Performance Appraisal Meaning

Performance appraisal is a tool that is used to evaluate the employee’s performance at the workplace. This generally includes quantitative and qualitative dimensions of an employee’s job performance. Performance can be defined as the level of work achievement. It simply represents how successfully an individual satisfies the job requirements. Performance can be evaluated based on outcomes.

For example, an athlete applied great effort while preparing for the race but he didn’t perform well. These types of cases show that efforts applied are of high value but the result is low.

Immediate supervisors, subordinates, customers being served and even self-appraisal and computer can evaluate the performance of an individual.

Objectives of Performance Appraisal

Objectives of performance appraisal are as follows: 


1) Providing Feedback: 

The main objective of performance appraisal is to provide feedback to its employees. Through this process, the individual learns how he performed during the past twelve months. Then, he can utilise this information for improving his performance in future. Thus, performance appraisal aims to ensure that the expectations of managers are adequately communicated to employees.

2) Facilitating Promotion and Downsizing Decisions:
Performance appraisal helps in making decisions regarding promotion and downsizing so that efficient employees can be retained and low performers can be removed.

3) Motivating Superior Performance:

Performance appraisal also helps in stimulating people for rendering superior performance in several ways. Firstly, it helps in understanding what an organisation means by being “superior”. Secondly, as most people desire to be treated as superior performers, the performance appraisal process helps them to understand their actual performance. Lastly, performance appraisal motivates employees to become superior performers.

4) Setting and Measuring Goals:

Goal establishment has been confirmed as a management process that produces advanced performance. The 360 degree performance appraisal process generally ensures that every individual sets and attains valuable goals.

5) Determining Compensation:

The concept of performance pay is generally followed by every organisation. Performance appraisal helps to ensure that those good performers are paid more. Thus, employees are awarded as per their performance

6) Counselling Poor Performers: 

Everyone can’t meet the standards of the organisation. Performance appraisal pressurises the managers to deal with those who are not fulfilling the organisational expectations.

7) Encouraging, Coaching and Mentoring: 

Managers are supposed to be good coaches for their subordinates and mentors for their trainees. Performance appraisal determines the need for coaching and motivates managers to play an active role as coaches.

8) Supporting Manpower Planning:

Well-groomed organisations frequently evaluate their to ensure that they have the required talent. Organisations need to find out their most effective employees They also need to locate the departments having talented employees and those that are lagging behind. Performance appraisal provides the organisation with a tool to ensure that they are having that creative strength which is needed in future.

9) Determining Training and Development Needs: 

With the help of data obtained from performance appraisals, training and development experts can better decide the areas where an organisation should focus its training efforts.

10) Validating Hiring Decisions: 

Once the performance of newly selected employees is evaluated, only thin an organisation can determine whether or not they have selected the right candidate. 

11) Providing Legal Defensibility for Personnel Decisions:

More or less every personnel decision, whether termination, denial of a promotion or transfer to another department, is governed by legal inspection. If any of these decisions are challenged, the organisation could also be challenged. Therefore, the organisation must be capable of justifying that the decisions taken were not established on any personal issue or any other protected aspect. A strong record of performance appraisals deeply assists in legal defensibility, when any complaint about biasness is made.

12) Improving Overall & organisational Performance: 

Overall improvement of organisational performance is one of the most important purposes for which performance appraisal is being used in organisations. Performance appraisal helps in conveying the organisational expectations to all team members and evaluates how each employee is performing his job. When an employee is aware of what is being expected from him and how he is performing his work against those expectations, then ultimately this leads to enhancement in the success of an organisation.

Process of Performance Appraisal
Performance Appraisal includes various steps as shown in the figure :

Process of Performance Appraisal

1) Establish Performance Standards with Employees:

The process of performance appraisal starts with the formation of performance standards, according to organisational planned goals. These standards should be derived from the organisational strategic decisions, particularly from job analysis and job description. These standards should be easy to understand so that they can be easily evaluated and comprehended. 

Generally, these standards are expressed with confusing remarks that one understands little such as “a full day’s work” or “a good job”. It is difficult to understand what is a full day’s work or a good job. A manager should have a clear-cut picture in his mind of what he expects from his employees. Thus, he would be able to convey these expectations to the employees in future and evaluate their performance as per these standards.

2 Mutually Set Measurable Goals:

After the formation of standards, the most important thing is to communicate the expectations so that an employee would not waste his time assuming what is being expected from him. Many jobs have ambiguous performance standards and the problem occurs when these standards are set individually without any discussion with employees. Only the transfer of information from manager to employee cannot be termed as communication because communication is a two-way process.

3) Measure Actual Performance:

Measurement of actual performance is the following phase of the appraisal process. To measure actual performance, it is important to gather information about it. Managers should be aware of what is to be measured and how. There are four common sources of information that are often applied by managers to evaluate the actual performance of employees. These sources are statistical reports, personal observations, and oral and written reports. 

Every source has its own limitations and benefits. However, a group of these sources will increase the number of input sources and the possibility of collecting accurate information. What is being measured is more difficult to evaluate as compared to how it is being measured. Selecting the wrong criteria may result in severe results. What is to be measured indicates, what people have to achieve to excel in the organisation.

4) Compare Actual Performance with Standards:

The next step involves the comparison of standards with actual performance. This step involves the identification of variations between the standard performance and the actual performance to proceed further.

5) Discuss the Appraisal with the Employee:

During this phase, the appraiser discusses the concept of appraisal with the employee. For managers, the most difficult job is to provide a precise appraisal to the employee. The review of performance appraisal affects an employee’s self-esteem and most importantly his performance.

Certainly, giving positive feedback is comparatively easier for both the appraiser and the employee than giving negative feedback. The appraisal may have both positive and negative outcomes.

6) If Necessary, Take Corrective Actions:

The last phase of the appraisal process includes taking corrective actions wherever needed. These actions could be immediate or basic. Immediate actions deal mostly with the symptoms. These actions are frequently regarded as putting out fires as they deal with urgent problems. 

They rectify the problems immediately and smoothen the flow of work. On the other hand, basic actions deal with the causes of the problem. These actions cover the reasons for fluctuation and aim at controlling the variations forever. 

They diagnose how and why the performance fluctuates. In some cases, appraisers may give a reason that due to a shortage of time they did not take basic remedial actions. 

Hence, appraisers feel happy setting out fires. Efficient managers know that spending a short time evaluating the problem now, may save their time in solving the problem tomorrow.

Features of performance appraisal

Features of Performance  appraisal are as follows :

1)  Evaluating Process: 

Performance appraisal identifies the employee’s performance level based on some predefined criteria and tries to develop a future improvement plan.

2) Organised Process:

Performance appraisal is an organised process that has the following three steps:

  • Deciding performance standards.
  • Providing feedback so that employees can remove errors and enhance their performance in due course of time.
  • Comparing the actual performance of employees with performance standards.

3) Periodic Process: 

Performance appraisal is performed at regular intervals as per the specified requirement. It is not a one-time process. These cycles can be large or small, depending on the requirement.

4) Futuristic :

Performance appraisal focuses on the future instead of focusing on the past. It identifies and indicates the areas where employees are lagging and help employees to produce the best results by appropriately utilising their capabilities.

5) Develops Employees:

Performance appraisal also emphasises the overall development of employees. It guides managers to act like coaches rather than judges. It helps in identifying the issue for discussion, removes any significant problems, and determines new goals for purpose of attaining high performance.

6) Identifies employee’s potentialities:

Performance appraisal determines the capability of employees to perform the allocated job effectively.

Need for Performance Appraisal

 The need for performance appraisal is as follows :

1) It is required to inform the employees about the criteria being used by the organisations to decide the productivity and utility of employees in the organisation

2) It is required in an organisation to evaluate the achievements and failures of employees related to their work
It also helps the employees to know their position in the opinion of their supervisor and organisation.

3) Performance appraisal help employees to be motivated and become more efficient in their work. It provides them with a summary of their past performance which helps them in planning their future in a better way

4) It helps to recognise personality differences because each person differs in personality and has different situational, psychological, physiological and social traits.

5) Performance appraisal helps to identify the strengths and weaknesses of an employee. Consistent appraisal makes this information easily available during allocating new assignments. Knowing the strengths and weaknesses also helps the management in effectively selecting the right employee for the right team, which is necessary for effective management.

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