PERFORMANCE

APPRAIS
AL

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BY
VARSHINI.P
II MSC PSYCHOLOGY
 PERFORMACE
APPRAISAL
According to Edwin Flippo, "Performance appraisal" is defined as a
"systematic, periodic, and impartial rating on an employee's
excellence in matters pertaining to his present job and to his
potentialities for a better job.". Essentially, it's a process of regularly
evaluating an employee's job performance, skills, and potential for
development within an organization, often used to inform decisions
about promotions, compensation, and training needs.
 Robert Owen is credited with initiating the earliest
documented form of performance appraisal in the early
1800s at his cotton mills in Scotland, where he used a
system of "silent monitors" to observe worker
performance; making him the likely founder of
performance appraisal in HRM.

According to Dale S. Beach, “Performance appraisal is systematic

evaluation of the individual with respect to his or her performance on
the job and his or her potential for development”.
PROCESS OF PERFORMANCE
APPRAISAL
 Establish
performance
standards

Communicating
standards

Measuring
actual
performance
Comparing
standard

Discussing
standards

Taking
corrective
action
Establish performance standards:
The performance appraisal process beings will
setting up standards for appraising the performance
of employees. there should be some base on which 1
one must say that the performance is good,average
or bad.

Communicating the standards:

The standards set for performance should be
communicated to the employees and explained to
2
them.

Measuring actual performance:

This requires choosing the right technique of
measurement, identifying the internal and external
factors influencing performance
3
Comparing standards:
Actual performance is compared with the
predetermined standards of performance. such
comparison will reveal deviation, which may be
positive or negative.
4
Discussing standards:
The appraisal results are communicated and
discussed with the employees. Along with
deviation, the reasons behind them are also 5
analyzed and discussed.

Taking corrective actions:

Training, coaching, counseling, advice, refresher
courses, delegation of authority etc are the examples
of corrective actions that helps to improve the
6
employee performance.
 Rating Checkli
scale st

Traditional Forced
Forced choice
methods distribution
method
method

Critical incident
BARS( Behaviorally
method anchored rating)
 Field Tests and
review observatio
ns

Traditional
ACRS Essay
methods
method

Cost Comparative
accounting evaluation
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.

Example:
Infosys uses a 5-point rating scale to evaluate
employees on different performance criteria during
annual appraisals. Each criterion is rated from 1 (Poor)
to 5 (Excellent).
Advantages:
• Easy to use Low cost
• Nearly every type of job can be
evaluated

Disadvantages:
• Rater’s biases influence evaluation
• Numerical scoring gives an illusion of
precision
Checklist Method
Under this method, a checklist of statements on the traits
of the employee and their job is prepared in two columns
—'Yes' and 'No'. The rater ticks the appropriate column,
and HR assigns points.

Advantages:
• Easy to administer
• Saves time

Disadvantages:
• Rater biases, including halo effect
• Use of personality traits instead of performance criteria
• Misinterpretation of checklist items
Forced choice method:
• The rater selects statements that best describe the employee
from a set of paired statements.
• This method reduces personal bias but may not precisely
describe employee traits.

Advantages:
• Reduced subjectivity
• Clear identification of top
performers
• Standardized evaluation process
Disadvantages:
Demotivation of employees
Potential for inaccurate
evaluations
Forced Distribution Method:

Employees are forced into a bell-curve distribution.

Forced distribution is a performance appraisal method that ranks
employees into categories based on their performance relative to others.

Advantages:
• Reduced bias
• Alignment with organizational goals

Disadvantages :
• Unrealistic in high-performing organizations
• Can harm employee morale
• Raters may struggle to place employees into
groups
Critical Incidents Method:
• Focuses on key performance events
• Incidents recorded as they occur
• Differentiates between effective and ineffective performance

Advantages:
• Detailed insights
• Focus on important
events
Disadvantages:
• Time-
consuming
• Memory bias
Behaviourally Anchored Rating Scales (BARS)
• Behaviourally anchored scales, sometimes called
behavioural expectation scales, are rating scales
whose scale points are determined by statements of
effective and ineffective behaviors.
• They are said to be behaviourally anchored in that
the scales represent a range of descriptive
statements of behavior varying from the least to the
most effective.
• A rater must indicate which behavior on each scale
best describes an employee’s performance.
Advantages of BARS:
• More Accurate & Objective – Reduces subjectivity by using
predefined behavioral statements.
• Clear Expectations – Employees know what behaviors are
expected at different performance levels.

Disadvantages:
• Difficult to Develop – Requires expert input and agreement on
what behaviors define performance levels.
• May Not Cover All Scenarios – Limited to predefined
behaviors, which might not capture every aspect of job
performance.
Field Review Method:
This is an appraisal by someone outside the assessee’s own
department, usually from the corporate office or the HR department.
The outsider reviews employee records and holds interviews with the
ratee and their superior. The method is primarily used for making
promotional decisions at the managerial level.

Advantages:
• Reduced bias
• Comprehensive perspective
Disadvantages:
• An “outsider” is usually not familiar with conditions in an employee’s
work environment.
• The review does not have the opportunity to observe employee
behavior or performance over a period of time.
Tests and Observations:
This method used to measure employee knowledge or skills through written
tests or actual job performance. Practicality issues arise when test
development costs are high.

Advantages:
• Direct observation of skills
• Suitable for hands-on roles

Disadvantages:
• Observer bias
• May not capture full performance picture
Confidential Records:
It is mostly used in government departments (e.g., Annual Confidential
Report - ACR), containing ratings on attributes such as:
• Self-expression
• Technical ability
• Leadership
• Initiative
• Ability to understand new material
• Judgement
• Responsibility
• Integrity
Essay Method:

The rater describes the employee’s performance in a written

format, covering:
• Rater’s overall impression of performance
• Profitability of the employee
• Strengths and weaknesses
• Training and development needs

Disadvantages:
• Requires good writing skills.
• Time-consuming.
• Raters may be influenced by appearance rather than
performance.
Cost Accounting Method:
• Evaluates an employee’s performance based on monetary returns to the
company.
• Establishes a relationship between the cost of keeping the employee and
the benefit they generate.
• Increasingly used as companies convert training departments into profit
centers.

Advantages:
• Performance evaluation
• Informed decision-
making

Disadvantages:
• Complexity and data collection
challenges
• Lack of standardization
 Comparative evaluation
approaches:
• Ranking method
• Paired comparsion method

Ranking Method
The Ranking Method orders employees from best to worst based on
overall performance. Managers compare employees and rank them
accordingly.

Advantages: Simple, easy to use, and useful for small teams.

Disadvantages: Lacks specific evaluation criteria, can be biased and

demotivating for lower-ranked employees.
Paired Comparison Method
In Paired Comparison, each employee is compared directly with
every other employee in pairs, and the one who performs better
gets a point. The total score determines the final ranking.

Advantages: More objective than simple ranking, reduces bias.

Disadvantages: Time-consuming for large teams, does not

measure performance criteria separately (just overall comparison).
 Psychologic
MBO
al appraisal

Future
oriented
methods
360-Degree
Assessment feedback
centres

720-Degree
feedback
 • Management by Objectives (MBO):
Step 1: Set goals collaboratively with subordinates.
Step 2: Establish performance standards.
Step 3: Compare actual results with set goals.
Step 4: Adjust goals for continuous improvement.
MBO is useful for managerial roles but less effective for
routine jobs.

Challenges of MBO:
• May lead to short-term focus.
• Can demotivate employees if improperly implemented.
• Psychological Appraisals:
⚬ Conducted by industrial
psychologists.
⚬ Focuses on future potential rather
than past performance.
⚬ Uses interviews, tests, and
supervisor discussions.
⚬ Helps in career planning and role
placement.
Assessment centres:
• Assessment centres are mainly used for executive
hiring and evaluating supervisory potential.
• Managers undergo job-related exercises observed and
evaluated by trained professionals over 1-3 days.
• Exercises include in-basket tasks, role-playing, group
discussions, and computer simulations.
• The decision on promotion is based on observations.

Example:
A multinational company like Tata Steel wants to identify
potential future leaders for senior management positions.
They conduct a three-day assessment centre program
where employees participate.
Advantages:
• Improved candidate selection
• Employee engagement

Disadvantages:
• Costly to administer
• Stressful for candidates
360-degree feedback:
• This is a method where an employee’s performance is assessed
by various stakeholders (supervisors, peers, subordinates, and
external clients).
• Provides a holistic view of employee performance.
• Used for self-development, training, and career progression.

Advantages:
• Balanced and objective feedback.
• Separates personal observations from professional feedback.

Disadvantages:
• Time-consuming.
• Needs a structured approach for unbiased results.
• Increasing use of 360-degree feedback in companies for HR
decisions.
720-Degree feedback: 720 degree appraisal" is essentially
a double-check version of a 360-degree appraisal, meaning
an employee is evaluated from all angles by multiple sources
(like managers, peers, customers) twice,
Advantages:
• Development Opportunities
• Improved Communication

Disadvantages:
• Time-Consuming
• Costly
-