Designing Appraisal System

Posted by | June 24, 2011 | HRM

There is a simple equation when it comes to measuring performance:
P = A x E x S
A = Ability, E = Effort and S = Organization Support
Combined these three things, the skills and abilities of the employee, the amount of sincere efforts he/she puts in and the trust the organization shows actually determines the performance of that individual. It is vital that the Appraisal System devised by the company serves to improving employee performance through:

  • Positive Reinforcement
  • Employee Assistance/ Support Programs
  • Penalization (if required)
  • Self Management

For what I have learned with my limited experience, I believe that to devise a successful Appraisal System following Parameters need to be met:

1.Gain Support for the System:
A proper foundation is required to build an effective appraisal system and that foundation can only be provided by the organizational leadership. It is essential that the management must synthesize and pronounce to all employees why performance appraisals are being conducted and what outcomes are to be achieved with this appraisal system. Sedulously devised and clearly communicated intentions will enable and motivate managers to conduct appraisals properly and energize their effectiveness in relation to performance management.

Decisions regarding employee training & development, employee performance planning and compensation & benefits programs for the employees are likely to be judged by the information collected during their appraisals and hence there must be no compromise on the effectiveness of the appraisal system. This can only be achieved if the manager has complete support from the top management and is also held completely accountable for the quality of the appraisal system. This will be a constant motivation factor for the manager to design the best possible performance appraisal system for the company.

2. Choose Appropriate Rating System:
Focused and meaningful Appraisal system is a successful Appraisal system. It is important on the part of the manager, keeping in mind the situation and psychology of his/her employees, to select the most appropriate method for performance appraisal. Following are some common methods used to carry out performance appraisals.

  • Rating Scales:
    This method is perhaps the most commonly used tool for Performance Appraisal, as each employee trait or characteristic is measured on a two sided scale that contains points from 1 to 10 (with 10 being the highest) or notions such as from “poor” to “excellent” (or some other similar rankings). These scales measures employee performance and traits such as cooperation, leadership skills, communication abilities, time management and so on and so forth. Such scales are easy to use and can be used for all kinds of employees working in the company.
  • Comparative Methods:
    Comparative Methods actually compare the performance of one employee to another. Comparative Methods, though, are rarely popular with modern HR managers because such methods are unable to compare employees across different groups. Some common comparative methods are explained below:
  • Ranking: Rankings refer to overall assessments of employees, where the evaluator judge employees from best to worst overall or from most effective to least effective in terms of a certain criterion.
  • Forced Distribution: Forced distribution is a statistical model which rates employees according to a specified distribution. Manager rates subordinates according to the following distribution: 10 percent low; 20 percent below average; 40 percent average; 20 percent above average; and 10 percent high. In a group of 20 employees, two would have to be placed in the low category, four in the below-average category, eight in the average, four above average, and two would be placed in the highest category. The proportions of forced distribution can vary. For example, a supervisor could be required to place employees into top, middle, and bottom thirds of a distribution. This method can be confusing and is certainly not suitable for small groups otherwise massive discrimination is likely to occur.
  • Critical Incident Methods:
    The critical incident method of performance appraisal involves pointing out and evaluating of specific events (or incidents) where the employee did something really well or something that needs improvement. This technique can be very helpful for the employees to improve themselves and also be motivated. Some of the very common Critical Incident Methods are
  • Annual Review: A yearly assessment by the manager of the employee with regards to his/ her performance during a series of incidents. The HR manager writes down success or failure of employee with respect to carrying out the tasks assigned to him/her throughout the performance period.
  • Behaviorally Anchored Rating Scales (BARS): Smith and Kendall developed this model of rating employee performance. BARS are normally presented vertically with scale points ranging from five to nine. Here employee performances are evaluated on his/ her exhibition of behaviors critical to job success or failure regarding a particular incident. For e.g. the mode in which the receptionist answers a telephone call etc.
  • Management by Objectives (MBO):
    MBO methods are more result oriented mode of performance appraisal. Employee is evaluated by the extent to which he/she was able to carry out a predetermined work objective. For e.g. a sales manager was given the task of increasing company sales volume by certain units by certain time (like 1000 units in six months). Once an objective is set the employee is expected to self-audit i.e. identify the skills needed to carry out this task. After that certain amount of time, the employee itself will be in a better position to assess his/her performance.These are some very commonly used methods of performance appraisal currently in use. These methods may also be used in combinations.

3.Choose Appropriate Timings for Appraisals:
Performance appraisals can be conducted for each month, or on annual basis. However, the general suggestion is to conduct performance semi annually as a 6 month review is neither too frequent nor too infrequent. Though regular checks on employee performances should be kept by the manager and a monthly meeting should be scheduled to review employee performances, so that employees may know their current work status.

4. Ensure Appraisal Fairness:
Without a doubt a fair performance appraisal is what the company needs after all, otherwise there will be no point in conducting one. If employees are assessed unfairly, they will be de-motivated, their work will suffer, and in-turn the company as well. Organization must ensure that no personal bias on the part of the HR manager or the Administration exists when conducting Performance Appraisal. This can only be achieved if a clear code of conduct and strong sense of ethics is present amongst the management and the employees.

View PDF:

1.Designing effective performance Appraisal System


2.Designing a performance Appraisal System


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7 Responses to “Designing Appraisal System”

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