PERFORMANCE MGT. SYSTEM

INTRODUCTION • How do we manage performance within the organization? The

most common part of the process and the one with which we are most familiar, is the process of PERFORMANCE APPRAISAL.

• However PA process is not the only thing that done in performance mgt.

• Performance mgt. is the process of identifying, measuring, managing and developing the performance of HR in an organization.

• PA on the other hand, is the ongoing process of evaluating employees performance. PA are reviews of employee performance over time, so appraisal is just one piece of performance mgt.

Cont.

Changing trends in PA

The 1st variation came with the introduction of MBO later to as MBR

1980s saw a move towards competency based evaluation

1990s 360 degree feedback

Latest : new social performance mgt. system

WHAT IS PERFORMANCE APPRAISAL?

• PA is the method of evaluating the behaviour of the employees in the workplace, normally including both quantitative and qualitative aspect of the job. How the employee is performing

How the employee can develop

What the superior can do to make it happen

How the job is going

DEFINITION

• According to Edwin Flippo, "Performance Appraisal is the systematic, periodic and impartial rating of an employee's excellence, in matters pertaining to his present job and his potential for a better job."

WHY conduct a Performance Appraisal

• Provide information about the performance ranks.

Decision regarding salary revision, confirmation,

promotion and demotions.

• Provide feedback about level of achievement and

behaviour of the subordinate.

• Provide information which helps to counsel the employees.

• Provide information to diagnose the deficiency of the

employees.

• Provide training and development needs of the employees.

WHEN to conduct a Performance Appraisal

• The performance review must occur at least once in a year. Some companies review twice in a year.

• However, as a part of Performance Management, the performance review is a continuing, ongoing activity.

OBJECTIVES OBJECTIVE REMARKS

1) Setting targets and goals as performance standards

Performance std.’s & specific goals are set at the beginning of appraisal period . These targets motivate the employees to perform better

2) Evaluating employee performance

It helps to understand the strengths and weakness of the employee.

3) Identifying training and development needs

Shortcomings in employees performance are improved through T & D

4) Rewarding performance

Rewards and punishments, and reinforcement theory

5) Career planning Assist in career planning

WHO are involved in Performance Appraisal

• The Appraisee

• The Appraiser

• HR Department

PROCESS OF PERFORMANCE APPRAISAL

Determination of standards

What components

are to be measured

Measurement of employee performance

Communicating the actual

result

Take further steps as per

result

METHODS OF PERFORAMNCE APPRAISAL

TRADITIONAL METHODS

• These methods lay more emphasis on rating of individuals' personality traits, such as initiative, dependability, drive, creativity, integrity, intelligence, leadership potential, etc. In the following pages each method has been described in brief.

Graphic Rating Scales: This is the oldest and most widely method used

for performance appraisal. The scales may specify five points, so a factor such as job knowledge might be rated 1 (poorly informed about work duties) to 5 (has complete mastery of all phases of the job).

Table: Typical Graphic Rating ScaleEmployee Name................... Job

title .................Department ......................... Rate ...............

Data ..................................

Quantity of work: Volume of work under normal working conditions

Unsatisfactory(1)

Fair(2)

Satisfactory

(3)

Good(4)

OutStandi

ng(5)

Quality of work: Neatness, thoroughness and accuracy of work Knowledge of job

         

A clear understanding of the factors connected with the job

         

Attitude: Exhibits enthusiasm and cooperativeness on the job

         

Ranking Method• This is one of the oldest and simplest techniques of

performance appraisal. In this method, the appraiser ranks the employees from the best to the poorest on the basis of their overall performance. It is quite useful for a comparative evaluation.

• However, this method has some limitations namely : (1) It is difficult to adopt this method, in case of

evaluating large number of employees. (2) It is difficult to compare one individual with other

having varying behavioral traits.

Paired comparison method • In this method, each employee is compared with the other on one-

to-one basis. This method makes judgment easier as compared to ranking method. The number of times the employee is rated as better in comparisons with others determines his or her final ranking. The total number of comparison can be ascertained by the following formula :

where N stands for number of employees to be evaluated. The concept can be illustrated with the help of the following example. If the following five students Ashok (A), Bina (B), Chitra (C), Dinesh

(D), Eillen (E) have to be evaluated for the best student award, the total number of comparison would be = 10

A with B A with C B with C A with D B with D C with D A with E B with E C with E D with E• The number of times a student gets a better score, would be the basis

for selecting the Best Student. This method is not appropriate if a large number of students are required to be evaluated.

Forced Distribution Method

• This technique was contributed by Joseph Tiffin. The method operates under the assumption that an employee's performance can be plotted in a bell-shaped curve. Here 10% of the employees are given excellent grade, 20% are given good grade, 40% are given the average grade, next 20% are given the below average grade and last 10% are given unsatisfactory grade.

Checklist Method

• The main purpose of this method is to reduce the evaluator's burden of rating the employee. In this method a dichotomous questionnaire (A question with two answer choices namely `Yes' or `No') is used. A rater is required to put a tick mark against the respective column.

• This questionnaire is prepared and scored by the HR department. The main disadvantage of this method is the rater is not given the flexibility to add or delete the statements. A typical check list is given below

• Is the employee really interested in the task assigned? Yes/No

• Is he respected by his colleagues (co-workers)Yes/No

• Does he give respect to his superiors?Yes/No

• Does he follow instructions properly?Yes/No

• Does he make mistakes frequently?Yes/No

FORCED CHOICE METHOD

• This method was contributed by J.P. Guilford. Here, an evaluator rates an employee on the basis of a group of statements. These statements are a combination of positive and negative statements. The rater is required to identify the most or least descriptive statement pertaining to an employee. For example :

PARTICULARS MOST LEAST

1) Provides clear guidance to employees.

2) Can be depended to complete the assignment on hand.

3) Is reliable and trustworthy.

4) Is partial to some employees

Critical Incidence Method• Under this method, the manager prepares lists of

statements of very effective and ineffective behavior of an employee. These critical incidents or events represent the outstanding or poor behavior of employees on the job .

• July 20 – Mr. Paul patiently attended to the major customers complaint. He is polite, prompt, enthusiastic in solving the customers’ problem.

  On the other hand the bad critical incident may appear as under:

• September 28– Mr. Paul stayed 45 minutes over on his break during the busiest part of the day. He failed to answer the store manager’s call thrice. 

Essay Method

• In this method, the rater writes a narrative description of an employees strengths, weaknesses, past performance, potential and suggestions for improvement. As there is no prescribed format, the length and content of essay is likely to vary. Similarly, the quality of Essay would depend upon the rater's writing skills. As the essays are descriptive in nature, it only provides qualitative information about the employee

Confidential Report

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.

MODERN METHODS

BARS (Behaviorally Anchored Rating Scale) :

In order to overcome the problem of judgmental evaluation, this method was conceived by some organizations. This method combines the benefits of Essay Method, Critical Incident and Rating scales.

How to construct BARS:1) Collect Critical Incidents 2) Identify performance dimensions 3) Assigning scale values to the incidents 4) Producing the final instrument

DIMENSIONS: PLANNING AND ORGANIZING

SCALE VALUE ANCHOR

5: EXCELLENT

4: GOOD

3: AVERAGE

2: BELOW AVERAGE

1: UNACCEPTABLE

DEVELOPS A COMPREHENSIVE PLAN, DOCUMENTS WELL, OBTAINS APPROVAL AND DISTRIBUTES TO ALL CONCERNED

LAYS OUT ALL PLANS , SATISFIES CUSTOMER, SOMETIMES DOCUMENTS ARE NOT READY ON TIME, BUT ITS INFREQUENT

REVISES DUE DATES AS PROJECT PROGRESSES AND INVESTIGATE TO CUSTOMER COMPLAINTS

POOR PLANS AND UNREALISTIC SCHEDULES

SELDOM COMPLETES A PROJECT AND DOES NOT BOTHER

Assessment Centers :• This method was used to appraise army officers in

Germany way back in 1930s. The concept was adapted from army to business arena in 1960s. In India, the concept has been adopted by organizations such as Crompton Greaves, Eicher, Hindustan Lever and Modi Xerox recently.

• This method is mainly used to evaluate executive and supervisory potential. Here employees are taken to a place away from work and a series of tests and exercises are administered. For example, assesses are asked to participate in; in-basket exercise, simulations, group exercise and role plays. Performance of the employee is evaluated in each of these tests and feedback is provided to the ratee, in terms of strengths and weaknesses.

MBOA process whereby the superior and subordinates of the organization

jointly identify its common objectives, define each individual’s major areas of responsibility.

1. Establishment of Goals2. Setting the performance standard3. Actual level of job attainment is compared with the goals agreed

upon.4. Establishing new goals and new strategies for goals not previously

attained.

360 DEGREE FEEDBACK

• 360 Degree Feedback is a multi - rater feedback system where an individual is assessed by a number of assessors including his boss, direct reports, colleagues, internal customers and external customers

Cost Accounting Method :

• This method evaluates an employee's performance in relation to the contribution of an employee in monetary terms. Here the rater evaluates the employee in terms of cost of retaining the employee and the benefits the organization derives from him/her. The following factors are taken into account in this method :

• (1) Cost of training the employee.• (2) Quality of product or service rendered.• (3) Accidents, damages, errors, spoilage, wastages, etc.• (4) The time spent in appraising the employee.

RATING ERRORS

1. Halo/horn effect – employee’s extreme competence in one area “shines” over all others. Conversely, employee does poorly in one area and this overshadows all areas.

2. Bias – own prejudices {race, national origin, gender, appearance, etc.} influence the appraisal

3. Comparison Rating – contrasting one employee with another

3. Central Tendency – rate everyone as average

4. Recency Effect – focusing on recent performance instead of entire year

5. Personal Prejudice – If the rater dislikes one group or employees, he may rate them at the lower end.

6. Favoritism – evaluating friends or those who don’t make waves, etc. more favorably than others

• Leniency or Strictness Error: Performance-rating error in which the appraiser tends to give employees either unusually high or unusually low ratings.