[Date]

Appraisal System
Assignment

Baskar M
ICHE-UGPA 13-16

Subject Name
.

: Appraisal System

Student Name

: Baskar M

Session

: 2013-2016

Batch

: Fall winter UG-A

Contact Number

: 96261-99981,

Mail

: baskar180@gmail.com

Submission Date

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Question 1:
Define Performance Appraisal System? Briefly explain the process of
Performance Appraisal. Elucidate it with the help of an industry
example.
Answer:
A performance appraisal (PA), also referred to as a performance
review, performance evaluation, (career) development
discussion, or employee appraisal is a method by which the job
performance of an employee is documented and evaluated.
Performance appraisals are a part of career development and consist of
regular reviews of employee performance within organizations.
Human resource management (HRM) conducts performance
management. Performance management systems consist of the
activities and/or processes embraced by an organization in anticipation
of improving employee performance, and therefore, organizational
performance. Consequently, performance management is conducted at
the organizational level and the individual level. At the organizational
level, performance management oversees organizational performance
and compares present performance with organizational performance
goals. The achievement of these organizational performance goals
depends on the performance of the individual organizational members.
Therefore, measuring individual employee performance can prove to be
a valuable performance management process for the purposes of HRM
and for the organization. Many researchers would argue that
"performance appraisal is one of the most important processes in
Human Resource Management".
The performance management process begins with leadership within
the organization creating a performance management policy. Primarily,
management governs performance by influencing employee
performance input (e.g. training programs) and by providing feedback
via output (i.e. performance assessment and appraisal). "The ultimate
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objective of a performance management process is to align individual

performance with organizational performance". A very common and
central process of performance management systems is performance
appraisal (PA). The PA process should be able to inform employees
about the "organization's goals, priorities, and expectations and how
well they are contributing to them".
Performance appraisals (PAs) are conducted at least annually, and
annual employee performance reviews appear to be the standard in
most American organizations. However, "it has been acknowledged that
appraisals conducted more frequently (more than once a year) may
have positive implications for both the organization and employee." It is
suggested that regular performance feedback provided to employees
may quell any unexpected and/or surprising feedback to year-end
discussions. In a recent research study concerning the timeliness of PAs,
"one of the respondents even suggested that the performance review
should be done formally and more frequently, perhaps once a month,
and recorded twice a year."
Other researchers propose that the purpose of PAs and the frequency of
their feedback are contingent upon the nature of the job and
characteristics of the employee. For example, employees of routine jobs
where performance maintenance is the goal would benefit sufficiently
from annual PA feedback. On the other hand, employees of more
discretionary and non-routine jobs, where goal-setting is appropriate
and there is room for development, would benefit from more frequent
PA feedback. Non formal performance appraisals may be done more
often, to prevent the element of surprise from the formal appraisal.
Objective production
The objective production method consists of direct, but limited,
measures such as sales figures, production numbers, the electronic
performance monitoring of data entry workers, etc. The measures used
to appraise performance would depend on the job and its duties.
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Although these measures deal with unambiguous criteria, they are

usually incomplete because of criterion contamination and criterion
deficiency. Criterion contamination refers to the part of the actual
criteria that is unrelated to the conceptual criteria. In other words, the
variability in performance can be due to factors outside of the
employees control. Criterion deficiency refers to the part of the
conceptual criteria that is not measured by the actual criteria. In other
words, the quantity of production does not necessarily indicate the
quality of the products. Both types of criterion inadequacies result in
reduced validity of the measure. Regardless of the fact that objective
production data is not a complete reflection upon job performance,
such data is relevant to job performance.
Happy-productive worker hypothesis
The happy-productive worker hypothesis states that the happiest
workers are the most productive performers, and the most productive
performers are the happiest workers. Yet, after decades of research, the
relationship between job satisfaction and job performance produces
only a weak positive correlation. Published in 2001 by Psychological
Bulletin, a meta-analysis of 312 research studies produced an
uncorrected correlation of 0.18. This correlation is much weaker than
what the happy-productive worker hypothesis would predict.
Personnel
The personnel method is the recording of withdrawal behaviors (i.e.
absenteeism, accidents). Most organizations consider unexcused
absences to be indicators of poor job performance, even with all other
factors being equal; however, this is subject to criterion deficiency. The
quantity of an employees absences does not reflect how dedicated
he/she may be to the job and its duties. Especially for blue-collar jobs,
accidents can often be a useful indicator of poor job performance, but
this is also subject to criterion contamination because situational factors
also contribute to accidents. Once again, both types of criterion
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inadequacies result in reduced validity of the measure. Although

excessive absenteeism and/or accidents often indicate poor job
performance rather than good performance, such personnel data is not
a comprehensive reflection of an employees performance.
Judgmental evaluation
Judgmental evaluation appears to be a collection of methods, and as
such, could be considered a methodology. A common approach to
obtaining PAs is by means of raters. Because the raters are human, some
error will always be present in the data. The most common types of
error are leniency errors, central tendency errors, and errors resulting
from the halo effect. Halo effect is characterized by the tendency to rate
a person who is exceptionally strong in one area higher than deserved in
other areas. It is the opposite of the Horns effect, where a person is
rated as lower than deserved in other areas due to an extreme
deficiency in a single discipline. These errors arise predominantly from
social cognition and the theory in that how we judge and evaluate other
individuals in various contexts is associated with how we "acquire,
process, and categorize information".
An essential piece of this method is rater training. Rater training is the
"process of educating raters to make more accurate assessments of
performance, typically achieved by reducing the frequency of halo,
leniency, and central-tendency errors". Rater training also helps the
raters "develop a common frame of reference for evaluation" of
individual performance. Many researchers and survey respondents
support the ambition of effectual rater training. However, it is noted
that such training is expensive, time consuming, and only truly
functional for behavioral assessments.
Another piece to keep in mind is the effects of rater motivation on
judgmental evaluations. It is not uncommon for rating inflation to occur
due to rater motivation (i.e. "organizationally induced pressures that
compel raters to evaluate ratees positively"). Typically, raters are
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motivated to give higher ratings because of the lack of organizational

sanction concerning accurate/inaccurate appraisals, the rater's desire to
guarantee promotions, salary increases, etc., the rater's inclination to
avoid negative reactions from subordinates, and the observation that
higher ratings of the ratees reflect favorably upon the rater.

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Question 2:
What is Forced Distribution Method of Performance Appraisal? Explain
with the help of a diagram & list out with advantages & two
disadvantages of the method.
Answer:
Each performance management process has rules for managers and
employees. One of the most criticized and controversial rule in many
systems is the forced distribution (also called stacked ranking). Many
organizations introduce the forced distribution because they want to
reach the visible differentiation among the performance of employees in
the entire business. GE in the era of Jack Welsh was the most famous
user of forced distribution. GE was limiting each category, and it
required managers to act on top and low performers. Today, most
companies do not use the strict forced ranking, but they have at
least limits on certain performance categories. The companies do not
want to have the organization full of excellent employees if the business
is underperforming.

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Ranking of employees is the emotional part for managers. HR Managers

do enjoy many discussions about the unfairness of the process for
employees and managers. The system pushes managers to choose an
employee, who is unlucky and his or her performance appraisal is
needs improvement. No one makes any complaints about the
requirement to choose the employee, who is better than the others.
Benefits of the Forced Distribution
The forced ranking has many benefits for the large organization. All costs
are under a control. HR can make an exact estimate of the development
because it knows the limits. The system sets the limits for managers. No
exceptions are allowed.
The system makes differences among employees. The top players (A
players) enjoy many benefits. Their careers are quick; their bonuses are
high; they enjoy salary increases. They enjoy benefits at costs of other
employees, who are not lucky to be "A players".
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The system can produce a healthy pressure on employees. They are

required to increase their performance. The "A" players have to develop
their skills and competencies to stay at the top level. The employees
clearly see that managers act on low performers in the team. It is a
motivation for the rest to work hard.
Weaknesses of the Forced Distribution
The forced distribution can kill innovations in the organization. The
employees do not focus on being innovative; they focus on being visible
in the organization. The manager has to be informed about every step.
The organization is full of presentations and status reports. Nobody
reads them and follows. However, the reports and presentations exist,
because they have to exist. No deliverables, no excellent performance
rating.
The forced ranking usually depends on the visibility of the employee in
the organization. The employee, who join many important meetings,
has a higher chance to receive the excellent rating. Some people learn to
live in the matrix quickly. They are always seen as stars, but they have no
real results to prove it.
The forced distribution usually stops working after few cycles. The low
performers are out of the organization, and the manager has to choose
new low performers. The manager starts to rotate the low performance
ranking or starts to protect the last low performer in the team. The same
situation happens to "A players". The manager is worried to rank the A
player as the B player.

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The forced ranking can have a destroying impact on the friendliness of

the corporate culture. Employees do not cooperate; they protect their
ideas and do not share them with others. The team without inspiring
discussion is not a functioning team.

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Question 3:
Discuss Expectancy Theory of motivation & elaborate on its relation with
Performance Appraisal. Illustrate it with an industry example.
Answer:
Expectancy theory (or expectancy theory of motivation) proposes an
individual will behave or act in a certain way because they are motivated
to select a specific behavior over other behaviors due to what they
expect the result of that selected behavior will be. In essence, the
motivation of the behavior selection is determined by the desirability of
the outcome. However, at the core of the theory is the cognitive process
of how an individual processes the different motivational elements. This
is done before making the ultimate choice. The outcome is not the sole
determining factor in making the decision of how to behave.
Expectancy: effort performance (EP)
Expectancy is the belief that one's effort (E) will result in attainment of
desired performance (P) goals.
1. Self efficacy the person's belief about their ability to successfully
perform a particular behavior. The individual will assess whether
they have the required skills or knowledge desired to achieve their
goals.
2. Goal difficulty when goals are set too high or performance
expectations that are made too difficult. This will most likely lead
to low expectancy. This occurs when the individual believes that
their desired results are unattainable.
3. Perceived control Individuals must believe that they have some
degree of control over the expected outcome. When individuals
perceive that the outcome is beyond their ability to influence,
expectancy, and thus motivation, is low.
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Instrumentality: Performance Outcome (PO)

Instrumentality is the belief that a person will receive a reward if the
performance expectation is met. This reward may present itself in the
form of a pay increase, promotion, recognition or sense of
accomplishment. Instrumentality is low when the reward is the same for
all performances given.
Another way that instrumental outcomes work is commissions. With
commissions performance is directly correlated with outcome (how
much money is made). If performance is high and many goods are sold
the more money the person will make.
Factors associated with the individual's instrumentality for outcomes are
trust, control and policies:
Trusting the people who will decide who gets what outcome, based
on the performance,
Control of how the decision is made, of who gets what outcome,
Policies understanding of the correlation between performance and
outcomes.
Valence V(R)

Valence: the value an individual places on the rewards of an outcome,

which is based on their needs, goals, values and Sources of Motivation.
Influential factors include one's values, needs, goals, preferences and
sources that strengthen their motivation for a particular outcome.
Valence is characterized by the extent to which a person values a given
outcome or reward. This is not an actual level of satisfaction rather the
expected satisfaction of a particular outcome.
The valence refers to the value the individual personally places on the
rewards. -1 0 +1
-1= avoiding the outcome 0 = indifferent to the outcome +1 = welcomes
the outcome
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In order for the valence to be positive, the person must prefer attaining
the outcome to not attaining it.
Valence is one behavioral alternative, where the decision is measured
on the value of the reward. The model below shows the direction of
motivation, when behavior is energized:
Motivational Force (MF) = Expectancy x Instrumentality x Valence
When deciding among behavioral options, individuals select the option
with the greatest amount of motivational force
(MF). Expectancy and instrumentality are attitudes (cognitions), whereas
valence is rooted in an individual's value system.
Examples of valued outcomes in the workplace include, pay increases
and bonuses, promotions, time off, new assignments, recognition, etc. If
management can effectively determine what their employee values, this
will allow the manager to motivate employees in order to get the
highest result and effectiveness out of the workplace.

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Question 4:
(A) Describe Potential Appraisal and explain its linkages with other
system in the company.
(B) Explain Management By Objective. Why is it a continuous process
?
Answer:
A).
The potential appraisal refers to the appraisal i.e. identification of the
hidden talents and skills of a person. The person might or might not be
aware of them. Potential appraisal is a future oriented appraisal whose
main objective is to identify and evaluate the potential of the employees
to assume higher positions and responsibilities in the organizational
hierarchy. Many organisations consider and use potential appraisal as a
part of the performance appraisal processes..

To advise employees about their overall career development and future

prospects

Help the organisation to chalk out succession plans

Motivate the employees to further develop their skills and competencies.

To identify the training needs.

Techniques of potential appraisal:

Self appraisals

Peer appraisals

Superior appraisals

MBO

Psychological and psychometric tests

Management games like role playing

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Leadership exercises etc.

It is different from performance appraisal as it refers to the abilities of
the employees that are not being used at the time of appraisal. It
searches for the latent abilities of the employee in discharging higher
responsibilities in future.
The potential of the employees is judged on the basis of his present
performance, personality traits, past experience and age and
qualification. It also looks at the unused skills and knowledge of an
employee.
It aims at informing the employee their future prospectus and helps the
organization in drawing your suitable successions plan. It also
requires updating the training efforts regularly and advised the
employees on things which they can do to improve their career
prospectus.
B).
Management by objectives (MBO), also known as management by
results (MBR), was first popularized by Peter Drucker in his 1954
book The Practice of Management. Management by objectives is the
process of defining specific objectives within an organization that
management can convey to organization members, then deciding on
how to achieve each objective in sequence. This process allows
management to take work that needs to be done one step at a time to
allow for a calm, yet productive work environment. This process also
helps organization members to see their accomplishments as they
achieve each objective, which reinforces a positive work environment
and a sense of achievement. An important part of MBO is the
measurement and comparison of the employee's
actual performance with the standards set. Ideally, when employees
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themselves have been involved with the goal setting and choosing the
course of action to be followed by them, they are more likely to fulfill
their responsibilities.
The principle of MBO is for employees to have a clear understanding of
their roles and the responsibilities expected of them, so they can
understand how their activities relate to the achievement of the
organization's goals. MBO also places importance on fulfilling the
personal goals of each employee.
Proponents argue that benefits of MBO include:
1. Motivation Involving employees in the whole process of goal
setting and increasing employee empowerment. This increases
employee job satisfaction and commitment.
2. Better communication and coordination Frequent reviews and
interactions between superiors and subordinates help to maintain
harmonious relationships within the organization and also to solve
problems.
3. Clarity of goals.
4. Subordinates tend to have a higher commitment to objectives they
set for themselves than those imposed on them by another
person.
5. Managers can ensure that objectives of the subordinates are
linked to the organization's objectives.
6. Common goal for whole organization means it is a unifying,
directive principle of management.
The mnemonic S.M.A.R.T. is associated with the process of setting
objectives in this paradigm. "SMART" objectives are:

Specific
Measurable
Agreed/Achievable/Attainable
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Realistic/Responsible/Receivable
Time-bound

The aphorism "what gets measured gets done," is aligned with the MBO
philosophy.

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