Methods of Performance Appraisal

Numerous methods have been devised to measure the quantity and quality of employee’s job performance. Each of the methods could be effective for some purposes, for some organizations. None should be dismissed or accepted as appropriate except as they relate to the particular needs of the organization or of a particular type of employees.

The approaches can be broadly classified into:-

(i) Past-oriented methods,

(ii) Future-oriented  methods

Past-oriented Methods

Rating Scales

This is the simplest and most popular technique for ap­praising employee performance. The typical rating-scale system consists of several numerical scales, each representing a job-related performance criterion such as dependability, initiative, output, attendance, attitude, co-operation, and the like. Each scale ranges from excellent to poor. The rater checks the appropriate performance level on each criterion, then computes the employee’s total numerical score. The number of points scored may be linked to salary increases, whereby so many points equal a rise of some percentage.

Rating scales offer the advantages of adaptability, relatively easy use and low cost. Nearly every type of job can be evaluated with the rating scale, the only requirement being that the job-performance criteria should be changed. This way, a large number of employees can be evaluated in a short time, and the rater does not need any training to use the scale.

The disadvantages of this method are several. The rater’s biases are likely to influence evaluation, and the biases are particularly pronounced on subjective criteria such as co-operation, attitude and initiative. Furthermore, numerical scoring gives an illusion of precision that is really unfounded.

Checklist

Under this method, a checklist of statements on the traits of the employee and his or her job is prepared in two columns-viz., a ‘Yes’ column and a ‘No’ column. All that the rater (immediate superior) should do is tick the ‘Yes’ column if the answer to the statement is positive and in column ‘No’ if the answer is negative.

After ticking off against each item, the rater forwards the list to the HR department where the actual assessment of the employee takes place. In other words, the rater only does the reporting, while actual evaluation is done by the HR department. The HR department assigns certain points to each ‘Yes’ ticked. Depending on the number of ‘Yes’ the total score is arrived at. When points are allotted to the checklist the technique becomes a weighted checklist.

The advantages of a checklist are economy, ease of administration, limited training of rater, and standardization. The disadvantages include susceptibility to rater’s biases (especially the halo effect), use of personality criteria instead of performance criteria, misinterpretation of checklist items. and the use of improper weights by the HR department. Another disadvantage of this approach is that is does not allow the rater to give up relative ratings.

Forced Choice Method

In this, the rater is given a series of statements about an employee. These statements are arranged in blocks of two or more, and the rater indicates which statement is most or least descriptive of the employee. Typical statements are:

1. Learns fast —————works hard
2. Work is reliable————-performance is a good example for
2. Absents often————-others usually tardy

As in the checklist method, the rater is simply expected to select the statements that describe the ratee. Actual assessment is done by the HR department.

This approach is known as the forced choice method because the rater is forced to select statements which are readymade. The advantage of this method is the absence of personal bias in rating. The disadvantage is that the statements may not be properly framed-they may not be precisely descriptive of the ratee’s traits.

Forced Distribution Method

One of the errors in rating is leniency- clustering a large number of employees around a high point on a rating scale. The forced distribution method seeks to overcome the problem by compelling the rater to distribute the ratees on all points on the rating scale.

The method operates under an assumption that the employee performance level conforms to a normal statistical distribution. Generally, it is assumed that employee performance levels conform to a bell-shaped curve. For example, the following distribution might be assumed to exist-excellent I0 per cent, good 20 per cent, average 40 per cent, below average 20 per cent, and unsatisfactory 10 per cent.

The major weakness of the forced distribution method lies in the assumption that employee performance levels always conform to a normal (or some other) distribution. In organizations that have done a good job of selecting and retaining only the good performers, the use of forced distribution approach would be unrealistic, as well as possibly destructive to the employee morale.

The error of central tendency may also occur, as the rater resists from placing an employee in the lowest or in the highest group. Difficulties also arise for the rater to explain to the ratee why be or she has been placed in a particular group. One merit of this approach is that it seeks to eliminate the error of leniency. However, the forced choice method is not acceptable to raters and ratees, especially, in small groups or when group members are all of high ability.

Critical Incidents Method

The critical incidents method of employee assessment has generated a lot of interest these days. The approach focuses on certain critical behaviours of an employee that make all the difference between effective and non-effective performance of a job. Such incidents are recorded by the superiors as and when they occur.

One of the advantages of the critical incidents method is that the evaluation is based on actual job behaviour. Further, the approach has descriptions in support of particular ratings of an employee. Giving job-related feedback to the ratee is also easy. It also reduces the recency bias, if raters record incidents throughout the rating period. Finally, this approach can increase the chances that the subordinates will improve because they learn more precisely what is expected of them. The method, however has significant limitations. These include:

1. Negative incidents are generally more noticeable than positive ones.
2. The recording of incidents is a chore to the supervisor and may be put off and easily forgotten.
3. Overly close supervision may result.
4. Managers may unload a series of complaints about incidents during an annual performance review session. The feedback may be too much at one time and thus appear as a punishment to the ratee. More appropriately, the management should use incidents of poor performance as opportunities for immediate training and counselling.

Behaviourally Anchored Rating Scales

Behaviourally anchored scales sometimes called behavioural expectation scales, are rating scales whose scale points are determined by statements of effective and ineffective behaviours. They are said to be behaviourally anchored in that the scales represent a range of descriptive statements of behaviour varying from the least to the most effective. A rater must indicate which behaviour on each scale best describes an employee’s performance. Behaviourally anchored rating scales (BARS) have the following features.

1 Areas of performance to be evaluated are identified and defined by the people who will use the scales.
2. The scales are anchored by descriptions of actual job behaviour that, supervisors agree, represent specific levels of performance. The result is a set of rating scales in which both dimensions and anchors are precisely defined.
3. All dimensions of performance to be evaluated are based on observable behaviours and are relevant to the job being evaluated since BARS are tailor-made for the job.
4. Since the raters who will actually use the scales are actively involved in the development process, they are more likely to be committed to the final product.

BARS were developed to provide results which subordinates could use to improve performance. Superiors would feel comfortable to give feedback to the ratees. Further, BARS help overcome rating errors. Unfortunately, this method too suffers from distortions inherent in most rating techniques.

Field Review Method

This is an appraisal by someone outside the assessee’s own department, usually someone from the corporate office or the HR. department. The outsider reviews employee records and holds interviews with the ratee and his or her superior. The method is primarily used for making promotional decisions at the managerial level. Field reviews are also useful when comparable information is needed from employees in different units or locations. Two disadvantages of this method are:

1. An “outsider” is usually not familiar with conditions in an employee’s work environment which may affect the employee’s ability or motivation to perform.
2. An ‘outsider’ review does not have the opportunity to observe employee behaviour of performance over a period of time and in a variety of situations, but only in an artificially structured interview situation which extends over a very short period of time.

Raters making field reviews normally receive training on how to conduct the interview and develop their writing skills. Being independent of the work scene, they normally have less bias for or against the ratee than does the immediate supervisor. Even when a supervisor or others concerned supply biased information, the rater may be able to pinpoint areas requiring training and development assistance.

Performance Test and Observations

With a limited number of jobs, employee assessment may be based upon a test of knowledge or skills. The test may be of the paper-and-pencil variety or an actual demonstration of skills. The test must be reliable and validated to be useful. Even then, performance tests are apt to measure potential more than actual performance. In order for the test to be job related, observations should be made under circumstances likely to be encountered. Practicality may suffer if costs of test development or administration are high.

Confidential Records

Confidential records are maintained mostly in government departments, though its application in the industry is not ruled out.

A typical Confidential Report (ACR) shall have 14 items ­

(i) attendance,
(ii) self-expression (written or oral),
(iii) ability to work with others,
(iv) leadership,
(v) initiative,
(vi) technical ability (job knowledge),
(vii) ability to understand new material
(viii) ability to reason,
(ix) originality and resourcefulness,
(x) areas of work that suits the person best,
(xi) judgement,
(xii) integrity,
(xiii) responsibility and,
(xiv) and indebtedness and memo served.

Twelve of these may be filled on a four-point grade scale (Excellent, Good, Fair and Poor). For integrity, there shall be special instructions from the management. Justification is required for outstanding or poor rating. Overall rating on a five-point scale may be separately given (Outstanding, Very good, Good, Average, Poor), again with justification for rating as outstanding or poor. Recommendations for promotion may be also given. The ACR to contain recommendations and signature of the rater, the head of the department and the CMD.

Ranking Method

In this, the superior ranks his or her subordinates in the order of their merit, starting from the best to the worst. All that the HR department knows is that A is better than B. The ‘how’ and ‘why’ are not questioned, nor answered. No attempt is made to fractionalise what is being appraised into component elements. This method is subject to the halo and recency effects, although rankings by two or more raters can be averaged to help reduce biases. Its advantages include ease of administration and explanation.

Future-oriented Methods

Is it not enough if only the past performance is assessed. How an employee can perform in the days to come is equally important. This can be assessed by focussing on employee potential or setting future performance goals. The commonly used future-oriented techniques are MBO, psychological appraisals, and assessment centres.

Management by Objectives

It was Peter F. Drucker who first gave the concept of MBO to the world way back in 1954 when his ‘The Practice of Management’ was first published. The concept, as was conceived by Drucker, reflects a management philosophy which values and utilises employee contributions. Application of MBO in the field of performance appraisal is a recent thinking.

It was Peter F. Drucker who first gave the concept of MBO to the world way back in 1954 when his The Practice of Management was first published. The concept, as was conceived by Drucker, reflects a management philosophy which values and utilizes employee contributions. Application of MBO in the field of performance appraisal is a recent thinking.

Assessment Centres

Mainly used for executive hiring, assessment centres are now being used for evaluating executive or supervisory potential. An assessment centre is a central location where managers may come together to have their participation in job-related exercises evaluated by trained observers. The principal idea is to evaluate managers over a period of time, say one to three days, by observing (and later evaluating) their behaviour across a series of select exercises or work samples.

Assessees are requested to participate in in-basket exercises, work groups (without leaders), computer simulations, role paying, and other similar activities which require the same attributes for successful performance, as in the actual job. After recording their observations of ratee behaviours, the raters meet to discuss these observations. The decision regarding the performance of each assessee is based upon this discussion of observations. Self-appraisal and peer evaluation are also thrown in for final rating.

The characteristics assessed in a typical assessment centre include assertiveness, persuasive ability, communicating ability, planning and organizational ability, self-confidence, resistance to stress, energy level, decision-making, sensitivity to the feelings of others, administrative ability, creativity, and mental alertness. It is a formidable list which is quite difficult to measure accurately over three days, though there would be sizeable number of trained observers and psychologists.

360-Degree Feedback

As said above, where multiple raters are involves in evaluating performance, the technique is called 360-degree appraisal. The 360-degree technique is understood as systematic collection of performance data on an individual or group, derived from a number of stakeholders- the stakeholders being the immediate supervisors, team members, customers, peers and self. In fact, anyone who has useful information on ‘how an employee does the job’ may be one of the appraisors.

The 360 degree appraisal provides a broader prospective about an employees’ performance. In addition, the technique facilitates greater self-development of the employees. For one’s development, multi-source feedback is highly useful. It enables an employee to compare his or her perceptions about self with perceptions of others.

Sonia Kukreja

I am a mother of a lovely kid, and an avid fan technology, computing and management related topics. I hold a degree in MBA from well known management college in India. After completing my post graduation I thought to start a website where I can share management related concepts with rest of the people.
Sonia Kukreja