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Chapter: Principles of Management : Organizing

Performance Appraisal

Performance appraisal is the process of obtaining, analyzing and recording information about the relative worth of an employee.


Performance appraisal is the process of obtaining, analyzing and recording information about  the relative worth of an employee. The focus of the performance appraisal is measuring and improving the actual performance of the employee and also the future potential of the employee. Its aim is to measure what an employee does.

Objectives of Performance appraisal:


            To review the performance of the employees over a given period of time.


            To judge the gap between the actual and the desired performance.


            To help the management in exercising organizational control.


            Helps to strengthen the relationship and communication between superior – subordinates and management – employees.


            To diagnose the strengths and weaknesses of the individuals so as to identify the training and development needs of the future.


            To provide feedback to the employees regarding their past performance.


Provide information to assist in the other personal decisions in the organization.

            Provide clarity of the expectations and responsibilities of the functions to be performed by the employees.


            To judge the effectiveness of the other human resource functions of the organization such as recruitment, selection, training and development.


            To reduce the grievances of the employees.



Process of performance appraisal:

a) Establishing performance standards:


The first step in the process of performance appraisal is the setting up of the standards which will be used to as the base to compare the actual performance of the employees. This step requires setting the criteria to judge the performance of the employees as successful or unsuccessful and the degrees of their contribution to the organizational goals and objectives. The standards set should be clear, easily understandable and in measurable terms.

In case the performance of the employee cannot be measured, great care should be taken to describe the standards.


b) Communicating the standards:


After establishing the standards, it is the responsibility of the management to communicate the standards to all the employees of the organization.


The employees should be informed and the standards should be clearly explained to the. This will help them to understand their roles and to know what exactly is expected from them. The standards should also be communicated to the appraisers or the evaluators and if required, the standards can also be modified at this stage itself according to the relevant feedback from the employees or the evaluators.


c) Measuring the actual performance:


The most difficult part of the Performance appraisal process is measuring the actual performance of the employees that is 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 and providing assistance rather than interfering in an employees work.


d) 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. The result can show the actual performance being more than the desired performance or, the actual performance being less than the desired performance depicting a negative deviation in the organizational performance. It includes recalling, evaluating and analysis of data related to the employees’ performance.


e) Discussing results:


The result of the appraisal is communicated and discussed with the employees on one-to-one basis. The focus of this discussion is on communication and listening. The results, the problems and the possible solutions are discussed with the aim of problem solving and reaching consensus. The feedback should be given with a positive attitude as this can have an effect on the employees’ future performance. The purpose of the meeting should be to solve the problems faced and motivate the employees to perform better.


f) Decision making:


The last step of the process is to take decisions which can be taken either to improve the performance of the employees, take the required corrective actions, or the related HR decisions like rewards, promotions, demotions, transfers etc.


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