The Concept Of Performance Appraisal Commerce Essay


In multinational and local companies, performance appraisal is one of the popular concepts. By Devries et al., (1981) the concept of performance appraisal has been defined as the process which is used to measure and evaluate the employee's achievements and behaviour consequently over a certain period of time. The main purpose to align the employee's efforts with the overall objective of the firm, by using performance appraisal techniques with an organization

When Performance appraisal brought together, consists of two simple words produce a raft of strong reactions, emotions, and opinions, in the organisational context of formal appraisal procedure. To achieve a variety of human resource management objectives most organisation all through the world despite of whether they are large or small, public or private, service or manufacturing, use performance appraisal with degrees of success (Longenecker, 1997). For performance appraisal organisations use different tools and they have number of goals, which repeatedly results in little confusion as to the exact purpose of the performance appraisal systems. On the other hand, an individual employee's behaviour and accomplishments can be measured by using performance appraisal over a specific period of time as performance appraisal is not just a set of instructions for supervisor to complete a form (Wiese and Buckley, 1998).

Lady using a tablet
Lady using a tablet


Essay Writers

Lady Using Tablet

Get your grade
or your money back

using our Essay Writing Service!

Essay Writing Service

Yong (1996) defines performance appraisal as "an evaluation and grading exercise undertaken by an organisation on all its employees either periodically or annually, on the outcomes of performance based on the job content, job requirement and personal behaviour in the position".

Heyel (1958) defines performance appraisal as a process of evaluating the performance and qualifications of the employees in terms of job requirements, for administrative purposes such as placement, selection and promotion, to provide financial rewards and other actions which require differential treatment among the members of a group as distinguished from actions affecting all members equally".

Performance appraisal objectives can be classified in a number of ways. One of the best known classifications was produced by McGregor (1987) who grouped the objectives as follows:-

• Administration: Providing an orderly way of determining promotions, transfers and salary increases.

• Informative: Supplying data to management on the performance of subordinates and to the individual on his or her performance.

• Motivational: Creating a learning experience that motivates staff to develop themselves and improve their performance.

From the First World War, the concept of performance appraisal is there, and it was called "Merit Rating Programme". The concept of performance appraisal is through lots of changes over a period of time. The areas which are evaluated have also changed (Sourabh, 2009).

From many thousands of years, the performance appraisal process can be traced easily. Though, the first recorded appraisal system in industry was in new Lanark cotton mills in Scotland around 1800 when Robert Owen's use the character books and blocks (Newstrom and Davis, 1993).

The department head used to appraise the employee, few decades ago. The feedback of the employees was only discussed to the immediate superior of the employee by the department head. Therefore, the feedback information was kept confidential. With the passage of time, the subordinate's performance were being appraised by the immediate superior and sent it to the head department which is kept confidential. At that time employees were not involved in their appraisal process. The immediate superior took are the decisions related to his pay hike, promotion etc. Thus, the system was non-transparent (Longenecker and Gioia, 1992).

Today's performance appraisal process is much more open and there is some scope of self appraisal of employee as well. The discussion of appraisal is between employee and superior but the decision is taken by department head on his pay hike or promotion etc. The feedback which is related to the performance of the employee is given directly to him. So, the process of performance is changed from the phase of non-transparency to transparency (Chawla, n.d.).

A performance appraisal in the transparency phase can be defined as the interaction between a subordinate and supervisor which is structured formal that usually takes the form of a periodic interview, in which the subordinate's work performance is examined and discussed, to identify weakness and strengths as well as opportunities for improvement and skills development (Edwin B, 1984).

Lady using a tablet
Lady using a tablet


Writing Services

Lady Using Tablet

Always on Time

Marked to Standard

Order Now

Top management is constantly appraising the performance of its subordinate managers in day to day interaction, whether an organisation accepts or not the usefulness of performance appraisal, whether it adopts a formal appraisal system or not. Further, the subordinates are doing the same to its lower employees. Performance appraisal is the heart of the art of managing whether it is formal or informal, that is why they are doing this (Wiese and Buckley, 1998).

Managing is the process which is active and only dealing entirely with present and the future, on the other hand performance appraisal is the static rating of an employee related almost to the past. Now days, some of the management were indentifying that "rating" by themselves had limited utility, the employees are happy that the management had changed into an art. The management had judged before that "management by hunch" could no longer be tolerated and for them measurements does not matter how unclear they were and that were essential for the future development of the art of managing (Beaumont et al., 1994).

As they feel the need for measurements which gave the birth to "systems" of management, who tried to apply measurement of different kinds of aspects and elements of the manager's job. For starting point for measurement or for the measuring devices, the number of the systems leaned on the betterment of the performance appraisal methods. The meaning of performance appraisal was expanded or broadened sometimes from a mere rating to include the whole concept of management with all its elements (Christophe, 1995).

Modern philosophy also forces the employee to participate in mutually setting goals with the supervisor. Typically, the contemporary performance appraisal systems are employed to achieve several objectives that include the following (Edmonstone, 1996; Longenecker, 1997):

Through the use of feedback system, the communication between the supervisor and subordinate improves.

By the modern systems of performance appraisal, they identify the scope of performance improvement and the means by which they are going to achieve this.

The individual training and development needs can be identified.

The individuals potential for promotion, placement etc. can be identified

On the basis of performance, the methods of performance appraisal use as base for remuneration and reward.

Through the setting of objectives and review of success or failure in achieving the objectives, it becomes a powerful mean of managerial control.

Performance appraisal must have two components in place in order to successfully achieve these rather broad objectives, for research as well as for organisational experience. Firstly, the organisation must have a technically sound rating process in place. The organisation must have clearly developed rating procedures; an appropriate, user- friendly instrument (form); and a system in place to monitor compliance and to store appraisal data. The second key component is the manger who is actually evaluating the employee's performance, to make performance appraisal system. The manager must have the skill to rate and to motivate to conduct the performance appraisals, which is being placed in the challenging role. Unfortunately, many managers do not possess these critical attributes (Fink and Longenecker, 1998).

According to Steers and Black (1994), "performance appraisal is one of the most important and often one of the most mishandled aspects of management". It has been said that it is the one of the challenging concepts of the human resource management and is viewed as either a futile bureaucratic exercise or worse, a destructive influence on the employee- supervisor relationship (Coutts and Schneider, 2004). It has been found that managers usually find the process of formal appraisal frustrating, political and less than a meaningful experience, which is not good for the development of the management of the organisation.

Foundations of Performance Appraisal

Performance appraisal measures that how fine people have been doing in their jobs and what they must apply to do it in a better way. It all depends on the content of the job and about the expected achievements in each aspect of their work (heath field, n.d.)

Following are the foundations in Performance Appraisal process:

Job Profile:

Job profile means the job description which focuses more on the detail of the tasks which the jobholder has to accomplish. It includes the detailed information of reporting relationship and normally covers all the responsibilities of the job. It shows that how the objectives of a team or a department and the mission of the organisation can be achieved by the individual's job (Wijesiriwardena, 2003).

Lady using a tablet
Lady using a tablet

This Essay is

a Student's Work

Lady Using Tablet

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

Examples of our work


An objective describes that what has to be achieved. Objectives define the expectation of organisations, functions, departments, teams and individuals to achieve.

According to Henman, (2000), there are two types of objectives:

Work or Operational Objectives:

It directs to the results which are to be achieved or the contribution to be made for the success of teams, departments and corporate objectives.

Developmental objectives:

It is the objectives which tell that what an individual should do and learn to improve their performance and their knowledge, skills and competencies. Or it can be called as training and personal development plans.


Competencies refer to the behavioural dimensions of a role. It is the behaviour which is required by the people to carry out their work satisfactorily. Competencies mean what the employees or people bringing to job in the form of different types and levels of behaviour. They ruled the aspects of the process of job performance (Grote, 1998).


Even more, organisations think the behaviour of all the employees should be governed that is why they set out the core. Value statements are prepared which define core values in areas like care for customers, concern for people, competitiveness, excellence, growth, innovation (Grote, 1998).

Three Essential Steps for Effective Performance Appraisal

The process of getting to know the people who work for the organisation involves three essential steps that are training, evaluation and review.


According to Tovey et al. 2006, Successful training is the accomplishment of a system in which every employee of the organisation geared towards improvement. It gives an approach in which employees are encouraged to evaluate himself or herself under the guidance of the appraiser.

How it works?

Firstly, the employee should be involved in the appraisal process. When an employee knows that the opinion of his or her can affect the other employees, as the opinion of the other employees can affect him or her. This

This not only empowers the employee and improves relations in the workplace, but it encourages higher productivity as well. This interactive approach is made complete with the leadership of the appraiser. Carefully administering praise coupled with constructive criticism keeps the workforce on its toes (Tovey, M.D. et. al., 2006)


The best methods for employee evaluation are based on results and behavior. While conducting performance appraisal based on employees' characteristic traits is quite common, the results are often subjective and unsatisfactory. A results-based approach to performance appraisal is by far the cleanest, most objective method of tackling the complex task of evaluation. It uses a rating system to measure productivity within a given timescale. If an employee makes a certain number of sales in a certain week, he or she can be rated by sheer worth as well as ranked against other employees. The study of behavior is closely tied to productivity. The pace of work, willingness to put in overtime and ability to work with others all contribute to overall productivity (Dransfield, Robert, 2000).


The review process should, again, employ the techniques of interactivity. Before sitting down together, the appraiser should give the employee a chance to review him or herself. This not only empowers the employee, but also saves a lot of time and possible contention during the actual discussion. Initially the appraiser should walk the employee through the process. The successful supervisor starts out with an overview of why the review session is needed. Then the supervisor takes the employee down a point-by-point list of every aspect of the job. In each case, the employee should be given a chance to describe his or her achievements and shortcomings. The supervisor should always supplement this with added insight. While praising and applying criticism, the supervisor maintains authority throughout the review and indeed, the entire appraisal process (Bacal, Robert, 2003)

Methods of performance appraisal

The Critical Incidents File

The critical incidents file is a performance appraisal method in which the manager writes down positive and negative performance behaviour of employees throughout the performance period. The critical incidents file is a form of documentation that is needed in this litigious environment (Lussier, Robert N., 2000)

The Rating Scale

The rating scale is a performance appraisal form on which the manager simply checks off the employee's level of performance. Some of the possible areas evaluated include quantity of work, quality of work, dependability, judgment, attitude, cooperation, and initiative (Giri, y. L., 2008)

Behaviourally Anchored Rating Scales (BARS)

BARS is a performance appraisal method combining rating and critical incidents. It is more objective and accurate than the two methods separately. Rather than having excellent, good, average, and so forth, the form has several statements that describe the employee's performance, from which the manager selects the one that best describes the employee's performance for that task. Standards are clear when good BARS are developed (Lussier, Robert N., 2005).


Ranking is a performance appraisal method that is used to evaluate employee performance from best to worst. Under the ranking method, the manager compares an employee to another employee, rather than comparing each one to a standard measurement. An offshoot of ranking is the forced distribution method, which is similar to grading on a curve. A predetermined percentage of employees are placed in performance categories: for example, excellent-5 percent, above average-l5 percent, average-GO percent, below average-l5 percent, and poor-5 percent (Kimball and Lussier, 2009)

The Narrative Method

The narrative method requires the manager to write a statement about the employee's performance. The system can vary. Managers may be allowed to write whatever they want, or they may be required to answer questions about employees' performance. The narrative is often combined with another method (Lene and Boissoneau, 1998)

Management by Objectives (MBO)

MBO is a process in which managers and their employees jointly set objectives for the employee, periodically evaluate the performance, and reward according to the results (Imran, arshia, 2008).

The concept of 'Management by Objectives' (MBO) was first given by Peter Drucker in 1954. It can be defined as a process whereby the employees and the superiors come together to identify common goals, the employees set their goals to be achieved, the standards to be taken as the criteria for measurement of their performance and contribution and deciding the course of action to be followed.

The essence of MBO is participative goal setting, choosing course of actions and decision making. An important part of the MBO is the measurement and the comparison of the employee's actual performance with the standards set. Ideally, when employees themselves have been involved with the goal setting and the choosing the course of action to be followed by them, they are more likely to fulfil their responsibilities (Raia, Anthony P, 1974).


Management By Objectives


The principle behind Management by Objectives (MBO) is to create empowered employees who have clarity of the roles and responsibilities expected from them, understand their objectives to be achieved and thus help in the achievement of organizational as well as personal goals.

Kroon (1995) has identified following important features and advantages of MBO:

Clarity of goals - With MBO, came the concept of SMART goals i.e. goals that are Specific Measurable Achievable Realistic, and Time bound.

The goals thus set are clear, motivating and there is a linkage between organizational goals and performance targets of the employees.

The focus is on future rather than on past. Goals and standards are set for the performance for the future with periodic reviews and feedback.

Motivation - Involving employees in the whole process of goal setting and increasing employee empowerment increases employee job satisfaction and commitment.

Better communication and Coordination - Frequent reviews and interactions between superiors and subordinates helps to maintain harmonious relationships within the enterprise and also solve many problems faced during the period.

360 degree feedback, also known as 'multi-rater feedback', is the most comprehensive appraisal where the feedback about the employees' performance comes from all the sources that come in contact with the employee on his job.

360 degree respondents for an employee can be his/her peers, managers (i.e. superior), subordinates, team members, customers, suppliers/ vendors - anyone who comes into contact with the employee and can provide valuable insights and information or feedback regarding the "on-the-job" performance of the employee (Ward, peter, 1997).

Many researchers are agreed that 360 degree appraisal has following four integral components:

1. Self appraisal

2. Superior's appraisal

3. Subordinate's appraisal

4. Peer appraisal.

Self appraisal gives a chance to the employee to look at his/her strengths and weaknesses, his achievements, and judge his own performance. Superior's appraisal forms the traditional part of the 360 degree performance appraisal where the employees' responsibilities and actual performance is rated by the superior (Garza, Melissa C., 2000)

Subordinates appraisal gives a chance to judge the employee on the parameters like communication and motivating abilities, superior's ability to delegate the work, leadership qualities etc. Also known as internal customers, the correct feedback given by peers can help to find employees' abilities to work in a team, co-operation and sensitivity towards others (Rao and Rao, 2005).

360 Degree Performance Appraisal

Self assessment is an indispensable part of 360 degree appraisals and therefore 360 degree Performance appraisal have high employee involvement and also have the strongest impact on behaviour and performance. It provides a "360-degree review" of the employees' performance and is considered to be one of the most credible performance appraisal methods (Lepsinger and Lucia, 2009).

360 degree performance appraisal is also a powerful developmental tool because when conducted at regular intervals (say yearly) it helps to keep a track of the changes others' perceptions about the employees. A 360 degree appraisal is generally found more suitable for the managers as it helps to assess their leadership and managing styles. This technique is being effectively used across the globe for performance appraisals (Armstrong, Michael, 2006).

Which Performance Appraisal Method Is the Best?

Determining the best appraisal method depends upon the objectives of the system. A combination of the methods is usually superior to any one method. For developmental objectives, critical incidents and MBO work well. For administrative decisions, a ranking method based on rating scales or BARS works well. The real success of performance appraisal does not lie in the method or form used; it depends upon the manager's human relations skills (Sims, Ronald R., 2002)


When it comes to performance appraisal, managers and employees agree about one thing: They hate going through them. Employees, managers and HR experts agree that fear, guilt, responsibility and resentment are the real reasons why most employees dread the appraisal process. Besides some think that it is a ritual that is mandatory to follow (Kulik, Carol T., 2004)

An effective review process helps organizations in three areas:

evaluation and improving personnel selection and training systems;

preventing wrongful termination; and

increasing real employee diversity

Good appraisals start with information from multiple sources, and they evaluate employees at all levels from top to bottom.

This system requires both the appraisee and appraiser to jointly assess the employee's ability to complete the duties and achieve the goals set forth in the previous appraisal (Ford, Deborah Kilgore, 2004)

HR professionals should consider the following steps and make the appraisal process simple yet effective:

The performance Appraisal form should reflect the strategic objectives of the company. Many organizations use a form that contains several sections.

The results and impact section should address accomplishments related to job responsibilities, goals and projects. It is a review of past performance (Simmons, J.E.L. et. al., 2003).

A skills and abilities section should discuss the ways those results were accomplished. By listing the core competencies for each job classification and for the entire organization - this section can address the kinds of behaviour that are critical for success (Stevenson and Starkweather, 2009)

Appraisal results, either directly or indirectly, determine reward outcomes. The better performing employees may get the majority of available merit pay increases, bonuses and promotions, while the poorer performers may require some form of counselling or in extreme cases no increases in pay. The assignment and justification of rewards and penalties through performance appraisal is a very uncertain and controversial matter and conveys both satisfaction as well as dissatisfaction with an employee's job performance. Whatever is the case, organizations should foster a feeling that performance appraisals are positive opportunities that provide for overall development of the employee, in order to get the best out of the people and the process. Hence performance appraisals should be positive experiences and it should never be used to handle matters of discipline (Floyd, Robert, n.d).


The outcome of the appraisal is either in the form of reward by way of increase in pay, additional bonus or incentive and/or promotion, or by way of not affecting any increase in pay, denying promotion etc. This gives emergence to the concept of Performance Related Pay (PRP) (Kane, Jeffrey S., 2002)

Performance related pay is not an easy option. Before embarking on its introduction the following factors should be taken into account.

Matching the Culture:

Successful PRP schemes need to match the culture and core values of the organization. It is only by understanding and working with the culture that it is possible to develop schemes (Martin, Graeme, 1994).

Linking PRP to the Performance Management process:

The focus when relating pay to performance needs to be one of the issues which emerge from the business planning process such as profitability, productivity, cost control, research initiatives, product and market development and generally increasing stakeholder value (West, Michael A et. al., 2003).

Balancing performance measures:

The performance measures used as a basis for rating must include a balanced mix of both input factors (skills and competences) and output factors (performance and contribution). The assessment upon which pay decisions are made should be based not only on performance in achieving objectives, contribution to organizational success and the levels of skill and competence achieved, but also on the degree to which the behaviour of individuals support corporate values in such areas as teamwork, total quality management, customer services, innovation, etc. (Amaratunga, Dilanthi, 2000).


PRP arrangements should allow for some flexibility in the criteria for reward and the method of payment (Egan, Janet, 2010)


Poor PRP schemes can produce a lot of single-minded individuals. The importance of teamwork should be recognized in structuring the scheme and in defining critical success factors and performance indicators. Individuals should be aware that achieving their targets at the expense of others is not considered competent performance (Armstrong, Michael, 2000).

Avoiding Short-termism:

To avoid the danger of PRP focusing attention on short-term results at the expense of more important longer-term objectives, long-term as well as short-term goals should be set wherever appropriate and short-term objectives should be discussed in their overall context (Shen, Jie, 2004).

Involvement in the design process:

The design of PRP schemes is usually an iterative process- trying and testing ideas on measures and structure with those who will eventually be involved in the scheme. It is also a valuable learning process, which can throw up fundamental strategic and business issues. Those due to participate in the scheme should have an input into agreeing critical success factors and performance indicators both for themselves and the organization (Fisher, Colin M. , 1995).

Getting the message across:

PRP provides a very powerful form of communication. To get the right messages across, the following question will have to be dealt with:

Assess reasons for PRP

Why do we want to introduce PRP?

What, realistically, do we expect to get out of it?

Assess readiness for PRP

Is PRP right for our culture?

Do we have the Performance Management and other processes in place required for successful PRP?

Are the attitudes of management and other employees in favour of PRP? (An attitude survey can be conducted to establish opinions).

Do the people concerned with managing PRP have the required skills and resources?

Is PRP likely to make a significant enough impact on performance to justify the costs of developing, introducing and operating the scheme? (Armstrong, Michael, 2003).

Decide whether or not to introduce PRP

Does the result of the above assessment indicate that PRP is right for the organization?

If no, what are the alternatives? There are many: Consider performance-related team pay, organization-wide profit sharing or profit-related pay plans, gain sharing, the use of incentive or bonus schemes, concentrating more on the motivational aspects of Performance Management, job re-design to increase motivation, performance-related training more intensive management coaching and training to improve leadership abilities, process re-engineering to improve organizational performance and productivity (Appelbaum, Steven H., 1996).

Brief, consult and involve employees

How should employees be informed of the organization's objectives and intentions concerning the introduction of PRP?

How do we minimize concerns about PRP through this briefing process?

To what extent and how should we consult and involve employees? (Harris, Lynette, 2001)

Design scheme

What criteria should be used for determining PRP awards? It can be an appropriate mix of:

Input criteria related to the skills and knowledge brought to bear on fulfilling role responsibilities

Process criteria related to the behavioral competencies used successfully in achieving results

Output performance indicators related to the achievement of objectives and meeting performance requirements as set out in statements of principal accountabilities or main tasks

Outcome contribution indicators which measure how outputs contribute to the achievement of team, departmental and organizational objectives and how the behavior of individuals support corporate values (McConville, Teri, 2006)

To what extent will it be possible to define the criteria in the key jobs for which PRP will operate?

Are performance measures available for these criteria, which will enable fair and consistent assessment to be made?

What form of rating system should be used?

How are we going to ensure that ratings are fair and consistent?

What are our policies be on the size of payments in relation to performance, contribution, skill and competence?

What should our policies to be on the rate of progression and any limits to progression within pay ranges? (Baron and Armstrong, 2004)

Does the organization want to make provision for performance-related lump sum bonuses for special achievement or sustained high-level performance at the top of a range?

Should PRP reviews be separated in time from performance reviews conducted as part of the Performance Management process?

What rating, pay increase and budget guidelines are going to be issued to managers implementing PRP in their departments?

Should performance matrices be used? If so, how should they be constructed?

How PRP will be monitored and its effectiveness be evaluated?

How the cost of PRP would be controlled?

What is the program for developing and introducing PRP? (Cunneen, P, 2006)

Brief and train

How the organization is going to brief and train line managers on the PRP scheme?

How the organization is going to brief employees in general on PRP so that they understand how it will operate and how they will benefit? (GILLEN, T,2007)


How the process should be started? Even after due care some unforeseeable problem will arise. It is often advisable to start with a pilot scheme, probably at management level so that they understand the principles, benefits and problem before applying PRP to the people for whom they are responsible.

How to monitor the introductory stages? It is essential to keep closely in touch with how things are going so that problems can be anticipated or dealt with swiftly when they arise (Harris, Lynette, 2001)


Dowling and Richardson (1997) explains performance evaluation as:-

Have clear objectives been established for the scheme the progress towards which can be measured and evaluated?

How to carry out a continuing monitoring and evaluation process?

Who is responsible for evaluation and taking any corrective action that may be required?

What points should be covered?

Evaluating Performance Related Pay

It is essential to evaluate the acceptability and cost effectiveness of PRP. The following questions should be answered (Dowling and Richardson, 1997).:

To what extent have the defined objectives of PRP been achieved?

How much have been paid out under the scheme?

What differentials have emerged between high/average performers over, say, 2-3 years?

What measurable benefits has PRP produced in the shape of improved organizational, team and individual performance?

How do managers regard PRP? Do they, for example, believe that it is operating fairly?

To what extent have rewards been linked to key and measurable areas of performance? Are rewards meeting people's expectations?

Do Performance Management processes provide adequate support for PRP?

Do the organization want to retain PRP in its present form? If not, what are the alternatives?

Performance Related Pay (PRP) in practice

There is no doubt the system of PRP must be made to fit the culture of the organization. This either means that the existing culture can be receptive to the competitive and individual elements of PRP or the culture has to be changed. PRP can be used as part of the change process but, on its own, it is unlikely to be powerful enough to prove successful (Garavan, Thomas, 1998)

Performance Related Pay (PRP) - a judgment?

Does Performance Related Pay work? Most experience in the United States is that greater use of performance pay results in improved organizational performance as measured by return on capital employed, particularly when applied to managerial pay. In the United Kingdom, the few studies have been largely negative or inconclusive. (Cardona, Francisco, 2007).

Finally, all research has confirmed that employees regard positively the concept of PRP but deny quite strongly that it acts as a motivator for them in practice, and are mostly critical of the resulting procedural and distributive justice. It can be concluded that employees may work harder, in a more focused way and get better results through a PRP system which is under printed by a robust performance management scheme but employees may do this through a mixture of necessity and fear, rather than a genuine desire to do so.


Before understanding the process of appraisal, the following terms are revised:

Performance refers to an employee's accomplishment of assigned tasks (Heathfield, Susan M., n.d.)

Performance Appraisal is the systematic description of the job-relevant strengths and weaknesses of an individual or a group (Patterson, Thomas F, 1987)

Appraisal period is the length of time during which an employee's job performance is observed in order to make a formal report of it (Edwards, Steven T, 2004)

Performance Management is the total process of observing an employee's performance in relation to job requirements over a period of time (i.e. clarifying expectations, setting goals, providing on-the-job coaching, storing and recalling information about performance) and then making an appraisal of it. Information gained from the process may be fed back via an appraisal interview to determine the relevance of individual and work-group performance to organizational purposes, improve the effectiveness of unit and improve work performance of employees (Cokins, Gary, 2009)

Designing an appraisal program poses several questions, which need answers (Nobile, R.J., 1991). They are:

Whose performance is to be assessed?

Who are the appraisers?

What should be evaluated?

When to appraise?

What problems are encountered?

How to solve the problems?

What methods of appraisal are to be used?

Whose performance should be assessed?

The answer is obvious - employees. When we say employees, it is individual or teams? Specifically, the appraisee may be defined as the individual, work group, division or organization (Grote, Dick and Grote, Richard C., 2002).

Who are the appraisers?

Appraisers can be immediate superiors, specialists from the human resource department, subordinates, peers, committees, clients, self-appraisals or a combination thereof (Grote, Dick and Grote, Richard C., 2002).

What should be evaluated?

One of the steps in designing an appraisal program is to determine the evaluation criteria. It is obvious that the criteria should be related to the job. The criteria for assessing performance can be (Grote, Dick and Grote, Richard C., 2002):

Quality & Quantity


Cost Effectiveness

Need for supervision

Interpersonal impact

Innovation & Creativity

Problem Analysis

Customer orientation

Market Orientation

Entrepreneurial Drive

Negotiation skills etc.

This is not an exhaustive list, but several other parameters too can be added depending on job requirements and organizational needs.

When to appraise/rate?

The most frequent rating schedules are semi-annual and annual. New employees are rated more frequently than older ones. Some practices call for ratings (Grote, Dick and Grote, Richard C., 2002):

Annually as per company practice

After first 6 months of employment

Upon promotion or within 3 months after promotion

When the job occupied has been revaluated upward

Upon special request, as when the employee's salary is below the average pay

What are the problems related to Performance Appraisal?

An ideal Performance Appraisal is done when the evaluation is free from biases and idiosyncrasies of the evaluator. There are many factors of appraisal that lead to failure of the system (Henderson, Richard I., 1984):

Negative attitude towards Performance Appraisal:

There is a large population of managers who are hostile or indifferent to the Performance Appraisal processes and/or do it badly if they do it at all.

According to sain, R.K., (2009)

Hostility from the appraiser:

The appraiser reacts indifferently to the appraising system because he believes that it is a waste of time. At times they feel that the scheme has nothing to do with their own needs and it exists to feed the personnel database.

Ii. Hostility from the appraisee:

Hostility from the people at the receiving end arises because they feel Performance Appraisal is simply another method in the hands of the managers to exercise their command and control prerogatives. They feel that the data collected will be utilized as evidence against them. In some cases appraisees even have a feeling that the outcome of the performance evaluation is predetermined by the management or their superiors and the process is completed only as a formality, due to which appraisees lack interest in the entire appraisal process.

Halo Error:

Under this type of error, one marked characteristic or latest achievement or failure of the appraisee (either favourable or unfavourable) may be allowed to dominate the appraisal for the entire year (Jacobs, Rick, 1985)

Logical Error:

This is a dangerous pitfall for the inexperienced appraiser. He is very often inclined to arrive at similar assessments in respect of qualities that seem logically related (Mayer, Roger C. And Davis, James H, 1999).

Constant Error:

When two appraisers rate an appraisee their ratings may be different. One may show consistent leniency by giving him high scores, the other my consistently rate him by giving low scores (Pike, Gary R., 1999).

Central Tendency:

It is also called as "Average Ratings". Here, the appraiser tends to avoid giving frank views to the question asked or the appraiser is in doubt or he has inadequate information or he simply wants to play safe and don't displease anyone (Murphy Terrence H., 2004).

Mirror-Image Error or Projection Error:

This error arises when an appraiser expects his own qualities, skills, and values in an appraisee. The appraiser may falsely believe that if the appraisee is good he has to be like him (appraiser) because the appraiser considers himself as the standard (Brenner, Rick, 2008)

Contrast Error:

This error occurs in the sequencing of ratings. If superior performers are rated first, average performers are rated down, if poorer performers come first, the average performers will be rated more highly (Smith, David E., 1986)

Biases of position, Sex, Race, Religion & Nationality:

There is a tendency to rate the occupant at a higher position more favourably than the person in a lower position. Similarly rating can be biased based on sex, religion and nationality too (Rubenstein, M. 2009)

Lack of Skill in conducting Appraisal discussion:

Conducting Performance Appraisal discussions require certain skills and training (Sims, Ronald R., 1988)

How to solve the appraiser's problems?

The best way to overcome the problem is to give training to the appraiser. Training can help improve the appraisal system to the extent that distortion occurring due to appraiser errors such as halo, leniency, central tendency and bias are minimized (McGregor, D and smith M.M., 1975).

Redman, Tom, et. al., (1993) explains two ways to solve appraiser's problems:

Factors that help to improve accuracy:

The appraiser has observed and is familiar with behaviours to be appraised.

The appraiser has documented behaviours calling for improvement.

The appraiser has a checklist to obtain the review on job-related information.

The appraiser is aware of personal biases and is willing to take action to minimize their effects.

Rating scores by appraisers of one group or organization are summarized and compared with those by other appraisers.

The appraiser focuses attention on performance related behaviours over which he has better control than on other aspects of evaluation.

Higher levels of management are held accountable for reviewing all ratings.

Factors that may lower accuracy:

The appraiser rates only when administrative actions are contemplated.

The appraiser is unable to express herself/himself honestly and unambiguously.

Appraisal systems, processes and instruments fail to support the appraiser

The appraiser is unaware of causes of rating errors.

The appraiser has to rate employees on factors that are poorly defined.

Techniques/methods of appraisal to be used?

There are different types of systems for measuring the excellence of an employee. Each type has its own advantages and disadvantages. The earlier developed methods, still being used, are Traditional Methods that are non-transparent in nature. While other newer methods are transparent in nature. Each of the method has its own format of appraisal form (Henderson, Richard I., 1984)