PERFORMANCE APPRAISAL

UNIT- I INTRODUCTION

Definition of performance appraisal :

“It (performance appraisal) is the process of evaluating the performance and qualifications
of the employees in terms of the requirements of the job for which he is. employed, for the
purposes of administration including placement, selection for promotion, providing financial
rewards and other actions which require differential treatment among the members of a
group as distinguished from actions affecting all members equally”.
Beach has defined performance appraisal as follows:
“Performance appraisal is the systematic evaluation of the individual with regard to his or
her performance on the job and his potential for development”.

OBJECTIVES OF PERFORMANCE APPRAISAL

Performance appraisal practices show that organisations undertake performance

appraisal to meet certain objectives which are in the form of salary increase, promotion,
identifying training and development needs, providing feedback to employees and
putting pressure on employees for better performance.

1. Salary Increase: Performance appraisal plays a role in making decision about salary
increase. Normally salary increase of an employee depends on how he is performing his
job. There is continuous evaluation of his performance either formally or informally. In a
small organisation, since there is a direct contact between the employee and the one
who makes decisions about salary increase, performance appraisal can be an informal
process. However, in a large organisation where such contact. hardly exists, formal
performance appraisal has to be undertaken. This may disclose how well an employee is
performing and how much he should be compensated by way of salary increase. .

2. Promotion: Performance appraisal plays a significant role where promotion is based on

merit. Most of the organisations often use a combination of merit and seniority for
promotion. Performance appraisal discloses how an employee is working in his present
job and what are his strong and weak points. In the light of these, it can be decided
whether he can be promoted to the next higher position and what additional training will
be necessary for

him. Similary, performance appraisal can be used for transfer, demotion and discharge of
an employee.

3. Training and Development: Performance appraisal tries to identify the

strengths and weaknesses of an employee on his present job. This information
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can be used for devising training and development programmes appropriate for
overcoming weaknesses of the employees. In fact, many organisations use
performance appraisal as means for identifying training needs of employees.

4. Feedback: Performance appraisal provides feedback to employees about their

performance. It tells them where they stand. A person works better when he knows how
he is working; how his efforts are contributing to the achievement of organisational
objectives. This works in two ways. First, the person gets feedback, about his
performance and he may try to overcome his deficiencies which will lead to better
performance. Second, when the person gets feedback about his performance, he can
relate his work to the organisational objectives. This provides him satisfaction that his
work is meaningful. Thus, given the proper organisational climate, he will try his best to
contribute maximum to the organisation.

5. Pressure on Employees. Performance appraisal puts a sort of pressure on

employees for better performance. If the employees are conscious that they are being
appraised in respect of certain factors and their future largely depends on such appraisal,
they tend to have positive and acceptable behaviour in this respect. Thus, appraisal can
wok automatically as control device.

HUMAN RESOURCE DEVELOPMENT AND PERFORMANCE APPRAISAL

 Every organization must prepare a program that contains activities that can
improve the capabilities and professionalism of HR so that the
organization can survive and develop in accordance with the
organizational environment.

 The appraisal process starts from setting employee performance standards. A

manager must determine what achievements, skills or

outputs will be evaluated. These performance standards should be included in

the job analysis and job description.

 After the performance standards have been set, the next thing to do is
communicate to each employee, so that the employees know what is
expected by the company.

 Performance appraisals are used to tell employees how far they are performing
and the rewards they will get.
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 Performance appraisal also aims to evaluate and provide feedback to
employees that will develop employees and also the effectiveness of the
organization. Poor performance shows the need for training as well as good
performance can reflect the great potential that must be developed.

 HR development is all activities carried out by organizations in facilitating

employees to have the knowledge, expertise, and / or attitudes needed in handling
current or future work and the objectives of HR development are increasing
work productivity, achieving efficiency, minimizing damage, Reducing accidents,
improving service, maintaining employee morale, increasing career
opportunities, increasing conceptual abilities, improving leadership,
increasing remuneration, improving service to consumers.

 Performance evaluation is the process of reviewing how effectively

employees fulfill their job responsibilities and contributing to business
objectives.

 Performance appraisal is a process or activity carried out by individuals or groups

within a company to evaluate and communicate how employees do work by
comparing the results of their work with a set of standards. which has been made i

PERFORMANCE EVALUATION PROCESSS

STEP WISE PROCEDURE OF PERFORMANCE APPRAISAL

1) The appraisal process starts from setting employee performance

standards. A manager must determine what achievements, skills or
outputs will be evaluated. These performance standards should be
included in the job analysis and job description (Levy & Williams, 2004;
Caruth & Humphreys, 2008). After the performance standards have been
set, the next thing to do is communicate to each employee, so that the
employees know what the company expects from them.
2) The absence of communication can complicate the process, so
communication must be two-way. This means that management must get
feedback from employees regarding the performance standards that have
been set for the employee concerned.
3) The third stage of performance evaluation is to measure actual
performance or actual performance based on information available from
various sources. Such as observations, statistical reports, oral reports or
written reports.
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Measurement of performance must be carried out objectively based on
facts and findings, not to include feelings in this performance measurement.
4) Compare actual performance with existing, or predetermined standards.
This comparison will reveal whether or not there is a deviation
between actual performance and performance standards.
5) The fifth step is to communicate and discuss the results of the
assessment to the employees concerned. This step is one of the most
challenging tasks, because a manager must present an accurate assessment
so that the employee can accept the results of the assessment.
6) The discussion about this assessment allows each employee to find out his
strengths and weaknesses and their impact on their performance in the
future.

7) The final step in the assessment process is to take corrective or corrective

action as needed. If there is a deviation between the performance standard
and the employee's actual performance and it has been well communicated
between the two parties, then both the company and the employee must
take action to improve their performance.

PERFORMANCE PLANNING

• Employee performance planning is a key area in performance

management, which deals with improving and developing employee
performance to achieve overall business goals.
• Performance planning refers to the process of identifying the goals of an
individual or organization and planning the best ways to achieve them. It
focuses on underpinning the growth of employees and helping their career
development.
• During performance planning, the company objectives and the
performance goals should be communicated to the employee by his senior.
And the necessary training, resources, and support should also be provided.

PERFORMANCE PLANNING PROCESS

• In consultation with the superior, the employee formulates his job
objectives keeping in view the organizational/ unit objectives. An objective
is a statement of intent and states what the superior expects from the
employee to accomplish, how well and by when.
• Objectives are the tools for helping the employee understand the key
result expected of him during a period, generally on yearly basis. To be
operational, objectives should be result-oriented, specific, measurable and
time-bound.
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• 2. During the performance planning session, each objective and its
contribution to organizational objectives is discussed and it is also

determined how the accomplishment of each objective will be measured

Need for Performance Planning:

• Performance planning is the first step of performance management.

Performance planning is the process of determining what and how
a job is to be done in such a manner that both the employee and
his superior understand what is expected from the employee and
how success is defined and measured. Performance planning for an
employee flows from organizational or unit objectives and is
undertaken jointly by the employee and his superior.
• Performance planning is a simple way of ensuring that the
employee gives quality inputs that will ensure the output expected
from him. Planning gives a sense of direction and ensures good
economics for the company. In addition, it ramps up the
contribution of the individual and enhances his self-worth.

Planning Individual Performance

Individual performance can be planned, some of which include:

• 1. Task Analysis.
• 2. Key performance areas (KFA’s).
• 3. Key result areas.
• 4. Task and target identification.
• 5. Activity plans/ action plans.
• 6. Goal setting exercise.

All these methods emphasize the key tasks the individual is

expected to perform as part of his role during the year. Some
emphasize on detailed analysis and listing of all activities (Task
Analysis). A few emphasis the planning part of the work (Activity
plans) and some others emphasize the performance or what the
individual is expected to do (KPAs).

Tasks
• Jobs can best be understood as a series of tasks. A task is an action
designed to contribute a specified end result to the
accomplishment of an objective. It has an identifiable beginning
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and end that is a measurable component of the duties and
responsibilities of a specific job.
• A task has a definite beginning and end.
• Tasks are performed in relatively short periods of time. They are
usually measured in minutes or hours.
• Tasks are observable. By observing the performance of a jobholder,
a definite determination can be made that the task has been
accomplished.
• Each task is independent of other actions. Tasks are not dependent
on components of a procedure. A task is performed by an individual
for its own sake.
• A task statement is a statement of a highly specific action

1. Task Analysis
• A task analysis defines a job in terms of KSA necessary to perform daily
tasks. It is a structured framework that dissects a job and arrives at a reliable
method of describing it across time and people by composing a detailed
listing of all the tasks.

2. Key Result Areas

 “Key Result Areas” or KRAs refer to general areas of outcomes or outputs for which
the department's role is responsible.
 A typical role targets three to five KRA. Value of KRAs.
Identifying KRAs helps individuals:
 Clarify their roles
 Align their roles to the organisation’s business or strategic plan
 Focus on results rather than activities
 Communicate their role’s purposes to others
 Set goals and objectives
 Prioritize their activities, and therefore improve their time/work management
 Make value-added decisions Description of KRAs Key result areas
 (KRAs) capture about 80% of the department's work role.

Example-
ROLE- Product manager
Goal- Ensuring delivery of quality product within schedule
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Key Result Area

 Consumer Satisfaction
 Product management
 Operational cost control
 Quality Check
 Record keeping

Key Performance Area

 Maintaining good working conditions in plant

 Optimum resource utilization
 Process improvement
 Safety and prevention planning and control
 Working within the company’s SLA(service level
Agreement) ,GRC( Governance ,Risk management and compliance) policies

KPAs and Performance Planning:

 Identify KPAs and setting quantifiable targets wherever possible is the only way of
planning one’s performance.
 Some organizations stress on increasing objectivity in ratings through KPAs.
 KPAs help in reducing subjectivity but sometimes not in very visible ways.
 Objectivity in appraisals is difficult to achieve and ratings will always have
limitations . So for the organizations the only way out is to inculcate a planning
orientation and role clarity through KPAs than improving objectivity.
 There is no well-tested technology to identify the key performance areas

Importance of Role clarity in performance planning

 Role clarity is the degree to which employees have a clear understanding of their
tasks, responsibilities and processes at work.
 This clarity is not limited to their own role; it also includes their colleagues roles.
Clarity is an essential precursor of productivity, and a lack thereof can cause stress
and confusion.
 To reduce these feelings and improve both personal effectiveness and the
organization’s overall performance, role clarity is crucial.
 Employees who experience role clarity are 53% more efficient and 27% more
effective at work than employees who have role ambiguity.
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 It also improves trust among colleagues and increases the chance of an
employee committing to your organization for a longer period of time

KEY PERFORMANCE INDICATOR

• A Key Performance Indicator is a measurable value that demonstrates how effectively a

company is achieving key business objectives. Organizations use KPIs at multiple levels to
evaluate their success at reaching targets

Goal: The objective you are trying to achieve

Example;- Improve health

KPI: The measure(s) that help you understand whether you are achieving your results,
e.g. blood pressure, cholesterol levels, body mass index, etc.

Target: The level or benchmark you are aiming to achieve for your KPIs, e.g. blood
pressure of 120, cholesterol levels under 200 (mg/dL), or a body mass index between
18.5 and 25
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TYPES OF KPIS
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METRICS, KPI, KRI, ANALYTICS