Some of the commonly used methods of performance appraisal for employees are discussed below:
Performance Appraisal Methods for Employees: Modern, Traditional, Top 16 and 360 Degree Methods
Methods of Performance Appraisal (Widely Used Methods):
There are various methods of performance appraisal in use.
The most widely used methods may be classified into two categories namely:
1. Traditional methods and
2. Modern methods.
The traditional methods are also in use. The traditional methods give more emphasis on the rating of individual’s traits while modern methods are concerned with the evaluation of work results.
Let us discuss one by one in detail:
1. Traditional Methods:
The traditional methods of performance appraisal include:
(a) Straight ranging method
(b) Paired comparison methods
(c) Factor comparison methods
(d) Grading method
(e) Graphic or point method
(f) Forced choice description method
(g) Check list method
(h) Free – easy method
(i) Field review method.
Let u discuss one by one in detail:
(a) Straight Ranking Method:
This is the oldest and simplest method. Here employee is not separately treated from his job. One person is compared with the other. This separates the efficient from the inefficient but this is not practical, as all persons have separate qualities. If a person is efficient in one job, the other is efficient for the other; hence comparison is difficult between the two. To solve the problem, person is evaluated in pairs. This is known as paired comparison method.
This evaluation of a person with pair or other persons of the group. This system is simple but it is defective. Firstly, to compare one person is difficult with the other as every person has his own personal qualities. Secondly, one group’s person is compared but they are not compared with other groups, if this is possible and how, then efficiency and inefficiency is known but no measure of efficiency is possible. Thirdly, there is no basis for serial assessment hence there is partiality. Hence, this is not used much.
(b) Paired Comparison Method:
In paired comparison method, each employee in a job family is compared with every other employee to determine who is a better worker. This method is better, simpler and easier as compared with Simple Ranking Method. The rater is provided with a little booklet, containing two names on each page. 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.
The ranks will be available as per the formula- n (n- 1) 2. N is the total number of employees to be compared. Suppose, there are five employees in a job family named ABCDE. A will be compared with B, C, D, E. And B will be compared with CDE and so on.
The result will be:
5(5-1)2 = 10.
These 10 ranks may be shows as under-
A will be compared with B, C, D, E = 4 Ranks
B will be compared with CDE. = 3 Ranks
C will be compared with DE = 2 Ranks
D will be compared with E = 1/10 rank
These results of these comparisons are tabulated and a rank is assigned to each individual this method is also subject to criticism. That it is not suitable when a group is large because in that case, the number of judgments becomes excessively large.
(c) Factor Comparison Method:
This method is known as man to mans’ comparison method. The technique was developed by USA army during the First World War. By this method, man is not compared with man as a ‘whole man’ certain factors are selected for the purpose of analysis such as leadership, dependability and initiative in a scale is designed by the rater for each factor. The each man to be rated is compared with the man in the scale and certain sources for each factor are awarded to him.
Instead of comparing ‘Whole man’ with ‘Whole man’, personnel are compared to the key man in respect of lone factor at one time performance appraisal, this method is not useful because it is difficult to design scales.
(d) Grading Method:
In this method all persons are grouped serially from best to least efficient for their every qualities like extraordinary, best, good, average, bad, worst. These groups are also explained. These groups could be increased or lessened. Dr. Kimball and Kimball have put this in the following way in his book ‘Principles of Industrial Organisation’.
(e) Graphic Rating Scales Method:
In his method, a form is used in which an index of the qualities for performance of works is given. A scale is given in front of each merit on which this evaluation is noted that this merit is found in the employee to what quantity and how much of it the uses in working. On the basis, a progress report is made ready. The system is like that of used in Montessori classes used for their progress evaluation. This is more used in Eastern countries.
(f) Forced Choice Description Method:
This method is more scientific and objective and minimum chances of rater’s bias. After great efforts and research, this method was evolved during the World War II for the Military Services. This method tries to correct rater’s tendency to give consistently high or consistently low rating to all the employees. This method calls for more objectives and less subjective. In this method, usually set of four phrases are made out of which two are positive and two are negative relating to job proficiency and personal traits.
In the last, the rater is asked which of the four phrases is most and least descriptive. In each phrases, two are positive and two are negative phrases. This method has certain benefits as to while choosing two statements from each series, the rater is unable to introduce personal bias of halo effect as each phrases are related to the two phrases whether favorable or unfavourable.
Thus, it increases the overall objectivity of the method. This method is also having certain defects as the results of evaluation do not prove useful for counseling and training purposes because the rater is ignorant of how he is evaluating the individual.
(g) Checklist Method:
This is also known as Questionnaire Method. In this method, for the accomplishment of job, an index is prepared of necessary merits. Evaluator reads that list to a person and those merits which are found in him are (+) marked while those which are not in him are marked with (-) sign. Or at times ‘yes’ or ‘no’ is used to entries. If he is doubtful about a merit, he marks with (?).
This system has the possibility of partiality as evaluator does the work himself. Secondly, each department or work needs separate forms as nature of work, character and responsibilities have vast differences.
(h) Free -Essay Method:
This is also a traditional method in which rater appraises the rater in an open-ended and uses a free-form in his own words and puts down his impressions about the employee.
He takes a note of these factors:
(i) Job knowledge and potentials
(ii) Employee’s characteristics and attitudes
(iii) General organisation and planning ability
(iv) Understanding of Company’s policies and procedures and its application
(v) Production or Quantity, Quality and cost control
(vi) Physical Conditions
(vii) Development needs for future.
This evaluation depends on factual and concrete information and no quantitative evaluation is made as far as possible. This method provides a good deal of information ‘When the Supervisor is asked to give two or three examples of each judgment he makes. The information will give the specific information about the ratees but more important is that reveals the judgment abilities of the rater.
This method also has certain drawbacks. Firstly, this method is more subjective as it may affect certain important functions of personnel as no criterion is given for evaluation. Secondly, sometimes the valuation may be over speaking about the rate while in real he may not be so positive. Lastly the method is more time consuming and is caused with rater’s biasness as the evaluation is written in rater’s own words.
(i) Field Review Method:
This method is quite different from other traditional method. In this method, the supervisor does not fill up any forms but the ratees are interviewed by an expert relating to the Personnel Departments. He asks certain questions relating to over-all performance of each employee and takes a note in his note book. These notes are sent to the Supervisors for the approval improvements and modifications.
Thus, overall ratings are obtained. The interviewer questions the Supervisor about the job requirements of each job in his unit and performance of each man in his job. He tries to find out not only what the employees are doing but why the employee is not up to the mark and what can be done to improve or develop him. The success of this system depends upon the competency of the interviewer. Moreover, he keeps the supervisor on his toes by this evaluation and minimizes bias and prejudice on his part.
This system is useful in large organizations and does not suffer from the weaknesses which are evident and prevalent in other traditional systems. There are only three ratings given to ratees i.e., satisfactory, outstanding and unsatisfactory. The main defect of the system is to keep two management persons-involved in the performance appraisal which may be sometimes biased and dangerous.
Though these traditional methods are in use but these methods are having many short coming such as some methods are time consuming, expensive and subjective, while some are caused with certain errors like Halo effect, Biasness and Stereo type.
2. Modern Methods:
Some new techniques have been developed in the field of performance evaluation.
The different modern methods are:
(a) Management by objective (MBO)
(b) Assessment centre method
(c) Human asset accounting method
(d) Behaviorally anchored rating scales (BARS)
Let us discuss in detail one by one:
(a) Management by Objective (MBO):
In the present changing economic environment old techniques of management do not give better results. The expansion of business in size and changes in technology has necessitated a new thinking in managerial approach. A number of new techniques of management have been developed in the recent and this Management by Objectives (MBO) is one of them. The credit for developing MBO goes to Peter Ducker who emphasized that performance of each job should be directed towards the achievement of whole organization objectives.
Meaning and Definition of MBO:
Management by Objectives (MBO) is a management concept that has gained immense popularity in many organizations. The process of MBO begins with the setting of sub-ordinates’ objectives jointly by the immediate superior and sub-ordinates and ends with the performance of die sub-ordinates. Managers and their sub-ordinates plan together to set common goals.
Each employee’s major areas of responsibility are clearly defined in terms of measurable objectives and result areas. Periodic reviews, both individual and departmental, are done to assess the accomplishment of objectives.
Heinz Weiherich and Harold Knootz define management by objectives as “a comprehensive managerial system that integrates many key managerial activities in a systematic manner and that is consciously directed toward the effective and efficient achievement of organizational and individual objectives”.
Essential Features of MBO:
1. They are established for striving towards certain objectives.
2. MBO focuses on goals and their achievement. This is a big step towards effective management.
3. It is a policy of participative management.
4. MBO tries to relate the long-range goals of the organization with the short-range goals. Overall system goals with the goals of the various sub-systems and the organizational goals with the goals of society.
5. MBO places emphasis not merely on goals, but on effective performance and tangible result also.
6. The philosophy of MBO views organizations as dynamic entities.
7. The technique of MBO recognizes the fact that the setting and achievement process is a co-operative and participative Endeavour.
8. Effective management of organizations is possible when managers at all levels have the required authority, responsibility and accountability for getting things done and for producing results.
Advantages of MBO:
The following axe the advantages of MBO:
1. MBO helps managers allocate organizational resources and plan activities effectively. Thus, MBO facilitates better management.
2. MBO identifies the key result areas where organizational efforts are needed.
3. The biggest advantage of MBO is that is encourages personal commitment to goals by employees. The MBO program gives employees the responsibility of setting their own objectives, gives them the opportunity of having their ideas included in the planning program, provides them a clear picture of their area of discretion or authority and facilitates assistance from superiors for accomplishing their goals.
4. MBO brings about personal satisfaction by allowing employees to participate in setting their objectives and by appraising their performance in a rational manner.
5. The MBO process stimulates organizational change, provides the framework and guidelines for planned change and helps managers overcome resistance to change (by employees). Thus, the MBO process helps top management initiate, plan, direct and control the direction and speed of change.
6. Since MBO forces management to clearly state objectives, it deals to the development of effective controls. Management control involves the measurement of results and taking corrective action to check deviations from plans. A clear set of verifiable goals helps managers determine what should be measured and what action should be taken correct deviations.
Some of other advantages of MBO are listed below:
1. It helps managers coordinate goals and plans.
2. It helps managers clarify priorities and expectations.
3. It co-ordinates the efforts of various departments of an organization.
4. It allows greater consistency in decision-making.
5. It helps an enterprise focus on areas where effective management is crucial for the organization.
6. It improves communication between superiors and the subordinates and increases understanding between them.
Limitations of MBO:
The following are the major limitations of MBO:
1. It takes too much time and effort and involves too much paper work.
2. It necessitates training of managers.
3. It tends to fatter without strong, continual commitment from top management.
4. Its emphasis on measurable objectives can be used as a threat by overzealous managers.
5. It can lead to considerable frustration if one manager’s efforts to achieve goals are dependent on the achievement of goals of others within the organization. Group goal setting and flexibility are required to solve this type of problem.
Making MBO Effective:
The following are the prerequisites for implementing the MBO programme and making it effective are discussed below:
1. The degree to which the MBO program is likely to succeed depends on the extent of top management support it receives. In order to keep the MBO program alive and fully functional, the top management must provide continual support to the subordinates.
2. In addition to setting realistic goals, managers must carry out regular performance reviews and provide feedback to subordinates. The success of an MBO program essentially depends on the participants knowing where they stand in relation to their objectives.
3. To be successful MBO programs should ensure commitment and participation in the MBO process at all levels of the organization.
Steps in MBO:
The following steps are necessary in MBO:
1. Formulating Organizational Objectives:
The first step in MBO program is to determine main objectives of the business. The major objectives of the business. The major objectives of the business are survival and expansion. To achieve their major objectives, derivative objectives are set up. Different departments set departmental objectives. The objectives from top level to individual level are aimed at achieving the main business objectives.
2. Setting up Sub-Ordinate Goals:
The sub-ordinate goals are set at department level, section level, unit or individual level etc. The sub-ordinate objective will assign specific responsibilities to persons at various levels. Everybody in the organization should know what is expected of him? The sub-ordinate goals, in no way should be inconsistent with the overall objectives of all business. These goals should aim at contributing towards the overall business goals.
3. Periodic Meeting:
The ultimate aim of various objectives may be at any levels, should be to achieve overall business objectives. There should be periodic meetings to know the views of subordinate staff. The top level management will be able to know the views and difficulties faced by the staff in achieving need any modification, it should also be done to make the objectives realistic.
4. Performance Appraisal:
Evaluation of performance at the end of a period is essential to assess the work. The superior should evaluate the work of the sub-ordinates and find out deviations, if any. The persons whose performance is below the standard performance are penalized and those whose performance is outstanding are rewarded. The process of appraisal will enable the management to take collective measures if there are deviations in performance.
(b) Assessment Centre Method:
Every Performance appraisal method has been started from military organisation. Whether it is traditional method or modern method. The creation and growth of the technique, “Assessment Centre” is also given by Military organisation of German in 1930 and British Army in 1960.
In this method, the candidates are tested in social situation using a number of assesses. The social situation is related to the job-related simulations. The simulations are based on characteristics. This method is usually used in higher level jobs. This method is also useful for selecting lower-level managers or supervisors.
The objectives or purposes of Assessment Centers may be:
(i) To measure the potentialities among the supervisors, middle level managers and top managers,
(ii) To determine training and development needs of the employees
(iii) To Select College Students for entry level positions,
(iv) To make more reliable and efficient manpower planning,
(v) To make an early determination of potential.
There may be other objectives which are useful for personnel functions.
Procedure of Assessment Centre:
This method is commonly used and a common procedure is applicable in all situations. A group of leadership is established in which each member supports predefined positions but the group must arrive at consensus. The leader initiates the task and decides the future course of action. Simulations in basket games are used to test organizational and planning abilities. Personal interviews and projective tests are also used to assess work motivation, career-orientation and dependence on others.
Paper and pencils tests i.e., psychological tests measure intellectual ability. The duration of the method may be different depending on the purpose of assessment centers. It may be for one day or less than one day in the selection of first line supervisors used for higher level management may run for two or three days and for development purposes, it may take still longer time.
Problems of Assessment centre:
This method suffers from many real hazards which are as follows:
1. It is a test or exam taking procedure. Perfect and solid performer in day-to-day operations suddenly chokes in simulated environment.
2. Those not selected under this method, have adverse effect on the potentials of the employees.
(c) Human Asset Accounting Method:
This method, though not popular and a little in use has its own practical value. In the end of every financial year we prepare a Balance Sheet showing the statement of Assets and liabilities. In the same way the value of human beings in the organisation is assessed. The method refers to activity devoted to attaching money estimates to the value of a firm’s internal human organisation and its external customer good will. If able well-trained personnel leave a firm, the human organisation is worthless.
If they join it, its human assets are increased. Employees of the organizations maybe assets or liabilities of the organizations. These are certain factors which create a difference between asset and liability are loyalties, motivations, attitudes, collective capacity for effective interaction, communication and decision making. If distrust and conflict prevails, the organisation is devalued.
The current value of a firm’s human organisation can be appraised by developed procedures, by undertaking periodic measurements of ‘Key causal’ and ‘intervening enterprise’ variables. The key causal variables include the management side like company’s policies, procedures, strategies, leadership, decision making etc. Second is the individual variable like loyalties, motivations etc. Those two types of variable measurements must be made over several years to provide the needed data for the computation of the human asset accounting.
(d) Behaviorally Anchored Rating Scales (BARS):
The dissatisfaction with traditional judgmental techniques used for performance appraisal has led an increasing number of organizations to move towards behaviorally based techniques around 1960s.
At the initial stage, some behaviorally oriented techniques like behavioral expectancy scales (BES) were developed which were replaced by the more refined scales known Behaviorally Anchored Rating Scales (BARS). BARS approach gets away from measuring subjective personal traits and instead measures observable, critical behaviors that are related to specific job dimensions.
Various steps involved in developing BARS are as follows:
1. Identification of Performance Measures:
The first step in developing BARS is the identification of performance measures, that is, the outcomes of an effective job performance. These measures may be identified by knowledgeable, relevant people who may be usually superiors, jobholders and HR personnel or combination of all of them. These people are asked to identify the important dimensions of the job under question. These dimensions may be the same as used in traditional methods and as disclosed by comprehensive job analysis.
2. Identification of Critical Behaviours:
Critical behaviors are those which are essential for the performance of the job effectively. These behaviors are generated from different dimensions of the job and are related to various critical incidents of the job. These may be stated in a few short sentences or phrases using the terminology of the job in question.
3. Retranslation of Critical Behaviours:
Various critical behaviors as identified in retranslation process, usually by a different group of personnel. In the retranslation process, various critical incidents are classified into clusters with each cluster having similar critical incidents. Those behaviors which are approved by majority of personnel are kept for further development and others discarded. The basic idea is to keep the number of behaviors to a manageable limit and which are more descriptive of the job. The retranslation process assures the reliability of the critical behaviors consistent with the job dimensions.
4. Scaling of Critical Behaviors:
Those critical behaviors which are included for the performance appraisal during the process of retranslation are given scales usually in numbers with their description. The scales may range from 1 to 7 or from 1 to 9, with each point of a scale demonstrating the perceived level of performance. The scale value is determined on the basis of estimates provided by various persons in the retranslation process.
5. Development of the BARS Instrument:
The result of arranging various scales for different dimensions of the job (known as behavior anchors) produces a vertical scale for each dimension. This scale is used for performance appraisal.
Evaluation of BARS Method:
BARS method of appraisal is better as compared to traditional methods in the following ways:
1. Employees’ behaviors and not their unobservable traits, are measured which gives better description of employees.
2. BARS approach is aimed at specific dimensions of job performance. This makes the technique much more compatible with the requirements of unbiased appraisal.
3. The people who are actually involved with the job participate in determining the job dimensions and the development of the scales. Such participation greatly enhances acceptance of the technique.
4. Because the evaluation is done in terms of specific behaviors, the rater can give objective feedback on how the ratee performed and on what specific behavior the ratee must make improvement. However, BARS is it free from limitations though it provides better results as compared to other traditional techniques.
Many research studies support this view. As to whether the BARS technique does get at independent performance dimensions and whether the critical behaviors are reliable, a review article concludes that “it is clear that research on BARS to date does not support the high promise regarding scale independence. In short, while BARS may outperform conventional rating techniques, it is clear that they are not a panacea for obtaining high interrater reliability.”
Methods of Performance Appraisal (Traditional and Modern Methods):
There are various methods of performance appraisal which may be classified into:
1. Traditional Methods
1. Traditional Methods:
Traditional methods are very old techniques of performance appraisal based on personal qualities like knowledge capacity, judgment, initiative, attitude, leadership, intelligence, loyalty, etc.
The traditional methods of performance appraisal are as under:
i. Unstructured Appraisal:
Under this method, the appraiser is required to write down his impression about the person being appraised in an unstructured way. He may note down about the quality of job performance, reasons for specific job behaviours, personality traits, and development needs. This method being subjective is quite simple and is still prevailing in the small firms.
ii. Ranking Method:
This is the simplest and oldest method of performance appraisal. The appraisal consists of ranking employees as more or less efficient by inter-personal comparison of overall qualities. This method may be conveniently adopted if the number of employees is small and work performance is measurable. Ranking method is adopted or used when performance of small number of employees are measured and evaluated.
Under the method of paired-comparison, employees are compared and ranked in pairs. The results of paired-comparison are tabulated and rank is given to each employee.
iii. Forced Distribution Method:
The basic assumption made for using this method is that employees are distinguishable as outstanding, above average, average, below average and poor; and the manager can distinguish his employees on their capabilities, e.g., 10% each in the highest and lowest categories, 20% each in the above average and below average categories, and 40% in the average category. The rater is required to distribute the employees in the five categories on the basis of their overall performance and attributes.
iv. Graphic Rating Scales:
This method is similar to the Rating- scale Method except that the degrees of qualities or attributes on which employees are to be appraised are indicated on a graph or chart. The scale of attributes may be numerical-alphabetical or descriptive-adjective. Thus different degrees of an attribute may be stated as exceptional, above average, below average, and poor or assigned numbers 5, 4, 3, 2, 1.
v. Check List:
Employee appraisal under this method involves listing of a number of statements about the performance and behaviour of the employee and the rater is to check these statements indicating whether a statement applies or does not apply to the employee or there is a doubt. Afterwards, values (or weights) are assigned to the statements depending upon their respective importance.
The final rating of the employee is taken as the average of the scale value of all statements that the rater has checked.
vi. Critical Incident Method:
This method involves employee appraisal on the basis of events that occur during the performance of the job. A continuous record of incidents is maintained by the supervisors and numerical scores are assigned according to the nature of employee’s reaction to particular events.
vii. Field Review Method:
Under this method, the supervisors are interviewed by an expert from the personnel department. The expert questions the supervisor to obtain all the relevant information on each employee and takes notes in his note book. The workers are usually classified into three categories as outstanding, satisfactory and unsatisfactory.
2. Modern Methods:
There are two important methods of performance appraisal which are used by the modern concerns.
i. Management by Objectives (MBO)
ii. Behaviourally Anchored Rating System (BARS)
MBO implies evaluation of managerial performance in terms of verifiable objectives. MBO is a method of measuring performance against results. This method is also termed as appraisal by results. The process involves appraising how efficiently managers set actionable objectives and how well these are attained. The focus here is thus on results accomplished and not on the personal qualities and attributes.
The method focuses on setting and achievements of goals, participation of subordinates and time-bound results. The time span of appraisal is decided in accordance with the level of management and the nature of goals established.
Performance appraisal involves the following steps:
i. The subordinate discuss his job descriptions with his superior and they agree on the contents of his job and the key results areas.
ii. The subordinate prepares a list of reasonable objectives for the coming period of six to twelve months.
iii. He spend his time with his superior to discuss these targets and plans, and a final set is worked out.
iv. Check-points are established for the evaluation of progress, and the ways of measuring progress are selected.
The main features of MBO are:
i. The basis of appraisal is the performance against mutually-agreed targets.
ii. It is participative technique of performance appraisal as the target is discussed with superiors in advance and an agreed programme is evolved.
iii. It aims at developing the performance instead of merely evaluating it.
iv. It is a method of continuous performance of each individual employee through feedback, guidance and counselling in periodical meetings throughout the year.
Following are the limitations of MBO:
i. This approach can be applied only when the goal setting is possible by the subordinates. It is doubtful if such a procedure can be applied for the blue collar workers.
ii. It involves considerable time, thought and contact between the superior and the subordinate.
iii. If the span of supervision is quite large, it will not be possible for the superior to have discussion with each and every subordinate for setting up mutually agreed goals.
iv. This approach mainly emphasizes counselling, training and development.
ii. Behaviourally Anchored Rating Scales:
Behaviourally Anchored Rating Scales (BARS) is a recently developed method of rating in behavioural terms. The exponents of BARS claim that it is more reliable and advantageous method of performance appraisal.
Under this method, behaviourally anchored rating techniques are outlined to recognize the critical areas of effective and ineffective performance behaviour for getting results.
The appraiser is required to observe the behaviour of the employee while performing the job. He then compares these behavioural observations with the behaviourally anchored rating scales.
Following are the advantages of BARS:
i. BARS method gives clear difference about behaviour, performance, and results, and thus provides basis for setting developmental goals for the employee.
ii. BARS method, being job-specific is more reliable and valid method for performance appraisal.
iii. The BARS experience has helped to clarify three major controversies of the appraisal process.
They are:
(1) Trait vs. job related issues.
(2) Performance Dimension
(3) Numerical or behavioural judgment issue.
Top 16 Methods of Performance Appraisal:
Some of the commonly used methods of performance appraisal are discussed below:
1. Straight Ranking Method:
Straight ranking method is the oldest and simplest method of performance appraisal that evaluates the employee and his performance. No attempt is made to fractionalize the rated employee 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.
Straight ranking method is the simplest method of separating the most efficient from the least efficient. It is relatively easy to develop and use. The greatest limitation of this method is that in practice it is very difficult to compare a single individual with human beings having varying behavior 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 judgments, nor does it provide us with a systematic procedure for determining the relative ranks of subordinates.
2. Alternation Ranking Method:
Ranking employees from best to worst on a trait or traits is another method for evaluating employees. Since it is usually easier to distinguish between the worst and best employees than to rank them, an alternation ranking method is most popular. First, list all subordinates to be rated, and then cross out the names of any not known well enough to rank.
Then, on a form the employee who is the highest on the characteristic being measured and also the one who is the lowest. Then choose the next highest and the next lowest, alternating between highest and lowest until all the employees to be rated have been ranked.
3. The Paired Comparison Method:
For every trait (quantity of work, quality of work, and so on), every subordinate is paired with and compared to every other subordinate. The paired comparison method helps make the ranking method more precise. This technique makes judgment 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 provide the rank order of the entire group.
Suppose there are five employees to be rated. In the paired comparison method you make a chart, as in exhibit 9.1, of all possible pairs of employees for each trait. Then for each trait indicate (with a + or -) who is the better employee of the pair. Next the number of times an employee is rated better is added up.
The results of these comparisons are tabulated, and a rank is assigned to each individual.
This method is not appropriate when a group is large because, in that case the number of judgments becomes excessively large.
4. Man to Man Comparison Method:
US army used this technique during the First World War. This method selects certain factors such as leadership, dependability and initiative for the purpose of analysis and the rater designs a scale for each factor. The rater also develops a scale of man for each selected factor.
Each employee is compared with the man in the scale, and certain score for each factor are awarded to him. Instead of comparing a “whole man” to a “whole man”, personnel are compared to the key man in respect of one factor at a time.
This method is used in job evaluation, and is known as the factor comparison method. In performance appraisal, it is not of much use because the designing of scales is not an easy task.
5. Grading Method:
Using the grading system, the rater considers certain features and marks them according to a scale. The rater first establishes categories of worth and defines them carefully. The selected features may include analytical ability, cooperativeness, dependability, self- expression, job knowledge, judgment, leadership and organizing ability. The grades A, B, C, D, E and F may be assigned for outstanding, very good, good or average, fair, poor or very poor.
The actual performance of an employee is then compared with these grade definitions, and he is allotted the grade that best describes his performance. This sort of grade is given in semester examinations and also in the selection of candidates by the public service commission
6. Graphic or Linear Rating Scale:
Graphic rating scale is the simplest and most popular technique for appraising performance. It lists traits (such as quality and reliability) and a range of performance values (from unsatisfactory to outstanding) for each trait. The supervisor rates each subordinate by circling or checking the score that best describes his or her performance for each trait.
The assigned values for the traits are then totaled. Instead of appraising generic traits or factors (such as quality and quantity), many firms specify the duties to be appraised. It shows an appraisal form for the position of administrative secretary.
In this case, the job’s five main sets of duties have been taken from the job description and prioritized. Importance ratings are thus indicated as percentages at the top of each of the five categories (typing and stenography, reception, and so on). There is also space on the form for comments, and for evaluation of general performance attributes like reporting for work on time and observing work.
The two important features of this system are:
i. The person who is making the judgment is freed from direct “quantitative” terms in making his decision of merit on any quality; and
ii. The person who is making the judgment can make as fine a discrimination of merit as he chooses.
The rating scale method is easy to understand and easy to use. It permits a statistical tabulation of scores. A ready comparison of scores among the employees is possible that indicates the worth of every individual. It is most common evaluation tool in use today.
The graphic rating scale method suffers from the drawback that it is arbitrary, and the rating is generally subjective. Another drawback of this method is that it assumes that each characteristic is equally important for all jobs.
7. Forced Choice Description Method:
This method attempts to correct a rater’s tendency to give consistently high or consistently low ratings to all the employees. The use of this method calls for objective reporting and minimum subjective judgment. Under this method, rating elements are several set of pair phrases or adjectives (usually sets of four phrases two of which are positive, two negative) relating to job proficiency or personal qualification. The rater is asked to indicate which of the four phrases is most and least descriptive of the employee.
8. Forced Distribution Method:
Joseph Tiffin evolved this method. The forced distribution method is similar to grading on a curve. This system eliminates or minimizes raters’ bias and requires the rater to appraise an employee according to a pre-determined distribution five-point performance scale without any descriptive statement. With this method, predetermined percentages of rates are placed in performance categories.
For example, employees may be distributed as follows:
i. 15 % high performers
ii. 20% high-average performers
iii. 30% average performers
iv. 20% low-average performers
v. 15% low performers.
In addition to job performance, employees are rated for promotion.
A three point scale is often used for this purpose:
(a) Very likely promotional material;
(b) May or may not be promotional material;
(c) Very unlikely to be promotional material.
The forced distribution system avoids the problem of using different parts of the scale by different raters. This method tends to eliminate or reduce bias; but its use in wage administration leads to low morale and low productivity. This method is highly simple to understand and very easy to apply in organizations.
9. Free Essay Method:
This method enables a supervisor to make a free form, open-ended appraisal of an employee in his own words and put down his impressions about the employee. He makes his observations about the factors. The description is always as factual and concrete as possible.
No effort is made to evaluate an employee in a quantitative manner. This method provides a good of information especially if the supervisor is asked, for instance, to give two or three examples of each judgment he makes. The explanations will give specific information about the employee, and can reveal even more about the supervisor.
However, this method suffers from certain drawbacks:
i. It contains a subjective evaluation of the reported behavior of an individual and may affect such employment decisions as promotion, lay-off etc. There is no 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 rate than with the actual evaluation of performance.
iv. The supervisor is required to devote considerable time and thought and has to be critical. The appraisal depends more on the appraiser’s literary skills than on an employee’s abilities and performance.
v. Rater’s bias is easily introduced into such ratings, since the essay is in the supervisor’s own words.
10. Critical Incident Method:
With the critical incident method, the supervisor keeps a log of desirable or undesirable examples or incidents of each subordinate’s work-related behavior. Then every six months or so, the supervisor and subordinate meet and discuss the latter’s performance using the specific incidents as examples.
This method can always be used to supplement another appraisal technique, and in that role it has several advantages. It provides executives with specific hard facts for explaining the appraisal. It ensures that the managers think about the subordinate’s appraisal all during the year because the incidents must be accumulated; therefore, the rating does not just reflect the employee’s most recent performance.
Keeping a running list of critical incidents should also provide concrete examples of what specifically the subordinate can do to eliminate any performance deficiencies. You can adapt the critical incident method to the specific job expectations laid out for the subordinate at the beginning of the year.
The critical incident method is often used to supplement a ranking technique. It is useful for identifying specific examples of good and poor performance and planning how deficiencies can be corrected. It is not as useful by itself for comparing employees, nor, therefore, for making salary decisions.
11. Group Appraisal Method:
Under this method, an employee is appraised by a group of appraisers. This group consists of the immediate supervisor of the employee, to other supervisors, who have close contact with the employee’s work, manager or head of the department and consultants.
The head of the department of management may be the Chairman of the group and the immediate supervisor may act as the Coordinator of the group activities. This group uses any one or multiple techniques. The immediate supervisor enlightens other members about the job characters, demand, standards of performance, etc.
Then the group appraises the performance of the employee, compares the actual performance with standards, finds out the deviations, discusses the reasons and suggests ways for improvement of performance, prepares action plans, studies the need for change in the job analysis and standards and recommends change, if necessary. This method is widely used for purposes of promotion, demotion and retrenchment appraisal.
12. Field Review:
The field review is a group judgement technique and it tends to be fairer and more valid individual ratings. Here a member of the personnel department meets with small groups of raters from each supervisory unit and goes over each employee’s ratings with them. In this way, each rater conceives uniform standards, arrives at group consensus and identify areas of disagreement between inter raters. But it is time consuming and arduous.
13. Appraisal Management by Objectives:
Stripped to its essentials, management by objectives (MBO) requires the manager to get specific measurable goals with each employee and then periodically discuss his or her progress toward these goals. Managers could engage in a modest MBO program with subordinates by jointly setting goals and periodically providing feedback.
However, the term MBO almost always refers to a comprehensive, organization wide goal-setting and appraisal program that consists of six main steps:
(i) Set the organization’s goals. Establish an organization wide plan for next year and set goals.
(ii) Set departmental goals. Here department heads and their superiors jointly set goals for their departments.
(iii) Discuss departmental goals. Department heads discuss the department’s goals with all subordinates in the department (often at a department wide meeting) and ask them to develop their own individual goals; in other words, how can each employee contribute to the department’s attaining its goals?
(iv) Define expected results (set individual goals). Here department heads and their subordinates set short-term performance targets.
(v) Performance reviews- Measure the results. Department heads compare the actual performance of each employee with expected results.
(vi) Provide feedback. Department heads hold periodic performance review meetings with subordinates to discuss and evaluate the latters’ progress in achieving expected results.
14. Assessment Centre Method:
The assessment centres aim to identify select employees for higher-level positions. They play an important role in employee development. Assessment centres allow candidates to demonstrate job-related dimensions of performance in exercises that replicate the important situations that occur on the job.
In an assessment centre, information about an employee’s promotability and career development is collected systematically and analyzed as the candidate participates in a series of tests, interviews, and exercises.
The devices used in assessment centres include extensive interviews, tests of mental ability, skill in reasoning, and knowledge of current affairs, the leaderless group discussion, presentations by each member of the group and simulation exercises. An important component of an effective assessment centre programme is the feedback session, in which a member of the assessment staff explains the scores and ratings to each participant.
These sessions are useful in minimizing participant frustration stemming from lack of information about results. Studies at Michigan Bell found that most employees who had participated in the assessment centre and feedback process had a good understanding of their ratings and felt that the information given to them would be helpful in their careers.
Studies have also found that assessment results are useful predictors of managerial success, which indicates that assessment centres can increase the proportion of successful to unsuccessful managers.
15. Behaviorally Anchored Rating Scales:
A behaviorally anchored rating scale (BARS) combines the benefits of narratives, critical incidents, and quantified ratings by anchoring a quantified scale with specific behavioral examples of good or poor performance. Its proponents claim that it provides better, more equitable appraisals than do the other tools.
Developing BARS typically requires five steps:
i. Generate critical incidents. Persons who know the job being appraised (job holders and/or supervisors) are asked to describe specific illustrations (critical incidents) of effective and ineffective performance.
ii. Develop performance dimensions. These people then cluster the incidents into its smaller set of performance dimensions (say, five or ten). Each cluster (dimension) is then defined.
iii. Reallocate incidents. Another group of people who also know the job then reallocate the original critical incidents. They are given the clusters definitions and the critical incidents and are asked to reassign each incident to the cluster they think it fits best. Typically, a critical incident is retained if some percentage (usually 50% to 80%) of this second group assigns it to the same cluster as did the group in step 2.
Scale the incidents. This second group is generally asked to rate the behavior described in the incident as to how effectively or ineffectively it represents performance on the appropriate dimension (seven- or nine-point scales are typical).
16. 360 Degree Performance Appraisal:
Unlike, the traditional top-down appraisal where a supervisor appraises the performance of their subordinate, 360 degree feedback incorporates multiple perspectives by using feedback from a variety of sources including peers, subordinates, customers, self, and supervisor.
The 360 degree feedback may be called multi-source feedback, multi-rater feedback, multi-level feedback, upward appraisal and peer review. The results of this type of appraisal process provide an understanding how the employee is perceived from different perspectives. This process helps an individual understand how others perceive them.
Uses for 360 degree feedback include employee development, performance appraisal, performance management, training needs assessment, evaluation of training, attitude survey, organizational climate survey and customer satisfaction survey.
This process can also be a motivator of performance since it shows the employee that their opinions and views are considered important. 360 degree feedback may improve service to customers if they are able to offer feedback to the employee, offer a more complete picture of the employee’s performance and can provide guidance on skills that an employee may need to develop.
Some managers think that 360 degree feedback method is only appropriate for developmental purposes as when raters believe that they may hurt others by what they say in the evaluation, they will not be honest. This is the view of G.E. ‘s former CEO Jack Welch who maintained that the 360 degree system in his firm had been “gamed” and that people were saying nice things about one another resulting in all good ratings.
Another critical view is that input from peers, who may be competitors for raises and promotions, might intentionally distort the data and sabotage the colleague. However, many firms use 360 degree feedback evaluation and it seems that many firms have found ways to avoid the pitfalls. The biggest risk with 360 degree feedback is confidentiality.
Many firms outsource the 360 degree process to make participants feel comfortable that the information they share and receive is completely anonymous. The information is very sensitive and could impact careers.
Methods of Performance Appraisal (3 Categories):
The performance appraisal methods may be classified into three categories, as shown below:
Category # 1. Individual Evaluation Methods:
Under the individual evaluation methods of merit rating, employees are evaluated one at a time without comparing them with other employees in the organization.
It is mostly used in government organizations. It is a descriptive report prepared, generally at the end of every year, by the employee’s immediate superior. The report highlights the strengths and weaknesses of the subordinate. The report is not databased.
The impressions of the superior about the subordinate are merely recorded there. It does not offer any feedback to the appraise. The appraise is not very sure about why his ratings have fallen despite his best efforts, why others are rated high when compared to him, how to rectify his mistakes, if any; on what basis he is going to be evaluated next year, etc.
Since the report is generally not made public and hence no feedback is available, the subjective analysis of the superior is likely to be hotly contested. In recent years, due to pressure from courts and trade unions, the details of a negative confidential report are given to the appraise.
Under this method, the rater is asked to express the strong as well as weak points of the employee’s behaviour. It is a non-quantitative technique. This method is advantageous in at least one sense, i.e., the essay provides a good deal of information about the employee and also reveals more about the evaluator.
The essay evaluation method, however, suffers from the following limitations:
1. It is highly subjective; the supervisor may write a biased essay. The employees who are sycophants will be evaluated more favourably than other employees.
2. Some evaluators may be poor in writing essays on employee performance. Others may be superficial in explanation and use flowery language which may not reflect the actual performance of the employee. It is very difficult to find effective writers.
3. The appraiser is required to find time to prepare the essay. A busy appraiser may write the essay hurriedly without properly assessing the actual performance of the worker. On the other hand, appraiser takes a long time, this becomes uneconomical from the view point of the firm, because the time of the evaluator (supervisor) is costly.
iii. Critical Incident Technique:
Under this method, the manager prepares lists of statements of very effective and ineffective behaviour of an employee. These critical incidents or events represent the outstanding or poor behaviour of employees or the job. The manager maintains logs of each employee, whereby he periodically records critical incidents of the workers behaviour.
At the end of the rating period, these recorded critical incidents are used in the evaluation of the worker’s performance. Example of a good critical incident of a Customer Relations Officer is- June 10—the officer processed complaints from customer patiently. He was polite in his replies and prompt in resolving the knotty issues.
He showed maturity and emotional balance while handling angry protests from customers. This method provides an objective basis for conducting a thorough discussion of an employee’s performance. This method avoids recency bias (most recent incidents get too much emphasis).
However, it suffers from the following limitations:
1. Negative incidents may be more noticeable than positive incidents.
2. The supervisors have a tendency to unload a series of complaints about incidents during an annual performance review session.
3. It results in very close supervision which may not be liked by the employee.
4. The recording of incidents may be a chore for the manager concerned, who may be too busy or forget to do it.
Most frequently, the critical incidents method is applied to evaluate the performance of superiors.
iv. Checklists and Weighted Checklists:
Another simple type of individual evaluation method is the checklist. A checklist represents, in its simplest form, a set of objectives or descriptive statements about the employee and his behaviour.
If the rater believes strongly that the employee possesses a particular listed trait, he checks the item; otherwise, he leaves the item blank. A more recent variation of the checklist method is the weighted list. Under this, the value of each question may be weighted equally or certain questions may be weighted more heavily than others.
The following are some of the sample questions in the checklist:
A rating score from the checklist helps the manager in evaluation of the performance of the employee. The checklist method has a serious limitation. The rater may be biased in distinguishing the positive and negative questions. He may assign biased weights to the questions.
Another limitation could be that this method is expensive and time consuming. Finally, it becomes difficult for the manager to assemble, analyse and weigh a number of statements about the employee’s characteristics, contributions and behaviours.
Graphic rating scales require an evaluator to indicate on a scale the degree to which an employee demonstrates a particular trait, behaviour, or performance result. Rating forms are composed of a number of scales, each relating to a certain job or performance-related dimension, such as job knowledge, responsibility, or quality of work.
Each scale is a continuum of scale points, which range from high to low, from good to poor, from most to least effective, and so forth. Scales typically have from five to seven points. Graphic rating scales may or may not define their scale points.
Carefully constructed graphic rating scales have a number of advantages:
1. Standardization of content permitting comparison of employees.
2. Ease of development use and relatively low development and usage cost.
3. Reasonably high rater and rate acceptance.
A weak spot in such rating scales is that they are susceptible to rating errors which result in inaccurate appraisals. Possible rating errors include halo effect, central tendency, severity, and leniency. The halo effect occurs when a rating on one dimension of an appraisal instrument substantially influences the ratings on other dimensions for the same employee.
As a result of the halo effect, an employee is rated about the same across all performance dimensions. Central tendency is a lack of variation or difference among ratings of different subordinates, wherein most employees tend to be rated as average.
Leniency refers to an evaluator’s tendency to rate most employees very highly across performance dimensions, whereas severity refers to the tendency to rate most employees quite harshly.
vi. Behaviourally Anchored Rating Scales (BARS):
It is a combination of the rating scale and critical incident techniques of employee performance evaluation. The critical incidents serve as anchor statements on a scale and the rating form usually contains six to eight specifically defined performance dimensions.
It consists of predetermined critical areas of job performance or sets of behavioural statements describing important job performance qualities as good or bad (for example, qualities like inter-personal relationships, adaptability, reliability, and job knowledge).
These statements are developed from critical incidents. In this method, an employee’s actual job behaviour is judged against the desired behaviour by recording and comparing the behaviour with BARS. Developing and practising BARS requires considerable skills and expert knowledge.
Evaluation:
The ratings are fairly accurate since they are carried out by experts. Since job-specific factors are observed and measured, the ratings are more reliable. Employees tend to accept them readily since they have participated in the process. The method allows participants learn from the feedback and grow.
The method, however, suffers from the following disadvantages:
i. Requires observational skill and proper determination of critical behaviours; inadequacies can lead to misleading data.
ii. Compilation of critical behaviours takes considerable time and effort, and recording data also involve alert and constant observations (i.e. keeping logs)
iii. Less preferable due to similarity to trait measures
vii. Forced Choice Method:
This method was developed to eliminate bias and the preponderance of high ratings that might occur in some organisations. The primary purpose of the forced choice method is to correct the tendency of a rater to give consistently high or low ratings to all the employees.
This method makes use of several sets of pair phrases, two of which may be positive and two negative and the rater is asked to indicate which of the four phrases is the most and least descriptive of a particular worker. Actually, the statement items are grounded in such a way that the rater cannot easily judge which statements apply to the most effective employee.
Box 20.1 is a classic illustration of the forced choice items in organizations:
The favourable qualities earn a plus credit and the unfavourable ones earn the reverse. The worker gets over plus when the positive factors override the negative ones or when one of the negative phrases is checked as being insignificantly rated.
The overall objectivity is increased by using this method in evaluation of employee’s performance, because the rater does not know how high or low he is evaluating the individual as he has no access to the scoring key. This method, however, has a strong limitation. In the preparation of sets of phrases trained technicians are needed and as such the method becomes very expensive.
Further, managers may feel frustrated rating the employees ‘in the dark’. Finally, the results of the forced choice method may not be useful for training employees because the rater himself does not know how he is evaluating the worker. In spite of these limitations, the forced choice technique is quite popular.
viii. Management by Objectives:
MBO is based on the assumption that people perform better when they know what is expected of them and can relate their personal goals to the organizational objectives. It also assumes that people are interested in the goal-setting process and in evaluating their performances against the target.
Important features of this method may be listed thus:
1. Joint Goal Setting:
MBO requires the superior and the subordinate to recognize that the development of objectives is a joint effort. They must be jointly agree and write out their duties and areas of responsibility in their respective jobs.
2. Quantifiable Goals:
MBO is all about goals that are tangible, verifiable and measurable. The subordinate in consultation with his superior sets his own short-term goals—that are realistic and attainable.
3. Focus On Goal Achievement:
MBO focuses special attention on what must be accomplished (goals) rather than how it is to be accomplished (methods). The superior and the subordinate mutually find out ways and means to achieve the goals that are mutually agreed upon. They mutually set the standards to be followed and decide the norms for evaluating performance.
4. Effective Results:
MBO paves the way for the attainment of goals by putting resources to best use.—with a single minded focus on attainable goals. Subordinates are allowed to think creatively and meet targets. When everyone is aware of what needs to achieved and how the performances is going to be evaluated and rewarded—the end result is superior performance.
5. Consistent Support and Continued Blessings from Superior:
Superiors extend their help whenever and wherever needed. They offer necessary coaching and guidance from time to time. They keep all communication lines open. The whole focus is on getting results, through mutual support, help and cooperation.
Category # 2. Multiple-Person Evaluation Techniques:
The above discussed methods are used to evaluate employees one at a time. Here let us discuss some techniques of evaluating one employee in comparison to another. Three such frequently used methods in organization are – ranking, paired comparison and forced distribution.
This is a relatively easy method of performance evaluation. Under this method, the ranking of an employee in a work group is done against that of another employee. The relative position of each employee is tested in terms of his numerical rank. It may also be done by ranking a person on his job performance against another member of the competitive group.
The quintessence of this method is that employees are ranked according to their levels of performance. While using this method, the evaluator is asked to rate employees from highest to lowest on some overall criterion.
Though it is relatively easier to rank the best and the worst employees, it is very difficult to rank the average employees. Generally, evaluators pick the top and bottom employees first and then select the next highest and next lowest and move towards the average (middle) employees.
The major limitations of this method are:
1. The ‘whole man’ is compared with another ‘whole man’ in this method. In practice, it is very difficult to compare individuals possessing varied behavioural traits.
2. This method speaks only of the position where an employee stands in his group. It does not tell anything about how much better or how much worse an employee is when compared to another employee.
3. When a large number of employees are working, ranking of individuals becomes a painstaking issue.
4. There is no systematic procedure for ranking individuals in the organisation. The ranking system does not eliminate the possibility of snap judgments.
In order to overcome the above limitations a paired comparison technique has been advanced by organisational scholars.
Ranking becomes more reliable and easier under the paired comparison method. Each worker is compared with all other employees in the group; for every trait the worker is compared with all other employees.
For instance, when there are five employees to be compared, then A’s performance is compared with that of B’s and decision is arrived at as to who is the better or worse.
Next, B is also compared with all others. Since A is already compared with B, this time B is to be compared with only C, D and E. By this method when there are five employees, fifteen decisions are made (comparisons). The number of decisions to be made can be determined with the help of the formulae n (n-2).
For several individual traits, paired comparisons are made, tabulated and then rank is assigned to each worker. Though this method seems to be logical, it is not applicable when a group is large. When the group becomes too large, the number of comparisons to be made may become frighteningly excessive. For instance, when n=100, comparisons to be made are 100 (100-2) = 100 (98) = 9800.
iii. Forced Distribution Method:
Under this system, the rater is asked to appraise the employee according to a predetermined distribution scale. The rater’s bias is sought to be eliminated here because workers are not placed at a higher or lower end of the scale. Normally, the two criteria used here for rating are the job performance and promotability.
Further, a 5-point performance scale is used without any mention of descriptive statements. Workers are placed between the two extremes of “good” and “bad” performances.
For instance, workers of outstanding merit may be placed at the top 10 per cent of the scale; 20 per cent may be given good rating (i.e. above average); 40 per cent satisfactory (or average); 20 per cent fair and 10 per cent unsatisfactory (below average or poor) Apart from job performance as the criterion, another equally important factor in this method is promotability.
Employees may be classified according to their promotional merits. The scale for this purpose may consist of three points-namely, quite likely promotional material, may/may not be promotional material and quite unlikely promotional material.
One strong positive point in favour of the forced distribution method is that by forcing the distribution according to predetermined percentages, the problem of making use of different raters with different scales is avoided.
Further, this method is appreciated on the ground that it tends to eliminate rater bias. The limitation of using this method in salary administration, however, is that it may result in low morale, low productivity and high absenteeism. Employees who feel that they are productive, but find themselves placed in a lower grade (than expected) feel frustrated and exhibit, over a period of time, reluctance to work.
Category # 3. Other Methods:
Other methods of appraising performance include- Group Appraisal, Human Resource Accounting, Assessment Centre, Field Review, etc.
These are discussed below:
In this method, an employee is appraised by a group of appraisers. This group consists of the immediate supervisor of the employee, other supervisors who have close contact with the employee’s work, manager or head of the department and consultants.
The head of the department or manager may be the Chairman of the group and the immediate supervisor may act as the Coordinator for the group activities.
The immediate supervisor enlightens other members about the job characteristics, demands, standards or performance, etc.
Then the group appraises the performance of the employee, compares the actual performance with standards, finds out the deviations, discusses the reasons therefore, suggests ways for improvement of performance, prepares an action plan, studies the need for change in the job analysis and standards and recommends changes, if necessary.
This method eliminates ‘personal bias’ to a large extent, as performance is evaluated by multiple rates. But it is a very time-consuming process.
ii. Human Resource Accounting:
It is the process of accounting for people as an organisational resource. It tries to place a value on organizational human resources as assets and not as expenses. The HRA process shows the investment the organization makes in its people and how the value of these people changes over time.
The acquisition cost of employees is compared to the replacement cost from time to time. The value of employees is increased by investments made by the company to improve the quality of its human resources such as training and development skills acquired by employees over a period of time through experience.
When qualified, competent people leave an organization, the value of human assets goes down. In this method, employee performance is evaluated in terms of costs and contributions of employees. Human resource costs include expenditure incurred by the company in hiring, training, compensating and developing people.
The contributions of human resources is the money value of labour productivity. The cost of human resources may be taken as the standard. Employee performance can be measured in terms of employee contribution to the organization.
Employee performance can be taken as positive when contribution is more than the cost and performance can be viewed as negative if cost is more than contribution. Positive performance can be measured in terms of percentage of excess of employee contribution over the cost of employee. Similarly, negative performance can be calculated in terms of percentage of deficit in employee contribution compared to the cost of employee.
In this approach individuals from various departments are brought together to spend two or three days working on an individual or group assignment similar to the ones they would be handling when promoted. Observers rank the performance of each and every participant in order of merit.
Since assessment centres are basically meant for evaluating the potential of candidates to be considered for promotion, training or development, they offer an excellent means for conducting evaluation processes in an objective way. All those assessed get an equal opportunity to show their talents and capabilities and secure promotion based on merit.
Since evaluators know the position requirements intimately and are trained to perform the evaluation process in an objective manner, the performance ratings may find favour with majority of the employees. A considerable amount of research evidence is available to support the contention that people chosen by this method prove better than those chosen by other methods.
The centre enables individuals working in low-status departments to compete with people from high-profile departments and enhance their chances of promotion. Such opportunities, when created on a regular basis, will go a long way in improving the morale of promising candidates working in less important positions.
Where subjective performance measures are used, there is scope for rater’s biases influencing the evaluation process. To avoid this, some employees use the field review method. In this method a trained, skilled representative of the HR department goes into the ‘field’ and assists line supervisors with their ratings of their respective subordinates.
The H R specialist requests from the immediate supervisor specific information about the employees performance. Based on this information, the expert prepares a report which is sent to the supervisor for review, changes, approval and discussion with the employee who is being rated.
The ratings are done on standardized forms. Since an expert is handling the appraisal process in consultation with the supervisor, the ratings are more reliable. However, the use of HR experts makes this approach costly and impractical for many organizations.