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Performance appraisal is the process of obtaining, analyzing and recording information about the relative worth of an employee. The focus of the performance appraisal is measuring and improving the actual performance of the employee and also the future potential of the employee. Its aim is to measure what an employee does.
According to Flippo, a prominent personality in the field of Human resources, "performance appraisal is the systematic, periodic and an impartial rating of an employee's excellence in the matters pertaining to his present job and his potential for a better job." Performance appraisal is a systematic way of reviewing and assessing the performance of an employee during a given period of time and planning for his future
Objectives Of Performance appraisal:
To review the performance of the employees over a given period of time.
To judge the gap between the actual and the desired performance.
To help the management in exercising organizational control.
Helps to strengthen the relationship and communication between superior - subordinates and management - employees.
To diagnose the strengths and weaknesses of the individuals so as to identify the training and development needs of the future.
To provide feedback to the employees regarding their past performance.
Provide information to assist in the other personal decisions in the organization.
Provide clarity of the expectations and responsibilities of the functions to be performed by the employees.
To judge the effectiveness of the other human resource functions of the organization such as recruitment, selection, training and development.
To reduce the grievances of the employees.
Performance appraisal of employee is important in managing the human resource of an organization. With the change towards knowledge-based capitalism, maintaining talented knowledge workers is critical. However, management classification of "outstanding", "poor" and "average" performance may not be an easy decision. Besides that, superior might also tend to judge the work performance of their subordinates informally and arbitrarily especially without the existence of a system of appraisal.
Performance appraisal of candidates in relation to a particular position, is a key task towards managing the human resources of an organization. Supervisors are concerned with performance
appraisal judgments and evaluations that they have to make on their subordinates. On the other hand, subordinates are increasingly realizing the importance of performance appraisal since it would very much affect their rewards and future career path. As the world began to shift towards knowledge based capitalism, it reminds all organizations on the importance of maintaining their talented knowledge workers.
Performance appraisal is usually conducted periodically within an organization to examine and discuss the work performance of subordinate so as to identify the strengths and weaknesses as well as opportunities for improvement among employees. Following this, most of the employers use the performance appraisal result to determine if a particular staff should be terminated or reinforced; as an employee development and coaching tool; to give a practical evaluation of an employee's readiness for promotion; and to serve as the foundation for giving merit bonus.
Some companies do not havea formal appraisal system and as a result the company gets infected with certain drawbacks like under motivated and under committed workers. In a recent Human Resources Forum poll, 16 percent of the people responding have no performance appraisal system at all. Supervisory opinions, provided once a year, are the only appraisal process for 56 percent of respondents. Another 16 percent described their appraisals as based solely on supervisor opinions, but administered more than once a year.
The improvement of performance appraisal systems is a matter of sharing a social definition of performance appraisal that is congruent with the original intent decided by the organisation. The management development professional can aid the process by being educated about appraisal systems, analysing the potential benefits to the organisation, and accepting that all appraisers need training. To help performance appraisal reach its fullest potential, management development professionals need to be political strategists, appraisal system experts, trainers, salespeople and catalysts, in combination.
An organization comes across various problems and challenges Of Performance Appraisalin order to make a performance appraisal system effective and successful. The main Performance Appraisal challenges involved in the performance appraisal processare:
Identification of the appraisal criteria is one of the biggest problems faced by the top management. The performance data to be considered for evaluation should be carefully selected. For the purpose of evaluation, the criteria selected should be in quantifiable or measurable terms
Top management should choose the raters or the evaluators carefully. They should have the required expertise and the knowledge to decide the criteria accurately. They should have the experience and the necessary training to carry out the appraisal process objectively.
Many errors based on the personal bias like stereotyping, halo effect (i.e. one trait influencing the evaluator's rating for all other traits) etc. may creep in the appraisal process. Therefore the rater should exercise objectivity and fairness in evaluating and rating the performance of the employees.
The appraisal process may face resistance from the employees and the trade unions for the fear of negative ratings. Therefore, the employees should be communicated and clearly explained the purpose as well the process of appraisal. The standards should be clearly communicated and every employee should be made aware that what exactly is expected from him/her. Â
The appraisal process might also be influenced by the following factors relating to the forms that are used by raters:
The rating scale may be quite vague and unclear
The rating form may ignore important aspects of job performance.
The rating form may contain additional, irrelevant performance dimensions.
The forms may be too long and complex.
The raters may not be adequately trained to carry out performance management activities. This becomes a serious limitation when the technical competence of a ratee is going to be evaluated by a rater who has limited functional specialization in that area. The raters may not have sufficient time to carry out appraisals systematically and conduct thorough feedback sessions. Sometimes the raters may not be competent to do the evaluations owing to a poor self-image and lack of self-confidence. They may also get confused when the objectives of appraisal are somewhat vague and unclear.
If the sincere appraisal effort put in by a rater is not suitably rewarded, the motivation to do the job thoroughly finishes off. Sometimes, low ratings given by raters are viewed negatively by management - as a sign of failure on the part of rater or as an indication of employee discontent. So, most employees receive satisfactory ratings, despite poor performance. Normally, the rater's immediate supervisor must approve the ratings. However, in actual practice, this does not happen. As a result the rater 'goes off the hook' and causes considerable damage to the rating process.
If the rater dislikes any employee, he may rate them at the lower end and this may distort the rating purpose and affect the career of these employees.
A person outstanding in one area tends to receive outstanding or better than average ratings in other areas as well, even when such a rating is undeserved.
To minimizing the halo effect, you should appraise all the employees by one trait before going to rate on the basis of another trait. In general, raters remember the recent appraisal of the employee and they usually follow appraisal results last time.
Some of the biases all managers should refrain from while conducting the performance evaluation are as follows:-
(i)Â Â Â Â Â Â Â First impressions (primacy effect): The appraiser's first impressions of a candidate may color his evaluation of all subsequent behavior. In the case of negative primacy effect, the employee may seem to do nothing right; in the case of a positive primacy effect, the employee can do no wrong (Harris, p.192).
(ii)Â Â Â Â Â Halo: The Halo error occurs when one aspect of the subordinate's performance affects the rater's evaluation of other performance dimensions. If a worker has few absences, his supervisor might give the worker a high rating in all other areas of work. Similarly an employee might be rated high on performance simply because he had a good dress sense and comes to office punctually!.
(iii)Â Â Â Â Horn effect: The rater's bias is in the other direction, where one negative quality of the employee is being rated harshly. For example, the ratee does not smile normally, so he cannot get along with people!
(iv)Â Â Leniency: Depending on rater's own mental make-up at the time of appraisal, raters may be rated very strictly or very leniently. Appraisers generally find evaluating others difficult, especially where negative ratings have to be given. A professor might hesitate to fail a candidate when all other students have cleared the examination. The Leniency error can render an appraisal system ineffective. If everyone is to be rated high, the system has not done anything to differentiate among employees.
(v)Â Â Â Â Â Â Central tendency: An alternative to the leniency effect is the central tendency, which occurs when appraisers rate all employees as average performers. For example, a professor, with a view to play it safe, might give a classÂ grades nearly equal to B, regardless of the differences in individual performance.
(vi)Â Â Â Â Â Stereotyping: Stereotyping is a mental picture that an individual holds about a person because of that person's sex, age, religion, caste, etc. By generalizing behavior on the basis of such blurred images, the rater grossly overestimates or underestimates a persons' performance. For example, employees from rural areas might be rated poorly by raters having a sophisticated urban background if they view rural background negatively.
(vii)Â Â Â Â Recency effect: In this case the rater gives greater weightage to recent occurrences than earlier performance. For example, an excellent performance that may be six or seven months old is conveniently forgotten while giving a poor rating to an employee's performance which is not so good in recent weeks. Alternatively, the appraisal process may suffer due to a 'spill over effect' which takes place when past performance influences present ratings.
In conclusion I would state that performance appraisals are important to any organization. The procedure should be carried out effectively. The reward and point system for human capital is vital for the employee development and also for the organization to reach its corporate goals. Some of the topics discussed aboce should be avoided and the above written issues should be catered to while a manager conducts a performance appraisal system within the organization.