Once the employee has been selected and placed, he is then appraised for his performance. Performance appraisal is the step where the management finds out how effective is has been in selecting employees. Performance appraisal is a process of evaluating an employee’s performance on the job in terms of its requirements. It is the process of evaluating the performance of the employee in terms of the requirements of the job for which he is employed, for placement, selection promotion, financial reward and other actions which require differential treatment among the members of a group as distinguished from actions affecting all members equally.

Table 1: Trend in Employee Appraisal

Item Former Emphasis Present Emphasis

Terminology Merit Rating Performance Appraisal

Purpose Determine qualifications for wage Development of the individual,

increase, transfer, promotion etc. improved performance on the job

and provide emotional security

Application For blue collar workers For all employees at all levels

Factors Rated Personal traits Results, accomplishments,

performance

Techniques Rating scales, comparison with Mutual goal setting, critical

other employees incidents, performance standards,

less quantitative

Post Appraisal Superior communicates his rating Superior stimulates employee to

Interview to employee and expects analyse and to set own objectives

employee to conform to it for achievement, superior is counselor

Performance appraisal is considered as most significant and indispensable tool for organisation .because it provides highly useful information in making decisions regarding employee placements and promotions. Accurate information plays a vial role in organisation as a whole. It helps pinpoint weak areas in employees and provide need bases training programmes.

Performance appraisal is very important but equally delicate and sensitive area in Human Resource Management. Periodical performance appraisal is a common practice in mist of the enterprises. It is a tool for the up-gradation of performance of the employees. Performance appraisal has main three aspects viz.

1. Actual performance of the employee

2. Potential of the employee

3. Performance to grant a salary increases or promotion

Performance appraisals are applicable for all categories of employees in the enterprise. Sometimes self appraisal schemes are implemented for top management cadre. In most cases employees are appraised by their superiors. The modern way of appraising is by superiors, subordinates, peers and others which is 360 degree appraisal.

It is good to discuss the outcome of appraisal with the employee. The objective of appraisal is not to blame the employee but to bring an improvement in the employee. Appraisal needs to be objective and not subjective. The actual performance of the employee is to be appraised and not the employee as a person. It gives a qualitative judgment as to indicate how well or how bad the employee is doing the job, whether the employee is able to complete the job assigned to him and to what extent the achievement is possible, whether the performance is affected by the reasons beyond the control of the employee and whether the employee has utilised his strengths in performing the job.

Performance appraisals play a useful role in understanding and identifying the potential of the employees. It focuses on the aspects like whether the strengths and capabilities of the employee can be developed to match the specific requirements of the jobs at higher levels. It also helps to understand which other jobs can be assigned to him. Thus, the appraisal is the analysis of the employee. It suggests how to strengthen the strengths and overcome the weaknesses so that he can become a better asset for the organisation.

Performance appraisal is an important tool applied at the time of giving salary increase to the employees. Often, the performance of an employee is so extraordinary that the organisation plans to reward the employee with a special increase in salary over and above the routine increase. These employees contribute valuably to the organisation and giving extra benefits make them not to leave the organisation. Thus performance appraisal is an integral part of the human resource development effort.

The performance appraisal process can be described in six steps as under

Table 2 : Performance Appraisal Process

Step 1 - Establish Performance Standards

Step 2 - Communicate Performance Expectations to Employee

Step 3 - Measure Actual Performance

Step 4 - Compare Actual Performance with Standards

Step 5 - Discuss the Appraisal with the Employee

Step 6 - Initiate Corrective Action

Other methods of Performance Appraisal

There are two other effective measures of performance appraisal viz. MBO i.e. Management by Objectives and Assessment Centre.

MBO

This method was evolved by Peter Drucker. MBO is potentially a powerful philosophy of managing and an effective way of operationalising the evaluation process. It seeks to minimize external controls and maximise internal motivation through joint goal setting between the manager and the subordinate and increasing the subordinate's own control of his work. It strongly reinforces the importance of allowing the subordinate to participate actively in the decisions that affect him directly.

MBO is a process whereby the superior and the subordinate jointly identify its common goals, define each individual's major area of responsibility in terms of results expected of him and use these measures as guides for operating the unit and assessing the contributions of each of its members.

MBO is an objective in itself. The objective is to change behavior and attitudes towards getting the job done. In other words, it is result oriented, it is performance that counts. It is a management system and philosophy that stresses goals rather than methods. It provides responsibility and accountability and recognises that employees have needs for achievement and self fulfillment. It meets these needs by providing opportunities for participation in goal setting process. Subordinates become involved in planning their own careers.

Although MBO has something of an aura of mystery about it, it really is a fairly simple procedure. It consists of five basic steps as follows

1. Set organisation goals - Such goals are expressed clearly and concisely and can be measured accurately. They have to be periodically revised. They should be challenging i.e. high enough to provide motivation, but not so high that they are out of reach. Attainable goals help channel energies in specific directions and let the subordinate know the basis on which he will be rewarded.

2. Joint goal setting - Establish short term performance targets between the management and the subordinate in a conference between them. Superior asks each subordinate to write down his personal goals, while in turn the superior writes out the goals he thinks subordinate should have. Both of them then discuss and reach an agreement about the goals. The superior then helps the subordinate to achieve the agreed goals.

3. Performance Reviews - Frequent, say monthly, performance review meetings between the superior and subordinate are conducted to find out how far the goals are achieved.

4. Set Check Posts - Establish major check posts to measure progress. The quirk of human nature demands that the superior be constantly alert and exercise sound judgment which can gradually be reduced.

5. Feedback - The employees who receive frequent feedback concerning their performance are more highly motivated than those who do not. Feedback that is specific, relevant, and timely helps satisfy the need most people feel about knowing where they stand.

Benefits of MBO are many:

a. MBO helps and increases employee motivation because it helps to increase an employee's understanding of where he is heading

b. Superiors compete with themselves than with others thereby reducing internal conflicts.

c. MBO results in assuring that everyone's activity is ultimately aimed toward organisation's goals.

d. MBO reduces role conflict and ambiguity because it provides clear targets and their order of priority.

e. MBO provides more objective appraisal criteria. The targets provide a sound set of criteria for evaluating performance.

f. MBO forces and aids in planning to achieve targets.

g. MBO identifies problems better and early because of frequent review sessions.

h. MBO identifies performance deficiencies to set self improvement.

i. MBO helps the superior to develop personal leadership especially the skills of listening, planning, counseling, motivating and evaluating.

Thus MBO does some good without costing much. Under proper conditions, participation and consultative management provide encouragement to employees to direct their creative energies toward organisation objectives, give them some voice indecisions which affect them, and provide sufficient opportunities for satisfaction of social, egoistic and self-fulfillment needs.

Assessment Centre Method

The purpose of this method is to test employee's social situation, using a number of assessors and a variety of procedures. The most important feature of the assessment centre is job-related simulations. These simulations involve characteristics that superiors feel are the important to the job success. The evaluator observes and evaluate subordinate as he performs activities commonly found in these jobs.

Under this method, many evaluators join together to judge employee performance in several situations with the use of a variety of criteria. It is used mostly to help select employees for the first level supervisory positions. Assessments are made to determine employee potential for purposes of promotion. The assessment is generally done with the help of a couple of employees and involves a paper and pencil test, interviews and situational exercises.

The Assessment Centre generally measures interpersonal skills, organising, planning, interpersonal competence, quality of thinking, resistance to stress, orientation to work, dependence on hers, creativity. The duration of assessment centre programme varies from one day at junior level to 3 days at senior level.