Performance Management

 It is the process by which managers and employees work together to plan, monitor and review an
employees work objectives and overall contribution to the organization.
 It covers not only evaluation but also the scheme to boost up the performance.
 “Performance Management is a broad process that requires managers to define, facilitate and
encourage performance by providing timely feedback and constantly focusing employee’s attention
on the ultimate objectives.”--Cascio
Performance Appraisal
 Performance appraisal is the measurement of the level of effectiveness and efficiency a job holder
has achieved during a specific period by comparing with pre-determined criteria or standards.
 It is the process of determining how well employees do their jobs compared to a set of standards to
improve their performance.
 It is evaluating an employee’s current or past performance relative to the person’s performance of
standards.
 It is basically designed to tell employees how they have done over a period of time and to tell them
know what they pay raise they would be getting.
 It is also known as Performance Review, Performance Evaluation and Employee Appraisal.
 It is evaluation of the actual performance delivered by the employees.
 Accomplishment of assigned tasks by an employee.
 It is productivity measured in terms of effectiveness and efficiency.
 It helps to know where employees stand, where they ought to be going, and how they are going to
get there.
 “It is a systematic evaluation of individuals with respect to their performance on the job and their
potential for development.” – Dale S. Beach
Performance Appraisal Process (Steps)
1. Establishing performance standards: This first step in the process of performance appraisal is the
setting up the standards which will be used to as the base to compare the actual performance of the
employees. The standard set should be clear, easily under stable and in measurable terms. Standards
can be in terms of quality, quantity, time, cost, etc.
2. Communicating standards to employees: The next step is to communicate these standards to the
employees so that they would not find it difficult to guess what is expected of them. To make
communication effective, feedback is necessary from the subordinate to the manager.
3. Measuring the actual performance: The most difficult part of performance appraisal process is
measuring the actual performance of the employees i.e. the work done by the employees during the
specified period of time. It is a continuous process which involves monitoring the performance
throughout the year. This stage requires the careful selection of the appropriate techniques of
measurement, taking care that personal bias does not affect the outcome of the process & providing
assistance rather than interfering in an employees work. Generally, four source of information are
used to measure actual performance: personal observation, statistical reports, oral reports and written
reports.
4. Comparing the actual with the desired performance: The actual performance is compared with
the desired or the standard performance. The comparison tells the deviations in the performance of
the employees from the standards set. Hence, the employee is appraised & judged of his/her potential
for growth and development.
5. Discussing the appraisal with the employees: The result of the appraisal is communicated and
discussed with the employees on one-to-one basis. In this case good points, weak points and
difficulties are indicated and discussed so that performance can be improved. It provides
performance feedback to the employees.
6. If necessary, initiate corrective actions: The last step of performance appraisal is to initiate
corrective action when necessary. It can be of two types. One is immediate and deals predominantly
with symptoms. The other is basic and deals into causes. Sometimes in this step performance
standards may be revised to make them appropriate & realistic for the next appraisal period.
Performance Evaluation Approaches
 Attributes/Trait Approach
It is mainly based on a set of specific traits (attributes) of an employee like problem solving skills, initiative,
decisiveness etc.
 Comparative Approach
It involves ranking an employee’s performance with respect to that of others’ in the group. Employees are
ranked on the basis of highest to the lowest performer.

 Behavioral Approach
It basically focuses on the behaviors discharged by employee according to job description while doing the
assigned job. Mostly used technique under this approach is BARS (Behaviorally Anchored Rating System)
 Results (Based) Approach
It mainly focuses on job outcomes (contributions) of an employee to the organization. More specifically, it
seeks to identify and evaluate what has been really accomplished by an employee subject to appraisal.
 Behavioral Approach
It basically focuses on the behaviors discharged by employee according to job description while doing the
assigned job. Mostly used technique under this approach is BARS (Behaviorally Anchored Rating System)
 Results (Based) Approach
It mainly focuses on job outcomes (contributions) of an employee to the organization. More specifically, it
seeks to identify and evaluate what has been really accomplished by an employee subject to appraisal.
 Quality Based Approach
Its major focus is towards improvement in customer satisfaction, reducing error in job, and continuous
service improvisation. Furthermore, managers receive continuous feedback on the personal and professional
traits of the employee from supervisions, colleagues and clients to resolve performance issues.

Selection of Performance Evaluation Criteria

➢ Quality of Work:
This is the measurement of the degree of excellence of the work performed over the entire rating period.
In rating this factor, attention should be given to the consequence of poor quality of work.
➢ Quantity of Work:
It refers to the quantity of satisfactory work turned out during a given period of time. Does the employee
consistently accomplish a full day's work? Does the employee produce enough work? It is the amount
produced, expressed in monetary terms, number of units, or number of completed activities cycles.

➢ Job Knowledge Required:

This factor should not be restricted to the technical knowledge an employee is required to bring a
specialized job. It does relate to the mental and/or physical skills required in a given position. Does the
employee consistently demonstrate at a proper level the job knowledge prerequisites in the job
specification? Has the probationary employee acquired an acceptable level of job knowledge? Etc.
➢ Need of Supervision:
The degree of supervision an employee requires in accomplishing assigned duties and how successful
his/her planning and organizing are in achieving desired results. Does the employee take time to plan the
sequence of steps required in carrying out his/her tasks? Is the employee self-motivated? Does he/she
take opportunities to exercise independence of action or must he/she be prodded into action? Is he/she
altering to operating efficiency and cost cutting?
OTHER CRITERIAS:
• Timeliness
• Cost effectiveness
• Need for supervision
• Interpersonal impact
Methods of Performance Appraisal
Absolute Standards Relative Standards Comprehensive Methods

➢ Essay Appraisal ➢ Individual ranking • Appraisals by results

➢ Critical incident ➢ Paired comparison & MBO
method • 3600 Appraisal
➢ Checklist method
➢ Graphic rating scale
➢ Forced choice method
➢ Behaviorally anchored
rating scales (BARS)

Absolute Standards: It is concerned with a judgment which is made basing solely on the performance
standard, rather than comparing the performance of co-workers.
➢ Essay Appraisal:
• According to this method the appraiser writes a note about the employee describing his/her qualities
merits, demerits, & suggestion to improve.
• This method is simple does not require specific training or the need for developing specific format.
• This method describes qualities and weakness of an individual worker and do not facilitate
comparison with others because description is not uniform worth to be compared.
• Essay method do not provide quantified description to evaluate the impact of those qualities or
weakness performance.
➢ Critical incident method:
• According to this method, the evaluator mentions specific behavioral incidents that have proved
effective or ineffective performance.
• A series of such recording with respect to different workers over a period of time can result in the set
of effective & ineffective behavior that can be used later for training & development purposes.
• This method though includes employees effective and ineffective behavior and also highlight weak
point for development does not specifically relate with productive behavior.
• Negative incidents may be more noticeable than positive incidents.
• It results in very close supervision which may not be liked by an employee.

➢ Checklist method:
• HR department develops a list of job related questions to be evaluated, the rater is given the list to
check on.
• The completed checklist is then evaluated by an expert in the HR department according to the
weightage assigned to each question in the checklist and score is derived which is later
communicated to the employee for consulting & suggestion to improve.
• This method is very expensive & time consuming because a separate checklist must be developed for
different classes of jobs.
• Rater may be biased in distinguishing the positive and negative questions.
• It is difficult to assemble, analyze and weight a number of statements about employee characteristics
and contributions.

➢ Forced choice method:

• According to this method, the rater is provided with the questions related to factors to be evaluated
with alternative answers.
• The rater is expected to mark the one answer that represents best to the candidate.
• The major advantage of this method is that all the answer seems correct and the rater does not
exactly know the right answer. Hence, possibility of biasness is minimum.
 • Since, all the answer seems correct the rater fails to determine the right answer. Hence, out of
frustration the rater marks any answer without proper consideration.

➢ Graphic rating scale:

• This is the simplest, oldest and popular technique of performance appraisal.
• The employees are rated on personality characteristics and performance.
• The rater is provided with a printed form for each employee to be rated, containing a number of
characteristics to be rated.
• There is typically 5 to 10 points on the range.
• This method provides facility to evaluate subjective qualities of the employee.
• For example: regularity, punctuality, job related knowledge, motivation level, creativity, etc.

➢ Behaviorally anchored rating scales (BARS):

• BARS is an improvement or combination of Critical Incident Method and Graphic Rating Scale.
• Under this method, HR department identifies critical job dimensions and then enumerates critical
incidents related to each dimensions.
• The rater then specifies each job related behavior i.e. critical incidence, in each dimension on a scale.
• The scale can vary form 5 points to 10 points scale and there can be numerous expressions on the
scale.
• BARS involves following steps: i) identifying performance dimension, ii) collecting critical
incidents, iii) reclassifying incidents, iv) developing final BARS instruments.
• Hence, it specifies definite, observable and measurable job performance behavior.

Relative Standards: Under this technique, the individuals are compared against other individuals. So, it is
also known as Comparative Method.

➢ Individual ranking or alternative ranking:

• Under this method the rater ranks the employees from the highest to lowest on the basis of overall
performances.
• Only one employee will be rated as best or worst.
• First the evaluator or rater will list all the subordinates or employees to be rated. Then s/he will
indicate the employee who is the highest and the lowest on the characteristics being measured. Then
the next higher & lowest until all employees have been ranked.
• It is easy to understand and administer.
• It takes less cost and less time.
• There is possibility of biasness at the time of ranking employees from high to low.
• It is complex to administer when the number of employees is large.

➢ Paired comparison:
• It is a more precise form of employees ranking method.
• For every trait such as creativity, leadership, quality of work, etc., each employee will be compared
with one another.
• It is basically related with comparing employee on one to one basis to measure overall performance.
• The overall rank of the employee is determined by the number of times chosen as better performer in
total pairs.
• The basic formula to determine number of pairs is N(N-1)/2 where, N= number of employees to be
evaluated.
• For example: if there are 5 employees then 5(5-1)/2=10.

Comprehensive Methods:
➢ Appraisals by results & MBO:
• One of the development in the field of performance appraisal is appraisal by result.
 • Result appraisals are the outcome of the modern management techniques known as Management
By Objectives (MBO).
• MBO can be described as a process whereby the superior and subordinates of an organization
jointly identify its common goals, define each individual’s major areas of responsibility in terms
of results expected of him/her and uses these measures as guides of operating the unit and
assessing the contributions of each of its members.

• The MBO process consists of four steps:

a) Joint Goal setting: In joint goal setting, managers and subordinates meet to discuss & set time
bound objectives for the sub-ordinate. It should be challenging, clearly attainable and measurable.
The agreed objectives become standards for evaluating employee’s performance.
b) Action plan: It includes identifying the activities necessary to accomplish objectives, establishing
the critical relationship between those activities, estimating the time requirements and determining
the resources required to complete each activity.
c) Self-control: It is the systematic monitoring & measuring of his/her performance by the individual.
It is based on the philosophy that individual can be responsible, can exercise self-direction and do
not require external controls.
d) Performance review: It includes frequent performance review meeting between the manager &
the subordinates. Corrective actions are initiated where the actual performance deviates from the
standards. The superior plays the supportive role through counseling, coaching & problem solving.
➢ 3600 Appraisal:
• It is also known as Multi-rater feedback, Multiple-source feedback, Full-circle appraisal, Group
performance review, etc.
• It is the most comprehensive appraisal where the feedback about the employees’ performance
comes from all the sources that come in contact with the employee on his/her job.
• 3600 respondents for an employee can be his/her peers, managers, supervisor, subordinates, team
members, customers, suppliers/vendor, anyone who comes into contact with the employee and
can provide valuable insights and information or feedback regarding On-the-job performance.
• 3600 appraisal has four internal components: self-appraisal, superior’s appraisal subordinate’s
appraisal and peer appraisal.
• Self-appraisal gives a chance to the employee to look at his/her strengths and weaknesses, his
achievements, and judge his/her own performance.
• Superior’s appraisal forms the traditional part of the 3600 performance appraisal where the
employees’ responsibilities and actual performance is rated by the superior.
• Subordinates appraisal gives a chance to judge the employee on the parameters like
communication and motivating abilities, ability to delegate the work, leadership qualities, etc.
• The correct feedback given by peers can help to find employees abilities to work in a team,
cooperation and sensitivity towards others.
Factors Affecting Performance Appraisal/ Factors that can Distort Appraisal/ Errors
in Performance Appraisal
• Personal bias error: We all have our biases, whether they come out as a general positive or negative
feeling about something or someone. Bias can come from attitudes and opinions about race, national
origin, sex, religion, age, status, disability, hair color, weight, height, intelligence, etc.
• Leniency error: Leniency error is when a raters’ tendency is to rate all employees at the positive
end of the scale (positive leniency) or at the low end of the scale (negative leniency). This can
happen when a manager over-emphasizes either positive or negative behaviors.
• Halo error: Halo Effect is when a rater’s overall positive or negative impression of an individual
employee leads to rating him or her the same across all rating dimensions. Impact of one factor to
rate another factor.
• Similarity error: It is when the rater’s tendency is biased in performance evaluation toward those
employees seen as similar to the raters themselves. Rating other perceiving their self-characteristics.
 • Recency errors: Recency error is the rater’s tendency to allow more recent incidents (either
effective or ineffective) of employee behavior to carry too much weight in evaluation of
performance over an entire rating period.
• Central tendency: Central tendency error is the raters’ tendency to avoid making “extreme”
judgments of employee performance resulting in rating all employees in the middle part of a scale.
Raters who are prone to the central tendency error are those who continually rate all the employees
as average.
• Attribution errors: It is related to attribution theory as well as Mc. Gregor’s Thoery X and Theory
Y. Here, rating or evaluation is based on perception.
• Inappropriate Substitutes for performance: It is always difficult to use appropriate criteria for job
because of unavailability or difficult in defining on what good job is.
• Unclear standards: Although the rating scale seem objective, but they too can produce unfair
appraisals because the traits and degree of merit are open to interpretation.

Performance Appraisal Practices in Nepal

 Unclear standard
 Low priority in practice
 Formal and informal appraisal
 Promotion-oriented performance appraisal
 Issue of fairness and transparency
 Vast difference between PA practices among different organization.
 Issue of nepotism and favoritism
 Mostly uses traditional techniques

Ways to Improve Employee Performance

 Proper communication
 Identify reasons for under performing
 Creation of positive work environment
 Providing effective training
 Rest and entertainment
 Appreciate contributions

Career Planning
• It is a process by which one selects career goals and the path to those goals.
• It is pattern of job related experiences gained during one’s working life.
• Robbins, “Career is the sequence of positions that a person has held over her/his life”.
• The process where employees explore their abilities, and strategically plan their career goals.

Career Development
• Career development is the lifelong progress of managing learning, work, leisure, and transitions in
order to move toward a personally determined and evolving preferred future.
• It is a formal approach used by the firms to ensure that people with proper qualifications and
experience are available when needed.
• Career development benefits both employees as well as organizations.

Objectives of Career Planning/Development

 Ensuring needed talents
 Assisting in attracting and retaining good employees
 Ensuring growth opportunities for all employees
 Reducing employee frustration
 Providing challenging jobs
 Establishing career oriented performance appraisal
  Offering job rotation

Stages of Career Development

Phases of Career Development

1. Integrated Career development and HR planning: CD provides a supply of talents with the
abilities, and HRP projects the demand for talents and abilities.
2. Dissemination of career option information: In many organization, employees do not get proper
information about career options; and as managers identify and set career paths that successful
employees follow within the organization, they should make this information available to all
concerned.
3. Job postings: The basis purpose of job postings is to ensure that the career goals and skills of inside
candidates are matched openly, fairly and effectively with promotional opportunities.
4. Use of assessment centers: Observing each employee’s ability and behavior in a complete situation
to develop a broader appraisal for his/her reaction.
5. Career counseling programs: Career counseling programs are the most logical parts of career
development programs. In this stage, individual and organizational needs and opportunities can be
matched in a variety of ways.
6. Career development workshops: Taking steps to increase employee’s involvement and expertise in
planning and developing of their own career.
7. Continuous education and training: Preparing for future.
8. Periodic job changes: Employee may seek job changes for the purpose of personal enrichment for
more interesting jobs.
9. Sabbaticals and other facilities: Employees should be provided leaves and other facilities.
10. Career oriented performance appraisals: Manager need concrete information regarding the
employee’s potential career path. Information about the nature of the future work for which she/he is
appraising the subordinate.