Performance Appraisal and Reward Management

Performance is an individual’s action toward any kind of activities. It shows how an individual exert his/her effort in work. So it is directly linked with productivity, efficiency and ultimately, with the achievement of organizational objectives.

Performance appraisal is the process of evaluating an individual’s effort on job, and take corrective measures if any deviation is found between actual and standard performance required for a job.

According to Casio, performance appraisal is defined as “ The systematic description of job- relevant strength and weakness of individual or group.”

Thus, performance appraisal is process of systematically evaluating performance of an individual with a view to meet prior objective of a job.

The performance appraisal process:

1. Establish performance standard.
2. Communicate performance expectations to employees.
3. Measure actual performance.
4. Compare actual performance with standards.
5. Discuss the appraisal with the employees.
6. If necessary, initiate corrective actions.

Use of performance appraisal:

The basic uses of performance appraisals are as follows:-

a. Reward management: Performance appraisal can be used as a basis for reward allocation. Decisions as to who gets salary increased, promotion and rewards are determined by performance evaluation.

b. Training and development decision: Performance appraisal can be used for identifying areas where development effort are needed. In an organization, management needs to find out those individuals, who have specific knowledge or skill deficiencies. This helps the management to take decision on training and development programs. So to overcome such problems like skill deficiencies, performance appraisal can be used as a major tool.

c. Validation of selection test: Higher score in selection test means higher performer. This can only be valid when and individual performance is evaluated and meets the expectation of job.

d. To evaluate and individual performance: Performance of an individual play vital role in the achievement of an organizational goal effectively and efficiently. Whether workers are putting their full effort on work or not can only be ascertained by certain evaluation. So performance appraisal helps in finding out the ability and performance relation and takes corrective action if necessary.

Methods of performance appraisal:

Following are the method used for performance appraisal.

a. Essay Method: Under this method, the appraiser/rater write an essay related to the employee strength and weakness, previous performance and his/her potentials. Besides, appraiser also point out the weakness and suggest the way for improvement. It is a simple method and gives detailed information of employee. However, it is time consuming and not easy to compare between employees .The biasness of appraiser may also exist in such methods.

b. Checklist method: Under this method, the possible average behavior and characteristics of an individual are listed out. The appraiser check (put tick mark) on those behaviors which are present or showed by the employee. Once the checklist is complete, it is usually evaluated by human resource department not the person doing the check list. The analyst in the personal department scores the checklist as per the importance of listed behavior and feedback to the employee and take corrective action if necessary. This method is easy and helpful in reducing the bias of rater or appraiser. However, it is costly and mainly focuses on employee behavior rather than performance criteria.

c. Forced choice method: The forced choice appraisal is a special type of checklist, but he rater has to choose between two or more statement all of which may be favorable or unfavorable. The appraiser’s job is to identify which statement is most descriptive of the individual being evaluated. Once the evaluation is done, the HR department score the answer based on the key (validate answers). This method is bias free. However, it is costly and may be disliked by the appraiser because of forced selection of option.

d. Critical incident: Under this method, the appraiser write down a little story (note ) that describe the key behavior of an individual, that make the difference between doing a job effectively or doing it ineffectively. This method looks at the behavior and help HRM to identify the desirable and undesirable behaviors of an individual and take corrective action if necessary. However, it is not used for comparison.

e. Graphic rating scale: A graphic rating scale is the simplest and most popular technique for appraising performance. It lists traits (such as quality and reliability) and a range of performance values (from unsatisfactory to outstanding) for each trait. The supervisor rates each subordinates by circling or checking the score that best describe his/her performance for each trait. The assigned values for the traits are then totaled. This method is easy to develop and comparisons among employees are possible. However, this method is not free from bias, similarly in some cases, the evaluation criteria may not reflects the job performance.

f. Behaviorally Anchored Rating Scale (BARS): It combines the benefits of narrative, critical incident and quantified (graphic rating type) scales by anchoring a rating scale with specific behavioral examples of good or poor performance.

Developing BARS typically requires five steps:

1. Generate critical incidents: person who know the job (jobholders and or supervisors) describe specific illustration (critical incidents) of effective and ineffective performance.
2. Develop performance dimension: All these critical incidents are grouped on 5 to 10 different job dimension (e.g. Technical ability, knowledge and judgment, human relation skills etc).
3. Reallocate incidents: Supervisor reallocates the incidents. Each relevant incident is assigned to specific performance dimension.
4. Scale the incident: All the incidents are scales on 7 to 9 points scales.
5. Each employee in the particular job is rated on each dimension or appropriate scale of the BARS.

Even though it is more time consuming than others appraisal methods. It has the advantages of preciseness, consistency and effectiveness of job evaluation.

g. Alternative ranking method: Under this method, employees are rank from best to worst on a particular trait, choosing highest ,then lowest, until all are ranked .This method takes considerable time for appraising and is based on subjective judgment.

h. Paired comparison method: This method rank employees by making a chart of all possible pairs of the employees for each trait and indicating which the better employee of the pair is. This method allows for the comparison of each employee with every other employee. The paired comparison method is calculated by taking the total of n (n-1)/2 comparisons. This method compares each employee with another one .However it is very difficult when larger number of employees need to be compared.