Limitations of Performance Appraisal

Performance appraisal is a tool that is used to estimate employees’ performance at the workplace. This generally includes qualitative and quantitative dimensions of employees’ job performance. In this context, performance is described as the level of work achievement. It generally represents how successfully someone fulfils the job requirements.


Limitations and constraints of performance appraisal are as follows:


1) Rating Errors: Positive or negative deviations in ratings of performance appraisal which affect its accuracy are termed rating errors. The common rating errors are given as follows:

 i) First Impression Error: It occurs when a manager forms a positive or negative image about an employee based on a first impression and keeps it in mind for future judgements as well. It is also known as primacy or primary effect. 

For example, a new boss finds that a worker is not performing properly. The reason behind this was that his parents had recently died in a mishap. In a month, the employee became normal and began giving high-level performance but the manager’s opinion did not change as it was negatively influenced by the first impression.


ii) Halo Effect: It takes place whenever a person who is rating gives too much importance to a particular factor of performance and gives identical ratings to other performance factors as well. 

For example, if an employee is always the first one to reach the office and the last one to leave the office, he is considered to be very creative and industrious. Whereas a worker with a  relaxed body language and casual attitude would not be taken seriously and would not be trusted. These two judgements that have been taken by a manager are based on the halo effect and might not be accurate as the manager has taken into account only a single obvious characteristic of the employees. Such judgements should be carefully examined as a single trait cannot define the character and performance of an employee.


iii) Leniency or Strictness: Many managers rate their subordinates equally either high or low. These are known as leniency or strictness errors. The strict manager gives lower ratings to what an employee is entitled to. While the lenient manager gives a higher rating than the entitled. 

For example, Ramesh gave higher ratings to all his employees than what they deserved because he feels that this will motivate them to perform better and they will put all their efforts to fit with the rating being given to them.


iv) Central Tendency Bias: Some managers play a safe game by providing average ratings to all the employees. It could be performed with an idea to averse the need for valid scoring across two ends. The reason behind this is that several systems want the managers to mention additional remarks when they assign too high or too low ratings to employees.


v) Recency Bias: Recent actions have the tendency to surpass the overall performance. Generally, people have a short memory. 

For example, an employee acted strongly and very well over the years, but due to some inevitable situations in the last few weeks, his performance level went downwards. As a result, his supervisor gave him a bad rating based on his last few weeks performances and ignored his eleven months’ superior performance. This is termed a recency error. Recency error can be reduced to a large extent if a manager maintains a record of his performance throughout the year then.


vi) Stereotyping: Stereotyping refers to making a general image regarding the characteristics (which are usually wrong) of all members of a group. This impedes a manager’s ability to take correct decisions. 

For example, Suresh is an introvert but an outstanding salesman and his manager underrates his performance as compared to the other salespersons because he does not fit with them. The manager here ignored his performance due to stereotyping and made an inaccurate judgement.


vii) Contrast Effect: Contrast effects state something drastically different (highest or lowest). will overstate the difference. 

For example, in an interview when there are large numbers of job applications, distortion in the evaluation of any candidate may occur based on the place of his application. If a person’s application is placed after a relatively weak candidate, he may immediately catch the attention of the interviewer whereas another candidate may lose his charm, if his application is placed after a very strong candidate. 

Another example of the contrast effect is that after rating an excellent performer, the manager begins to rate a good performer. But due to contrasting effects, the boss will find significant differences in their productivity, performance, and aptitudes and therefore will rate him as an average performer. Hence, the contrast effect plays a very negative role in the manager’s decision-making.


viii) Personal Bias: Sometimes unfair evaluation occurs due to various reasons like attitudes, experiences, personal beliefs,  assumptions,  preferences, and deficiency of accepting any particular individual, class, or fact. Everyone experiences such biasness while taking day-to-day decisions about people, things, etc. Differentiating people based on race, religion, age, sex, etc., and assuming that a particular person is not suitable for a specific job, is an example of personal bias. If a manager believes that men are rational and women are emotional, then he will not select a female candidate for a job, which requires practical decisions. Another assumption is that people believe that young employees are more efficient than ageing employees. This may result in giving a lower efficiency rating to the older worker as compared to young workers.


ix) Spillover/Past Performance Effect: It simply means the previous performance rating is affecting the current rating, irrationally. 

For example, Vijay was awarded as a star performer the last year as he got the highest rating. This year his performance was not up to the mark even then he was rated as a star performer, based on the previous record.


x) Similar-to-Me Effect: It is the nature of supervisors to give higher ratings to those employees whom they believe have qualities or qualifications similar to their own. 

For example, those employees whose children go to the same school as their managers, get high-performance ratings as compared to those employees whose children go to other schools.


xi) Attribution Error: It is the inclination to determine the behaviour of people according to personal factors while ignoring situational factors. 

For example,   A manager has both good and average employees in his team. But he gives the credit for success only to his own leadership qualities and blames the laziness and bad attitude of employees for failure.


2) Poor Appraisal Forms: Various factors related to appraisal forms affect the whole appraisal process:

i) Ambiguous rating scale.

ii) Vital dimensions of job performance may be ignored by the rating form. 

iii) Various irrelevant performance dimensions are involved in rating forms.

iv) Forms may be lengthy and complicated.


3) Lack of Rater Awareness: It can be possible that raters may not be correctly skilled to execute performance management exercises. Then it becomes a great barrier for a rater having inadequate specialisation in a particular area, to assess the technical capabilities of a rate. The raters may not have plenty of time to execute the appraisals in an organised manner and to hold a proper review session. At times, the raters may not be skilled enough to perform the assessments due to poor self-confidence and bad self-image. Appraisers may also, get puzzled due to ambiguous objectives of appraisals.

4) Ineffective Organisational Policies and Practices: Raters get demotivated if they do not get a correct appreciation for their evaluation. Frequently, low ratings given by raters are taken by management as a negative sign of malfunction on the part of the rater or a signal of employee dissatisfaction. Thus, most of the employees obtain good ratings, despite their poor performance. Generally, the rater’s immediate senior must appreciate the ratings. However, practically, it does not occur. Therefore, the rater becomes upset and produces comprehensive harm to the rating process.


5) Inflationary Pressures: It is a special case of low discrimination in the upper limit of the rating decisions. These pressures are regular in occurrence. Due to the increasing importance of equality principles and fear of revenge from unhappy employees, who did not receive fair reviews, the appraisal process has become quite lenient and firm. Harmful consequences from the appraisal process can be minimised by usual inflating or modifying appraisals. Thus, inflating the assessments has created a tough situation for organisations to defend their own actions while discharging an employee.

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