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Performance Appraisal is an important part of the rational and systematic part of the human resource management process. The information from performance appraisal is used for making organizational decision about firing or hiring staff, training and development of the current staff members, and promotions or demotions of the existing staff. The system of Performance Appraisal was introduced as a simple method of income and promotion justification. In other appraisals are used to decide whether the salary and remunerations of an employee are according to his performance or not. When an employee's performance is found less than what is required for organization's benefit a warning or cut in pay is the result. If the supervisor of an employee finds his performance better than the expectations of the organization, an increment in pay and extra remunerations are in order. Performance Appraisal has been a great motivating factor for employees to improve their performance or at least continue the good work. Employees do not want a good performance appraisal just for getting more money from the employer but employees' morale and self esteem were also important factors. The performance of an employee is measured in terms of the outcomes i.e. the degree of accomplishments of the tasks which were assigned to him. Performance should be confused with efforts, efforts are considered as energy is expended but not beneficial for the organization. Task outcomes of an employee are not the only thing which has to be evaluated in his performance appraisal. Employees' traits and behavioral qualities like personality, aptitude, attitude, skills and abilities are also been evaluated from the information in the employee's performance appraisal. Every organization has certain defined goals and objectives. In achieving these objectives and to maintain and nourish its growth and image in the present competitive word, each and every employee and his performance plays a very important role. (Per10)
Defining Performance Appraisal
Performance appraisal is the process of evaluation of an individual's job performance, behavior and traits at the workplace which includes both the qualitative and the quantitative features based on some set of standards. Performance Appraisal is also defined as a formal and structured interaction between an employee and his supervisor, which usually happens to be in the form of periodical interviews, in which the work performance of the employee is evaluated and discussed, and the intention is to identify his strengths, weaknesses, and opportunities of improvement and development of skills and abilities he lacks in. An employee's work performance counts heavily in an organization's performance so this assessment of individual performance should be done continuously to take their contribution to higher extent. (Per101)
As the structure and policies of every organization varies so does the appraisal methods. There are many different methods of evaluating individual performance, which are suitable for organizations according to their organizational structure. Some of these methods are:
360 Degree Appraisal: It is the most common appraisal method used in the organizations. Companies use multiple raters for the evaluation of individual performance. In this system feedback about the employees' performance is obtained from peers, subordinates and internal and external customers. In this appraisal method individual's attitude, aptitude, skills and abilities are assessed by his colleagues including his boss, peers, and reports from the customers. (Ind102)
List approach: In this method of appraisal the appraiser has to mark some negative and positives about the employee each point has its own weight depending on the importance of that particular quality.
Essay Appraisal: This method of performance evaluation is considered to be a faulty one. In this method the evaluator is asked to right a detailed essay about the employee's past performance, strengths, weaknesses, capabilities, and suggestions for improvement. Because of some heuristics like critical incident the appraiser sometimes make mistake in writing the appraisal unusually favorable or unfavorable. (ICM10)
Objectives of Performance Appraisal
The major objective of performance appraisal in previous time was defined as evaluation of employee's performance and to check whether the salary of that employee is justified or not. If the performance was less than the company requirements then he deserve a pay cut else an increment in the salary was the result. But in the today's competitive era the performance is not only a form filling formality for employee's promotion or demotion. It is more about knowing company's human resources, what are they capable of, what are their skills, and how these skills and capabilities and skills can be improved. These are the developmental objectives of an organization that helps in creating a healthy superior-subordinate relationship. For a company its human resource is an important asset so appraisal policy of an organization should be more focused on development of human resources. However the main purposes of performance appraisal are the following:
Performance appraisal is used as criterion for deciding the rise or cut in the salary and remunerations of an employee. Company needs performance appraisals in making decisions about the promotion and demotion, rise and cut, and transfer of the existing staff. In this globalized and competitive market the idea of the remuneration policies are based on performance of the employees rather than their seniority. In this system employees receive what they deserve on the basis of their performance.
Employees are rewarded on the basis of their performance appraisal. So these appraisals work as a motivator for them. Extra payment an employee receives is not the only motivating factor for him. But also the self esteem and his morale are also behind the scene. Employees would like to be recognized as a responsible and important asset to the organization he works in so he would always work hard in improving his performance and will bring more outcomes for the organization.
Clarification of Expected Performance
A new employee of a company is not aware of the hard work he has to do and the performance he has to come up with. Review on his performance by the supervisor and discussion on that appraisal will make him aware of his current performance and the expectations of the organization from him. So if that appraisal is not very favorable for him then he can work harder in future and fulfill the organizations expectations with him. Performance appraisals of an individual will also help him in his self awareness.
Reinforcement of Organizational Goals
Employee of an organization must know its objectives and goals and should contribute in achieving those targets. If some employee's current performance is not matching the required criteria of the organization then it is the duty of his supervisor to let him know the company's goals and make the employee work accordingly. Performance is all about the outcomes not the efforts made by an employee so it is important that the energy of employees should be expended in company's benefit. Reviewing the performance appraisals will be very helpful in reinforcing the company's goals and guide the employees to work for achieving them.
Training & Development Programs
Performance appraisal works as a guide for devising appropriate training & development programs for the employees of the company. The appraisals will inform the employees and the organization about their progress and performance. It will tell both of them about the skills and abilities the employee lacks and need to develop and improve the competencies they own so that the company can formulate suitable training and development program for its employees.
Performance appraisals help in revealing the reasons for good or bad performance of an employee. After knowing the reasons for his performance the employee can do self realization and accept the reason for his bad performance and should undergo some training & development program to overcome the shortcomings. A good performer should also realize the reason for the performance and work on those things to perform better next time. Discussion with the supervisor may also help in analyzing the problem and improve the performance. (Med102)
Where to use Performance Appraisal
Performance Appraisals are used for the analytical studies of the human resource of an organization. These appraisals are used at every level of the organizational hierarchy. Performance appraisal of each and every employee of an organization is mandatory. Even the CEO of a company, director of an institute has to through the process because they are also an employee of that organization. As the 3600 appraisal method is used in most the organizations so the performance of higher authorities are appraised by their subordinates and other stakeholders of the organization. Performance appraisal examines not only the contribution of the employee in profit but also his behavior and traits at the workplace. Whenever the company feels that the manager is not fulfilling his duties well then he appraisal of managers from his subordinates becomes more important for company's benefit.
Role of Industrial Psychology
Industrial Psychology is the field of psychology that applies the principles of psychology in the industrial and business setting and context to the people that work in the organization. Industrial Psychologists basically aim at improving the overall performance of the employees, and hence, of the industry by using various techniques like job analysis, performance appraisals, individual assessment, and so on. The way a person works, his level of satisfaction, his duties, and his behavior is studied, and hence the relationship between a person and his job and workplace is evaluated. This information is essentially useful since it helps the managers and the organizations in decisions related to hiring and giving rewards. Moreover, most of the industries and organizations in the present time use industrial psychologists to train the employees based on the fact that it improves and smoothens the working of the organization. Industrial psychology's most significant role is in the area of feedback systems, which is the fundamental issue relating to performance appraisal. Industrial Psychology has been further put to use in to reduce and curb behavior that may be counterproductive in any way. Apart from being helpful in totality to the overall team, it is also significantly helpful to the managers and CEOs, so that they can attune their outlooks and way of analyzing for the performance of the employees. Hence, in many ways, industrial psychology inescapably plays an indispensable role in the field of performance appraisals. It is the principle of industrial psychology that the technique of performance appraisals is used. The objectives of performance appraisal include the help to improve and strengthen the inter-employee and the employee-superior relations and communication between them. This way, using the principles of psychology that a healthy and free communication can improve many aspects regarding the efficiency of an individual, performance appraisal and its proper use achieve the cardinal aim-which is to improve the overall performance. Employees, moreover, are also given appropriate feedback relating to their performance in the company, as part of the performance appraisal, which involves a manager or an executive rating them on a scale. Thus, a feedback is necessary for the employee to know his or her working level, and to work and improve upon it. Furthermore, employees are told in clear terms about what is expected of them, about their functions, duties and responsibilities, so that future needs are properly judged by them. In this context, again the basic theories of psychology underlie this situation which is achieved by performance appraisals. A genuine attempt is also made to address the grievances of the working staff, as part of the whole evaluation of performance appraisals, so that the employees are retained, and work in an environment which is stress-free, and their morale is boosted by the show that the organization cares for their needs, which is again fundamental to social and organizational psychology, and which in turn helps the executives and managers to effectively manage and exercise organizational control.
Contextual approach, in more recent times has developed and come up as a key aspect of job performance in totality. The main application and connectivity of contextual approach was earlier recognized in Industrial and Organizational psychology. This approach is both rewarded as well as incorporated very actively by organizations in performance appraisal. Expectations that are held from employees have increased as has knowledge economy. It is of key importance to the advantage of an organization if employees voluntarily put in effort and display some innovative skills. Task performance on the other hand is a counterpart of contextual approach. While contextual approach is more reliant on self voluntary contributions from employees, task performance on the other hand is specified and allotted in the job description. Though contextual approach is thought of and in some ways is very discretionary, yet it has been proven through research and statistics that employers do in fact take this into consideration while making checks on performance and evaluating it. Concentrating only on the task performances of an employee is not a very conceptually strong parameter for judging his proficiency. As statistics and evidences shows that the ratings on employees given by supervisors depends also on contextual performance, there is a need for a more comprehensive conceptualization in setting the parameters for employee task analysis. It is also often argued that OCB overlaps with contextual approach and therefore the two should be defined as the same construct. It is therefore a need for future work in theoretical fields to clearly remove the anomalies and re-conceptualizing these different constructs. Also, contextual performance is thought of as something that is extra-role and is never guaranteed to be rewarded for or appreciated by an organization. This mistaken conceptualization also needs to be reviewed and it may not after all be accurate. An industrial psychologist, after doing the necessary job analysis, which involves collecting all the information about the job, would design a scale so that rating for the level of performance of each employee can be done. He would further make sure that personal or any other kind of bias does not creep in while using the rating scale, by educating the people who would use the appraisal equipment. The relative worth of an employee would hence be optimally calculated for each employee, and correct and proper feedback of the performance against the expectations can be given. In addition to this, the industrial psychologist can also discuss with the company on how the ratings of the performance appraisal can be used for further increasing the performance management goals rather than just giving the feedback. An effective idea could be to tell the employees to rate themselves, truthfully on the rating scale. Such a technique can be potential when it comes to the individual performances of the employees. The self-criticizing rating could be further incorporated into the final performance appraisal ratings. Hence, this could give an idea of the psychology of the working staff, which could then result in a fair distribution of compensations and promotions, thereby achieving fully the aims of performance appraisal.