Performance appraisal helps organizations to determine how employees can help to achieve the goals of organizations. It has two important activities included in it. First has to do with determining the performance and other with the process of evaluation.


a) What is Performance?

What does the term performance actually mean? Employees are performing well when they are productive. Productivity implies both concern for effectiveness and efficiency, effectiveness refers to goal accomplishment. However it does not speak of the costs incurred in reaching the goal. That is where efficiency comes in. Efficiency evaluates the ratio of inputs consumed to outputs achieved. The greater the output for a given input, the greater the efficiency. It is not desirable to have objective measures of productivity such as hard data on effectiveness, number of units produced, or percent of crimes solved etc and hard data on efficiency (average cost per unit or ratio of sales volume to number of calls made etc.).

In addition to productivity as measured in terms of effectiveness and efficiency, performance also includes personnel data such as measures of accidents, turnover, absences, and tardiness. That is, a good employee is one who not only performs well in terms of productivity but also minimizes problems for the organisation by being to work on time, by not missing days, and by minimizing the number of work-related accidents.

b) What is Appraisal?

Appraisals are judgments of the characteristics, traits and performance of others. On the basis of these judgments we assess the worth or value of others and identify what is good or bad. In industry performance appraisal is a systematic evaluation of employees by supervisors. Employees also wish to know their position in the organization. Appraisals are essential for making many administrative decisions: selection, training, promotion, transfer, wage and salary administration etc. Besides they aid in personnel research.

Performance Appraisal thus is a systematic and objective way of judging the relative worth of ability of an employee in performing his task. Performance appraisal helps to identify those who are performing their assigned tasks well and those who are not and the reasons for such performance.


Conducting performance appraisals on employee’s performance should be more than a simple checklist of Do’s and Don’ts. Performance evaluation should serve as a vital component, one that is of interest to both the organization and the employee. From the organizational perspective, sound performance appraisals can ensure that correct work is being done, work that assists in meeting department goals simply. Each employee’s work should support the activities needed to action his or her supervisor’s performance objectives. This should ultimately continue up the hierarchy, with all efforts supporting corporate strategic goals. From the employee perspective, properly operating performance appraisal systems provide a clear communication of work expectations. Knowing what is expected is a first step in helping one to cope better with the stress usually associated with a lack of clear direction. Secondly, properly designed performance appraisals should also serve as a means of assisting an employee’s personal development.

To make effective performance appraisals a reality, four criteria need to be present. These are:

a) Employees should be actively involved in the evaluation and development process.

b) Supervisors need to enter performance appraisals with a constructive and helpful attitude.

c) Realistic goals must be mutually set.

d) Supervisors must be aware, and have knowledge of the employee’s job and performance.



Performance appraisal has a number of specific objectives. These are given below:

a) To review past performance;

b) To assess training needs;

c) To help develop individuals;

d) To audit the skills within an organizations;

e) To set targets for future performance;

f) To identify potential for promotion.

Some employees may believe that performance appraisal is simply used by the organization to apportion blame and to provide a basis for disciplinary action. They see it as a stick that management has introduced with which to beat people. Under such situations a well thought out performance appraisal is doomed to failure. Even if the more positive objectives are built into the system, problems may still arise because they may not all be achievable and they may cause conflict. For Example, an appraise is less likely to be open about any shortcomings in past performance during a process that affects pay or promotion prospects, or which might be perceived as leading to disciplinary action. It is therefore important that performance appraisal should have specific objective. Not only should the objectives be clear but also they should form part of the organization’s whole strategy. Thus incorporating objectives into the appraisal system may highlight areas for improvement, new directions and opportunities.


Following steps are involved in appraisal process:

1) The appraisal process begins with the establishment of performance standards. These should have evolved out of job analysis and the job description. These performance standards should also be clear and objective enough to be understood and measured. Too often, these standards are articulated in some such phrase as “a full day’s work” or “a good job.” Vague phrases tell us nothing. The expectations a manager has in term of work performance by the subordinates must be clear enough in their minds so that the managers would be able to at some later date, to communicate these expectations to their subordinates and appraise their performance against these previously established standards.

2) Once performance standards are established, it is necessary to communicate these expectations. It should not be part of the employees’ job to guess what is expected of them. Unfortunately, too many jobs have vague performance standards. The problem is compounded when these standards are not communicated to the employees. It is important to note that communication is a two-way street. Mere transference of information from the manager to the subordinate regarding expectations is not communication. Communication only takes place when the transference of information has taken place and has been received and understood by subordinate. Therefore feedback is necessary. Hence the information communicated by the manager has been received and understood in the way it was intended.

3) The Third step in a appraisal process is measurement of performance. To determine what actual performance is, it is necessary to acquire information about it. We should be concerned with how we measure and what we measure. Four common sources of information are frequently used by mangers to measure actual performance: personal observation, statistical reports, oral reports, and written reports. Each has its strengths and weaknesses; however, a combination of them increases both the number of input sources and the probability of receiving reliable information. What we measure is probably more critical to the evaluation process than how we measure. The selection of the wrong criteria can result in serious dysfunctional consequences. What we measure determines, to a great extent, what people in an organization will attempt to excel at. The criteria we choose to measure must represent performance as stated in the first two steps of the appraisal process.

4) The fourth step in the appraisal process is the comparison of actual performance with standards. The attempt in this step is to note deviations between standard performance and actual performance. One of the most challenging tasks facing managers is to present an accurate appraisal to the subordinate and then have the subordinate accept the appraisal in a constructive manner. The impression that subordinates receive about their assessment has a strong impact on their self esteem and, very important, on their subsequent performance. Of course, conveying good news is considerably less difficult than conveying the bad news that performance has been below expectations. Thus, the discussion of the appraisal can have negative as well as positive motivational consequences.

5) The final step in the appraisal is the initiation of corrective action when necessary. Corrective action can be of two types; one is immediate and deals predominantly with symptoms. The other is basic and delves into causes. Immediate corrective action is often described as “putting out fires”, where as basic corrective action gets to the source of deviation and seeks to adjust the differences permanently. Immediate action corrects something right now and gets things back on track. Basic action asks how and why performance deviated. In some instances, managers may rationalize that they do not have the time to take basic corrective action and therefore must be content to “perpetually put out fires.” Figure-1 shows the performance process in summary.

performance appraisal process

Figure-1 : Performance Appraisal Process


The benefits of an effective appraisal scheme can be summed up under three categories. These are for the organization, for appraiser and for appraise.

1) For the Organizations: Following benefits would accrue to the organization.

a) Improved performance throughout the organization due to more effective communication of the organization’s objectives and values, increased sense of cohesiveness and loyalty and improved relationships between managers and staff.

b) Improvement in the tasks performed by each member of the staff.

c) Identification of ideas for improvement.

d) Expectations and long-term plans can be developed.

e) Training and development needs can be identified more clearly.

f) A culture of continuous improvement and success can be created and maintained.

g) People with potential can be identified and career development plans can be formulated for future staff requirements.

2) For the appraiser: The following benefits would accrue to the appraiser:

a) The opportunity to develop an overview of individual jobs and departments.

b) Identification of ideas for improvements.

c) The opportunity to link team and individual objectives and targets with departmental and organizational objectives.

d) The opportunity to clarify expectations of the contribution the manager expects from teams and individuals.

e) The opportunity to re-prioritize targets.

f) A means of forming a more productive relationship with staff based on mutual trust and understanding.

3) For the appraisee: For the appraisee the following benefits would accrue:

a) Increased motivation.

b) Increased job satisfaction.

c) Increased sense of personal value. 



The issues raised above essentially focus on the problems of reliability and validity of performance appraisal. In other words, how do we know whether what is appraised is what was supposed to be appraised. As long as appraisal format and procedure continues to involve subjective judgment, this question cannot be fully answered and perhaps, will not be answered completely because no matter how objective a system is designed it will continue to be subjective. Perhaps, the following steps can help improve the system.

a) The supervisors should be told that performance appraisal is an integral part of their job duties and that they themselves would be evaluated on how seriously they have taken this exercise.

b) To help them do this task well, they should be provided systematic training on writing performance reports and handling performance interviews.

c) Conduct job evaluation studies and prepare job descriptions/roles and develop separate forms for various positions in the organization.

d) Design the system as simple as possible so that it is neither difficult to understand nor impossible to practice

e) Generally after the appraisal interview the employee is left alone to improve his performance on the dimensions. The supervisor should monitor now and then whether the improvement in performance in the areas found weak is taking place or not and, if not, help the employee to achieve the required improvement.

f) Finally, reviewing, the appraisal systems every now and then help updating it, and making suitable evolutionary changes in it. This is the most important factor in making performance appraisal effective. As time passes changes in technology and work environment necessitate changes in tasks, abilities and skills to perform these tasks. If changes in the format are not incorporated the reports may not generate the kind of date needed to satisfy appraisal objectives.

In addition, following can also help in improving the effectiveness of an appraisal:

a) Behaviourally Based Measures

The evidence strongly favours behaviourally based measures over those developed around traits. Many traits often considered to be related to good performance may, in fact have little or no performance relationship. Traits like loyalty, initiative, courage, reliability, and self-expression are intuitively appealing as desirable characteristics in employees. But the relevant question is, Are individuals who are evaluated as high on those traits higher performers than those who rate low? Traits like loyalty and initiative may be prized by managers, but there is no evidence to support that certain traits will be adequate synonyms for performance in large cross-section of jobs. Behaviorally derived measures can deal with this objection. Because they deal with specific examples of performance-both good and bad, they avoid the problem of using inappropriate substitutes.

b) Ongoing Feedback

Employees like to know how they are doing. The annual review, where the manager shares the subordinates evaluations with them, can become a problem. In some cases, it is a problem merely because managers put off such reviews. This is particularly likely if the appraisal is negative. The solution lies in having the manager share with the subordinate both expectations and disappointments on a day-today basis. By providing the employee with frequent opportunities to discuss performance before any reward or punishment consequences occur, there will be no surprises at the time of the annual formal review. In fact, where ongoing feedback has been provided, the formal sitting down step should not be particularly traumatic for either party.

c) Multiple Raters

As the number of raters increase, the probability of attaining more accurate information increases. If rater error tends to follow a normal curve, an increase in the number of raters will tend to find the majority congregating about the middle. If a person has had ten supervisors, nine having rated him or her excellent and one poor, we can discount the value of the one poor evaluation.

d) Peer Evaluations

Periodically managers find it difficult to evaluate their subordinates’ performance because they are not working with them every day. Unfortunately, unless they have this information, they may not be making an accurate assessment. One of the easiest means is through peer evaluations. Peer evaluations are conducted by employees’ coworkers, people explicitly familiar with the jobs involved mainly because they too are doing the same thing, they are the ones most aware of co-workers’ day to-day work behavior and should be given the opportunity to provide the management with some feedback.

The main advantages to peer evaluation are that (a) there is tendency for co-workers to offer more constructive insight to each other so that, as a unit, each will improve; and (b) their recommendations tend to be more specific regarding job behaviors- unless specificity exists, constructive measures are hard to gain.

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