The dynamic organizational system is going continuously with the transformation. The organizations have used adaptive ability & proactive approach to excel in their business environment. The performance appraisal system is result oriented and helps in improving employee productivity. The main aim of the performance appraisal system is to enhance and enrich the potentials of the employee through a rewards system, promotional activities, and to some extent through corrective measures. According to Baker, Jensen, and Murphy (1998), the behavior and the performance of the employees largely reflects the incentive system of the organization which is based on the appraisal system. Good salary system, the interrelationship between the superior and the subordinate, employee turnover, punishments, poor performance, etc all are depended on the product of the behavioral pattern of the employee, which is the by-product of the incentive system.
A healthy Performance Appraisal process is systematic, cyclic, in nature and essential need of an organization which helps the managers to assess and evaluate their employees’ performance on an ongoing basis. According to Flippo (2006), Performance Appraisal is a systematic and periodic review of the employee performance working in the organization.
Employee performance can be enhanced if the employee knows his goals, aligns them, increases his engagement with the organization and continuously interacts with his superior for seeking feedback on his performance.
Performance appraisal helps the organization and employee to locate the areas of non-performance and initiate corrective action.
Performance Appraisal aims to determine the required performance of the worker at the beginning of the year. It is done mutually by the superior and his subordinate. The supervisor then facilitates his performance during the given period.
At the end of the period, the actual performance is measured and compared with the standard performance. The reasons for the gap are identified and then the worker is helped to overcome the deficiency or gaps.
It is a formal system designed to measure and evaluate the performance and behavior of individuals at work and through constant observation, developmental changes can be made in his performance, behavior, results, etc. Performance appraisal helps the organization to understand and compare the after-effects of employee behavior when a task is given. The focus of performance appraisal is the actual performance under the requirements of the job, and standardized performance that is expected from him.
1.1 Purpose of Performance Appraisal:
According to Wayne F. Cascio (2006), Appraisals provide a formal organizational justification for employment decision in terms of promotions, training, salary hikes, and incentives. In short, appraisal serves as a key input for administering a formal organizational reward and punishment system. Appraisals provide feedback to employees and thereby serve as a vehicle for personal and career development. It helps the organization in diagnosing organizational problems by identifying training needs, characteristics needed for hiring, basis for distinguishing between effective and ineffective performers.
The major reason of performance appraisal is to encourage conversation between the subordinate and superior about job performance. According to Abraham, Karns, Shaw, and Mena(2001) leadership skills, customer focus, result orientation, problem-solving, communication, and teamwork are six most critical and effective competencies of manager while appraising the performance of the employee. The performance appraisal is considered as the tool for communication that ensures the supervisor and her reporting employee are clear about the expectations of each employee.
In the entire discussion both superior and subordinate concentrates on:
- The successful achievement of target by the subordinate in the given timeframe.
- Initiatives for performance enhancement and improvement, and
- Setting of targets for the coming year.
1.2 Performance Appraisal Process:
In the most simple manner the performance appraisal can be explained from the diagram below:
The achieved targets or evaluation of employee acts as a key guide which ensures that the superior and the subordinate know and the subordinate has been made clear about the task and future needs and outcomes, which can help in better performance. The employee at the beginning is made aware of the expectations, and the desired results.
Managers’ initiatives to enhance the performance of the employee: According to Grensing and Prohal (2001), managers are committed to managing maximum performance recognizing that one of their major responsibility is to eliminate roadblocks to successful performance. Managers have to:
- Recognize the employee achievement during the evaluation process
- Have an objective, crystal clear performance evaluation and recommend improvement plans
- Align employee’s performance to unit or organizational performance
- Align employee Merit enrichment and Bonus distribution to performance and building the “Pay for Performance” criteria and culture.
- Correlating organizational targets with employee’ target, thus enabling the Human Resource to efficiently support their management team with strategic decisions.
Table 1.1: Goals of Performance Appraisal
|General Goals||Specific Goals|
|Administrative Decisions / Uses||
1.3 Performance Appraisal and Performance Management:
In the current Scenario, the organizations have shifted their focus from performance appraisal to performance management as a result of the internalization of human resource and globalization of business. The performance management approach focuses more on the actual results based on the previously framed smart objectives. These smart objectives are established keeping in mind the various facts and figures, employee behavior pattern, expected a result and the superior plays an important role as a mentor and as a facilitator. According to Augniuis, et.al, (2011), employee growth and improved performance is the key determinant to organizational success. Performance Management frames employee performance at a broader level as it is a business function. Both the manager and the employee should participate equally in setting goals, behavior and assessing the result.
The objectives are mutually set at the beginning of the year and the expected standard of performance for evaluation is expressed.
Performance management is a broader term in comparison to performance appraisal as it dealt with those hidden concepts of performance appraisal which were never deal with. Performance appraisal deals with the evaluation of employee performance, but performance management emphasizes building a system of a high-performance team and continuous improvement of the employee. Performance management focuses on ongoing improvement of the employee rather than just evaluating the employee as done in the performance appraisal.
Below given table shows the difference between the Performance Appraisal and Performance Management:
Table 1.2: Difference between the Performance Appraisal and Performance Management
|S.N.||Dimensions||Performance Appraisal||Performance Management|
|1.||Concept||Evaluating the employee’s current and/past performance relative to his/her performance standard||A process that consolidates goal setting, performance appraisal and development into a single, common system, the aim of which is to ensure that the employee’s performance is supporting the company’s strategic aims.|
|2.||Objective||Focus is on top down assessment||Stresses on mutual objective setting through a process of joint dialogue|
|3.||Duration||Reviewed annually||Continuous reviews are performed|
|4.||Usage of the System||Very common||Less common|
|5.||Focus||On traits||On quantifiable objectives, values and behaviors|
|6.||Structure||Rigid system||Flexible system|
|7.||Linked with||Directly linked with pay.||Not directly linked with pay|
1.4 Objectives of Employee Performance Evaluation:
Employee Objectives of Employee Performance Evaluation performance evaluation has many important objectives to meet. Moynihan and Pandey(2010) suggested that information related to performance improvement always help the employees to perform well. Motivation towards organizational work, work related information, benfits given by the organization, organizational culture are some of the factors which provide better performance information.
These are the five objectives of an effective employee evaluation process.
- The superior and the subordinate are well aware of the set objectives, expected results, and to what extent the achievement will contribute to the success of the overall organizational achievement.
- The objectives of the employee performance assessment also include employee development and organizational improvement. The employee performance evaluation leads to employee personal development and organizational goals and growth.
- Since the objectives are discussed in an effective manner and ways are looked upon to achieve them successfully, the superior and the employee are committed to achieving them. These objectives are also maintained in a written form.
- The employee performance evaluation is a base for non-discriminatory promotion, pay, and recognition processes. This is an important consideration for the HR Manager in consistent, regular, non-discriminatory employee performance evaluations.
- Employee performance appraisal systems have a number of methods for evaluation but their basic element may differ from one organization to another. And some of these elements can be more effective than the other.
The traditional appraisal system was insufficient and incomplete as it was based on the concept of considering the employee as a tool to be used and managers were forced to make subjective decision and judgment about the employee performance and behavior against the pre-determined job standards. This approach of performance appraisal was more concentrated on employee accomplishment of the task. The evaluation was from the top to the bottom where the superior played a pivotal role. Judging of such performance was totally done without the active involvement of the employee himself. Performance appraisal faced the unnecessary delay in the decisions making and more biased. Performance appraisal was mostly narrowly focused and functioned in isolation without bearing any linkage with the overall organizational vision and goals. Therefore modern appraisal system became an important approach to evaluate the performance of the employee.
1.5 Techniques/Instruments/Methods of Performance Appraisal:
S.K. Bhatia (2006) has elaborated the following types of Traditional and Modern Methods of Performance Appraisal
|2. Paired Comparison||Grading|
|3. Graphic Rating||Assessment Centre|
|4. Forced Distribution||Human Resource Accounting|
|6. Field Review||360 degree|
|7. Confidential Report||Potential Appraisal|
|8. Forced Choice||Self Appraisal|
1.6 Employee Self-appraisal is a Career Promotion Tool:
Wayne (2006), stated that encourage performance, especially repeated good performance, additionally provide sufficient amount of rewards that employees really value, in a timely, and fair manner.
The employee self- appraisal is one of the easiest and best method to make employee aware of the appraisal process which can and leads to better performance, and moreover setting of employee personal and career related goals. The employee self-appraisal ensures his performance development planning or appraisal meeting with his superior. It entails an important opportunity for the employees to seriously think about their level of performance and contribution towards their achievement of personal and organizational goals.
Employee self- appraisal motivates the employee to vision his future goals aligning with the organization. With this objective they can plan their upcoming opportunity, possible promotions, different job options, and training in related or different fields. Through systematic self- appraisal and organizational appraisal employee can think about various career choices with the current company or some other prospective company.
The input given by the manager to his employee gives further insight where he lacks, chances of improvement, and motivates him.
Self-appraisal is an integral component of employee progression. It speaks about the possibilities and expectations which can enhance the capabilities of the employee and how the manager perceives it. Performance appraisal is not just what is expected from the employee, but moreover when the employee raises the expectation by performing well.
1.7 Why to Use an Employee Self- Appraisal:
In a self-appraisal process, an employee responds to a series of questions that help the employee to analyze his or her performance during the year. This guides the employees to focus on the many aspects and degree of performance.
The employee is compelled to think about all the required elements of performance, from the job description to goal achievement. This structured approach of performance appraisal and planning helps the employee to see-through at his present and desired outcome.
Self-appraisal opens up the dialogue between the subordinate and superior during the regular performance evaluation meetings. The act of self-appraisal and the coexisting introspection causes an employee to review goals, assess progress and thoughtfully consider areas for and better choice for job and career growth.
During the process of the employee self- appraisal the superior and the subordinate discusses performance development planning.
1.8 Essentials for Effective /Enhanced Performance Appraisal System:
The most important criteria for the success of the employee performance appraisal is to prepare the performance appraisal system. A systematic appraisal system gives a wider picture of employee performance, his career goals, career progression and easy methods for the attainment of goals. Below are some of the measures to prepare performance appraisal:
- To accumulate basic information: Collect all the relevant information related to the job description, its expectation, required competencies, and developmental plans which were the outcomes of the previous appraisal. This information acts as a base for prospective accomplishments, strength, and areas for development. This information also helps in recalling the past performance, feedback, ratings, and challenges, if any.
- Review the performance: Review done by the employee about his performance will help him to identify his areas strengths and weaknesses. Various activities, accomplishments, success, failures, hurdles, threats, and challenges, etc all help the employee to introspect himself.
- The difference of “how and what”: The employee should work more on the fact that “how” he performed rather than “what” he performed. “How” gives a contextual detail to the employee that during the achievement of the target what were the hurdles and failures that he encountered and what measures he took to overcome them. During the setting of the targets with the superiors, these challenges and hurdles can be reviewed
- Knowing the areas for development: It is important for an employee to know the areas where he is lacking. He should analyze the factors like skills, goals projected and achieved, performance done, a listing of achievements, areas of struggle, or other areas of improvement. Enhancement and expansion in the areas of his skills/experience/expertise lead to better career growth and progression. Training develops a particular skill that improves employee need and improves his performance.
- Draft goals for the coming period: Employee should have a proactive approach and draft some possible goals based on his job description, or the organization’s higher level goals. While drafting the goals, the employee should look for the opportunities to expand his duties, broaden his knowledge, or take on more responsibility.
- Share the information: All the above if discussed with the superior before the appraisal it would result in a more meaningful two-way dialogue between the employee and the superior.
- Broad Outlook: Employee should be well prepared with the criticism and praises in his appraisal. The feedback received should be considered as the stepping stone by the employee for his better career.
1.9 Significance of Performance Appraisal:
1. Improving Communication: performance appraisal provides the platform for open communication. The employee can converse with his superior on the task accomplishment, performance enhancement issues, and its successful achievement. Communication also helps the employee to understand how the organization perceives his performance and on what areas he needs to improve.
2. Providing a Career Path: through an enriching performance appraisal system, the employee is able to enhance his career path. It provides the employee with an opportunity to be of greater use to an organization. New opportunities, learning process and recognition of employee lead to loyalty and stability in the organization.
3. Encouraging and Improvement: Noting the key areas of improvement is not an easy task. Performance appraisal is the means to identify and highlight the areas that need improvement. Even the most valuable employee could benefit from additional training. And training is the means to improve performance.
4. Improving Decision-Making Ability: When a company has detail information on employee performance, business decisions become easy. The appraisal helps to know the employee’s strengths and weakness. It also provides a framework when decisions related to compensation or separation are taken. Effective use of performance appraisals helps an organization to operate efficiently and with focus.
5. Measuring Recruitment Efforts: Performance appraisals can provide key information that can help to evaluate the recruiting practices of the organization.
For example, if a certain number of employees were hired with certain qualification and experiences were rated high in their appraisals, the organization may conclude that its recruiting process is working effectively. On the other hand, poor performance is indicative that the recruiting efforts were not up to the expectations, hence it became of one the reason for poor results.
1.10 Merits of Performance Appraisal:
Performance appraisal is an investment for the company which can be justified by the following advantages:
1. Promotion: Performance Appraisal helps the supervisors to promote those employees who have proved their efficiency throughout the year. Promotion programmes can act as an impetus for the non-performers.
2. Compensation: Performance Appraisal helps in taking initiatives for better compensation packages for deserving employees. Compensation package includes bonus, high salary rates, extra benefits, allowances, and pre-requisites. Performance Appraisal tries to give worth to the performance which is reflected through a good compensation.
3. Employees Development: The systematic procedure of performance appraisal helps the supervisors to frame training policies and programmes. It helps to analyze the strengths and weaknesses of employees so that new jobs can be designed for employees accordingly. It also helps in framing future development programmes.
4. Selection Validation: Good selection of employees leads to better results. Performance Appraisal helps the supervisors and the management to understand the importance of the selection procedure and to what extent has the selection has been worth full. The supervisor comes to know the factors which acted as the strengths and weaknesses of the selection procedure. Future changes in selection methods can be made in this regard.
5. Communication: Communication is the strongest means of idea transfer. Manager can make subordinate aware of the areas where the subordinate is lacking, how can he improve and what are his strength and potential for development. Communication can be beneficial in the following ways:
• For Employers: Through performance appraisal, the superior can understand and accept the skills of subordinates. He can converse with him the matters related to inefficiency. Can make the employee realize that to what extent performance appraisal can affect his compensation, promotion, career, growth, and relation with another employee
• For Employee: Communication helps the subordinates to converse with the superior on the areas where he is lacking, what initiatives can be taken to improve them, so that desired results can be achieved. At the time, if the employee is not satisfied with the appraisal been done, through effective communication and maintaining cordial relation with superior, he can express his feelings.
• For Organization: It helps in maintaining the cordial and congenial labor-management relationship. Set goals or objectives, if are be achieved, then the organization progress, which further leads to the progress of all the employees. This can be done through a better understanding of the task, which is a product of good communication. It develops the spirit of work and boosts the morale of employees.
6. Motivation: Motivation and satisfaction to the employee: Performance appraisal plays a vital role in effecting the level of employee motivation and satisfaction. Performance appraisal provides employees with recognition for their work efforts. Social recognition from an organization acts as an incentive for the employee. The existence of an effective appraisal system is indicative of organization genuine interest in employee performance and development.
7. Performance Feedback: employee working in the organization is always keen to know whether he has come up to the extent of expectation of the organization or not. Performance Appraisal helps him in this process. Performance Appraisal helps him to know his current position, future prospects, his areas of improvement and moreover his strength and weakness.
8. Need for Employee Training: performance of the employee helps the organization too, to identify and understand the performance gaps.
Organisation at its level takes initiatives and measures to fill these gaps by training. Lack of good performance may be due to inadequate knowledge or skills and effective training methods can fill these gaps.
9. Transfers: Performance appraisal has also guided the organization in making transfer decisions. The transfer involves a change in job design and area of work. Organisation tries to find out those employees who can be responsible and perform well.
10. Separation: weak or poor performance can lead to serious results. At times, when continuous monitoring and opportunities for improvement are not seriously taken by the employee then the organization has to take a firm step of employee separation. This is the last step taken by the organization.
11. Career Development: all the above points leads to better career development.
Performance appraisal is a method of evaluating the behavioral standards of employees at the workplace which includes both the quantitative and qualitative aspects of job performance. It is a systematic and objective way of evaluating both work-related behavior and potential of employees. It is a process that involves determining and communicating to an employee how he or she is performing the job and establishing the plan of improvement.
1.11 Post Result of Performance:
Appraisal Salary hike after appraisal motivates the employees. Some employees quit the organization after a salary hike. And those employees who do not get a satisfactory salary hike and appraisal get de-motivated and look for a change. Separation has been a major concern for the organizations as time and some proactive steps are required for replacement. It is the liability of the organization to motivate those who have received a good appraisal so that they remain the performers for the future and also should motivate those employees have been non-performers. Areas of non-performance should be discussed with the non-performer so that he can perform well in the future. Poor appraisal leads to negative vision in the mind of appraisee for the management, superior and organization.
Original Reference Article:
Swati, T. (2018). Effectiveness of performance appraisal systems in private banks in jaipur city.