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15.
EDWARD DEMING ON
PERFORMANCE APPRAISAL
55
16. CHALLENGES OF PERFORMANCE
APPRAISAL
56-60
17. PIRAMYD MEGASTORE - STORY
OUTLINE
61-62
18. HR VISION OF PIRAMYD MEGASTORE 63-64
19. PERFORMANCE APPRAISALMETHODS USED AT PIRAMYD
65-70
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MEASURINGPERFORMANCEV/SACTION
Come appraisal time and one of the most debated aspects of completing the fair-and-
square appraisal revolves around what is 'measured' and what is 'achieved'. And the fable
of the Bees and the Bee Keepers is a very popular paradigm that often gets quoted at such
times. It goes thus:
The Story: Once upon a time there were two beekeepers that each had a beehive.
The beekeepers worked for a company called Bees, Inc. The company's customers loved
its honey and demand for the product was increasing. So Bees, Inc. assigned each
beekeeper a goal for increased honey production. The beekeepers had different ideas
about how to meet their goal and designed different approaches to improve the
performance of their hives.
The first beekeeper established a bee performance management approach that
measured the number of flowers each bee visited. At considerable cost to the beekeeper,
an extensive measurement system was created to count the flowers each bee visited. He
also provided feedback to each bee at mid-season on his individual performance. He also
created special awards for the bees who visited the most number of flowers. However, the
bees were never told about the hive's goal to produce more honey so that the company
could increase honey sales. The second beekeeper also established a bee performance
management approach but this approach communicated to each bee the goal of the hive
for increased honey production. The beekeeper and his bees measured two aspects of
their performance the amount of nectar each bee brought back to the hive and the amount
of honey the hive produced. The performance of each bee and the hive's overall
performance were charted and posted on the hive's bulletin board for all the bees to see.
The beekeeper created a few awards for the bees that gathered the most nectar. But he
also established a hive incentive program that rewarded each bee in the hive based on the
hive's overall honey production the more honey produced, the more recognition each beewould receive.
At the end of the season, the beekeepers evaluated their approaches. The first
beekeeper found that his hive had indeed increased the number of flowers visited ,but the
amount of honey produced by the hive had dropped. The Queen Bee reported that
because the bees were so busy trying to visit as many flowers as possible, they limited the
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amount of nectar they would carry so they could fly faster. Also, since only the top
performers would be recognized, the bees felt they were competing against each other for
awards. As a result, they would not share valuable information with each other that could
have helped improve the performance of all the bees (like the location of the flower filled
fields they'd spotted on the way back to the hive). As the beekeeper handed out the
awards to individual bees, unhappy buzzing was heard in the background. After all was
said and done, one of the high performing bees told the beekeeper that if he had known
that the real goal was to make more honey, he would have worked totally differently. The
second beekeeper, however, had very different results. Because each bee in his hive was
focused on the hive's goal of producing more honey. This Bess had concentrated their
efforts on gathering more nectar in order to produce more honey than ever before. The
bees worked together to determine the highest nectar yielding flowers and to create
quicker processes for depositing the nectar they had gathered. They also worked together
to help increase the amount of nectar gathered by the poorer performers. Tile Queen Bee
of this hive reported that the poor performers either improved their performance or
transferred to hive No.1, because the hive had reached its goal. The beekeeper rewarded
each bee his portion of the hive incentive. The keeper was also surprised to hear a loud,
happy buzz and a jubilant flapping of wings as he rewarded the individual high-
performing bees with special recognition.
Should you measure performance or mere activities of employees? is the one who
does silent work but does not show of himself/herself or the one who puts up a show but
hardly performs to be recognized and rewarded? This and other related questions are
answered in this chapter.
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PERFORMANCE APPRAISAL
An organizations goals can be achieved only when people put in their best efforts. How
to ascertain whether an employee has shown his or her best performance on a given job?
The answer is performance appraisal. Employee assessment is one of the fundamental
jobs of HRM. But not an easy one though. This chapter is devoted to a detailed
discussion of the nature and process of conducting performance appraisal.
Meaning and Definition
In simple terms, performance appraisal may be understood as the assessment of an
individual's performance in a systematic way, the performance being measured against
such factors as job knowledge, quality and quantity of output, initiative, leadership
abilities, supervision, dependability, co-operation, judgement, versatility, health, and the
like. Assessment should not be confined to past performance alone. Potentials of the
employee for future performance must also be assessed.
A formal definition of performance appraisal is:
It is the systematic evaluation of the individual with respect to his or her performance on
the job and his or her potential for development.
A more comprehensive definition is:Performance' appraisal is a formal structured system of measuring and evaluating an
employees job related behaviors and outcomes to discover how and why the employee
is presently performing on the job and how the employee can perform more effectively in
the future so that the employee organization and society all benefit.
The second definition includes employees behaviour as part of the assessment.
Behaviour can be active or passive--do something or do nothing. Either way behaviour
affects job results. The other terms used for performance appraisal arc: performance
rating, employee assessment. Employees performance review, personnel appraisal
performance evaluation employee evaluation and (perhaps the oldest of the terms used)
merit rating. In a formal sense, employee assessment is as old as, the concept of
management and in an informal sense; it is probably as old as mankind. Nor performance
appraisal is done in isolation. It is linked to job analysis as shown in Fig.
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Fig. Relationshipof Performance Appraisal and
Job Analysis
Job analysis sets out requirements, which are translated into performance standards,
which in turn from the basis for performance appraisal.
OBJECTIVES OF PERFORMANCE APPRAISAL
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Performance
StandardsPerformance
Appraisal
Describes work andpersonnel requirement
of a particular job
Describes the job-relevan
strengths and weaknesses of
each individual
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Data relating to performance assessment of employees arc recorded, stored. and
used for seven purposes. The main purposes of employee assessment are:
1. To effect promotions based on competence and performance.
2. To confirm the services of probationary employees upon their completing the
probationary period satisfactorily.
3. To assess the training and development needs of employees.
4. To decide upon a pay raise where (as in the unorganized sector) regular pay scales
have not been fixed.
5. To let the employees know where they stand insofar as their performance is concerned
and to assist them with constructive criticism and guidance for the purpose of their
development.
6. To improve communication. Performance appraisal provides a format for dialogue
between the superior and the subordinate, and improves understanding of personal goals
and concerns. This can also have the effect of increasing the trust between the rater and
the ratee.
7. Finally, performance appraisal can be used to determine whether HR programmes such
a selection, training, and transfers have been effective or not.
Broadly, performance appraisal serves four objectives-
(i) developmental uses,
(ii) administrative uses/decisions,
(iii) organizational maintenance/objectives, and
(iv) documentation purposes
Table below outlines these and specific uses more clearly:-
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Multiple Purposes of Performance Assessment
General Applications Specific PurposeDevelopmental Uses
Administrative Uses/Decisions
Identification of individual needs
Performance feedback
Determining transfers and job assignments
Identification of individual strengths ad
development needs
Salary
Promotion
Retention or termination
Recognition of individual performanceLay-offs
Identification of poor performers
Organizational Maintenance/ Objectives
Documentation
HR planning
Determining organization training needsEvaluation of organizational goal
achievement
Information for goal identificationEvaluation of HR systems
Reinforcement of organizational
development needs
Criteria for validation research
Documentation for HR decisions
Helping to meet legal requirements
PERFORMANCE APPRAISAL AND COMPETITIVE
ADVANTAGE
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The objectives of performance appraisal, listed above, point out the purpose which
such an exercise seeks to meet. What needs emphasis is that performance evaluation
contributes to firm's competitive strength. Besides encouraging high levels
performance, the evaluation system helps identify employees with potential, reward
performance equitably and determine employee's need for training. Specifical
performance appraisal helps an organization gain competitive edge in the following ways
(see Fig below)
Fig: How Performance Appraisal can contribute to Firm's Competitive Advantage?
Improving Performance
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Strategy and
Behavior
Improving
Performance Making correct
decisions
Competitive
Advantage
Minimizingdissatisfaction and
turnover
Ensuring Legal
Compliance
Values and
Behaviour
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An effective appraisal system can contribute to competitive advantage by improving
employee job performance in two ways-by directing employee behaviour towards
organizational goals, as was done by the second beekeeper (see opening case), and by
monitoring that behaviour to ensure that the goals are met.
Making Correct Decisions
As stated above, appraisal is a critical input in making decisions on such issues as pay
raise, promotion, transfer, training, discharges and completion of probationary periods.
Right decision on each of these can contribute to competitive strength of an organization.
If promotion, for example, is made on performance, the promotee feels motivated to
enhance his or her performance.
Ensuring Legal Compliance
Promotions made on factors other than performance might land up a firm in a legal
battle, thus diverting its focus on non-productive areas, as it happened to Williamson
Magar. Organizations can minimize costly performance-related litigation by using
appraisal systems that give fair and accurate ratings.
Minimizing Job Dissatisfaction and Turnover
Employees tend to become emotional and frustrated if they perceive that the ratings
they get are unfair and inaccurate. Such employees find that the efforts they had put in
became futile and obviously get de-motivated.
Dissatisfaction in the job sets in and one of the outcomes of job dissatisfaction is
increased turnover. Fair and accurate appraisal results in high motivation and increased
job satisfaction. An organization having satisfied and motivated employees will have an
edge over its competitors.
Consistency between Organizational Strategy and Behaviour
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An organization needs a strategy consistent with the behaviour of its employees if it
were to realize its goals. A truism of organizational life is that people engage themselves
in behaviours that they perceive will be rewarded. As employees want to be rewarded,
they tend to occupy themselves more with those activities on which the organization
emphasizes. For example, if the focus is on service, employees will behave in ways that
will help them in gaining rewards associated with service delivery. If the focus is on cost
control, employees will seek to control cost and thus be recongnised and rewarded. If the
focus is on rewarding productivity, employees will strive for productivity.
performance appraisal becomes not only a means of knowing if the employees' behaviour
is consistent with the overall strategic focus, but also a way of bringing to the foreany
negative consequence of the strategy- behaviour fit For example, a single poin
productivity focus may include potential negative consequences such as decreased quality
and co-operations. Thus, the performance appraisal system is an important organizational
mechanism to elicit feedback on the consistency of the strategy-behaviour link.
Organizational Strategy and Performance Appraisal
The performance appraisal system serves many organizational objectives and goals.
Besides encouraging high level of performance, the evaluation system is useful in
identifying employees with potential, rewarding performance equitably. And determining
employees' needs for development. These are all the activities that should support the
organizations strategic orientation. Although these activities are clearly instrumental in
achieving corporate plans and long-term growth, typical appraisal systems in most
organizations have been focused on short-term goals.
From the strategic management point of view, organizations can be grouped into three
categories defenders, prospectors and analyzers. Performance appraisal has definite roles
in all the three strategies.
Typically, defenders have a narrow and relatively stable product-market domain.
Because of this narrow focus, these organizations seldom need to make
adjustments in their technology. Structure or methods of operations. They devote primary
attention to improving the efficiency of their existing operations. Because of the
emphasis 011building skills within the organization, successful defenders u
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performance appraisal for identifying training needs. Performance appraisal is usually
more behaviour oriented.
Organizations with a prospector strategy continuously search for different product and
market opportunities. In addition, these organizations regularly experiment with potential
responses to new and emerging environmental trends. Prospectors are often
harbingers of change. Because of the emphasis on skills identification and acquisition of
human resources from external sources, as opposed to skills building wit
organization, prospectors often use the performance appraisal as a means of identifying
staffing needs. The emphasis is on results. Finally, the focus is on division and corporate
performance evaluation as they compare with other companies during the
evaluation period.
Organizations with an analyzer strategy operate in two types of product-.market
domains. One domain is stable while the other is changing. In their more innovative
areas, managers watch their competitors closely and rapidly adopt the ideas that appear
promising. In general, analyzers use cost effective technologies for stable products and
project or matrix technologies for new product. Analyzers tend to emphasize both skill
building and skill i1cquisilion and employ extensive training programmes.
Thus, these organizations attempt to identify both training as well as staffing needs. The
appraisal systems are considered at the individual, group and divisional levels. Finally,
successful analyzers have a tendency to examine current performance with
performance within the organization. Cross-sectional comparisons (comparisons among
'companies) may also occur.
Whatever the category, a performance appraisal system has strategic importance to a
firm in three ways:
1. Feedback mechanism,
2. Consistency between organizational strategy and job behaviour, and
3. Consistency between organizational values and job behaviour.
APPRAISAL PROCESS
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Figure below outlines the performance- appraisal process. Each step in the process is
crucial and is arranged logically. The process as shown in Fig. Below is somewhat
idea1ised. Many organizations make every effort to approximate the ideal process,
resulting in first-rate appraisal systems. Unfortunately, many others fail to consider one
or more of the steps and, therefore, have less-effective appraisal system.
1. Objectives of Appraisal
Objectives of appraisal as stated above include effecting promotions and transfers,
assessing training needs, awarding pay increases, and the like. The emphasis in all these
is to correct problems. Theses objectives are appropriate as long as the approach in
appraisal is individual. Appraisal in future, would assume systems orientations. In the
systems approach, the objectives of appraisal stretch beyond the traditional ones.
In the systems approach, appraisal aims at improving the performance, instead of
merely assessing it. Towards this end, an appraisal system seeks to evaluate opportunity
factors. Opportunity factors include the physical environment such as noise, ventilation
and lightings, available resources such as human and computer assistance and social
processes such as leadership effectiveness. These opportunity variables are m
important than individual abilities in determining work performance.
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Objectives of
Appraisal
Establish jobExpectation
Design an appraisalperformance
Performanceinterview
Use appraisal data forappropriate purposes
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In the systems approach the emphasis is not on individual assessment and rewards or
punishments. But it is on how work the work system affects an individuals.
In the systems approach the emphasis is not on individual assessment and rewards or
punishments. But it is on how the work systems affect an individuals performance. In
order to use a systems approach, managers must learn to appreciate the impact that
systems levels factors have on individual performance and subordinates must adjust to
lack of competition among individuals. Thus, if a systems approach is going to be
successful, the employee must believe that by working towards shared goals, everyone
will benefit.
Not that the role of the individual is undermined. The individual is responsible for a
large percentage of his or her work performance. Employees should not be encouraged to
seek organizational reasons for his failures. The identifications of systems obstacles
should be used to facilitate development and motivation, not as an excuse to poor
performance. The following table displays some of the differences between the traditional
approach and the systems-oriented one.
Traditional Systems
Guiding value
Primary roles
Attribution to individual
Control, documentation
Attribution to systems
Development, problem
solving
Leadership practices
Appraisal frequency
Directional, evaluative
Occasional
Facilitative, coaching
Frequent
Degree of formality
Reward practices
High
Individual orientation
Low
Group orientation
2. Establish Job Expectations
The second step in the appraisal process is to establish job expectations. This includes
informing the employee what is expected of him or her on the job. Normally, a discussion
is held with his or her superior to review the major duties contained in the job place of
formal performance evaluation.
3. Design Appraisal Programme
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PERFORMANCE APPRAISAL SYSTEMS
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Designing an appraisal programme poses several questions which we need to answers.
They are: -
1. Formals versus informal appraisal
2. Whose performance is to be assessed?
3. Who are the raters?
4. What problems are encountered?
5. How to solve the problems?
6. What should be evaluated?
7. When to evaluate?
8. What methods of appraisal are to be used?
1. Whose performance should be rated?To the question as to whose
performance should be rated, the answer is obviousemployees, is it individual
or teams? Specifically the rate may be defined as the individual, work group,
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FormalV/s
Informal
When toevaluate?
What toevaluate?
How to
solve?
Whatproblems
What are
theraters?
Whoseperforman
ce
Whatmethods?
Appraisaldesign
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division, or organizations. It is also possible to define the rate at multiple levels.
For example, under some condition, it may be desirable to appraise performance
both at work-group level for merit-pay increases and at the individual level to
assess training needs. Two conditions necessitate a group level appraisalgroup
cohesiveness and difficulty in identifying individual performance. Description.
Individual should not be expected to begin the job until they understand what is
expected out of them.
2. Formal V/s informal appraisal: - the first step in designing an appraisal
programme is to decide whether the appraisal should be formal or informal.
Formal appraisal usually occurs at specified time periodsonce or twice year.
Formal appraisals are most often required by the organizations for the purposes
of employee evaluation. Informal performance appraisal can occur whenever the
superior feels the need for communication. For example, if the employee has
been consistently meeting or executing standards, an informal appraisal may be
in order to simply recognize this fact. Discussions can take place anywhere in the
organizations, ranging from the managers office to the canteen. But care needs to
be taken to ensure that the discussion is held in private. Many organizations
encourage a mixture of both formal and informal appraisal. The formal appraisal
is most often used as primary evaluation. However, the informal appraisal is very
helpful for more performance feedback. Informal appraisal should not take the
Group cohesiveness refers to shared feeling among work-team members. There is
cooperation and clear understanding to accomplish tasks which a
interdependent. Any attempt to assess individual performance shall undermine
group cohesiveness and tend to promote individualistic or even competitive
orientation. The difficulty in identifying individual contribution is also important
to consider. In some cases, interdependent of tasks is so complete that it isdifficult to identify who has contributed what. There is no other choice but to
view that task as a team effort. But the point to be remembered is that the
performance of all employees must be rated. All must become raters.
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3. Who are Raters? Raters can be immediate supervisors, specialist from the HR
department, subordinates. Peers, committees, clients, self appraisal, or
combination of several.
a. Immediate supervisoris the fit candidate to appraise the performance of
his or her subordinate. There are 3 reasons in support of this choice. No
one is familiar with the subordinates performance than his or her
superior. Another reason is that the superior has the responsibility of
managing a particular unit. When the tasks of evaluating a subordinate is
given to another person, the superior authority may be undermined
seriously. Finally, training and development of subordinate is am portent
element in every mangers job. Since appraisal programme are often
clearly linked to training and development, the immediate superior may
be the legal choice to conduct the performance evaluation.
b. Subordinate can assess the performance of their superiors. The use of this
choice may be useful in assessing an employee ability to communicate,
delegate work, allocate resources, disseminate information, resolve intra-
personal conflict, and deal with employees on a fair basis. But the
problem with the subordinate evaluation is that supervisors tend to
become popular, not by effective leadership, but by mere gimmicks.
c. Peers are in better position to evaluate certain facts of job performance
which the subordinates or supervisors cannot do. Such facts include
contribution skills, reliability and initiative. Closeness of the working
relationships and the amount of personal contacts place peers in a better
position to make accurate assessments. Unfortunately friendship o
animosity may result in distortion of evaluation. Further when rewardallocation is based on peer evaluation, series conflicts among co-workers
may develop. Finally join together to rate each other high.
d. Although clients are seldom used for rating employee performance,
nothing prevents an organization from using this source. Clients may be
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members within the organization who have direct contact with the rate
and make use of an output (goods or services) this employee provides.
Interest, courtesy, dependability and innovativeness are but a few of the
qualities for which clients can offer rating information. Clients, external
to the organization can also offer similar kinds of information. Where
appraisal is made by the superior, peers, subordinates and clients, it is
called the 360-degree system of appraisal. First developed at General
Electric, US in 1992 the system has become popular in our country too.
GE (India). Reliance Industries, Crompton Greaves, Godrej Soaps
Wipro, Infosys, Thermax and Thomas Cook are using the method with
greater benefits. The Arthur Anderson Survey 1997 reveals that 20% of
the organization use 360 degree method. In the 360 degree method,
besides assessing performance. Other attributes of the assesstalents,
behavioral quirks, values, ethical standards, tempers and loyalty are
evaluated by the people who are best placed to do it. Many employees use
rating committees to evaluate employees. These committees are often
composed of the employees immediate supervisor and three or four other
supervisors who come in contact with the employee. This choice is
welcome when an employee in the course of his or her job performs a
variety of tasks in different environment. For e.g. 1supervisor may work
with the employee when technical aspects of a job are being performed
and another supervisor may deal with the same employee in situations
where communications skills are crucial. There are several benefits in
using multiple raters. First there may be objectivity in rating as more than
rater is involved in the assessment. Furthermore where there
differences in the rater ought ratings they usually stem from the fact that
raters at different level in the organization often observe different facetsof an employee performance-the appraisal to reflect these differences.
The disadvantages of committee rating are that it diminishes the role of
the immediate supervisor in the area of training and development.
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e. In self appraisalemployee himself or herself evaluates his or her own
performance. Indian Telephone Industries has been following the self-
appraisal system for executives in grade I to IV. Hewlett-Packard and
Texas Instruments too ask their performance to prepare their own
appraisal. On the positive side it may be stated that in self-appraisal there
is an opportunity to participate in evaluation particularly if it is combine
with goal setti9ng and this should be improve the mangers motivation.
Managers are less defensive in self-evaluation than when supervisors tell
them what they are. Self-appraisal is best suited where execu
development is the main purpose of evaluation as the approach enablers
managers to clearly assess their areas of differences. Unfortunately self-
appraisal falls short almost by any criterion. They tend to be more lenient
compared to other sources of evaluation, even that of peers who are more
lenient than their superiors. Self-appraisal is also more likely to be less
biased and less in agreement with judgment of others. In practice a
combination of methods is followed for employee. For examp
evaluation by self may be followed by a superior, the personal department
or the HR department (following diagram).
Different Raters of Performance- L&T, Bangalore works
PROCEDURE AND SCHEDULE FOR PERFORMANCE APPRAISL PROCESS
Action by/Date Form/Section
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Annual Performance Review
Form 2
Sec:
Form 2
Sec: B, C
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Describes actual results against
objectives set earlier. Not more thanfive
Carries out self-review highlighting
significant contributions and factorsinfluencing performance
Keeps himself or herself ready for
appraisal interview by analyzing his
performance, strengths and weaknessand development needs.
Employee by15.4.1999
Prepares for the appraisal interview byanalyzing results against objectives,
strengths and weakness and recalling
significant incidents. Related to critical
attributes.
Discusses with the employees and
provides feedback on critical attributes
and rate on performance and attributes.
Carries out development planning with
the employee
Carries out performance planning for
1994-1995 with employee, selects anddescribes role related attributes.
Describes strengths and weakness andcomments on potential areas for growth
Records training needs and apecific
developments plans.
Comments on specific developments
plans Makes overall observations on the
employees performance
Forwards the forms if necessary to his
superior to ensure:
1. Covenants are reviewed by a superiors
at least at DGM level2. Superiors/ executives are reviewed by
covenanted officers.
Sec C
Sec D
From 2Sec E
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2. PERIODIC REVIEW (during the year)
- 22 -
Next superior(s)
By 15.6.1994
Immediate
superior(s)By 15.6.1994
From 2 Notes the comments by the next
superiors and conveys significant
observations to employee
Forwards for convents to HRD depts.and for superiors/executives to
Analyses rating and comments and
furnishes data to all concerned for
necessary actions
Co-ordinates Development Action
Proposals at Respective Group/ unitlevel
Plans training programme and other
actions
Complies Pa data for aggregate analysis
Comments on Pa exercise and send
report to GMs and corporatemanagement
Reviews performance and objectivesand writes comments as necessary
Reviews development action taken
and records status.
Personnel/
HRD dept.By 15.7.1994
HRD dept.By 30.7.1994
Immediate
Superior
From 2
From 2
From 2
From 1
From 3
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Whoever may be the rater two requisites must be fulfilled. First the rater must be free
from bias. Second the rater must have an opportunity to observe the full spectrum of
activities and behavior of the rate over an extended time period.]
4. Problems of Rating: - Performance appraisals are subject to a wide variety of
inaccurate and biases referred to as rating errors. These errors occur in the raters
observations, judgments and information processing and can seriously affect assessment
result. The most common rating errors are leniency or severity, central tendency, halo
effect, primary and recency effects, perceptual set, performance dimension behavior, spill
over effect and status effect.
5. Leniency or Severity: - Leniency or severity on the part of the rater makes the
assessment subjective. Subjective assessments defeat the very purpose of performance
appraisal. Ratings are lenient for the following reasons.
The rater may feel that anyone under his or her jurisdictions who is rated
unfavorably will reflect poorly on his or her own worthiness.
He or she may feel that anyone who could have been rated unfavorably has
already been discharged from the organization
He or she may feel that a derogatory rating will be revealed to the rate to the
determinant of the relations between the rater and rate.
He or she may rate leniently in order to win promotions for the subordinates and
therefore indirectly increase his or her hold over them.
He or she may be projecting
He or she feels it necessary to always approve of others in order to gain approval
for him or herself.
He or she may be operating on the premise, whoever associates with me is
meritorious therefore, and I am meritorious.
He or she may rate leniently because there exists, in the culture, a response set
approve rather than disapprove.
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WC according to a WC according to a lenient rater Severe rater True amount WC
LOW written communication HIGH
Skills (WC)
4. Central tendency: - this occurs when employees are incorrectly rated near the
average or middle of the scale. The attitude of the rate is to play safe. This safe-
playing attitude stems from certain doubts and anxieties which the raters have
while assessing the ratees. Such doubts and anxieties are :
Do I know the man sufficiently well to be able to give a fair assessment of
him?
If I rate him the way I think I should what will be its influence on his
relations with me and on his performance in the future?
If I rate him the way I think I should what will be its effect on my relations
with the others subordinates?
If I rate him the way I think I should what will be its effect on his
relationship within the group or subordinates?
Will I able to be objective in view of pressures from peers, subordinates and
trade union?
If I rate him the way I think I should will be accused to being partial?
How will my boss view the appraisal I make and how will that influences the
way he appraises the man?
What standards will my peers adopt to appreciate their subordinates? And in
view of this am I likely to affect adversely the future of my subordinates?
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Naturally the rates use such expressions as satisfactory and average to describe the
performance of the rates. For example the principal of a college while giving character
certificates to the outgoing students describe the character of each student as satisfactory.
Obviously its become difficult to distinguish between excellent performance and poor
performance. In small organization it is common to label all employees as an average.
But in large companies errors of this type tend to obviate the value of evaluations.
Close to error of central tendency is the problem of range restriction. Range restriction
may involve clustering all employees around any point on a scale, often in combination
with leniency errors at very top. What is distinctive in the error of central tendency and
the error of range restriction is a failure to note real performance differences, either
intentionally or due to insufficient attention.
Halo Error - it takes place when one aspect of an individual performance influences the
evaluation of the entire performance of the individual just as the assessment of the
performance of a student in his or her examination being influence by the opening
paragraph of every answer. If the introductory paragraph is poorly written the chances of
scoring high marks in that answer are diminished however good the subsequent portion
of the essay may be
In an organization a halo error occurs when an emplopuee who work late constantly
might be rated high on productivity and quality of output as well as on motivation.
Similarly an attractive or popular employee might be given a high overall rating. Rating
employees separately can each of a number of performance and encouraging raters to
guard against the halo effect are two ways to reduce halo effect.
Rater effect: this includes favoritism, stereotyping and hostility. Excessively high or low
scores are given only to certain individual or groups based on the raters attitude towards
the rate, not on actual outcomes or behavior. Sex, age, race and friendship biases areexample of this type of error.
Primary and recency effects: - the raters ratings are heavily influenced either by
behavior exhibited by the rate during the early stage of the review period or by outcomes
or behavior exhibited by the rate near the end of the review period (recency). For
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example if a salesperson captures an important contract/ sales just before the completion
of the appraisal the timing of the incident may inflate his or her standing even though the
overall performance of the salesperson may not have been encouraging. Likewise a
blunder committed just before the appraisal period may diminish chance of securing a
favorable rating even if the performance is good.
One way of guarding against such an error is to ask rater to consider the composite
performance of the ratee and not to be influenced by one incident or own achievement.
The rater must also be aware of tendency on the part of the rates to improve odds in their
favors or suppress weak points during the rating period.
Perceptual Set: - this occurs when the raters assessment is influenced by previously
held beliefs. If the supervisors for example have a belief that employee hailing from 1
particular region is intelligent and hard working his subsequent rating of an employee
hailing from that region tends to be favorably high.
Performance Dimension order: 2 or more dimensions on a performance instrument
follows or closely follow each other and both describe or rotate to a similar quality. The
rater rates first dimension accurately and then rates the second dimension similar to the
first because of their proximity. If the dimension had been arranged in a significant
different order the rating might have been different.
Spillover effect:This refers to allowing past performance appraisal ratings
unjustifiably influence current ratings. Past ratings, good or bad result for the period
although the demonstrated behavior does not deserve the rating good or bad.
Status effect: - it refers to overrating of employee in higher-level jobs held in high
esteem, and underrating employees in lower-level-job or jobs held in low esteem.It is not the raters errors alone that are barriers to accurate and valid measurement of
employee performance. Barriers lie deep within the genetic and acquired make-up of all
people concerned with performance appraisal. A wide variety of emotio
psychological, intellectual and physical factors that at first glance may appear to be
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separate and irrelevant may combine in any numbers of ways during the appraisal
process.
Exhibit 10.2
Here is a bizarre case of performance appraisal. A pulp making unit located at Harihae in
Karnataka, hired 40 engineers in 1994, as management trainees. The new hires were fresh
from, REC, Suratkal, and other prestigious institutions. Obviously they were toppers in
their respective branches and institutions.
The management of the plant adopted a freakish policy with regard to performance
appraisal 10 percent of all the employees were to be rated below average. The
management did not want all the employees to be ranked high, notwithstanding their
excellent performance.
The axe fell on the trainees. The raters rated all the 40 trainees below average.
Humiliated, these 40 put in their papers even before their training period expired.
Solving Raters Problems
the best way to overcome the problems is to provide training to the raters. At Hewlett-
Packard, a 2 day training course is organized every year to prepare managers to handle
appraisals better. Not that training is a cure-all for all the ills of appraisal systems. From
a practical point of view, several factors, including the extent which pay is related to
performance ratings, union pressure, turnover rates, time constraints and the need to
justify ratings may be more important than training, influencing the ratings they actually
give. This means that improving rating systems involves not just training the raters but
remedying outside factors such ass union pressure. And it means that rater training, to be
effective, should also add real life problems such as the fact that union representatives
will try to influence supervisors to rate everyone high.
But training can help improve the appraisal system to the extent of distortion that occurs
due to the raters error such as halo, leniency, central tendency and bias. In a typicaltraining, raters are shown a video-tape of jobs being performed and are asked to rate the
workers. Ratings made by each participant are then placed on a flip chart and the various
charts are explained. For e.g., a trainee is rated on all criteria (such as quantity and
quality) about the same, the trainer might explain that halo error had occurred. If, on the
other hand, a trainer rated all video-taped workers very high, this might be explained as a
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leniency error. Typically, the trainer gives the correct rating and then illustrates the rating
errors made.
In effect, training of raters must help strengthen the factors that tend to improve accuracy
of ratings and weaken those that lower the accuracy of the performance measurement.
Factors that help improve accuracy:
1. The rater has observed and is familiar with behaviors to be appraised.
2. The rater has documented the behaviors to improve the recall.
3. The rater has a checklist to obtain and review job-related information.
4. The rater is aware of personal biases and is willing to take action to minimize
their effect.
5. Rating scores by raters of one group or organization are summarized and
compared with those by other raters.
6. The rater focuses attention on performance-related behaviors over which the rater
has better control than in other aspects of evaluation.
7. Higher levels of management are held accountable for reviewing all ratings.
8. The raters own performance ratings are related to the quality of rating given and
the performance of units.
9. Performance factors are properly defined.
Factors that may lower accuracy:
1. The rater rates ratees only when administrative actions are contemplated.
2. The rater tends to inflate ratings when the ratees receive scores and results of
appraisals.
3. The rater tends to recall more behaviours known to be of particular interest to
higher level managers, whether or not they are pertinent, when his or her ratings
are reviewed by such authorities.4. The rater is unable to express him or herself honestly and unambiguously.
5. Appraisal systems, processes and instruments fail to support the rater.
6. The rater has to rate employees on factors that are poorly defined.
7. Finally, the supervisor/rater must be trained to conduct the appraisal interview.
For many raters, this is a difficult task, especially when the appraisal is
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unfavorable to the rater. Favorable or unfavorable rating, it is the job of the rater
to convince the ratee about the appraisal, and advise him or her about the future
course of action the rate should take.
What should be rated?
One of the steps in designing an appraisal programme is to determine the evaluation
criteria. It is obvious that the criteria should be related to the job. The six criteria for
assessing performance are:
1. Quality: The degree to which the result or process of carrying out an activity
approaches perfection in terms of either conforming to some ideal way of
performing the activity, or fulfilling the activitys intended purpose.
2. Quantity: The amount produced, expressed in monetary terms, number of units, or
number of completed activity cycles.
3. Timeliness: the degree to which an activity is completed or a result produced, at
the earliest time desirable from the standpoints of both co-coordinating with the
outputs of others and of maximizing the time available for other activities.
4. Cost Effectiveness: the degree to which the use of the organizations resources
(e.g. human, monetary, technological and material) is maximized in the sense of
getting the highest gain or reduction in loss from each unit or instance of use of a
resource.
5. Need for supervision: the degree to which a job performer can carry out a job
function without either having to request supervisory assistance or requiring
supervisory intervention to prevent an adverse outcome.
6. Interpersonal impact: the degree to which as performer promotes feeling of self-
esteem, goodwill and co-operation among co-workers and sub-ordinates.
These criteria relate to past performance and behavior of an employee. There is also the
need for assessing, as was pointed out earlier, the potential of an employee for futureperformance, particularly when the employee is tipped for assuming gre
responsibilities.
Exhibit 10.3
Appraisal of Potential at Philips
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More and more number of organizations are trying to assess potential of their employees,
particularly at the managerial level. Cadbury India, Sandoz, Pfizer, Mafatlal, Philips,
National Organic Chemical Industries, Glaxo and P&G are a few of the companies which
seek to top managerial potential.
At Philips a 2 by 2 matrix is used to assess performance and potential to perform. The
vertical axis measures potential while the horizontal, actual performance. Both are further
subdivided into parameters high and low resulting in 4 quadrants of classification.
The Philips Model
Low Potential-Low Performance: these employees are categorized as question marks.
The company asks such employees to improve their performance levels. Failure to
improve would result in their planned separation.
High Potential-Low Performance: these are the problem children. In order to help them
improve their performance, these employees are shifted to new locations to work and are
closely monitored. If performance levels do not improve, these employees are reclassified
as question marks and the separation process initiated.
High Potential-High Performance: these are the star performers. They have to be kept
engaged with complex assignments all the time and groomed to take up the top positions.
Otherwise, they might leave.
Low Potential-High Performance: these are called as solid citizens and constitute 70 to
75 % of the total number of employees in any organization. They have skills but lack the
potential to grow beyond their current job-profile. The organization has to constantly
recognize their limitations and take care of their needs.
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Problem
Children Stars
Solid
Citizens
Problem
Separation
High
Low
HighLow
Potential
Performance
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In order to assess employee potential, Philips has adopted the system that prevails at
Philips NV, Holland. The system at Philips NV uses 4 broad attributes conceptual
effectiveness, operational effectiveness, interpersonal effectiveness and achievement
effectiveness and achievement motivation. Each attribute has a 5-point grading scale
excellent, very good, good/adequate, weak and insufficient.
Coming to the six criteria, it may be stated that the first 4 quality, quantity, timeliness
and cost effectiveness are objective in nature; and the last 2 - need for supervision and
interpersonal impact are subjective. Objective measures are quantifiable and are
therefore highly useful in measuring the performance of an employee. But performance
of employees should not always be evaluated against the amount of deposits mobilized
for his or her bank. The effort put in by him/her, the contacts he/she has established, the
image about the bank he/she has created in the eyes of public, and if relationships he/she
has maintained with subordinates speak more reliably about the managers performance.
Here comes the relevance of the subjective criteria. However, as subjective measures are
dependent upon human judgments, they are prone to the kinds of errors we noted earlier
leniency or severity, central tendency, halo and the like. To be useful, subjective
measures must be based on a careful analysis of the behaviors viewed as necessary and
important for job performance.
Of late, there has been a shift in focus of appraisals. This shift is from performance of the
individual to the systems approach. As stated earlier, in the systems approach the
emphasis is on improving ones performance. Work performance of an individual
depends on organizational factors in addition to his or her abilities. The focus in the
systems approach is, therefore, the entire organization.
Timing of Evaluation
How often should an employee be assessed? The general trend is to evaluate once in 3months, or six months, or once in a year. According to a survey conducted in 1997 by
Arthur Anderson, 70 percent of the organizations conduct performance appraisal once a
year. Newly hired employees are rated more frequently than the older ones. Frequent
assessment is better than phased evaluation. Feedback in the latter is delayed and the
advantage of timely remedial measures by the employee is lost. Frequent evaluation gives
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constant feedback to the rate, thus enabling him or her to improve performance if there is
any deficiency. The performance of trainees and probationers should be evaluated at the
end of respective programmes.
METHODS OF APPRAISAL
The last to be addressed in the process of designing an appraisal programme is to
determine methods of evaluation. Numerous methods have been devised to measure the
quantity and quality of employees job performance. Each of the methods discussed
could be effective for some purposes, for some organizations. None should be dismissed
or accepted as appropriate except as they relate to the particular needs of the organization
or of a particular type of employees. Broadly, all the approaches to appraisal can be
identified into (i) past-oriented methods, and (ii) future-oriented methods. Each group has
several techniques as shown in the figure below:
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Appr
aisal
Meth
ods
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Past-Oriented Methods
Rating Scales: This is the simplest and most popular technique for appraising employee
performance; the typical rating-scale system consists of several numerical scales, each
representing a job-related performance criterion such as dependability, initiative, output,
attendance, attitude, co-operation, and the like. Each scale ranges from excellent to poor.
The rater checks the appropriate performance level on each criterion, then computes the
employees total numerical score. The number of points scored may be linked to salary
increases, whereby so many points equal a rise of some percentage.
RATING SCALE
Instructions: For the following performances factors, please indicate on the rating
Scale your evaluation of the employee named below:
Employees Name:
Raters Name
Excellent Good Acc
5 4
1. Dependability ------ ------
2. Initiative ------ -
3. Overall Output ------ ------
4. Attendance ------ ------
5. Attitude ------
6. Co-Operation ------ ------
------ ------
------ ------
------ ------
20. Quality of Work ------ ------
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TOTAL + +
TOTAL SCORE
Rating scales offer the advantages of adaptability, relatively easy use and low cost.
Nearly every type of job can be evaluated in a short time, and the rater does not need any
training to use the scale.
The disadvantages of this method are several. The raters biases are likely to influence
evaluation, and the biases are particularly pronounced on subjective criteria such as co-
operation, attitude and initiative. Furthermore, numerical scoring gives an illusion of
precision that is really unfounded.
Checklist: Under this method a checklist of statements on the traits of the employee and
his or her job is prepared in 2 columns viz., a Yes column and a No column. All that
the rater (immediate superior) should is tick the Yes column if the answer to the
statement is positive and in column No if the answer is negative. A typical checklist is
given in the table below. After ticking off against each item, the rater forwards the list to
the HR department. The HR department assigns certain points to each Yes ticked.
Depending upon the number of Yes the total score is arrived at. When points are
allotted to the checklist, the technique becomes a weighted checklist. The advantages of
as checklist are economy, ease of administration, limited training of rater
standardization. The disadvantages include susceptibility to raters biases (especially the
halo effect), use of personality criteria instead of performance criteria, misinterpretation
of checklist items, and the use of improper weights by the HR department. Another
disadvantage of this approach is that it does not allow the rater to give up relative ratings.
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Table: - Checklist for Operators
SR.
NO.
QUESTIONS YES NO
1. Is the employee really interested in the job? - -
2. Does he or she possess adequate knowledge about the job - -
3. Is his or her attendance satisfactory? - -
4. Does he/she maintain his/her equipment in good condition? - -5. Does he/she co-operate with co-workers? - -
6. Does he/she keep his/her temper? - -
7. Does he/she obey orders? - -
8. Does he/she observe safety precautions? - -
9. Does he/she complete what he/she commences? - -
10. Does he/she evade responsibility? - -
Forced Choice Method: In this, the rater is given a series of statements about an
employee. These statements are arranged in blocks of 2 or more, and the rater indicates
which statement is most or least descriptive of the employee. Typical statements are :
1. Learns fast _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ works hard
2. Work is reliable_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ performance is a good example for
3. Absents often_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ others usually tardy.
As in the checklist method, the rater is simply expected to select the statements that
describe the rate. Actual assessment is done by the HR Department.
This approach is known as the forced choice method because the rater is forced to select
statements, which are readymade. The advantage of this method is the absence ofpersonal bias in rating. The disadvantage is that the statements may not be properly
framed they may not be precisely descriptive of the ratees traits.
Forced Distribution Method: One of the errors in rating is leniency clustering a large
number of employees around a high point on a rating scale. The forced distribution
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method seeks to overcome the problem by compelling the rater to distribute the ratees on
all points on the rating scale.
The method operates under an assumption that the employee performance level conforms
to a normal statistical distribution. Generally, it is assumed that employee performance
levels conform to a bell shaped curve. For example, the following distribution might be
assumed to exist excellent 10 %, good 20 %, average 40 %, below average 20 %, and
unsatisfactory 10 %.
The major weakness of the forced distribution method lies in the assumption that the
employee performance levels always conform to a normal distribution. In organizations
that have done a good job of selecting and retaining only the good performers, the use of
forced distribution approach would be unrealistic, as well as possibly destructive to the
employee morale.
The error of central tendency may also occur, as the rater resists from placing an
employee in the lowest or in the highest group. Difficulties also arise for the rater to
explain to the rate why he or she has been placed in a particular group. One merit of this
approach is that it seeks to eliminate the error of leniency. However, the forced choice
method is not acceptable to raters and ratees, especially, in small groups or when group
members are of high ability.
Critical Incidents Method: The critical incidents method of employee assessment has
generated a lot of interest these days. The approach focuses on certain critical behaviors
of an employee that make all the difference between effective and non-effective
performance of a job. The supervisors as and when they occur record such incidents.
Examples of critical incidents of a plant manager are given in the following table:
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Examples ofCritical Incidents for an Assistant Plant Manager
One of the advantages of the critical incidents methods is that the evaluation is based on
actual job behavior. Further, the approach has descriptions in support of particular ratings
of an employee. Giving job-related feedback to the ratee is also easy. It also reduces the
personal biases, if raters record incidents throughout the rating period. Finally, this
approach can increase the chances that the subordinates will improve because they learn
more precisely what is expected of them. The method however has significant limitations.
These include:
1. Negative incidents are generally more noticeable that positive ones.
2. The recording of incidents is a chore to the supervisor and may be put off an
easily forgotten.
3. Overly close supervision may result.
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CONTINUING
DUTIES
TARGETS CRITICAL
INCIDENTSSchedule Production for Plant Full Utilization of
personnel andmachinery in the plant,
order delivered on time
Instituted new production
scheduling system;decreased late orders by
10% last month;
increased machineutilization in plant by20%
last month
Supervise procurement of raw
materials and inventory control
Minimize inventory
costs while keeping
adequate supplies onhand
Let inventory storage costs
rise 15% last month;
Over Ordered parts Aand B by 20%;Under Ordered part C
by30%
Supervise machinery
maintenance
No shutdowns due to
faulty machinery
Instituted new preventive
maintenance system for
plant;Prevented a machine
breakdown by discovering
faulty part.
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4. Managers may unload a series of complaints about incidents during an annual
performance review session. The feedback may be too much at one time and thus
appearing as a punishment to the rate. More appropriately, the management
should use incidents of poor performance as opportunities for immediate training
and counseling.
Behaviorally Anchored Rating Scales:
Behaviorally Anchored Scales, sometimes called behavioral expectation scales, are rating
scales whose scale points are determined by statements of effective and ineffective
behaviors. They are said to be behaviorally anchored in that the scales represent a range
of descriptive statements of behavior varying from the least to the most effective. A rater
must indicate which behavior on each scale best describes an employees performance.
Behaviorally anchored rating scales (BARS) have the following features:
1. Areas of performance to be evaluated are identified and defined by people who
will use the scales.
2. The scales are anchored by descriptions of actual job behavior that, supervisors
agree, represent specific levels of performance. The result is a set of rating scales
in which both dimensions and anchors are precisely defined.
3. All dimensions of performance to be evaluated are based on observable behaviors
and are relevant to the job being evaluated since BARS are tailor-made for the
job.
4. Since the raters who will actually use the scales are actively involved in the
development process. They are more likely to be committed to the final product. BARS
were developed to provide results which subordinates could use to improve performance.
Superiors would feel comfortable to give feedback to the rates. Further, BARS help
overcome rating errors. Unfortunately, this method too suffers from distortion inherent in
most rating techniques.
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Field Review Method
This is an appraisal by someone outside the, assessors own department. Usually
someone from the corporate office or the HR department. The outsider reviews Employee
records and holds interviews with the ratee and his or her superior.
This method is primarily used for making promotional decision at the managerial level.
Field reviews are also useful when comparable information is needed from employees in
different units or locations. Two disadvantage of this method are:-
1. An "outsider" is usually not familiar with conditions in an employees work
environment which may affect the employee's ability or motivation to perform.
2. An 'outsider' review dose not have the opportunity to observe employee behavior of
performance over a period of time and in a variety of situations. But only in an artificially
structured interview situation which extends over a very short period of time.
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A BARS Scale for the Knowledge and Judgement Dimension of a
Grocery Checker's Job.
Raters, making field reviews normally receive training on how to conduct the interview
and develop their writing skills. Being independent of the work scene they normally have
less bias for or against the ratee than docs the immediate supervisor. Even when a
supervisor or others concerned supply biased information the rater may he able to
pinpoint areas requiring training and development assistance.
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Extremely good
performance
Good
performance
You can expect this checker to be aware of items that
constantly fluctuate in price.
Neither poor
nor good
performance
Slightly poor
performance
Poor
performance
Extremely poor
performance
By knowing the price of items. This checker would be
expected to look for mismarked and unmarked items.7
6
When in doubt. This checker would ask the other clerk i
the item is taxable.
This checker can be expected to verify with another
checker a discrepancy between the shelf and the marked
price before ringing up that Item.
5Slightly good
performance
When operating the quick check. If the lights are flashin
this checker can be expected to check out a customer wi
15 items.
4
3
In order to take a break. this checker can be expected to
block off the check stand while people wait in line.
You could expect this checker to ask the customer the
price of an Item that he or she does not know.
In the daily course of personal relationships, he or she m
be expected to linger in long conversations with a custom
or with another checker.
2
1
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Performance Tests and Observations
With limited number of jobs, employee assessment may be based upon a test of
knowledge or skills. The test may he of the paper-and-pencil variety or an actual
demonstration of skills. The test must he reliable and validated to be useful. Even then,
performance tests are apt to measure potential more than actual performance. In order for
the test to be job related, observations should he made under circumstances likely to be
encountered. Practicality may suffer if costs of test development or administration arc
high.
Confidential RecordsConfidential records arc maintained mostly in government Departments. though its
application in the industry .not ruled out. ITI. for example. had followed this method for a
long time. Called the Annual Confidential Report (ACR). the approach had 14 items-(i)
attendance. (ii) self-expression (written or oral). (iii) ability to work with others. (iv)
leadership. (v) initiative. (vi) technical ability (job knowledge). (vii) ability to understand
new material. (viii) ability to reason, (ix) originality and resourcefulness. (x) areas of
work that suits the person best. (xi) judgement. (xii) integrity. (xiii) responsibility and.
(xiv) and defect-indebtedness. Memo served. etc. Twelve of these were filled on a four-
point grade scale (Excellent. Good. Fair and Poor).
For integrity. there were special instructions from the management. Justification was
required for outstanding or poor rating. Over:!!! rating on a five-point scale was
separately given (Outstanding. Very good. Good. Average, Poor). again with justification
for rating as outstanding or poor. Recommendations for promotion were also given. The
ACR contained recommendations and signature of the rater. the head of the department
and the CMD.
The system was highly secretive and confidential Feedback to the assessee was given
only in case of an adverse entry. The AC'R was highly subjective. Ratings were easily
manipulated because the evaluation was linked to promotion. Even ITI has discontinued
ACR system for these reasons.
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Essay Method
In the essay method the rater must describe the employee within a number of broad
categories such as (i) the rater's overall impression of the employee's performance. (ii),
the promo ability of the employee (iii) the jobs that the employee is now able or qualified
to perform (.iv) the strengths and weaknesses of the employee. and (v)the training and
the development assistance required by the employee. Although this method may be used
independently, it is most frequently found in combination with others. It is extremely
useful in filing information gaps about the employees that often occur in the better
structured checklist method.
The strength of the essay method depends on the writing skills and analytical ability
of the rater.
However many raters do not have good writing skills. They become confused about
what to say. How much they should state and the depth of the narrative The essay method
can consume much time because the rater must collect the information necessary to
develop the essay and then he or she must write it The essay method also depends on the
memory power of the rater.
A problem with this method is that the rate may be rated on the quality of the
appraisals that they give. The quality standard for the appraisal may be unduly influenced
by appearance rather than content. Thus. a 'high quality' appraisal may provide little
useful information about the performance of the rate.
Cost Accounting Method
This method evaluates performance from the monetary returns the employee yields to
his or her organisation. A relationship is established between the cost included in keeping
the employee and the benefit the organization derives from him or her. Performance of
the employee is then evaluated based on the established relationship between the cost and
the benefit.
Comparative Evaluation Approaches
These are a collection of different methods that compare one worker's performance
with that of his/her co-workers. Comparative appraisals are usually conducted by
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supervisors. As these appraisals can result in a ranking from best to worst, they are useful
in deciding merit-pay increases, promotions and organisational rewards. The usual
comparative forms used in this kind of evaluation are the ranking method and the paired
comparison method.
Ranking Method
In this, the superior ranks his or her subordinates in the order of their merit, starting
from the best to the worst. All that the HR department knows is that A is better than B.
The, 'how' and 'why' are not questioned, nor answered. No attempt, is made to
fractionalise what is being appraised into component elements. This method is subject to
the halo and recency effects, although rankings by two or more raters can be averaged to
help reduce biases. Its advantages include ease of administration and explanation.
Paired-comparison Method
Under this method the appraiser compares each employee with every other employee
one at a time. For example there are five employees named A, B. C. D and E. The
performance of A is first compared with the performance of B and a decision is made
about whose performance is better. Then A is compared with C. D and E in that order.
The same procedure is repeated for other employees. The number of comparisons may be
calculated with the help of a formula which reads thus: N(N-1)/ 2 where N stands for
the number of employees to be compared. If there are 10 employees, the number of
comparisons will be 10(10-1)/2 = 45.
After the completion of comparison, the results can be tabulated and a rank is created
from the number of times each person is considered to be superior.
Future-oriented Appraisals
Is it not enough if only the past performance is assessed . How an employee can
perform in the days to come is equally important. This can be assessed by focusing on
employee potential or setting future performance goals. The commonly used future-
oriented techniques are MBO, psychological appraisals, and assessment centres.
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MANAGEMENT BY OBJECTIVES
It was Peter F. Drucker who first gave the concept of MBO to the world way back in
1954 when his The Practice of Managementwas first published. The MBO concept, as
was conceived by Drucker, reflects a management philosophy which values and utilizes
employee contributions. Application of MBO in the field of performance appraisal is a
recent thinking.
Four Steps in the MBO Process
How MBO works can be described in four steps:
The firststep is to establish the goals each subordinate is to attain. In some
organisations, superiors and subordinates work together to establish goals. In others.
Superiors establish goals for subordinates. The goals typically refer to the desired
outcome to be achieved. These goals can then be used to evaluate employee performance.
The secondstep involves setting the performance standard for the subordinates in a
previously arranged time period. As subordinates perform, they know fairly well what
there is to do, what has been done, and what remains to be done.
In the thirdstep, the actual level of goal attainment is compared with the goals agreed
upon. The evaluator explores reasons for the goals that were not met and for the goals
that were exceeded. This step helps determine possible training needs. It also alerts the
superior to conditions in the organization that may affect a subordinate but over which
the subordinate has no control.
The finalstep involves establishing new goals and, possibly new strategies for goals
not previously attained. At this point, subordinate and superior involvement in goal-setting may change. Subordinates who successfully reach the established goals may be
allowed to participate more in the goal setting process the next time. The process is
repeated. As with other approaches. MBO too has been criticised. One comment made
against the approach is that it is not applicable to all jobs in all organisations. Jobs with
little or no flexibility. Such as assembly-line work, are not compatible with MBO. An
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assembly-line worker usually has so little job flexibility that the performance standards
and objectives are already determined. The MBO process seems to be most useful with
managerial personnel 'and employees who have a fairly wide range of flexibility and self-
control in their jobs. Besides, when the result of an MBO system are to be used to
allocate organisational rewards, employees may be less likely to establish challenging
goals-goals they are confident that they can accomplish. Further, the allocation of merit
pay on a semi-annual or annual basis may encourage the setting up of goals with short
time horizons to the disadvantage of important long-term goals.
The performance appraisal presently followed in L&T reflects the principles of MBO.
Psychological Appraisals
Large organization employs full-time industrial psychologists. When psychologists are
used for evaluations. They assess an individuals future potential and past performance.
The appraisal normally consists of in-depth interviews, psycho1ogical tests. Discussions
with supervisors and a review' of other evaluations. The psychologist then write an
evaluation of the employee's intellectual, emotional, motivational and other-related
characteristics that suggest individual potential and may predict future performance. The
evaluation by the psychologist may be for a specific job opening for which the person is
being considered. Or it may be a global assessment of his or her future potential. From
these evaluations. Placement and development decisions may be made to shape the
person's career. Because this approach is slow and costly, it is usually required for bright
young members who, others think. May have considerable potential within
organisation. Since the quality of the appraisal depends largely on the skills of the
psychologists, some employees object to this type of evaluation, especially if cross-
cultural differences exist.
LARSEN AND TOUBRO, HUMAN RESOURCE DEVELOPMENT
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PERFORMANCE APPRAISAL SYSTEM
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CONFIDENTIA
L PA FORM:28NAME EMS. PS. NO CADRE GROUP DEPT.
EXECUTIVES &SUPERVISORS
LARSEN &TOUBRO LIMITED
HUMAN RESOURCE DEVELOPMENT-PERFORMANCE APPRAISAL
SYSTEM
PERFORMANCE ANALYSIS AND REVIEW
APRIL 1993 TO MARCH 1994
NAME DATE SIGNATURE
EMPLOYEE
IMMEDIATE SUPERVISOR
NEXT SUPERIOR 1.
2.
PERSONNEL/ HRD DEPT.
A]PERFORMANCE REVIEW AGAINST
OBJECTIVES
B1] BY IMMEDIATE
SUPERIOR
A1] BY EMPLOYEE
OUTSTANDING
V.GOOD
GOOD
ADEQUATE
INADEQUATE
AGREED
OBJECTIVES ANDTARGETS
RESULTS
ACHIEVED
1.2.
3.
4.
5.
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A2] SELF REVIEW (by employee)
SIGNIFICANT CONTRIBUTORS (JOBS OR PROFESSION RELATED NOT COVERED ABOVE)
IMPORTANT FACTORS FACILITATING PERFORMANCE
IMPORTANT FACTORS HINDERING PERFORMANCE
B2] PERFORMANCE AGAINST OBJECTIVES(BY IMMEDIATE SUPERIOR)
OUTSTANDING V. GOOD GOOD A
C1] Appraisal of Critical Attributes(by immediate
superior)
OU
TSTANDING
V.GOOD
GOOD
ADEQUATE
INADEQUATE
C2] CRITICAL ATTRIBUTES
1.INNOVATIVENESS Ability to think new and better
ways of doing things that results
in introduction of new ideas or
improvements of the systems
and operations.
2.INITIATIVE Ability to determine and initiate
actions that result in improve
handling of jobs, without
waiting to be told.
3. INTERPERSONAL &TEAM RELATIONSHIP
Ability to interact effectivelywith people at all levels to gain
their confidence and respect and
work in a collaborative and
participative manner.
4.RESOURCEFULNESS Ability to muster resources to
achieve desired results and
device ways and means of
solving problems in difficult
situations.
5.COMMUNICATION
SKILLS
Ability to convey thoughts and
feelings clearly both through
oral as well as writtenexpressions for betterunderstanding.
C2] AREAS OF STRENGTH AND IMPROVEMENTS (by immediate superior)
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C3] Potential Areas Of Growth (By Immediate Superior)
D] Recommendations For Training And Development( By Immediate Superior)
D1] IN-COMANT TRAINING PROGRAMMES
Description Code
1.
D2] OTHER TRAINING PROGRAMMES
1.
D3] SPECIFIC DEVELOPMENT PLANS
Proposed action
(tick as applicable)
Job rotaion
Job enlargement
Special assignment
Deputatiomn of other dept
Others(please specify)
E ] COMMENTS BY NEXT SUPERIOR(S)
E1] ON SPECIFIC DEVELOPMENT PLANS STATED ABOVE IN D3
E2] OVERALL OBSERVATIONS:
F] FOR USE BY PERSONNEL/ HRD CO -ORDINATOR
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ASSESSMENT CENTRES
Mainly used for executive hiring, assessment centre are now "being used for evaluating
executive or supervisory potential. An assessment centre is a central location where
managers may come together to have their participation in job-related exercise evaluatedby trained observers. The principal idea is to evaluate managers over a period of time say
one to three days, by observing (and later evaluating) their behaviour across a series of
select exercises or work samples. Assesses are requested to participate in in-basket
exercises, work groups (without leaders), computer simulations, role paying, and other
similar activities which require the same attributes for successful performance, as in the
actual job. After recording their observations of ratee behaviors, the raters meet to discuss
these observations. The decision regarding the performance of each assessee is based
upon this discussion of observations. Self-appraisal and peer evaluation are also thrown
In for final rating.
The characteristics assessed in a typical assessment centre include assertiveness,
persuasive ability, communicating ability, planning and organisational ability, self
confidence, resistance to stress, energy level, decision making, sensitivity to the
feelings of others, administrative ability, creativity and mental alertness. It
formidable list which is quite difficult to measure accurately over three days, though
there would be sizable number of trained observers and psychologists.
First developed in the US and the UK in 1943, the assessment centre is gaining
popularity in our country, Crompton greaves, Facher, HLL and Modi Xerox are using the
technique with results being highly positive.
Assessment Centre - Many Takers
Ranbaxy retained the services of a team of psychologists from the UK-
based Kelly& King to take the executives (of Ranbaxy) through an assessment
center. 20 star manager went through the exercise.
Santrupt Misra, Director- Birla Management Corporation had plans for
a similar exercise to be held at Gyanodaya, the Aditya Birla learning centre. Misra
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first used the assessment centre concept four years ago on 150 middle and senior
level managers.
Old timers like Tata have created their own assessment centers, and so
have the talent centric companies' like Wipro and Cognizant.
SHL, a HR consulting firm has worked with over 100 companies
conducting dose to 1,000 assessment centers.
Consulting firm ECS (formerly known as Eicher Consulting Services)
does a number of assessments in a month for a variety of clients like Tata Steel,
ING Vysya and the host of BPO outfits.
ICICI Bank uses assessment centre as a recruitment and selection tool
to find the best talent, while GE India subsidiary GECIS has used it on 20% of it5
middle managers.
The problem with the assessment centres is their cost Not only are the asses sees away
from their jobs while the company pays for their travel and lodging, but the evaluators are
often company managers who are assigned to the assessment centre fo