PERFORMANCE MEASUREMENT SYSTEM [HR Paper 2] Module 3.pdf

Copyright © 2024 Jayanti Rajdevendra Pande. All rights reserved.
RASHTRASANT TUKDOJI MAHARAJ NAGPUR UNIVERSITY
MBA
SEMESTER: 3
SPECIALIZATION
HR
SUBJECT
PERFORMANCE MEASUREMENT SYSTEM
MODULE NO : 3
PERFORMANCE APPRAISAL
- By Jayanti R Pande

Q1. Define Performance Appraisal. Also state its need and objectives.
Performance Appraisal
•Performance appraisal is a systematic process of evaluating and assessing an employee's job performance.
•It involves measuring an employee's achievements, skills, behaviors, and contributions to the organization.
•The appraisal process typically includes setting performance expectations, collecting feedback, and conducting formal
evaluations.
•The primary goal of performance appraisal is to provide feedback to employees, identify areas for improvement, and
recognize and reward high performance.
•Performance appraisal serves as a basis for making decisions related to promotions, compensation, training, and career
development.
According to DeNisi – “Performance Appraisal is a system whereby an organization assigns some score to indicate the level of
performance of a target person or group.”

NEED OF PERFORMANCE APPRAISAL
1. Identifying Training and Development Needs: Through performance appraisals, organizations can identify skill gaps or
areas where employees require further training or development. This helps in creating targeted training programs to
enhance employee skills and knowledge.
2. Succession Planning: Evaluating employee performance aids in succession planning by identifying potential candidates
for key positions within the organization. It ensures a pipeline of qualified individuals ready to take on higher
responsibilities.
3. Improving Morale and Motivation: Recognizing and rewarding good performance during appraisals can boost employee
morale and motivation. It instills a sense of appreciation and encourages employees to continue performing at high
levels.
4. Legal and Documentation Purposes: Performance appraisals serve as documented evidence of an employee's
performance, which can be crucial in legal matters like disputes, promotions, or disciplinary actions.
5. Aligning Individual Goals with Organizational Objectives: By assessing performance against predefined goals,
performance appraisals help in aligning individual efforts with the broader objectives of the organization, ensuring
everyone is working towards common goals.

OBJECTIVES OF PERFORMANCE APPRAISAL
1.Giving Feedback: To provide employees with constructive feedback on their performance, acknowledging strengths and
addressing areas requiring improvement.
2.Promotion and Downsizing Decision Making: To assess employee performance for decisions related to career
advancements, promotions, transfers, or, conversely, for identifying performance-related issues leading to downsizing or
corrective measures.
3.Setting Measurable Goals: To establish clear, attainable, and measurable goals aligned with organizational objectives and
individual job roles.
4.Compensation Determination: To fairly evaluate employee contributions and performance as a basis for determining
appropriate compensation, rewards, and recognition.
5.Counseling Poor Performance: To identify underperforming employees, provide support, training, or corrective actions
necessary to improve their performance and contribution to the organization.

Q2. Discuss the process of Performance Appraisal.
PERFORMANCE APPRAISAL PROCESS
1. Establish Performance Standards with Employees
2. Mutually Set Measurable Goals
3. Measure Actual Performance
4. Compare Actual Performance with Standards
5. Discuss the Appraisal with Employees
6. Take Corrective Actions

PERFORMANCE APPRAISAL PROCESS
1. Establish Performance Standards with Employees:
Begin by setting clear performance standards and expectations for each employee. These standards should be communicated
and discussed between the manager and the employee. This step ensures that both parties understand what is expected in
terms of job responsibilities, behavior, and performance.
2. Mutually Set Measurable Goals:
Collaboratively set specific, achievable, and measurable goals aligned with the organization's objectives. These goals should be
agreed upon by the employee and the manager to ensure clarity and commitment.
3. Measure Actual Performance:
Throughout the performance period, managers observe and assess the employee's performance based on the established
standards and goals. They collect relevant data, observations, feedback from colleagues or clients, and any other pertinent
information to evaluate performance accurately.
4. Compare Actual Performance with Standards:
Compare the employee's actual performance against the predetermined standards and goals. This step involves a detailed
analysis to identify strengths, areas of improvement, achievements, and areas needing development or corrective action.
5. Discuss the Appraisal with Employees:
Hold a formal meeting between the manager and the employee to discuss the appraisal results. Provide constructive feedback
regarding the employee's performance, highlighting achievements, areas of improvement, and addressing any discrepancies
between actual performance and standards.
6. Take Corrective Actions:
If necessary, identify and implement corrective actions. This might include providing additional training, support, mentoring, or
resources to help the employee improve their performance in areas where they are lacking. Additionally, if exceptional
performance is noted, recognition or rewards may be considered.

Q3. Explain Performance Appraisal in practice.
Performance appraisal methods can vary significantly across different types of organizations, reflecting their unique goals,
cultures, and structures. Some organisations may have formal performance appraisal whereas some organisations may have
unstructured performance appraisal. Here's how performance appraisal is practiced in three categories of companies:
1 Government Departments (e.g., Village Development, Soil Conservation):
• Emphasis on Personality Traits: Government departments often prioritize personality traits such as dedication, punctuality,
alertness, motivation, and leadership abilities in their performance appraisal systems.
• Job Performance: While job-related accomplishments are considered, they may not be the sole focus. Instead, these
accomplishments may be evaluated in conjunction with personality traits.
2 Private and Public Sector Companies (e.g., SAIL, ONGC, BSNL):
• Combination of Traits and Job Accomplishments: These companies typically assess performance based on a mix of personality
traits and job-related accomplishments.
• Personality Traits: Similar to government departments, traits like dedication and leadership are valued.
• Job-related Accomplishments: Quantifiable achievements, meeting targets, project completions, and other job-related metrics
are also considered.
3 Organizations Using Complex Performance Appraisal Methods:
• Confidential Report Systems: Some organizations, particularly those with complex structures or high levels of confidentiality,
may utilize more intricate performance appraisal methods.
• Confidentiality: The appraisal process may involve confidential reports, where feedback and evaluations are shared only with
specific stakeholders.
• Multi-dimensional Evaluation: These organizations might employ comprehensive evaluation criteria, potentially incorporating
360-degree feedback, peer reviews, self-assessments, and managerial assessments.

Q4. State the characteristics and importance of Performance Appraisal.
CHARACTERISTICS OF PERFORMANCE APPRAISAL:
• Systematic Process: Performance appraisal involves a structured and systematic approach to evaluating an individual's performance against
predefined criteria or standards.
• Periodic: It is usually conducted periodically, such as annually or biannually, to assess performance over a specific timeframe.
• Feedback-oriented: Performance appraisal provides feedback to employees regarding their strengths, weaknesses, and areas for improvement.
This feedback serves as a basis for employee development and career planning.
• Two-way Communication: Ideally, performance appraisal encourages open communication between employees and managers, allowing both
parties to discuss performance expectations, achievements, and challenges.
• Goal-oriented: Performance appraisal often aligns with organizational goals and objectives, helping employees understand how their
performance contributes to the overall success of the organization.
• Developmental Focus: While performance appraisal assesses past performance, it also serves as a tool for identifying development needs and
creating plans to enhance employee skills and competencies.
IMPORTANCE OF PERFORMANCE APPRAISAL:
1. Employee Development: Performance appraisal provides valuable insights into employees' strengths and weaknesses, enabling targeted
training and development initiatives to enhance their skills and capabilities.
2. Reward and Recognition: It serves as a basis for determining rewards, promotions, bonuses, and other forms of recognition for high-performing
employees, thereby motivating and retaining top talent.
3. Goal Alignment: By evaluating individual performance against organizational goals, performance appraisal helps ensure that employees' efforts
are aligned with the overall objectives of the organization.
4. Performance Improvement: Performance appraisal identifies areas where employees may be underperforming or facing challenges, allowing for
targeted interventions and support to improve performance.
5. Fairness and Transparency: When conducted effectively, performance appraisal promotes fairness and transparency in the evaluation process,
helping to mitigate biases and perceptions of favoritism.
6. Legal Compliance: Performance appraisal can also serve a legal function by documenting performance-related issues, which may be necessary

Q5. What are the traditional methods of Performance Appraisal?
1. Graphic Rating Scale: In this method, a list of traits or behaviours relevant to the job is provided, and the manager rates the
employee on each trait using a numerical scale. It's a straightforward method but can be subject to bias if not used carefully.
2. Straight Ranking Method: Employees are ranked from best to worst or vice versa based on their performance. This method is
simple but may not provide detailed insights into individual strengths and weaknesses.
3. Paired Comparison Method: Employees are evaluated by comparing them to every other employee in pairs. The one who is
perceived as performing better in each pair receives a higher ranking. This method can be time-consuming but provides a more
nuanced assessment.
4. Critical Incident Method: Specific examples of behaviour or incidents demonstrating good or poor performance are
documented by the manager. This method focuses on actual behaviours and outcomes rather than general traits.
5. Group Appraisal Method: This method involves evaluating the performance of a group or team rather than individual
employees. It can be useful for assessing teamwork and collaboration but may not recognize individual contributions
adequately.
6. Checklist Method: A list of traits, behaviours, or tasks is provided, and the manager checks off those that apply to the
employee. It's a simple method but may not capture the full complexity of job performance.
7. Forced Choice Method: Managers are presented with pairs of statements describing different behaviours, and they must
choose which statement best describes the employee. This method helps reduce bias but can be time-consuming to administer.
8. Forced Distribution Method: Employees are forced into a predetermined distribution of ratings (e.g., bell curve), regardless of
actual performance. While it can prevent grade inflation, it may lead to unfair evaluations if employees' performance does not
naturally fit the distribution.
9. Field Review Method: External evaluators, such as customers, peers, or other managers, provide feedback on the employee's
performance. This method can provide diverse perspectives but may be less reliable if the evaluators are not familiar with the
employee's work.

Q6. Discuss the modern oriented method of Performance Appraisal.
4. Human Resource Accounting: (HRA) is a method of quantifying
and measuring the contribution of employees to organizational
performance and profitability. It involves assessing the value of human
capital investments, such as recruitment, training, and development,
and their impact on organizational outcomes. HRA integrates financial
and non-financial performance metrics to evaluate the return on
investment in human resources and inform strategic decision-making.
5. 360-Degree Performance Appraisal: involves collecting feedback
from multiple sources, including supervisors, peers, subordinates, and
sometimes external stakeholders, to provide a comprehensive
assessment of an employee's performance. This method offers a more
holistic and balanced view of employee performance, incorporating
diverse perspectives and reducing biases associated with single-
source evaluations. It promotes self-awareness, identifies
development needs, and fosters a culture of continuous improvement
and teamwork.
6. Assessment Centers: They are structured evaluation processes
designed to assess employees' competencies, skills, and behaviors
using various assessment methods, such as simulations, role-plays,
case studies, and exercises. Participants are observed and evaluated
by trained assessors based on predetermined criteria relevant to job
performance and organizational objectives.They provide a realistic and
standardized approach to evaluating employee potential, identifying
strengths and development areas, and making informed selection,
promotion, and development decisions.
1. Behaviorally Anchored Rating Scales (BARS): BARS combine
the qualitative nature of narrative appraisal methods with the
quantitative nature of rating scales. It involves defining specific
behavioral anchors representing different levels of performance for
each job dimension. Assessors then rate employees based on their
demonstrated behaviors relative to these anchors. BARS provide more
objective and specific feedback compared to traditional rating scales.
2. Management by Objectives (MBO):
MBO is a performance appraisal method where managers and
employees collaboratively set specific, measurable, achievable,
relevant, and time-bound (SMART) objectives or goals for the
upcoming performance period. The appraisal process focuses on
evaluating the extent to which employees achieve these objectives.
MBO encourages employee involvement in goal-setting, promotes
alignment with organizational objectives, and emphasizes continuous
feedback and development.
1. Psychological Appraisals:
Psychological appraisals involve assessing employees' psychological
characteristics, such as personality traits, attitudes, values, and
motivations, and their impact on job performance. These assessments
may include personality tests, interest inventories, and psychological
interviews. Psychological appraisals provide insights into employees'
behavioral tendencies and can inform decisions related to job
assignments, training, and career development.

Q7. State the pitfalls of Performance Appraisal in detail.
Performance appraisal processes, while essential for evaluating employee performance, can be prone to several pitfalls that can
undermine their effectiveness and fairness. Here are detailed explanations of some common pitfalls
PITFALLS OR DISADVANTAGES OF PERFORMANCE APPRAISAL
1. Halo Effect: The halo effect occurs when an assessor's overall impression of an employee, typically based on one outstanding
trait or performance aspect, influences their evaluation of other aspects. For example, if an employee is exceptionally
punctual, the manager might rate them highly in all areas, even if their performance in other aspects is mediocre or poor.
2. Central Tendency Bias: This bias refers to assessors' tendency to rate all employees as average or close to the midpoint of the
rating scale, regardless of their actual performance. It often occurs when assessors are unsure how to differentiate between
employees or are reluctant to assign extreme ratings.
3. Stereotyping: Stereotyping occurs when assessors rely on preconceived notions or stereotypes about certain groups of
people, such as gender, race, or age, rather than evaluating individuals based on their actual performance. This can lead to
unfair evaluations and discrimination.
4. First Impression Error: Assessors may form opinions about an employee based on their initial interactions or observations,
which can bias their subsequent evaluations. Even if the employee's performance improves or declines over time, the
assessor's initial impression may persist and influence their appraisal.
5. Personal Bias: Personal biases, such as favoritism or aversion towards certain employees, can significantly impact
performance appraisals. Assessors may consciously or unconsciously rate employees more positively or negatively based on
personal feelings rather than objective criteria.
6. Ineffective Organizational Policies: Poorly designed or implemented organizational policies related to performance appraisal
can also contribute to its pitfalls. This includes unclear performance criteria, inadequate training for assessors, lack of
standardization in the appraisal process, and insufficient feedback mechanisms for employees.

Q8. Write short note on -
1.Forced Choice Description Method:
• The Forced Choice Description Method is a performance appraisal technique that aims to reduce bias by presenting
managers with sets of statements about an employee's behavior or performance.
• Instead of providing an open-ended evaluation, managers must choose the most or least descriptive statement from each
set.
• This method forces the evaluator to make choices between predetermined options, minimizing subjectivity and
encouraging a more objective assessment of employee performance.
2. 360 Degree Feedback Method:
• The 360 Degree Feedback Method is a comprehensive performance appraisal approach that gathers feedback from
multiple sources, including supervisors, peers, subordinates, and sometimes external stakeholders like customers or
clients.
• This feedback provides a well-rounded view of an employee's performance, incorporating diverse perspectives and
insights.
• It helps employees understand their strengths, weaknesses, and areas for improvement, fostering self-awareness,
development, and collaboration within the organization.

3. Human Resource Accounting:
• Human Resource Accounting (HRA) is a method of quantifying and measuring the value of human capital within an
organization.
• It involves assessing the costs and benefits associated with acquiring, developing, and retaining employees.
• HRA integrates financial and non-financial metrics to evaluate the contribution of human resources to organizational
performance and profitability.
• By recognizing the importance of human capital investments, HRA informs strategic decision-making and resource
allocation, emphasizing the value of employees as key assets.
4. Management by Objectives (MBO):
• Management by Objectives (MBO) is a performance appraisal and management technique that focuses on setting specific,
measurable, achievable, relevant, and time-bound (SMART) objectives or goals for employees.
• Managers and employees collaboratively establish these objectives, aligning individual performance with organizational
goals and priorities.
• MBO emphasizes continuous feedback, regular performance reviews, and employee development.
• It encourages employee involvement in goal-setting, fosters accountability, and enhances organizational performance by
ensuring alignment and clarity of objectives at all levels.

Copyright © 2024 Jayanti Rajdevendra Pande.
All rights reserved.
This content may be printed for personal use only. It may not be copied, distributed, or used for any other
purpose without the express written permission of the copyright owner.
This content is protected by copyright law. Any unauthorized use of the content may violate copyright laws and
other applicable laws.
For any further queries contact on email: jayantipande17@gmail.com

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