Performance appraisal - What is Performance? - What is Appraisal? - How often should appraisals take place?

The performance appraisal is the process of assessing employee performance by way of comparing present performance with already established standards which have been already communicated to employees, subsequently providing feedback to employees about their performance level for the purpose of improving their performance as needed by the organisation.

As said above, the very purpose of performance assessment is to know performance of employee, subsequently to decide whether training is needed to particular employee or to give promotion with additional pay hike. performance appraisal is the tool for determining whether employee is to be promoted, demoted or sacked ( remove ) in case of very poor performance and no scope for improvement.

Every corporate sector uses performance appraisal as a tool for knowing about the employee and take decisions about particular employee. for the purpose of performance appraisal of employees there are different methods under the category of traditional methods and modern methods which are discussed in following chapters.

What is Performance?

What does the term performance actually mean?

Employees are performing well when they are productive. Productivity implies both concern for effectiveness and efficiency, effectiveness refers to goal accomplishment. However it does not speak of the costs incurred in reaching the goal. That is where efficiency comes in. Efficiency evaluates the ratio of inputs consumed to outputs achieved. The greater the output for a given input, the greater the efficiency. It is not desirable to have objective measures of productivity such as hard data on effectiveness, number of units produced, or percent of crimes solved etc. and hard data on efficiency (average cost per unit or ratio of sales volume to number of calls made etc.).

In addition to productivity as measured in terms of effectiveness and efficiency, performance also includes personnel data such as measures of accidents, turnover, absences, and tardiness. That is a good employee is one who not only performs well in terms of productivity but also minimizes problems for the organisation by being to work on time, by not missing days, and by minimizing the number of work-related accidents.

What is Appraisal?

Appraisals are judgments of the characteristics, traits and performance of others. On the basis of these judgments we assess the worth or value of others and identify what is good or bad. In industry performance appraisal is a systematic evaluation of employees by supervisors. Employees also wish to know their position in the organization. Appraisals are essential for making many administrative decisions: selection, training, promotion, transfer, wage and salary administration etc. Besides they aid in personnel research. Performance Appraisal thus is a systematic and objective way of judging the relative worth of ability of an employee in performing his task. Performance appraisal helps to identify those who are performing their assigned tasks well and those who are not and the reasons for such performance.


Performance appraisal has been defined by different scholars in various ways. Some of the important definitions are as follows:

Dale S. Beach, "Performance appraisal is systematic evaluation of the individual with respect to his or her performance on the job and his or her potential for development".

Randall S. Schuler, "Performance appraisal is a formal, structured system of measuring and evaluating an employees job, related behaviour and outcomes to discover how and why the employee is presently performing on the job and how the employee can perform more effectively in the future so that the employee, organisation, and society all benefit."

Heyel, "It is the process of evaluating the performance and qualifications of the employees in terms of the requirements of the job for which he is employed, for purposes of administration including placement, selection for promotions, providing financial rewards and other actions which require differential treatment among the members of a group as distinguished from actions affecting all members equally."

Dale Yoder, ''Performance appraisal includes all formal procedures used to evaluated personalities and contributions and potentials of group members in a working organisation. It is a continuous process to secure information necessary for making correct and objective decisions on employees."Performance appraisal from employee point of view - "A performance appraisal is meant to help employees realise their strengths and shortcomings and receive a compensation accordingly."

Facts [+]

A recent survey of more than 2,000 full-time employees by Adecco Staffing of North America found that less than half of workers say managers take performance reviews seriously, and even fewer say they receive constructive feedback.

Tech Mahindra in its annual performance appraisal process layoff bottom performers every year and this year too. company, however, did not specify the number of employees that could be asked to leave. However, industry sources suggest that the number would run into hundreds. At the end of December 2016, the company had over 1.17 lakh employees. In an another incident the US-based Cognizant had rolled out a voluntary separation programme for directors, associate VPs and senior VPs, offering them 6-9 months of salary.

The development comes at a time when Indian IT firms are facing challenges in the business environment and stricter work permit regime in countries like the US, Singapore, Australia and New Zealand

How often should appraisals take place?

Performance appraisal in any organisation will be done at a specific period, like annually or half yearly or quarterly or maybe regularly. It all depends upon the nature or size of the organisation, and sometimes necessity of the managers decide the period of performance appraisal of their employees. Most of organisations are insisting employee appraisal should be a continuous process and should not be limited to a formal review once a year. The frequency of formal appraisals will depend on the nature of the organization and on the objectives of the system.

For example, in a advanced technology oriented organisation, objectives may change quickly so that formal appraisals may need to be carried out more than once a year. In an environment which is less subject to change, annual appraisals may be sufficient. Most employees receive a formal appraisal annually, although more frequent appraisals are often needed for new employees, for longer serving staff who have moved to new posts or for those who are below acceptable performance standards.

Adobe Systems, U.S based software company has abolished annual performance appraisal system of its employees. Instead company management has introduced regular feedback method for reviewing regular performance of its employees rather than waiting till year ending for performance review. Company managers feel regular feedback will improve the performance of employees as they come to know their regular performance, further managers are considering these regular feedback in the matter of salary hikes and promotions.

Mid-year appraisals good for staff motivation

Appraisals may no longer exist as once-a-year phenomena. A growing number of companies are opting for mid-year - and even quarterly - reviews. The main argument in favour of this trend is that it may not be wise for a company to wait as long as one year to assess employee performances.

Whether it is to reward employees for something they did two quarters back or bringing them back on the path of growth, in case they have strayed, companies have realized the earlier they do so, the better. Organizations like Deutsche Bank and Akzo Nobel India have been following mid-term performance reviews for a few years now, while the list of other companies following this model appears to be growing. Nivea India is among those which have recently adopted the practice.

According to Makarand Khatavkar, MD and head, HR (Dt. 2012) at Deutsche Bank, the bank is trying to make its mid-term reviews more robust. The move is aimed at making managers and employees more accountable. Bank is currently conducting a communication and education exercise to train and convey to all our employees about the new performance system.At Deutsche Bank, performance standards are being made more objective so that they are easy to understand and implement.

During annual appraisals, mostly recent accomplishments and disappointments may get noticed as these are fresh in the memory while the events which date back a few quarters could go unnoticed. At global paints and coatings major, Akzo Nobel India, appraisals are a continuous process. "The HR team conducts workshops with managers before the mid-year and year-end cycle based on the performance and development dialogue process. The mid-year review is not about ratings but is geared at reviewing and providing guidance to the employees. The year-end process, on the other hand, focuses more on self assessment and involves feedback by both primary and secondary reviewer," said Sangeeta Pandey, director, HR (Dt. 2012), Akzo Nobel India.

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

March, 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.

HCL Technologies is looking at a unique experiment this year - whether appraisals could be based on feedback from peers and subordinates and if the same practice could be extended to rewards and recognitions as well. The company is looking at piloting this experiment with a small group. The company, however, didn't elaborate on details as the process is in early stages.

Facts [+]

A Brazilian firm, Semco,( best known for its radical form of industrial democracy and corporate re-engineering.) has 3,000 employees, a turnover of over $200 million and has been growing at 20-30% every year. Semco does have managers but employees have more freedom than elsewhere. They can choose their hours of work, decide their salaries and pick their bosses. Managers are anonymously evaluated every six months by their subordinates. Semco has practised this philosophy for 25 years now.