Performance Appraisal Method

Prepared for Dr. Shahid Uddin Ahmed Course name: Human Resource Management

Prepared by Md. Golam Rasul ID # 3-07-11-042

EMBA Program Department of Business Studies University of Dhaka

Submitted on: Feb 02, 2008

PERFORMANCE APPRAISAL
Performance appraisal means evaluating an employees current or past performance related to the persons performance standards. Once employees have been on the job for some time, we need to evaluate their performance. It comes sequentially after recruiting, training or developing them. It helps the employees for their further development in the career. Thats why developing a career plan for the employee is an important part of any appraisal process. Performance appraisal involves: a) Setting work standards b) Assessing the employees actual performance relative to these standards. c) Providing feedback to the employee with the aim of motivating that person to eliminate deficiencies.

PURPOSE

OF THE

PERFORMANCE APPRAISAL

There are four reasons for performance appraisal. Firstly, appraisal provides information upon which the promotion, transfer and salary decision will be made. Secondly, it provides an opportunity to review the work-related behavior of the subordinates, which in turn will help in developing a plan for correcting any deficiencies. Thirdly, the appraisal is part of the firms career planning process, because it provides an opportunity to review the persons career plans in light of his or her strengths and weaknesses. Fourthly, for making the company standard high by increasing: Productivity in the workplace Quality Improving internal relation

 purpose)

Improving external relation (for export and import

LEGALITIES REGARDING PERFORMANCE APPRAISAL:

It was found that the inadequacies of an employers appraisal system lay at the root of illegal discriminatory actions, particularly in cases concerning layoffs, promotions, discharges, merit pay, or combination of these. And all these will lead the company to stand in front of the court. Company should consider following legal issues carefully: Incorporate successful performance standard into a form Defines job dimensions clearly Communicate expectations before hand Train supervisors and allow them substantial daily contact Never allow a single appraiser to make the entire determination (done by the departmental heads, immediate supervisors). Provide a chance to the employee to appeal against appraisal Corrective guidance or improvement plan.

OBTAINING

THE

TRAITS

OR

ACTIVITIES:

This is done with the help of job description. So a job analysis is made before the performance appraisal program. Some common traits are given below that are followed at the time of Performance appraisal: I. II. III. Productivity: Job knowledge: used con the job. Reliability: The extent to which an employee can be relied upon regarding task completion and follow up. The quantity and efficiency of work produced in a specified period of time. The practical/technical skills and information

IV.

Availability:

The extent to which an employee is punctual,

observes prescribed work break/meal periods, and the overall attendance record. V. VI. VII. VIII. Independence: supervision. Responsibility: Team work. Behavior in the work place. How the employee is committed to the work and rules regulations of the company. The extent of work performed with little or no

SETTING STANDARDS:
Use of measurable standard of appraisal should be defined. For example: O Outstanding: Performance is exceptional in all areas and is recognizable as being far superior to others. V Very good: Results clearly exceeds most position requirements. Performance is of high quality and is achieved consistently. G Good: Competent performance. I Improvement needed: U Unsatisfactory: and dependable Meets level of performance

standards of the job. Performance is deficient in certain areas. Improvement is necessary. Results are generally unacceptable and require immediate improvement. No merit increase should be granted to individuals with this rating.

COMMUNICATING EXPECTATION:
One very important task is to talk about the expectation and make it understandable to the employees who are going to accomplish those. Now the best way to do it is by quantifying the expectations. Some examples are given below: Increase sales by 10% from the previous year Customer complaint management (only 1or 2 complain can be sent to supervisors). Reduce Days Sales Outstanding by 15 days. Prevent loss (reduce waste of resources by 20% for the next year) Minimize injury (At least try to reduce to half at the site)

Communicate about Standards:

Before the appraisal, the company communicates performance standards to employees and to those (supervisors, GM , COO) rating them in writing. Company also informs further contact address with whom the employees can talk about the matters is enclosed too.

Communicate about Appraisal Due Date:

The employees should know the time of appraisal. For this purpose company announced the due date at the beginning of the year or at least six-month before the appraisal. Sometimes the appraisal date for the respective employees is given in their joining letter. But normally it is announced once for all.

CHOOSE APPRAISAL METHOD:

Company usually conducts the appraisal using a predetermined and formal method. Different methods may be used for managers and ordinary staff. For example:

1) Trait Rating
At the center of this method is a list of personality/ disposition traits to which the appraiser must assign a numerical rating or a descriptive rating of adjectives. Traits may include items such as cooperation, motivation, flexibility, and attitude. Cautionary Notes... This approach assumes that one can define and rate traits

objectively, but in practice, traits are too broadly defined and so are the criteria for evaluating each trait. Because the trait approach is unreliable and invalid, it is highly employee performance and development. Furthermore, questionable as to whether it is able to offer any useful information about because of its reliance on erroneous assumptions, the trait method is likely to be de-motivating to employees and create tension between employees and managers.

2) Graphic Rating Scale

A scale that lists a number of traits and range of performance for each trait. The employee is then rated by identifying the score that best describes his level of performance for each trait. A sample of this method is as follows:

Performance Comments)

Appraisal

(Graphic

Rating

Scale

with

Space

for

Employee Name_____________________________________ Reason for Review: Annual Merit Date of Joining_________________ position___________________ Promotion

Title_____________________________ Unsatisfactory Performance Other

Department______________________________________ Employee Payroll Number_________________

End Probation Period

Date of beginning current

Instruction: Carefully evaluate employees work performance in relation to current job requirements. Check rating box to indicate the employees performance. Indicate N/A if not applicable. Assign points for each rating within the scale and indicate in the corresponding points box. Points will be totaled and averaged for an overall performance score. RATING IDENTIFICATION
O Outstanding: Performance is exceptional in all areas and is recognizable as being far superior to others. V Very good: Results clearly exceeds most position requirements. Performance is of high quality and is achieved consistently. G Good: Competent and dependable level of performance. Meets performance standards of the job. I Improvement needed: Performance is deficient in certain areas. Improvement is necessary. U Unsatisfactory: Results are generally unacceptable and require immediate improvement. No merit increase should be granted to individuals with this rating.

GENERAL FACTORS

RATING SCALE

SUPPORTIVE DETAILS OR COMMENTS

1. Quality The accuracy and thoroughness, and acceptability of work performed. 2. Productivity The quantity and efficiency of work produced in a specified period of time

OVGIUOVGIU-

100 90 90 80 80 70 70 60 below 60 100 90 90 80 80 70 70 60 below 60

Points ____________________ ____________________ ____________________

Points ____________________ ____________________ ____________________

3. Job Knowledge The practical & technical skills and information used on the job.

OVGIU-

100 90 90 80 80 70 70 60 below 60

Points ____________________ ____________________ ____________________

3) Global Essay and Rating System

This method has two variations. a) The first variation of this method involves a manager writing an essay about what they consider to be an overall assessment of an employee's performance. It is important to note that nothing obligates the manager to justify anything within their assessment. b) The second variation has the manager rating the employee using a list of terms such as "above average; fair; or poor." Cautionary Notes... The appraisal content is not necessarily job related. Managers subjectively choose their evaluation criteria. The subjectivity of this method denies employees reliable feedback about their performance. The lack of objectivity and assessment of relevant performance criteria may hinder an employee's ability to improve job performance, and further hinders the organization's potential to optimize employee capacity, consequently impeding overall organizational improvement. T. Philip (1990) points out that an absence of objective measures by which to determine performance levels is an invitation to tension-ridden employee-employer relations, because employees and managers often hold diametric views about 1) which performance inputs/ outputs ought to be evaluated, and (2) what

evaluative judgments ought to be made about those performance inputs/ outputs.

4) Critical Incidents Approach

Critical incidents focus the evaluator's attention on those behaviors that are keys in making the difference between executing a job effectively and executing it ineffectively. The manager documents the employee's on-the-job behaviors;

separates each behavior or incident as either unsatisfactory or satisfactory (or some analogous classification scheme), and essentially compares the two categories of incidents, concerned mostly with the higher pile. Cautionary Notes... The degree of objectivity can vary greatly depending on the appraiser and what different appraisers view as critical incidents. Managers need to ensure they have sufficient quantity and quality of employee observational opportunities.

5) Peer Ranking
In the peer ranking approach, the manager is typically asked to assess the overall performance of an employee by ranking them in relation to other employee.

Some attempted to deal with the inherent subjectivity of this method by using a forced-ranking method, which meant distributing ratings so they conformed to a normal distribution curve. But as T. Peters (1987) points out, this means creating a statistical imperative to evaluate a predetermined portion of employees as losers. Cautionary Notes...

Fairly obvious is the negative potential performance effects of labeling an individual as a loser.

Inherent in the ranking approach, is the pitting of one employee against another, thus inhibiting the potential for a collaborative work environment.

The larger the number of employees a manager has to evaluate and rank, the less likely there will be sufficient familiarity with each person's work to adequately complete the ranking exercise.

6)

Behaviorally

Based

Scales

and

Behaviorally

Anchored Rating Scales (BARS)

BARS use the constituents of critical incidents and graphic rating scales (similar to trait rating except it measures performance factors rather than personality factors). BARS use careful job analysis to determine the behaviors required for a particular job. The required behavior patterns become "anchors" for a rating scale. Concrete job behavior is displayed from best to worst. For

any particular job, BARS involve identifying the complete range of relevant job behaviors, and a design of the appropriate performance dimensions.

Cautionary Notes...

BARS are complex and difficult scales to construct. Organizations usually need an expert to coordinate the process as well as an individual with statistical skills.

It is not only costly to set up, but costly to maintain as well.

7) Objectives and goal-setting procedures (MBO)

The principle behind this approach is to compare expected performance with actual performance. This approach was devised as a method of incorporating performance planning into performance appraisal. In essence, the manager, or manager and employee decide which goals must be achieved by the employee. The goals are connected to a time schedule, are specific and measurable, and become the measure of the employee's performance. Typically, the goals are established at the beginning of the appraisal period and measured at the end of the appraisal period. Cautionary Notes... According to Peters (1987), Drucker proposed MBO as a method of

non-bureaucratic self-management, but the method has been

debased over time because it has become burdened by top-down forces. Generally speaking, most, if not all, performance appraisal approaches have some fault. R. Aguayo (1990), a Deming student, offers some of Deming's more common criticisms of performance appraisals:

PERFORMANCE APPRAISALS:
o

Encourage

everyone

to

try

to

outdo

everyone

else,

thus

discouraging cooperative behavior;

o o o o

Act as a major barrier to people experiencing joy in their work; Tend to be descriptive and do not help performance to improve; Artificially create winners and losers; Tend to be a measure of past performance instead of present performance; Do not adequately tap internal motivation; Artificially separate individual performance from that of the whole company; and Focus on the individual to the exclusion of the system in which the individual operates.

o o

Performance appraisals are not inherently evil. There are useful purposes for them, and it is possible to effectively integrate performance appraisal into an overall performance management system. The key is to have both performance appraisal methods and performance management processes tailored to each organization's needs - 'cookie cutter' approaches never have worked, and never will work Apart from the above method there are also appraisal methods like 1. Forced Distribution Method

2. Alternation Ranking Method 3. Computerized and Web based appraisal method, etc.

TRAIN RATERS:
After choosing the appraisal method necessary training needs to be given to the rater to use the appraisal tools properly. If formal training is not possible, at least provide raters with written instructions for using the rating scale.

DOING PERFORMANCE APPRAISAL:

Generally the persons direct supervisors appraise his or her performance. Other main options are: Rating committee: Immediate supervisor plus 3 or 4 other Peers appraisal. Self rating. Appraisal by sub-ordinates. 380 degree feedback departmental head, GM and COO make the appraisal.

Review is necessary and in most of the time the immediate supervisors conduct review.

COMMUNICATE RESULTS DURING FEEDBACK & FUTURE PLAN:

It is done through appraisal interview. An interview in which the supervisors and subordinates review the appraisal and make plans to remedy deficiencies and reinforce strengths. At the time of feedback the supervisors talk directly with the employees and encourage the person

to talk, listen to what the person is trying to say, and asks open-ended questions for better understanding. After that some employees are provided better training for further improvement.

A sample of employee improvement plan could be as follows: Performance Improvement Plan

Name ______________________ ________________________ Position Title ________________ __________________ Performance factors / Skills Planning Performance Analysis & Example Dept./ Div. Improvement Plan Date

Organizing

Team Building

Discipline

PERFORMANCE APPRAISAL

FORMAT OF

RAHIMAFROOZ COMPANY

The Performance Appraisal Format comprises of five main sections but only important three are described below: Section 1A: Review of performance against agreed standard: In this section the key result areas are defined as per job description and targets as set in ABP, weights are distributed judging the required efforts needed to accomplish the KRA and eligibility factors are put keeping in minds the impact of the target on the business in the beginning of the financial year to appraise the appraise against agreed standards. At the end of the each financial year performance index is calculated by comparing the actual achievement with set target Section 1B: Performance against standards in other areas (Non quantifiable but of long term importance): This section encompasses activities those are defined as non-quantifiable but have long-term importance. Expected results and weight are set as per the long-term business plan in the line with company policy, aspiration and values. Here the performance index is calculated by multiplying weight and rating (Rating shall be done as per the given rating scale) Calculation of total index: Total index (TI) which is finally considered for deciding KRA bonus is calculated by taking 70% of index from section 1A and 30% of index from 1B. The percentages are decided by measuring the value adding weight of the section 1 & 2. The formula is, Total Index = (.70 A + .30 B) Section 2: Review of competencies: In this section some specific personal attributes are evaluated in a given rating scale. Each of the given personal competencies are defined

separately, so that the review of competencies are done unbiased and effectively. This section is paramount to assess the training needs and areas of improvements of the appraise and to make the training areas wide. The section is divided into two parts: a. Managerial/executives competencies b. Technical competencies (department specific) Section 3: Development plan: In this section needed training are proposed for concerned appraise which is divided into two parts: a. Managerial/ executive training (with reference to section 2A) b. Technical training (with reference to section 2B)