Introduction to management

10.4  Methods of Performance Appraisal

 

Here, we will look at how management can actually establish performance 

standard and devise instruments that can be used to measure and appraise 

an employee’s performance. There are various methods to appraise the 

employees. No single method is always best. Each has its strengths and 

weaknesses. Following are the some of the standard methods used by the 

organizations to measure the performance of their employees: 

1. 

Graphic Rating Scale 

 

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The graphic rating scale is the simplest and most popular technique for 

appraising the performance. It consists of typical rating scale. It lists traits 

(such as quality and reliability) and arrange of performance values (from 

unsatisfactory to outstanding) for each trait. The supervisor rates each 

subordinate by circling or checking the score that best describes his or her 

performance for each trait. The assigned value for the traits is then 

aggregated. 

The rating method is easy to understand and easy to use. It permits the 

statistical tabulations of scores in terms of measures of central tendency, 

skewness and dispersion.  

It permits a ready comparison of scores among employees. The scores 

presumably reveal the merit or value of every individual. However, this 

method has certain drawbacks also. There is a disadvantage that a high 

score on one factor can compensate for a low score on another. If a man 

scores low for quantity of work, this may be counter-balanced by high 

scores for attendance, attitude, cooperativeness etc. In practice, rating tends 

to cluster on the high side with this system. 

2. Ranking 

Method 

One of the simplest methods of performance appraisal is ranking method. 

The supervisor evaluates all the subordinates under him on an overall basis 

and then rank orders them from exceptional to poor. Each rank indicates the 

position of an employee in relation to others under the same supervisor. In 

case these employees have worked under several supervisors each one of 

these supervisors ranks them according to his own assessment. Finally, all 

the ranks are grouped to see which one of the employees is rated low. An 

illustration of this is presented in Figure given below, where five 

subordinates working under three supervisors are ranked. 

 

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  Subordinates 

                    Supervisors 

Mean 

Rank  

 Subhash 

Usha 

Bijender 

 

 

  Sanjeev 

      2 

  4 

      3 

        3 

 

  Vinod 

      1 

  2 

      1 

       1.3   

  Tilak 

      3 

  1 

      2 

        2 

 

  Pradeep 

      5 

  3 

      4 

        4 

 

  Mahesh 

      4 

  5 

      5 

      4.6   

One represents the highest rank. The individual ranking of three supervisors 

are added and they divided by the number of supervisors. The mean ranks 

are given in the last column. Since Vinod gets rank of 1.3, he is on an 

average, the best of all five subordinates. 

The difficulty of this system is that the rater is asked to consider rated as a 

wholeman. It is quite obvious that human personally is very complicated 

and to ask a human being to pass a judgments on another human being in 

terms of saying he is ‘good’ or ‘bad’ is not only difficult but also 

undesirable. Asking the appraiser to rank employee on certain desirable 

traits can reduce the subjectiveness of this method. 

3. 

Paired Comparison Method 

Pair comparison force raters to compare each employee with all the 

employees in the same group who are being rated. For every trait (quantity 

of work, quality of work and so on) every subordinate is paired with and 

compared to every other subordinate. 

Suppose there are five employees to be rated. In the paired comparison 

method one can make chart, as in following Figure, of all possible pairs of 

employees for each trait. Then for each trait indicate (With a + or -), who is 

 

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the better employee of the pair. Next the number of items an employee is 

rated better is added up. In Figure, employee B ranked highest (has the 

most + marks) for quantity of work, while employee A was ranked highest 

for creativity. 

For the trait ‘Quantity of Work’   

 

    

As 

 

A 

B 

C 

D 

E 

 

 compared 

 

 to 

 

 

 A 

 

+ 

+ 

– 

– 

 

  

 B 

 

– 

 

– 

– 

– 

 

   

C 

 

– 

+ 

 

+ 

– 

 

   

D 

 

+ 

+ 

– 

 + 

 

   

E 

 

+ 

+ 

+ 

– 

 

 

                    B ranks highest here 

 

For the trait ‘Creativity’ 

 

As   

 

A 

B 

C 

D 

E 

 compared 

 to 

 

 A 

 

 

– 

– 

– 

– 

 

 B 

 

+ 

 

– 

+ 

+ 

 

 C 

 

+ 

+ 

 

– 

+ 

 

 D 

 

+ 

– 

+ 

 

– 

 

 E 

 

+ 

– 

– 

+ 

 

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↓ 

 

 

 

      A ranks highest here 

 

Note: 

+ 

means ‘better than’

—

 means ‘worse than’. For each chart add up 

the number of +’s in each column to get the highest ranked employee. 

4. 

Forced Distribution Method 

Some appraisers suffer from the constant error, i.e. they either rate all 

workers as excellent, average or poor. They fail to evaluate the poor, 

average or excellent employees clearly and cluster them closely around a 

particular point in the rating scale. The forced distribution system is devised 

to force the appraiser to fit the employees being appraised into 

predetermined ranges of scale. 

The forced distributor system is applicable to a large group of employees. 

This system is based on the presumption that all employees can be divided 

into five-point scale of excellent, very good, average, acceptable and poor. 

For example, he may be asked to identify and rank employees according to 

the following percentages: 

 

 

 

Percentage of  

Ranking 

 Employees 

 

 10% 

Poor 

 

 20% 

Acceptable 

 

 40% 

Average 

 

 20% 

Very 

good 

 

 10% 

Excellent 

 

 

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This method obviously eliminates the scope for subjective judgment as the 

part of the supervisors. Besides this, the system is easy to understand and 

administer. The objective of this technique is to spread out rating in the 

form of normal distribution. Many times this categorization is not found in 

work groups particularly when the group is comparatively small. 

5. Checklist 

Method 

In the checklist, the evaluator uses a list of behavioral descriptions and 

check-off those behaviors that apply to the employees. As Figure illustrates 

on preceding page, the evaluator merely goes down the list and gives ‘yes’ 

or ‘no’ responses. 

Once a checklist is complete, the staff of personnel department, not the 

manager giving the checklist, usually evaluates it. Therefore, the rater does 

not actually evaluate the employee’s performance. He merely records it. An 

analyst in the personnel department then scores the checklist, often 

weighting the factors in relationship to their importance. The final 

evaluation can then be returned to the rating manager for discussion with 

the subordinate, or someone from the personnel department can provide 

feedback to the subordinates. 

Sample of checklist for appraising Sales Clerks 

 

 

  

[Answer in Yes/No] 

1.  Are supervisor’s orders usually followed? 

 

 

2.  Does the individual approach customers? 

 promptly? 

     

3.  Does the individual suggest additional merchandise to customers? 

    4.  Does the individual keep busy when not servicing the customers? 

 

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    5.  Does the individual lose his or her temper in public? 

    6.  Does the individual volunteer to help other employee? 

6. 

Critical Incident Appraisal 

With the critical incident method, the supervisor keeps a log of desirable or 

undesirable examples or incidents of each subordinates work related 

behaviour. Then every six months or so, the supervisor and subordinates 

meet and discuss the latter’s performance using the specific incidents as 

examples. 

This method can always be used to supplements another appraisal 

techniques and in that role it has several advantages. It provides you with 

specific and hard facts for explaining the appraisal. It ensures you to think 

about the subordinates’ appraisal all during the year because the incidents 

must be accumulated. Keeping a running list of critical incidents should 

also provide concrete examples of what especially your subordinate can do 

to eliminate any performance deficiencies. 

Given below are a few typical incidents from a checklist for the appraisal of 

an individual in purchase department: 

• 

Displayed unpleasant behaviour to a supplier. 

• 

Consistently absent from work. 

• 

Refused to work over-time when asked for. 

• 

Talked rudely and abruptly on the telephone. 

• 

Created a disturbance with loud speaking. 

• 

Accepted inferior quality goods from a supplier. 

• 

Failed to follow a chain of command. 

• 

Suggested a new method to work. 

• 

Accepted inferior quality goods. 

 

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• 

Developed a new procedure that reduced paper work. 

• 

Rejected a bid that was unreasonably priced. 

• 

Helped fellow employees to solve their problems. 

7. 

Behaviorally Anchored Rating Scales (BARS) 

This method assists upon accurate measurement and improvement of job 

performance through feedback to appraisees. It provides statements of 

standards against which the performance of an appraisee is evaluated. 

These standards are put on the scales in BARS. There is one scale for each 

significant broad performance area or job dimension. While developing 

BARS, small group discussions are conducted with would-be appraisers 

and appraisees with a view to identifying the significant dimensions of a 

job, which need to be evaluated. Different job dimensions identified in this 

way tend to form varied behaviorally anchored scales. For example, for a 

managerial position, the significant job dimensions may include: planning, 

organizing, controlling, leadership, motivation, communication and 

coordination. 

Frequently, the scale is presented vertically with “excellent” performance at 

the top and “very poor” performance at the bottom. There are a number of 

scale points ranging between five and nine in between these two extremes. 

Suppose, five job dimensions have been identified in a particular job. There 

will be five scales in the appraisal format, each having several anchors 

illustrating varied amounts of performance along the scales. These scales 

may also embody statements to facilitate the clarity of the job dimension 

being evaluated. To cite an example of BARS for the position of an 

equipment operator-one job dimension in this position is verbal 

communication. The excellent performance on this scale may contain the 

following statements: checks verbal instructions against written procedures, 

 

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checks to ensure he/she heard others correctly, brief replacements quickly 

and accurately—giving only relevant information. On the other hand, a 

very poor performance on this scale may contain the following statements: 

not answers when called, refuses to brief replacements, gives a person 

relieving him/her inaccurate information deliberately. The appraiser is 

required to indicate on each scale the level of performance he/she visualizes 

is revealed by the appraisee’s typical job behaviour. While doing so, he/she 

makes use of the behavioural anchors and dimensions— clarification 

statements as guidelines and cues to recall the appraisee’s job behaviour. 

Explicitly, it is not possible for the appraisers to place behavioural 

statements embracing all dimensions of job performance on the scales. 

Therefore, they merely indicate specific behavioural examples, which can 

be recalled for each appraisee at appropriate levels on the scale. In this way, 

these added anchors represent their own examples and rationale for an 

appraisal at a particular level. 

BARS are useful for varied reasons. Their major characteristic relates to 

behavioural orientation. They are based on job behaviour—what 

individuals really do on their jobs, which is within their control. 

Attachment of behavioural anchors to different scales enables the 

appraisees to understand what they must do to organizing the dimension of 

a managerial job may include the following: assigns/delegates tasks, 

identifies alternative approaches to resource applications, coordinates 

human, financial and material resource applications and divides unit 

objective into identifiable tasks and sets due dates. This feature of 

specificity of these scales also enables the appraisers to provide relevant 

feedback to appraisees why they received a particular level of appraisal, 

and what they can do to improve their performance. This quality of the 

 

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scale minimizes subjectivity in appraisal as well as also enables the 

appraisees to overcome their anxiety related to such appraisals. 

BARS also provide participation to both appraisee and appraiser in their 

development. They become familiar with different aspects of the job as a 

result of discussions of job dimensions and anchors in small group 

meetings. This understanding provides guidelines to the appraiser while 

observing performance and enables the appraisee to judge the expectations 

of his/her superior. Any conflict between the appraiser and appraisee over 

the desired performance can be clarified in subsequent discussions. The 

participation of their ultimate users in the design of BARS also ensures 

their commitment to this method of appraisal. 

As BARS are based on quantity measures, an attempt may be made to 

relate appraisal scores to current wage and salary structure with a view to 

ascertaining varying extents of rewards to different behaviors. Thus, the 

management may link different levels of merit raises to different ranges of 

scores on BARS. In addition, certain job dimensions can be singled out for 

bonus administration and allied purposes. Last but not the least, the scales 

can also be used to identify behavioural criteria to facilitate selection 

decisions, construct selection tests and specify behavioural training 

objectives. Explicitly, the job dimensions in BARS can help in formulating 

training courses, and the behaviour anchors can indicate the specific 

behaviors to be learned in different content areas. The poor performance 

areas can be pinpointed to improve performance. Notwithstanding these 

advantages, BARS form a time-consuming method. Although it is 

promising, much more research is required to demonstrate its ability to 

eliminate certain types of rater errors. 

8. Management 

by 

objectives (MBO) Method: 

 

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This method of appraisal was introduced and made popular by Peter F. 

Drucker. Management by objectives requires the manager to get specific 

measurable goals with each employee and then periodically discuss his or 

her progress towards these goals. You could engage in a modest MBO 

program with subordinates by jointly setting goals and periodically 

providing feedback. However, the term MBO almost always refers to a 

comprehensive, organization wide goal setting and appraisal program that 

consist of following steps: 

(i) 

Set the organization’s goal: Establish on organization wide plan for 

next year and set goals. 

(ii) 

Set departmental goals: Here department/heads and their superiors 

jointly set goals for their departments. 

(iii) Discuss departmental goals: Department heads discuss the 

department’s goals with all subordinates in the department and ask 

them to develop their own individual goals; In other words, how can 

each employee contribute to the department’s attaining its goals. 

(iv)  Define expected results: Here department heads and their 

subordinates set short-term performance targets. 

(v) Performance 

reviews: 

Department heads compare the actual 

performance of each employee with expected results. 

(vi) Provide 

feedback: 

Department heads hold periodic performance 

review meetings with subordinates to discuss and evaluate the 

latters’ progress in achieving expected results. 

MBO, thus, is a performance-oriented system. A well thought out MBO 

system provides the following benefits to the organization. 

 

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(i) 

The setting up of objectives provides a basis for coordinating 

between and among various units of the organization. 

(ii) 

It establishes a linkage between the performance of the individual 

and organizations. Hence, both move in the achievement of same 

objectives. 

(iii) 

It becomes easy to implement because those who carry out the plans 

also participate in setting up these plans. 

(iv) 

Each employee becomes aware of the exact task that he is supposed 

to perform leading to better utilization of capacity and talent. 

(v) 

The communication chain between and among employees and units 

are clearly established facilitating information sharing. 

(vi) 

The performance appraisal is built in the system itself. It provides 

the guidelines for self as well as evaluation by the supervisor against 

the set tasks and goals. 

(vii)  It facilitates the task of employee guidance and counseling. 

Notwithstanding the above merits, the result-oriented procedure has several 

limitations. The procedure is impracticable in situations where the superior 

is decisive and seldom bothers to involve the subordinates in goal-setting 

goals. Moreover, the procedure stresses tangible goals (i.e. production) and 

ignores intangible goals (i.e. morale). This may also cause concealment of 

poor performance, distortion of data and the fixation of low goals. 

MBO is a time-consuming. Taking the time to set objectives, to measure 

progress and to provide feedback can take several hours per employee per 

year, over and above the time you spent doing each person’s appraisal. 

Setting objectives with the subordinate sometimes turns into a tug of war 

 

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with you pushing for higher quotas and the subordinate pushing for lower 

ones. 

10.5  Grey Areas in Performance Appraisal

 

The ideal approach to performance evaluation is that in which evaluator is 

free from personal biases, prejudices and idiosyncrasies. This is because 

when evaluation is objective, it minimizes the potential capricious and 

dysfunctional behaviour of the evaluator, which may be detrimental to the 

achievement of the organizational goals. However a single foolproof 

evaluation method is not available. Inequities in evaluation often destroy 

the usefulness of the performance system—resulting in inaccurate, invalid 

appraisals, which are unfair too. There are many significant factors, which 

deter or impede objective evaluation. These factors are: 

(i) 

Halo Error  

It occurs when the rater allows one aspect of a man’s character or 

performance to influence his entire evaluation. It is the tendency of 

many raters to set their rating is excessively influenced by one 

characteristic rather than on all subsequent characteristics. 

This problem often occurs with employees who are especially 

friendly or unfriendly toward the supervisor. For example, an 

unfriendly employee will often be rated unsatisfactory for all traits 

rather than just for trait “gets along well with others”. Being aware 

of this problem is a major step toward avoiding it. Supervisory 

training can also alleviate the                problem.