PERFORMANCE ‎APPRAISAL

Managing Human Resources (5563)-2019
PERFORMANCE APPRAISAL
Definitions:
Performance management is ...
 “Series of activities designed to ensure that the organization gets the performance it needs
from its employees”. (Mathis & Jackson, 2011)
 “The continuous process of identifying, measuring, and developing the performance of
individuals and teams and aligning their performance with the organization’s goals.” (Dessler,
2017)
Performance appraisal (PA) is...
 “The process of evaluating how well employees perform their jobs when compared to a set of
standards, and then communicating that information.” (Mathis & Jackson, 2011)
 “Evaluating an employee’s current and/or past performance relative to his or her performance
standards.” (Dessler, 2017)
Performance Management is a goal-oriented process directed toward ensuring that organizational
processes are in place to maximize the productivity of employees, teams, and ultimately, the
organization. It is a major player in accomplishing organizational strategy in that it involves
measuring and improving the value of the workforce.
According to the Armstrong and Baron (2005) performance management is ‘a process which
contributes to the effective management of individuals and teams in order to achieve high levels of
organisational performance. It establishes shared understanding about what is to be achieved and an
approach to leading and developing people which will ensure that it is achieved’.
Performance management is the process of identifying, measuring, managing, and developing the
performance of the human resources in an organization. It is about what organization is going to do to
help an employee continue in their development to become increasingly better in their performance
for their organization.
Performance Appraisal is the ongoing process of evaluating employee performance. It is how
organization evaluates the progress being made by assessing or measuring the employee’s actual
performance on a regular basis over time. It is the important part of the performance management that
is purely based on the performance evaluation of the teams, and team members of the organizations.
This process enables the management to review teams’ work, team member’s work based on the
assigned work responsibilities derived from operational plans or execution plans of the organizations.
Performance appraisal is a formal and structured system by which management measures, evaluates
and assesses an employee’s job-related attributes, behaviours and outcomes. It is undertaken to
discover how productive the employee is and whether the employee can continue to perform in future
to help achieve the organisation’s goals.

METHODS OF PERFORMANCE APPRAISAL
Different methods are used for various organizations based on their work methods, business processes
and procedures. These methods are as below:
1. Check List Method
2. Graphic Rating Scale Method
3. Alternation Ranking Method
4. Paired Comparison Method
5. Forced Distribution Method
6. Critical Incident Method
7. Narrative Forms
8. Behaviorally Anchored Rating Scales
(BARS)
9. Mixed Standard Scales
10. Human Resource Accounting Method
11. Management by Objectives
12. Computerized and Web-Based
Performance Appraisal
13. Electronic Performance Monitoring
14. 360-Degree Appraisals Method
1. Check List Method: Under this method, the appraiser is given a set of metaphors to be used for
rating the employees. This comprises of a list of questions based on which the rater evaluates the
acts of the human resources. Let us see the below statements or descriptions used as checklist:
Checklist
Is the employee actually interested in the job? Yes/No
Do they give respect to their superiors? Yes/No
Do they follow the directives? Yes/No
Mistakes are made frequently? Yes/No
2. Graphic Rating Scale Method: The graphic rating scale is the simplest and most popular method
for appraising performance. It commonly includes the several job dimensions or traits (such as
“communication” or “teamwork”) and a range of performance values (from “below expectations”
to “role model” or “unsatisfactory” to “outstanding”) for each trait. The supervisor rates each
subordinate by circling or checking the score that best describes the subordinate’s performance
for each trait, and totals the ratings. Competency- (skills or behavior) based graphic rating scales
are another option. This graphic rating form assesses the person’s competencies and skills. This
includes the goals, and rating achieved against those goals with certain explanation. (Dessler,
2017) (Figure 3.1)

3. Alternation Ranking Method: Ranking employees from best to worst on a trait or traits is
another option. Since it is usually easier to distinguish between the worst and best employees, an
alternation ranking method is most popular. First, list all subordinates to be rated, and then cross
out the names of any not known well enough to rank. Then indicate the employee who is the
highest on the performance dimension being measured and the one who is the lowest. Then
choose the next highest and the next lowest, alternating between highest and lowest until all
employees have been ranked. (Dessler, 2017)
4. Paired Comparison Method: The paired comparison method makes the ranking method more
precise. For every trait (quantity of work, quality of work, and so on), compare every employee
with every other employee. A score is obtained for each employee by simply counting the number
of pairs in which the individual is superior at the job trait, ranking each individual in relationship
to all others on a one-on-one basis as shown in Figure 3.2. For example, in the paired
comparisons, five employees are being compared for their innovation and creativity on the job.
The plus (+) means the employee being rated is better than the comparison employee, the minus
(–) means the employee being rated is worse than the comparison employee. The employee
receiving the most s will be the highest ranked employee. (Dessler, 2017)
Figure 3.2 - Ranking Employees by Paired Comparison
(DeCenzo, Robbins & Verhulst, 2010)
5. Forced Distribution Method: The forced distribution method is similar to grading on a curve.
With this method, the manager places predetermined percentages of ratees into performance
categories. The ratings of employees’ performance are distributed along a bellshaped curve.
Figure 3.1 -Sample of Graphic Rating Scale Items and Format (DeCenzo, Robbins & Verhulst, 2010)

(Figure 3.3). For example, a medical clinic administrator ranking employees on a 5-point scale
would have to rate 10% of the employees as a 1 (“unsatisfactory”), 20% as a 2 (“below
expectations”), 40% as a 3 (“meets expectations”), 20% as a 4 (“above expectations”), and 10%
as a 5 (“outstanding”).
Forced distribution’s big advantage is that it prevents supervisors from rating all or most
employees “satisfactory” or “high.” Forced distribution makes some sense. It reflects the fact that
top employees often outperform average or poor ones by as much as 100%. Forced distribution
rating systems may also increase the risk of discriminatory adverse impact. (Dessler, 2017)
6. Critical Incident Method: With the critical incident method, the supervisor keeps a log of
positive and negative examples (critical incidents) of a subordinate’s work-related behaviors.
Every six months or so, supervisor and subordinate meet to discuss the latter’s performance, using
the incidents as examples. Compiling incidents is useful. It provides examples the supervisor can
use to explain the person’s rating. It makes the supervisor think about the subordinate’s appraisal
all during the year. The downside is that it doesn’t produce relative ratings for pay raise purposes.
(Dessler, 2017)
7. Narrative Forms: All or part of the written appraisal may be in narrative form. The person’s
supervisor assesses the employee’s past performance and required areas of improvement. The
supervisor’s narrative assessment helps the employee understand where his/her performance was
good or bad, and how to improve that performance. (Figure 3.4) (Dessler, 2017)
Figure 3.3 - Forced Distribution on a Bell-Shaped Curve

Figure 3.4 - Sample Narrative Appraisal Form
8. Behaviorally Anchored Rating Scales: A behaviorally anchored rating scale (BARS) is an
appraisal tool that anchors a numerical rating scale with specific illustrative examples of good or
poor performance. In Figure 3.5 an example is shown.
Developing a BARS typically involves five steps:
i. Write critical incidents. Ask the job’s jobholders and/or supervisors to write specific
illustrations (critical incidents) of effective and ineffective performance on the job.
ii. Develop performance dimensions. Have these people cluster the incidents into 5 or 10
performance dimensions, such as “salesmanship skills.”
iii. Reallocate incidents. To verify these groupings, have another team who also knows the
job reallocate the original critical incidents to the cluster they think it fits best. Retain a
critical incident if most of this second team assigns it to the same cluster as did the first.
iv. Scale the incidents. This second group then rates the behavior described by the incident
as to how effectively or ineffectively it represents performance on the dimension.
v. Develop a final instrument. Choose about six or seven of the incidents as the
dimension’s behavioral anchors.

Figure 3.5 - Sample BARS for an Employee Relations Specialist
This behaviorally anchored rating scale (BARS) evaluates how well an HR employee relations
specialist can understand and interpret company policies by describing the levels of performance.
Better performance earns higher point value.
The BARS method has several advantages. Most notably, the critical incidents along the scale
illustrate what to look for in terms of superior, average, and poor performance (an idea equally
valuable when creating most other types of appraisal tools, including graphic rating scales). The
critical incidents make it easier to explain the ratings to appraisees. Clustering the critical
incidents into five or six performance dimensions (such as “salesmanship skills”) helps make the
performance dimensions more independent of one another. (Dessler, 2017)
9. Mixed Standard Scales: Mixed standard scales are somewhat similar to behaviorally anchored
scales. However they are called mixed scales because the employer “mixes” together sequentially
the good and poor behavioral example statements when listing them. The aim is to reduce rating
errors by making it less obvious to the appraiser (1) what performance dimensions he or she is
rating; and (2) whether the behavioral example statements represent high, medium, or low
performance. For each statement the appraiser rates the employee by indicating whether the
latter’s performance is better than, the same, or worse than the statement. (Dessler, 2017)
10. Human Resource Accounting Method: This method measures the efficiency of personnel
management behaviour and how the people are used in an organization. This is handing over,
budgeting and reporting of how much cost is involved in the acquisition of human resources,
which includes salaries and wages. There is a saying, ‘the human resources are
the assets of an organization.’ HRA method finds out net worth of these resources in monitory
terms. Under this method the cost incurred on employees right from recruitment to induction is
calculated and the contribution of employees which in this method is the total value added, is also
calculated. The difference between the cost and input is considered to be the performance of the
manpower hired; preferably the contribution from the employee’s side should be greater than the
cost incurred.

11. Management by Objectives: The term management by objectives (MBO) usually refers to a
multistep companywide goal-setting and appraisal program. MBO requires the manager to set
specific measurable, organizationally relevant goals with each employee, and then periodically
discuss the latter’s progress toward these goals. The steps are:
i. Set the organization’s goals. Establish a company-wide plan for next year and set goals.
ii. Set departmental goals. Department heads and their superiors jointly set goals for their
departments.
iii. Discuss departmental goals. Department heads discuss the department’s goals with their
subordinates and ask them to develop their own individual goals. They should ask, “How
could each employee help the department attain its goals?”
iv. Define expected results (set individual goals). Department heads and their subordinates set
short-term performance targets for each employee.
v. Conduct performance reviews. After a period, department heads compare each employee’s
actual and expected results.
vi. Provide feedback. Department heads hold periodic performance review meetings with
subordinates. Here they discuss the subordinates’ performance and make any plans for
rectifying or continuing the person’s performance.
Formal MBO programs require numerous time-consuming meetings, and their use has
diminished. However, some companies successfully use streamlined versions. For example,
Google CEO sets company-wide “OKRs” (objectives and key results) quarterly. All Google
employees then make sure their own goals are more or less in synch with the CEO’s. All
employees’ goals are posted on Google’s internal Web site, next to their names. (Dessler, 2017)
12. Computerized and Web-Based Performance Appraisal: Employers increasingly use
computerized or Internet-based appraisal systems. Most enable managers to compile
computerized notes on subordinates during the year, and then to merge these with ratings for the
employee on several performance traits. The software presents written examples to support part of
the appraisal. Most such appraisals combine several appraisal tools, usually graphic ratings
anchored by critical incidents. The manager chooses the phrase that most accurately describes the
worker. Then Employee Appraiser generates an appraisal with sample text. Success factors, a
subsidiary of software giant SAP, offers a Web-based employee appraisal solution. It includes
performance review forms and approval processes, competencies for most job types, a built-in
writing assistant, and a legal scan. (Dessler, 2017)
13. Electronic Performance Monitoring: Electronic performance monitoring (EPM) systems use
computer network technology to allow managers to monitor their employees’ computers. They
allow managers to monitor the employees’ rate, accuracy, and time spent working online. EPM
can improve productivity, but also seems to raise employee stress. However, one researcher
concludes that electronic performance monitoring “represents the future of performance feedback
where supervisors can electronically monitor the amount and quality of work an employee is
producing and have objective indicators of employee performance immediately available and
visible.” Similarly, some employers digitally track workers’ performance through wear-ables. For
example, the British retailer Tesco has warehouse workers wear armbands. These track which
specific goods each worker is moving and how long the task is taking to complete and quantify
and report things like how long it takes each worker to fulfil each order. (Dessler, 2017)
14. 360-Degree Appraisals Method: The central idea of a 360 degree appraisal system is to obtain
performance evaluations on individual employees from multiple perspectives or sources.

Typically, ratings are gathered from supervisors, peers, and subordinates, or some combination of
these sources. Self ratings and customer ratings may also be elicited. Other terms used to de scribe
360 degree appraisals include multi rater systems, upward feedback, and full circle feedback.
(Figure 3.6)
Advantages of 360 degree appraisal:
 Offer a more comprehensive view towards the
performance of employees.
 Improve credibility of performance appraisal.
 Such colleague’s feedback will help strengthen self-
development.
 Increases responsibilities of employees to their
customers.
 The mix of ideas can give a more accurate
assessment.
 Opinions gathered from lots of staff are sure to be
more persuasive.
 Not only manager should make assessments on its staff performance but other colleagues
should do, too.
 People who undervalue themselves are often motivated by feedback from others.
 If more staff takes part in the process of performance appraisal, the organizational culture
of the company will become more honest.
Disadvantages of 360 degree appraisal:
 Taking a lot of time, and being complex in administration
 Extension of exchange feedback can cause troubles and tensions to several staff.
 There is requirement for training and important effort in order to achieve efficient
working.
 It will be very hard to figure out the results.
 Feedback can be useless if it is not carefully and smoothly dealt.
 Can impose an environment of suspicion if the information is not openly and honestly
managed.
Problem Encountered in Performance Appraisal
A completely error-free performance appraisal is only an ideal HRM professionals can aim for. In
reality, most appraisals fall short, often through one or more actions that can significantly impede
objective evaluation. Figure 3.7
Leniency Error: Every rater has his/her own value system that acts as a standard against which
appraisals are made. Leniency error is when a raters’ tendency is to rate all employees at the positive
end of the scale (positive leniency) or at the low end of the scale (negative leniency). This can happen
when a manager over-emphasizes either positive or negative behaviors.
If all individuals in an organization were appraised by the same person, there would be no problem.
Any error factor would be applied equally to everyone. The difficulty arises when we have different
raters with different leniency errors.
Figure 3.6

Halo Error: Halo Effect is when a rater’s overall positive or negative impression of an individual
employee leads to rating him/her the same across all rating dimensions. This is when a manager really
likes or dislikes an employee and allows their personal feelings about this employee to influence their
performance ratings of them. For example, if an employee tends to be conscientious and dependable,
we might become biased toward that individual to the extent that we will rate him or her positively on
many desirable attributes.
Similarity Error: When evaluators rate other people in the same way that the evaluators perceive
themselves, they make a similarity error. That is, they project self-perceptions onto others. For
example, the evaluator who perceives himself or herself as aggressive may evaluate others by looking
for aggressiveness. Those who demonstrate this characteristic tend to benefit, and others who lack it
may be penalized.
Low Appraiser Motivation: If the evaluator knows that a poor appraisal could significantly hurt the
employee’s future—particularly opportunities for promotion or a salary increase; the evaluator may
be reluctant to give a realistic appraisal. Evidence indicates that it is more difficult to obtain accurate
appraisals when important rewards depend on the results.
Central Tendency: Central tendency occurs when a rater refuses to use the two extremes (for
instance, outstanding and unacceptable, respectively). Raters prone to the central tendency error
continually rate all employees as average. For example, if a supervisor rates all employees as 3 on a
scale of 1 to 5, no differentiation among the employees exists. Failure to rate deserving employees as
5 or as 1, as the case warrants it, will only create problems, especially if this information is
used for pay increases. This can happen either when a manager is not comfortable with conflict and
avoids low marks to avoid dealing with behavioral issues or when a manager intentionally forces all
employees to the middle of the scale.
Figure 3.7 - Factors that Distort Performance Appraisals

Inflationary Pressures: A tendency for evaluators to be less rigorous and to reduce the negative
repercussions from the appraisal process by generally inflation or upgrading evaluations. As
“equality” values have grown in importance in our society, as well as fear of retribution from
disgruntled employees who fail to achieve excellent appraisals, evaluation has tended to be less
rigorous, and negative repercussions from the evaluation have been reduced by generally inflating or
upgrading appraisals. However, inflating these evaluations has put many organizations in a difficult
position when having to defend its personnel action in the case of discharging an employee.
Inappropriate Substitutes for Performance: In many jobs it is difficult to get consensus on what is
a good job and it is still more difficult to get agreement on what criteria will determine performance.
For a salesman the criterion may be the money value of sales in his territory but even this criterion is
affected by factors beyond the salesman’s control, such as action of competitors. As a result, the
appraisal is frequently made by using substitutes for performance, such as criteria that closely
approximate performance and act in its place. Many of these substitutes are well chosen and give a
good approximation of actual performance.
However, the substitutes chosen are not always appropriate. Organisations use criteria such as
enthusiasm, conscientiousness and a positive attitude as substitutes for performance.
Mathis & Jackson (2011) elaborated common raters errors as shown in Figure 3.8
Figure 3.8 - Common Rater Errors

Dr. John Sullivan, professor, author, corporate speaker, and advisor, is an internationally known HR
thought-leader from the Silicon Valley who specializes in providing bold and high-business-impact
talent management solutions. He provides Top 50 problems with performance appraisals (grouped
into six categories):
I. Most Serious Performance Appraisal
Problems
IV. Manager/execution problems
1. Don’t assess actual performance 27. Managers are not trained
2. Infrequent feedback 28. Managers are “chickens”
3. Non-data-based assessment 29. Gaming the system
4. Lack of effectiveness 30. Recency errors
5. Lack of accountability 31. Corporate culture issues
II. Process related problems 32. Inconsistency across managers
6. Disconnected from 33. Managers don’t know the employee
7. No integration 34. Secret codes
8. Individual scores exceed team performance 35. Mirror assessments
9. Each year stands alone 36. Managers are not rewarded
10. No comprehensive team assessment 37. Managers don’t own
11. A focus on the squeaky wheel V. Employee/subject problems
12. Little legal support 38. High anxiety
13. No second review 39. One-way communication
14. Not reliable or valid 40. Self-assessment is not possible
15. Cross-comparisons are not required 41. No alerts
16. Assessments are kept secret 42. No choice of reviewers
17. Process manager is not powerful 43. One-way process
18. No process goals 44. No appeal process
19. Not global 45. Retention issues
20. Forced ranking issues 46. Many possible emotional consequences
21. No ROI calculation VI. Timing issues
III. Instrument (form) problems 47. A time-consuming process
22. Doesn’t address diversity 48. It is historical
23. The process does not flex with the business 49. Not coordinated with business cycles
24. The factors are all equal 50. Not simultaneous
25. Inconsistent ratings on the same form
26. Disconnected from job descriptions
Some of these problems are explained below:
1. Lack of effectiveness metrics: Many accept that the goals of the process are to recognize results,
provide feedback to address weaknesses, determine training needs, and to identify poor
performers. The most common measure relating to performance appraisal is the percentage
completed. Their ratio of performance is high to meet that push the team to work hard to meet the
desired effectiveness.
2. High accountability: Managers are measured or held accountable for providing accurate
feedback on the field projects with facts and figures. There is no penalty for doing a half-assed job
or making mistakes on them but strict in funds management and utilization. They do remove a
troublesome employee found that the manager had rated the individual the highest within the
department and awarded them employee of the year without any effective result reports. They

practice high standards and monitor teams deeply with results that push employees to work
effectively and employees are accountable for their work responsibilities. This approach put
pressure on teams specifically in the fields to report accurate facts and figures.
3. Low integration: This process is integrated low with compensation, performance management,
development, or staffing (internal movement). Their criteria for project based teams are very
different and are not eligible to apply for internally core jobs. Project based teams are given better
compensation but no opportunity to apply internally. Core teams are not rewarded as per their
tiles or responsibilities and have limited benefits based on the budgets comparatively.
4. Individual scores exceed team performance: Without controls, quite often the average score of
team members exceeds the actual performance of the team (i.e. the team reached 80 percent of its
goals but the average performance appraisal for its members was 95 percent).
5. Each year stands alone — each performance appraisal by definition covers a finite period of
time. However, if the goal is to assess potential and identify patterns, an employee’s performance
must be assessed over multiple years. They practice yearly performance appraisal but not sure to
have raise in compensation due to various other factors. They believe in commitment and
contribution in the society to help them based on various projects. They do praise and certify their
performers in events but has no connection with compensation and benefits.
6. No second review: Even though the process may have impacts on salary, job security, and
promotion, in many firms the assessment is done by a single manager. Departmental managers’
reports are important for performance as they continuously monitors the team, and have weekly
progress reports. All facts and figures are available with them throughout their work teams, and
do not require second review.
7. Process manager is not powerful: Often the process is managed by lower-level HR
administrators without a complete understanding of performance and productivity. Even
managers are not powerful so powerful for the appraisal. They pass their recommendations with
all desired facts and figures, assessment reports in front of board of directors. Board of directors
and Executives director after detailed discussion take decisions keeping in view all the desired
factors for appraisals. Their all board of directors are honorary members for few years with
extensive experience in their fields of expertise.
8. Gaming the system: Often managers artificially rate individual employees to save money or to
keep employees from becoming visible for promotion. Some selfishly give a score just below that
required for a pay increase, while others give scores just above the point where they would be
required to take disciplinary action.
9. A time-consuming process: Most of the forms are incredibly long and time-consuming. As a
result, some managers routinely recycle “last year’s” evaluations. HR organise the sessions to
discuss issues and all related information to build the actual opinion based on facts. The amount
of wasted time increases significantly. HR coordinates and listen everyone to reach their opinion
for corrective actions and improvements.
(Sullivan, 2011)

Referring to SPARC (Society for the Protection of the Rights of the Child) head office based in
Islamabad and managing multiple projects on child rights, juvenile justice, trainings and other areas
with multiple offices in different locations of Pakistan. Their workforce includes the professionals in
the specialised disciplines and professional volunteers in the fields based on the projects. They have
effective HR planning process and follow different forecasting techniques to meet their desired HR
requirements. They are following Graphic Rating Scale Method, Alternation Ranking Method, and
Paired Comparison Method for evaluation for core team and project managers for different projects.
Project evaluation is purely based on results, cost controls, and effectiveness of the projects in quality
and quantity. They face issues in the execution of their projects and appraisal is very transparent and
approved by volunteer board of directors.
CONCLUSION
An objective, workable performance appraisal lets employer/ manager evaluate each individual's
performance. It provides the opportunity for two-way communication between the employee and the
employee's supervisor, and it allows the employee to predict future success on the job. It is an
opportunity to provide constructive, valuable feedback. Without a performance dialogue, a company
cannot retain its best people. The success of an organization's performance appraisal system is
essential in order for any organization to make critical decisions about its future leadership.
Performance appraisal is the judgment of individual employee performance by superiors and is
usually done in anticipation of determining an annual salary increase. Elaborate systems, complete
with self-rating forms, sign-off procedures, and extensive supervisory training, are often used for
performance appraisal and with good reason. Inequitable, inconsistent, or arbitrary performance
appraisal, whether actual or merely perceived, can destroy the best-conceived system of internal
equity and motivation ever constructed for a salary program.
REFERENCES
Armstrong, M., & Baron, A. (2005). Managing performance: Performance management in action. London: CIPD
publishing.
DeCenzo, D. A., Robbins, S. P. & Verhulst, S. L. (2010). Fundamentals of Human Resource Management. 10th
ed.
Hoboken, NJ: John Wiley & Sons.
Dessler, G. (2017). Human resource management. 15th
Ed. Upper Saddle River, NJ: Pearson
Education, Inc.
Mathis, R. L., & Jackson, J. H. (2011). Human resource management. 13th
ed. Mason: Cengage Learning.
Sullivan, J. (2011, January 31). The Top 50 Problems With Performance Appraisals. Talent Management & HR. Retrieved
from https://www.tlnt.com/the-top-50-problems-with-performance-appraisals/

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