Objectives of Performance Appraisal

Performance appraisal is a method of evaluating the job performance of an employee. It is an ongoing process of obtaining, researching, analysing and recording information about the worth of an employee.

The main objective of performance appraisals is to measure and improve the performance of employees and increase their future potential and value to the company. Other objectives include providing feedback, improving communication, understanding training needs, clarifying roles and responsibilities and determining how to allocate rewards.

Providing Feedback.

Providing feedback is the most common justification for an organization to have a performance appraisal system. Through its performance appraisal process the individual learns exactly how well he/she did during the previous twelve months and can then use that information to improve his/her performance in the future. In this regard, performance appraisal serves another important purpose by making sure that the boss’s expectations are clearly communicated.

Facilitating Promotion Decisions.

Almost everyone in an organization wants to get ahead or get promoted. How should the company decide who gets the brass rings? Performance appraisal makes it easier for the organization to make good decisions about making sure that the most important positions are filled by the most capable individuals.

Rightsizing or Downsizing Decisions.

If promotions are what everybody wants, layoffs are what everybody wishes to avoid. But when economic realities force an organization to downsize, performance appraisal helps make sure that the most talented individuals are retained and to identify poor performers who effects the productivity of the organisation. (India's largest software services provider TCS axed 1,000 jobs in the country due to non-performance by its employees. Jan 15, 2015, PTI)

INDIA: Technology firm cognizant uses annual performance appraisal system to assess its employees for the purpose of retaining talent and for Compensation management. During its annual performance appraisal of the employees, the firm has asked its employees identified as underperformers to leave the organisation. Sources said there were more than 500 'underperformers' in the list, this could not be verified.

Ericsson lays off 22 executives in India,

17 Apr, 2013. ET.

Nearly 22 executives across categories have been fired on performance grounds and another 100 are likely to be transferred to sister organisations like Ericsson India Global Services, Ericsson Supply Site Jaipur, R&D centres and the regional technical centres (RTCs) to boost efficiencies, a top company executive aware of the development .

Encouraging Performance Improvement.

How can anyone improve if he doesn’t know how he’s doing right now? A good performance appraisal points out areas where individuals need to improve their performance.

Motivating Superior Performance.

This is another classic reason for having a performance appraisal system. Performance appraisal helps motivate people to deliver superior performance in several ways. First, the appraisal process helps them learn just what it is that the organization considers to be ‘‘superior.’’ Second, since most people want to be seen as superior performers, a performance appraisal process provides them with a means to demonstrate that they actually are. Finally, performance appraisal encourages employees to avoid being stigmatized as inferior performers (or, often worse, as merely ‘‘average’’).

Setting and Measuring Goals.

Goal setting has consistently been demonstrated as a management process that generates superior performance. The performance appraisal process is commonly used to make sure that every member of the organization sets and achieves effective goals.

Counselling Poor Performers.

Not everyone meets the organization’s standards. Performance appraisal forces managers to confront those whose performance is not meeting the company’s expectations.

Determining Compensation Changes.

This is another classic use of performance appraisal. Almost every organization believes in pay for performance. But how can pay decisions be made if there is no measure of performance? Performance appraisal provides the mechanism to make sure that those who do better work receive more pay.

Encouraging Coaching and Mentoring.

Managers are expected to be good coaches to their team members and mentors to their proteges. Performance appraisal identifies the areas where coaching is necessary and encourages managers to take an active coaching role.

Supporting Manpower Planning.

Well-managed organizations regularly assess their bench strength to make sure that they have the talent in their ranks that they will need for the future. Companies need to determine who and where their most talented members are. They need to identify the departments that are rich with talent and the ones that are suffering a talent drought. Performance appraisal gives companies the tool they need to make sure they have the intellectual horsepower required for the future.

Determining Individual Training and Development Needs.

If the performance appraisal procedure includes a requirement that individual development plans be determined and discussed, individuals can then make good decisions about the skills and competencies they need to acquire to make a greater contribution to the company. As a result, they increase their chances of promotion and lower their odds of layoff.

Determining Organizational Training and Development Needs.

Would the organization be better off sending all of its managers and professionals through a customer service training program or one on effective decision making? By reviewing the data from performance appraisals, training and development professionals can make good decisions about where the organization should concentrate company-wide training efforts.

Validating Hiring Decisions.

Is the company hiring stars, or is it filling itself with trolls? Only when the performance of newly hired individuals is assessed can the company learn whether it is hiring the right people.

Providing Legal Defensibility for Personnel Decisions.

Almost any personnel decision—termination, denial of a promotion, transfer to another department—can be subjected to legal scrutiny. If one of these is challenged, the company must be able to demonstrate that the decision it made was not based on the individual’s race or handicap or any other protected aspect. A solid record of performance appraisals greatly facilitates legal defensibility when a complaint about discrimination is made.

Improving Overall Organizational Performance.

This is the most important reason for an organization to have a performance appraisal system. A performance appraisal procedure allows the organization to communicate performance expectations to every member of the team and assess exactly how well each person is doing. When everyone is clear on the expectations and knows exactly how he is performing against them, this will result in an overall improvement in organizational success.

Need for employee training

These appraisals also identify the necessary training and development needs to employees to close the gap between current performance and desired performance.

Additional objectives Performance appraisal:

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

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

    • To help the management in exercising organizational control.

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

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

    • To provide feedback to the employees regarding their past performance.

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

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

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

    • To reduce the grievances of the employees.

60% employees say performance appraisals are a waste of time, 70% say no idea how they are evaluated: Survey - Mar 17, 2017

Organisations need to make staff appraisals more transparent and useful as most employees are neither fully conversant with the process nor do they see them as a worthy task to perform.

Majority of the employees find performance reviews in their organisations opaque, cumbersome and a waste of time, reveals a TimesJobs survey, 'The Performance Review Puzzle', of more than 1,200 employees in various kinds of organisations.

Sixty per cent employees said the performance review was a waste of time.

Most employees are not even fully aware of the process of evaluation. Seventy per cent said they did not know how they were evaluated. Not surprisingly, 85 per cent were not aware of the end-to-end process of performance review.

Ninety per cent found performance review forms complex and cumbersome.

Outcome of appraisals never left 35 per cent satisfied while 25 per cent had been rarely satisfied. Only 10 per cent said they were always satisfied. Thirty per cent were sometimes satisfied.

A huge 95 per cent said they were not trained by the human resource department to fill in the review form.