- In this method, an employee’s performance is evaluated by his immediate superior.
- The superior is in the best position to judge performance as he allocates, supervises, and controls the work.
- The superior is responsible for the work of subordinates, so he has the authority to appraise them.
- However, appraisal by superior may be biased due to personal likes or dislikes.
- To reduce bias, appraisal by superior should be supplemented by feedback from juniors, peers, and clients (multi-source appraisal).
Definitions [1]
Definition: Performance Appraisal
- "The systematic evaluation of the individual with respect to his performance on the job and his potential for development." - Dale S. Beach
- Scot, Clothier and Spriegel have defined it as "The process of evaluating the employee's Performance on the job in terms of requirements of the job."
- In the words of Dale Yoder, performance appraisal consists of "All formal procedures used in working organisations to evaluate personalities and contributions and potentials of group members."
- According to Scot and Spriegel, "Performance appraisal is the process of evaluating the employees, performance on the job is terms of the requirements of the job."
Key Points
Key Points: Objectives of Performance Appraisal
- To evaluate whether employees are performing according to the required standards.
- To maintain performance records for decisions regarding wage increments and rewards.
- To identify employees who are wrongly placed and take corrective action.
- To assess employees’ potential for promotion and higher responsibilities.
- To identify weaknesses and provide suitable training and development.
- To create awareness among employees about their performance and motivate self-improvement.
Key Points: Importance of Performance Appraisal
- Performance appraisal helps in proper placement by identifying the right person for the right job.
- It identifies strengths and weaknesses, helping in training and development of employees.
- It assists in deciding incentive compensation such as pay increases and rewards.
- It supports decisions regarding promotions and transfers based on employee potential.
- It creates psychological awareness among employees, motivating them to improve their performance.
Key Points: Methods of Performance Appraisal> Merit Grading
- Merit grading is a method of performance appraisal where employees are placed into fixed categories like poor, average, and outstanding.
- Ratings are distributed according to a normal distribution pattern (e.g., 10% poor, 40% average, etc.).
- It is simple to understand and helps in easy comparison of employees’ performance.
- The method reduces bias by forcing distribution of ratings into predetermined grades.
- However, it may demotivate low-rated employees and does not provide detailed feedback for improvement.
Key Points: Performance Appraisal
- Performance appraisal is a systematic evaluation of an employee’s performance and potential.
- It compares an employee’s performance with job requirements and predetermined standards.
- The main objectives are to reward efficient employees and identify areas for improvement.
- It helps in decisions related to promotion, pay increase, training, and career development.
- Performance appraisal is usually conducted by the immediate superior and reviewed by higher authority.
- It evaluates both past performance and future development potential of employees.
- Performance appraisal is a continuous process and should be objective and based on clear standards.
Key Points: Potential Appraisal
- Potential appraisal means evaluating the hidden abilities and future capabilities of an employee.
- It focuses on identifying an employee’s capacity to handle higher responsibilities.
- Potential is assessed through personality traits, skills, qualifications, experience, and past performance trends.
- It helps in identifying employees suitable for promotion and higher positions.
- Potential appraisal ensures proper use and development of employees’ talents for organisational growth.
Difference between Performance Appraisal and Potential Appraisal
| Basis | Performance Appraisal | Potential Appraisal |
|---|---|---|
| Meaning | Evaluation of job performance | Evaluation of future capabilities |
| Time | After job is performed | Before assigning higher job |
| Purpose | Decide pay, promotion, training | Decide future responsibilities |
| Basis | Quantity and quality of work | Traits, skills, experience, aptitude |
Key Points: Methods of Performance Appraisal> Appraisal By Results
- Appraisal by Results is also known as Management by Objectives (MBO) and is based on goal setting.
- Performance is evaluated against specific and measurable objectives decided jointly by superior and subordinate.
- It involves setting targets, reviewing progress, and taking corrective actions through mutual discussion.
- This method reduces bias as appraisal is based on clear and time-bound goals.
- It improves motivation and job satisfaction by involving employees in goal setting.
- It focuses on training, development, and problem-solving rather than mere criticism.
- However, it is time-consuming, difficult to apply at lower levels, and may ignore external factors affecting performance.
Key Points: Methods of Performance Appraisal> Appraisal By Superior Staff
Key Points: Points: Methods of Performance Appraisal> The 360° Appraisal
- The 360° appraisal system evaluates an employee from multiple sources – superiors, subordinates, peers, and self.
- It uses structured questionnaires to collect feedback on performance and behaviour.
- The system increases objectivity, transparency, and participation in performance evaluation.
- Self-appraisal encourages self-awareness and helps employees identify strengths and weaknesses.
- Superior, subordinate, and peer appraisals provide comprehensive feedback from different work relationships.
- It promotes teamwork, empowerment, and personal development through counselling and feedback sessions.
- However, it may involve bias, misuse, denial of feedback, and may not always focus on goal achievement.
Important Questions [10]
- Discuss Any Four Purposes of Performance Appraisal.
- Briefly explain the pros of staff appraisal of subordinates by their superiors.
- Give any two differences between Performance Appraisal and Potential Appraisal.
- Answer Briefly the Following Questions: How Does Performance Appraisal Differ from Potential Appraisal ?
- Explain in brief any four objectives of the staff appraisal.
- State any two objectives of performance appraisal.
- Answer the Following Question: What is the Merit Grading Method of Staff Appraisal?
- What is meant by merit grading method Performance Appraisal?
- Which method of Performance Appraisal reduces the bias on the part of raters so that ratings are not concentrated in a particular area on the rating scale.
- Explain the components of 360° appraisal used to appraise staff in an organisation.
