Meaning of Performance Appraisal

Performance appraisal is the systematic process of evaluating the performance of employees. This is done to see what and how the employees are doing with their job. It is also done to understand the prospect and potential of future development of employees. It is the process of obtaining, analyzing and maintaining information about the job-related conduct of employees. Performance appraisal helps in determining the worth of an employee for the job and the organization. It is done periodically and on a continuous basis. 

Key Definition

Defined By	Definitions
Casio	“Performance evaluation is the systematic description of job-related strengths and weaknesses of an individual or group”
Flippo	“Performance appraisal is defined as a systematic periodic and so far as humanly possible on an impartial rating of an employee’s e excellence in matters pertaining to his present job and his potential for a better job”
Dale S. Beach	“Performance appraisal is the systematic evaluation of an individual with respect to their performance on the job and their potential for the development”
Hegel	“Performance appraisal or merit rating is the process of evaluation of the employees in terms of requirement of the job for which he is employed”

With the help of the above discussion and definition: performance appraisal is a systematic process of evaluating and recording performance periodically. Such evaluation is done by collecting information about different factors of the job and the employee. Such factors include job knowledge, quality or quantity of output, leadership ability, independence, dependability, versatility, co-operatives etc. Organizations determine parameters on the basis of these factors and use them for performance appraisal. Performance appraisal is related to the following aspects of employee performance:

1. The superior collects information regarding job-related affairs of the employee
2. The superior analyzes such information to know the performance of the employee
3. The superior identifies and understands the reasons behind such level of performance
4. Feedback is given to the employee on the basis of job performance by the superior

Objectives/Need/Importance of Performance Appraisal

Performance appraisal is knowing the current job performance and future development potential of an employee. Hence, it is a very necessary and important function of human resource management. In this context, the objectives/need/importance of performance appraisal has been mentioned below:

1. To maintain a record to determine pay level, wage structures, salary raises etc.
2. To determine strengths and weaknesses of employees to ensure the right man is working at the right place and right compensation level
3. To assess potential in employees for further growth and development
4. To provide feedback to employees regarding their job performance and guiding to make the performance better if it is not at a satisfactory level
5. To influence the working habit and behavior of employees using performance appraisal as an essential tool
6. To determine training needs to improve weaknesses inherent in employees
7. To make promotion, punishment, confirmation and transfer decisions
8. To communicate personal goals and concerns of superiors and subordinates
9. To determine different HR policies and programs are effective or not

Process of Performance Appraisal

Performance appraisal is the systematic process of evaluating employees as per different factors and their parameters. It is knowing the current performance status and potential for future development of an employee. Noticeably, the process of performance appraisal follows the given steps:

Step 1: Establishment of Performance Standards

First of all, the organization has to set definite performance standards. It is the level up to which the performance of the employee should be. An organization sets standards for punctuality, dress, behavior, attitude, job targets etc. For these factors, the parameters of high to low are set to evaluate the employee’s performance. For instance, a Customer Service Desk employee of a bank must open 10 accounts every day. Here, ’10 accounts every day is the set performance standard for the employee.

Step 2: Communicating the Standards

In this step, the established performance standards are communicated to employees. This is making standards of performance known to the concerned employee. It is telling employees what to do and what not to do regarding their duties, responsibilities, attitude, behavior and work culture of the organization. Such communication of established performance standards is done through e-mails, circulars, notices, manuals, code of conduct papers etc.

Step 3: Measure Actual Performance

After establishment and communication of performance standards, actual performance is measured. The measurement is done during the working of the employee. It is capturing what the employees are doing at work regarding their duties and responsibilities. Their behavior and attitude at work place are also taken into consideration. It is measuring and making notes of the actual performance of employees.

Step 4: Comparing Actual Performance With Standard Performance

The obtained performance results are compared with the standard performance. The actual performance is up to mark with the standard performance is checked. After such comparison, the outcome could be either actual performance meets the standard performance level or actual performance could be lower than standard performance. Such outcome from the comparision is communicated with the concerned employee.

Step 5: Take Corrective Actions (If Required)

 It is fine if actual performance equals or goes higher than the standard performance level. But if actual performance is lower than standard performance, corrective actions are required. Such corrective actions could be in the form of an oral or written warning, suspension, termination, grade holding etc. 

Methods of Performance Appraisal

Performance appraisal is a systematic process of evaluating employee performance. For such evaluation, different methods are used. These methods of performance appraisal have been explained below:

Traditional Methods of Performance Appraisal

1.  Unstructured Appraisal: In this method, the appraiser is asked to write down his/her impression about the person being appraised. Such writing is done on a piece of paper in an unstructured way. The appraiser writes whatever he/she thinks should be written as no parameter is given for appraisal. This simple method can be used by anyone at any time. But appraisal under this method has a great chance of subjective biases of the appraiser.
2. Ranking Method: This is a very simple method in which the employees being appraised are ranked from the higher or lower order. Such ranking is based on different attributes such as punctuality, quality and quantity of output, leadership qualities, client handling, negotiation, level of co-operation, the need for supervision etc. All these attributes are ranked from ‘Excellent to Poor’. Each of these attributes of each employee is ranked and finally, the rank of each employee is determined. This is an economical method to use. In this method, ranks are relative and the difference of ranking can’t be quantified in numbers.
3. Checklist Method: In this method, a checklist of different traits and the corresponding option of “yes” or “No” is given to the supervisor. The supervisor tick marks either “Yes” or “No” corresponding to each trait while rating an employee. Later on, weights are assigned to each parameter by the HR department and the final score is calculated for each employee. This is an easy method to administer as the supervisor has to report on different traits of employees. But this method has a chance of biases of the rater and improper weight assignment to each trait. Moreover, this method focuses on personality traits rather than performance traits.
4. Forced Choice Method: In this method, the rater is forced to choose between the descriptive statements of equal worth. Statements are chosen from both sides ie. Favorable and unfavorable. The rater is asked to choose between favorable statements and unfavorable statements for an employee. Based on a number of favorable statements and unfavorable statements, the performance of the employee is judged. This method has less chance of rater biases as the rater must choose from given statements and he/she cannot add any new statements. However, this is a very time-consuming method as statements are to be prepared for individual employees engaged in different work at different levels in different departments.
5. Critical Incident Method: There could be different critical incidences in an organization. Employees also behave distinctly in different critical incidences. The job behavior of employees in such incidences is rated by the rating supervisor. Actual job behavior rather than personality traits of the employee is measured in this method. Generally, negative incidences have a higher impact and remembrance than positive incidences. Hence, the chance of negative incidences influencing the ranking is more as compared to positive incidences. 
6. Essay Method: Under this method, the appraising supervisor is asked to write a descriptive essay about the performance of the employee. Different parameters to rate are listed. The rater describes each parameter of the employee subjectively. Different traits of the employee can be explained in detail under this method The evaluation of the employee depends upon the writing skill and memory of the supervisor.
7. Performance Test: In this method, a proper performance test of the employee is taken. Such tests could be taken either through demonstration of skill in a particular situation or paper pen written examination. Such performance tests help in knowing the job knowledge of the employee. Such performance tests help in understanding the future potential of employees rather than current actual job performance.

Modern Methods of Performance Appraisal

1. Assessment Centers: Assessment centers are those organizations that have professional evaluators to assess the job performance of employees. An employee is sent to these centers for 1 to 3 days where the knowledge, skills and abilities of the employee are being assessed. The evaluators evaluate the personality, job knowledge, behavior, tactfulness, leadership qualities etc. of the employee. This is done with the help of tests and simulation exercises. Primarily the techniques of simulation exercises like management games, leaderless group discussion, role-play etc. are used to assess the employee performance. Assessment centers are used to assess the performance of executive-level employees or a large group of employees.
2. 360 Degree Performance Appraisal: This is a method of getting feedback about an employee from numerous people around the surrounding of that employee. It is taking feedback not just from superiors but also from subordinates, colleagues, customers and top management. Such appraisal is done to see the all-around proficiency of the employee and to determine her/his training and development needs.
3. Management By Objective (MBO): This is both employee and employer-driven method. In an organization, employees have their individual goals and managers also have their goals. They both sit and decide on common goals to achieve. Managers take note of employee performance directed towards their goal achievement and checks how near are these employees to achieve the common organizational goals. This is a fair method as the standard is known to employees against which their performance is to be measured.
4. Behaviorally Anchored Rating Scale (BARS): This is a method in which the behavior of employees at each critical incidences is measured through a rating scale. Employee behavior could be favorable to not acceptable levels. Such behavior is rated on a scale of 1 to 9. The score of such a rating scale is totaled to find the performance level of the employee.