Performance appraisal

Performance appraisal is a distinct and formal management procedure used in the evaluation of work performance. It can be defined as a structured formal interaction between a subordinate and his superior, at a defined periodicity. During a performance discussion the previous period’s performance of the subordinate is examined and discussed. In addition the performance appraisal is also used to identify areas of training and improvement.

It is a review of his work and goals that are set for him by the company in accordance with the goals of the company. In many organizations, appraisal results are used, to help determine reward outcomes. It helps in identifying the “better performers” employee who will get majority of available merit pay increases, bonuses and promotions. It also helps in identifying the “poor performers” who may require some form of counseling or in extreme cases, demotion, dismissal or decrease in pay. Appraisals address a “whole person development” and not just job skills or skills required for promotion.

There are 8 commonly used methods of Performance Appraisal.
Comparative Standards or multi-person comparison- this relative method of performance is one in which one employees’ performance is compared to the performances of the other employees.

Group Rank Ordering – in this kind of performance appraisal, the supervisor places employees into a particular classification such as ‘top one fifth’ and ‘second one fifth’. If a supervisor has ten employees only two could be in the top fifth and two must be assigned to the bottom fifth.

Individual ranking- in this, the supervisor lists the employees from highest to lowest. The difference between the top two employees is assumed equivalent to the difference between the bottom two employees.

Paired comparison- in this the supervisor compares each employee in the group and rates each as either superior or weaker of the pair. After all comparisons are made, each employee is assigned a summary or ranking based on the number of superior scores received.

Critical incidents- the supervisor’s attention is focused on specific or critical behavior that separate effective from ineffective performance.

Graphic rating scale- in this kind of performance appraisal, a set of performance factors such as job-knowledge, work quality, cooperation are listed, that the supervisor uses to rate employee performance using an incremental scale.

Behaviorally anchored rating scale (BARS) – BARS combines elements from critical incident and graphic rating scale approaches. The supervisor rates employees’ according to items on a numerical scale.
Management by objectives- management by objectives evaluate how well an employee has accomplished objectives determined to be critical in job performance. This method aligns objectives with quantitative performance measures such as sales, profits, zero-defect units produced.

360 degree feedback- In this multisource feedback method provides a comprehensive perspective of employee performance by utilizing feedback from the fuel circle of people with whom the employee interacts, supervisors, subordinates and co-workers. It is effective for career coaching and identifying strength and weaknesses.

Strengths of the negotiated performance appraisal are its ability to promote candid two-way communication between the supervisor and the person being appraised and to help the latter take responsibility for improving performance. In contrast, in the traditional performance appraisal, the supervisor acts more as a judge of employee performance, than a coach. By doing so, unfortunately, the focus is on blame rather than on helping the employee assume responsibility for improvement. Thus there are a whole lot of conventional trends that have changed the outlook of performance appraisals.

Let’s analyze the new trends that are prevalent in performance appraisal in today’s corporate world:

A valuable line management tool- today’s performance appraisal system is one of the principle tool, executives, line managers, and employees are able to use to achieve their collective goals. The change in application of performance appraisal has been enabled by software that provides management with a way to achieve its operational and strategic goals. These new applications provide a means of:
Ø cascading strategic and operational objectives down to ensure every person knows their part of the plan and executes their part of the plan,
Ø developing the entire organization by setting specific development objectives for each individual,
Ø providing managers with visibility of their team members,
Ø Multiple assessment methods like business objectives, development objectives, competency review, behavioral objectives and activity review.

Full time performance appraisal - Annual appraisal is rapidly being replaced with Full time Performance Management. This trend provides a mechanism where both managers and employees are able to make relevant notes on performance related issues throughout the year. This function is also referred to as “performance diary”. When the appraisal is conducted, both are better prepared and have a full record of achievements or areas for development and coaching throughout the year. This feature also promotes an ongoing dialogue between managers and employees and ensures that both are on track to achieve their goals for the year.

Let’s take an example of an IT manager to see how the performance diary is used in practice. One of his primary objectives is to “deliver all projects on time and on budget”. With the performance diary, the IT manager makes notes on each project all the way through the year. His own manager also makes notes about these projects. When both parties meet, they have an adequate data to draw from and can perform a meaningful review in a short amount of time. They can objectively develop a relevant performance rating derived from factual data. Therefore, the IT manager receives an objective review based on documented information as opposed to a subjective review based on memory.

Less reliance on position descriptions- In years gone by, appraisals were often conducted against a position description. Today both HR and Line management are using performance appraisal system to drive performance requirements during future performance periods. The reasons behind this shift are: firstly, position descriptions are typically static. Secondly, position descriptions are only one element of the performance management spectrum. Thirdly, position descriptions are far out of date and line management cannot rely on their integrity to conduct performance appraisal.

Low administration Performance Management- Early automated performance management systems were stand alone systems that offered several benefits but still suffered from high administrative input. These systems required HR to make duplicate data entries for all additions, changes and deletions to staff because entries had to be made in both the payroll system and the performance management system. Today, performance management applications can be fully integrated with the payroll system which means data entry is only required in payroll. All changes made to payroll are automatically made to the performance management application. This substantially reduces costs related to administration, enabling HR to assist line management with more strategic issues and matters of compliance.

Link to strategy- Performance Appraisal systems are the vehicle for setting organizational objectives to organizational strategy. Combined with Full Time Performance diary functionality, performance appraisal system is now one of the most powerful methods for effectively directing organizational effort.

Retention- Organizations have now made the link between performance appraisal systems and retention. In the war for talent, employees want to be appreciated and developed. The answer to this is frequent reviews and developmental planning. Automated Performance Appraisal addresses both of these needs.

Succession planning- Performance appraisal systems can leverage the data collected to implement succession planning system to allow HR to realize successors for critical and non critical roles and also the high potential staff. A significant benefit of this is that the employees see the organization as a developing career path and this binds them closer to their organization and work.

Remuneration management and salary packaging- By implementing an effective Performance Appraisal system, organizations can now rank employees according to how well they achieved their business and development objectives. So remuneration now gains objectivity and is directed mainly towards those employees who are the top achievers.

Thus Performance Appraisal system in its present form is a trend itself. Performance Appraisal system has progressed from appraisals and reviews to a valuable tool to link performance to strategy and to do this in an environment that is less onerous on HR than it has ever been in the past. In a nutshell performance appraisals are an important part of any corporate or organizational plan because it drives the manpower in various ways to work their best towards the success of the goals and targets.