PERFORMANCE

MANAGEMENT
MBA T6

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 UNIT 1
PERFORMANCE EVALUATION
Performance evaluation is the process of evaluating how effectively employees are
fulfilling their job responsibilities and contributing to the accomplishment
of organizational goals. To appraise performance effectively, a manager must be
aware of the specific expectation for a job, monitor the employee’s behavior and
results, compare the observed behavior and results to expectations and measure the
match between them. Performance evaluations are extremely important to an
organization, although they may be difficult to conduct. They tell organizations
whether their selection methods are right. They demonstrate where training,
development and motivational programs are needed and later help to assess
whether these have been effective. Performance refers to an employee’s
accomplishment of assigned tasks. Performance means doing a job effectively and
efficiently. Performance evaluation is the process by which manager or consultant
examines and evaluates an employee’s work behavior by comparing it with preset
standards, documents the results of the comparison and uses the results to provide
feedback to the employees to show where improvements are needed and why.
Characteristics of an effective Performance evaluation

Characteristics of an effective Performance evaluation are:-

1) Explain the appraisal process:- In the appraisal meeting between a manager
and employee, the manager should first explain the purpose and the process of the
Performance evaluation.
2) Clarify job expectations:- A mutual understanding of job expectations is
essential to an effective Performance evaluation. Absence of mutual understanding,
the appraisal meeting could spiral downward because the manager and employee
might be working from completely different viewpoints.
3) Review and update job skills:- It is important to review the skills of employees
and update accordingly. Manager discusses any improvements necessary, and
praise the employee for acquiring the new skill.
4) Review accomplishments and goals:- Accomplishments throughout the
evaluation year will be enumerated. If there are quantifiable goals established for
the review period, the manager and the employee determine if the goals have been
met. Often, a “management by objective” technique is used to track specific, goals,

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progress and completion of each quarter. Using this technique simplifies the
Performance evaluation because there are intermediate assessments made during
the evaluation period.
5) Final steps and rewards:- An overall appraisal score may be discussed during
the meeting or it may be calculated after the manager has had an opportunity to
consider the employee input. In addition, the manager should indicate whether or
not the employee will be entitled to an increase in pay or bonus, if applicable.
Many employers use a scale that determines a percentage increase in Performance
evaluation scores.
Overall performance evaluation of employees is done in order to achieve the
following objectives:
1) To effect promotions based on competence and performance.
2) To confirm the services of probationary employees upon their completing
the probationary period satisfactorily.
3) To assess the training and development needs of employees.
4) To decide upon a pay raise where (as in the unorganized sector) regular pay
scales have not been fixed.
5) To let the employees know where they stand insofar as their performance is
concerned and to assist them with constructive criticism and guidance for the
purpose of their development.
6) To improve communication, performance evaluation provides a format for
dialogue between the superior and subordinate and improves understanding of
personal goals and concerns.
7) Finally, performance evaluation can be used to determine whether HR
programs such as selection, training, and transfers have been effective or not.

7 Steps of Performance Evaluation Process

1. Job Analysis: - The first step in the process of performance appraisal is job
analysis. Defining the job and analyze for making sure that employer and
subordinates agree on his or her duties and job standards.

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2) Establishing performance standards:- The second 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.
3) Communicating the standards:- Once set, 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 them. This will help them to understand their roles and to
know what exactly is expected from them.
4) Determining the actual performance:- The most difficult part of the
Performance appraisal process is determining the actual performance of the
employees that is the work done by the employees during the specified period of
time.
5) Matching the actual with the desired performance:- The actual performance
is matched with the desired or the standard performance. The comparison tells the
deviations in the performance of the employees from the standards set.
6) Discussing results:- The result of the appraisal is communicated and discussed
with the employees on a 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.
7) 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.
Benefits of Performance Evaluation
i) Advantages to Appraiser:-
1) It sharpens appraiser’s control over his own activities: A systematic
appraisal will provide the executive with a better idea of his strengths and
weaknesses in his department and so enable him to make more effective
work assignments.

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 2) Clear-cut responsibility for results: Sometimes there are differences in
understanding on the part of the manager and his subordinate executives
as to just what their authority and responsibilities are. Drawing up a
checklist of the responsibilities of the subordinate as well as the scope of
his position will reduce any possible misunderstanding as to performance
goals.
3) Perspective in sizing up subordinates: A systematic appraisal program
means that there will be relaxed discussions with subordinate personnel
regarding their strengths and weaknesses. This type of interview results
in a more judicious evaluation and is far superior to the crisis discussion
which takes place when something has gone wrong.
4) An objective basis for discussing salary and promotion: When an
employee comes to his office with a request for a wage raise or for
promotion, the appraisal record and the last appraisal interview provide
an objective basis for discussion. This will serve to avoid embarrassment.
5) Aid to effective recruitment: An executive who follows systematic
appraisal procedures will be able to discuss past hiring with the personnel
department on the basis of tangible results. And he can be much more
specific in setting up job specification when he has to go outside the
company for staff recruitment.
ii)Advantages to Appraisee
1) How am I doing: The periodic review tells the subordinate where he
stands in the organization? This is one of the most important results of
the appraisal activity. The discussion of his record as a whole over an
extended period enables the subordinate to see his job and his
performance in that job in true perspective.
2) Specific development of subordinates: The appraisal activity should
help the subordinate improve performance. It is a guide for coaching and
a basis for suggesting further training which will help the subordinate
expand his presentation skills.
iii)Benefits to the organization:-
1) To plan and adjust compensation package for employees.

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 2) To identify training and development needs for the potential employee.
3) To provide a career plan for the employee.
4) To motivate the employees through an objective appraisal.
Disadvantages or Limitations of Performance Evaluation
1) Performance evaluations are very time consuming and can be
overwhelming to managers with many employees.
2) Sometimes, a strict appraisal may affect the goodwill between senior and
junior. When different departments in the same company use different
methods of appraisal, it becomes very difficult to compare among the
employees.
3) They are based on human assessment and are subject to rater’s errors and
biases.
4) PA can be a waste of time if not done appropriately.
5) Many bosses do not wish to spoil their relations with subordinates by
giving a poor appraisal. They can create a very stressful environment for
everyone involved.
6) The objective of the PA is to evaluate and develop employees. One PA
system cannot achieve both objectives.
7) Feedback is an important element of PA. Performance feedback lets
employees know how well they have performed in comparison with the
standards of the organization.
Guidelines for effective performance evaluation interviews
1) Emphasize positive aspects of employee performance.
2) Tell each employee that the evaluation session is to improve
performance, not to discipline.
3) Conduct the performance review session in private with minimum
interruptions.
4) Review performance formally at least annually and more frequently for
new employees or those who are performing poorly.

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 5) Make criticisms specific, not general and vague.
6) Focus criticisms on performance, not personality characteristics.
7) Stay calm and do not argue with the person being evaluated.
8) Identify specific actions the employee can take to improve performance.
9) Emphasize the evaluator’s willingness to assist the employee’s efforts
and to improve performance.
10) End the evaluation sessions by stressing the positive aspects of the
employee’s performance.
EVOLUTION OF PERFORMANCE MANAGEMENT
The term performance management gained its importance from the times when
the competitive pressures in the market place started rising and the
organizations felt the need of introducing a comprehensive performance
management process into their system for improving the overall productivity
and performance effectiveness.
The performance management process evolved in several phases
1) First Phase: The origin of performance management can be traced in the
early 1960’s when the performance appraisal systems were in practice.
During this period, Annual Confidential Reports (ACR’s) which was also
known as Employee service Records were maintained for controlling the
behaviors of the employees and these reports provided substantial
information on the performance of the employees. Any negative comment
or a remark in the ESR or ACR used to adversely affect the prospects of
career growth of an employee. The assessments were usually done for ten
traits on a five or a ten point rating scale basis. These traits were job
knowledge, sincerity, dynamism, punctuality, leadership, loyalty, etc. The
remarks of these reports were never communicated to the employees and
strict confidentiality was maintained in the entire process. The employees
used to remain in absolute darkness due to the absence of a transparent
mechanism of feedback and communication. This system had suffered
from many drawbacks.
2) Second Phase: This phase continued from late 1960’s till early 1970’s,
and the key hallmark of this phase was that whatever adverse remarks

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 were incorporated in the performance reports were communicated to the
employees so that they could take corrective actions for overcoming such
deficiencies. In this process of appraising the performance, the reviewing
officer used to enjoy a discretionary power of overruling the ratings given
by the reporting officer. The employees usually used to get a formal
written communication on their identified areas of improvements if the
rating for any specific trait used to be below 33%.
3) Third Phase: In this phase the term ACR was replaced by performance
appraisal. One of the key changes that were introduced in this stage was
that the employees were permitted to describe their accomplishments in
the confidential performance reports. The employees were allowed to
describe their accomplishments in the self appraisal forms in the end of a
year. Besides inclusion of the traits in the rating scale, several new
components were considered by many organizations which could
measure the productivity and performance of an employee in
quantifiable terms such as targets achieved, etc. Certain organizations
also introduced a new section on training needs in the appraisal form.
However, the confidentiality element was still being maintained and the
entire process continued to be control oriented instead of being
development oriented.

4) Fourth Phase: This phase started in mid 1970’s and its origin was in India
as great business tycoons like Larsen & Toubro, followed by State Bank
of India and many others introduced appreciable reforms in this field. In
this phase, the appraisal process was more development driven, target
based (performance based), participative and open instead of being
treated as a confidential process. The system focused on performance
planning, review and development of an employee by following a
methodical approach.

5) Fifth Phase: This phase was characterized by maturity in approach of

handling people’s issues. It was more performance driven and emphasis
was on development, planning and improvement. Utmost importance
was given to culture building, team appraisals and quality circles were
established for assessing the improvement in the overall employee
productivity.

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Definition of Performance Management
The role of HR in the present scenario has undergone a sea change and its foc us
is on evolving such functional strategies which enable successful
implementation of the major corporate strategies. In a way, HR and corporate
strategies function in alignment. Today, HR works towards facilitating and
improving the performance of the employees by building a conducive work
environment and providing maximum opportunities to the employees for
participating in organizational planning and decision making process.
Performance management is a much broader and a complicated function of HR,
as it encompasses activities such as joint goal setting, continuous progress
review and frequent communication, feedback and coaching for improved
performance, implementation of employee development programmers and
rewarding achievements.
A performance management system includes the following actions:-
1) Developing clear job descriptions and employee performance plans which
includes the key result areas (KRA') and performance indicators.
2) Selection of right set of people by implementing an appropriate selection
process.
3) Negotiating requirements and performance standards for measuring the
outcome and overall productivity against the predefined benchmarks.
4) Providing continuous coaching and feedback during the period of delivery of
performance.
5) Identifying the training and development needs by measuring the outcomes
achieved against the set standards and implementing effective development
programs for improvement.
6) Holding quarterly performance development discussions and evaluating
employee performance on the basis of performance plans.
7) Designing effective compensation and reward systems for recognizing those
employees who excel in their jobs by achieving the set standards in accordance
with the performance plans or rather exceed the performance benchmarks.
8) Providing promotional/career development support and guidance to the
employees.
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9) Performing exit interviews for understanding the cause of employee
discontentment and thereafter exit from an organization.
THE LINK BETWEEN PERFORMANCE APPRAISAL AND OTHER
HUMAN RESOURCES MANAGEMENT FUNCTIONS:-
1) Appraisal and Human resources planning: Human resource planning
is used to estimate future human resources management needs by
analyzing current job occupation, turnover, transfers, promotions (as
well as the related skill levels) and retirements. Because the managers
and supervisors must take decisions concerning promotions, demotions,
transfers and lay-offs, past performance apprails normally help to
determine which employee is most deserving of a promotion or other
desirable job changes.

2) Appraisal and promotion:- If promotions are not fairly administered low

employee morale; high turnover can be the order of days in an
organization which will ultimately reduce productivity and increase
unnecessary costs. Performance evaluation can be used to increase and
to promote an individual as well as to improve employee performance.

3) Appraisal and remuneration:- If the decision is made to use a merit pay

system which is based on performance appraisal result, then it follows
that appraisal must be done and done very well. Even if performance
appraisal results are not used for merit pay purposes, there is a good
reason to believe that appraisals should be done.

4) Appraisal and training and development:- Employee performance

appraisals are especially appropriate for identifying individual training
and educational needs. After all, an appraisal is intended to determine
how well an individual is performing his or her job.

5) Appraisal and dismissals:- Dismissals cause movement outside the

organization and invariably lead to an unplanned vacancy. They
represent extreme disciplinary action and must not be taken lightly.

6) Performance appraisal and recruitment, selection, and placement:- The

effectiveness of these functions can be partially be measured by

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 comparing employees’ performance appraisals with their test scores as
job applicants.

GOAL SETTING THEORY

“Goals refer to future valued outcomes, the setting of goals is first and foremost
a discrepancy-creating process” (Locke & Latham 2006: 265). In addition goal
setting will help in developing action plan designed to guide people and
organizations. Consequently, this helps in making it a major component of
personal development and management literature. Furthermore, many
researchers point out that there is a positive correlation between goal setting and
improved business and organisational results. This is because goal setting
theory encompasses all aspects of building organisations with efficiency (Locke
& Latham 2006; Spaulding & Simon 1994; Koppes 2014).
Properties of goal setting theory
According to Locke, there are five basic principles that allows goal setting to
perform better. These include: clarity, challenge, commitment, feedback, and
task complexity (Locke & Latham 2006).
1) Clarity: refers to a clear and measurable goal that can be achieved within
specific timeline and within goal setting.
2) Challenge: refers to the goals being able to achieve decent level of
difficulty, motivating the individual and organisation to strive for positive
goal achievements.
3) Commitment: makes individuals or organisations to put on deliberate
efforts in meeting goals. Furthermore, it also helps goals to become more
achievable.
4) Feedback: provides information on the progress towards achieving goals.
Individuals and organisations can adjust goal setting according to the
feedbacks.
5) Task complexity: makes the achieving of goals easier by laying down
process and steps. Goal setting can be achieved by applying all the
principle stringently and ensuring that all goals account for the principles.

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Used at both individual and organizational level
Goal setting is often used by individuals for their personal goals and in
groups at workplaces and social gatherings. Goal setting can be applied in all
place where effective results are desired through efficient goal setting (Locke &
Latham 2013). Hence, in order to apply goal setting in day to day work, a
‘commitment analysis’ should be undertaken to draw up objectives and goals. It
allows continuous improvement in objectives and performance standards
(Moynihan 2008). Commitment analysis helps in determining the continuous
pursuance of objectives and goals set to improve productivity (Krausert 2009).
Advantages of goal setting theory
1) Choice helps to narrow down the goals and directs goal efforts to more
relevant activities. Various factors such as self-efficacy, past performance
and social influences affect the choice of goals. Therefore, it is important
to consider goal choice.
2) Efforts make goals to be achieved with more intensity and positive
working. Efforts allow goal commitment to be expected to impact
performance directly and indirectly. Also efforts are detrimental in
affecting personal goals and self-efficacy for individuals combined
(Wosnitza et al. 2009).
3) Persistence allows to become more intense in pursuing goals and
improving performance. Persistence includes efforts expended over the
process of achieving goals. Individuals who are persistent often see
obstacles in their goals as a challenge.
4) Cognition helps to develop and change behaviour to achieve goals. In
effective goal setting method, an intrinsic motivation towards goal
attainment is important. High achieving goals are seen as being
intrinsically and cognitively inclined (Spaulding & Simon 1994). Lock
and Latham recognised the fundamental significance of cognition in goal
setting. Furthermore, it helps to achieve task specific goals and situational
goals more progressively. Research done on cognition specific goal
setting element concluded that every cognitive task situation pose a set of
requirements for those who seek to successfully complete the task (Locke
& Latham 2013: 249).

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Limitation of goal setting theory and its validity in a business
Goal setting has often been brought out as being time consuming and expensive
in application (Mobley 1999; Julnes et al. 2007). This is because there are
various factors needs to be addressed to achieve the goals by businesses. This
includes:
i) Selections of right people with skills and knowledge.
ii) Making training for career development and organisational
productivity a necessity.
iii) Involving time and incurring expenses.
Furthermore, it also brings in internal competition risk, where employees often
compete with each other. In such a scenario the interest and objectives of the
business is to ignore and focus on individual achievements. Favoritism by
leaders of those individuals who perform better also become a limitation of the
goal setting theory (Mobley 1999; Julnes et al. 2007). Goal setting is applicable
and more importantly many organisations prefer it over other management
tools. Performance Management system is that vital part of Human Resource
Management which aligns and optimizes individual performance with the
overall performance of the organization. It can be defined as “a continuous
process of identifying, measuring and developing performance in organizations.
It is achieved by linking each individual’s performance and objectives to the
organization’s overall mission and goals” (Aguinis, 2011). There are many
notable strategies and approaches of performance management systems in order
to simplify the process. This also helps to make performance management
process more efficient for organizations. Among different approaches Control
theory is one such approach. Control theory helps in sustaining the performance
management system by defining forms of control between the organization and
the systems within. According to control theory, actions of all systems should
be in sync with the overall goals and objectives of an organization (Barrows &
Neely, 2012).
CONTROL THEORY
Control theory focuses on control mechanism which should be imposed at all
levels of an organization. There are different forms of control which an
organisation can use in order to get the desired results such as: organizational
structure, behavioral controls like norms and policies of an organization or
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performance measurement mechanisms. These results have to be congruent with
the objectives and goals of an overall organization (Barrows & Neely, 2012).
Control theory has three types of control systems:
i) Under behavior control, employer monitor and evaluate the actions
of the employees on a regular basis, as per the standards of the
organization and then reward accordingly.
ii) In case of output control the performance of an employee is
controlled with rewards or sanctions after evaluating it on the basis of
organizational standards.
iii) Input control system seek to control the selection and training
process of an employee. However, it is important to ensure the
availability of required competencies in the employees as desired by
the organization for growth and development (Krausert, 2009). Out of
these three systems, organisations can use any type of control system
or a combination of different models. Selection of the control depends
on the structure, norms, policies and administrative information in an
organization (Shell, 1992).
Managing performance through controlled process in the system
Control theory helps in performance management by evaluating the output of
the system for its consistency with pre-defined sets of parameters. In case of any
kind of deviation it will be adjusted by the controller in the system. This model
is popularly known as Cybernetic model (Barrows & Neely, 2012). This model
helps the managers to control the performance of the employees. Similarly, it
also generates faster and better outputs by regular monitoring and feedback.
Cybernetic model states that, if an organisation can execute control and
performance more effectively and efficiently, it can easily cope up with the
changes in its external environment.
Strength and weakness of control theory
All humans have some basic needs which Maslow had defined at several levels.
This includes:
I) Physiological
II) Safety

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 III) Belongingness
IV) esteem and
V) self actualization.
An employee hopes to meet these basic needs by working in an organisation.
Once their needs align with the organization’s standards and demands, desired
behavior will be achieved (Luria G., 2008). Thus, these needs make control
theory more applicable as it acts as a controller in syncing employee behavior
with the organizational behavior standards. Therefore, this will eventually lead
to achieve the desired performance. On the other hand control theory assumes
that employees look at their feedback. This feedback controls the quality of the
output. However it can also have a negative impact, as it could result in
decreased motivation and productivity level of the employee. In control theory
employee performance is also controlled by the rewards and recognition which
an employee achieves once his performance meets the standards of an
organization. However control theory sounds too mechanical and fails to
contemplate that humans are not mechanical objects (Locke, 1991). Control
theory sounds more mechanical in terms of human behavior and performance. It
can go well with a Bureaucratic, strict organization framework where employee
actions are continuously monitored and controlled. But now days work
environment has become more dynamic, challenging and competitive.
Employees need to undergo all type of self learning and skills upgradation in
order to survive.
Application of control theory at workplace
There are multiple applications of Control theory at workplace. In order to
increase the performance of employees, managers must assign specific and
challenging goals to employees that will upgrade their performance. However,
organizations should avoid the ambiguous goals which do not have the specific
standards and direct feedback (Campion & Lord, 1982). This is because without
clear feedback and proper standards, employees will not be able to rectify their
errors. On the other hand regular supervision by the supervisors on the
subordinates in the workplace can be analyzed with the control system (Carver
& Scheier, 1981). Similarly managers can use Control theory in management
program “to facilitate continuous flow of feedback between managers and
employees in an organization to track and evaluate achievements as a team”
(Pennsylvania State University World Campus, 2016). So organizations can
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apply Control theory in the areas where there are evaluation of performances,
team meetings and check-ins. In case of human resource management, all three
types of control system which are behavior control, output control and input
control can be utilized to analyze behavior and performance of an employee
(Shell, 1992). In a highly competitive global business environment, managing
human resources has become more challenging task than ever before. Most
organizations face various key issues with respect to their workforce such as:
manpower planning, recruitment, performance management and training &
development. There are various theories of performance management such as:
Goal Setting theory, Expectancy theory, Control theory and Justice Theory.
JUSTICE THEORY
Justice theory, also known as organizational justice, refers to the extent in
assessing the perceptions of the employees regarding organization’s
performance management system. These performances can influence attitudes
and behavior of the employees. These behaviors can have a negative or positive
impact on employees’ performance and the organization’s success. According
to a study there is a positive correlation between organizational justice and job
satisfaction.
In other words better the employee perception of an organization, the higher the
satisfaction level of that employee (Ali, 2010). Organizational justice is also
positively correlated to motivation, implying that where justice is observed, a
general positive attitude emerges by itself (Çelik & Saritürk, 2012). Allameh &
Rostami (2014) studied the relationship between organizational justice and
Organizational Citizenship Behavior (OCB). In the study authors found strong
relationship between the two. Similarly study by (Wan, 2016) shows that
citizenship behavior are employee behaviors that go beyond the call of duty.
Author concluded a positive association between organizational justice and
citizenship behavior. Similarly authors also suggested that organizations need to
ensure the practice of organizational justice so that it can create confidence and
loyalty among the employees. This will influence employee’s organizational
citizenship behavior.
Properties of justice theory
According to Baldwin (n.d.), there are four basic principles which can enhance
employee’s perceptions of an organizational justice: Voice gives the chance to
be heard and gives the opportunity to present the information. This can enhance
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the feelings among the employees that they are being listened to. Other
initiatives promoting voice might include suggestions schemes, empowerment
programs and participative management. Organisation should treat its
employees with utmost dignity and respect. Such culture can boost the
morale and enhance their productivity level which ultimately translates into
better and more efficient output. Employees often seek some sort of
interaction with their supervisors. It gives the opportunity so that employee
can share the information appropriately. An explanation or apology can reduce
or eliminate the sense of anger generated and avoids rude and cruel remarks.
Perceptions on a manager’s authority can affect organizational justice
judgments. One should take decisions on the basis of facts and not on vested
interests and personal feelings of the decision maker.

Advantages of justice theory

On the basis of various studies it can be said that there should be a well defined
system that promotes fair and equitable justice in an organization. This type of
system is a key to improve the employee productivity and helps in realizing the
goals of an organization. The advantages of just treatment by work
organizations include:
1) Commitment helps in building the strong connection between the
employees and the organization. Commitment and loyalty can be further
enhanced if managers give response to their employees with appropriate
explanations and feedback. With this managers can demonstrate that they
value their own employees (Baldwin, n.d.).
2) Fostering job performance enhances the overall performance of the
organization. Job performance refers to “formal job duties, assigned by
organizational authorities and evaluated during performance
appraisals” (Organ, 1988). Organizational justice indicates how
effectively workers discharge their job duties thereby improving
productivity.
3) Reduced absenteeism indicates that employees are being provided with
adequate training and support which ensures that employers are dealing
with their employees appropriately and professionally. This helps in
reducing the employee’s absenteeism and enhances the level of
organizational justice (Baldwin, n.d.).

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 4) Improved health outcomes and well-being is an important focus of
organizational psychology and management research. Both the factors
will help in achieving organizational justice (Eib, n.d.). Positive
organizational justice perceptions may trigger positive emotions and
help the employee in fulfilling the need for a meaningful existence which
may also affect individuals’ health and their well being positively
(Cropanzano & Byrne, 2001).

Limitations of justice theory

The theory of justice in performance management system perceived by
employees has some limitations also. Justice theory sometimes viewed as time-
consuming and controversial, especially when it comes to increment of pay
structure of the employees this leads to dissatisfaction among them. This is
because supervisors tend to become bias and pass their own judgments which
can make the employers to deviate from their goal targets. Employees may
sometimes perceive that they are performing at an outstanding level while the
supervisor sees such performance as average. So there is a chance that Justice
Theory may involve emotions on the part of employers in assessing the
performance level of employees (Gupta & Upadhyay, 2012). Employers may
make errors in their judgment or permit biases during the process of evaluation.
This might occur because they focus on the negative aspects and not balancing
it with the positive aspects. In some cases the employers do not have required
information to evaluate their employees.
SOCIAL COGNITIVE THEORY
Social Cognitive Theory (SCT) started as the Social Learning Theory (SLT) in
the 1960s by Albert Bandura. It developed into the SCT in 1986 and posits that
learning occurs in a social context with a dynamic and reciprocal interaction of
the person, environment, and behavior. The unique feature of SCT is the
emphasis on social influence and its emphasis on external and internal social
reinforcement. SCT considers the unique way in which individuals acquire and
maintain behavior, while also considering the social environment in which
individuals perform the behavior. The theory takes into account a person's past
experiences, which factor into whether behavioral action will occur. These past
experiences influences reinforcements, expectations, and expectancies, all of
which shape whether a person will engage in a specific behavior and the reasons
why a person engages in that behavior.
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1) Reciprocal Determinism:- This is the central concept of SCT. This
refers to the dynamic and reciprocal interaction of person (individual with
a set of learned experiences), environment (external social context), and
behavior (responses to stimuli to achieve goals).
2) Behavioral Capability:- This refers to a person's actual ability to
perform a behavior through essential knowledge and skills. In order to
successfully perform a behavior, a person must know what to do and how
to do it. People learn from the consequences of their behavior, which also
affects the environment in which they live.
3) Observational Learning:- This asserts that people can witness and
observe a behavior conducted by others, and then reproduce those
actions. This is often exhibited through "modeling" of behaviors. If
individuals see successful demonstration of a behavior, they can also
complete the behavior successfully.
4) Reinforcements:- This refers to the internal or external responses to a
person's behavior that affect the likelihood of continuing or discontinuing
the behavior. Reinforcements can be self-initiated or in the environment,
and reinforcements can be positive or negative. This is the construct of
SCT that most closely ties to the reciprocal relationship between behavior
and environment.
5) Expectations:- This refers to the anticipated consequences of a person's
behavior. Outcome expectations can be health-related or not health-
related. People anticipate the consequences of their actions before
engaging in the behavior, and these anticipated consequences can
influence successful completion of the behavior. Expectations derive
largely from previous experience. While expectancies also derive from
previous experience, expectancies focus on the value that is placed on the
outcome and are subjective to the individual.

6) Self-efficacy:- This refers to the level of a person's confidence in his or

her ability to successfully perform a behavior. Self-efficacy is unique to
SCT although other theories have added this construct at later dates,
such as the Theory of Planned Behavior. Self-efficacy is influenced by a
person's specific capabilities and other individual factors, as well as by
environmental factors.

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Limitation of Social Cognitive Theory
There are several limitations of SCT, which should be considered when using
this theory in public health. Limitations of the model include the following: The
theory assumes that changes in the environment will automatically lead to
changes in the person, when this may not always be true. The theory is loosely
organized, based solely on the dynamic interplay between person, behavior, and
environment. It is unclear the extent to which each of these factors into actual
behavior and if one is more influential than another. The theory heavily focuses
on processes of learning and in doing so disregards biological and hormonal
predispositions that may influence behaviors, regardless of past experience and
expectations. The theory does not focus on emotion or motivation, other than
through reference to past experience. There is minimal attention on these
factors. The theory can be broad-reaching, so can be difficult to operationalize
in entirety. Social Cognitive Theory considers many levels of the social
ecological model in addressing behavior change of individuals. SCT has been
widely used in health promotion given the emphasis on the individual and the
environment, the latter of which has become a major point of focus in recent
years for health promotion activities. As with other theories, applicability of all
the constructs of SCT to one public health problem may be difficult especially
in developing focused public health programs.

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 UNIT-2
PERFORMANCE MANAGEMENT PROCESS
1) Pre- Requisitesal :- it is necessary defining the purpose Cleary for
existing and new employees/ staff, departments in order to make integrate
all teams to meet company’s target. There are three primary stages where
the company defines their long term and short term goals.
i) organization level, where the management describes the holistic
view and defines overall objective of formulation of the company,
what are their long term vision, what are the values on which they
stands for, and what is the mission the company is chasing.
ii) Department level, where the management assign targets to each
department to achieve overall organization objective. At this stage,
the management strategize the processes and allocate targets to
each department.
iii) individual level, where the department further give targets to
employees. The above three stages are the foundation of
performance management system of any organization. Basis on
these three levels, the management design, strategize and develop
the performance management system. It describes job
descriptions, job specification, and job design at each level and
delegate targets to perform in order to achieve organization
objective.
2) Performance Planning:- There are three important attributes
of performance planning:
i) Results:- It provides the information about the performance gaps
and achievements. Hence, it evaluates how well the individual
employee has performance against his assign targets.
ii) Behavior:- measuring the employees behaviors are one of the most
challenging and difficult task basis on performance standards. The
human behavior can only be measured through observation and
close monitoring by his supervisors or human resources
department.

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 iii) Development plan:- development plan is the third stage of
performance planning. At this stage, we develop the plans to
improve employees knowledge, skill and attitude (K, S, A). It
allows employee to take his professional standards to next level
which the support of development tools and plans.
3) Performance Execution: Performance execution is considered as most
important stage because the whole exercise of creating performance
management systems and building up standards would rely on it. The
primary responsibility and ownership of performance execution is with
employee, which is followed by department and then organization.
Hence, it is considered as a chain or process, in which the performance of
individual employees would result department performance.
4) Performance Assessment:- Performance assessment is the next stage
followed by performance execution. In this phase, the employee and
manager both are responsible to measure and assess the performance of
employee against his targets. The process should comprise to the extent
of individual targets, behaviors or attitude and special achievements
during the performance appraisal cycle.
5) Performance Review:- The performance review stage is a platform
where the subordinate and superior exchange performance feedbacks and
review performances against given targets or goals to individual. To
make the performance review successful, the involvement and exchange
of dialogue are equally essential between employee and his manager.
Apart from performance review, they also discuss about the development
plans, trainings to improve skills and knowledge, next year goals and
targets and expectations of employee and manager both. Hence, this stage
is considered the base of next year performance appraisal cycle as well.
6) Performance Renewal and Reconstructing:- The performance
management process is an ongoing continuous process. Once the
performance has been reviewed and end, then the cycle starts for the next
performance appraisal. It should be again align with next year
organization mission, goals and objective and integrated with
departments goals In facts, it is a process which starts all over again
which needs to be discuss, design, develop , executed and review again.
This is necessitate because the external environment of company like

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 market, customers , competitors , suppliers etc. also revolved and all
subsequent changes has to prerequisites for performance planning and
setting with strategic objectives of organization.

PERFORMANCE MANAGEMENT CYCLE

1) Planning:- Planning means setting performance expectations and goal for
group and individuals to focus their effort towards achieving
organizational objectives. It is the first stage and foundation of entire PM
cycle. This stage is traditionally done in the beginning of every financial
year. During this stage managers develop an overall strategic plan for the
business. They identify future performance goal for each of their
employees in terms of target, actions and behaviour. Two major activities
during this phase is: Setting objectives, Employee development plan.
2) Monitoring:- PM works best if it is done as a continuous process
throughout the year. Regular performance review (quarterly/half yearly)
helps to ensure the plan is on track and goals will be achieved at the set
level or time. A periodic meeting is a mandatory factor in PM cycle.
3) Reviewing:- This is typically done on annual basis. It is when the final
results of the performance are reviewed. It is designed to allow the
supervisor and employee to evaluate how effectively achievements are
met the indented goals set during the planning stage. During this stage
both the supervisor and the employer review the performance.
4) Rewarding:- Rewarding means providing incentives to the employees
for their performance and acknowledging their contributions to the
organizations success. This can create a positive and a negative impact on
employees. It should be based on the merit. Rewards can be in different
forms like: Pay increase, Bonus, Promotion, Public acknowledgement,
Personal time off and Special projects.
5) Identifying talent gaps: When your HR team is engaging with
employees and managers about employee process and performance,
you’re able to see the possibilities and potential, as well as where
problems may be prone to happen. You can more easily see the need for
additional positions or new hires – having a more holistic view of the
entire process can give your business more information to make better

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 business decisions that ultimately serve everyone from individual
employees to overworked teams to lagging business units.
6) Documentation: Formal performance management gives your business
the opportunity to document everything from complaints and problems to
praise and promotions. Businesses of every size need to have
documentation of the communication between employees and HR to
make sure that there is the appropriate paperwork available in case there’s
ever a legal issue or dispute.
EMPLOYEE ENGAGEMENT AND PERFORMANCE MANAGEMENT
Aberdeen defines employee engagement as a positive, work-related attitude
characterized by high levels of energy, emotional commitment, and satisfaction
derived from the work simply put, performance management ensures that all
employees are dedicated to organizational operations, and employee
engagement creates a culture in which employees feel excited about and
satisfied with their work. These functions are complementary. They subtly, yet
actively encourage and assist employees in reaching both individual,
professional benchmarks and overall company goals. Businesses should be
paying close attention to how they engage employees, sustain that engagement,
and integrate it with performance management processes.
PRINCIPLES OF PERFORMANCE MANAGEMENT
The principles of performance management have been well summarized by IRS
(1996) as follows:-
1) It translates corporate goals into individuals, teams, department and
divisional goals.
2) It helps to clarify corporate goals.
3) It is a continuous and evolutionary process, in which performance
improves over time.
4) It relies on consensus and cooperation rather than control on coercion.

5) It encourages self-management of individual performance.

6) It requires a management style that is open and honest and encourages to
two-way communication between superiors and subordinates.

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 7) It requires continuous feedback
Performance management should operate in accordance with the following
ethical principles as defined by Winstanely and Stuart- Smith (1996)
1) Respect for the individuals – people should be treated as ‘ends in
themselves’ and not merely as ‘means to other ends’;
2) Mutual respect- the parties involved in performance management
processes should respect each other’s need and preoccupations;
3) Procedural fairness- the procedures incorporated in performance
management should be operated fairly to limit the adverse effect on
individuals;

4) Transparency- people affected by decisions emerging from the

performance management process should have the opportunity to
scrutinize the basis upon which decisions were made.
OVERVIEW OF PERFORMANCE MANAGEMENT AS A SYSTEM
Performance management system is the systematic approach to measure
the performance of employees. It is a process through which the organization
aligns their mission, goals and objectives with available resources (e.g.
Manpower, material etc), systems and set the priorities.
Managing employee’s performance is the key objective of establishing
systematic Performance Management system in an organization. These process
servers’ six main purposes in the company: Strategic, Administrative,
Communication, Developmental, Organizational Maintenance,
Documentation.
DIMENSIONS OF PERFORMANCE MANAGEMENT
1) Result and Output: The most acceptable and measurable dimension of
performance is result and output. It describes the conditions of inputs
which included raw material, working conditions, process capabilities and
talent of employees in the final form of product or service. It is necessary
to plan all the performance activities in a scientific and systematic
manner so that the desired result or output may be obtained.

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2) Input: This dimension deals with the activities to be accomplished by the
employee. Performance can be achieved if the nature of inputs can be
managed without mistake, because performance is a function of three sets
of factors – ability, motivation and organizational support. If anyone
among these three factor is less the performance is to be poor.
Employee Performance = Employee Competence + Employee Motivation
+ Organisational Support
3) Time: Time is precious and very important dimension of performance. In
the current scenario of world, the performance management is time bound
otherwise the survival of organisation is not possible in the future.
Performance of an employee in relation to a given role during particular
period of time under the set of circumstances operating at that point of
time. Therefore, time may become the target.
4) Focus: Performance also has a focus dimension. For example in case of
sales, profits and new areas. Focus means attention, not only on own
activities but should also keep close watch on related activities.
5) Quality: ‘Quality is not destination but a journey’. Quality refers to doing
the things right from the first time rather than making and correcting
mistakes in order to achieve total customer satisfaction. It means quality
is conformance to customer requirements, not goodness. Higher is the
quality greater is the satisfaction of customers. It is the responsibility of
each and every employee as well as management to build a quality
standard which provides reasonable customer satisfaction at economical
cost. Quality is the core dimension of performance management.
6) Cost: The ultimate principle of purchasing is the low cost with best
quality. Therefore cost effectiveness is another dimension of performance
management. It implies the capacity of a business unit to produce a given
commodity at a lower cost through more effective utilization of existing
resources. It is the process of cost reduction by improving efficiency of
operations.
7) Output: Output relationships and analysis- It is relevant and essential to
understand the input-output relationships and analysis. The purpose of
input-output analysis is to find out the interdependencies and
complexities of the economy in order to determine the conditions for

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 maintaining balance between demand and supply. It describes the inputs
required to produce the outputs of different sectors of the economy. It
also involves the study of the exchange of goods and services among
industries.

UNIT 3
PERFORMANCE MANAGEMENT PLANNING
The performance planning is a formal process in organizations for discussing,
identifying and planning the organizational as well as individual goals which an
employee can or would achieve in coming appraisal or review cycle. The
performance and planning are done both but the employer as well as employee
through a proper plan called development plan. Performance plans are decided
between the supervisor and employee working together. They together
determine the performance expectations and development objectives to be
accomplished during the review period. They discuss goals, objectives and
expectations for the review period. The process helps to improve the
communication and discuss the career development plan of the employee.
OBJECTIVE AND NEED FOR PM PLANNING
1) To come to agreement on the individual’s job responsibilities
2) To remove any ambiguity of the goals and objectives that needs to be
achieved
3) To identify the competencies required for doing the job
4) To create an appropriate performance and career development plan for
the individual
Definition
Performance Planning may be defined as a systematic outlining of the activities
that the manager is expected to undertake during a specified period so that he is
able to make his best contribution to developmental and organizational
outcomes. (Rao 2004)

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PERFORMANCE PLANNING PROCESS
1) Identify the Strengths of Each Individual:-

 A handy tool that can be used here is the SWOT analysis.

 The results will reveal not only the strengths of the individual, but
also their weaknesses, and the opportunities and threats with regard
to their career.

 So the manager can take a decision on the basis of this.

2) Set Performance Goals:-

 On the basis of SWOT, establish performance goals.

 Involve the employee during this step; their participation will help
them understand the plan and where he/ she is heading.

 However, prior to setting the goals, you need to gain an

understanding of the overall goals of the organization, and that of
the team or department the employee represents. Then make sure
that the individual performance goals align well with them.

3) Define Employee Responsibilities:-

 When you have already established the goals an individual has to

achieve within the time period, it becomes easier to define their
responsibilities. With a performance review, their responsibilities
may change, but they’ll always be assigned a basic set of functions.

 Create an organizational chart clearly conveying their place in the

organizational or team hierarchy and their roles and
responsibilities. This will also let them see how they influence the
work of their colleagues as well.
4) Describe the Resources Needed:-

 Once the performance goals are clear, identify the resources

necessary to accomplish them. These could vary from computers,
training material to action plans.

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  The action plan should lay out the steps the individual should take
to accomplish the goals. Check out this resource on Action Plans to
learn how to create one.
5) Create a Development Plan:-

 This is where you come up with a plan or plans to develop the

skills, knowledge and even the attitudes of the employees which
are needed to achieve the goals that have been set and carry out the
new responsibilities assigned to him/ her.

 During this stage, career development plans are built to help the
employee understand where they are headed in their career. It will
have a positive impact on the employee’s motivation and personal
growth.
6) Continue to Coach and Counsel:- As the employee carry out his/ her
responsibilities and the steps laid out in the action plan to achieve the
goals, his/her seniors should take it upon themselves to give the support
necessary for him/ her to succeed.
PERFORMANCE AGREEMENT
A performance agreement is a method of establishing expectations and
accountability for meeting a set standard of execution excellence -- and the
consequences for not meeting them. Two or more parties agree on the actions
the performer will execute and agree on the expected results from executing
those actions. Oftentimes, there are consequences if the performer doesn't
deliver as agreed. Performance agreements not only ensure that performance
is measured, they also set up a great communication system to regularly
discuss individual performance. These agreements are essentially a way of
making sure that everyone is aware of what they need to work on, and why.
Performance agreements must clearly state agreed-upon objectives and how
these will be measured. Document these things to help you avoid future
disagreements about exactly what you expected the person to accomplish. It
establishes and agrees results-oriented goals that are aligned with the overall
objective you want to achieve. This is where managers help staff understand
how their roles fit into the larger picture of organizational success. From there,

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each staff member develops specific performance goals and targets that are
aligned with the company's strategic goals.

CHARACTERISTICS OF PERFORMANCE AGREEMENT

 Reflects business needs.

 Is achievable and relevant.

 Outlines authority and accountability.

 Can be evaluated or measured.

 Is fair.

 Holds people to account.

ADVANTAGES OF PERFORMANCE AGREEMENT

 Aligns personal and organizational goals.

 Improves trust and understanding.

 Encourages communication and feedback

 Assists career planning and development.

 Ensures that what you agree upon is relevant and achievable.

 Makes performance a shared responsibility between you and your staff.

 Establishes a process to follow up on performance and development

plans.

 Provides an objective and fair way to evaluate performance.

 Holds staff members accountable for their performance.

DRAWING UP THE PLAN

1) Be specific about what good performance looks like:- The foundation
for a good performance improvement plan is to be overt about goals and
priorities, and to revisit them on a regular basis. The individual needs to

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 understand exactly what they need to focus on, what they need to achieve
and what actions and behaviours will be valued by their manager.
2) Agree a timeline:- Setting a clear timeline will give people focus and
ensure that the situation doesn’t just meander on. Be realistic. If there are
significant development needs, for example, progress isn’t going to
happen overnight. Work with the individual to agree a timescale that they
are happy with – preferably one that doesn’t put them under an
unacceptable level of pressure, but ensures they will deliver as quickly as
is feasible.
3) Include relevant training:- Lack of appropriate skills is often behind
under-par performance. Maybe someone has been catapulted into a role
for which they are not equipped. Or perhaps their skills have become out
of date or overtaken by technological developments. If a skills deficit is a
factor in poor performance, it’s only fair to provide training to help
people close that gap.
4) Offer on-going support:- When you’re drawing up a performance
improvement plan, it’s important to make sure the employee knows you
actively want them to succeed. Make it clear you have their back and will
be there to offer support and a listening ear along the way. Drawing up a
plan in conjuction with the employee, rather than imposing something on
them from on high, is always going to be more successful. If people feel
they are part of the process, they are much more likely to be committed to
it.
5) Be ready with next steps:- If it’s been put together well, your
performance improvement plan should have been successful and the
employee in question will have raised their game. If that doesn’t happen,
however, you need to be clear about what will happen next. Does the
issue need to be escalated? Is there a need to get others involved? What is
the company’s disciplinary procedure and under what circumstances will
it be invoked. Make sure you are clear about the process – but that the
employee is also clear that there will be consequences if their
performance fails to improve.

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PERFORMANCE MANAGEMENT PLANNING AND
DOCUMENTATION

 Good documentation is important in justifying evaluations and resultant

administrative decisions.

 It is important to document performance over the entire year.

 Good documentation procedures support a productive performance

review discussion.

 Managers need to document employee performance, both positive

contributions and performance failures.

 Documentation should be written during or immediately following the

meeting or conversation with the employee.
CHARACTERISTICS OF EFFECTIVE DOCUMENTATION

 Accurate

 Specific

 Consistent

 A record of a discussion – never done in isolation

 Factual, not inferential

PERFORMANCE DOCUMENTATION MAY FOCUS ON
Actions of the employee, Results of job performance
NEED FOR DOCUMENTING EMPLOYEE PERFORMANCE

 Documentation provides evidence for PM process.

 It is chronological and a precise description of the employee’s actions, the

manager’s actions, and events as they occur.

 Documentation provides evidence to justify salary increases, decreases,

or why an employee received no raise.

 In the event of a lawsuit, complete and thorough documentation protects

an employer's interests.
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THE NEED FOR STRUCTURE IN PERFORMANCE MANAGEMENT

 Organizational structure defines the supervisory relationships,

departmental structure and workflow within a company.

 Performance management involves the systematic improvement of

individual and team performance through goal-setting and regular
performance reviews.

 Performance management systems and policies can be greatly influenced

by a company's organizational structure, and organizational performance
goals can help to shape a company's structure, as well.

 Understanding the interplay between these two concepts can help you to
design the most effective performance management systems for your
organizational structure.
WHAT TO DOCUMENT

 Managers need to document employee performance, both positive

contributions and performance failures.

 They need to document exactly what the employee did and said and what
the manager did and said in response during the meeting or conversation.

 Document any agreements made during the conversation, goals set,

improvements required and expected, and the timeline for improvement.

 Documentation should also contain commitments that the manager makes

to assist the employee.

 Any documentation of disciplinary actions should certainly be included.

MANAGER’S ROLE AND RESPONSIBILITY IN PERFORMANCE
MANAGEMENT

 Communicating an organization’s mission and values to its employees.

 By clearly defining the work expectations and communicating it.

 Keeping the employees informed about their progress towards

achievement of goals.

 Suggesting corrective actions for non achievement of performance.

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  Design policies which ensure an efficient management of performance in
an organization
EMPLOYEE’S ROLE IN THE PERFORMANCE MANAGEMENT
PROCESS

 The employees have a vital role to play in the performance management

cycle as the entire process revolves around them.

 Work effectively to the agreed standards required by the organization.

 They play an active part in formulating performance agreements along

with their line managers.

 They discuss their roles and the competencies required and define
objectives in conjunction with their superiors.

 Hence, the employees should be trained in all these activities.

UNIT-4
PERFORMANCE APPRAISAL
A “Performance appraisal” is a process of evaluating an employee’s
performance of a job in terms of its requirements. Performance appraisal is the
process of reviewing an individual’s performance and progress in a job and
assessing his potential. It is a systematic method of obtaining, analyzing a
recording information about a person doing a specific job, rather than assessing
the job itself as in the case of job analysis. Performance appraisal is the
assessment of the real and relative worth of the employees in a systematic and
subjective way. The competence of the employee should be measured with
reference to the established standard of the task assigned.
DEFINITION
According to Newstrom, “It is the process of evaluating the performance of
employees, sharing that information with them and searching for ways to
improve their performance’’. According to Flippo, "performance appraisal is
the systematic, periodic and an impartial rating of an employee’s excellence in
the matters pertaining to his present job and his potential for a better job."

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PURPOSE OF PERFORMANCE APPRAISAL:-
1) Informational Purposes:- To let employees know how their performance
compares with job standards, To provide a written record of employee
performance, To assist in identifying special talents and abilities, To identify
employees whose performance must improve or face disciplinary action, and
make this a matter of record.
2) Motivational Purposes:- To establish closer supervisor-employee
relationships and communicate to the employee the job requirements and
standards of performance, To provide recognition for a job well done, To
establish plans to solve performance problems, To encourage initiative and
develop a sense of responsibility.
3) Developmental Purposes:- To identify individual employee training needs,
To help the employee strengthen current performance and prepare for
promotional opportunities, To identify situations in which reassignment can be
used to develop potential.
CHARACTERISTICS
1) Reliability and validity:- Appraisal system should be fair and ethical, to
make the organization attain pinnacle of success. This can be made
possible only when the data is valid and reliable. The data here is nothing
but the goal against employee outcome, time taken to accomplish the goal
and status of the goal. All this data must be recorded and documented for
every employee performance. Collation of this data showcases complete
employee performance on the appraisal day and will be real time, reliable
data.
2) Job relatedness :- The appraisal system should focus attention on job-
related behaviour and performance. It should provide information on job
related activities and areas.
3) Standardisation:- The appraisal form, procedures and rules should be
standardised. There should be well-defined performance criteria and
standards. Employees should be made fully aware of these standards as
appraisal decisions affect all employees of the group.
4) Legal sanction:- Appraisals must meet the laws of the land. They must
comply with provisions of various acts relating to labor.

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 5) Training to appraisers:- Because appraisal is important and sometimes
difficult, it would be useful to provide training to appraisers viz., some
insights and ideas on rating, documenting appraisals and conducting
appraisal interviews. Familiarity with rating errors can improve rater's
performance and this may inject the needed confidence in appraisers to
look into performance ratings more objectively.
6) Open communication:- Most employees want to know how well they
are performing the job. A good appraisal system provides the needed
feedback on a continuing basis. The appraisal interviews should permit
both parties to learn about the gaps and prepare themselves for future. To
this end, managers should clearly explain their performance expectations
to their subordinates in advance of the appraisals period. Once this is
known, it becomes easy for employees to learn about the yardsticks and,
if possible, try to improve their performance in future.
7) Employee access to results:- Employees should know the rules of the
game. They should receive adequate feedback on their performance. If
performance appraisals are meant for improving employee performance,
then withholding appraisal result would not serve any purpose.
Employees simply cannot perform better without having access to this
information. Permitting employees to review the results of their appraisal
allows them to detect any errors that may have been made. If they
disagree with the evaluation, they can even challenge the same through
normal channels.
OBJECTIVES OF PERFORMANCE APPRAISAL
To maintain records in order to determine compensation packages, wage
structure, salaries raises, etc., To identify the strengths and weaknesses of
employees to place right men on right job, To maintain and assess the potential
present in a person for further growth and development, To provide a feedback
to employees regarding their performance and related status, It serves as a basis
for influencing working habits of the employees, To review and retain the
promotional and other training programmes.
Parties involved

 Appraisee:- appraisee is one who is appraised; one undergoing an

appraisal

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  Appraiser:- appraiser is one who performs appraisals

 HR department

ADVANTAGES OF PERFORMANCE APPRAISAL

1) Promotion:- Performance Appraisal helps the supervisors to chalk out
the promotion programmes for efficient employees. In this regards,
inefficient workers can be dismissed or demoted in case.
2) Compensation:- Performance Appraisal helps in chalking out
compensation packages for employees. Merit rating is possible through
performance appraisal. Performance Appraisal tries to give worth to a
performance. A compensation package which includes bonus, high salary
rates, extra benefits, allowances and pre-requisites are dependent on
performance appraisal. The criteria should be merit rather than seniority.
3) Employees Development:- The systematic procedure of performance
appraisal helps the supervisors to frame training policies and
programmes. It helps to analyse strengths and weaknesses of employees
so that new jobs can be designed for efficient employees. It also helps in
framing future development programmes.
4) Communication:- For an organization, effective communication
between employees and employers is very important.
5) Motivation:- Performance appraisal serves as a motivation tool. Through
evaluating performance of employees, a person’s efficiency can be
determined if the targets are achieved. This very well motivates a person
for better job and helps him to improve his performance in the future.
DISADVANTAGES
1) Creates Negative Experience:- If not done right, the performance
appraisal can create a negative experience for both the employee as well
as the manager. Proper training on process and techniques can help with
this.
2) Time Consuming: Performance appraisals are very time consuming and
can be overwhelming to managers with many employees. I’ve known
managers who were responsible for doing an annual PA on hundreds of
employees.
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 3) Natural Biases: Human assessments are subject to natural biases that
result in rater errors. Managers need to understand these biases to
eliminate them from the process.
4) Stressful Workplace: Performance appraisals can create stressful work
environments for both employees and managers. Proper training can help
to reduce the stress involved in the process.
PERFORMANCE APPRAISAL PROCESS
1) Set performance standard:- The appraisal process begins with the
establishment of performance standards. The managers must determine
what outputs, accomplishments and skills will be evaluated. These
standards should have evolved out of job analysis and job descriptions.
2) Employee communication:- Once the performance standards are
established, this need to be communicated to the respective employees so
that they come to know what is expected of them. Past experience
indicates that not communicating standards to the employees compounds
the appraisal problem.
3) Measure actual performance:- his is the third step involved in the
appraisal process. In this stage, the actual performance of the employee is
measured on the basis of information available from various sources such
as personal observation, statistical reports, oral reports, and written
reports.
4) Compare actual performance with the standard:- In this stage, the
actual performance is compared with the predetermined standards. Such a
comparison may reveal the deviation between standard performance and
actual performance and will enable the evaluator to proceed to the fifth
step in the process, i.e., the discussion of the appraisal with the concerned
employees.
5) Discuss the appraisal with the employee:- The fifth step in the appraisal
process is to communicate to and discuss with the employees the results
of the appraisal. This is, in fact, one of the most challenging tasks the
manager’s face to present an accurate appraisal to the employees and then
make them accept the appraisal in a constructive manner

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 6) Action Plan Development:- The final step in the appraisal process is the
initiation of corrective action when it is necessary. The areas needing
improvement are identified and then, the measures to correct or improve
the performance are identified and initiated.
COMMON ERRORS IN PERFORMANCE APPRAISAL
1) JUDGEMENTAL ERRORS:-
a) Favoritism:- Overlooking the flaws of favored or “nice” employees,
especially those whom everyone likes.
b) Grouping:- Excusing below-standard performance because it is
widespread; “Everyone does it.”

c) Guilt by association:-Rating someone on the basis of the company

they keep, rather than on the work they do.
d) The halo effect:-Letting one positive work factor you like affect your
overall assessment of performance.
e) Holding a grudge:-A dangerous luxury that may result in your ending
up in court. Never try to make employees pay for past behavior.
f) The horns effect:- The opposite of the halo effect—letting one
negative work factor or behavior you dislike color your opinion of
other factors.
g) Bias:- Allowing your bias to influence the rating. Bias can come from
attitudes and opinions about race, national origin, sex, religion, age,
veterans’ status, disability, hair color, weight, height, intelligence, etc.
h) Recency:- Rating only recent performance, good or bad. Data should
be representative of the entire review period. If you’re not keeping
good notes, you may not remember the whole period. Armstrong
noted that “you want to make sure, again, that you’re keeping records
so that you can adequately describe performance over an entire
performance period.”
i) Stereotyping:- it is a mental picture that an individual holds about a
person on the basis of the group to which he belongs to. Eg: sex, age,
religion, caste, nationality etc.

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 j) Central tendency:- it occurs when an appraiser rate all employees as
average performer. Eg: when a appraiser with a view to play it safe.
2) Poor appraisal forms
3) Lack of rater preparedness
4) Ineffective organizational policies and practises

METHODS OF PERFORMANCE APPRAISAL

1) TRADITIONAL METHOD:-
a) Ranking Method:- It is the oldest and simplest formal systematic
method of performance appraisal in which employee is compared with
all others for the purpose of placing order of worth. The employees are
ranked from the highest to the lowest or from the best to the worst. In
doing this the employee who is the highest on the characteristic being
measured and also the one who is L lowest, are indicated. Then, the
next highest and the next lowest between next highest and lowest until
all the employees to be rated have been ranked.
b) Paired Comparison:- In this method, each employee is compared
with other employees on one- on one basis, usually based on one trait
only. The rater is provided with a bunch of slips each containing pair
of names, the rater puts a tick mark against the employee whom he
considers the better of the two. The number of times this employee is
compared as better with others determines his or her final ranking.
c) Grading Method:- In this method, certain categories of worth are
established in advance and carefully defined. There can be three
categories established for employees: outstanding, satisfactory and
unsatisfactory. There can be more than three grades. Employee
performance is compared with grade definitions. The employee is,
then, allocated to the grade that best describes his or her performance.
d) Forced Distribution Method:- This method was evolved by Tiffen to
eliminate the central tendency of rating most of the employees at a
higher end of the scale. The method assumes that employees’
performance level confirms to a normal statistical distribution i.e.,

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 10,20,40, per cent. This is useful for rating a large number of
employees’ job performance and promotional ability. It tends to
eliminate or reduce bias.
e) Forced-Choice Method:- The forced-choice method is developed by
J. P. Guilford. It contains a series of groups of statements, and rater
rates how effectively a statement describes each individual being
evaluated. Common method of forced-choice method contains two
statements, both positive and negative.
f) Check-List Method:- The basic purpose of utilizing check-list
method is to ease the evaluation burden upon the rater. In this method,
a series of statements, i.e., questions with their answers in ‘yes’ or ‘no’
are prepared by the HR department. The check-list is, then, presented
to the rater to tick appropriate answers relevant to the appraisee. Each
question carries a weight-age in relationship to their importance.
g) Critical incident method:- The critical incident method requires the
rater to record statements that describe extremely good or bad
behavior related to job performance. The statements are called critical
incidents and are usually recorded by the supervisor during the
evaluation period for each subordinate. Recorded incidents include a
brief explanation of what happened.
h) Field review method:- This is an appraisal done by someone outside
employees, own department usually from corporate or HR department.
Advantages: Useful for managerial level promotions, when
comparable information is needed. Disadvantages: Outsider is
generally not familiar with employees work environment, Observation
of actual behaviors not possible.
i) Graphic rating scale:- The graphic rating scale is one of the most
popular and simplest techniques for appraising performance. It is also
known as linear rating scale. In this method, the printed appraisal form
is used to appraise each employee.
j) Essay evaluation:- Under this method the rater is asked to express
strong as well as weak points of the employee behaviour.

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 2) MODERN METHODS:-
a) Management by Objectives (MBO):- The concept of MBO can be
described as a “process whereby the superior and subordinate
managers of an organization jointly identify its common goals, define
each individual’s major areas of responsibility in terms of results
expected of him, and use these measures as guides for operating the
unit and assessing the contribution of each its members”.
b) Assessment Centers:- An assessment center is a central location
where the managers may come together to participate in job related
exercises evaluated by trained observers. The principle idea is to
evaluate managers over a period of time, by observing and later
evaluating their behaviour.
c) 360 degree feedback:- In 360-degree appraisal system, an employee
is appraised by his supervisor, subordinates, peers, and customers with
whom he interacts in the course of his job performance. All these
appraisers provide information or feedback on an employee by
completing survey questionnaires designed for this purpose.
d) HR Accounting:- Human resource method attaches money values to
the value of a firms internal human resources and its external customer
good will. Under this method, performance is judged in terms of costs
and contributions of employees. Difference between the cost and
contribution will reflect the performance of the employees.
e) Behaviorally anchored rating scale:- it is a measuring system which
rates employees or trainees according to their performance and
specific behavioral patterns. BARS is designed to bring the benefits of
both quantitative and qualitative data to emp loyee appraisal process as
it mechanism combines the benefits of narratives, critical incidents
and quantified ratings.
PERFORMANCE APPRAISAL FEEDBACK
The purpose of performance appraisals is generally to provide feedback to the
employee on his or her performance in order to correct any deficiencies and to
create increased opportunities. Performance feedback is a communications
process. It should be ongoing meaning as adjustments are made based on the
information exchanged between manager and team member. the primary
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purpose of an evaluation feedback is to let the person receiving it know where
they stand when it comes to their performance. When an employee knows
where they stand, they have clear expectations and they feel reassured and safe.
TYPES OF CONSTRUCTIVE FEEDBACK
1) Negative feedback – corrective comments about past behavior, Focuses
on behavior that wasn’t successful and shouldn’t be repeated.
2) Positive feedback – affirming comments about past behavior, Focuses on
behavior that was successful and should be continued.
3) Negative feed forward – corrective comments about future performance,
Focuses on behavior that should be avoided in the future.

4) Positive feed forward – affirming comments about future behavior,

Focused on behavior that will improve performance in the future.
CHARACTERISTICS OF CONSTRUCTIVE FEEDBACK

 Specific rather than general.

 Focused on behavior rather than on the person.

 Given in order to help, not hurt.

 Well-timed.

 Followed up on at a later date.

WHY FEEDBACK IS IMPORTANT

 It provokes change and fuels growth

 It gives people a sense of purpose

 It improves employee engagement

 It helps improve working relationships

360-DEGREE FEEDBACK
360-degree feedback is an evaluation method that incorporates feedback from
the worker, his/her peers, superiors, subordinates, and customers. Results of
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these confidential surveys are tabulated and shared with the worker, usually by a
manager. 360-degree feedback is an appraisal or assessment process used to
improve managerial effectiveness by providing the manager with a more
complete assessment of the employee’s effectiveness, his performance and
development needs. 360 degree feedback is also known as Multi-rater feedback,
Multi-source feedback, Full-circle appraisal or Group performance review.
Who should do appraisal?

 Immediate supervisor

 Peers

 Users of services

 Consultants

 Self rating

 subordinates

IMPORTANCE OF 360 DEGREE FEEDBACK

 It is essential for an organization to evaluate the performance of its

employees.

 This feedback may be used as an input to the performance appraisal

process.

 It may also be used to identify competency gaps to administer relevant

training to the employee.

 Such feedbacks can help in training & development programs of

employees, and help in their career development.

 Important employee skills like leadership, time management, team

management, communication management etc can be developed.
ADVANTAGES

 It helps in evaluating the overall performance of an employee.

 360 degree feedback gives a complete view of the work the employee has
done, and just based on some supervisors review.

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  This feedback shows all the competencies of an employee across various
domains and verticals of business.

 Based on 360 degree feedback, new training programs can help develop
the employee even more.

 The employee can work on his or her shortcomings based on the feedback
given by everyone.
DISADVANTAGES OF 360 DEGREE FEEDBACK

 Favoritism can affect the feedback of certain employees who otherwise

must be working well.

 360 degree feedback mostly gives qualitative feedback and might

overlook the quantitative performance of an employee.

 Unfair feedback from some people may lead to an ambiguous rating of

the employee's performance.

 Hence, this concludes the definition of 360 Degree Feedback or

Assessment along with its overview.
IMPACT OF 360 FEEDBACK ON ORGANIZATION:-

 Promotes communication

 Promote a culture of continuous improvement

 Builds leadership

 Can be a powerful trigger for change

360 DEGREE FEEDBACK STEPS

1) Self-assessment – 360 feedback begins with an individual’s self-
appraisal
2) Inviting others to appraise – Once their self-assessment is complete,
individuals invite their peers, superiors and/or direct reports to submit
their thoughts

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 3) Monitoring progress – While waiting for assessors to submit, each
individual can monitor who has and hasn’t submitted – and send reminder
emails where necessary.
4) Feedback generation – Once submissions have been received, the
individual being assessed can download their reports.
5) Targeted development – Once the reports are in, action planning can
begin. Often, our clients partner 360 reporting with a verbal feedback
session, to help their people identify areas for improvement and ensure
strengths are built upon.

UNIT- 5
TEAM
A team is when two or more people interact dynamically and independently and
share a common and valued goal, objective, or mission. Teams do not have to
be permanent and do not have to be in the same geographical location. In fact,
team members do not need to have ever met in person to be members of the
same team.

PERFORMANCE MANAGEMENT AND TEAMS

An organization that includes any type of teams should manage the
performance of both individual employees and teams. Specifically, PM systems
should target:
– individual performance.
– an individual’s contribution to the performance of his or her
team(s).
– the performance of teams as a whole.
PM must consider the type of team in question before performance measures are
put in place. Different performance measurement methods are particularly

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appropriate depending on the type of team being evaluated. For eg: Work and
Service Team Peer ratings
GENERAL PRINCIPLES OF PM RELATING TO TEAMS
• Design and implement the best possible system.
• Consider the possible dangers of a poorly implemented system.
BASIC PRINCIPLES FOR DESIGNING A PM SYSTEM THAT
INCLUDES TEAM PERFORMANCE
1. Make sure your team is really a team.
2. Make the investment (in time and effort) to measure team performance
that yields useful data.
3. Define measurement goals clearly.
4. Use a multi-method approach to measurement.
5. Focus on process as well as outcomes.
6. Measure long-term changes.

PERFORMANCE OF LEARNING ORGANISATIONS

A learning organization is a company that facilitates the learning of its members
and continuously transforms itself. The concept was coined through the work
and research of Peter Senge and his colleagues. They are created on the basis of
four pillars:
A. Organization
A learning organization has an inspiring vision for learning and an
organizational learning strategy that clearly communicates learning is
critical for organizational succces.
B. People
A learning organization needs people who are intellectually curious about
their work, who actively reflect on their experience, who develop
experience-based theories of change and continuously test these in

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 practice with colleagues, and who use their understanding and initiative
to contribute to knowledge development.
The people subsystem values psychological safety and trust, developing
and retaining people, performance management systems for knowledge
management and learning, coaching and mentoring, and development of
leadership competencies.
C. Knowledge
Knowledge is a critical asset in every learning organization. Because
learning is both a product of knowledge and its source, a learning
organization recognizes that the two are inextricably linked and manages
them accordingly.
This subsystem attaches importance to individual and collective units of
knowledge production, systems and infrastructure for knowledge
management, feedback mechanisms, resilient organizational memory, and
networking.
D. Technology
Technology Learning organizations know how to harness the power of
information and communication technologies—without these
technologies constraining knowledge management and learning.
The technology subsystem values creative use of information and
communication technologies, and provides opportunities for staff to learn
how to make use of technologies for knowledge management and
learning.
PERFORMANCE MANAGEMENT AND VIRTUAL TEAM
A virtual team, also known as a geographically dispersed team or a remote
team, is a group of people who interact through electronic communications.
A virtual team is a group of people who participate in common projects by
making collaborative efforts to achieve shared goals and objectives. These
people perform tasks and jobs in a virtual work environment created and
maintained through IT and software technologies.
Types of virtual team

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1. Networked Teams
Networked teams are composed of cross-functional members
brought together to share their expertise and knowledge on a specific issue.
Membership is fluid in that new members are added whenever necessary while
existing members are removed when their role is complete.
2. Parallel Teams
Parallel teams are generally formed by members of the same
organization to develop recommendations in a process or system. Parallel teams
are usually formed for a short period of time and membership is constant in that
members of a parallel team remain intact until the goal is realized.
3. Product Development Teams
Product development teams are composed of experts from different
parts of the world to perform a specifically outlined task such as the
development of a new product, information system, or organizational process.
For example, bringing in a team of experts from the United States, Canada, and
Hong Kong for a period of one year to develop a new engine.
4. Production Teams
Production teams are formed from members of one role coming
together to perform regular and ongoing work. Members of a production team
are given clearly defined roles and work independently. The individual outputs
of each member are combined together to give the end result.
5. Service Teams
Service teams are formed by members from different time zones.
Each member does work independently but the work produced by each member
is a continuation of the previous member. For example, customer support teams
in Canada finish their shift while support teams in Asia start their shift and
continue the work.
6. Management Teams
Management teams are formed by managers of the same
organization who work in different geographical regions. Members of
management teams largely discuss corporate level strategies.

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7. Action Teams
Action teams are formed for a very short duration of time to
respond to immediate problems. Upon resolving the problem, the team is
adjourned.
ACTIONS IN HANDLING PM IN VIRTUAL TEAM
• Ensure role clarity with SMART goal

• Monitor employees quality

• Trust the team members
• Involve in activities
REWARD SYSTEM
A reward system is the set of mechanisms for distributing both tangible and
intangible returns as part of an employment relationship. The reward systems
include returns given to the employees in the form of cash (benefits, pay raises)
or recognition programs (intangible form).The traditional approach of rewarding
employees was only based on their job description and not on how they
perform.
TANGIBLE RETURNS
• Cash compensation
– Base pay (hourly wages, salary)
– Cost of living adjustment

– Merit pay (additional pay on the basis of performance)

– incentives
• Benefits
– Income protection program (medical, pension savings plan)
– Allowance (housing, transportation, phone)
– Work life focus(vacation, councelling)

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INTANGIBLE OR RELATIONAL RETURNS
• Recognition and status
• Employment security
• Challenging work
• Learning opportunities

REWARD AND PERFORMANCE MANAGEMENT

Reward and performance should be made for employee retention and their
commitment to work, which ultimately improvise the contributing factor of the
employee. Employees should perform well to be rewarded and the approach
designed for this is “Pay for Performance”. Apart from the base pay, which is
based on job description, a variable pay should be announced for their
outstanding performance. Although the pay raise motivates the employees to an
extent, ultimately they want them to be appreciated and recognized in a society
for their work, here comes the employee recognition program. Many employees
become less committed to work not because of their low pay structure, but for
the lack of recognition. Both types of rewarding system should be ensured for
higher motivation, retention, engagement and job satisfaction.

SIGNIFICANCE OF REWARD IN PM
• Reward as a source of organizational effectiveness
• Reward as medium between organization and employees
• Reward as a factor of motivation
• Reward as a performance guide
• Employee involvement
• Source of competitiveness
BENEFITS OF PERFORMANCE-BASED REWARDING APPROACH
• Decreased attrition rate, which empowers employee retention in long run
and commitment.

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 • Motivate employees to perform better, aligning with the organizational
goals.
• Employee involvement (Participation Management) is increased which
results in autonomy, more productivity and satisfaction.
• Rather than working on routine jobs, employees volunteer to work on
challenging jobs to increase their recognition levels in the working
society. It enforces healthy competition among individuals to perform
better.
• Employee gets a chance to learn and enhance their skills, which
highlights their development in career.

COMPONENTS OF EFFECTIVE PAY SYSTEM

A) Expectancy: The employee believes that he or she is capable of meeting
expectations. Expectancy refers to the belief that an effort will lead to
completion of a task. Which means performance dialogue and
performance planning has catered this and overcome any concern about
the capability to achieve the results including the required resources.

B) Instrumentality: The employee believes that his or her actual

performance does prompt the reward which is done through formal
performance reward policies and mutually agreeing performance
agreement.

C) Valence:- The employees believes that the reward is desirable or values.

TOTAL REWARD
• Five important components of total reward are:

– Compensation
– Benefits
– Work life
– Performance and recognition
– Development and career opportunities

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Compensation
This is the pay that is given for the work that one does. It has an exchange
relation and consists of fixed pay and variable pay.
– Fixed pay: (base pay)
– Variable pay
DANGERS OF POORLY IMPLEMENTED PM SYSTEM
• Increased turnover
• Lowered self esteem
• Wasting time and money
• Damaged relationship
• Decreased motivation to perform.
• Varying unfair standards and ratings
• Emerging biases Personal values, biases, and relationships are likely to
replace organizational standards.
Key Performance Indicator (KPI) is a specific measure of an organization’s
performance in an area of its business. It is a general concept, with different
implementations depending on the type of business and goals of the
organization.
“Key Result Areas” or KRAs refer to general areas of outcomes or outputs for
which the department's role is responsible. A typical role targets three to five
KRA.
key performance areas (KPAs), which are 'those areas of performance that are
reflected explicitly or implicitly in the vision and strategies of the organization'
(Barker, 1997)

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