Q. What is Performance Appraisal System and what are its objectives? Describe the various sources of errors in the appraisal process. What is the difference between the Performance Appraisal and Performance Management Systems in an organisation?
Ans. Performance appraisal is a method of evaluating the behaviour of employees in the work place normally including both the quantitative and qualitative aspects of job performance. Performance refers to the degree of accomplishment of the tasks that make up an individual’s job. It indicates how ell an individual is fulfilling the job demands.
Every organization has to decide upon the content to be appraised before the programme is approved on the basis of job analysis. The content to be appraised may vary with the purpose of appraisal and type and level of employees.
The key factor in an organization to support an effective performance appraisal system is as follows:
–Â Â Â Â Â Â Â Â Â Â Organizational planning based on potentialities of human resources.
–Â Â Â Â Â Â Â Â Â Â Human Resource Planning based on weakness, strengths and potentialities of human resources.
–Â Â Â Â Â Â Â Â Â Â Organizational effectiveness through performance improvement
–Â Â Â Â Â Â Â Â Â Â Fixation and refixation of salary, allowances, incentives and benefits
–Â Â Â Â Â Â Â Â Â Â Original placement or placement adjustment decisions
–Â Â Â Â Â Â Â Â Â Â Identifying training and development needs and to evaluate effectiveness of training and development
–Â Â Â Â Â Â Â Â Â Â Needs and to evaluate effectiveness of training and development programmes
–Â Â Â Â Â Â Â Â Â Â Career planning and development and movement of employees.
Objectives of Performance Appraisal System :- Performance appraisal aims at attaining the different purposes. They are :
- To create and maintain a satisfactory level of performance.
- To contribute to the employee growth and development through training, self and management development programmes. Tata Power aims at employee development through performance appraisal.
- To help the superiors to have a proper understanding about their subordinates.
- To guide the job changes with the help to continuous ranking.
- To facilitate fair and equitable compensation based on performance.
- To facilitate for testing and validating selection tests, interview techniques through comparing their scores with performance appraisal ranks.
- To provide information for making decisions regarding lay-off, retrenchment etc. as in the case of Hyundai Engineering.
Sources of Error in Performance Appraisal:
- Rating Biases: It is a subjective measure of rating performance which is not verifiable by others and has the opportunity for bias. There rater biases include: a) the halo effect b) the error of central tendency c) the leniency and strictness biases d) personal prejudice and e) the recency effect.
- Halo Effect: it is the tendency of the raters to depend excessively on the rating of one trait or behaviourial consideration in rating all other traits or behavioural considerations. One way of minimizing the halo effect is appraising all employees by one trait before going to rate them on the basis of another trait.
- The Error of Central Tendency: Some raters follow play safe policy in rating by rating all the employees around the middle point of the rating scale and they avoid rating the people at both the extremes scale. They follow play safe policy because of answerability to the management or lack of knowledge about the job and person he is rating or has least interest in the job.
- The Leniency and Strictness: the leniency bias crops when some raters have a tendency to be liberal in their rating by assigning higher rates consistently. Such ratings do not serve any purpose. Equally damaging is assigning consistently low rates.
- Personal Prejudice: If the rater dislikes any employee or any group, he may rate them at the lower end, which may distort the rating purpose and affect the career of these employees.
- The Recency Effect: The raters generally remember the recent actions of the employee at the time of rating them on the basis of these recent actions  favourable or unfavourable-rather than on the whole activities.
Difference between Perfomance Appraisal and Performance Management System.
Perfomance Appraisal |
Perfomance Management System |
| Performance Appraisal is Organisational planning based on potentialities of its human sources. | Performance Management System performance of the employee is continuously monitored and developed in tune with the organisational requirements.
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| It is human resource planning based on weakness, strengths and potentialities of human resources. |  Emphasis on Documentation : Emphasis is required for goal setting of employees and other important processes of a performance management system.
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| The basic purpose is to find out how well the employee is performing the job and to establish a plan of improvement. | Computer-based Performance Management :Â Now-a-days software is available for implementing the entire performance management process. |
| It is not job evaluation. It refers to how someone is doing the assigned job. Job evaluation determines how much a job is worth to the organization and therefore, what range of pay should be assigned to the job. | Collaborative Performance Management :Â Both the Manager and the subordinates understand each other and both understand the organisational goals and requirements with a common and collaborative mind.
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| It identifies training and development needs and evaluates effectiveness of training and development programmes. | Customised Performance Management System :Â Organisations started adopting seperate performance appraisal techniques and design the system for each employee separately based on employee skills, behaviour and his job needs.
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