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"Most folks scoff at the idea that there might be a perfect system for doing employee performance appraisal. They think that since their organization is "unique," then their system for analyzing employee performance must be unique, too. How foolish.
Don't scoff - there is an ideal method for the assessment process. In organisations that take employee performance appraisal seriously and use the process well, the system functions as an on-going process - not merely an annual event."
- Dick Grote
1. Among Performance Appraisal experts, there is a significant amount of agreement that there is an ideal cycle that, if followed, will generally produce superior results 1. The distinct phases or the number of steps of this cycle, however, varies across the literature available. While Dick Grote identifies four distinct phases2, Stephen P Robbins 3 outlines six different steps. Back home in India, management expert, Subba Rao 4 divides the cycle into nine steps. Before presenting an ideal performance evaluation system, it is important to review the various methods or techniques that have been developed along with the evolution of appraisal systems. A few of the important ones are outlined in the succeeding paragraphs.
Methods and Techniques for Appraisal
2. Graphic Rating Scales. This is the simplest and most popular method for appraising performance and offers a high degree of structure.5. It compares individual performance to an absolute standard, with each employee trait or characteristic rated on a bipolar scale that usually has several points ranging from "poor" to "excellent" (or some similar arrangement). The supervisor rates each subordinate by circling or checking the score that best describes his or her performance for each trait. The assigned values for the traits are then totalled. The traits assessed on these scales include employee attributes such as cooperation, communications ability, initiative, punctuality and technical (work skills) competence. The nature and scope of the traits selected for inclusion is limited only by the imagination of the scale's designer, or by the organisation's need to know. The one major provision in selecting traits is that they should be in some way relevant to the appraisee's job. The traits selected by some organisations have been unwise and have resulted in legal action on the grounds of discrimination.6
3. Advantages. The following are the advantages of following this system:-
(a) Graphic Rater Scales are structured and standardised. This allows ratings to be easily compared and contrasted - even for entire workforces. Each employee is subjected to the same basic appraisal process and rating criteria, with the same range of responses. This encourages equality in treatment for all appraisees and imposes standard measures of performance across all parts of the organization.7
(b) Rating scale methods are also very simple to use and understand. The concept of the rating scale makes obvious sense; both appraisers and appraisees have an intuitive appreciation for the simple and efficient logic of the bipolar scale. The result is widespread acceptance and popularity for this approach.
4. Disadvantages. The major drawbacks of the rating scale have been discussed below:-
(a) Trait Relevance. The traits selected may not be relevant in the same degree across all jobs of the appraisees. For example, the trait "instructional ability" might not be very important in a job that is tightly defined and rigidly structured. In such cases, a low appraisal rating for the same may not mean that an employee lacks the ability. Rather, it may reflect the fact that an employee has few opportunities to use and display that particular trait.
(b) Systemic Disadvantage. Rating scales, and the traits selected, generally attempt to provide an overall assessment criteria or standard for the apraisees. There is an assumption that all the possible indicators of performance are included, and all false and irrelevant indicators are excluded. This is an assumption very difficult to prove in practice. It is possible that an employee's performance may depend on factors that have not been included in the selected traits. Such employees may end up with ratings that do not truly or fairly reflect their effort or value to the organization. Employees in this class are systemically disadvantaged by the rating scale method.
(c) Perceptual Errors. This includes various well-known problems of selective perception (such as the horns and halos effect) as well as problems of perceived meaning. Selective perception is the human tendency to make private and highly subjective assessments of what a person is "really like", and then seek evidence to support that view (while ignoring or downplaying evidence that might contradict it). 8 In other words, we see in others what we want to see in them. An example is the supervisor who believes that an employee is inherently good (halo effect) and so ignores evidence that might suggest otherwise. On the other hand, a supervisor may have formed the impression that an employee is bad (horns effect). The supervisor becomes unreasonably harsh in their assessment of the employee and always ready to criticize and undermine them.
(d) Perceived Meaning. Problems of perceived meaning occur when appraisers do not share the same opinion about the meaning of the selected traits and the language used on the rating scales. For example, to one appraiser, an employee may demonstrate the trait of initiative by reporting work problems to a supervisor. To another appraiser, this might suggest an excessive dependence on supervisory assistance - and thus a lack of initiative.
(e) Rating Errors. The problem here is not so much errors in perception as errors in appraiser judgement and motive. Unlike perceptual errors, these errors may be (at times) deliberate. The most common rating error is central tendency. Busy appraisers, or those wary of confrontations and repercussions, may be tempted to dole out too many passive, middle-of-the-road ratings (e.g. "satisfactory" or "adequate"), regardless of the actual performance of a subordinate. Thus the spread of ratings tends to clump excessively around the middle of the scale. This problem is worsened in organisations where the appraisal process does not enjoy strong management support, or where the appraisers do not feel confident with the task of appraisal.
5. Ranking Method. Ranking employees from best to worst on a trait or traits is another option. Since it is usually easier to distinguish between the worst and best employees, an alternation ranking method is most popular. First, list all subordinates to be rated, and then cross out the names of any not known well enough to rank. Then, on a form indicate the employee who is the highest on the characteristic being measured and also the one who is the lowest. Then choose the next highest and the next lowest, alternating between highest and lowest until all employees have been ranked. 9
6. Paired Comparison Method. In this method all possible pairs of employees are formed.10 The evaluator indicates which individual in each pair is a better performer. An employee's rank is determined by the number of times he or she is chosen as the better performer in a pair. The person chosen most often is ranked first. Use of this method requires the comparison of many pairs even when the total number of employees is not very large. This method helps to make the ranking method more precise, though it is more complicated than straight ranking.
7. Checklist Methods. The checklist is a simple rating technique in which the supervisor is given a list of statements or words and asked to check statements representing the characteristics and performance of each employee. There are three types of checklist methods viz., simple checklist, weighted, and forced choice method.
(a) Simple Checklist. The checklist consists of a large number of statements9 like "is he punctual" or "is his behaviour courteous" etc. The rater checks to indicate if the behaviour of an employee is positive or negative to each statement. Employee performance is rated on the basis of number of positive checks. The negative checks are not considered. A difficulty may arise because the words or statements may have different meanings to different raters.
(b) Weighted Checklists. This involves weighting different items in the checklist, to indicate that some are more important than others. The performance ratings are multiplied by the weights of the statements and the coefficients are added up. The weighted performance score is compared with the overall assessment standards to find out the overall performance of the individual. However, it is expensive to design, and time consuming. Though this method is evaluative as well as developmental, it has the basic problem of the evaluator not knowing the items which contribute most to successful performance.
8. Critical Incident Method. With this method the supervisor keeps a log of positive and negative examples (critical incidents) of a subordinate's work related behaviour. Every six months or so, supervisor and subordinate meet to discuss the latter's performance, using the incidents as examples. This method has several advantages. It provides examples of good and poor performance the supervisor can use to explain the person's rating. It makes the supervisor think about the subordinate's appraisal all during the year (so the rating does not just reflect the employee's most recent performance). The list provides examples of what specifically the subordinate can do to eliminate deficiencies. The downside is that without some numerical rating, this method is not too useful for comparing employees or for salary decisions. Also it is time consuming for the evaluators, and it may be hard to quantify or structure the incidents into a final narrative evaluation.
9. Essay or Free Form Appraisal. This method requires the manger to write a short essay describing each employee's performance during the rating period. This format emphasises evaluation of overall performance, based on strengths/weaknesses of employee performance, rather than specific job dimensions. The downside is the time involved, there is no common standard, and the essay writing skills may be unequal with different evaluators.
10. Group Appraisals. Under this an employee is appraised by a group of appraisers, consisting of the immediate supervisor, other supervisors who have close contact with the employees work, managers or heads of department and consultants. The group appraises the performance based on comparison with set standards, finds out deviations, discusses reasons thereof and suggests ways to improve performance. This method is widely used for purposes of promotion, demotion and retrenchment appraisal.
11. Assessment Centre. This method was first developed by the German army in1930. This is not a technique of performance appraisal by itself but is a system, where assessment of several individuals is done by various experts, using various techniques. Individuals from various departments are brought together to spend two or three days working on an individual or group assignment similar to the ones they would be handling when promoted. Observers rank the performance of each participant in order to merit. All assesses get an equal opportunity to show their talents and capabilities and secure promotions based on merit. The centre also enables individuals working in low status departments to compete with people from well known departments and enhance their promotion chances.
12. Management by Objectives. MBO requires the manager to set specific measurable goals with each employee and then periodically discuss the latter's progress toward these goals. The term MBO generally refers to a comprehensive and formal organisation wide goal setting and appraisal program consisting of six steps:
(a) Set the organisation's goal.
(b) Set departmental goals.
(c) Discuss departmental goals
(d) Define expected results and set individual goals
(e) Performance reviews.
(f) Provide feedback.
13. There are three problems with MBO:
(a) Setting unclear goals
(b) It is time consuming
(c) Setting objectives with the subordinate turns into a tug of war with the management pushing for higher objectives and the subordinate pushing for lower ones.
The Ideal Performance Appraisal Cycle
14. Consultants who help organisations create effective performance appraisals, academicians who study the performance appraisal process, human resource managers, and organisational development practitioners with companies that have successfully developed their own performance appraisal systems come to the same conclusion: performance appraisal doesn't start with the form, it starts with the job
- planning what needs to be done and figuring out how it will be accomplished. 11
15. An organisational strategy is a prerequisite for developing an overall performance management system. Before any assessment of an individual's performance can be made, the organisation's direction must be clarified and communicated. Until the goal of the organisation has not been decided, it would be fruitless to decide the goals for individual units or the worker's performance assessment standards. Classic MBO (Management by objectives) theory, the core philosophy behind most successful appraisal systems, begins with the requirement that the organisation formulate long term goals and strategic plans. These plans lead to overall organisational objectives and the process continues downward to derivative objectives for individual units and sections, till every member of the organisation has specific and measurable objectives in consonance with the goals of the organisation. Once an agreement is reached between the supervisor and the subordinate on the job specifics, the next step is to actualise it, followed by the appraisal, preferably by both the appraiser and the appraisee. The review of the performance is done in a face to face meeting. Thereafter the process begins anew. Thus the ideal performance appraisal cycle can be divided into four phases:-
16. The Evaluation Process. The evaluation process involves:-
(a) Performance Planning. An organisation must have its mission clearly defined prior to undertaking the performance appraisal process. If the org does not have a specific direction, herculean efforts on the part of its members won't provide results. At the time that a job is designed and a job description formulated, performance standards should also be developed for the position. These standards and objectives should be clear and enough to be understood and measured. Vague phrases should not be used to define the standards. 12
(b) Communicate Performance Expectations to Employees. The appraiser and the appraisee meet to plan for the upcoming year. In the discussion, they come to an agreement about five major areas:-
(i) The key accountabilities of the subordinate's job i.e. the major areas within which he is responsible for getting results.
(ii) The specific objectives the subordinate will achieve within each accountability area
(iii) The standards that will be used to evaluate how well the subordinate has achieved each objective.
(iv) The performance factors, competencies etc that will be critical in determining how the results will be achieved (how he will conduct the job).
(v) The elements of the development plan the subordinate shall complete during the year.
17. This discussion generates an improved employee performance as he knows exactly what is expected of them. Moreover, the appraiser can now hold the appraisee accountable.
18. Employee Performance Execution. Over the course of the year, employee performance should be focused on achieving the goals, objectives and key responsibilities of the job. The superior provides assistance and feedback to the individual so as to increase the probability of success and creates conditions that motivate and also resolve any problems that may arise.
19. The appraiser and the appraisee meet periodically to review progress toward the plans and goals discussed in the employee performance planning meeting. The appraisee must seek out a feedback and the required guidance for the future. Also elements of the plan that have become obsolete are abandoned by mutual agreement and new objectives to respond to changing conditions are established.
20. Employee Performance Assessment. At the time for the formal employee performance appraisal, the appraiser reflects on how well the subordinate has performed over the course of the year, assembles the various forms and paperwork that the organization provides to make this assessment, and fills them out. The Appraiser and appraisee independently evaluate the degree to which the different elements of the annual plan were achieved. The appraiser completes an assessment of the subordinate's performance and typically has it reviewed and approved by senior management before discussing it with the subordinate. In an ideal system, the subordinate also completes a self assessment, collecting data, if necessary, from peers, subordinates, and others. The subordinate may submit the self appraisal to the appraiser to be used as a part of his overall assessment.
21. Employee Performance Review. The appraiser and the subordinate meet, to review their appraisals. They discuss the results that were achieved and the performance factors that contributed to their accomplishment. The discussion includes:
Results achieved (what was done).
Performance or behavioural effectiveness (how it was done).
Overall performance assessment.
Development. At the end of the review meeting they set a date to meet again to hold an employee performance planning discussion for the upcoming twelve months, starting the process anew.
22. This performance appraisal process not only transforms employee performance management from an annual event to an on-going cycle, it also tightly links the performance of each member with the mission and values of the organisation as a whole. The real value of the system is in focusing everyone's attention on what is genuinely important i.e. the achievement of the organisation's strategic goals through demonstration of the organisation's vision and values in each employee's day-to-day behaviour.
23. In the best-run and most efficient organisations, employee performance appraisal is a vital and vigorous management tool. No other management process has as much influence on individuals' careers and work lives. Employee performance appraisal can focus each person's attention on the company's mission, vision and values. Also ideally, the process can answer the two fundamental questions that every single person in the organization wants the answers to: What do you expect of me? And how am I doing?