The process of Performance Appraisal Systems

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Performance appraisal is a process by which organizations evaluate employee performance based on preset standards. The main purpose of appraisals is to help managers effectively staff companies and use human resources, and, ultimately, to improve productivity. When conducted properly, appraisals serve as a purpose by showing employees how to improve their performance, setting goals for the employees, and helping managers to assess their subordinates effectiveness and take actions related to hiring, promotions, demotions, training, compensation, job design, transfers, and terminations. Competent appraisal of individual performance in an organization or company serves to improve the overall effectiveness of the entity. According to D. McGregor, author of The Human Side of Enterprise, the three main functional areas of performance appraisal systems are: administrative, informative, and motivational. Appraisals serve an administrative role by facilitating an orderly means of determining salary increases and other rewards, and by delegating authority and responsibility to the most capable individuals. The informative function is fulfilled when the appraisal system supplies data to managers and appraisees about individual strengths and weaknesses. Finally, the motivational role entails creating a learning experience that motivates workers to improve their performance. When effectively used, performance appraisals help employees and managers establish goals for the period before the next appraisal.

A good appraisal system ensures the communication flow is enhanced, and organizational diagnosis and development are enhanced. The types of appraisal systems are broadly classified under two heads: Individual Appraisal Systems and Multiple Person Appraisal Systems. Individual Appraisal Methods Under this classification, the employee's performance in the given period is studied. Common forms of these are Annual Confidential Reports (ACR), Essay Evaluation, Management by Objectives (MBO) and Check list methods. These forms only study the employee's strengths and weaknesses in performance. Confidential Reports is perhaps the oldest technique. This is a report prepared by the employee's senior wherein he highlights the subordinate's strengths and weaknesses of performance in the past year. The inherent flaw here is that the feedback on the report prepared is not provided to the employee for whom this has been written because every report is kept confidential. Critical Incident and Checklist Techniques in this method, the superiors study and analyze the subordinate's best and worst incidents of behavior in the past year. That is the most critical incidents are analyzed. In the Checklist Technique, the supervisor is given a paper that has a set of statements that are expressive and purposive in nature, and the answers to which are Yes or No. The usual and typical questions are whether or not the performance was satisfactory and whether or not the standards were met.

Multiple Persons Appraisal Methods is this classification type compares the performances of all employees in a particular department. They are pitted against one another to see who has been the best performer and who has been the worst. Ranking, Paired Comparison, Forced Distribution, Performance Tests and 360-Degree Appraisal Techniques are all examples of Multiple Person Appraisal Systems. 360 Degree Appraisal Method is various stakeholders, such as the employee's immediate superior, other superiors who are not the bosses but who are in contact with the employee on a daily basis, the top management and the employee's subordinates, all provided data on his performance.  All 360 degrees of the employee's working and working style are analyzed but involve the whole circle of individuals with whom the employee interacts for work. This feedback is then passed onto the employee to increase productivity.

Benefits of 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.

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.

 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 analyzed 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.

 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.

 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 judgment 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.

Goals and Objectives

A performance appraisal system allows an employee to periodically receive feedback regarding his performance as well as his goals and objectives. An employee wants to know how well he/she matches up to the goals that have been set by the company. A performance appraisal will provide this information by being as objective as possible. The best way to do this is using some type of measurement. If an employee is expected to close five sales per day and someone is only closing two sales per day, then the performance appraisal should outline this information. The employee should be told about the variance and then management or the immediate supervisor should provide feedback. The feedback should give the employee some insight about what is causing the variance and how it can be corrected.

Every performance appraisal system should have a section that measures an employee's career development. This section should outline things the employee should do that will help advance his career. Some career development programs could be attending outside seminars, which are paid for by the company. An employee should always receive additional education and training within his area of expertise. Taking classes or working towards a degree is another way to help an employee develop. When an employee goes and visits other departments to see how they operate this shows initiative and show interest in a company or organization. An employee's performance appraisal should outline the things that an employee has chosen to do which will help define his career.

Recognition and Rewards

A performance appraisal should always include a recognition and awards section. An employee should always be recognized for contributions whenever possible. This helps to motivate, inspire and encourage an employee to go above and beyond the call of duty. Sometimes a simple thank you is all it takes. Whenever someone is recognized or rewarded, he feels like he is appreciated and this sets the stage for good relations between management and the employee. This will motivate them to perform better in the future to get more rewards.


A performance appraisal system should measure an employee on the ability and desire to take on leadership functions, whenever possible. Every job does not require this of an employee. When an employee is allowed to lead a team meeting or share the best demonstrated practice for completing a function with the team, it makes him feel like he is contributing and it increases confidence and self-worth. Taking on leadership functions allows the employee to develop, grow and ultimately assume larger leadership responsibilities. So it will make sure the employee will increase his performance in order to take the leadership in the organization which he wants to.

Performance appraisal isn't about the forms (although, often managers and HR treat it as such). The ultimate purpose of performance appraisal is to allow employees and managers to improve continuously and to remove barriers to job success. In other words, to make everyone better. Forms don't make people better, and are simply a way or recording basic information for later reference. If the focus is getting the forms "done", without thought and effort, the whole process becomes at best a waste of time, and at worst, insulting.

Prepairing for performance appraisal helps the employee focus on the key issue such as performance improvement, and to examine his or her performance in a more objective way. Unfortunately, many employees walk into the appraisal meeting not having thought about the review period, and so are unprepared to present their points of view. Being unprepared means being a reactive participant, or being a passive participant. Neither is going to help manager or employee. Employees can prepare by reviewing their work beforehand, identifying any barriers they faced in doing their jobs, and familiarizing themselves with their job descriptions, job responsibilities, and any job performance expectations set with the manager

Also performance appraisal or evaluation is to help the subordinate employee being appraised to do better, accomplish more, and get motivated to work toward making your organization more successful. It also can be used to acknowledge a job well done, a way of showing that you actually notice and appreciate the personal commitments many of your employees make.

You can also use a performance review to help a poorly performing employee "see" what it would take to succeed, and try to find out what that employee needs to improve!


• As well, feedback is encouraged in both directions: as such, employees are encouraged to prepare ratings of their supervisors. Also it provides constructive feedback to the individual regarding how their performance is seen. This provides a structured format for the discussion of performance issues on a regular basis. Feedback either reinforces performance strengths, or provides the opportunity to discuss resolution of performance deficiencies.

Performance History

This provides a performance history which is not dependent upon human memory, and which may be useful in the full range of personnel decisions, including compensation decision-making. Also to review past and present performance, identifying strengths and weaknesses.

Organizational Goals

• To clarify, for the individual, organizational expectations

• This provides an opportunity to view one's performance in the context of broader organizational goals.

• To assess future promotion prospects and potential

• To set objectives for the next period

Job Standards

This provides an opportunity for clearer articulation and definition of performance expectations.

Effective performance appraisal systems contain two basic systems operating in conjunction: an evaluation system and a feedback system.

The main aim of the evaluation system is to identify the performance gap (if any). This gap is the shortfall that occurs when performance does not meet the standard set by the organization as acceptable.

The main aim of the feedback system is to inform the employee about the quality of his or her performance. (However, the information flow is not exclusively one way. The appraisers also receive feedback from the employee about job problems, etc.)

One of the best ways to appreciate the purposes of performance appraisal is to look at it from the different viewpoints of the main stakeholders: the employee and the organization. 

Employee Viewpoint

From the employee viewpoint, the purpose of performance appraisal is four-fold:

(1) Tell me what you want me to do

(2) Tell me how well I have done it

(3) Help me improve my performance

(4) Reward me for doing well.

(From Cash, 1993)

Organizational Viewpoint

From the organization's viewpoint, one of the most important reasons for having a system of performance appraisal is to establish and uphold the principle of accountability.

For decades it has been known to researchers that one of the chief causes of organizational failure is "non-alignment of responsibility and accountability." Non-alignment occurs where employees are given responsibilities and duties, but are not held accountable for the way in which those responsibilities and duties are performed. What typically happens is that several individuals or work units appear to have overlapping roles.

The overlap allows - indeed actively encourages - each individual or business unit to "pass the buck" to the others. Ultimately, in the severely non-aligned system, no one is accountable for anything. In this event, the principle of accountability breaks down completely. Organizational failure is the only possible outcome.

In cases where the non-alignment is not so severe, the organization may continue to function, albeit inefficiently. Like a poorly made or badly tuned engine, the non-aligned organization may run, but it will be sluggish, costly and unreliable. One of the principal aims of performance appraisal is to make people accountable. The objective is to align responsibility and accountability at every organizational level.