Many companies, which carry out performance appraisal, also keep records on the potential of their employees for future promotion opportunities. The task of identifying potential for promotion cannot be easy for the appraising manager, since competence of a member of staff to perform well in the current job is not an automatic indicator of potential for promotion. Very often the first class salesman is promoted to become a mediocre sales manager, the excellent chief engineer is promoted to become a very poor engineering director, and the star football player struggles to be a football manager.
Potential can be defined as ‘a latent but unrealised ability’. There are many people who have the desire and potential to advance through the job they are in, wanting the opportunity to operate at a higher level of competence in the same type of work. The potential is the one that the appraiser should be able to identify and develop because of the knowledge of the job. This requires an in-depth study of the positions which may become vacant, looking carefully at the specific skills that the new position may demand and also taking into consideration the more subjective areas like ‘qualities’ required. These may be areas where the employee has not had a real opportunity to demonstrate the potential ability and there may be areas with which you, as the appraisers are not familiar. There are few indicators of potential (Box 1) which may be considered.
Source: Adopted from Philip, Tom (1983). Making Performance Appraisal Work, McGraw Hill Ltd., U.K.
Like the Performance Appraisal, potential appraisal is also done by the employees’ supervisor who has had the opportunity to observe the employee for some time. Potential appraisal may be done either regularly or as and when required. Generally last part of appraisal deals with potential appraisal, as this is seen in case of Maruti Udyog Ltd. (Illustration 1).
One of the important objectives of appraisal, particularly potential appraisal is to help employees to move upwards in the organization. People do not like to work on dead end jobs. Hence, a career ladder with clearly defined steps becomes an integral component of human resources management. Most HRM practitioners favour restructuring of a job to provide reasonably long and orderly career growth. Career path basically refers to opportunities for growth in the organization. Availability of such opportunities has tremendous motivational value. It also helps in designing salary structures, identifying training needs and developing second line in command. Career paths can be of two kinds:
a) Those where designations changes to a higher level position, job remaining more or less the same. A good example of this is found in teaching institutions, where an assistant professor may grow to become associate professor and a professor, but the nature of job (teaching and research) remains the same. Career path in such situations means a change in status, better salary and benefits and perhaps less load and better working conditions.
b) Those where changes in position bring about changes in job along with increased salary, status and better benefits and working conditions. In many engineering organisations, an employee may grow in the same line with increased responsibilities or may move to other projects with different job demands.