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Effectiveness of performance appraisal system
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I. Contents of getting effectiveness of performance appraisal system
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For most companies, the end of the year is a time when employees and leaders go through the
annual review process. This process is designed to rate performance for the year and, if
applicable, apply a merit increase. Many companies consider this their performance management
system. A true performance management system however is much more involved.
True performance management is an ongoing process. It occurs all year long. It involves ongoing
dialogue between leader and employee. It requires constant alignment of employee goals against
business objectives. It fosters the ability to make a meaningful impact on employee performance
for both the sake of the employee and the company.
When implementing a performance management system, there are three keys to making the
system effective.
Performance Management Alignment
As I mentioned above, an effective performance management system aligns business objectives
with employee goals. It takes a look at company culture and strategic direction and creates goals
based on those objectives. This alignment helps each employee understand how they contribute
to the growth of the company. When employees feel that their contributions make a difference,
they are more effective.
Communication Between Leader and EmployeeMary Kay Ash Quote

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Effective performance management systems create an environment where open communication
between leader and employee is not only encouraged but expected. The leader should be willing
and able to provide performance feedback at any given time, not just at annual performance
review time. In turn, the employee should be able to provide feedback about what they may need
to better perform their job. Similarly an employee should feel free to talk about the desired
direction they want their career to go and how the company may help them get there.
Consistency Identifying Good or Poor Performance
In any performance management system, the true test of its effectiveness is whether it can
consistently identify good or poor performance. Meaning, the system should be very clear about
what good performance looks like, what bad performance looks like, and the rewards or
consequences associated with both. This system should be applied across all employees at all
levels. To accomplish this, identifying behaviors and goals must begin early in the design phase
and, once completed, everyone must be trained on how to identify effectively the differences in
performance. A performance management system that does not apply standards consistently
serves to inhibit company growth rather than influence it positively.
While the overall design of a performance management system can be a bit complicated, keeping
these three keys in mind will help focus the project. In the end, moving from just an employee
appraisal system to an overall performance management system is what allows employee
performance to truly have a positive impact on company performance. Without it, chances are
good that leaders and employees are just checking the box at annual performance review time
and giving it little to no thought the rest of the year.
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III. Performance appraisal methods
1.Ranking Method
The ranking system requires the rater to rank his
subordinates on overall performance. This consists in
simply putting a man in a rank order. 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.
Advantages of Ranking Method
i. Employees are ranked according to their performance
levels.

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ii. It is easier to rank the best and the worst employee.
Limitations of Ranking Method
i. The “whole man” is compared with another “whole man”
in this method. In practice, it is very difficult to compare
individuals possessing various individual traits.
ii. This method speaks only of the position where an
employee stands in his group. It does not test anything
about how much better or how much worse an employee
is when compared to another employee.
iii. When a large number of employees are working, ranking
of individuals become a difficult issue.
iv. There is no systematic procedure for ranking individuals
in the organization. The ranking system does not eliminate
the possibility of snap judgements.
2. Rating Scale
Rating scales consists of several numerical scales
representing job related performance criterions such as
dependability, initiative, output, attendance, attitude etc.
Each scales ranges from excellent to poor. The total
numerical scores are computed and final conclusions are
derived. Advantages – Adaptability, easy to use, low cost,
every type of job can be evaluated, large number of
employees covered, no formal training required.
Disadvantages – Rater’s biases
3. Checklist method

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Under this method, checklist of statements of traits of
employee in the form of Yes or No based questions is
prepared. Here the rater only does the reporting or
checking and HR department does the actual evaluation.
Advantages – economy, ease of administration, limited
training required, standardization. Disadvantages – Raters
biases, use of improper weighs by HR, does not allow
rater to give relative ratings
4. Critical Incidents Method
The approach is focused on certain critical behaviors of
employee that makes all the difference in the
performance. Supervisors as and when they occur record
such incidents. Advantages – Evaluations are based on
actual job behaviors, ratings are supported by
descriptions, feedback is easy, reduces recency biases,
chances of subordinate improvement are high.
Disadvantages – Negative incidents can be prioritized,
forgetting incidents, overly close supervision; feedback
may be too much and may appear to be punishment.
5. Essay Method

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In this method the rater writes down the employee
description in detail within a number of broad categories
like, overall impression of performance, promoteability
of employee, existing capabilities and qualifications of
performing jobs, strengths and weaknesses and training
needs of the employee. Advantage – It is extremely
useful in filing information gaps about the employees
that often occur in a better-structured checklist.
Disadvantages – It its highly dependent upon the writing
skills of rater and most of them are not good writers.
They may get confused success depends on the memory
power of raters.
6. Behaviorally Anchored Rating Scales
statements of effective and ineffective behaviors
determine the points. They are said to be
behaviorally anchored. The rater is supposed to
say, which behavior describes the employee
performance. Advantages – helps overcome rating
errors. Disadvantages – Suffers from distortions
inherent in most rating techniques.
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