ADVANTAGES & DISADVANTAGES OF PERFORMANCE APPRAISAL METHODS - HUMAN RESOURCE MANAGEMENT THEORY

CONTENTS

Introduction of performance appraisal
Modern appraisal
What is performance appraisal?
Why use performance appraisal?
Why are appraisal important?
Definition of performance appraisal
Basic purpose of performance appraisal
Benefits of performance appraisal
Process of performance appraisal
Objectives of performance appraisal
Advantages of performance appraisal
Disadvantages of performance appraisal
Performance appraisal methods
Advantages and Disadvantages of performance appraisal methods
Summary
Bibliography

Introduction of performance appraisal

The history of performance appraisal is quite brief. Its roots in the early 20th century can be traced to Taylor's pioneering Time and Motion studies. But this is not very helpful, for the same may be said about almost everything in the field of modern human resources management.

As a distinct and formal management procedure used in the evaluation of work performance, appraisal really dates from the time of the Second World War - not more than 60 years ago.
 
Yet in a broader sense, the practice of appraisal is a very ancient art. In the scale of things historical, it might well lay claim to being the world's second oldest profession.

Performance appraisal systems began as simple methods of income justification. That is, appraisal was used to decide whether or not the salary or wage of an individual employee was justified.

Modern Appraisal

Performance appraisal may be defined as a structured formal interaction between a subordinate and supervisor, that usually takes the form of a periodic interview (annual or semi-annual), in which the work performance of the subordinate is examined and discussed, with a view to identifying weaknesses and strengths as well as opportunities for improvement and skills development.
  
In many organizations - but not all - appraisal results are used, either directly or indirectly, to help determine reward outcomes. That is, the appraisal results are used to identify the better performing employees who should get the majority of available merit pay increases, bonuses, and promotions.
 
By the same token, appraisal results are used to identify the poorer performers who may require some form of counseling, or in extreme cases, demotion, dismissal or decreases in pay. (Organizations need to be aware of laws in their country that might restrict their capacity to dismiss employees or decrease pay.)

What is performance appraisal?

A performance appraisal is a balancing act. It should balance the need to look backwards (the review), with the need to look forwards (the plan). It should also balance the need to address weaknesses, whilst at the same time building on strengths.
 
Remember though, that it's far easier to motivate people to develop something they can do, than to try to teach them things they can't do. Development needs should be as much about further improving what someone already does well, as about correcting weaknesses. Peter Drucker made this point emphatically when he suggested

"It takes far less energy to move from first-rate performance to excellence than it does to move from incompetence to mediocrity."

Why use performance appraisals?

Some of the reasons why you might like to perform a performance appraisal:

to give employees feedback on their performance;

to identify employee training needs;

to obtain information which can be used to assist in the allocation of organisational rewards, eg. pay increases or bonuses;

 to obtain information which can be used for organisational diagnosis and development.


Why are appraisals important?

Companies have become aware that the success of any organization is dependent upon its employees. Following on from this is the need to recognise who these hard working employees are and to reward them. For most participants Starfare Images Performance Appraisal System will be different to the appraisals you have previously undertaken. However, the basis of any system is to reward staff that provide a quality service in the workplace.

Definition of performance appraisal

“Performance Appraisal may be defined as any procedure that involves
a. Setting work standards; 

b. Assessing the employees’ actual performance related to these standards; 

c. providing feedback to the employee with the aim of motivating that person to eliminate performance deficiencies or to continue to perform above par”.

 Performance Appraisal is the systematic evaluation of the performance of employees and to understand the abilities of a person for further growth and development. Performance appraisal is generally done in systematic ways which are as follows:

The supervisors measure the pay of employees and compare it with targets and plans.

The supervisor analyses the factors behind work performances of employees.

The employers are in position to guide the employees for a better performance.

3. “Performance appraisal involves identification, measurement and management of human performance in organization”.
                                                                                                          - Balkin and Cardy
 
4. “Performance appraisal is a systematic and formal process by means of which the job relevant strength and weakness of employees are identified, observed, measured recorded and developed”      -  Swanepole

5. “Performance appraisal is the process of systematically evaluating performance and providing feedback upon which performance adjustments can be made”.
                                                                                          - Schermerhorn, Hunt and Osborn

Basic purpose of performance appraisal

Effective performance appraisal systems contain two basic systems operating in conjunction: an evaluation system and a feedback system.

The main aim of the evaluation system is to identify the performance gap (if any). This gap is the shortfall that occurs when performance does not meet the standard set by the organization as acceptable.

The main aim of the feedback system is to inform the employee about the quality of his or her performance. (However, the information flow is not exclusively one way. The appraisers also receives feedback from the employee about job problems, etc.)
 
One of the best ways to appreciate the purposes of performance appraisal is to look at it from the different viewpoints of the main stakeholders: the employee and the organization.
 
Benefits of Appraisal
 
Perhaps the most significant benefit of appraisal is that, in the rush and bustle of daily working life, it offers a rare chance for a supervisor and subordinate to have "time out" for a one-on-one discussion of important work issues that might not otherwise be addressed.

Almost universally, where performance appraisal is conducted properly, both supervisors and subordinates have reported the experience as beneficial and positive.

 Appraisal offers a valuable opportunity to focus on work activities and goals, to identify and correct existing problems, and to encourage better future performance. Thus the performance of the whole organization is enhanced.

For many employees, an "official" appraisal interview may be the only time they get to have exclusive, uninterrupted access to their supervisor. Said one employee of a large organization after his first formal performance appraisal, "In twenty years of work, that's the first time anyone has ever bothered to sit down and tell me how I'm doing."

The value of this intense and purposeful interaction between a supervisors and subordinate should not be underestimated.

Process of performance appraisal
  
 The employees should be informed and the standards should be clearly explained to the. This will help them to understand their roles and to know what exactly is expected from them. 

The standards should also be communicated to the appraisers or the evaluators and if required, the standards can also be modified at this stage itself according to the relevant feedback from the employees or the evaluators.

process-of-performance-appraisal

Objectives of Performance Appraisal

Performance Appraisal can be done with following objectives in mind:

To maintain records in order to determine compensation packages, wage structure, salaries raises, etc.

To identify the strengths and weaknesses of employees to place right men on right job.

To maintain and assess the potential present in a person for further growth and development.

To provide a feedback to employees regarding their performance and related status.

To provide a feedback to employees regarding their performance and related status.

It serves as a basis for influencing working habits of the employees.

To review and retain the promotional and other training programmes.

Advantages of performance appraisal

They provide a record of performance over a period of time.

They provide an opportunity for a manager to meet and discuss performance with an employee.

Provide the employee with feedback about their performance and how they completed their goals.

Provide an opportunity for an employee to discuss issues and to clarify expectations with their manager.

Offer an opportunity to think about the upcoming year and develop employee goals.

Can be motivational with the support of a good reward and compensation system.

Disadvantages of performance appraisal

If not done appropriately, can be a negative experience.

Are very time consuming, especially for a manager with many employees.

Are based on human assessment and are subject to rater errors and biases.

If not done right can be a complete waste of time.

Can be stressful for all involved.

Performance appraisal methods

 Performance appraisal methods include 11 appraisal methods / types as follows:
 
Critical incident method Weighted checklist method

 Paired comparison analysis method

Graphic rating scales method

Essay Evaluation method

Behaviorally anchored rating scales method

Management By Objectives (MBO) method

Performance ranking method

360 degree performance appraisal

Forced ranking (forced distribution)

Behavioral Observation Scales

Advantages and Disadvantages of performance appraisal methods

1. Critical incident method ::-
   This format of performance appraisal is a method which is involved identifying and describing specific incidents where employees did something really well or that needs improving during their performance period.

ADVANTAGES:--

Critical incident is a method used for many sectors.
 
Each employee will be evaluated as such and one’s performance appraisal will be based on the logs that are put in the evaluation form.

The manager maintains logs on each employee, whereby he periodically records critical incidents of the workers behavior.

At the end of the rating period, these recorded critical incidents are used in the evaluation of the workers’ performance.

The critical incidents file of performance appraisal is a form of documentation that reflect all data about employee performances.

Disadvantages:--

This method suffers however from the following    limitations:

Critical incidents technique of evaluation is applied to evaluate the performance of superiors rather than of peers of subordinates.

Negative incidents may be more noticeable than positive incidents.

It results in very close supervision which may not be liked by the employee.

The recording of incidents may be a chore for the manager concerned, who may be too busy or forget to do it.

The supervisors have a tendency to unload a series of complaints about incidents during an annual performance review session.

2. Weighted checklist method :-

 In this style, performance appraisal is made under a method where the jobs being evaluated based on descriptive statements about effective and ineffective behavior on jobs.

Advantages :--

This method help the manager in evaluation of the performance of the employee.
The rater may be biased in distinguishing the positive and negative questions. He may assign biased weights to the questions.

Disadvantages :--

This method also is expensive and time consuming.
It becomes difficult for the manager to assemble, analyze and weigh a number of statements about the employee’s characteristics, contributions and behaviors.

3. Paired comparison analysis method ::-

This form of performance appraisal is a good way to make full use of the methods of options. There will be a list of relevant options. Each option is in comparison with the others in the list. The results will be calculated and then such option with highest score will be mostly chosen.

Advantages:--

It helps you to set priorities where there are conflicting demands on your resources.
This makes it easy to choose the most important problem to solve, or select the solution that will give you the greatest advantage.

Disadvantages :--

It is useful where priorities are not clear.
It is particularly useful where you do not have objective data to base this on.

4. Graphic rating scales method

This format is considered the oldest and most popular method to assess the employee’s performance.
In this style of performance appraisal, the management just simply does checks on the performance levels of their staff.

Advantages :--

Graphic rating scales are less time consuming to develop.
They also allow for quantitative comparison.

Disadvantages :--

Different supervisors will use the same graphic scales in slightly different ways.

One way to get around the ambiguity inherent in graphic rating scales is to use behavior based scales, in which specific work related behaviors are assessed.

More validity comparing workers ratings from a single supervisor than comparing two workers who were rated by different supervisors.

5. Essay Evaluation method
 
In this style of performance appraisal, managers/ supervisors are required to figure out the strong and weak points of staff’s behaviors. Essay evaluation method is a non-quantitative technique. It is often mixed with the method the graphic rating scale.

Advantages :--

The essay method is far less structured and confining than the rating scale method. It permits the appraiser to examine almost any relevant issue or attribute of performance. This contrasts sharply with methods where the appraisal criteria are rigidly defined.
 
Appraisers may place whatever degree of emphasis on issues or attributes that they feel appropriate. Thus the process is open-ended and very flexible. The appraiser is not locked into an appraisal system the limits expression or assumes that employee traits can be neatly dissected and scaled.

Disadvantages :-- 

Essay methods are time-consuming and difficult to administer. Appraisers often find the essay technique more demanding than methods such as rating scales.

The techniques greatest advantage - freedom of expression - is also its greatest handicap. The varying writing skills of appraisers can upset and distort the whole process.

The process is subjective and, in consequence, it is difficult to compare and contrast the results of individuals or to draw any broad conclusions about organizational needs.

The techniques greatest advantage - freedom of expression - is also its greatest handicap. The varying writing skills of appraisers can upset and distort the whole process. 

The process is subjective and, in consequence, it is difficult to compare and contrast the results of individuals or to draw any broad conclusions about organizational needs.

 Manager / supervisor may write a biased essay.

A busy rater may write the essay hurriedly without properly assessing the actual performance of the worker.
 
Apart from that, rater takes a long time, this becomes uneconomical from the view point of the firm, because the time of rater is costly.

Some evaluators may be poor in writing essays on employee performance. Others may be superficial in explanation and use flowery language which may not reflect the actual performance of the employee.

6. Behaviorally anchored rating scales method
 
This formatted performance appraisal is based on making rates on behaviors or sets of indicators to determine the effectiveness or ineffectiveness of working performance. The form is a mix of the rating scale and critical incident techniques to assess performance of the staff.

Advantages & Disadvantages :--

This method are very useful and exactly.

It is very difficult to develop this method because you need to identify what is “good level” etc.

7. Management By Objectives (MBO) method

MBO is a method of performance appraisal in which managers or employers set a list of objectives and make assessments on their performance on a regular basis, and finally make rewards based on the results achieved. This method mostly cares about the results achieved (goals) but not to the way how employees can fulfill them.


Advantages :--

 It is based on the assumption that the individual (employee) knows more than anyone else about her/his own capabilities, needs, strengths, weaknesses and goals.

A further advantage of MBO is that the emphasis is on the future rather than on the past. Appraisal thus becomes a means to a constructive end.

MBO is often achieved using set targets. MBO introduced the SMART criteria: Objectives for MBO must be SMART (Specific, Measurable, Achievable, Relevant, and Time-Specific).

Several managers have employed this management technique and have applied it to their company. These managers include Mukesh Ambani, Don Sheelen and Steve Jobs.

Disadvantages:--

1. Positive and active participation from subordinates is not easily forth forthcoming.

2. Truly verifiable goals are bot easy to formalise

3. Emphasis is put in short-range goals, whereas long-range goals are avoided, tough long-range goals are vital for growth and development of the organization

4. Goals remain inflexible and rigid. For example, changes desirable in annual budgets are not easily accepted in the middle of the year.

5. Over-use of quantitative goals jeopardizes the qualitative aspect which may more important than quantification in some cases.

8. Performance ranking method
 
The performance appraisal of ranking is used to assess the working performance of employees from the highest to lowest levels.

Managers will make comparisons of an employee with the others, instead of making comparison of each employee with some certain standards.

9. 360 degree performance appraisal
 
The style of 360 degree performance appraisal is a method that employees will give confidential and anonymous assessments on their colleagues.

Advantages :--

Offer a more comprehensive view towards the performance of employees.

Improve credibility of performance appraisal.

Such colleague’s feedback will help strengthen self-development.

Increases responsibilities of employees to their customers.

The mix of ideas can give a more accurate assessment.

Opinions gathered from lots of staff are sure to be more persuasive.

Not only manager should make assessments on its staff performance but other colleagues should do, too.

 People who undervalue themselves are often motivated by feedback from others.

 If more staff takes part in the process of performance appraisal, the organizational culture of the company will become more honest.

Disadvantages:--

Taking a lot of time, and being complex in administration

Extension of exchange feedback can cause troubles and tensions to several staff.

There is requirement for training and important effort in order to achieve efficient working.

It will be very hard to figure out the results.

Feedback can be useless if it is not carefully and smoothly dealt.

Can impose an environment of suspicion if the information is not openly and honestly managed.

10. Forced ranking (forced distribution)
 
In this style of performance appraisal, employees are ranked in terms of forced allocations.
For instance, it is vital that the proportions be shared in the way that 10 or 20 % will be the highest levels of performances, while 70 or 80% will be in the middle level and the rest will be in the lowest one.

Advantages:--
  
They force reluctant managers to make difficult decisions and identify the most and least talented members of the work group.

They create and sustain a high performance culture in which the workforce continuously improves.

Disadvantages:--

They increase unhealthy cut-throat competitiveness;

They discourage collaboration and teamwork;

They harm morale;

They are legally suspect giving rise to age discrimination cases.

11. Behavioral Observation Scales
 
The method based on the scales of observation on behaviors is the one in which important tasks that workers have performed during their working time will be assessed on a regular basis.

Summary

Performance appraisal measures the qualitative and quantitative aspects of job performance. An appraisal evaluates not only the employee's performance but also his potential for development. The primary objectives of an appraisal are – to assess past performance, to identify training needs, to set and agree on future objectives and standards, and to facilitate the achievement of these goals.

In many situations, the appraiser is the supervisor of the person who is to be rated. However, companies may also use multiple raters to evaluate performances (360 degree appraisal).
 
Peer and self-evaluations are on the increase, as are customer or client evaluations. Some appraisal systems use subordinate or reverse appraisals and team rating techniques.

Different methods are used for appraising performance. In the straight ranking method, employees are ranked from the best to the worst on the basis of their performance. Management by Objectives involves an agreement between a superior and his employee on the employee's performance objectives for a specified period and a periodic review of the extent to which the employee is able to accomplish those objectives.
 
Performance appraisal is the process of obtaining, analyzing and recording information about the relative worth of an employee. The focus of the performance appraisal is measuring and improving the actual performance of the employee and also the future potential of the employee. Its aim is to measure what an employee does.

According to Flippo, a prominent personality in the field of Human resources, "performance appraisal is the systematic, periodic and an impartial rating of an employee’s excellence in the matters pertaining to his present job and his potential for a better job."

Performance appraisal is a systematic way of reviewing and assessing the performance of an employee during a given period of time and planning for his future.

Bibliography
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         5.)    Essential of Human Resource Management & Industrial relations. Text cases & games.
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