Performance
Appraisal &
Management
Rida Zaman

What is Performance Appraisal?
Performance appraisal is a part of a
company’s process of understanding their
employees better and giving them feedback
to help them improve their performance

What is Performance Appraisal?
Performance appraisal in HRM is a process of analyzing an employee’s
worth as well as contribution to the job. Getting an objective
evaluation of an employee’s performance will help a company identify
any existing problems in the workplace. This will help the HR
department to solve those problems quickly and with ease.
Performance appraisals are used for an employee’s development. It
helps the management to make decisions regarding promotions, job
transfer & terminations. This systematic approach also gives employees
an insight into their current capabilities, whether they have scope to
learn and grow, “where they currently stand” with their boss & their
long-term plans with the company.

What is Performance Appraisal?
Performance appraisal in HRM is a process of analyzing an employee’s
worth as well as contribution to the job. Getting an objective
evaluation of an employee’s performance will help a company identify
any existing problems in the workplace. This will help the HR
department to solve those problems quickly and with ease.
Performance appraisals are used for an employee’s development. It
helps the management to make decisions regarding promotions, job
transfer & terminations. This systematic approach also gives employees
an insight into their current capabilities, whether they have scope to
learn and grow, “where they currently stand” with their boss & their
long-term plans with the company.

Definition of Performance Appraisal in HRM
Performance appraisal is a process where the employee’s performance,
contributions & skills are evaluated against his/her job requirements.
This provides a uniform platform to measure financial rewards,
selection for promotions, or assignments to important projects for each
candidate.
Performance Appraisal in HRM creates a healthy competition between
colleagues. It also helps employees compare and improve upon their
skills if needed. Appraisals are usually held annually in most companies.

How Performance Appraisals Work?
Every company has a different approach to their performance appraisal. Some
companies hold an annual review process, which may have assessment sessions
annually, semi-annually, or quarterly.
Some companies also adopt a method of one-on-one check-ins, which are
considered less formal than the annual assessments. Managers are able to provide
frequent feedback to their employees in this system. These check-ins help the
employees to periodically check their performance and re-evaluate their goals if
needed. This approach works well on agile and collaborative projects.
Different methods are best suited for different companies. Some organizations also
base their appraisals based on the kind of projects their employees are currently
working on.

Process of
Performance Appraisal
in HRM

Methods & Types of Performance Appraisal

Modern Methods of Performance Appraisal in
HRM
Different companies use different methods to conduct their
performance appraisal calculations.
It depends on the job role and the type of company it is.
A few of the common methods doing performance appraisals in HRM
are:

Management by Objectives (MBO)
In this method, managers and employees collaborate together to
identify, plan, organize, and communicate objectives. This is usually for
a specific appraisal period and objectives are validated using
the SMART (Specific, Measurable, Achievable, Realistic & Time-
sensitive) method.
After setting clear goals, managers and employee interact periodically
to discuss the feasibility of achieving set objectives and the progress
made. These measures of progress help analyze the contributions of an
employee at the end of the review period. Success is rewarded with
appraisals like salary hike or promotion, whereas others are re-
evaluated for further training.

360-Degree Feedback Method
The method focuses on collecting feedback from everyone an
employee interacts with like managers, customers, peers, etc. When
data is collected from multiple sources, the chances of a manager’s bias
affecting the appraisal are eliminated. Plus, it offers a clearer picture of
the employee’s competence in terms of work.

Assessment Center Method

Assessment Center Method
Introduced by the German Army in the 1930s, the concept of
assessment center has been revamped to suit the current business
scenario. The employees are assessed based on their performance like
social-stimulating exercises like role-playing, decision-making, informal
discussions, etc. The assessment evaluates the performance of
employees to identify future leaders and managers.
The effectiveness of the Assessment Center Method allows employees
to get a clear picture of their own performance and how others
observe them. The impact of other’s perspective on their performance
can also be realized from these exercises. It is easier to evaluate the
current performance of an employee and also predict future
performance.

Human Resource Accounting Method

Human Resource Accounting Method
Also known as Human Resource Cost Accounting Method, it is used to
evaluate an employee’s performance as per the monetary benefits they
yield from the organization. This means the performance of an
employee is compared against the salary & other costs the company
pays to the employee.

Behaviorally Anchored Rating Scale (BARS)

Behaviorally Anchored Rating Scale (BARS)
In this modern method of performance appraisal, both the qualitative
and quantitative aspects of an employee are evaluated. BARS compares
an employee’s performance with specific behavioral examples that are
assigned a numerical rating. As per employee’s role and job-level, BARS
has a set of predetermined standards called BARS statements. These
statements are used as yardsticks to measure the performance on each
BARS scale level.
BARS sets typical workplace behaviors as per a job role and evaluates
an employee’s performance in comparison to these set standards. How
an employee should behave in any given situation (critical incidents) is
measured as per the expected behavior. The performance appraisal
with BARS provides more accurate and unbiased results.

Performance Appraisal Objectives

1. Provide Feedback:
Appraisals are an effective way to give feedback to employees Also,
managers to communicate clearly regarding employee objectives and
expectations. An employee can learn about what he/she can do to
improve their future performance.

2. Downsize or Right-Size:
The COVID pandemic is one of the many harsh realities that might force
an organization to downsize. In such a situation, appraisals are a way to
make sure that the most productive and talented individuals can be
retained in a company. It is also an effective way to know which
employees are non-performers.

3. Promote The Right Person:
Appraisals give an organization objective and data-driven tools to make
good promotion decisions Also, It helps the most talented individuals
retain the position of the highest importance.

4. Set Goals & Measure Goals:
The annual appraisals are also an effective way to set future goals for
the employees. This ensures maximum productivity and superior
performance.

5. Improve Work Performance:
An employee can only improve if he knows how to Objectives of a good
appraisal include highlighting the specific area of improvement for
every employee.
Some tips improve performance:
1. Keep your eyes on the deadline
2. Also, Improve project evaluation skills
3. Set Goals as well as Personal Benchmarks

6. Determine Compensation Changes:
An appraisal system works as a determining factor in increasing
compensation, pay raises, etc. Also, It ensures that people who work
harder get paid better.

7. Encourage Coaching & Mentoring:
Managers are usually expected to coach their team members Also,
appraisals help the managers to identify the areas where mentoring is
required.

8. Employee Training and Development:
Individual skills are evaluated during an appraisal. Also, this helps
employees to identify if they need to acquire more skills and
competencies to contribute to the company. It also helps an
organization to plan the up-skilling training for their employees.

9. Provide a Legal Defense For Personal
Decisions:
A company can be held accountable for any decision that they take,
even firing or promoting an employee. Therefore, conducting a
performance appraisal will help the company prove a point if their
decisions are ever challenged.

10. Encouraging Coaching & Mentoring:
Teaching and coaching are part of managing employees. It is part of
being a good manager. Performance appraisals will help them
understand where an employee is lacking therefore where they can
train and help employees to do better.

11. Improving Overall Organization’s
Performance:
Last but not least, performance appraisals will help the company to
learn more about the employees and their requirements. It will help
the employees to understand where they are lacking and where they
are doing well. This will help them learn and grow quickly.

Characteristics of an Effective Performance
Appraisal System:

1. Clear Objectives
Employee performance appraisals should have a clear goal. There must be a predefined set of factors to evaluate
employees based on their skill sets Which obviously must be clear what the managers aim to get out of these
appraisals.
2. Well Defined Performance Criteria
Employees must have a clear idea of what they are being evaluated. Good appraisal systems have a set of
procedures and standards for the performance of each individual. For instance, a fresh graduate cannot be
evaluated against someone with years of experience.
3. Accuracy & Reliability in Results
An effective performance appraisal also helps a company to make clear, data-driven & informed decisions. The
data (or results) of any appraisal must be reliable and valid, and they must be presented in an unambiguous
manner. Accurate insights will also help a company gain the trust of its employees.
4. Post Appraisal Interview
Post appraisal interviews are important because they help the employees to get direct feedback from their
superiors or managers. These interviews also help the managers decide if any training or skill development
programs are needed. Employee grievances can also be addressed during this interview.
Characteristics of an Effective Performance Appraisal System:

5. Time-Saving
A good appraisal system is one that saves time as well as cost. Also, this helps a company to get the maximum
benefit. Instead of wasting all their time on managerial tasks, HR personnel could focus on other important jobs.
6. Continuous Feedback
Modern appraisal systems have done away with the annual performance review model. Instead, that model has
been replaced with a system wherein managers give continuous (read- periodical) feedback to their employees.
This helps the employees fill in their weaknesses from the start and improve upon them.
7. Focusing on What Matters
A good appraisal system evaluates employees on various factors. However, an employee’s work performance
and competency are of utmost importance. Subjective factors, such as personal behavior, attitude & personality
come secondary to an employee’s skill set.
8. Match Your Goals
Appraisal systems should be designed according to the functioning of your company. For instance, if you are
using a 360-degree feedback approach, feedback should be taken from only those who have worked closely with
the employee overtime. It’s good to practise to be innovative with appraisals so they match your company’s
working policy.
Characteristics of an Effective Performance Appraisal System:

Importance of performance appraisal
Organizations understand the importance of providing performance
appraisal to employees. However, it sometimes neglect that employees
are also humans and require guidance to stay motivated and improve.
In the coming years, performance appraisal will become more human-
centric. That means the human aspect of the manager-employee
relation will be at the forefront.

Think for future
A futuristic approach to your performance management system and
performance appraisal can help establish a pro-active working
environment. When you adopt a more realistic and human approach to
judging your employee performance, they will be more satisfied with
their work. And satisfied employees work to their best ability and
contribute towards the organizational success.