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Why performance appraisal is important

The aims of the performance appraisal are to supply the employees with the feedback on their performance. Performance appraisal also helps in identifying working out needs of the employees. The performance helps the organization provide the proper rewards and recognition to the deserving employees. In addition, it provides the chance to the organization for the diagnosis and development. In addition, it helps the organization to raised the communication between your employees and the administration. (Thomas F. Patterson, 1987).

There are various methods that are employed to measure and evaluate the performance and appraise the employees. The appraisal system of the organization may have the common practice of measuring the performance of the business in the form of the numerical or the scaling system. (Armstrong, Michael, 2006). The managers are asked to evaluate the individuals on the scale on the many objectives and attributes. In many companies employees may receive the assessment off their peers, managers, subordinates and customers which is also called the 360 degree performance appraisal. (Smit, Martin E. J. H. , 2006).

Tuckman and Oliver, 1968 : This study illustrate how feedback is the efficient tool which valued the most for crucial decision making process. Receiver will be benefit from the various people surrounding him by feedback system if the sources have ample of knowledge about task & performance of the recipient. According to review conducted student versus supervisor feedback to teachers proved that students were more effective & efficient to increase the performance of the teacher as opposed to the supervisor. In explanation the author says that teacher spend additional time with the students as opposed to the supervisor. Along recover multiple feedback system properly shows the potential of the individual by reducing biasness or malice practice which is usually area of the corporate. Seniors or supervisor generally or constantly focus on the scope of the improvement, underestimating the achievement.

DeNissi and Mitchell, 1978: According to him middle & upper management spend plenty of time using their peers. Hence the peers have maximum opportunity to find out about attributes, qualities rather than supervisor or the boss. Hence it's more important who spend the utmost time as well as who observe the concern person in a number of dimension of work behavior & that person's thoughts and opinions is quite important.

Mintzberg (1973) : This literature review gives us details about how exactly manager use the judgment of the staff, supervisor or peers as effective tool to judge or appraise of the employee which is completely unbiased in the nature. According his study middle level manager, peers and subordinates are more qualified to evaluate the performance rather than supervisor because the they have significantly more information about the working style, working environment rather than the supervisor. It helps to improve the supervisory behavior.

Hegarty, 1973: Many experimental studies already proved that multiple feedback not only improve the supervisory quality but also brought transparency in the complete appraisal system. According to him top level people think that peers were at best position to judge the personal traits as well as personal achievement. Implementation of 360 degree employee assessment is fair practice which help to reduce the discrimination & biasness help motivate the the employee to perform better & productive. Implementation of multiple feedback system helps to improve to qualities in individual level as well as professional level.

Bernardin (1986) : Though peers & subordinates were in the best position to judge the performance but major challenge is the situation of anonymity. Its very hard to share the correct information about the peers with whom you have a good rapport. Hence some time the multiple feedback system become ineffective & biased.

The Essence and Functions of Performance Appraisal Systems by Newman, Warren & McGiIl, 1987: Job performance evaluation is an integral part of an any organization. It really is basically management decision to regulate the organizations which consist of the control standards, measurement, and corrective actions. Control Standard is the first & foremost thing which based primarily upon the mission of the business or individual short-term goal of the every department. This implies the crucial contribution of the performance appraisal system in the business. Measurement which really is a quantitative analysis or process depends upon many steps like appraisal criteria/ technique consist of the attributes or parameters, appraisal timing. The appraisal conditions are predefined by the business which varies from organization to organization. The appraisal method or technique plays a crucial role in this technique. Generally appraisal depends after the performance of the prospect along with lot of qualities like team skill, soft skill, analytical skill, domain knowledge etc. Feedback is most important & essential area of the appraisal process which cannot ignore any moment. Corrective measures are taken after feedback receive from different sources. The appropriate corrective action should be studied to if there is any discrepancy between actual performance and performance standard. It not just a check guard for an employee to realize certain standard or level but also help to motivate the employee to perform better and productive manner. It built or reinforces trust among the list of team members or employees. According to the study it creates a value which help to motivate the employees to perform better.

Ilgen, Barnes-Farrell, and McKellin (1993): According to authors four important aspects should be considered to appraise the performance of the average person, those are reason for the performance appraisal, characteristics of the rates, nature of the scale used for the rating purpose and the impact of influence of this appraisal on the organization as whole.

Chu (2002): Though his study compare performance appraisal system in two industries i. e. manufacturing and service industry but it widely applicable to all the industry. According to him comprehensive framework of the performance appraisal include six category which can be purpose of appraisal, personnel whom to appraise, requirements or attribute for the appraisal, methods involve for your, appraisal timing, & feedback of the appraisal.

Cleveland, Murphy and Williams (1989): According his study there's a positive correlation exist between your organization characteristics and the performance appraisal. Organization culture and structure are two ingredients of the performance measurement system. When organization more leans towards to the decentralization, performance standard more concentrates towards the results, where organization is centralized one it more leans towards procedure for management functions.

Jobber, Hooley & Shipley (1993): According to them, a big organization and small organization adapt different options for performance evaluation. Pre determined performance standards which are more formalized and quantitative in nature adopted by the large or multinational organization where as small organization generally follow qualitative and informal appraisal methods. According to this study, the performance appraisal system change from industry type to industry type but still there's a relation between organization characteristics and function of performance appraisal system.

Ouchi (1981): The analysis carried out the performance appraisal system in region wise rather than industry type wise. According to his study American organizations are usually more focused about individual performance, while Japanese organizations are more focused about group or team performance.

2. 2 The Performance Appraisal Process

Performance appraisal is planned, developed and implemented through some steps,

Establish performance standards: Appraisal systems require performance standards, which serve as benchmarks against which performance is measured. Being useful, standards should relate to the required results of each job. In situations pertaining to embarrassment, performance standards must be clear to both the appraiser and the appraisee. The performance standards or goals must be developed after an intensive analysis of the work. Goals must be written down. They must be measurable within certain time and cost considerations.

Communicate the standards: performance appraisal involves at least two parties; the appraiser who does the appraisal and the appraisee whose performance is being evaluated. Both are anticipated to do certain things. The appraiser should prepare job description clearly; help the appriasee set his goals and targets; analyse results objectively; offer coaching and guidance to the appraisee whenever required and reward great results. The appraisee should be very clear about what he is doing and just why he is carrying it out. For this purpose, performance standards must be communicated to appraisees and their reactions should be noted down right away. If necessary, these standards must be reviesed or modified. As pointed out by De Cenzo and Robbins, "too many jobs have vague performance standards and the condition is compounded when these standards are occur isolation, nor involve the employee".

Measure actual performance: Following the performance standards are set and accepted, the next thing is to measure actual performance. This involves the utilization of dependable performance measures, the ratings used to evaluate performance. Performance measures-to be helpful-must be simple to use, reliable, and report on the critical behaviours that determine performance. Four common sources of information which are generally employed by managers regarding how to measure actual performance are personal observation, statistical reports, oral reports and written reports. Performance measures may be objective or subjective. Objective performance measures are indications of job performance that may be verified by others and are usually quantitative. Subjective performance measures are ratings that derive from the non-public standards or opinions of these doing the evaluation, and are not verifiable by others. Subjective conditions include ratings by superiors, overall goals, and socio-cultural values of the environment.

Compare actual performance with standards and discuss the appraisal: actual performance may be better than expected and sometimes it could set off the track. Whatever be the consequences, there's a way to communicate and discuss the ultimate outcome. The assessment of another person's contribution and ability is not a simple task. They have serious emotional overtones as it impacts the self-esteem of the appraisee. Any appraisal based o subjective requirements is likely to be questioned by the appraise and leave him quite dejected and unhappy when the appraisal works out be negative.

Taking corrective action, if necessary: Corrective action is of two types: one generates the fires immediately, as the other destroys the main of the condition permanently. Immediate action sets things right and get things back on track whereas the essential corrective action reaches the foundation of deviations and seeks to adapt the difference permanently. Basic corrective steps seek to change the difference permanently. Basic corrective steps seek to determine how and why performance deviates.


2. 3. 1Confidential System

In most of the organizations confidential reports are believed to be confidential documents. The individual is communicated if there are any adverse ratings or remarks in C. R for a particular year. Communication aspect can not work well in most of organizations due to reluctance on part of assessor to communicate to employee about what he thinks of him. The greatest benefit of the confidential system is that it fails to honor the right if the given individual to be heard in matter in which he has very high stakes.

2. 3. 2Open System

The open system suggests that all aspects of assessment should be processed with the entire knowledge of assesses. This will help him to understand his deficiencies and he will be able to appreciate what the organization does for his development.

Whatever system suits the organization depends upon culture and social conditions of the organization. In times to come, the confidential system will steadily supply the way to open system.

The need for involving assesses along the way of appraisal is seen from different angles. One is the necessity to allow participation by the employee along the way of evaluation.

Another need is involving him in setting his goals or targets. If the individual should be given an opportunity for self-appraisal as part of reporting process or whether this opportunity should get to him via an appraisal interview is matter of policy for an organization. What's that opportunity should be given to have a say as to what he himself considers his own performance.

The likelihood of getting a good report or bad report are same, as there is absolutely no guarantee that the assessment reports would be written on basis of real performance. Often a reporting officer who would like to give a good report in regards to a poor performer would

Emphasize the potential aspect of the individual while an extremely potential gets a detrimental report predicated on his performance. However, somebody who is initially linked with day-to-day work of employee concerned should do performance appraisal. This immediate superior should have an important say in evaluating his performance. Self-appraisal shouldn't form the sole basis for just about any final decision. Self-appraisal should only form part of an sound appraisal system.


The performance appraisal methods may be classified into two categories, namely the Traditional and Modern methods,


Graphic Rating Scales 1. Behaviorally Anchored

Ranking Method Rating Scales

Paired Comparison Method 2. Assessment Centre

Forced Distribution Method 3. Human Resource Accounting

Checklist Method 4. Management by Objectives

Critical Incident Method 5. 360 degrees appraisal

Grading Method

Forced Choice Method


Graphic Rating Scales method is a printed form which is employed to evaluate the performance of the employee. A number of traits can be utilized in these kinds of rating devices the most typical being the number and quality of work. The rating scales can be adapted by including traits that the company considers very important to effectiveness face to face. From the graphic rating scales excerpts can be obtained about the performance standards of employees. The rating scale method is the most typical method of analysis of your employee's performance today. The graphic rating scale may however, suffer from a long standing disadvantage, i. e. , it may be arbitrary and the rating may be subjective.

In Ranking Method: the ranking of a worker in a work group is performed against that of another employee. The relative position of each employee is expressed in terms of his numerical rank. It could also be done by ranking a person on his job performance against another person in the competitive group. The quintessence of this method is that employees are ranked according with their relative degrees of performance. While using this technique, the evaluator is asked rate employees from highest to lowest on some overall criterion. Though it is relatively simpler to rank the best and the worst employees, it is difficult to rank the average employees.

Under Paired Comparison Method the appraiser ranks the employees by comparing on employee with all the employees in the group, individually. This method results in each employee being given an optimistic comparison total and a certain percentage of the full total positive evaluation.

Forced Distribution Method is developed to prevent the raters from rating too high or too low. Under this method, the rater after assigning the points to the

Performance of each employee must distribute his ratings in a pattern to confirm to frequency distribution.

Check list Method contains a list with lots if statements about the worker and his behavior. Each statement of the list is assigned value depending upon its importance. Both statements and their values are derived from preliminary research where the pooled judgments of folks familiar with the work are used. No restrictions are put on the rater regarding the variety of statements he should mark. The personnel final rating is taken as the average of the scale values of all statements that his superior has checked in rating him.

Under Critical Incidents Method, the supervisor consistently records the critical incidents of the employee performance or behavior associated with all characters (both positive & negative) in a specially designed notebook. The supervisor rates the performance of his subordinates on the basis of notes taken by him.

Grading Method, this technique certain well-defined grades are established in advance. Generally; three different grades are used i. e. , out standing, satisfactory and unsatisfactory. Employee performance is compared with the defined grades and each employee is allotted a grade that best describes his/her performances. The primary limitation of the method is that the rater may rate most of the employers on the bigger side of the performance.

Forced Choice Method, J. P Guilford developed this technique. This method contains a series of statements and the rater rates how effectively a statement describes each

Individual being evaluated. The primary limitation of the method is that it takes lots of time and effort to create several evaluating statements.

Under Group Appraisal Method, an employee is appraised by several appraisers. This group involves the immediate supervisor of the employee, other supervisors who have close connection with the employee's work, manager or head of the department and consultants. The head of the department or manager can be the chairman of the group and the immediate supervisor may act as the coordinator for the group activities.

In Confidential Reports Method, superior appraises the performance of his subordinates based on his observations, judgments and intuitions. The superior keeps his judgment and report confidentially.


Behaviorally Anchored Rating scales (BARS) method combines elements of the traditional rating scales and critical incidents methods. BARS are a complex method of evaluating employee performance predicated on employee behavior rather than attitudes or assumptions about motivation or potential. BARS are numerical scale that is anchored by specific narrative exemplory case of behaviors that range from very negative to very positive descriptions of performance. BARS are difficult and time-consuming scale to build up. Each job must be analyzed and a list of critical incidents developed by the experts in the job. After the critical incidents are developed, they may be then scaled from effective to ineffective performance.

The BARS technique offers high degree of inter rater reliability and objectivity because of its focus on behavior.

In the Assessment Centre Method, individuals from various departments are brought together to spend several days working on an individual or group assignment much like ones they would be handling when prompted. Observers rank the performance of each and every participant in order of merit.

The Human Resource Accounting, deals with cost and contribution of recruiting to the business. Cost of recruiting may be studied as standard. Employee performance can be measured in conditions of employee contribution to the business. This technique is rolling out but still it is in the transitory stage.

The concept of Management by Objectives, requires the management to create specific, measurable goals with each employee and then periodically discuss the latter's progress towards these goals. This system emphasizes participatively set goals that are tangible, verifiable and measurable. MBO focuses attention on what must be accomplished rather than how it is to be accomplished. It really is, thus some sort of goal setting techniques and appraisal programme involving six steps:

Set the organisation's goals

Set department goals

Discuss departmental goals

Define expected results

Performance reviews

Provide feedback

Under 360 degrees Appraisal, The 360 degrees appraisal method was initially developed and utilized by General Electric Company of USA in1992. Today, the Indian companies like Wipro corporations, Infosys, Reliance Industries follow this technique.

In this technique, his superiors, subordinates, peers and customers with whom he interacts in the course of his performance appraise a worker. Each one of these appraisers provide feedback on employee by completing survey questionnaire suitable for this purpose. And then reports are ready, and then presented to the employees being rated.


Performance appraisal system should be effective as lots of crucial decisions are made on the basis of score or rating distributed by the appraiser, which in turn, is heavily based on the appraisal system.

An effective appraisal system should have the next essential characteristics:

Reliability and validity

Job relatedness


Practical viability

Training the appraisers

Open communication

Employee access to results


Recent trends in organizational behavior and the structural changes of organizations have facilitated a rise in the use of teams (Fisher, Schoenfeldt, & Shaw, 2003). As traditional bureaucratic hierarchies have been replaced by flatter structures, teams have grown to be commonplace in most organizations (Cascio, 1998). Much like individual performance appraisal, performance rating in team settings is complicated by a bunch of issues regarding the most appropriate method for measuring it, including the appropriateness of rating sources. Team performance appraisal is further complicated through dealing with others as a necessity for the successful completion of work. The performance dimensions relevant to team performance differ from the task-specific performance typically evaluated in individual performance appraisal. In general, interpersonal aspects of contextual performance are more relevant, if not essential, for successful team performance (Levy & Steelman, 1997). Most conceptualizations of team performance integrate contextual performance dimensions into formal appraisal.

Across the literature, a lack of agreement exists regarding what the precise targets should be in team performance appraisal and the way the ratings should be applied. Even though the team's effectiveness is the best goal, the performance of individuals and the team as a whole should be evaluated. Levy and Steelman (1997) argue that the traditional supervisor-rated methods of performance appraisal are not appropriate for team settings. Ratings should instead result from all sources where they have adequate opportunity to observe the team's behaviors.

Aside from opportunity to observe, the rater's relationship with the team may influence his / her perspective; in other words, whether the rater is a team member, team supervisor, customer, etc. Regarding the potency of each rating source, each has benefits and drawbacks. The requirements evaluated by a lot of the literature were inter-rater agreement, agreement with hard criteria, and rating acceptance.

From the literature reviewed, nearly all research on rater effectiveness in team settings evaluates rater congruence. This might not even be a proper way of measuring effectiveness, since multi-source appraisal generally proposes that each source affords a distinctive perspective for evaluating the target's performance. Therefore, rating sources may not agree but still be accurate (Murphy & Cleveland, 1995). Overall, the effectiveness of multi-source ratings in team performance appraisal has yet to be definitively answered through empirical research.

Of the various theoretical models and empirical studies, one common area of agreement is that team performance should be appraised using multiple raters. Still, a lack of research exists about the effectiveness of every rating source. Generally, the practice of team based performance appraisal has far outpaced empirical research (Jones, 1997). Research in the domain of team performance appraisal is filled with questions and seen as a a lack of agreement on many fronts. Overall, team performance management is a research area with a great demand for future development.

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