Techniques of Performance Appraisal

Everything you need to know about the techniques and methods of performance appraisal for evaluating performance of employees in an organisation.

Every method of performance appraisal is used for measuring different skills and qualities of employee. Some are simple and economical while others are costly and complex. Each organization adopts a technique which is most suitable for them.

The techniques and methods of performance appraisal is divided into two broad categories, traditional and modern techniques:

A: Traditional methods and techniques of performance appraisal includes –

i. Ranking Method ii. Paired Comparison Method iii. Grading Method iv. Forced Distribution Method v. Forced Choice Rating Method vi. Checklist Method  vii. Critical Incident Appraisal Method viii. Graphic Rating Scale Method ix. Essay Appraisal Method x. Field Review Method.

B: Modern methods and techniques of performance appraisal includes:

i. Human Resources Accounting Method ii. Management by Objectives Method (MBO) / Appraisal by Requests iii. Assessment Centres
iv. Behaviorally Anchored Rating Scales (Bars) v. 360 Degree Appraisal.

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Techniques and Methods of Performance Appraisal: Ranking Method, Grading Method, MBO, 360 Degree Appraisal and Few Others

Techniques of Performance Appraisal – Top 4 Techniques: Rating Scales, Forced Choice Techniques, Critical Incident and Self-Assessment

Performance appraisal is a development activity undertaken by the company for improvement of the skill, knowledge, ability, personality of the people at work. After procuring people, organization finds whether output/service of the people is as per standard set or below the standard.

In case of a situation, where performance of people is less than the standard set, organization provides counselling and feedback to such people for reinforcement of their weak areas. The mechanism of appraising performance of an employee relative to his standard set for performance is called, performance appraisal.

So, performance appraisal may be defined as a systematic and planned process of evaluating performance of an employee, relative to his/her standard set for performance.

The techniques of performance appraisal are:

Technique # 1. Rating Scales:

A conventional rating form of the cheek-the-box types is sometimes called “graphic rating” or “rating scale”. The important part here is the overall summary rating or score, which makes it possible to compare a large number of employees.

The rating on specific factors does serve a purpose, however, in helping to pinpoint areas in which a subordinate needs further development.

The employees are usually rated on “how well” or “how bad” they perform their job, considering the vital factors associated with the job.

The rating for each factor can be made over a range of levels, typically, four to six-

1-2-3-4-5

A-B-C-D

Exceptional, Very Good, Fair, Unsatisfactory, Outstanding, Superior, Satisfactory, Acceptable, Unacceptable.

In one variety of rating scales, the overall score is determined by adding up the scores given to specific factors.

In spite of its deceptive simplicity, this approach has severe limitations as listed below:

(i) Might have a very high sum total but possess great deficiency in one of the vital factors.

(ii) The scoring may be highly influenced by personal factors, and considerations.

Technique # 2. Forced Choice Techniques:

A newer method of appraising, which is gaining prominence, is the forced choice scale. It eliminates much of the criticism of subjectivity in rating forms. It was developed for the US army during World War II and has subsequently been adapted for use with the management and supervisory personnel.

How forced choice items are made- Forced choice rating elements are sets of four phrases or adjectives pertaining to job proficiency or personal qualifications. The rater indicates which of the four are most characteristic of the ratee, and which are the least characteristic and repeats this selection for each of the sets included.

A sample set is as follows:

E. Commands respect by his actions.

F. Cool-headed.

G. Indifferent.

H. Overbearing.

It is at once obvious that two of these are relatively favourable. One of the two favourable terms, when checked as most characteristic gives plus credit; whereas selection of the other gives no credit. In the same way, picking one of the two unfavourable items as the least characteristic adds credit, whereas the other adds nothing.

The construction of these tetrads and the determination of the scoring key are the crucial problems in the development of a rating scale of this type.

Rundquist outlined 6 steps in the process:

1. Collection of brief essay descriptions of successful and unsuccessful officers.

2. Preparation of a complete list of descriptive phrases or adjectives culled from these essays, and the administration of this list to a representative group of officers.

3. Determination of two indices for each descriptive phrase or adjective, a preference index and a discrimination index.

4. Selecting pairs of phrases or adjectives such that they appear of equal value to the rater (preference index) but differ in their significance for success as an officer (discrimination index).

5. Assembling of pairs so selected into tetrads.

6. Item selection against an external criterion and cross-validation of the selected items.

Construction of the Forced Choice Tetrads:

The scaling and selection of the rating elements to compose the forced choice tetrads is the hub of the problem.

The basic assumptions underlying the method can be stated as follows:

1. Any real differences which exist between officers in competence or efficiency can be described in terms of objective observable items of behaviour.

2. These “behaviour items” differ in the extent to which people in general tend to use them in describing other people, i.e., in general favourableness, and this tendency can be determined statistically.

3. These items also differ in the extent to which they characterise officers at one extreme of the true scale of competence as opposed to officers at the other extreme. The index of this difference the “discriminative” value, can also be determined statistically.

4. Pairs of items can be selected such that they are equal in preference value but different in discriminative value. A rater forced to say which item is the most (or the least) characteristic of a ratee is thus unable to select solely on the basis of prejudice for or against him (since the preference values are equal). The rater is compelled to consider both the alternatives and theoretically at least to do a more objective job of reporting.

The first step in the process of constructing the tetrads of items, is obtaining brief descriptive essays of good and poor officers. These essays serve as a source of behaviour items pertinent to the job — in this case, the job of being an Army Officer. This step is essential not only to focus agreement on the nature of traits involved, but also to insure that the behaviour items are worded in a language familiar to those who will later be using the scale.

In the second step, large pool of behaviour items culled from these essays is prepared in a list form and submitted to another group of officers (a group of about 300). Each man in the group is asked to select from among his acquaintances some one officer whom he knows well enough to rate with confidence, and to indicate for that officer the extent to which each of the items in the list applies to him.

The following key is used for this purpose:

1. To an exceedingly high or to the highest possible degree.

2. To an unusual or outstanding degree.

3. To a typical degree.

4. To a limited degree.

5. To a slight degree, or not at all.

After completing the entire list in this fashion, each man is asked to evaluate the officer he is rating on a scale showing his position with respect to overall competence in a representative group of 20 officers of the same grade.

All lists are collected, arranged in the order of rating of overall competence, and separated in upper (U), middle (M) and lower (L) groups. An analysis is then performed on each of the items, and a determination made for the three groups separately, of the frequency with which each of the five alternative was chosen for that item. The values are then computed for each item.

i. Preference Value:

Assume that there are exactly 300 officers in the group checking the lists, and consequently 300 officers rated, divided into three groups of 100 U 100 M and 100 L. For each item, the frequencies of each alternative are summed across the three groups (U, M, and L), multiplied by the alternative weight and these five weighted alternative frequencies in turn are added to yield a weighted total sum for the item.

This weighted total sum (which has limits of 0 to 1,200 where N is 300) is divided by N and multiplied by 100 to give the preferences index. As indicated, this value (with limits of 0 to 400) indicates the tendency of raters to mark people high or low on the particular behaviour item. As computed here, low values of the index indicate a tendency to mark the item as applying to a high or outstanding degree; high values indicate little or no applicability for the item.

ii. Discriminative Index:

For each of the alternatives of a given item, the difference between its frequencies in the upper and lower groups is computed. These five differences are then added, without regard to sign, to give the discriminative index. At one extreme, where the distribution of alternative frequencies is identical for the upper and lower groups, this index will be zero. At the other extreme, where the two frequencies do not overlap, the value will (in this case) be 200.

Low values of the index, obviously indicate that the item is equally applicable to good and poor officers and consequently, does not discriminate. High values, on the other hand, indicate gross differences between the groups in the applicability of the item, and suggest that they represent behaviour which has significance for success (or failure).

The following chart illustrates the method of calculating these two indices for a typical item-

Item pairs are made up by selecting as far as possible two items equal in preference value and widely different in discriminative value. This selection is facilitated by plotting each item (identified by its number on the list) on a double entry table with preference values along the abscissa and discriminative values along the ordinate — both at suitable intervals. By entering any row in this table, two items close in preference and are widely separated on the ordinate scale can be picked.

It is wise to avoid choosing items which are opposite in meaning since this eliminates the forced choice element. Also though the same item may be used in several pairs, it is wise to avoid too much repetition of this sort, since it tends to reduce the “scope” of the scale and necessarily raises the item intercorrelation; it may also inject an extraneous factor if the rater strives for “consistency”.

Finally, pairs of items are combined to form tetrads. One pair with low preference indices (favourable) is combined with a second pair having high (unfavourable) preference indices. There is no logical basis for this step, but experience has demonstrated that if single pairs are used with instructions to indicate the most characteristic, there is considerable rater resistance to those pairs that have high (unfavourable) preference indices.

By combining high and low preference pairs with instructions to choose the most and the least characteristic, rather resistance is materially reduced. The same end can be achieved by presenting high and low preference pairs (as pairs) separately with appropriate instructions for each.

Scoring Forced Choice Rating Scale:

Tetrads are formed from two pairs of items. The members of each pair are matched for preference value. One member of each pair differentiates good from poor officers. The other does not. It is possible, because of the way item; are thus combined into tetrads, to key forced choice scales by assigning a point (plus or minus as the direction of the discrimination indicates) to each of the two discriminating members of each tetrad.

Forced choice items may, however, act differently in combination with other items than they do by themselves. Consequently, it is always desirable to establish the key on the final set of tetrads. In doing this, it is necessary to include enough tetrads so that those which fail to stand up on the final cross validation can be eliminated from the scoring key. Needless to say, cross validation should employ an external criterion.

In one experiment on a group of 24 tetrads (96 items each of which could be marked as most of as least characteristic of the ratee) 75 per cent of the items were scored in the same way after cross validation as they have been scored by a predetermined key based on original preference and discrimination values.

It should be noted that while items which had a discrimination value (either positive or negative) in the predetermined key may have lost their value, and while some items which did not discriminate in the original study came to do so in the cross validation run, there was not one instance in which an item which discriminated in one direction in the first experimental situation had reversed its direction in the cross- validation run.

Technique # 3. Critical Incident:

A new approach has been developed which is designed to, place a much heavier, emphasis on the study of the behaviour of the worker on the job. It aims to collect representative samples of observed behaviour which can be used as basis for obtaining objective, quantitative data regarding the job. It is hoped that, instead of opinions and hunches, activity analysis can be made to yield the type of sampling data, which can lead to inference and predictions.

The essence of this new procedure is to establish the critical requirements of a job or activity through direct observations by participants in or supervisors of the job or activity. A critical requirement is defined as a requirement which is crucial in the sense that it has been responsible for outstandingly effective or definitely unsatisfactory performance of an important part of the job or activity in question.

Thus, a critical requirement differs from the requirements which appear important but in practice have no importance on performance with respect to the specific activity. Observation of personnel engaged in a specific activity leads directly to critical requirements in terms of what workers actually do on the job.

In addition to such critical requirements in terms of behaviour, it is desirable to determine critical requirements of the work in terms of aptitude, training, information, attitudes, habits, skills and abilities. Critical requirements of these latter types must be based on inferences and hypotheses. These inferences and hypotheses may be checked by empirical studies.

It is believed that the determination of critical requirements in terms of behaviour is a necessary condition to an adequate definition of the job in terms of behaviour. Such a definition of the job must include the identification of the aspects of behaviour to be included, standards of satisfactory performance for these, and estimates of their relative importance.

It is also clear that a definition of the job in terms of objectively described and evaluated behaviours of this type provides an almost complete statement of an adequate criterion measure of effectiveness of the job. Similarly, no criterion or evaluation system which ignores these definitions of standards and of relative importance can be satisfactory.

Thus, it follows that the problems of job definition, job requirements, and criteria of success necessarily reduce to one and the same problem, at least with respect to their major outlines.

It should be emphasised at this point that observations of the behaviour of the individual, or of the effectiveness of this behaviour in accomplishing the desired results in a satisfactory manner, constitute not just one source of data but the only source of primary data regarding the critical requirements of the job in terms of behaviour.

Neither outstanding ability nor unsatisfactory ability can exist independently of a series of observed behaviours. Success and failure in the activity are nothing more nor less than a series of actions leading to observed results.

Granting that objective data are greatly to be preferred to opinion, the next problem is how satisfactory data can be obtained. Experience in establishing critical requirements indicates that five specific conditions must be satisfied.

They are as follows:

1. It is essential that actual observations be made of the on-the-job activity and the product of such activity.

2. The aims and objectives of the activity must be known to the observer. Unless this condition is fulfilled, it will be impossible for the observer or judge to identify success or failure. For example, a foreman might be rated as very successful if the objective of his activity, i.e., getting along well with the workmen under him, was taken into account. At the same time, he might be rated as very unsatisfactory if the objective is to produce materials.

3. The basis for specific judgements to be made by the observer must be clearly defined. The data will be objective only if all observers are following the same rules. All observers must have the same criteria for judging satisfactoriness. The definition must clearly state whether or not a minor imperfection, will be regarded as an evidence of failure or whether a product must be completely, unusable to be classified as unsatisfactory.

4. The observer must be qualified to make judgements regarding the activity observed. Typically, a supervisor on the job is in a much better position to make judgement as to whether or not behaviour is outstanding or unsatisfactory than is the job analyst or psychologist. On the other hand, the supervisor on the job is ordinarily quite lacking in the training essential to make an inference as to the particular mental trait which caused the behaviour to be successful or unsuccessful.

5. The last necessary condition is that the situation should be such that reporting is accurate. The principal problems here are those of memory and communication, it is also important that the observer’s attention is directed to the essential aspects of the behaviour being observed.

In order that the critical requirements may accurately reflect the data, collected, the process of reducing several thousands of specific observations of behaviour to a fairly small number of critical requirements must be competently done.

The synthesis of the critical requirements from a variety of specific behaviours must be such that the judge will agree that each of the specific behaviours should be classified under the summary of statement which has been developed to include it. For maximum usefulness, the critical requirements also should be structured in such a way that they provide a coherent picture of activity.

In conclusion, a few of the devices which have been found effective in establishing critical requirements will be listed:

1. The critical incident technique which consists in getting incidents of extreme behaviour, either outstanding or unsatisfactory, has been found very effective in collecting data where adequate records regarding data are not available. This procedure becomes considerably efficient because of the use of only the extremes of behaviour. It is well known that extremes can be more accurately identified than behaviour which is more nearly average in character.

2. A second device which has been found very helpful in the evaluation and classification of incidents at the time of observation. It is much simpler to evaluate a sample of behaviour at the time it is observed when all the relevant details may be noted or checked than it is at some later time when further examination of the behaviour becomes impossible.

If an incident is evaluated and classified at the time of its occurrence and a mental note made that it is to be recorded later, the recall and recording of this material is greatly improved in accuracy and the time necessary is considerably reduced.

3. Another device which has been found to save much time is the preparation of a complete observational record form which contains practically all of the types of incidents which are likely to be observed. Incidents may be reported on such a form by merely tallying in the appropriate space.

4. A final use of such data is the direct conversion of frequencies into statistical estimates for purposes of prediction and evaluation. In situations where observations can be accurately classified and where also an adequate representative sample or behaviour can be obtained, it is possible to obtain fairly accurate, unbiased estimates of the importance of a particular critical requirement with relation to the other requirements.

Where requirements are independent, this can be converted into a correlation coefficient by using the usual formula for estimating the correlation attributable to the common elements in the variables.

The critical incident technique has been successfully used in a number of situations. One of the first uses was in establishing the critical requirements for the United States Air Force officers. In this instance, the incidents were obtained by interviewing officers who had a considerable amount of military experience.

The procedure has been used in determining the critical requirements for research workers in scientific laboratories. In this situation, also, experienced supervisory personnel were requested to provide the incidents. Recently, the procedure has been applied to hourly-wage workers in one of the divisions of a large industrial corporation.

In this situation, the foremen supplied the incidents from which the critical requirements were developed. The Committee on Ethical Standards of the American Psychological Association is using a variation of the critical incident techniques in obtaining a survey of practical problems in that area.

In the course of these studies, a substantial amount of research and developmental work has been accomplished, and it is believed that there is now sufficient experience with the critical incident technique to demonstrate that the critical requirements of a job can be established through the direct observations of personnel engaged in the activity.

The adoption of those techniques integrates the problems of job definition, selection and classification and the development of criterion measures and makes it possible to carry-out research on a sound rational basis.

This method of rating was developed by John C. Flangan of the American Institute for Research and the material was presented by him at an animal convention of the American Psychological Association. Commercial aids to the use of this system are produced by the Science Research Association and distributed in India by Manasayan, 32, Netaji Subhash Marg, Delhi-6.

Technique # 4. Self-Assessment:

An individual’s right to see, sign or comment on his/her own appraisal can contribute to greater openness but does not in itself indicate a truly participative approach. Some writers have advocated a method of self-assessment as a means towards greater involvement of the appraisee but much depends on what is meant by this term.

It is important to distinguish at the outset between true self-appraisal or self-rating and what should more properly be described as a joint problem-solving approach which may include interview preparation forms completed by the appraisee. These may contain a certain element of self-assessment but are primarily intended as guides to help both the interviewee and the interviewer to have a useful and constructive discussion with the emphasis on problem-solving.

The use of such forms can certainly contribute to a more constructive and participative approach to the appraisal interview, but it is generally advisable to stress that the form is the property of the interviewee and will not be put on record unless at the specific request of the individual concerned.

Not all employees, however, react favourably to attempts of this kind to involve them more in their own appraisal. One organisation found that a number of its employees, both at junior and senior management levels, felt that, far from the self-appraisal element in the paperwork contributing to their involvement it placed an unjustifiable onus on them. This, however, may have been due to the design or wording of the form.

It would be interesting to know how many, if .any, are prepared to rate themselves as “unsatisfactory” on the rating scales of this kind. Certainly, research finding suggests that self- rating tends, understandably, to have a higher leniency error than ratings by superiors. It is clear both from our survey and research studies in the literature that self-rating, in its strict sense, are little used, largely because of the obvious possibility of bias.

The other problem is that of disagreement between self-ratings and ratings by superiors. While true, self-rating seems to be of doubtful value, preparation by both the interviewer and the interviewee of matters they wish to discuss, improves the outcome of the appraisal interview.

Appraisal methods and design or appraisal forms have, in common with other management techniques, undergone various changes over the years in line with the prevailing fashions.

Many reasons can be attributed to the failure of the appraisal system but some of the major ones can be identified as follows:

(a) Failure to consult those who will have to use the scheme or to involve them early in its formative stages;

(b) Lack of commitment from the top;

(c) Too elaborate paperwork, too much documentation or forms of such complexity that they can only be understood by the designer are liable to arouse resentment in the line managers and may ultimately defeat their own purpose;

(d) Unequal standards applied by different raters, together with the lack of any systematic monitoring of ratings;

(e) Inadequate feedback and lack of follow-up;

(f) Lack of training of appraisers.

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Techniques of Performance Appraisal – Traditional and Modern Techniques

Every method of performance appraisal is used for measuring different skills and qualities of employee. Some are simple and economical while others are costly and complex. Each organization adopts a technique which is most suitable for them.

1. Traditional Techniques:

Following are some of the traditional techniques used to assess the performance of employees:

i. Ranking Method:

It is a simple, less-time consuming & economical method used by small organizations. In this method, there are no clearly defined qualities, standards or skills on the basis of which employees are assessed. Every employee is ranked from best to worst depending on overall performance. With this method, it is difficult to identify reason for high/low ranking or specific areas of weakness or strength.

ii. Paired Comparison Method:

In this method, each employee is compared with every other employee in a group or who is performing the same kind of job. The total number of times an employee is rated better compared to others, determines the final ranking of employee. This method is simple but it is not suitable when the number of employees is large.

iii. Grading Method:

This method initially establishes the qualities on the basis of which employees are assessed. Then, the grades are established (A – stands for excellent, B – stands for good, C- stands for average, D – stands for poor). Finally, every employee is assessed on the qualities established and grades are given on basis of employee’s performance. It is a simple method to evaluate performance.

iv. Forced Distribution Method:

Mostly, managers give average ratings to all employees. It is unfair for those who actually deserve high ratings. In order to overcome this limitation, forced distribution method is developed. In this method, evaluators are forced to place a certain percentage or number of employees in each of categories. For example, suppose a manager has to evaluate performance of 20 employees.

He will be instructed to place 3 employees in excellent category, 3 in poor category, 5 in above average category, 5 in below average category and 4 in average category. Here, the managers will be forced to consider the each employee’s skill and competency and rate them on the basis of actual performance. However, the drawback is few employees might always be placed in poor or below average category even when their performance is good.

v. Forced Choice Rating Method:

In this method, a set of descriptive statements are given to the evaluator. The statements are based on the qualities which are to be evaluated. The evaluator has to choose a statement that is most applicable & least applicable to the employee. Each statement is assigned a value or score which is not revealed to the evaluator in order to avoid personal bias. The drawback is evaluator is forced to select one option although none might be applicable.

Further, appraisal interviews / training process may be defective as the evaluator is unaware of the scores given to the employee. This is also an expensive method as trained personnel’s are hired for preparing the statements on basis of which employees are assessed. The descriptive statements could be – He / she participate in group discussions, He / she take initiative, He / she completes task in assigned time and so on.

vi. Checklist Method:

In this method, a set of questions based on the qualities to be evaluated are prepared in advance. Each statement is assigned score which is not revealed to the evaluator. The evaluator has to select YES/NO. In certain cases where the question is not applicable to an employee, it can be left blank. Different set of questions are prepared for different jobs. This is an expensive method as trained personnel’s are also required for preparing questions.

For example, following are some of the sample questions asked in appraisal sheet:

a. Is he regular on the job? (YES/NO)

b. Does he follow orders and instructions properly? (YES/NO)

c. Is he willing to co-operate with his colleagues? (YES/NO)

vii. Critical Incident Appraisal Method:

In this method, the manager makes note of all important incidents (positive & negative) of the employee that occurred at job. The record helps the evaluator to rate the employees correctly as per actual performance. For example, the manager takes record of the incident where a difficult and unsatisfied customer was skilfully handled by an employee. He takes note of the attitude and the manner in which he dealt with the incident.

It aids the manager to assess the capability of employee to handle difficult situations. For successful evaluation, the manager is required to be alert and observant about the activities occurring in his team. It is an effective method to evaluate the strength, weaknesses and capacity of employees. It helps in appraisal interviews and further training. But, there may be situations where there are no enough incidents or records which makes the evaluation process difficult.

viii. Graphic Rating Scale Method:

This is the most popular method as it is less time consuming and economical. In this method, list of qualities, attitudes and behaviour to be evaluated is prepared in advance. It also involves preparation of difference performance categories (outstanding, good, average, and poor). The evaluator is required to select a performance category which is most relevant and applicable to the employee for each statement.

ix. Essay Appraisal Method:

In this method, evaluator is required to write a detailed report of employee’s strength, weaknesses, potential, achievements and observations, if any. He is also required to state the manner in which the employee can improve his strength and overcome his weaknesses. As the employee’s overall is not rated numerically, comparison of peer performance is not possible. The performance report can be shared with the employee to assist him in self- assessment/training purpose.

x. Field Review Method:

In this method, performance of employee is not evaluated by his immediate superior or manager. HR personnel conduct such type of interviews and appraisals. This method helps to overcome the problem of partiality and favouritism involved in evaluation process. In order to collect information and evaluate performance, the HR personnel ask questions to supervisor/manager regarding employee’s performance, behaviour, attitudes, abilities etc.

2. Modern Techniques:

Following are some of the modern techniques used to assess the employees’ performance:

i. Human Resources Accounting Method:

This method aims to assess the value of organization’s human resource in terms of money. The performance of each employee is measured in terms of cost and contribution to the organization in monetary terms. Cost includes all the expenses incurred for human resource planning, recruitment, selection, training, compensation, welfare benefits. Contribution includes employee’s involvement in achieving goals and objectives of the organization. The difference between the cost and the contribution is the value of human resources.

ii. Management by Objectives Method (MBO) / Appraisal by Requests:

It measures the extent to which the objectives/goals set by the employees were achieved during a particular period. The manager and subordinate employees together establish these goals and design a plan to achieve them. During the appraisal, the actual performance is compared with the established goals. This helps in identification of gaps in achieving the goals and taking corrective steps. This method is also effective for training process as it helps to identify employees’ strengths and weaknesses.

It also reduces resistance from employees towards appraisal as they also form a part of the appraisal process. Moreover, it ensures that goals and objectives of the organization are achieved systematically. In short, it is a result oriented method. For example, suppose the aim is to increase company’s production by 15%. Then, an employee could set up his personal goal to produce 10 products a day. The personal goal of the employee plays a crucial role in achievement of organizational objective.

iii. Assessment Centres:

This method is used to evaluate performance of managers. Assessment Centre is an artificial environment specially created for assessing skill, behaviour and potential of the managers. This assessment may require 2-3 days. During this period, the managers are given particular assignments, projects or exercises that are more or less similar to the situation that they may face at actual workplace.

Several techniques such as in basket exercises, role playing, business games etc. are used to assess managers. The evaluators keenly observe and make a note of the behaviour, attitude and skills displayed by the managers during the activity. They may also conduct objective tests and interviews to prepare a detailed report. This type of evaluation helps to identify whether a particular employee is suitable for promotion.

iv. Behaviorally Anchored Rating Scales (Bars):

This method is used to rate the performance of employees based on their behaviour. It focuses on those aspect of behaviour which are important for completing any given task or job in efficient manner. In this method, a set of behaviour statements are prepared. Further, performance categories are established and assigned a specific value. The evaluators are required to assign appropriate values to each employee for different performance categories.

v. 360 Degree Appraisal:

360 degree appraisal is a feedback received from people working around or with the employee. Under this method, the performance is evaluated by the employee himself, his superiors, his peers and his subordinates. Sometimes, his clients and suppliers are also involved in the process. Some organizations also set up separate rating committee to evaluate its employees. This committee consists of skilled and trained group of superiors, peers and subordinates.

The feedback and information given by the evaluators remains confidential. This method is mostly used for measuring performance of middle level and senior level managers. This method aids employees in self-evaluation and self-development process. The organization is also benefited as the method ensures that suitable and competent employee is selected for future promotions or transfers. Google adopts 360 degree appraisal for assessing the performance of employees.

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Techniques of Performance Appraisal – 2 Broad Categories: Traditional and Modern Methods and Techniques

Several methods and techniques are used for evaluating employee performance.

These may be classified into two broad categories which are as follows:

A. Traditional Methods and Techniques:

Traditional-approach is also known as traits approach. It is based on the evaluation of traits in a person. The rater appraises subordinates on the basis of these standards and gives his rating. Since, there may be different methods of rating people on the basis of such dimensions there are several methods based on this approach.

The different methods are:

(1) Confidential Report:

In most of the government departments and public enterprises, performance appraisal is done through annual confidential reports. These reports differ from department to department and from level to level. The confidential report is written for a unit of one year and relates to the performance, ability and character of the employee during that year.

A very casual attitude is found among raters while filling confidential reports of the employees working under them. The report is not data based but subjective. No feedback is provided to the employee bring appraised and therefore, its credibility is very low.

The method focuses on evaluating rather than developing the employee. The employee who is appraised never knows his weaknesses and the opportunities available for overcoming them. In recent years, due to pressure from courts and trade unions, the details of a negative confidential report are given to the appraiser.

(2) Graphic Scales Method:

The graphic rating scale is the simplest and most popular method for appraising performance. A rating scale lists traits and a range of performance values for each trait. The supervisor rates each subordinate by circling or checking the score that best describes his performance for each trait.

The assigned values for the traits are then totaled. The selection of factors to be measured on the graphic rating scale in an important point under this system.

These are of two types:

(i) Characteristics such as initiative and dependability and

(ii) Contributions such as quantity and quality of work.

Since certain areas of job performance cannot be objectively measured, it is likely that graphic scale will continue to use a mixture of both characteristics and contributions.

(3) Straight Ranking Method:

It is the simplest and old method of performance appraisal. Every employee is judged as a whole without distinguishing the rates from his performance. A list is then prepared for ranking the workers in order of their performance on the job so that an excellent employee is at the top and the poor at the bottom. It permits comparison of all employee in any single rating group regardless of the types of work.

(4) Paired Comparison Method:

In this method every person is compared trait-wise, with other persons, one at a time, the number of times one person is compared with others is detailed on a piece of paper. These number help in yielding rank orders of employees. For example, if there are five persons to be compared.

A’s performance is first compared with that of B to find out who has better performance, then A is compared with C, D and E in turn and performance is recorded. Then B is compared to C, D and E, since he has already been compared with A. in turn C is compared with D and E and so on.

The results of these comparisons are tabulated and a rank is assigned to each employee. The number of rank order in this would be n(n-2) where n represents the number of persons to be compared.

(5) Grading System:

Under this system certain features like analytical ability, cooperativeness, dependability, job knowledge, etc. are selected for evaluation. The employee are given grades according to the judgement of the rater.

The grades may be such as:

A-outstanding;

B-very good;

C-satisfactory;

D-average;

E-below average, etc.

The actual performance of every employee is rated with various grades in mind.

(6) Forced Distribution Method:

Some raters suffer from a constant error i.e. either they rate employees as good, average or poor. They do not evaluate the employees properly. This system minimize rater’s bias so that all employees are not similarly rated. This system is based on the presumption that all employees are not similarly rated.

This system is based on the presumption that all employees can be divided into five categories i.e. Outstanding, above average, average, below average and poor. The rater is asked to place 10 percent in outstanding group; 20 percent in above average; 40 percent in average; 20 percent below average and 10 percent in poor category.

The main idea in this system is to spread ratings in a number of grades. This method obviously eliminates the room for subjective judgement on the part of the supervisors. Besides this the system is easy to understand and administer.

(7) Check List Method:

A check list is a list of statements that describes the characteristics and performance of employees on the job. The rater checks to indicate whether the behaviour of an employee is positive or negative to each statement. The performance of the employee is rated on the basis of numbers of positive checks.

There are three types of check lists that can be used:

(a) Simple Checklist:

Under this method the supervisors are provided with printed forms containing descriptive questions about the performance of employees. The supervisor has the answer is yes or no.

After ticking these questions the forms are sent to personnel department where final rating is done. Various questions in the form may be weighed equally or certain questions may be given more weightage than others.

The check list may contain such questions:

I. Is the employee hard working? Yes/No

II. Is he regular on the work? Yes/No

III. Does he co-operate with his superiors? Yes/No

IV. Does he maintain his equipment well? Yes/No

V. Does he follow instructions well? Yes/No

The supervisor’s bias remains in this method because he can distinguish between positive and negative questions. It is also difficult to put all possible questions in the check list because it will become lengthy.

(b) Weighted Checklist:

This method is used particularly with the objective of avoiding scope for personal prejudices. In this method, weights are assigned to different statements to indicate their relative importance.

Weighted check list involves a very lengthy and time consuming procedure. Moreover this method is a relatively costly affair. Financial burden is increased when diverse jobs are evaluated as a separate procedure must be established for each job.

(c) Forced Choice Checklist:

In this checklist, five statements are given for each trait, two most descriptive statements, two least descriptive statements and one neutral statement. The rates is required to tick one statement each from the most descriptive and least descriptive ones. The aim is to minimize the rater’s personal bias.

(8) Critical Incident Method:

This method attempts to measure worker’s performance in terms of certain-events or incidents that occur in the course of work. The assumption in this method is that the performance of the employee on the happening of critical incidents determines his failure or success. The supervisor keeps a record of critical incidents at different times and then rates him on this basis.

Examples of critical incidents are:

I. Refused to accept instructions with a detailed discussion.

II. Refused to accept instructions even when these were clear.

III. Increased his efficiency despite resentment from other workers.

IV. Showed presence of mind in saving a worker there was accidental fire.

V. Performed a difficult task even though it was outside his regular duties.

(9) Free Essay Method:

Under free essay method, the supervisor writes a report about the employee which is based on his assessment. The supervisor continuously watches the subordinates and writes his assessment in the report.

While preparing an essay on the employee, the rater generally considers the following factors:

I. Job knowledge and potential of the employee.

II. Employee’s traits and attitudes.

III. Employee’s understanding of the company employee’s relations with co-workers and supervisors.

IV. Employee’s understanding of the company’s programmes, policies, objectives etc.

V. Development needs for future etc.

Essay evaluation is a non-quantitative technique of appraisal. It provides a good deal of specific information about the employee and can reveal even more about the supervisor.

The essay method may suffer from personal and human bias because of likings or disliking of the supervisor. An appraiser may not be able to express his judgement in appropriate words and it will limit the utility of appraisal reports.

Moreover, a busy appraiser may write the essay hurriedly without properly assessing the actual performance of the employee. On the other hand, if the appraiser takes a lot of time in preparing the essay it becomes uneconomical from the point of view of the firm, because time is a very costly factor.

(10) Group Appraisal:

Under the group appraisal method, employees are rated by an appraisal group, consisting of their supervisor, and three or four other persons who have some knowledge of their performance. The supervisor explains to the group the nature of his subordinates duties.

The group then discuss the standards of performance for that job, the actual performance of the employee and the causes of their particular level of performance and offers suggestions’ for future improvements, if any.

(11) Field Review Method:

Under the field review, an expert form the personnel department interviews line supervisors to evaluate their respective subordinates. The expert questions the supervisor and obtains all the important information on each employee and takes notes in his note book.

There is no rating form with factors or degrees, but overall ratings are obtained. The employee are usually classified into three categories as outstanding, satisfactory and unsatisfactory.

(12) Nominations:

Under the nominations method, appraisers are asked to identify exceptionally good and exceptionally poor performers, who are then singled out for special treatment.

(13) Work Sample Tests:

In this method, employees are given, from time to time, work related tests which are then evaluated.

B. Modern Methods and Techniques:

Modern concerns use the following methods for the performance appraisal:

(1) Assessment Centre:

First developed in the U.S.A. and the U.K. in 1943, the assessment centre is gaining popularity in our country. Graves, Eicher and Hindustan Unilever Limited are using the technique with highly positive results. Earlier, assessment centre was being used for executive hiring, but now-a-days, these are being used for evaluating executive or supervisory potential.

An assessment centre is a central location where the managers may come together to participate in job related exercises evaluated by trained observers. The principle idea is to evaluate mangers over a period of time, by observing and later evaluating their behaviour across a service of select exercises or work sample.

An assessment centre generally measures interpersonal skills, communications skills, ability to plan and organize, self-confidence, resistance to stress, mental alertness etc.

(2) Human Resource Accounting:

Human resources are a valuable asset of any organization. This asset can be valued in terms of money. Human resource accounting method attaches money values to the value of a firm’s internal human resources and its external customer goodwill. When competent and well trained employees leave an organization the human asset is decreased and vice versa.

Under this method, performance is judged in terms of costs and contributions of employees. Costs of human resource consists of expenditure on human resource planning, recruitment, selection, induction, training, compensation etc. Contribution of human resource is the money value of labour productivity or value added by human resources. Difference between cost and contribution will reflect the performance of employees.

(3) Behaviorally Anchored Rating Scale:

Behaviorally Anchored Rating Scale on the behavioural traits demonstrated by the employees instead of his actual performance. Some of the other methods like graphic rating scale and checklist also measure the behaviour, based on the assumptions that desirable behaviour results in effective performance.

There are three steps in implementing a behaviorally anchored rating scale system.

They are:

I. Determination of relevant job dimensions by the manager and the employee.

II. Identification of behavioural anchors by the manager and the employee for each job dimension,

III. Determination of the scale values to be used and grouping of anchors for each scale value, based on consensus.

The main advantage of Behaviorally Anchored Rating Scale is that both the manager and the employee are actively involved in the appraisal processes. This increases the relevance of the system to each job and also improves its acceptance by employees.

However, one drawback of this system is that it is cumbersome and needs considerable time and commitment to develop.

(4) Management by Objectives (MBO):

The main aspects of MBO are clear and well-defined goals, a definite time-span to achieve the goal, an action plan and finally, timely and constructive feedback. Also called the goal-setting approach, MBO is more commonly used for manager and professionals. The goals are set with the participation of the employee and his supervisor. These goals have to be in alignment with the organizational goals and have to contribute to their achievement.

For successful implementation of MBO, the following are required:

I. Quantifiable and measurable goals that are neither too easy nor too difficult to achieve.

II. A well-laid out action plan providing for contingencies.

III. Employee who are suitably equipped and motivated to achieve these goals.

IV. Continuous and constructive feedback and guidance.

V. Objective evaluation of the performance.

VI. Identification of areas for improvement and corrective action.

(5) 360 Degree Performance Appraisal:

A 360 degree performance appraisal system aims at a comprehensive and objective appraisal of employee performance. In a 360 degree appraisal system, the employee’s performance is evaluated by his supervisor, his peers, his internal/external customers, his internal/external suppliers and his subordinates.

This system reduces the subjectivity of a traditional supervisor appraisal. It is also more comprehensive because the feedback is given by the peers, customers, suppliers and subordinates of the employee, who are more directly affected by his behaviour and performance, apart from the boss.

(6) Computerized and Web Based Performance Appraisal:

Now a days, several performance appraisal software programmes are also available in the market. These programmes enable the managers to keep notes on subordinates during the year and then to electronically rate them on a series of performance traits. Written text is also generated to support each part of the appraisal.

Electronic performance monitoring is in some respects ultimate in computerized appraisals. In Electronic performance monitoring, the supervisors electronically monitor the computerized data an employee is processing per day, and thereby monitors his performance.

Now a days, organizations use computer networks, sophisticated telephone systems and both wireless audio and video links to monitor and record the work activities of employees.

Employees react to electronic performance monitoring in two ways:

I. Employees with the ability to delay or prevent electronic performance monitoring indicate higher feelings of personal control and demonstrate superiors over how and when they are monitored.

II. Participants who know exactly when the monitoring is taking place, express lower feelings of personal control than do those who do not know that the monitoring is on.

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Techniques of Performance Appraisal – Unstructured Appraisal, Ranking, Forced Distribution, Graphic Rating Scale, Checklist Appraisal and Critical Incident

The important technique of performance appraisal are discussed below:

Technique # 1. Unstructured Appraisal:

Under this, the appraiser is required to write down his impression about the person being ap­praised in an unstructured way. However, in some organizations, comments are required to be grouped under specific headings such as quality of job performance, reasons for specific job behaviours, person­ality traits and development needs. This system is highly subjective and has got its merit in its simplicity and is still in use especially in the public sector undertakings and government departments.

Technique # 2. Ranking:

Ranking is a simple process of placing employees in a rank according to their job performance. It permits comparison of all employees in any single rating group regardless of the type of work. All workers are judged on the same factors and they are rated on the overall basis with reference to their job performance instead of individual assessment of traits. In this way, the beset is placed first in the rank and the poorest occupies the last rank. The difficulty of this system is that the rater is asked to consider a whole man. Subjectiveness in this method can be reduced by asking the appraiser to rank employees on certain desirable traits. The other difficulty with this method is that it does not indicate the degree of difference between the first man and the second man and so on.

Paired comparison is an improvement over simple ranking. Under this, every employee in a job family is compared with every other employee to determine which is the better worker. The rater is provided with a little booklet containing two names on each page. Obviously the number of rank order would be n(n – 1)/2, where n is the total number of persons to be compared. In this way, every employee is compared with every other employee in the same job family. The paired comparison gives a more reliable rating than the order of ranks although this system is more tedious to construct and use. It cannot be used for periodic employees’ ratings are it does not make evaluation of any improvement in the employees that might have been made over a period of time.

Technique # 3. Forced Distribution:

Some appraisers suffer from a constant error, i.e., they either rate all workers as excellent, average or poor. They fail to evaluate the poor, average or excellent employees clearly. The forced distribution system is devised to force the appraiser to fit the employees being appraised into pre­determined ranges of scale. It has an advantage over the paired comparison system in that two or more employees can be given equal ratings. This system is based on the presumption that employees can be divided into five points scale of outstanding, above average, average, below average and poor. In this system, the appraiser is asked to distribute the employees into these categories in such a way that 10% of the men are in group ‘outstanding’, 20% ‘above average’, 40% ‘average’, 20% ‘below average’ and 10% ‘poor’.

This method obviously eliminates the room for subjective judgement on the part of supervisors. Besides this, the system is easy to understand and administer. The objective of this technique is to spread out ratings in the form of a normal distribution and it is open to criticism. Many times, this categorization is not found in work groups particularly when the group is comparatively small.

Technique # 4. Graphic Rating Scale:

Under this method, scale are established for a number of specific factors and qualities. Five degrees are established for each factor and general definitions appear at points along the scale. Generally, the rater is supplied with a printed form, one for each person to be rated. The selection of factors to be measured on the graphic rating scale is an important point under this system. These are of two types – (i) characteristics, such as initiative and dependability and (ii) contributions, such as quantity and quality of work. Since certain areas of job performance cannot be objectively measured, it is likely that graphic scale will continue to use a mixture of both characteristics and contributions.

Graphic scale impose a heavy burden upon the supervisor. He must report and evaluate the performance of his subordinates on scales involving as many as five degrees on perhaps ten different factors. The main drawback of this system is that the rater may be biased. However, one means of ensuring is to leave space on the form after each factor and require him to explain the reason for his rating. In effect, he is asked to give example of the ratee’s behaviour that justifies the assigned rating. In practice, ratings tend to cluster on the high side under this system. A supervisor may tend to rate his men high to avoid criticism from them.

Technique # 5. Checklist Appraisal:

Various statements are prepared in such a manner that they describe various types of behaviour of an individual on a particular, job. Each statement is attached a scale value. At the time of rating the employees, the supervisor just recollects and checks all statements. After this weights or values are attached to the individual traits and rating up to this level is gathered on the rating sheet. Then the weights are averaged and employee is evaluated. The weighted checklist should be prepared by the persons thoroughly acquainted with the job and perfect at preparing and weighing statements. When this process is complete, ratings are placed on separate cards for future reference.

This method does not allow the supervisor to accumulate vague impressions as the basis for scoring. It compels him to think in terms of very specific kinds of behaviour. This method involves a lengthy procedure of evaluating employees. That is why, this method is relatively costlier. It puts more strain on the financial resources of the organization particularly in terms of personnel development time. Financial burden is further increased when diverse jobs are evaluated because a separate procedure must be established for each job.

Technique # 6. Critical Incident:

A critical incident means a significant act by an employee exceeding or failing any of the requirements of his job.

It represents an exceptional behaviour of an employee at work, as for instance:

(a) Resisted the implementation of change.

(b) Became upset over work.

(c) Refused to help a fellow worker.

(d) Suggested an improvement in the work method.

(e) Tried to get a fellow worker to accept the management decision.

(f) Accepted new ideas.

This method requires every supervisor to record all of such significant incidents in each employee’s behaviour which indicate effective or successful action and those which indicate ineffective or poor behaviour. These are recorded in a specially designed notebook which contains categories for characteristics under which various behaviours can be recorded. Examples of such types of job requirements for workers are judgement; learning ability, productivity, dependability, accuracy of work, responsibility and initiative. Daily recording of these items seems to be essential because, otherwise, the supervisor may forget the incidents with his subordinates.

The main problem with this method is that the outstanding incidents happen so infrequently that individual’s appraisal may not vary markedly in any two time periods. It has been observed that most of the time the employees have neither positive nor negative incidents. If the critical event does not happen, it will be difficult to rate an employee. Moreover, it may be difficult for a supervisor to decide what is the critical or exceptional incident. Here again the human bias may appear in recording the critical incident.

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