List of Methods Used for Performance Appraisal of Employees:
1.Traditional 2. Straight Ranking 2. Paired Comparison 4. Graphic or Linear Rating Scale 5. Forced Description 6. Checklist Method 7. Free Essay Method 8. Critical Incident 9. Group Appraisal 10. Field Review 11.Modern Appraisal Methods.
List of Methods Used for Performance Appraisal of Employees
Performance Appraisal Methods (Traditional and Modern Methods)
The methods could be classified into two broad categories as:
1. Traditional Methods:
I. Straight Ranking Method:
It is the oldest and simplest method of performance appraisal, by which the man and his performance are considered as an entity by the rater.
No attempt is made to fractionalise the rate or his performance; the “whole man” is compared with the “whole man”; that is, the ranking of a man in a work group is done against that of another.
The relative position of each man is tested in terms of his numerical rank. It may also be done by ranking a person on his job performance against that of another member of a competitive group by placing him as number one or two or three in total group, i.e., persons are tested in order of merit and placed in a simple grouping.
This is the simplest method of separating the most efficient from the least efficient; and relatively easy to develop and use. But the greatest limitation of this method is that in practice it is very difficult to compare a single individual with human beings having varying behaviour traits.
Secondly, the method only tells us how a man stands in relation to the others in the group but does not indicate how much better or worse he is than another.
Thirdly, the task of ranking individuals is difficult when a large number of persons are rated.
Fourth, the ranking system does not eliminate snap judgements, nor does it provide us with a systematic procedure for determining the relative ranks of subordinates.
To remedy this defect, the paired comparison technique has been evolved.
II. Paired Comparison Method:
By this technique, each employee is compared every trait with all the other persons in pairs one at a time. With this technique, judgement is easier and simpler than with the ordinary ranking method. The number of times each individual is compared with another is tallied on a piece of paper.
These numbers yield the rank order of the entire group. For example, if there are five persons to be compared, then A’s performance is compared to B’s, and a decision is arrived at as to whose is the better performance. Then A is compared to C, D and E… in that order. Next B is compared with all the others individually.
Since he has already been compared with A, he is compared only with C, D and E. A similar comparison is made in respect of other personnel. Thus, by this method, we arrive at ten decisions, and only two are involved in each decision. The number of decisions is determined by the formula N (N-2), where N represents the number of persons to be compared.
The results of these comparisons are tabulated, and a rank is assigned to each individual.
This method is not suitable when a group is large because, in that case, the number of judgements becomes excessively large.
III. Graphic or Linear Rating Scale:
This is the most commonly used method of performance appraisal. Under it, a printed form, one for each person to be rated. According to Jucius, these factors are employee characteristics and employee contribution. In employee characteristics are included such qualities as initiative, leadership, cooperativeness, dependability, industry, attitude, enthusiasm, loyalty, creative ability, decisiveness, analytical ability, emotional ability, and co-ordination.
In the employee contribution are included the quantity and quality of work, the responsibility assumed, specific goals achieved, regularity of attendance, leadership offered, attitude towards superiors and associates, versatility, etc. These traits are then evaluated on a continuous scale, wherein the rather places a mark somewhere along a continuum.
For example:
Sometimes a discontinuous or multiple type of scale is used, wherein one factor is used along a discontinuous scale, consisting of appropriate boxes or squares which are to be ticked off. The scale may be represented by, and broken down into 3, 7, 10 or more parts and points. Often, the number of factors used varies from 9 to 12; in some methods, they are as many as 30.
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The rating scale method is easy to understand and easy to use, and permits a statistical tabulation of scores. A ready comparison of scores among the employees is possible. These scores indicate the worth of every individual. It is the most common evaluation tool in use today.
Besides, when ratings are objectively given, they can provide useful feedback.
However, this method suffers from a serious disadvantage, for it is arbitrary, and the rating is generally subjective. Often, the rating clusters on the high side when this method is used. Another severe limitation is that it assumes that each characteristic is equally important for all jobs. Perhaps, worst of all, it assumes everyone’s definition of ‘dependable’ is the same.
This method was introduced by Walter D. Scott to get the judgement of superiors on subordinates.
The two important features of this system are:
(a) The person who is making the judgement is freed from direct “quantitative” terms in making his decision of merit on any quality; and
(b) The person who is making the judgement can make as fine a discrimination of merit as he chooses.
These two facts eliminate the restrictions on natural judgement which other rating methods impose.
To ensure the success of this method, one should:
(a) Obtain the descriptions of persons at two extremes of the performance scale;
(b) Analyse these descriptions into simple behavioural qualities and present these either as a statement or as trait names;
(c) Establish the discrimination value (i.e., the index of the extent to which a quality is valued);
(d) Pair the statement or trait names and preference value;
(e) Pair high and low preference values forming an item;
(f) Prefer instructions for the rater, asking him to choose one “best fit” and one “least appropriate” statement for the employees;
(g) Validate the technique, determine discriminating responses, and assign weights;
(h) Prepare a scoring key on the basis of responses and weights.
IV. Forced Description Method:
This method was evolved by Joseph Tiffin after statistical work. This system is used to eliminate or minimise raters’ bias, so that all personnel may not be placed at the higher end or at the lower end of the scale. It requires the rater to appraise an employee according to a predetermined distribution scale. Under this system, it is performance and promotability.
For this purpose, a five-point performance scale is used without any descriptive statement. Employees are placed between the two extremes of ‘good’ and ‘bad’ job performances; for example, 10 per cent are placed at the top end of the scale, given superior or outstanding merit; 20 per cent given good rating (i.e., above the average)-, 40 per cent satisfactory (or average); 20 per cent fair; and 10 per cent unsatisfactory (or below average or poor).
This forced distribution method assumes that, of the total personnel, 10 per cent must go to the top grade, 20 per cent to the second grade, 40 per cent to the middle grade, 20 per cent to the grade next to the lowest end of the scale, and 10 per cent of the lowest grade.
In addition to job performance, employees are rated for promotability.
A three-point scale is often used for this purpose:
(a) Very likely promotional material;
(b) May or may not be promotional material; and
(c) Very unlikely to be promotional material.
The good point of this system is that by forcing the distribution in this manner, the problem of different appraisers using different parts of the scale is avoided. Second, this method tends to eliminate or reduce bias; but its use in wage administration leads to low morale and low productivity. Third, the method is highly simple to understand and very easy to apply in organisations.
V. Checklist Method:
Under this method, the rater does not evaluate employee performance; he supplies reports about it and the final rating is done by the personnel department. A series of questions are presented concerning an employee to his behaviour. The rater, then, checks to indicate if the answer to a question about an employee is positive or negative. The value of each question may be weighed equally or certain questions may be weighed more heavily than others.
An example of a checklist is given below:
This method suffers from bias on the part of the rater because he can distinguish positive and negative questions. Secondly, a separate checklist must be developed for different classes of jobs. This process can be expensive and time-consuming. Thirdly, it is difficult to assemble, analyse, and weigh a number of statements about employee characteristics and contributions.
VI. Free Essay Method:
Under this method, the supervisor makes a free form, open-ended appraisal of an employee in his own words and puts down his impressions about the employee.
He takes note of these factors:
(a) Relations with fellow supervisors and personnel assigned to him;
(b) General organisation and planning ability;
(c) Job knowledge and potential;
(d) Employee characteristics and attitudes;
(e) Understanding and application of company policies and procedures;
(f) Production, quality and cost control;
(g) Physical conditions; and
(h) Development needs for future.
The description is always as factual and concrete as possible. No attempt is made to evaluate an employee in a quantitative manner.
There are several advantages of this method. An essay can provide a good deal of information, especially if the supervisor is asked, for instance, to give two or three examples of each judgement he makes. The explanations will give specific information about the employee, and can reveal even more about the supervisor.
However, there are certain drawbacks too:
(i) It contains a subjective evaluation of the reported behaviour of an individual and may affect such employment decisions as promotion, lay-off, etc. There is no common criterion for evaluation,
(ii) Some appraisers may be good at narrative appraisal, while others may not have the facility to write a descriptive report,
(iii) The appraisal may be loaded with a flowery language about the quality of the ratee than with the actual evaluation of performance.
(iv) Under this system, the supervisor is required to devote considerable time and thought to the procedure. He has to be critical. The appraisal depends more on the appraiser’s literary skills than on an employee’s abilities and performance,
(v) Rater bias is easily introduced into such ratings, since the essay is in the supervisor’s own words.
VII. Critical Incident Method:
This method was developed following research conducted by the armed forces in the United States during World War II. The essence of this system is that it attempts to measure workers’ performance in terms of certain ‘events’ or ‘episodes’ that occur in the performance of the ratee’s job.
These events are known as critical incident. The basis of this method is the principle that “there are certain significant acts in each employee’s behaviour and performance which make all the difference between success and failure on the job.”
The supervisor keeps a written record of the events (either good or bad) that can easily be recalled and used in the course of a periodical or formal appraisal. Feedback is provided about the incidents during performance review session. Various behaviours are recorded under such categories as the type of job, requirements for employees, judgement, learning ability, productivity, and precision in work, responsibility and initiative.
To give an illustration, a materials manager may be trained to look for and recognise the following critical incidents in a purchasing agent’s performance:
(i) He treated a salesman in a markedly discourteous fashion;
(ii) He helped a buyer to prepare an unusually difficult purchase order;
(iii) He persuaded a local vendor to stock a particularly important material needed by the firm;
(iv) He rejected a bid that was excessively overpriced;
(v) He failed to return an important phone call; and
(vi) He improved the design of the internal material requisition form.
These critical incidents are discovered after a thorough study of the personnel working on a job. The collected incidents are then ranked in order of frequency and importance.
This method provides an objective basis for conducting a discussion of an individual’s performance. Vague impressions and general remarks are avoided, for the supervisor is trained to record accurately the actual incidents from the daily activities of an employee. This approach reduces the “recency” effect (most recent incidents get too much emphasis) of most performance ratings.
However, this method has significant limitations.
These include:
(i) Negative incidents are generally more noticeable than positive ones,
(ii) The recording of incidents is a chore to the supervisor and may be put off and easily forgotten,
(iii) Very close supervision may result, which may not be to the liking of an employee,
(iv) Managers may unload a series of complaints about incidents during an annual performance review session.
The feedback may be too much at one time and appear as a punishment.
VIII. Group Appraisal Method:
Under this method, employees are rated by an appraisal group, consisting of their supervisor and three or four other supervisors who have some knowledge of their performance.
The supervisor explains to the group the nature of his subordinates’ duties. The group then discusses the standards of performance for that job, the actual performance of the jobholder, and the causes of their particular level of performance, and offers suggestions for future improvement, if any.
The advantage of this method is that it is thorough, very simple and is devoid of any bias, for it involves multiple judges. But it is very time-consuming.
IX. Field Review Method:
Under this method, a trainer employee from the personnel department interviews line supervisors to evaluate their respective subordinates. The appraiser is fully equipped with definite test questions, usually memorised in advance, which he puts to the supervisor.
The supervisor is required to give his opinion about the progress of his subordinates, the level of the performance of each subordinate, his weaknesses, good points, outstanding ability, promotability, and the possible plans of action in cases requiring further consideration. The questions are asked and answered verbally.
The appraiser takes detailed notes of the answers, which are then approved by the supervisor and placed in the employee’s personal folder. The success of this system depends upon the competence of the interviewer. If he knows his business, he can contribute significantly to a reasonably accurate appraisal. Moreover, he keeps the supervisor on his toes by this evaluation and minimises bias and prejudice on his part.
This system is useful for a large organisation, and does not suffer from the weaknesses which are evident in other systems. The overall ratings are obtained by largely using a three-way categorisation, viz., outstanding, satisfactory and unsatisfactory. It relieves the supervisor of the need for filling out appraisal forms. The main defect is that it keeps two management representatives busy with the appraisal.
Weaknesses of Traditional Methods:
Many of the above traditional performance evaluation techniques have internal weaknesses.
For example:
i. Managers generally are not qualified to assess personality traits, and most managers are even not properly trained to conduct evaluation and performance interviews. They have very vague notions of the purpose of evaluations. Hence, they do a poor job.
ii. Some managers discourage good performance by overemphasising shortcomings and almost neglecting good work. Others have little effect on poor workers because they tend to sugar- coat their criticisms. Consequently, the real message is lost.
iii. Rater’s personality also plays an important part in the effectiveness of evaluation programmes. Some raters are by temperament, overtly harsh and give low ratings to all subordinates. Others are too lenient and give everyone a good rating; some raters play favourites, some are victims of ‘halo’ effect.
iv. The relative status of raters in their organisation is a factor that is important to the validity of performance appraisal. Using more raters or endorsements by a superior reduces rater bias and increases validity of appraisals.
2. Modern Appraisal Methods:
I. Appraisal by Results or MBO:
This method has been evolved by Peter Drucker. Management by Objectives (MBO) is potentially a powerful philosophy of managing and an effective way for operationalising the evaluation process. It seeks to minimise external controls and maximise internal motivation through joint goal setting between the manager and the subordinate and increasing the subordinate’s own control of his work. It strongly reinforces the importance of allowing the subordinate to participate actively in the decisions that affect him directly.
Management by Objectives can be described as “a process whereby the superior and subordinate managers of an organisation jointly identify its common goals, define each individual’s major areas of responsibility in terms of results expected of him and use these measures as guides for operating the unit and assessing the contributions of each of its members.”
From another point of view, MBO has been defined as:
(i) A system approach to managing and organisation, where those accountable for directing the organisation first determine where they want to take the organisation;
(ii) A process requiring and encouraging all key management personnel to contribute their maximum to achieving the overall objectives;
(iii) An effort to blend and balance all the goals of all key personnel; and
(iv) An evaluation mechanism.
Objectives of MBO:
MBO has an objective in itself. The objective is to change behaviour and attitudes towards getting the job done. In other words, it is result-oriented; it is performance that counts. It is management system and philosophy that stress goals rather than methods.
It provides responsibility and accountability and recognises that employees have needs for achievement and self- fulfillment. It meets these needs by providing opportunities for participation in goal-setting process. Subordinates become involved in planning their own careers.
MBO Process:
Although MBO has something of an aura of mystery about it, it really is fairly simple procedure. It consists of five basic steps as follows:
i. Set organisation goals, i.e., establishment of an organisation – wide strategy and goals. Such goals are expressed clearly and concisely and can be measured accurately. They have to be periodically revised. They should be challenging- high enough to provide motivation, but not so high that they are out of reach.
Otherwise they might result in frustration among the employees and lead to defensive behaviour. Clear attainable goals help channel energies in specific directions, and let the subordinate know the basis on which he will be rewarded.
ii. Joint goal setting, i.e., establishment of short-term performance targets between the management and the subordinate in a conference between them. The individual manager must clarify in his own mind the responsibilities of their subordinates. Organisation Charts and Job Descriptions may be used.
The manager may ask each subordinate to write down his personal goals, while in turn the manager writes out the goals he thinks subordinates should have. The manager and subordinate then discuss them, reach an agreement about them, and put them in writing.
The manager may ask his subordinates how he personally can help achieve these goals, and request suggestions. The goals set should be flexible enough to accommodate new ideas, and they should stress individual responsibility.
The goals should be specific, and clear and should be quantified for easier measurement; for example:
a. To prepare, process, and transfer to the office superintendent, all accounts payable vouchers within three working days from the receipt of the invoice;
b. To cut each day, 350 metres of wire to standard three-metre lengths, with a maximum scrap of 10 metres;
c. To use programme evaluation and review technique (PERT) for all new plant layouts;
d. To hold weekly meetings with all subordinates, etc.
iii. Performance reviews, i.e., frequent performance review meetings between the managers and the subordinate. During the initial stages of the MBO programme, monthly reviews may be used and then extended to quarterly reviews. For maximum effectiveness, reviews probably should be made more often than once each year.
iv. Set check posts, i.e., establishment of major check posts to measure progress. The quirk of human nature demands that the manager be constantly alert and exercise sound judgement. However, as subordinate learns to establish objectives and direct activities towards their goals, the rate of control and amount of checking gradually can be decreased.
v. Feedback- The employees who receive frequent feedback concerning their performance are more highly motivated than those who do not feedback that is specific, relevant, and timely helps satisfy the need most people fell about knowing where they stand.
Thus, under MBO programme, an employee and his supervisor meet and together define, establish, and set certain goals or objectives which the employee would attempt to achieve within the period of prescribed time. They also discuss the ways and methods of measuring employee progress.
The goals which are set are work-related and career-oriented. The employee periodically meets his supervisor to evaluate the employee’s goal progress. If necessary, these goals may be revised. Frequent feedback and supervisor-subordinate interaction are the other key features of this method. The supervisor plays supportive, counseling and coaching roles.
In sum, the three foundations of MBO are:
(a) Goal setting;
(b) Feedback; and
(c) Participation — all these enhance performance.
This method emphasises the value of the present and the future instead of that of the past, and focuses attention on the results that are accomplished and not on personal traits or operational methodology.
An employee is not judged in terms of operational methodology, or in terms of initiative, cooperativeness, attitude, emotional stability, or any other human quality, but on the basis of the achievement of the targets that have been set. This method is largely applied to technical, professional, supervisory or executive personnel, and not to the hourly-paid workers because their jobs are usually too restricted.
Benefits of MBO Programme:
Management by Objectives is an important performance tool.
It has certain advantages:
i. MBO helps and increases employee motivation because it relates overall goals to the individual’s goals; and helps to increase an employee’s understanding of where the organisation is and where it is heading.
ii. Managers are more likely to compete with themselves than with other managers. This kind of evaluation can reduce internal conflicts that often arise when managers compete with each other to obtain scarce resources.
iii. MBO results in a “means ends” chain. Management aims at succeeding lower levels in an organisation established targets which are integrated with those at the next higher level. Thus, it can help insure that everyone’s activity is ultimately aimed toward organisation’s goals.
iv. MBO reduces role conflict and ambiguity. Role conflict exists when a person is faced with conflicting demands from two or more supervisors; and role ambiguity exists when a person is uncertain as to how he will be evaluated, or what he has to achieve. Since MBO aims at providing clear targets and their order or priority, it reduces both these situations.
v. MBO provides more objective appraisal criteria. The targets that emerge from the MBO process provide a sound set of criteria for evaluating the manager’s performance.
vi. MBO forces and aids in planning. By forcing top management to establish a strategy and goals for the entire organisation; and by requiring other managers to set their targets and plan how to reach them.
vii. MBO identifies problems better and early. Frequent performance review sessions make this possible.
viii. MBO identifies performance deficiencies and enables the management and the employees to set individualised self-improvement goals and thus proves effective in training and development of people.
ix. MBO helps the individual manager to develop personal leadership, especially the skills of listening, planning, counselling, motivating and evaluating. This approach to managing instills a personal commitment to respond positively to the organisation’s major concerns as well as to the development of human assets. Such a manager has a far greater chance to move ahead within the management hierarchy than the non-MBO type.
McGregor observes that MBO, in most cases, does some good without costing much. He points out, “Under proper conditions, participation and consultative management provide encouragement to people to direct their creative energies toward organisational objectives, give them some voice in decisions which affect them, and provide sufficient opportunities for satisfaction of social, egoistic and self-fulfillment needs.”
MBO is regarded as a superior method to the traditional systems.
However, it suffers from certain drawbacks, such as:
i. MBO programme takes a great deal of time, energy and form – completing on the part of managers. An individual becomes so enmeshed in performing assigned functions that he often loses sight of the goal, the reason for performance. It has been called “the activity trap” by Odiorne. It requires a great deal of investment of the top management’s time and effort before it arrives at realistic targets and reviews the performance.
ii. MBO is far from panacea. Those executives who have been involved very often find it difficult to apply MBO concepts to their own work habits. They find it hard to think about the results of work rather than the work itself. They tend to overemphasise goals that are easy to quantify, sometimes forgetting that workers often behave almost like children at play – when the game no longer challenges, interest is soon lost.
iii. In some areas, such as cutting costs or increasing sales, measuring performance is a straight forward and more or less objective matter. But in many other areas, such as subordinate development, appraising performance can be an acute problem.
iv. Many times neither the managers know the rationale and value of MBO, nor are the subordinates clear about the goals. This unnecessarily becomes more exasperating.
v. There is sometimes a “tug of war” in which the subordinate tries to set the lowest targets possible and the supervisor the highest.
A number of pitfalls have been indicated, by the researchers, in the way of effective working of MBO programmes. The reasons for failure in the MBO process are- hasty implementation, unknowledgeable users, lack of top management follow through, and support, overemphasis on structure, treatment as another gimmick, failure to carefully monitor and encourage the MBO process during hard initial years of implementation.
The most important reason why MBO fails is that many managers are unconcerned with performance, and they reward other criteria (e.g., reward people for “looking productive,” rather than for “being productive”).
More concern is given to how actions look than the effect of these actions. Instead of rewarding good performance, managers frequently reward other characteristics- things like getting along with people, good work habit, physical appearance, and personality. Further, organisations offer a narrow differentiation in the awards that are offered.
As a result of community wage patterns, union contracts, and organisational policies, salaries for similar jobs tend to bunch quite closely, irrespective of the performance that individuals exhibit on these jobs. This undermines the concept of MBO.
MBO can be effective technique for performance evaluation and for motivating subordinates, by developing communication between executives at all levels. Those at the bottom must be willing to listen to the voice of experience, and those at the top willing to accept fresh ideas from lower-echelon employees. Similarly, executives must keep abreast of new programmes, especially the modern ideas that have been developed in the academic circles.
II. Assessment Centre Method:
The Assessment Centre concept was initially applied to military situations by Simonies in the German Army in the 1930s and the War Office Selection Board of the British Army in the 1960s. The purpose of this method was and is to test candidates in a social situation, using a number of assessors and a variety of procedures.
The most important feature of the assessment centre is job-related simulations. These stimulations involve characteristics that managers feel are important to the job success. The evaluators observe and evaluate participants as they perform activities commonly found in these higher level jobs.
Under this method, many evaluators join together to judge employee performance in several situations with the use of a variety of criteria. It is used mostly to help select employees for the first level (the lowest) supervisory positions.
Assessments are made to determine employee potential for purposes of promotion. The assessment is generally done with the help of a couple of employees and involves a paper-and-pencil test, interviews and situational exercises.
Some of the other features of this system are:
(i) The use of situational exercises (such as an in-basket exercise, business game, a role-playing incident and leaderless group discussion);
(ii) Evaluators are drawn from experienced managers with proven ability at different levels of management;
(iii) They evaluate all employees, both individually and collectively, and each candidate is given one of the three categories- more than acceptable, less than acceptable and unacceptable;
(iv) A summary report is prepared by the members, and a feedback on a face-to-face basis is administered to all the candidates who ask for it.
Purposes of Assessment Centres:
Assessment centres are used for the following purposes:
i. To measure potential for first level supervision, sales and upper management positions; and also for higher levels of management for development purposes.
ii. To determining individual training and development needs of employees.
iii. To select recent college students for entry level positions,
iv. To provide more accurate human resource planning information.
v. To make an early determination of potential.
vi. To assist in implementing affirmative action goals.
The Assessment Centres generally measure interpersonal skills and other aspects such as: organising and planning; interpersonal competence (getting along with others), quality of thinking, resistance to stress, orientation (motivation) to work, dependence on others, other community communication and creativity.
The ability to organise, plan and make decisions, as in basket simulations and scores obtained on paper and pencil, psychological tests, are important to the overall assessment score.
Procedure:
The Assessment Centre programme commonly used follows this procedure. First, a leadership group is established; each member supporting a predefined position, but the group must arrive at consensus. Then a task force is used with an appointed leader, who decides on a course of action.
Simulation games and in-basket exercises are used to test organisational and planning abilities. Oral report is made by the candidate, which tests his communication skills and straight into his present position. Personal interviews, and projective tests are used to assess work motivation, career orientation, and dependence on others. Paper and pencil tests measure intellectual ability.
The duration of Assessment centre programme varies with the persons. For example, centres designed for selection of first line supervisors, sales personnel, and management trainees generally last for a day or less; while those used for higher-level managers may run for two or three days or longer if used for developmental and not for selection purposes.
Problems:
Assessment Centre ratings are said to be strongly influenced by the participant’s interpersonal skills, judges tend to evaluate the quality of the individual’s social skills rather than quality of the decisions themselves.
Further, the organisation and decision-making abilities are measured by in-basket exercises, verbal ability and personal traits. Thus, the relatively inexpensive paper-and- pencil tests for measuring potential may be as accurate as the high-cost high-stress assessment centre.
The Assessment Centre approach, therefore, suffers from many real hazards. One of the most obvious is the exam-taking. Solid performers in day-to-day operations suddenly choke in simulated environment. Another drawback is die potential bad effects on those not selected to participate in the exercise. The cost of assessing an individual in a particular job level is prohibitive.
Many Assessment Centres have one particular weakness- immediate supervisors nominate participants. Employees who are curious, independent, aggressive, and intelligent may never be selected because such traits, though important at higher levels, are not accepted by lower-level supervisors. Further, employees who receive a poor report from the centre may react in negative ways and might demoralise an employee who was once an asset.
To make Assessment Centre Programme successful, it is necessary that heavy emphasis must be placed on clear statement of goals, the obtaining of top management commitment, job analysis, assessor training and programme audit and evaluation.
III. 360 Degree Performance Appraisal:
360 Degree Appraisal is a system or process in which employees receive confidential, anonymous feedback from the people who work around them. The inputs for the said appraisal are provided by subordinates, peers, superiors, team members, customers, suppliers and anyone else who could come into contact with the employee (whose performance is evaluated by multiple raters) in question.
The appraisal measures behaviours and competencies exhibited by the ratee over a period of time. The skills that are being appraised include listening, planning, goal setting, etc. Other aspects of behaviour such as teamwork, leadership effectiveness are also assessed. The responses from different raters (subordinate’s appraisal, peer appraisal, superior’s appraisal along with self-appraisal) are combined to have an objective assessment of ratee’s performance and behaviours.
The feedback could be brutally frank — but reliable and credible — since it is obtained in an anonymous manner. As such, the quality of information obtained tends to be high. There is less scope for individual bias or prejudice coming in the way of an unbiased assessment.
The emerging discrepancies between an employee’s self-appraisal and the appraisals from others could be put to close examination. Such a probing exercise could uncover gaps and help the ratee to cover them up through efforts aimed at self-growth and self-development. Not surprisingly, over 90 per cent of Fortune 500 companies have implemented some form of 360 degree feedback system for career development, performance appraisal, or both.
Organisations like NTPC, State Bank of India, Titan Industries, Bajaj Auto, and Dr. Reddy’s Laboratories have reposed their faith in the 360 degree appraisals and have been using these increasingly in recent times. The method is highly popular in almost all leading IT companies, including the likes of Infosys, Wipro, TCS, KPMT Cummins, etc.
Understanding 360 Degree Appraisal Systems:
360 degree appraisals are beneficial for small and mid-sized organisations, but where the employee strength is large logistics could act as a deterrent in evaluating all the employees. In such cases, many large organisations conduct the feedback on a section of the top-rung managers.
In most 360 degree feedback processes, key competencies are identified and statements are framed focusing on these. The statements are focused on 10-12 competencies but can range from 45-75. The individual employee will then provide feedback to himself as well as get feedback from others.
It is necessary that 360 degrees be introduced in the company for the right reasons (developmental purposes). Organisations need to ask themselves certain questions. What is it that we are looking for? Is this appraisal just for a salary change or other developments? If it is only for the first reason then the answer is certainly ‘no,’ but if it is the second then any appraisal benefits.
This appraisal system has more to do with understanding, communicating and articulating in the right way; it is what ensures the success of the programme. If it is not articulated well-enough, different people will see it differently. For instance, people in leadership may view things in a different manner from subordinates or peers.
It is necessary to have some kind of common understanding. Lack of this understanding will spoil relations, create negativism, and have a dampening impact on team morale and productivity. Confidentiality is the key when it comes to feedback from peers and direct reports. It can often backfire if the right culture does not exist in the organisation.
The ‘boss’ might feel threatened or there might be hard feelings between peers. A 360 degree feedback programme is doomed if HR is its only champion. It needs buy-in from senior management as well. Companies should also train people in giving and receiving feedback.
Organisations that implement 360 degree feedback without first checking and developing their managers’ feedback skills risk serious damage to teamwork and morale. To provide constructive feedback, people need training and practice.
The gains will outweigh the high costs of the training as the feedback delivered to participants becomes focused, targeting the behaviours associated with value creation and destruction.
Ultimately, the goal should be to create a culture in which individuals feel comfortable giving and receiving feedback — both positive and negative — on a real-time basis rather than waiting for an annual review.
To ensure the successful implementation of a 360 degree appraisal system, the following things need to be taken care of:
i. Positioning of the Process:
Employees should be made aware that it is a tool to assess an employee’s leadership competencies.
ii. Building Transparency in the Process:
It is important that all who are involved in 360 degrees — the employees and respondents — are educated about the process and its usage. The peers and direct reports should be made comfortable by promising confidentiality of the feedback. Another important aspect is that the respondent nomination must be done by the employees themselves.
iii. Helping the Employee to Understand the Feedback:
The 360 degree feedback process will not be impactful and effective unless efforts are made to help the individual employee interpret the results. Many organisations identify a professional counsellor who works along with the employee to understand the result and accept the feedback.
iv. Preparing the Development Plan:
An employee must prepare a development plan which will need to be monitored and reviewed. Most companies at this stage involve the manager of the employee to ensure that there is buy-in of the development plan, and that the employee also has internal organisation support.
The development plan should include aspects such as training, job rotation, additional assignments or agreement by the employee that he will change any undesirable behaviour that he demonstrates. Most development plans require 75 per cent initiative by the employee and 25 per cent by the company.
v. Mentorship and Coaching Support:
Providing support either through an internal resource or by outsourcing to an external expert. The expert acts as a friend, philosopher and guide to the individual employee. The employee can go to this expert to discuss whatever he may be embarrassed to discuss with anyone else, or may not know how to deal with.
vi. Use Statistical Procedures:
It would be useful to deploy weighted averages or other quantitative approaches in combining evaluations. The raters, of course, should be careful not to rely on subjective combinations of data while coming to a conclusion. It is also essential to check the information for prejudices, preferences relating to age, gender, ethnicity or other group factors.
IV. Human Resource Accounting (HRA) Method:
The HRA (also known as human asset accounting) method refers to activity devoted to attaching money estimates to the value of a firm’s internal human organisation and its external customer goodwill. If able, well-trained personnel leave a firm, the human organisation is worthless; if they join it, its human assets are increased.
If distrust and conflict prevail, the human enterprise is devalued. If teamwork and high morale prevail, the human organisation is a very valuable asset. Human resource accounting is the art of valuing, recording and presenting systematically the worth of human resources in the books of account of an organisation.
According to M.N. Baker, “Human resource accounting is the term applied by the accountancy profession to quantify the cost and value of employees to their employing organisation.”
Objectives:
The main objective of human resource accounting is to facilitate the management to get information on the cost and value of human resources. Human resources accounting brings to light the quantum of human resources and indicates the right control of conservation, depletion and appreciation of it in the right perspective.
It provides data to the interested persons about the cost of human resources and correspondingly comparing it with the benefit obtained out of its utilisation. The objective of HRA is not merely the recognition of the value of all resources used by the organisation, but also includes the management of human resource which will enhance the quantity and quality of goods and services.
The basic objective of HRA is to facilitate the efficiency of human resource. It is basically adopted to treat human resources as assets, to generate human data about human resources, to assign value to human resources and to present human assets in the balance sheet.
Limitations:
HRA is not welcomed wholeheartedly due to the following reasons:
i. There is no proper clear-cut and specific procedure or guidelines for finding cost and value of human resources of an organisation. The systems which are being adopted have certain drawbacks.
ii. The period of existence of human resource is uncertain and hence valuing them under uncertainty in future seems to be unrealistic.
iii. There is a fear that HRA may dehumanise and manipulate employees.
iv. For e.g., an employee with a comparatively low value may feel discouraged and develop a complex which itself will affect his competency to work.
v. The much needed empirical evidence is yet to be found to support the hypothesis that HRA as a tool of the management facilitates better and effective management of human resources.
vi. In what form and manner, their value to be included in the financial statement is the question yet to be classified on which there is no consensus in the accounting profession.
vii. As human resources are not capable of being owned, retained and utilised, unlike the physical assets, there is problem for the management to treat them as assets in the strict sense.
viii. There is constant fear of opposition from the trade unions as placing a value on employees would make them claim rewards and compensations based on such valuation.
ix. Another question is, on value being placed on human resources how should it be amortised. Is the rate of amortisation to be decreasing, constant or increasing? Should it be the same or different for different categories of personnel?
x. In spite of all its significance and necessity, tax laws do not recognise human beings as assets.
xi. There is no universally accepted method of human asset valuation.
xii. As far as our country is concerned, human resource accounting is still at the developmental stage. Much additional research is necessary for its effective application.
V. Behaviourally Anchored Rating Scales (BARS):
This is a new appraisal technique which has recently been developed. Its supporter claim that it provides better, more equitable appraisals as compared to other techniques.
The procedure for BARS is usually five stepped:
i. Generate Critical Incidents- Persons with knowledge of the job to be appraised (jobholders/ supervisors) are asked to describe specific illustrations (critical incidents) of effective performance behaviour.
ii. Develop Performance Dimensions- These people then cluster the incidents into a smaller set (or say 5 or 10) of performance dimensions. Each cluster (dimension) is then defined.
iii. Reallocate Incidents- Any group of people who also know the job then reallocate the original critical incidents. They are given the cluster’s definitions, and critical incidents, and asked to redesign each incident to the dimension it best describes. Typically, a critical incident is retained if some percentage (usually 50 to 80%) of this group assigns it to the same cluster as the previous group did.
iv. Scale of Incidents- This second group is generally asked to rate (7 or 9 point scales are typical) the behaviour described in the incident as to how effectively or ineffectively it represents performance on the appropriate dimension.
v. Develop Final Instrument- A subset of incidents (usually 6 or 7 per cluster) are used as “behaviour anchors” for the performance dimensions.
Below is given an example of how the method works in practice, based upon the research done on grocery clerks in a large grocery chain store in USA.
A number of critical incidents were collected there and these were then clustered into eight performance criteria, viz.:
i. Knowledge and Judgement.
ii. Conscientiousness.
iii. Skill in Human Relations.
iv. Skill in Operation of Register.
v. Skill in Bagging.
vi. Organisational ability of Check stand work.
vii. Skill in monetary transactions.
viii. Observational ability.
In the chart is given the BARS for one of these criteria, viz., “knowledge and judgement.” The scale ranges, from one to seven, for rating performance from “extremely poor” to “extremely good”.
Though BARS technique is more time-consuming and expensive than other appraisal tools, yet it has got certain advantages, such as:
i. A more accurate gauge, since BARS is done by persons expert in the technique, the results are sufficiently accurate.
ii. Clear Standards. The critical incidents along the scale help to clarify what is meant by “extremely good” performance, “average” performance and so forth.
iii. Feedback. The use of critical incidents may be more useful in providing feedback to the people being appraised.
iv. Independent dimensions. Systematically clustering the critical incidents into 5 or 6 performance dimensions, helps in making the dimensions more independent of one another.
v. Rater Independence. The technique is not biased by the experience and evaluation of the rater.
Methods/Techniques of Performance Appraisal
There are several methods and techniques for measuring the excellence of employee performance. Different authors have suggested different approaches and have classified the methods accordingly.
The most widely accepted categorization comes from Strauss and Sayles.
They have classified performance appraisal methods into traditional, and newer or modern methods:
(1) Traditional methods lay emphasis on rating of an individual’s personally traits such as initiative, dependability, drive, responsibility, creativity, integrity, leadership potential, intelligence, judgement, organising ability, etc.
(2) Newer or Modern methods place more emphasis on the evaluation of work results – job achievements – than on personality traits.
Results-oriented appraisals are comparatively of recent origin and tend to be more objective and worthwhile especially for counselling and development purposes. However, it is important to note that these two types are not exclusively separate.
Appraisal of employees according to their traits, attributes and general behaviour on the job necessitates the evaluations of work performance of the individual. Similarly, appraisal of the results, work performance and goal achievement of the employee includes some assessment of personality characteristics and employee traits. In fact, it is not always possible to measure employee contributions as an individual’s work is intermixed with that of others.
The methods and techniques therefore differ for obvious reasons like:
(i) Personal traits of employees;
(ii) Job requirements;
(iii) Employee groups;
(iv) Degree of precision attempted in appraisals; and
(v) Outlook or attitude of management.
I. Traditional Methods:
1. Straight Ranking Method:
This is the oldest and simplest method of performance appraisal. This yields a ranking from best to worst of all individuals comprising the group. The rater simply picks out the individual he considers best, the one he thinks next best, etc. and ranks them in order on the basis of worth.
In doing this, the appraiser considers person and performance as an entity; no attempt is made to fractionalize the appraisee and his performance into component elements – “Whole man” is compared with the “Whole man”. The ranks assigned by rater are then averaged and then relative ranking of each individual in the group are determined.
Though simple, this method suffers from the lack of a common and unvarying standard. Edwin E. Ghiselli and C. W. Brown observe that the ranking method is difficult to use in large groups and as differences in ranks do not indicate equal differences in ability between individuals, the method has limited use. Moreover, it is very subjective method and with its use only very general distinctions can be made.
To simplify the problem of ranking method, a variation in the technique was used to increase its value for use in larger groups. And this new technique was called as Paired Comparison Method. By this technique each employee is compared with every other person, one at a time. With this technique, the judgement is easier and simpler than ordinary ranking method the number of times each individual is compared with another is tallied on a piece of paper.
These numbers yield the rank order of the entire group For example, suppose there are five persons in a group. Employee A’s performance is compared with B’s, and a decision is made concerning whose performance is the best. Then A is compared with C, D and E Similar comparison is made with respect to all the individuals.
Thus, by this method we arrive at ten decisions and only two are involved in each decision the number of decisions can be determined by the following formula:
Number of comparisons = N (N-1)/2
In this formula, N stands for the number of personnel to be compared the results of these comparisons can be tabulated, and a rank created from the number of times each person is considered to be superior.
2. Man-to-Man Comparison Method:
This technique was used by the U. S. Army during the First World War In this method, certain factors are selected for the purpose of analysis such as leadership, dependability, initiative etc. and a scale is designed by the rater for each factor. Each man to be rated is compared with the scale and certain scores for each factor awarded.
Thus, instead of comparing a “whole man” to a “whole man”, personnel are compared to the “key man” with respect to one factor at a time. This system of measurement is used in job evaluation and is known as the factor comparison method. Though it is highly useful in measuring jobs, it is of very limited use in measuring people since the devising of scales is extremely complicated task.
In the grading method, certain categories of worth are established in advance and carefully defined. The selected features may be analytical ability co-cooperativeness, dependability, self-expression, job-knowledge, judgement’ leadership and organizing ability etc.
These may be rated as – A = outstanding; B = very good; C = good or average; D = fair; E = poor; or any other scale. The actual performance of an employee is then compared with these grade definitions and he is allotted the grade which best describes his performance.
4. Graphic or Linear Rating Scale:
This is the most commonly used traditional, systematic method of performance appraisal which gained favour because qualitative differences become easier to visualize. Graphic or Linear rating scales provide the rater with a continuum representing varying degrees of a particular characteristic This method enables the rater to assess the degree of certain qualities required for the job such as industriousness, reliability and dependability.
In employee characteristics are included such qualities as initiative leadership cooperativeness, attitude, enthusiasm, loyalty, creative ability, decisiveness’ analytical ability, emotional ability, etc.
In the employee contribution are included quantity and quality of work, the responsibility assumed, specific goals achieved, regularity of attendance, versatility etc. These traits are evaluated on a continuous scale or sometimes a discontinuous scale is also used. Consisting of appropriate boxes or squares which are to be ticked off.
The degree is usually measured on a scale which can vary from three point (good, average, and poor) to several points. The anchor points are usually described as excellent-poor, high-low, or never-always, as per the format. For instance, the first two dimensions are aptly used when listing the traits. However, description statement of a trait like “is he punctual on his job?” requires the never-always dimension.
Traits, characteristics and abilities can be simply listed or listed with some description. Similarly scales can be defined in different ways.
The rating scale method is easy to understand and easy to use with the advantage of statistical tabulation of scores. A ready comparison of scores among the employees is possible. These scores indicate the worth of every individual. This method is most popular in use today.
However, it puts a heavy burden on the rater who has to evaluate the performance on scales involving as many as five degrees on more than ten factors for perhaps twenty or more people. Hence, obtaining accuracy becomes difficult. Moreover, this method is rather arbitrary and the rating is generally subjective.
5. Forced Choice Description Method:
In order to improve accuracy of rating an attempt was made by psychologists to reduce the rater’s intentional or un-intentional biases through Forced Choice Description Method. This method was evolved after a great deal of research conducted for the military services during Second World War.
This rating form prepares a series of items or statements which usually describe the degree of proficiency. Under this method, the rater cannot tell how the final rating is going to turn out as he is provided with a number of statements from which to choose in each set the one that is most and the one that is least descriptive of the individual being rated. Thus, in this method, the rater has a form on which each item consists of a group of four statements, two of them favourable and two unfavourable.
For example:
(i) Makes little effort and individual instruction
(ii) Organizes the work well
(iii) Lacks the ability to make people feel at ease
(iv) Has a cool even temperament.
Or again:
(i) Is punctual and careful
(ii) Is a hard worker and co-operative
(iii) Is dishonest and disloyal
(iv) Is overbearing and disinterested in work
The rater is asked to indicate which of these four phrases is most and least descriptive of the employee. Favourable terms get plus credit whereas unfavourable terms get no credit. The employee also gets plus credit if one of the negative phrases is checked as his least characteristic. The rater does not know which item in each of the two pairs will count and thus the possibility of bias and subjectivity is reduced.
This method is designed to eliminate errors of leniency and the halo effect. However, Lee W. Cozan observes, “Although this method appears to have greater objectivity, four basic requirements are hard to meet – trained technicians to develop the scales, a different collection of items for each job or occupational group, a fair agreement on the criteria of success and failure, and acceptance by supervisors who must rate their subordinates without knowing the relative ratings they are giving”.
6. Forced Distribution Method:
Under this method devised by Joseph Tiffin, it is assumed that it is possible and desirable to rate only two factors, viz. job performance and promotability.
Performance scale of five points without any descriptive statements is usually used. Employees are placed between the two extremes of “good” and “bad” performances. For instance, 10 percent are placed at the top end of the scale, given superior or outstanding merit; 20 percent given good rating indicating above the average; 40 percent satisfactory indicating average; 20 percent fair; and 10 percent unsatisfactory or below average or poor.
The forced distribution method assumes that, of the total personnel, 10 percent must go to the top grade, 20 percent to the second grade, 40 percent to the middle grade, 20 percent to the grade next to the lowest end of the scale, and 10 percent of the lowest grade. The most often used distribution is 10, 20, 40, 20, and 10 percent which equates with a normal distribution.
Promotability is measured on a three-point scale:
(i) Very likely promotional material;
(ii) May or may not be promotional material; and
(iii) Very unlikely to be promotional material.
Forced distribution method overcomes the problem of different appraisers using different parts of the scale. It also minimizes bias and is simple to understand and easy to implement. However, its use in wage administration gives rise to problems of low morale and low productivity. This method is useful for rating a large number of employees.
7. Checklist Method:
Under this method, the rater does not evaluate employee performance, it is merely reported. The evaluation of the worth of “reported” behaviour is done by the personnel department. A series of questions are presented concerning the employee and his behaviour. The rater checks to indicate if the answer to a question about the employee is yes or no. The value of each question may be weighted equally or certain questions may be weighted more heavily than others.
This method has a disadvantage that it is difficult to assemble, analyze and weigh a number of statements about employee characteristics and contributions*. Again, a separate listing of questions must be prepared for different types of jobs, since those used for clerical positions cannot be used for management. There is also likelihood of rater’s bias because he can easily distinguish positive and negative questions.
However, the checklist method has the advantage of requiring only a reporting of facts from the rater and he is saved from the task of distinguishing various degrees for each of ten or more factors for each of twenty or more employees.
In this method, the appraiser makes a free form, open-ended appraisal of an employee in his own words and puts down his impressions about the employee.
He usually considers following factors:
(i) Relations with fellow supervisors and personnel assigned to him
(ii) General organization and planning ability
(iii) Job knowledge and potential
(iv) Employee characteristics and attitudes
(v) Understanding and application of company policies and procedures.
(vi) Production, quality and cost control
(vii) Physical condition; and
(viii) Development needs for future.
The description is kept at the skill of the appraiser to make it most factual and concrete. In this method the employee is not evaluated in quantitative manner. The advantage of this method lies in the fact that it can produce rich variety of data to support each judgement with examples and specific information about the employee.
This method essentially suffers from the drawback of rater’s bias and subjectivity. Also, it is time consuming and depends on the rater’s literary skills than on an employee’s abilities and performance. Moreover, there is no common criterion for evaluation.
This method was developed after a research conducted by Armed forces in the U. S. during Second World War. A critical incident means a significant act by an employee exceeding or failing any or the requirements of his job. This method is based on the principle that “there are certain significant acts in each employee’s behaviour and performance which make all the difference between success and failure on the job”.
Under this method, the appraiser is required to maintain a record of major observations of what he feels are work behaviours critical to the difference between success and failure. Information has to be produced on’ the basis of systematic observation of actual job performance.
Advantage of this method is that it provides an objective basis for discussion and avoids vague impressions and general remarks. It also reduces “recency” effect.
However, this method is time-consuming and cumbersome. Quite often, negative incidents are more noticed than positive ones. If recording of incident is delayed, it is easily forgotten. Close observation may be resented by employees. Discussing incidents after considerable time lapse may evoke emotions and problems may arise. Employees may become defensive with feedback.
10. Group Appraisal Method:
Under this method, employees are rated by a group of appraisers who possess some knowledge of their performance. After the supervisor explains to the group the nature of duties of the employee, the group discusses the actual performance of the job holder and offers suggestions for future improvement, if any. Though the method is simple, thorough and devoid of bias since there are many judges, jt suffers from the drawback that it is extremely time consuming.
11. Field Review Method:
Under this method, a trainer employee from the personnel department interviews line supervisors to evaluate their respective subordinates. The appraiser is fully equipped with definite test questions, usually memorised in advance, which he puts to the supervisor.
The supervisor is required to give his opinion about the progress of his subordinates, the level of performance of each subordinate, his weaknesses, good points, outstanding ability, promotability, and the possible plans of action in cases requiring further consideration. The appraiser takes detailed notes of the answers, which are then approved by the supervisors and placed in employee’s personal file.
The success of field review method depends upon the competence of the interviewer. If he knows his job, he can contribute significantly to accurate appraisals. This method relieves the supervisors of the tedious writing work of filling in appraisal forms.
It also ensures a greater likelihood that the supervisors will devote keen attention to the appraisals because the personnel department largely controls the process. Deeper probing done in appropriate manner by the appraiser could avoid the problem of superficial judgement.
Drawbacks and Limitations of Traditional Methods:
The traditional methods of performance appraisal in general suffer from certain inherent weaknesses and limitations.
(i) Managers are not qualified and trained to assess personality traits and to conduct the evaluation and performance interviews. Their notions are vague as to the purpose of evaluation.
(ii) Sometimes good performance is discouraged by overemphasizing shortcomings and almost neglecting good work. Most of the times the real message is lost.
(iii) Rater’s personality also plays an important part in the effectiveness of evaluation programmes. Some raters are by temperament overtly harsh ad some are too lenient. Some raters play favouritism and some get carried away with ‘halo’ effect. Thus, the general criticism of traditional methods is that they are too subjective in nature because they are based on personal judgement of the rater.
II. Newer/Modern Methods:
In order to overcome some of the limitations of traditional methods, the newer/modern methods came into existence.
Assessment Centre Method:
This concept was initially applied to Military situations in German Army in 1930s and British Army in 1960s. Under this method many evaluators join together to judge employee’s performance in several situations with the use of a variety of criteria. Evaluators observe and evaluate participants as they perform activities in job-related simulations.
Assessment to determine employees’ promotion potential is generally done through paper-and-pencil tests, interviews and situational exercises such as in – basket exercises, business game, a role-playing incident and leaderless group discussions.
Assessment centres generally measure interpersonal skills and competence like getting along with others, quality of thinking, resistance to stress, work- motivation, communication skills and creativity. Other aspects like ability to plan, organize and to make decisions are also measured and evaluated.
The Evaluators are experienced managers with proven ability to evaluate the employees, both individually and collectively. A summary report is prepared and feedback is given on a face-to-face basis to all employees who ask for it.