Performance Management & Appraisals Project Report

  • June 2020
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For more Notes, Presentations, Project Reports visit a2zmba.blogspot.com hrmba.blogspot.com mbafin.blogspot.com

INDEX

Sr. #

Particular &

Pg. #

1

Performance Management Definitions & Glossary

Appraisal

Terms

&

2

Introduction

2

3

Purpose Of Performance Appraisals

3

4

Benefits Of Performance Appraisals

4

5

Challenges Of Performance Appraisals

6

6

Process Of Performance Appraisals

7

7

Traditional Methods Of Performance Appraisals

9

8

Modern Methods Of Performance Appraisals

10

9

360 Degrees Performance Appraisals

11

10

Management By Objectives

13

11

Assessment Centres

14

12

Conclusion

15

13

Bibliography

16

1

PERFORMANCE MANAGEMENT & APPRAISAL TERMS & DEFINITIONS & GLOSSARY It's important to understand the various terms and methods used in performance management and appraisals. Most of these aren't difficult to understand, but people often get confused about the meanings. Documentation: The process of creating a paper trail to record data such as discussions had with employee, results of those discussions, both supervisor and employee comments, agreements between the two. Objectives or Results: Statements of what an employee is supposed to achieve. Ongoing Performance Communication : Communication between manager and employee all throughout the year to ensure that problems are identified early, and so there are NO SUPRPRISES during the performance appraisal. Performance Review : Usually refers to a meeting to review and evaluate performance, involving supervisor and employee. Often done once a year, but to be effective performance reviews, or at least informal meetings to discuss performance should be undertaken at least every few months. Performance Appraisal : The regular (usual annual) process where an employees performance for the year is assessed by manager and/or employee. It is only one part of the performance management approach. Usually means the same as "performance review". Performance Diagnosis : Often performance problems are a result of a number of factors, not just the fault of the employee. Performance Management : The larger process of defining what employees should be doing, ongoing communication during the year, linking of individual performance to organization needs, and the evaluating of appraising of performance. Performance Planning : The process of communication between manager and employee that results in MUTUAL UNDERSTANDING of what the employee is to be doing during the next period of time. Often includes setting objectives and standards of performance. Progressive Discipline : The process of addressing performance difficulties by first trying to help, then setting up increasingly strong consequences for failure to reach the desired levels of performance. Ranking Scales : A way of evaluating staff by comparing them to each other, so there is a best, a second best, and so on. This is REAL SERIOUS TROUBLE, and almost always destructive. Standards of Performance : Mutually agreed upon criteria used to describe how WELL an employee must perform, written to reduce subjective judgement.

INTRODUCTION Managing employee performance is an integral part of the work that all managers and rating officials perform throughout the year. It is as important as managing financial resources and program outcomes because employee performance or the lack thereof, has a profound effect on both the financial and program components of any organization. The Department of the Interior’s performance management policy is designed to document the expectations of individual and organizational performance, provide a meaningful process by which employees can be rewarded for noteworthy contributions to the organization, and provide a mechanism to improve individual/organizational performance as necessary. To accomplish these objectives, managers need to identify organizational goals to be accomplished, communicate individual and organizational goals to employees that support the overall strategic mission and goals of the Department, monitor and evaluate employee performance, and use performance as a basis for appropriate personnel actions, including rewarding noteworthy performance and taking action to improve less than successful performance. The Office of Personnel Management defines performance management as the systematic process of: 1

• planning work and setting expectations

2

• continually monitoring performance

3

• developing the capacity to perform

4

• periodically rating performance in a summary fashion; and

5

• rewarding good performance

PURPOSE OF PERFORMANCE APPRAISAL Performance Appraisal is being practiced in 90% of the organisations worldwide. Self-appraisal and potential appraisal also form a part of the performance appraisal processes. •

To review the performance of the employees over a given period of time.



To judge the gap between the actual and the desired performance.



To help the management in exercising organizational control.



Helps to strengthen the relationship and communication between superior – subordinates and management – employees.



To diagnose the strengths and weaknesses of the individuals so as to identify the training and development needs of the future.



To provide feedback to the employees regarding their past performance.



Provide information to assist in the other personal decisions in the organization.



Provide clarity of the expectations and responsibilities of the functions to be performed by the employees.



To judge the effectiveness of the other human resource functions of the organization such as recruitment, selection, training and development.



To reduce the grievances of the employees.

The most significant reasons of using Performance appraisal are: •

Making payroll and compensation decisions – 80%



Training and development needs – 71%



Identifying the gaps in desired and actual performance and its cause – 76%



Deciding future goals and course of action – 42%



Promotions, demotions and transfers – 49%



Other purposes – 6% (including job analysis and providing superior support, assistance and counseling)

BENEFITS OF PERFORMANCE APPRAISAL Perhaps the most significant benefit of appraisal is that, in the rush and bustle of daily working life, it offers a rare chance for a supervisor and subordinate to have "time out" for a one-on-one discussion of important work issues that might not otherwise be addressed. Almost universally, where performance appraisal is conducted properly, both supervisors and subordinates have reported the experience as beneficial and positive. Appraisal offers a valuable opportunity to focus on work activities and goals, to identify and correct existing problems, and to encourage better future performance. Thus the performance of the whole organization is enhanced. For many employees, an "official" appraisal interview may be the only time they get to have exclusive, uninterrupted access to their supervisor. Said one employee of a large organization after his first formal performance appraisal, "In twenty years of work, that's the first time anyone has ever bothered to sit down and tell me how I'm doing." The value of this intense and purposeful interaction between a supervisors and subordinate should not be underestimated. 1. MOTIVATION AND SATISFACTION Performance appraisal can have a profound effect on levels of employee motivation and satisfaction - for better as well as for worse. Performance appraisal provides employees with recognition for their work efforts. The power of social recognition as an incentive has been long noted. In fact, there is evidence that human beings will even prefer negative recognition in preference to no recognition at all. If nothing else, the existence of an appraisal program indicates to an employee that the organization is genuinely interested in their individual performance and development. This alone can have a positive influence on the individual's sense of worth, commitment and belonging. The strength and prevalence of this natural human desire for individual recognition should not be overlooked. Absenteeism and turnover rates in some organizations might be greatly reduced if more attention were paid to it. Regular performance appraisal, at least, is a good start. 2. TRAINING AND DEVELOPMENT Performance appraisal offers an excellent opportunity - perhaps the best that will ever occur - for a supervisor and subordinate to recognize and agree upon individual training and development needs. During the discussion of an employee's work performance, the presence or absence of work skills can become very obvious - even to those who habitually reject the idea of training for them! Performance appraisal can make the need for training more pressing and relevant by linking it clearly to performance outcomes and future career aspirations. From the point of view of the organization as a whole, consolidated appraisal data can form a picture of the overall demand for training. This data may be analysed by variables such as sex, department, etc. In this respect, performance appraisal can provide a regular and efficient training needs audit for the entire organization.

3. RECRUITMENT AND INDUCTION Appraisal data can be used to monitor the success of the organization's recruitment and induction practices. For example, how well are the employees performing who were hired in the past two years? Appraisal data can also be used to monitor the effectiveness of changes in recruitment strategies. By following the yearly data related to new hires (and given sufficient numbers on which to base the analysis) it is possible to assess whether the general quality of the workforce is improving, staying steady, or declining. 4. EMPLOYEE EVALUATION Though often understated or even denied, evaluation is a legitimate and major objective of performance appraisal. But the need to evaluate (i.e., to judge) is also an ongoing source of tension, since evaluative and developmental priorities appear to frequently clash. Yet at its most basic level, performance appraisal is the process of examining and evaluating the performance of an individual. Though organizations have a clear right - some would say a duty - to conduct such evaluations of performance, many still recoil from the idea. To them, the explicit process of judgement can be dehumanizing and demoralizing and a source of anxiety and distress to employees. It is been said by some that appraisal cannot serve the needs of evaluation and development at the same time; it must be one or the other. But there may be an acceptable middle ground, where the need to evaluate employees objectively, and the need to encourage and develop them, can be balanced.

For more Notes, Presentations, Project Reports visit a2zmba.blogspot.com hrmba.blogspot.com mbafin.blogspot.com

CHALLENGES OF PERFORMANCE APPRAISAL In order to make a performance appraisal system effective and successful, an organization comes across various challenges and problems. The main challenges involved in the performance appraisal process are: 1. DETERMINING THE EVALUATION CRITERIA Identification of the appraisal criteria is one of the biggest problems faced by the top management. The performance data to be considered for evaluation should be carefully selected. For the purpose of evaluation, the criteria selected should be in quantifiable or measurable terms 2. CREATE A RATING INSTRUMENT The purpose of the Performance appraisal process is to judge the performance of the employees rather than the employee. The focus of the system should be on the development of the employees of the organization. 3. LACK OF COMPETENCE Top management should choose the raters or the evaluators carefully. They should have the required expertise and the knowledge to decide the criteria accurately. They should have the experience and the necessary training to carry out the appraisal process objectively. 4. ERRORS IN RATING AND EVALUATION Many errors based on the personal bias like stereotyping, halo effect (i.e. one trait influencing the evaluator’s rating for all other traits) etc. may creep in the appraisal process. Therefore the rater should exercise objectivity and fairness in evaluating and rating the performance of the employees 5. RESISTANCE The appraisal process may face resistance from the employees and the trade unions for the fear of negative ratings. Therefore, the employees should be communicated and clearly explained the purpose as well the process of appraisal. The standards should be clearly communicated and every employee should be made aware that what exactly is expected from him/her.

PROCESS OF PERFORMANCE APPRAISAL 1. ESTABLISHING PERFORMANCE STANDARDS The first step in the process of performance appraisal is the setting up of the standards which will be used to as the base to compare the actual performance of the employees. This step requires setting the criteria to judge the performance of the employees as successful or unsuccessful and the degrees of their contribution to the organizational goals and objectives. The standards set should be clear, easily understandable and in measurable terms. In case the performance of the employee cannot be measured, great care should be taken to describe the standards. 2. COMMUNICATING THE STANDARDS Once set, it is the responsibility of the management to communicate the standards to all the employees of the organization. The employees should be informed and the standards should be clearly explained to the. This will help them to understand their roles and to know what exactly is expected from them. The standards should also be communicated to the appraisers or the evaluators and if required, the standards can also be modified at this stage itself according to the relevant feedback from the employees or the evaluators.

3. MEASURING THE ACTUAL PERFORMANCE The most difficult part of the Performance appraisal process is measuring the actual performance of the employees that is the work done by the employees during the specified period of time. It is a continuous process which involves monitoring the performance throughout the year. This stage requires the careful selection of the appropriate techniques of measurement, taking care that personal bias does not affect the outcome of the process and providing assistance rather than interfering in an employees work. 4. COMPARING THE ACTUAL WITH THE DESIRED PERFORMANCE The actual performance is compared with the desired or the standard performance. The comparison tells the deviations in the performance of the employees from the standards set. The result can show the actual performance being more than the desired performance or, the actual performance being less than the desired performance depicting a negative deviation in the organizational performance. It includes recalling, evaluating and analysis of data related to the employees’ performance. 5. DISCUSSING RESULTS The result of the appraisal is communicated and discussed with the employees on one-to-one basis. The focus of this discussion is on communication and listening. The results, the problems and the possible solutions are discussed with the aim of problem solving and reaching consensus. The feedback should be given with a positive attitude as this can have an effect on the employees’ future performance. The

purpose of the meeting should be to solve the problems faced and motivate the employees to perform better. 6. DECISION MAKING The last step of the process is to take decisions which can be taken either to improve the performance of the employees, take the required corrective actions, or the related HR decisions like rewards, promotions, demotions, transfers etc.

TRADITIONAL METHODS OF PERFORMANCE APPRAISAL 1. ESSAY APPRAISAL METHOD This traditional form of appraisal, also known as “Free Form method” involves a description of the performance of an employee by his superior. The description is an evaluation of the performance of any individual based on the facts and often includes examples and evidences to support the information. A major drawback of the method is the inseparability of the bias of the evaluator. 2. STRAIGHT RANKING METHOD This is one of the oldest and simplest techniques of performance appraisal. In this method, the appraiser ranks the employees from the best to the poorest on the basis of their overall performance. It is quite useful for a comparative evaluation. 3. PAIRED COMPARISON A better technique of comparison than the straight ranking method, this method compares each employee with all others in the group, one at a time. After all the comparisons on the basis of the overall comparisons, the employees are given the final rankings. 4. CRITICAL INCIDENTS METHODS In this method of Performance appraisal, the evaluator rates the employee on the basis of critical events and how the employee behaved during those incidents. It includes both negative and positive points. The drawback of this method is that the supervisor has to note down the critical incidents and the employee behaviour as and when they occur. 5. FIELD REVIEW In this method, a senior member of the HR department or a training officer discusses and interviews the supervisors to evaluate and rate their respective subordinates. A major drawback of this method is that it is a very time consuming method. But this method helps to reduce the superiors’ personal bias. 6. CHECKLIST METHOD The rater is given a checklist of the descriptions of the behaviour of the employees on job. The checklist contains a list of statements on the basis of which the rater describes the on the job performance of the employees. 7. GRAPHIC RATING SCALE In this method, an employee’s quality and quantity of work is assessed in a graphic scale indicating different degrees of a particular trait. The factors taken into consideration include both the personal characteristics and characteristics related to the on-the-job performance of the employees. For example a trait like Job Knowledge may be judged on the range of average, above average, outstanding or unsatisfactory. 8. FORCED DISTRIBUTION

To eliminate the element of bias from the rater’s ratings, the evaluator is asked to distribute the employees in some fixed categories of ratings like on a normal distribution curve. The rater chooses the appropriate fit for the categories on his own discretion.

MODERN METHODS OF PERFORMANCE APPRAISAL

1. ASSESSMENT CENTRES An assessment centre typically involves the use of methods like social/informal events, tests and exercises, assignments being given to a group of employees to assess their competencies to take higher responsibilities in the future. Generally, employees are given an assignment similar to the job they would be expected to perform if promoted. The trained evaluators observe and evaluate employees as they perform the assigned jobs and are evaluated on job related characteristics. The major competencies that are judged in assessment centres are interpersonal skills, intellectual capability, planning and organizing capabilities, motivation, career orientation etc. assessment centres are also an effective way to determine the training and development needs of the targeted employees. 2. BEHAVIORALLY ANCHORED RATING SCALES Behaviorally Anchored Rating Scales (BARS) is a relatively new technique which combines the graphic rating scale and critical incidents method. It consists of predetermined critical areas of job performance or sets of behavioral statements describing important job performance qualities as good or bad (for eg. the qualities like inter-personal relationships, adaptability and reliability, job knowledge etc). These statements are developed from critical incidents. In this method, an employee’s actual job behaviour is judged against the desired behaviour by recording and comparing the behaviour with BARS. Developing and practicing BARS requires expert knowledge. 3. HUMAN RESOURCE ACCOUNTING METHOD Human resources are valuable assets for every organization. Human resource accounting method tries to find the relative worth of these assets in the terms of money. In this method the Performance appraisal of the employees is judged in terms of cost and contribution of the employees. The cost of employees include all the expenses incurred on them like their compensation, recruitment and selection costs, induction and training costs etc whereas their contribution includes the total value added (in monetary terms). The difference between the cost and the contribution will be the performance of the employees. Ideally, the contribution of the employees should be greater than the cost incurred on them.

360 DEGREE PERFORMANCE APPRAISALS 360 degree feedback, also known as 'multi-rater feedback', is the most comprehensive appraisal where the feedback about the employees’ performance comes from all the sources that come in contact with the employee on his job. 360 degree respondents for an employee can be his/her peers, managers (i.e. superior), subordinates, team members, customers, suppliers/ vendors - anyone who comes into contact with the employee and can provide valuable insights and information or feedback regarding the “on-the-job” performance of the employee. 360 degree appraisal has four integral components: 1. Self appraisal 2. Superior’s appraisal 3. Subordinate’s appraisal 4. Peer appraisal Self appraisal gives a chance to the employee to look at his/her strengths and weaknesses, his achievements, and judge his own performance. Superior’s appraisal forms the traditional part of the 360 degree appraisal where the employees’ responsibilities and actual performance is rated by the superior. Subordinates appraisal gives a chance to judge the employee on the parameters like communication and motivating abilities, superior’s ability to delegate the work, leadership qualities etc. Also known as internal customers, the correct feedback given by peers can help to find employees’ abilities to work in a team, co-operation and sensitivity towards others.

Self assessment is an indispensable part of 360 degree appraisals and therefore 360 degree Performance appraisal have high employee involvement and also have the strongest impact on behavior and performance. It provides a "360-degree review" of the employees’ performance and is considered to be one of the most credible performance appraisal methods. 360 degree appraisal is also a powerful developmental tool because when conducted at regular intervals (say yearly) it helps to keep a track of the changes others’ perceptions about the employees. A 360 degree appraisal is generally found more suitable for the managers as it helps to assess their leadership and managing styles. This technique is being effectively used across the globe for performance appraisals. Some of the organizations following it are Wipro, Infosys, and Reliance Industries etc.

Arguments Against 360 Degree Performance Appraisal

Despite the fact that 360 degree appraisals are being widely used throughout the world for appraising the performance of the employees at all levels, many HR experts and professionals argument against using the technique of 360 degree appraisals. The main arguments are: •

360 performance rating system is not a validated or corroborated technique for Performance appraisal.



With the increase in the number of raters from one to five (commonly), it become difficult to separate, calculate and eliminate personal biasness and differences.



It is often time consuming and difficult to analyze the information gathered.



The results can be manipulated by the employees towards their desired ratings with the help of the raters.



The 360 degree appraisal mechanism can have a adversely effect the motivation and the performance of the employees.



360 degree feedback – as a process- requires commitment of top management and the HR, resources(time, financial resources etc), planned implementation and follow-up.



360 degree feedback can be adversely affected by the customers’ perception of the organisation and their incomplete knowledge about the process and the clarity o f the process.



Often, the process suffers because of the lack of knowledge on the part of the participants or the raters.

MANAGEMENT BY OBJECTIVES The concept of ‘Management by Objectives’ (MBO) was first given by Peter Drucker in 1954. It can be defined as a process whereby the employees and the superiors come together to identify common goals, the employees set their goals to be achieved, the standards to be taken as the criteria for measurement of their performance and contribution and deciding the course of action to be followed. The essence of MBO is participative goal setting, choosing course of actions and decision making. An important part of the MBO is the measurement and the comparison of the employee’s actual performance with the standards set. Ideally, when employees themselves have been involved with the goal setting and the choosing the course of action to be followed by them, they are more likely to fulfill their responsibilities. THE MBO PROCESS The principle behind Management by Objectives (MBO) is to create empowered employees who have clarity of the roles and responsibilities expected from them, understand their objectives to be achieved and thus help in the achievement of organizational as well as personal goals. Some of the important features and advantages of MBO are: •

Clarity of goals – With MBO, came the concept of SMART goals i.e. goals that are:

Specific Measurable Achievable Realistic, and Time bound. The goals thus set are clear, motivating and there is a linkage between organizational goals and performance targets of the employees. •

The focus is on future rather than on past. Goals and standards are set for the performance for

the future with periodic reviews and feedback. •

Motivation – Involving employees in the whole process of goal setting and increasing

employee empowerment increases employee job satisfaction and commitment. •

Better communication and Coordination – Frequent reviews and interactions between

superiors and subordinates helps to maintain harmonious relationships within the enterprise and also solve many problems faced during the period.

ASSESSMENT CENTRES Assessment centre refers to a method to objectively observe and assess the people in action by experts or HR professionals with the help of various assessment tools and instruments. Assessment centers simulate the employee’s on-the-job environment and facilitate the assessment of their on-the-job performance. An assessment centre typically involves the use of methods like social/informal events, tests and exercises, assignments being given to a group of employees to assess their competencies and on-the-job behaviour and potential to take higher responsibilities in the future. Generally, employees are given an assignment similar to the job they would be expected to perform if promoted. The trained evaluators observe and evaluate employees as they perform the assigned jobs and are evaluated on job related characteristics. An assessment centre for Performance appraisal of an employee typically includes: Social/Informal Events – An assessment centre has a group of participants and also a few assessors which gives a chance to the employees to socialize with a variety of people and also to share information and know more about the organisation. Information Sessions – information sessions are also a part of the assessment centres. They provide information to the employees about the organisation, their roles and responsibilities, the activities and the procedures etc. Assignments- assignments in assessment centres include various tests and exercises which are specially designed to assess the competencies and the potential of the employees. These include various interviews, psychometric tests, management games etc. all these assignments are focused at the target job. The following are the common features of all assessment centres: • The final results is based on the pass/fail criteria • All the activities are carried out to fill the targeted job. • Each session lasts from 1 to 5 days. • The results are based on the assessment of the assessors with less emphasis on self-assessment • immediate review or feedback are not provided to the employees. An organization’s human resources can be a vital competitive advantage and assessment centre helps in getting the right people in right places. The major competencies that are judged in assessment centres are interpersonal skills, intellectual capability, planning and organizing capabilities, motivation, career orientation etc. assessment centres are also an effective way to determine the training and development needs of the targeted employees.

CONCLUSION

People differ in their abilities and their aptitudes. There is always some difference between the quality and quantity of the same work on the same job being done by two different people. Therefore, performance management and performance appraisal is necessary to understand each employee’s abilities, competencies and relative merit and worth for the organization. Performance appraisal rates the employees in terms of their performance.

Performance appraisal takes into account the past performance of the employees and focuses on the improvement of the future performance of the employees.

For more Notes, Presentations, Project Reports visit a2zmba.blogspot.com hrmba.blogspot.com mbafin.blogspot.com

BIBLIOGRAPHY

1.

Performance Appraisal Handbook for US Department Of the Interior (ebook)

http:// performance-appraisals.org

2. http://appraisals.naukrihub.com

3.

http://www.performance-appraisal.com

For more Notes, Presentations, Project Reports visit a2zmba.blogspot.com hrmba.blogspot.com mbafin.blogspot.com

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