Performance Appraisal

Md. Nawshad Pervez

Senior Vice President (Head)
Human Resources
Square Hospitals Ltd.
[email protected]
 Contents
2

❑ Historical Development of Performance appraisal system

❑ Performance Appraisal/ evaluation/ assessment
❑ Objectives of performance appraisal
❑ Uses of Performance Appraisal
❑ Essential of good performance appraisal system
❑ Responsibility for Appraisal
❑ Why do we need a Performance Appraisal?
❑ How Do Employees Benefit from Performance Appraisals?
❑ How Do Organizations benefit from Performance Appraisals?
❑ Performance Appraisal Problems
 Historical Development of Performance appraisal system
3

❑ The first recorded Performance appraisal system in industry was developed by

Robert Ownens in Scotland around 1800. Owens placed a colored block at each
worker’s place to designate how well the worker had performed the previous day.

❑ Formal appraisal system were first utilized in the United States by the federal
government and by certain city administrators in the middle to late 1800s.

❑ Frederick Taylor and his work measurement program laid the ground work for
performance Appraisal in business, which began shortly before world war 1.

❑ In 1916, Walter Dell Scott began the development of the man-to-man rating chart
that was widely used to identify and evaluate military leaders during World War 1.
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❑ These early appraisal systems were related to various numerical efficiency factors
developed from both work simplification studies and time and motion studies popularized
by the work of industrial engineers.
❑ The graphic rating scale was developed in the 1920s. It required the rater to evaluate an
individual on a continuum of “poor” to “ excellent” for several characteristics.
❑ Human Relations were strongly emphasized by the management in the 1930s and 1940s
as evidenced by appraisal systems that focused on rating employees’ personality and
Behaviors traits.
❑ During 1950s the concept of management by objectives began to emerge
 Performance Appraisal/ Evaluation/ Assessment
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Performance appraisal is a formal employee evaluation system. It can evaluate and

measure the employee’s working behavior and achievement through the systematic
method and principle.

A Performance Appraisal is a constructive process to acknowledge the performance of an

employee.

A performance appraisal is a systematic and periodic process that assesses an individual

employee's job performance and productivity in relation to certain pre-established
criteria and organizational objectives.
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An annual review of an employee’s overall contributions to the company by his/her

manager. Performance appraisals, also called annual reviews, evaluate an employee’s
skills, achievements and growth, or lack thereof. Companies use performance
appraisals to give employees big-picture feedback on their work and to justify pay
increases and bonuses, as well as termination decisions.

Performance appraisals also help employees and their managers create a plan for
employee development through additional training and increased responsibilities, as
well as to identify shortcomings the employee could work to resolve.
 Definitions:
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Dale S. Beach, "Performance appraisal is systematic evaluation of the individual with

respect to his or her performance on the job and his or her potential for development".

Randall S. Schuler, "Performance appraisal is a formal, structured system of measuring

and evaluating an employees job, related behavior and outcomes to discover how and
why the employee is presently perfuming on the job and how the employee can
perform more effectively in the future so that the employee, organization, and society
all benefit."
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Heyel, "It is the process of evaluating the performance and qualifications of the
employees in terms of the requirements of the job for which he is employed, for
purposes of administration including placement, selection for promotions, providing
financial rewards and other actions which require differential treatment among the
members of a group as distinguished from actions affecting all members equally."

Dale Yoder, ''Performance appraisal includes all formal procedures used to evaluated
personalities and contributions and potentials of group members in a working
organization. It is a continuous process to secure information necessary for making
correct and objective decisions on employees."
 Objectives of performance appraisal

The main objective of performance appraisals is to measure and improve the

performance of employees and increase their future potential and value to the company.
Other objectives are stated below:

To increase motivation and productivity:

Performance appraisal helps employees to set plan work and identify skills in order to
achieve them. Employee is motivated as there is clarity of what he is required to do in a
given period. Increased clarity brings greater focus on job related activities, which in
turns facilitates better performance, efficiency and commitment. This increases the
productivity of the individual employees and the organization stands benefited out of
improved performance of employees
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Providing Feedback.
Providing feedback is the most common justification for an organization to have a
performance appraisal system. Through its performance appraisal process the individual
learns exactly how well he/she did during the previous twelve months and can then use
that information to improve his/her performance in the future. In this regard,
performance appraisal serves another important purpose by making sure that the boss’s
expectations are clearly communicated.

Facilitating Promotion Decisions

Almost everyone in an organization wants to get ahead. How should the company
decide who gets the brass rings? Performance appraisal makes it easier for the
organization to make good decisions about making sure that the most important
positions are filled by the most capable individuals.
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Encouraging Performance Improvement.

How can anyone improve if he doesn’t know how he’s doing right now? A good
performance appraisal points out areas where individuals need to improve their
performance.
Motivating Superior Performance.
This is another classic reason for having a performance appraisal system. Performance
appraisal helps motivate people to deliver superior performance in several ways. First,
the appraisal process helps them learn just what it is that the organization considers to
be ‘‘superior.’’ Second, since most people want to be seen as superior performers, a
performance appraisal process provides them with a means to demonstrate that they
actually are. Finally, performance appraisal encourages employees to avoid being
stigmatized as inferior performers (or, often worse, as merely ‘‘average’’).
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Setting and Measuring Goals.

Goal setting has consistently been demonstrated as a management process that
generates superior performance. The performance appraisal process is commonly used
to make sure that every member of the organization sets and achieves effective goals.
Counseling Poor Performers.
Not everyone meets the organization’s standards. Performance appraisal forces
managers to confront those whose performance is not meeting the company’s
expectations.
Determining Compensation Changes.
This is another classic use of performance appraisal. Almost every organization
believes in pay for performance. But how can pay decisions be made if there is no
measure of performance? Performance appraisal provides the mechanism to make
sure that those who do better work receive more pay.
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Encouraging Coaching and Mentoring.

Managers are expected to be good coaches to their team members and mentors to
their progress. Performance appraisal identifies the areas where coaching is necessary
and encourages managers to take an active coaching role.

Determining Individual Training and Development Needs

If the performance appraisal procedure includes a requirement that individual
development plans be determined and discussed, individuals can then make good
decisions about the skills and competencies they need to acquire to make a greater
contribution to the company.
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Improving Overall Organizational Performance. 

This is the most important reason for an organization to have a performance appraisal
system. A performance appraisal procedure allows the organization to communicate
performance expectations to every member of the team and assess exactly how well each
person is doing. When everyone is clear on the expectations and knows exactly how he is
performing against them, this will result in an overall improvement in organizational
success.
To retain top talent
Performance appraisal helps organization in taking people related decisions such as career
planning, career development, promotions, training and development opportunities, and
succession planning. Meritorious employees are rewarded better with increased
compensation, promotions, leadership grooming opportunities, job rotations, etc. and help
retain top talents in the organization by satisfying their growth and development needs.
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To increase commitment:
Employee’s involvement in planning of work and identification of skills helps to bring greater
self-awareness and increases his commitment to the objectives of performance appraisal
activities. Performance appraisal provides an opportunity to communicate performance
feedback, review the job description, plan upcoming goals and objectives and develop an
individual development plan.

To develop employees:
Performance appraisal accord an opportunity to develop an employee through the
identification of gaps in skills and competencies. Once deficiencies in skills and competencies
has identified, suitable training and development programmes can be established for rectifying
the gaps/deficiency. This results in personal and professional development of employees
 Uses of Performance Appraisal

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For many organizations, the primary goal of an appraisal system is to improve

individual and organizational performance. There may be other goals, however. A
potential problem with PA, and a possible cause of much dissatisfaction, is expecting
too much from one appraisal plan. For example, a plan that is effective for developing
employees may not be the best for determining pay increases. Yet, a properly
designed system can help achieve organizational objectives and enhance employee
performance. In fact, PA data are potentially valuable for virtually every human
resource functional area.
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Human Resource Planning

In assessing a firm’s human resources, data must be available to identify those who have
the potential to be promoted or for any area of internal employee relations. Through
performance appraisal it may be discovered that there is an insufficient number of
workers who are prepared to enter management. Plans can then be made for greater
emphasis on management development. Succession planning is a key concern for all
firms. A well-designed appraisal system provides a profile of the organization’s human
resource strengths and weaknesses to support this effort.
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Recruitment and Selection

Performance evaluation ratings may be helpful in predicting the performance of job
applicants. For example, it may be determined that a firm’s successful employees
(identified through performance evaluations) exhibit certain behaviors when performing
key tasks. These data may then provide benchmarks for evaluating applicant responses
obtained through behavioral interviews. Also, in validating selection tests, employee
ratings may be used as the variable against which test scores are compared. In this
instance, determination of the selection test’s validity would depend on the accuracy of
appraisal results.
Compensation Programs
Performance appraisal results provide a basis for rational decisions regarding pay
adjustments. Most managers believe that you should reward outstanding job performance
tangibly with pay increases. They believe that the behaviors you reward are the behaviors
you get. Rewarding behaviors necessary for accomplishing organizational objectives is at
the heart of a firm’s strategic plan. To encourage good performance, a firm should design
and implement a reliable performance appraisal system and then reward the most
productive workers and teams accordingly.
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Training and Development

Performance appraisal should point out an employee’s specific needs for training and
development. If a firm finds that a number of first-line supervisors are having difficulty in
administering disciplinary action, training sessions addressing this problem may be
appropriate. By identifying deficiencies that adversely affect performance, T&D programs
can be developed that permit individuals to build on their strengths and minimize their
deficiencies. An appraisal system does not guarantee properly trained and developed
employees. However, determining T&D needs is more precise when appraisal data are
available.

Career Planning and Development

Performance appraisal data is essential in assessing an employee’s strengths and

weaknesses and in determining the person’s potential. Managers may use such
information to counsel subordinates and assist them in developing and implementing
their career plans.
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Internal Employee Relations

Performance appraisal data are also used for decisions in several areas of internal
employee relations, including promotion, demotion, termination, layoff, and transfer. For
example, an employee’s performance in one job may be useful in determining his or her
ability to perform another job on the same level, as is required in the consideration of
transfers. When the performance level is unacceptable, demotion or even termination
may be appropriate.
Assessment of Employee Potential
Some organizations attempt to assess an employee’s potential as they appraise his or her
job performance. Although past behaviors may be a good predictor of future behaviors in
some jobs, an employee’s past performance may not accurately indicate future
performance in other jobs. The best salesperson in the company may not have what it
takes to become a successful district sales manager, where the tasks are distinctly
different. Similarly, the best systems analyst may, if promoted, be a disaster as an
information technology manager. Overemphasizing technical skills and ignoring other
equally important skills is a common error in promoting employees into management jobs.
Recognition of this problem has led some firms to separate the appraisal of performance,
which focuses on past behavior, from the assessment of potential, which is future-
oriented.
 Essential of good performance appraisal system
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To effective, a performance appraisal system should the following requirements:

Mutual Trust :-

An atmosphere of mutual trust and confidence should be created in the

organization before introducing the appraisal system. Such an atmosphere is
necessary for frank discussion of appraisal. It also helps to obtain the faith of
employees in the appraisal system.
 
Performance appraisal is an emotional process involving feelings of fairness and
equal treatment. The human element in it must be considered if is to serve the
individual and organizational purposes.
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Clear objectives :
The objectives and uses of performance appraisal should be made clear and specific.
The objectives should be relevant, timely and open. The appraisal system should be fair
so that it is beneficial to both the individual employee and the organization. The system
should be adequately and appropriately linked with other subsystems of human
resource management.
Standardization :-
Well – defined performance factors and criteria should be developed. These factors
as well as appraisal form, procedures and techniques should be standardized. It will
help to ensure uniformity and comparison of ratings. The appraisal techniques
should measure what they are supposed to measure. These should also be easy to
administer and economical to use. Employees should be made fully aware of
performance standards and should be involved in setting the standards.
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Training :-
Evaluators should be given training in philosophy and techniques of appraisal. They
should be provided with knowledge and skills in documenting appraisals, conducting
post appraisal interviews, rating errors, etc.

Job Relatedness :-
The evaluators should focus attention on job-related behavior and performance of
employees. Multiple criteria should be used for appraisal and appraisal should be done
periodically rather than once a year.

Documentation :-
The raters should be required to justify their ratings. Documentation will encourage
evaluators to make conclusions efforts minimizing personal biases. It will also help to
impart accountability for ratings.
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Feedback and participation :-

Arrangements should be made to communicate the ratings to both the employees and
the raters. The employees should actively participate in managing performance and in
the ongoing process of evaluation. The superior should play the role of coach and
counselor. The overall purpose of appraisals should be developmental rather than
judgmental. The feedback message must contain comments with examples and
suggestions for improvement.

Individual differences :  
While designing the appraisal system, individual differences in organizations should be
recognized. Organizations differ in terms of size, nature, needs and environment.
Therefore, the appraisal system should be tailor-made for the particular organization.
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Post appraisal Interview :-

After appraisal, an interview with the employee should be arranged. It is necessary to
supply feedback, to know the difficulties under which the employees work and to
identify their training needs. The rater should adopt a problem – solving approach in
the interview and should provide counseling for improving performance.

Review and appeal :

 A mechanism for review of ratings should be provided. The review may be made by a
committee consisting of line executives and personnel experts. The committee will see
whether the raters are unusually strict or lenient.
 Responsibility for Appraisal
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Often the human resource department is responsible for coordinating the design and
implementation of performance appraisal programs. However, it is essential that line
managers play a key role from beginning to end. These individuals usually conduct
the appraisals, and they must directly participate in the program if it is to succeed.

Immediate Supervisor
An employee’s immediate supervisor has traditionally been the most logical choice
for evaluating performance and this continues to be the case. The supervisor is
usually in an excellent position to observe the employee’s job performance and the
supervisor has the responsibility for managing a particular unit. When someone else
has the task of evaluating subordinates, the supervisor’s authority may be
undermined. Also, subordinate training and development is an important element
in every manager’s job and, as previously mentioned, appraisal programs and
employee development are usually closely related.
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Subordinates
Historically, our culture has viewed evaluation by subordinates negatively. However, this
thinking has changed somewhat. Some firms conclude that evaluation of managers by
subordinates is both feasible and needed. They reason that subordinates are in an
excellent position to view their superiors’ managerial effectiveness. Advocates believe
that this approach leads supervisors to become especially conscious of the work group’s
needs and to do a better job of managing.

Peers and Team Members

A major strength of using peers to appraise performance is that they work closely with
the evaluated employee and probably have an undistorted perspective on typical
performance, especially in team assignments. Organizations are increasingly using
teams, including those that are self-directed. The rationale for evaluations conducted by
team members includes the
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The rationale for evaluations conducted by team members includes the following:

❑ Team members know each others’ performance better than anyone and can,
therefore, evaluate performance more accurately.

❑ Peer pressure is a powerful motivator for team members.

❑ Members who recognize that peers within the team will be evaluating their work
show increased commitment and productivity.

Self-Appraisal:

If employees understand their objectives and the criteria used for evaluation, they are
in a good position to appraise their own performance. Many people know what they do
well on the job and what they need to improve. If they have the opportunity, they will
criticize their own performance objectively and take action to improve it.
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Customer Appraisal
Customer behavior determines a firm’s degree of success. Therefore, some organizations
believe it is important to obtain performance input from this critical source.
Organizations use this approach because it demonstrates a commitment to the customer,
holds employees accountable, and fosters change.
 Why do we need a Performance Appraisal?
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• Links employee performance to the department and Organizational

objectives

• Communicates performance expectations to employees for shared

understanding

• Recognizes and acknowledges good performance

• Recognizes areas where performance must be improved

 How Do Employees Benefit from Performance Appraisals?
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• Employees have a clear understanding of the job duties set by their supervisor.
• Supervisors acknowledge the employees for his/her accomplishments.

• Opens the lines of communication between the employee and the supervisor
• Performance Appraisal’s improve employee’s performance and build opportunities for
career development

• Performance Appraisal’s offer opportunities to improve job performance when an

employee is not meeting requirements and needs improvement

• Encourages employees to take responsibility for their own performance and progress
 How Do Organizations benefit from Performance Appraisals?

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For the organization, performance appraisal is an opportunity to: -

• Improves organizational performance

• communicate organizational plans and objectives
• develop potential
• Promotes employee retention and loyalty
• Improves productivity
• Facilitates communication
• Increases accountability
 Problems in Performance Appraisal

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(Some) 90 percent of performance appraisal processes are inadequate.” –

Salary.com survey

Don’t evaluate actual performance —

most of the assessment that managers complete focuses on “the person,”

including categorizations of their personal “commitment", technical knowledge or
behaviors (i.e. attendance). While these factors may contribute to performance,
they are not measures of actual output. If you want to assess the person, call it
“person appraisal.” Performance is output quality, volume, value, and
responsiveness.
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Appraiser Discomfort
Conducting performance appraisals is often a frustrating human resource management
task. One management guru, Edward Lawler, noted the considerable documentation
showing that performance appraisal systems neither motivate individuals nor effectively
guide their development. Instead, he maintains, they create conflict between supervisors
and subordinates and lead to dysfunctional behaviors.

Lack of Objectivity
A potential weakness of traditional performance appraisal methods is that they lack
objectivity. In the rating scales method, for example, commonly used factors such as
attitude, appearance, and personality are difficult to measure. In addition, these factors
may have little to do with an employee’s job performance. Although subjectivity will
always exist in appraisal methods, employee appraisal based primarily on personal
characteristics may place the evaluator and the company in untenable positions with the
employee and equal employment opportunity guidelines. The firm may be hard-pressed
to show that these factors are job-related.
35

Halo error
Evaluation error that occurs when a manager generalizes one positive performance
feature or incident to all aspects of employee performance, resulting in a higher rating.

Horn error
Evaluation error that occurs when a manager generalizes one negative performance
feature or incident to all aspects of employee performance, resulting in a lower rating.

Leniency
Giving undeserved high ratings to an employee is referred to as leniency. This
behavior is often motivated by a desire to avoid controversy over the appraisal.
It is most prevalent when highly subjective (and difficult to defend) performance
criteria are used, and the rater is required to discuss evaluation results with employees.
When managers know they are evaluating employees for administrative purposes, such
as pay increases, they are likely to be more lenient than when evaluating performance
to achieve employee development.
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Strictness
Being unduly critical of an employee’s work performance. some managers, on their
own initiative, apply an evaluation more rigorously than the company standard. This
behavior may be due to a lack of understanding of various evaluation factors.

Central tendency error

Evaluation appraisal error that occurs when employees are incorrectly rated near the
average or middle of a scale.

Recency errors — managers, especially those who don’t consult employee files and
data, have a tendency to evaluate based primarily on events that occurred during the
last few months (rather than over the entire year).
con…
37

Infrequent feedback – 
At the very minimum, formal feedback needs to be given quarterly,

Non-data-based assessment —
most processes rely on the memory. In addition, most assessment criteria are
“fuzzy” and subjective.

Disconnected from rewards —

in too many organizations, getting a merit raise, bonus, or promotion is completely
disconnected from an employee’s performance appraisal scores. When there is a
weak link, employees and managers are not likely to take the process seriously.
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No second review —
even though the process may have impacts on salary, job security, and promotion,
in many firms the assessment is done by a single manager. If there is a second
review, it may be cursory, and therefore not ensure accuracy or fairness.

Disconnected from job descriptions –

in many cases, the factors on the form are completely different from the
factors on an employee’s job description, bonus criteria, or yearly goals. This
can confuse employees and cause them to lose focus.

Managers are not trained —

in most organizations, managers are not trained on how to assess and give
honest feedback. If the process includes a career development component, it is
even more likely that managers will not know how to enhance the career path
of their employees.
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Mirror assessments — most people, and managers are no exception, have a

tendency to rate people like themselves more positively. This can result in
discrimination issues.

Managers are not rewarded — managers that go out of their way to provide
honest feedback and actually improve the performance of their workers are not
rewarded or recognized.

Managers don’t own it — managers often feel they don’t own the process, so they
invest little in it and proceed to blame HR for everything

One-way communication — some managers simply give the employee the form
to quickly sign and they don’t even solicit feedback.

A time-consuming process — most of the forms are incredibly long and time-
consuming. As a result, some managers routinely recycle “last year’s” evaluations
Tips for Your Performance Review
40

Understand your role:

If you know what is expected of you both on the job and during the review, you
will be better prepared to succeed. If however you do not know or are uncertain
about your role, it is important to find sources that can clarify it for you. For
example, you can look at a job description, conduct research, or even ask
managers or other employees.

Engage in the process:

When you care about your job, it shows. For instance, in your performance
review, actively participate in setting goals to show initiative and ask for guidance
on what is expected. Your manager will appreciate your commitment to the job
and you will be able to capitalize on your earning potential.
Contd….
41

Set a mission :
if goals are set during a review, you can use those goals to guide your work year. You
can understand expectations and track progress. For instance, if you know what your
yearly goals are, you can make adjustments to your work accordingly to meet those
goals. Tracking progress toward your goals then helps to show the progress you have
made in achieving them.

Document accomplishments:

If you document your work, then you can show your accomplishments and
success. Documentation also helps you show milestones that you have reached.
For example, you might write down an accomplishment like cutting costs on
shipping.
Contd….
42

Be open to training:
If you indicate that you are willing to get additional training, then the company will see
that you are serious about improving yourself and your work. For example, if you want to
advance to the next level, you might enroll in courses that will prepare you for your
promotion while showing your company that you are valuable and motivated to learn.

Stay positive:

When you are positive about your job and your experiences, employers will perceive you
as easy to work with and willing to be flexible when needed. For instance, remaining
positive when a project takes more time than expected and spending a few hours after
work to finish the project show an employer that you are a hard worker and a valuable
employee.
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My work directly contributes to the company’s

objectives. It provides me with a sense of purpose
and direction. My Manager provides me with
feedback and opportunities to develop myself.

Both my Manager and the Company recognize me for

my performance

Employee
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With a performance management

system, I am able to motivate and
enhance my employees’ performance
via two-way discussion, identification
of  performance deficiencies and
development plan

Manager

At the same time, I am able to align

my employee’s objectives with
business goals
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Employees are clear on what their

work objectives are and how this
contributes to the Company.

Employees’ development
Organization and performance is geared
towards the Company’s
business objectives.

We are able to meet our

business goals through
leveraging our people.
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THANK YOU