ORGANISATION PERFORMANCE According to a few HR professionals, the appraisals have no value for the organisation as there is no direct relationship in performance appraisals and the organizational performance. Also, there is no strong evidence to prove that appraisals positively impact the performance of the employees. But the HR professionals who see the organizational performance as a result or sum of the employees performance, argue that apart from the direct benefits to the organisation, appraisals contribute to employee satisfaction, which in turn leads to improved performance. For an organisation to be effective, the goals, the standards and the action plans need to be planned well in advance. Thus, performance appraisal facilitates the achievement of organizational goals. It also facilitates the optimal use of the organizational resources. Performance appraisal is the strength of performance management, which in turn effects the organizational performance. It helps to identify and overcome the problems faced by the employees in their work. Performance appraisal is like a double edged sword for an organisation. Although it has many benefits for the organisation, various studies have also revealed that performance appraisals have the equal probability of having a bad impact on the organizational as well as the employee performance. Where the performance appraisal improves the work performance and employee satisfaction, it can also demotivate employees and leaving a bad impression on the good employees. Most of the employees do not approve of continuous performance monitoring and performance appraisals, and also consider it as a burdensome activity. According to Professor Kuvaas "Performance appraisals and other tools which involve feedback and target management should be adapted to the employees individual needs and characteristics. Otherwise, there is a risk of harming the good employees without being able to help the less good." Performance appraisal processes can create a sense of insecurity in the working environment and can become an obstacle in achieving the required changes in the attitudes and the performance of the employees. The element of bias in the appraisals can also worsen the situation. Therefore, performance appraisals can affect the organizational performance both positively and negatively, and should be dealt with care and expert knowledge and experience.

1.7

PRE-REQUISITES

FOR

EFFECTIVE

&

SUCCESSFUL

PERFORMANCE

APPRAISAL Documentation means continuous noting and documenting the performance. It also helps the evaluators to give a proof and the basis of their ratings. Standards / Goals the standards set should be clear, easy to understand, achievable, motivating, time bound and measurable.

Practical and simple format - The appraisal format should be simple, clear, fair and objective. Long and complicated formats are time consuming, difficult to understand, and do not elicit much useful information.

Evaluation technique An appropriate evaluation technique should be selected; the appraisal system should be performance based and uniform. The criteria for evaluation should be based on observable and measurable characteristics of the behaviour of the employee.

Communication Communication is an indispensable part of the Performance appraisal process. The desired behaviour or the expected results should be communicated to the employees as well as the evaluators. Communication also plays an important role in the review or feedback meeting. Open communication system motivates the employees to actively participate in the appraisal process.

Feedback The purpose of the feedback should be developmental rather than judgmental. To maintain its utility, timely feedback should be provided to the employees and the manner of giving feedback should be such that it should have a motivating effect on the employees future performance.

Personal Bias Interpersonal relationships can influence the evaluation and the decisions in the performance appraisal process. Therefore, the evaluators should be trained to carry out the processes of appraisals without personal bias and effectively.

1.8 USES OF PERFORMANCE APPRAISAL 1. 2. 3. 4. 5. 6. 7. 8. Promotions Confirmations Training and Development Compensation reviews Competency building Improve communication Evaluation of HR Programs Feedback & Grievances

CHAPTER 2. ANALYSIS I

2.1 METHODS OF PERFORMANCE APPRAISAL. Over the years, the value of performance appraisal has been understood better by organisations. With course of time, the methods of appraisal have also evolved and undergone change. However, there are two methods of performance appraisal, namely, Traditional & Modern methods of appraisal.

MODERN METHODS OF PERFORMANCE APPRAISAL: 1. Assessment centre method: This method was used for the first time in 1930 by the German army and then in 1960s by the British army. This method tests a candidate in different social situations using a number of assessor and procedures. The performance of an employee an also his potential for a new job is evaluated in this method by assessing his performance on job related simulations. Characteristics that the concerned managers feel are important for the success of a particular job are included in these simulations. Techniques like business games role playing and in basket exercises are used in this method. The employees are evaluated individually as well as collectively on job related characteristics. Personal interview and projective tests help in assessing the motivation, career orientation and dependence on others of an employee. To measure the intellectual capacity written tests are used. The evaluators in this method consist of experienced manager working at different levels who prepare a summary report for the management as well as for the employees. This technique usually measures the planning ability interpersonal skills and organizational skills of an employee.

2. Human Resource Accounting Method: Human resources are a valuable asset for any organization and it can be valued in monetary terms. This method evaluates the performance of an employee in terms of costs and contributions. HR costs include expenses incurred on HR planning recruitment selection induction and training. The difference between this costs and the contribution by an employee reflects the performance of that employee. This method is still developing hence is not very popular at present.

3. Behaviourally anchored rating scale (BARS): This method combines the graphic rating scale and the critical incident method. It determines in advance the critical areas of the performance and the most effective behaviour to achieve the results. Then the actual job behaviour of an employee is evaluated against the predetermined behaviour.

The following steps are used for constructing BARS. 1. Supervisor and other persons well acquainted with a job are asked to described specific critical incidence of effective performance behavior 2. Then these persons categorized the incidents into sets of performance dimensions and each set is then defined. 3. These people then reallocate the original critical incidents. They are given the cluster definition and critical incidents and are asked to re-design each incident to the dimensions that describes it the best. A critical incidents is retain only a some percentage that is usually between 50 80 percent of this group assigns the incidents to the same cluster as was done by the earlier group. 4. The second group then rates each incident on a 7 9 point scale where the rating is done on the basis of how well the behaviour described in the incidents represented the performance on the appropriate dimensions. 5. A sub set of incidents is used as behaviour anchors for the performance dimensions.

4. Appraisal through management by objectives (MBO): This concept was introduced by Peter Drucker in 1954 who named it management by objectives and self-control. It is an effective way it is also known as goal setting approach to appraisal. In this process the supervisor and subordinate members jointly identify the common goals of the organization and set the areas of the responsibility of each individual in terms of results expected from that person. These measures are use for operating the unit as well as for appraising the performance of the employees.

5. The 360 degree appraisal: The 360 degree method of performance appraisal is used to make the appraisal process more transparent, objective and participative. It introduced the concepts of self appraisal subordinates appraisal, peer appraisal and appraisal by customers. It is called a 360 degree method because it involves the evaluation of an employee by persons above him, below him and alongside him. Structured questionnaires are used to collect information from the seniors, subordinates and peers. The employee to be evaluated thus acquires a central position and everyone around him participates in the appraisal process in the 360 degree method. The following four are the main components of 360 degree appraisal.

Self-appraisal: It allows an employee complete freedom in accessing his or her strengths objectively and identifying the areas of development. The employees get a chance to share the development areas with their seniors based on their self appraisal and jointly worked out a plan in tune with the organizational realities like the availability of resources and time. It also gives a chance to the employee to express his career plans which is in the interest of the organization as it knows beforehand the aspirations of its employee.

Appraisal by superiors: An appraisal by superiors involves providing constructive, feedback about the performance of any employee as well as his development areas during the review period. It helps in setting goals for the employees that help in achieve the organizational goals and improve the performance of the employee. The career aspirations of an employee are also put in proper prospective.

Appraisal by subordinates: This is a unique feature of the 360 degree method of appraisal. As the subordinates play an important role in the performance of the employee. The feedback by the subordinates gives first-hand account of how they look at their superior in terms of working style. The capability of a superior in motivating, delegating the work, building a team and communicating with them effectively form the basis of appraisal by the subordinates.

Peer appraisal: It also plays an important role in 360 degree appraisal as the role of peers is quite important in life of an employee. Selecting the right peers is very important and peers from the departments that are directly related with the department of the employee should also be included. It mainly focuses on feedback about the style of functioning of the employee under review and can also include his ability to work as team leader besides his co-operation and collaboration.

Potential appraisal: It is different from performance appraisal as it refers to the abilities of the employees that are not being used at the time of appraisal. It searches for the latent abilities of the employee in discharging higher responsibilities in future. The potential of the employees is judged on the basis of his present performance, personality traits, past experience and age and qualification. It also looks at the unused skills and knowledge of an employee. It aims at informing the employee their future prospectus and helps the organization in drawing your suitable successions plan. It also requires updating the training efforts regularly and advised the employees on things which they can do to improve their career prospectus.

TRADITIONAL METHODS OF PERFORMANCE APPRAISAL 1. Rating Scales Method : Rating Scales Method is commonly used method for assessing the performance of the employees and well-known traditional method of performance appraisal of employees. Many corporations and companies example in the country India, telecommunications company likely Airtel and US IT companies like Dell Corporation are using this method for evaluating the employees and subsequently take decisions on concerned employee. Depending upon the job of employee under this method of appraisal traits like attitude, performance, regularity, accountability and sincerity etc, are rated with scale from 1 to 10. 1 indicates negative feedback and 10 indicates positive feedback Under this method of performance appraisal, employee may be assessed by his superiors, colleagues, subordinates or sometimes by his customers which all depends on nature of the company or job which is added where the employee. Appraiser is a person who appraises employee will give rating for

every trait given by marking or choosing number basing on his observation and satisfaction. ultimately all numbers chosen or marked will be added to determine highest score gained by employee. Employee who scored more points will be treated as top performer following descending scored employees will be treated as low performer and the least scored employee will be treated as non-performers. Advantages The greatest advantage of rating scales is that they are structured and standardised. This allows ratings to be easily compared and contrasted - even for entire work forces.

Each employee is subjected to the same basic appraisal process and rating criteria, with the same range of responses. This encourages equality in treatment for all appraisees and imposes standard measures of performance across all parts of the organization.

Rating scale methods are easy to use and understand. The concept of the rating scale makes obvious sense; both appraisers and appraisees have an intuitive appreciation for the simple and efficient logic of the bipolar scale. The result is widespread acceptance and popularity for this approach.

Disadvantages Trait Relevance

Are the selected rating-scale traits clearly relevant to the jobs of all the appraisees? It is inevitable that with a standardised and fixed system of appraisal that certain traits will have a greater relevance in some jobs than in others. For example, the trait "initiative" might not be very important in a job that is tightly defined and rigidly structured. In such cases, a low appraisal rating for initiative may not mean that an employee lacks initiative. Rather, it may reflect that fact that an employee has few opportunities to use and display that particular trait. The relevance of rating scales is therefore said to be context-sensitive. Job and workplace circumstances must be taken into account.

Systemic Disadvantage

Rating scales, and the traits they purport to measure, generally attempt to encapsulate all the relevant indicators of employee performance. There is an assumption that all the true and best indicators of performance are included, and all false and irrelevant indicators are excluded. This is an assumption very difficult to prove in practice. It is possible that an employee's performance may depend on factors that have not been included in the selected traits. Such employees may end up with ratings that do not truly or fairly reflect their effort or value to the organization. Employees in this class are systemically disadvantaged by the rating scale method.

Perceptual Errors

This includes various well-known problems of selective perception (such as the horns and halos effect) as well as problems of perceived meaning. Selective perception is the human tendency to make private and highly subjective assessments of what a person is "really like", and then seek evidence to support that view (while ignoring or downplaying evidence that might contradict it). This is a common and normal psychological phenomenon. All human beings are affected by it. In other words, we see in others what we want to see in them. An example is the supervisor who believes that an employee is inherently good (halo effect) and so ignores evidence that might suggest otherwise. Instead of correcting the slackening employee, the supervisor covers for them and may even offer excuses for their declining performance. On the other hand, a supervisor may have formed the impression that an employee is bad (horns effect). The supervisor becomes unreasonably harsh in their assessment of the employee, and always ready to criticize and undermine them. The horns and halo effect is rarely seen in its extreme and obvious forms. But in its more subtle manifestations, it can be a significant threat to the effectiveness and credibility of performance appraisal.

Perceived Meaning

Problems of perceived meaning occur when appraisers do not share the same opinion about the meaning of the selected traits and the language used on the rating scales. For example, to one appraiser, an employee may demonstrate the trait of initiative by reporting work problems to a supervisor. To another appraiser, this might suggest an excessive dependence on supervisory assistance - and thus a lack of initiative. As well, the language and terms used to construct a scale - such as "Performance exceeds expectations" or "Below average skill" - may mean different things to different appraisers.

Rating Errors

The problem here is not so much errors in perception as errors in appraiser judgement and motive. Unlike perceptual errors, these errors may be (at times) deliberate. The most common rating error is central tendency. Busy appraisers, or those wary of confrontations and repercussions, may be tempted to dole out too many passive, middle-of-the-road ratings (e.g., "satisfactory" or "adequate"), regardless of the actual performance of a subordinate. Thus the spread of ratings tends to clump excessively around the middle of the scale. This problem is worsened in organizations where the appraisal process does not enjoy strong management support, or where the appraisers do not feel confident with the task of appraisal.

2. ESSAY APPRAISAL METHOD This traditional form of appraisal, also known as Free Form method involves a description of the performance of an employee by his superior. The description is an evaluation of the performance of any individual based on the facts and often includes examples and evidences to support the information. A major drawback of the method is the inseparability of the bias of the evaluator. Under this method, the rater is asked to express the strong as well as weak points of the employees behaviour. This technique is normally used with a combination of the graphic rating scale because the rater can elaborately present the scale by substantiating an

explanation for his rating. While preparing the essay on the employee, the rater considers the following factors: Job knowledge and potential of the employee; Employees understanding of the companys programmes, policies, objectives, etc.; The employees relations with co-workers and superiors; The employees general planning, organizing and controlling ability; The attitudes and perceptions of the employee, in general.

Essay evaluation is a non-quantitative technique. This method is advantageous in at least one sense, i.e., the essay provides a good deal of information about the employee and also reveals more about the evaluator. The essay evaluation method however, suffers from the following limitations: It is highly subjective; the supervisor may write a biased essay. The employees who are sycophants will be evaluated more favourably than other employees.

Some evaluators may be poor in writing essays on employee performance. Others may be superficial in explanation and use flowery language which may not reflect the actual performance of the employee. It is very difficult to find effective writers nowadays.

The appraiser is required to find time to prepare the essay. A busy appraiser may write the essay hurriedly without properly assessing the actual performance of the worker. On the other hand, appraiser takes a long time, this becomes uneconomical from the view point of the firm, because the time of the evaluator (supervisor) is costly.

Advantages The essay method is far less structured and confining than the rating scale method. It permits the appraiser to examine almost any relevant issue or attribute of performance. This contrasts sharply with methods where the appraisal criteria are rigidly defined.

Appraisers may place whatever degree of emphasis on issues or attributes that they feel appropriate. Thus the process is open-ended and very flexible. The appraiser is not locked into an appraisal system the limits expression or assumes that employee traits can be neatly dissected and scaled.

Disadvantages Essay methods are time-consuming and difficult to administer. Appraisers often find the essay technique more demanding than methods such as rating scales

The techniques greatest advantage - freedom of expression - is also its greatest handicap. The varying writing skills of appraisers can upset and distort the whole process. The process is subjective and, in consequence, it is difficult to compare and contrast the results of individuals or to draw any broad conclusions about organizational needs

It is highly subjective; the supervisor may write a biased essay. The employees who are sycophants will be evaluated more favorably then other employees.

Some evaluators may be poor in writing essays on employee performance. Others may be superficial in explanation and use flowery language which may not reflect the actual performance of the employee. It is very difficult to find effective writers nowadays.

The appraiser is required to find time to prepare the essay. A busy appraiser may write the essay hurriedly without properly assessing the actual performance of the worker. On the other hand, appraiser takes a long time, this becomes uneconomical from the view point of the firm, because the time of the evaluator (supervisor) is costly.

3. RANKING METHOD How do we use the ranking method? Under the ranking method, the manager com-pares an employee to other similar employees, rather than to a standard measurement. An offshoot of ranking is the forced distribution method, which is similar to grading on a curve. Predetermined percentages of employees are placed in various performance categories, for example, excellent, above average, average, below average, and poor,. The employees ranked in the top group usually get the rewards (raise, bonus, promotion), those not at the top tend to have the reward withheld, and those at the bottom sometimes get punished. In SelfAssessment and Skill Builder 8-1, you are asked to rank the performance of your peers. Why and when do we use the ranking method? Managers have to make evaluative decisions, such as who is the employee of the month, who gets a raise or promotion, and who gets laid off. So when we have to make evaluative decisions, we generally have to use ranking. However, our ranking can, and when possible should, be based on other methods and forms. Ranking can also be used for developmental purposes by letting employees know where they stand in comparison to their peersthey can be motivated to improve performance. For example, when one of the authors passes back exams, he places the grade distribution on the board. It does not in any way affect the current gradesbut it lets students know where they stand, and he does it to motivate improvement.

Advantages : Improved Productivity and Profitability

One main advantage of using employee ranking tools is an increase in productivity and profitability by eliminating the poorest performers and retaining the top performers by rewarding and developing them. Ranking forces managers to identify the best performers and use company resources to develop business leaders, while ridding the company of lowperforming employees who arent contributing at higher levels.

Quick Identification of Top Performers

Another advantage of ranking is that it quickly identifies top performers for rewards, development and succession planning. This allows management to quickly affect business growth objectives, reach higher sales quotas and achieve aggressive corporate goals. In quarterly performance evaluations, ranking works even faster to identify high-performing workers.

Disadvantages : Competition Versus Teamwork

A major disadvantage of employee ranking is that it creates competition that can be counterproductive to corporate goals and employee development and may lead to discrimination. In team-based organizations, ranking is counter-productive to teamwork and effective working relationships. It creates obstacles to creativity by encouraging unethical behavior, limiting risk-taking and discouraging employees from asking for help or training. Unhealthy competition creates added stress for employees and in the work environment that hurts the bottom line through increased absenteeism, frustrated employees and an unpleasant work atmosphere.

Poor Morale and High Turnover

Ranking doesnt provide any in-depth analysis, proactive management or employee improvement allowances. It can lead to poor morale and high turnover by shedding 10 percent of the work force each year, which can cost as much as developing the lowest-ranked performers. It also demotivates many employees who arent in positions to perform at higher levels simply because of the nature of their jobs. Additionally, ranking loses effectiveness over time because of the increasing difficulty of identifying lower performers.

4. PAIRED COMPARISON A better technique of comparison than the straight ranking method, this method compares each employee with all others in the group, one at a time. After all the comparisons on the basis of the overall comparisons, the employees are given the final rankings.

5. CRITICAL INCIDENTS METHODS This technique of performance appraisal was developed by Flanagan and Burns. The manager prepares lists of statements of very effective and ineffective behavior of an employee. These critical incidents or events represent the outstanding or poor behavior of employees on the job. The manager maintains logs on each employee, whereby he periodically records critical incidents of the workers behavior. At the end of the rating period, these recorded critical incidents are used in the evaluation of the workers performance. An example of a good critical incident of a sales assistant is the following: July 20 The sales clerk patiently attended to the customers complaint. He is polite, prompt and enthusiastic in solving the customers problem. On the other hand the bad critical incident may appear as under: July 20 The sales assistant stayed 45 minutes over on his break during the busiest part of the day. He failed to answer the store managers call thrice. He is lazy, negligent, stubborn and uninterested in work. This method provides an objective basis for conducting a thorough discussion of an employees performance. This method avoids recency bias (most recent incidents get too much emphasis). Advantages of the critical incidents approach to performance appraisal: Its based on direct observations. The greatest strength of this approach is that performance evaluations are based on actual performance that is observed firsthand by the employees manager.

Its time-tested. In this approach, managers gather data over a full year, so its less likely to be influenced by a mad last-minute scurry for data or the undue impact that can be associated with an employees most recent behaviours

It provides more face time. By definition, the critical incident approach encourages managers to spend time on the floors with their employees, which allows them to provide more coaching, guidance, and feedback, while also learning more about overall developments in the department.

On the other hand, the critical incidents approach has some drawbacks: It delays the giving of feedback. In order for feedback to be truly effective (whether the feedback is positive or negative), it should be linked as closely as possible to the behavior in question. With critical incidents, a greater emphasis may be placed on gathering data and tallying it than actually using it to inform, educate, and motivate employees. As the distance between behaviour and feedback increases, the value of feedback decreases.

All satisfactory and unsatisfactory behaviours are not equal. Throughout the year, a person may display many excellent behaviours but only one unsatisfactory behaviour. In that case, her pile of satisfactory behaviours would be much greater than her pile of unsatisfactory behaviours. But weighing the number of satisfactory behaviours against the number of unsatisfactory ones can lead to an erroneous conclusion if the one unsatisfactory behaviour cost the company its best client, or its computer system, or its line of credit.

In order to increase the accuracy and utility of the critical incident method, managers who use it should attach a numerical value to each positive and negative behaviour.

Although managers should engage in managing by wandering around, the critical incident approach can cause managers to spend too much time on the floors. If the manager is constantly wandering around with his employees, the employees can start to feel as though the team is being micromanaged.

6. CONFIDENTIAL REPORT SYSTEM Confidential report system is well known method of performance appraisal system mostly being used by the the Government organisations. In this method of appraising system, subordinate is observed by his superiors regarding his performance in the job and on his duties done. Thereafter Superior writes confidential report on his performance, mainly on his behaviour in the organisation and conduct and remarks if any. Confidential reports will be kept confidential and will not be revealed to anyone and finally confidential reports will be forwarded to the top management officials for taking decision against person on whom confidential report has made. Confidential reports are the main criteria for promoting or transferring of any employee mainly in the government sector. All governmental organisations example judiciary, police Department and other government departments in the India are using confidential reports method as a tool to know about the employee and to take any decision connecting to him. Procedure of confidential report system The superiors who appraise their subordinates performance, behaviour and other key issues will be kept in the form of writing on paper, which is called as confidential report. Confidential report should not be sent openly on a paper, it must be kept in a sealed cover to send it to decision-making authorities. Only authorised persons are allowed to open the sealed covers which consists of confidential reports. Confidential reports shall not be handed over in loose sheets to the subordinates. Key factors assessed in Confidential Report writing Character and conduct of an employee. Absenteeism of an employee. Knowledge of an employee. His nature and quality of work. Punctuality of employee. Unauthorised absenteeism or leave without permission. Behaviour of an employee with colleagues, superiors and with public.

 Ability of supervision and controlling. His/her integrity and honesty. If any complaints against employee.

7. CHECKLIST METHOD The rater is given a checklist of the descriptions of the behaviour of the employees on job. The checklist contains a list of statements on the basis of which the rater describes the job performance of the employees. Another simple type of individual evaluation method is the checklist. A checklist represents, in its simplest form, a set of objectives or descriptive statements about the employee and his behavior. If the rater believes strongly that the employee possesses a particular listed trait, he checks the item; otherwise, he leaves the item blank. A more recent variation of the checklist method is the weighted list. Under this, the value of each question may be weighted equally or certain questions may be weighted more heavily than others. The following are some of the sample questions in the checklist.

Is the employee really interested in the task assigned? Is he respected by his colleagues (co-workers) Does he give respect to his superiors? Does he follow instructions properly? Does he make mistakes frequently?

Yes/No Yes/No Yes/No Yes/No Yes/No

Advantages of Checklist Method

Prevents Absolute Ratings

Everyone has strengths and weaknesses, but skills usually fall on a continuum. You usually can't describe someone as all or nothing in terms of his abilities. Misunderstandings result when managers, intentionally or not, make extreme-sounding appraisals of an employee's skills in written comments. For example, an employee with weaker presentation skills might get upset if a manager writes that she "doesn't demonstrate public speaking abilities." Because checklists force managers to rate skills on a scale -- for example, 1 = needs improvement and 5 = above and beyond expectations -- it's easier to avoid making exaggerated statements and using inflammatory language.

Avoids Discrimination

Because everyone gets evaluated according to the same scale and criteria, using checklists in employee evaluations helps managers avoid discrimination. With written evaluations, managers have more freedom to overemphasize and overlook strengths and weaknesses. Checklist formats force reviewers to evaluate employees on a skill-by-skill basis and to think critically about areas of employee performance that otherwise might have been left unconsidered. The checklist framework removes some of the emotional bias that goes into performance reviews.

Ensures Clarity

For performance reviews to be effective, employees have to understand the criteria used for evaluation before the review meeting. When employees are on the same page as their managers, people can focus their work efforts to show skills and traits that the employer values. Checklists break behaviours into skill-related categories. For example, in a section about initiative, managers might rate items such as "Stays late to complete work when necessary," and "Suggests new project ideas." Because employees see these performance criteria specifically outlined, they know what their managers are looking for.

8. GRAPHIC RATING SCALE

This is the very popular, traditional method of performance appraisal. Under this method, core traits of employee pertaining to his job are carefully defined like Attitude, Knowledge of Work, Managerial Skills, Team Work, Honesty, Regularity, Accountability, Interpersonal relationships, Creativity and Discipline etc. These traits are allotted with numerical scale to tabulate the scores gained by appraisee (employee) in performance assessment relating to his job by appraiser (employer) and sum-up to determine the best performer. Appraiser ticks rating of particular trait depending upon his endeavour in his job. Score vary from employee to employee depending up on his performance levels and endeavour in his job. This method is popular because it is simple and does not require any writing ability. The method is easy to understand and use. Comparison among pairs is possible. This is necessary for decision on salary increases, promotion, etc. Companies like DELL, Maruti Suzuki India Ltd and Airtel are using this graphic rating scale method to appraise performance of their employees in their jobs and to take decisions regarding the matters concerned to employees.

Advantages of the rating scales Graphic rating scales are less time consuming to develop. They also allow for quantitative comparison Many organizations use graphic rating scales because they are easy to use and cost little to develop. HR professionals can develop such forms quickly

Disadvantages of graphing rating scale is that different supervisors will use the same graphic scales in slightly different ways

9. FORCED DISTRIBUTION

A rating system used by companies to evaluate their employees. The system requires the managers to evaluate each individual, and rank them typically into one of three categories (excellent, good, poor). The system is thought to be relatively widely-used, but remains somewhat controversial due to the competition it creates, and also the reality that not all employees will fit neatly into one of the categories and might end up in a category that does not reflect their true performance. One of the first companies to use this system was General Electric, in the 1980s. Forced ranking is a method of performance appraisal to rank employee but in order of forced distribution. For example, the distribution requested with 10 or 20 percent in the top category, 70 or 80 percent in the middle, and 10 percent in the bottom. The top-ranked employees are considered high-potential employees and are often targeted for a more rapid career and leadership development programs. In contrast, those ranked at the bottom are denied bonuses and pay increases. They may be given a probationary period to improve their performance.

Advantages: They force reluctant managers to make difficult decisions and identify the most and least talented members of the work group. They create and sustain a high performance culture in which the workforce continuously improves. Disadvantages They increase unhealthy cut-throat competitiveness; They discourage collaboration and teamwork; They harm morale; They are legally suspect giving rise to age discrimination cases.

CHAPTER 3. ANALYSIS II
3.1 COMPANIES STILL PRACTICING THE TRADITIONAL METHODS OF

PERFORMANCE APPRAISAL INDIAN RAILWAY Confidential Report (CR) is prepared for Railway employees in Group A, B, C at the end of each Financial Year. It is written by immediate superior who must take into account performance of concerned railway staff over the period. Senior subordinates and officers give targets in advance and work is to be reviewed periodically. At the end of year Railway employee gives self-assessment along with resume of work done and reasons for shortfalls. Reporting officer fills up each column and makes overall assessment based on assessment in each column based on actual performance and matters on record. Form covers general qualities, professional abilities, integrity, intelligence, tact, industry, keenness, attitude to SC/ST, to superiors, equals and subordinates, general conduct and character, sociability, aptitudes and shortcomings etc. Whenever an entry is based on actual incident it should be indicated. Resume given by the employee should also be considered. Reporting officer submits report to Reviewing officer who may make his own assessment and record changes if necessary. Report is finally put up to accepting authority. Adverse entries in the CR should be communicated to the employee concerned and his representation if any in this regard shall be considered by the accepting authority who will pass a speaking order if representation is to be rejected. If accepted adverse remarks shall be expunged. CR is written with utmost circumspection, caution and care. CR is in two parts. Entries in part II are not communicated.

Why Indian Railways follows this method of Performance Appraisal ? Gives opportunity to the staff concerned to review his own performance through selfappraisal. It is beneficial for the administration for placements, promotion, deputation, training, career planning, growth etc. Periodical review of targets and performance. CPOs shall ensure that schedule of writing CR adhered to. No officer under suspension shall be allowed to write/review CR of subordinates, if during major part of writing/reviewing he was under suspension.

MTNL, INDIA POST The commitment to the performance appraisal system in public organizations in India is low. Low commitment and lack of accountability are the major reasons for the low institutionalization of the performance appraisal processes in government organizations. Performance appraisal in Government Organizations is not directly linked to rewards, training or promotions due to which the approach towards the whole process remains unprofessional. There is a lack of the appropriate atmosphere and professional approach towards the performance appraisal system and the objective of the whole exercise is defeated. The most common method of Performance appraisal that is used in most of the government organisations is confidential report (popularly known as CR) written by the superior of the employees. Even in companies like MTNL, India Post, Fire Brigade etc traditional forms of performance appraisal are practiced. Critical incidents, ranking method, essay method and confidential report are the more commonly practiced methods. The following are the major discrepancies found in the performance appraisal processes being followed at the government organizations. Most of the indicators used for measuring the performance the employees are not quantifiable in nature, making it difficult to measure the performance.

Due to the lack of accountability and job security, most government employees have a laisser faire attitude towards their work. Most of the objectives in government organisations are unchallenging, unrealistic and not timely reviewed and updated. It is difficult to measure the average performance of the government employees. Unprofessional and unstructured approach towards the process. There is often a lot of bias and subjectivity involved in the ratings given by the superiors. Lack of complete information on appraisal forms due to expertise and relevant training; often, the appraisals are not conducted on a regular basis. In government organisations, team appraisal is often not possible. Other HR decisions like rewards, training or promotions are not directly linked to the results of the performance appraisal process.

CHAPTER 4. CONCLUSION
This study includes the need and importance of performance appraisal in an organisation, its advantages and disadvantages, the two methods of performance appraisal with detailed study about the traditional method and the companies which still practice the traditional methods. Most of the companies today, practice the modern methods of performance appraisal as they are feasible in terms of time, money and energy. The traditional methods are practiced by few organisations, the government organisations to be precise as they are rigid, not so motivated and reluctant to change. Some traditional methods are beneficial in the practical sense, however, modern methods are preferred.

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