PA could be taken either for evaluating the performance of employees or for developing them. The evaluation is of two types telling the employees where he stands and using the data for personnel decisions concerning pay, promotions etc. The developmental objectives focus on finding individual and organizational strengths and weaknesses developing healthy superior subordinate relations and offering appropriate counselling / coaching to the employees with a view to develop his potential in future.
Appraisals of employees serves several useful purposes:
1) Compensations decisions: It can serve as a basis for pay raises. Managers need performance appraisal to identify employees who are performing at or above expected levels. This approach to compensation is at the heart of the idea that raises should be given for merit rather than for seniority. Under merit system, employees receive raises based on performance.
2) Promotion decisions: It can serve as a useful basis for job change or promotion. When merit is the basis for reward, the person doing the best job receives the promotion. If relevant work aspects are measured properly it helps in minimizing feelings of frustration of those who are not promoted.
3) Training and development programs: It can serve as a guide for formulating a suitable training and development program. Performance appraisals can inform employees about their progress and tell them what skills they need to develop to become eligible for pay raises or promotions or both.
4) Feedback: Performance appraisals enable the employees to know how well he is doing on the job. It tells him what he can do to improve his present performance and go up the organizational ladder.
5) Personal development: Performance appraisals can help reveal the causes of good and poor employee performance. Through discussions with individuals employees, a line manager can find out why they perform as they do and what steps can be initiated to improve their performance.
The benefits of performance appraisals
Employer perspective [Administrative uses]:
1) Despite imperfect measurement techniques, individual differences in performance can make a difference to company performance.
2) Documentation of performance appraisal and feedback may be required for legal defence. Appraisal offers a rational basis for constructing a bonus or merit system.
3) Appraisals dimensions and standards can help to implement strategic goals and clarify performance expectations.
Employees perspective [developmental purpose]:
1) Individuals feedback helps people to rectify their mistakes and get ahead focusing more on their unique strengths,
2) Assessments and recognition of performance levels can motivate employees to improve their performances.
What is the content of appraisals?
Every organization has to decide upon the content of appraisals before the program is approved. Generally, the content to be appraised is determined on the basis of job analysis. The content to be appraised may be in the form of contribution to organizational objectives (measures) like production savings in terms of cost , return on capital etc.
Other measures are based on: (1) behaviours which measure observable physical actions movements, (2) objectives which measure job related results like amount of deposits mobilized and (3) traits which are measured in terms of personal characteristics observable in employee’s job activities. The content to be appraised. Factors used in some leading Indian industries are shown below:
Who will Appraise?
The appraiser may be any person who has thorough knowledge about the job content, content to be appraised, standard of content and who observes the employees while performing a job. The appraiser should be capable of determining what is more important and what is relatively less important . He should prepare reports and make judgments without bias. Typical appraisers are: supervisors, peers, subordinates, employees themselves and users of services and consultants.
Source: HRM Book.