After reading this article you will learn about:- 1. Meaning of Performance Appraisal 2. Objectives of Performance Appraisal 3. Merit Rating and Performance Appraisal 4. Importance 5. Approaches 6. Persons Responsible 7. Methods 8. Essentials 9. Issues Involved in Evaluation System 10. Process 11. Appraisal for Promotion 12. Barriers.
- Meaning of Performance Appraisal
- Objectives of Performance Appraisal
- Merit Rating and Performance Appraisal
- Importance of Performance Appraisal
- Approaches to Performance Appraisal
- Persons Responsible for Performance Appraisal
- Methods of Performance Appraisal
- Essentials of Good Performance Appraisal
- Issues Involved in Evaluation System
- Process of Performance Appraisal
- Appraisal for Promotion
- Barriers to Performance Appraisal
1. Meaning of Performance Appraisal:
Appraisal means evaluation about the worth of an object or person and performance appraisal means evaluation of employees’ worth in terms of organisational performance. Judgment of employees’ performance at work can be done formally and informally. Informally, superiors continuously judge the performance of employees on a subjective basis. It may have an element of bias towards employees.
Informal evaluation, however, is not enough to arrive at realistic and correct assessment of the worth of employees in absolute or relative terms. The ultimate goal of evaluation programme is to make the employees more valuable to the company.
A proper evaluation and appraisal system can be valuable to the company. For this, performance evaluation programme should involve the study of employees (their habits, aptitude and skills) and their work record (efforts and accomplishments).
In the organisational context, performance appraisal is done in a more formal way through formal appraisal techniques which are objective in nature. Objective appraisal aims at systematic and accurate measurement free of bias and prejudice.
Performance appraisal is, thus, more of a formal exercise where managers evaluate the employees, in terms of their contribution towards organizational objectives. It evaluates their strengths and weaknesses in terms of attributes and behaviours to meet the organisational objectives. It appraises the performance of employees on continuous or intermittent basis and provides them feedback about their performance.
“Performance appraisal is the process of defining expectations for employee’s performance; measuring, evaluating and recording employee performance relative to those expectations; and providing feedback to the employee.”
Evaluating employees is a complex task because they perform a variety of activities and apply different skills in different work situations. They exhibit different personal qualities in different work areas. It is, thus, important that organizations have a sound monitoring system or performance appraisal system to evaluate their work performance.
Performance appraisal system involves setting performance standards and comparing actual performance with the standards to know the extent to which employees have contributed towards corporate profits. “It is a process whereby managers and their subordinates share understanding about what has to be accomplished, and the manager will naturally be concerned about how best to bring about those accomplishments by adept management and development of people in the short and long terms.”
It also helps in:
(i) Developing inter-personal relationships between manager and his team.
(ii) Motivating employees to achieve their targets.
(iii) Identifying the need for training the workforce.
(iv) Improving use of working tools like demonstration, material, working documents etc.
(v) Determining and re-allocating employees’ territories and work assignments.
(vi)Determining sound compensation and incentives plans for the employees.
2. Objectives of Performance Appraisal:
Performance appraisal has the following objectives:
1. Appraisal is a judgment which requires definite standards. Actual performance is compared with standards and goals. Such standards should be worked out by organisations and conveyed to all the employees, otherwise, judgment will be one way only. In a sound appraisal system, goal setting must be high; and accordingly high performance is expected.
Goal setting must be a mutual process and appraisal system should be transparent and known to employees. If there is no system of appraisal, superiors will waste time in making decisions. Also, in absence of specific knowledge, they will depend upon chance. To avoid this situation, there should be high goals and high performance appraisal system.
2. To judge means to apply a set of values. Value judgments without clear, sharp and public standards are irrational and arbitrary. Such judgment or appraisal will demotivate the manager and subordinates. It should, thus, be based on sound and objective appraisal standards.
3. Performance appraisal depends on “Merit Rating”. Merit rating refers to what the employee is. Performance appraisal refers to what the employee does. Appraisal records what is done by the employee. Merit rating gives information about “Potential”, “Personality” and “Promise” but appraisal tells about performance. It, thus, helps in deciding employees worthy of promotion or transfer to work areas that meet their skills and capabilities.
4. Standards consider what work was assigned, what resources were granted and what promises were given regarding salary/rewards. They, thus, provide a measure of evaluation.
5. One can only build in strength. One can only achieve by doing. One cannot achieve anything with what one does not do. Appraisal must, therefore, aim at bringing out what a man can do. Only when a man’s strengths are known and understood, it makes some sense. Weaknesses, by themselves, are of no interest.
Appraisal should refer to knowing more, doing better and behaving differently. If these three things are accomplished, the manager will be better, stronger and effective in managing people.
6. Appraisal should be an integral part of the system of managing. It is an essential element in the whole system of managing and in the sub-system of managerial staffing. Knowing how well a manager plans, organises, staffs, directs, leads and controls is the only way to assure that those occupying managerial positions are actually managing effectively. If a business is to reach its goals effectively and efficiently, there should be ways of accurately measuring and implementing management performance.
7. It is human tendency to recall only the latest events or achievements. Similarly only latest failures are remembered. Appraisals should cover some specific periods where an employee was involved fully, or even in his absence, how the deputy was doing, to what extent there was delegation of authority and responsibility. It should reflect a whole picture so that corrective measures can be taken.
8. It provides feedback to employees about their performance. Feedback helps in overcoming deficiencies in the work, promoting performance and relating his work to organisational objectives.
9. It helps in designing personal improvement plans to overcome the weaknesses of employees on the job and devising training and development programmes to strengthen their capabilities.
3. Merit Rating and Performance Appraisal:
Performance appraisal is an extension of merit rating. Merit rating emphasises on personal attributes of a person regarding what the person is. It determines qualification and skills of a person on the job to identify his chances for promotion, demotion or transfer.
It is more of a one-to-one comparison amongst people based on rating scales. Each employee is rated in comparison to others. Superiors communicate the rating to employees which helps in determining the wage structure. A higher wage rate is determined for those who stand high on merit and vice-versa.
Rather than merely rating employees to determine their wage structure, performance appraisal aims at overall appraisal of performance in terms of what he does in order to promote his performance on the job and develop him to exploit his future potential.
While initially, appraisal was in the form of merit rating only (based on personal attributes), it developed to a much larger area where factors like performance, behaviour, skills etc. are also taken into consideration. There are mutual goal-setting processes, comparison and conformance of actual performance to standard performance targets and promoting desirable behaviour in line with organisational objectives.
Merit rating, thus, refers to what a person is and performance appraisal refers to what the employee does with his merit skills. Merit rating identifies the potential of a person and performance appraisal appraises the extent to which the potential has been exploited to convert it into performance.
4. Importance of Performance Appraisal:
Evaluating employees is a complex task as they perform a variety of activities. Different situations demand different types of skills. There is also difference in degree of personal qualities. Performance evaluation consists of setting performance standards, both qualitative and quantitative to measure actual performance and judge the employees in terms of their contribution to objectives.
The key concept is productivity which means contribution to profits and sales. Productivity should be greater than the cost incurred by the company on their work efforts. Managers should “make the events happen” and not “let the events happen”. Every management activity has to be planned, otherwise it will be left to chance. Managers cannot rely on chance element.
The following reasons explain the need for making appraisals:
1. To know the quality of managers:
Every organisation sets high goals and objectives for which it needs competent managers. When an employee is recruited, he appears to be very promising and enthusiastic. He is called “a potential candidate”. This potential has to be converted into performance. Just to have potential is theory, but converting it into performance is practice.
If a candidate is theoretically strong but weak in execution, the organisation may not get a competent manager. Hence, the foremost advantage of appraisals is that the organisation gets to know the level of competence of managers. It enables the managers to know ‘where we are’ and ‘where we would like to go’. If an executive has proved his potential, the organisation can focus on it and en-cash his best merit points.
2. To put right man on the right job:
Every position has a job design or description. There should be a man to fit the position. There must be right man for the right job. This is possible by an appraisal method. What will happen if the organisation gets a wrong man?
For example, in the design department, there is a wonderful design engineer. He is expert in making designs, and is well versed with his work. Over a period, he attains specialisation in his work. He is now senior most in the department. The organisation is in need of a dynamic person to head the design department.
This design engineer does not have managerial skills. However, he is a competent engineer. If he is promoted as Head of design department, when he is not competent, what will be the result? The organisation will miss a good designer and get a bad manager to head the department. Hence, appraisal helps in getting right man for the right job.
3. To re-structure the organisation:
Basic advantage of appraisals is to know the innermost merit point of every employee. With the help of appraisal system, it is possible to rotate executives in a scientific way. The advantage of job rotation is that the organisation gets a good General Manager. Every organisation has a chart.
There are slots in the organisation which should be filled by the most competent person. When this is known, it would be possible to re-structure the organisation. Organisations today are flexible and dynamic. There is need to re-structure the organisations and have changing roles for the managers. This is possible only through competent appraisal systems.
4. To give feedback to employees:
Appraisal is a good tool for communication. When managers talk to employees about their achievements or failures, they take help of appraisals. In appraisals, there are objective facts and goals which are set jointly. Thus, it becomes easy for managers to convince employees and give them feedback on inputs and outputs.
In some organisations, appraisals are signed by both boss and subordinates so that it is easy to give feedback to employees especially on weak areas.
5. To develop employees:
A progressive organisation is concerned about employee development. Organisations have long-term objectives and plans. To get success, they groom people to shoulder future responsibilities of the organisation. This is called development process.
To achieve development, organisations develop Executive Development Programmes with the help of appraisals. There are different methods by which employees can be developed. Appraisal system helps to select an appropriate method. It involves resources (time and money) to develop employees and a sound appraisal system helps in making best use of resources to develop the employees.
6. To recommend rewards/transfers:
Appraisals are effective when they are tied with the reward system. Compensation for achievement is the most powerful motivating force. One of the strong motivating factors is promotion. There can be increments and cash awards. There can also be transfers on employee’s request or organisation’s requirement. Such decisions need sufficient data and cases. This is possible through appraisals.
For a good performance appraisal method, it is important to have a judicious mix of quantitative and qualitative standards against which performance can be compared. Many companies use quantitative standards. However, the tendency of using quantity as the only yardstick of performance is no longer prevalent. The manager selects a combination of qualitative and quantitative standards to appraise and assess different situations.
5. Approaches to Performance Appraisal:
There are two approaches to measure the performance of employees:
1. Informal Approach
2. Formal Approach
1. Informal approach:
This approach of performance appraisal measures the performance of employees on a continuous basis. It continuously informs them about how well they are doing. Managers inform the subordinates of the desirable and undesirable attributes of their work activities or the subordinates themselves go and ask the managers about it. This helps in immediate detection and rectification of mistakes.
2. Formal approach:
Rather than assessing performance on a continuous basis, formal approach conducts performance appraisal at regular intervals to rank the employees on the basis of their merit. This helps managers find candidates suitable for promotions. Those who are not performing up to the mark may be transferred to other departments.
6. Persons Responsible for Performance Appraisal:
There are different approaches to the responsibility of conducting a formal performance appraisal:
1. Performance appraisal by superiors:
Performance appraisal in most cases is done by immediate superiors.
2. Performance appraisal by a group of superiors:
A Committee is formed consisting of several managers who evaluate the performance of subordinates. Since evaluation is not done by the immediate boss but by a group of bosses, the immediate boss is generally not biased against the employees. This is a time consuming approach of performance appraisal but more scientific and reliable than the appraisal by immediate superior.
3. Performance appraisal by the peer group:
Though not much in use, some organizations follow the practice of performance appraisal by the peer group or co-workers. They evaluate the performance of employees working at the same level. This enables managers find a suitable candidate for promotion from employees working at the same level, selected by employees themselves. This approach is accepted by employees as those who are not selected for promotion do not feel dissatisfied. Rather, they work hard to get promotions in future.
4. Performance appraisal by subordinates:
Very few organisations follow the approach of subordinates evaluating managers’ performance. Some educational institutions follow this approach where students evaluate the performance of teachers on the basis of certain predetermined criteria.
7. Methods of Performance Appraisal:
The methods of performance appraisal fall into two major categories:
I. Performance results-oriented methods
II. Employee behaviour-oriented methods
I. Performance results-oriented methods:
These methods measure actual performance of employees and bring it in conformity with the pre-determined standards.
1. Graphic Scales:
These scales “list a number of rating factors, including general behaviours and characteristics, on which an employee is rated by the supervisor.” Depending on the factors that need to be rated like quality or quantity of work, technical knowledge, punctuality, integrity, cooperativeness, initiative, creativity, analytical ability, decisiveness etc., supervisors prepare a graphic scale with different grades and employees are rated on the basis of their performance on that scale. The appraiser goes through these set of factors on the rating scale where highest grade (A or 1) would denote the best rating.
The usual dimensions of a graphic scale are:
Grade A = Outstanding
Grade B = Above average
Grade C = Average
Grade D = Below average
Grade E = Unsatisfactory
The advantage of this scale is that grading of employee on the scale highlights the need for improvement in his abilities to perform the job. If an employee is placed at Grade D, his performance is below average and he needs to improve upon it.
The limitation of this method is that every manager does not follow the same method of rating people at a particular grade. An employee who is assigned Grade A by one manager may be assigned Grade B or C by another manager. This method is, thus, sensitive to errors.
Different types of rating errors are:
(i) Halo effect:
This is a presumption by managers that a person doing well in one area will be doing well in other areas also. This is not always the case. A person good at sales may not be good in production or vice versa.
(ii) Horns effect:
It is the opposite of halo effect. Managers presume that employees who do not perform well in one area are poor performers in other areas too. They tend to give such employees a low grade if they have performed badly on one job while they may have actually performed better on other jobs.
(iii) Contrast error:
Managers rate the subordinates by comparing their individual performances rather than measuring their performance against the standards. When two sub-standard employees are rated on this basis, manager will give Grade A to one and B to another while both of them may actually fall in Grade E.
(iv) Recency error:
The employees are rated on the basis of their latest or recent performance. The earlier performance is ignored. An outstanding employee who, for some reason, has not been able to do well in the latest assignment, shall be placed in Grade D or E. This is not a satisfactory method of rating.
(v) Leniency error:
Supervisors give lenient rating to all the employees without measuring their actual performance. The results are, thus, likely to be biased.
(vi) Severity error:
This is the opposite of leniency error. The supervisor gives low rating to all the employees, without appraising their actual performance. The results would, therefore, be again inaccurate.
(vii) Central tendency error:
An average rating or grade is given to everyone, disregarding their actual performance. The rater marks all the people as average without discriminating as superiors or inferiors. This may happen because the rater does not have sufficient knowledge about employees or because he is indifferent towards employees.
(viii) Constant errors:
Some raters have the habit of rating people as high or low. They either rate everyone high or everyone low. Some rate on the basis of present performance while others on the basis of potential to perform in future. The results of two raters are, thus, not comparable.
How to make rating effective:
The graphic scale is a simple and effective method to rank performance against standards but it is highly sensitive to a wide range of errors. Steps must, therefore, be taken to make this programme effective. The rater training programmes are organised to train the raters who hold biased opinion about rating the subordinates. These programmes develop general consensus among the raters to rate the subordinates according to a common standard and improve their perceptions about rating their performance.
2. Behaviourally anchored rating scales:
This method of performance appraisal is an extension of graphic scale method. These rating scales are used in situations where number of employees are performing similar work and high degree of precision is required in their job behaviours. Rather than assessing the performance as above average or below average, a range of levels of performance, from very high to very low is specified on the rating scale.
Unsatisfactory performance, for example, can further be labelled as very unsatisfactory or marginally unsatisfactory. Above average can also be ranked as slightly above average or much above average.
Five grades in the graphic scale can be developed as:
A wide range of performance is specified on the graphic scale and the raters are much less sensitive to bias by the range of errors that inhibit their rating capacity on the graphic scale. Though this method is more accurate and scientific than the graphic scale, it is more time consuming and expensive.
It also needs high precision on the part of raters to rate the subordinates as different rating levels form part of the same grade. Managers, therefore, often seek assistance of experts in preparing this scale.
3. Essay evaluation:
This is an unstructured form of performance appraisal where grades are not assigned to performance parameters. As the employees perform their jobs, the evaluators or raters keep track of the performance and note their positive and negative job attributes like quality and quantity of performance, knowledge about the job skills and organisational policies, employees’ strengths and weaknesses, their potential to work, need for training etc.
At the end of the period, they analyse all these points and give brief description of their performance in the form of an essay. This method has the merit of rating the employees purely on the basis of their actual performance. It reduces personal bias of the raters. However, different raters have styles and perception about rating the qualities of a person and this method, thus, may not be totally error free.
II. Employee behaviour-oriented methods:
These methods are also known as comparative methods of evaluation. They compare performance of employees against each other and rank them accordingly.
1. Straight ranking:
This is the simplest method of ranking where employees are rated as rank 1, 2, 3, 4 or 5. Where an employer has to consider one of his subordinates for promotion to higher job; he would simply see each person’s performance in the respective area of operation, say production, and the one having produced the maximum number of units would be given rank 1 followed by ranks 2 through 5, and accordingly considered for promotion.
People are, thus, given ranks on the basis of their traits. This method is effective when few number of persons have to be ranked as some of the traits for ranking cannot be quantified. For less number of people, however, personal observations can also be used for ranking.
Ranking method does not indicate differences in ranks as equal to differences in ability of people being ranked. This is only a comparative method of ranking where one is better than the other; how much better is not indicated through rankings.
2. Alternation ranking:
Rather than ranking the employees in ascending order of performance, the raters first pick up the best and give him rank 1, then the worst and rank him 5, then they pick up workers to be ranked as 2 and 4 and proceed this way until all the employees are ranked. This method is similar to straight ranking method with the difference in the approach towards picking up different ranks.
3. Paired comparison:
In this method of ranking, each person is compared with others in the group on the basis of specific traits, usually one trait as otherwise huge number of comparisons have to be made which can make rating a time-consuming process. A list is prepared containing the names of persons to be ranked in pairs. The rater puts a tick mark against the person who is better between the two.
The person who is ticked marked as better for maximum number of times is given the highest rank. The number of comparisons to be made is calculated by using the formula n(n – l)/2 where n is the total number of persons to be compared. For instance, paired comparison has to be made amongst 5 people. This requires 10 comparisons [5(5 – 1)/2] to rank who gets the highest rank in terms of being better than the others.
The comparisons are as follows:
Every person will be compared with 4 others (1 with 2, 3, 4, 5 / 2 with 1, 3, 4, 5 / 3 with 1, 2, 4, 5 / 4 with 1, 2, 3, 5 and 5 with 1, 2, 3, 4) and one who is most preferred gets the highest rank followed by others. Though everyone is compared with everyone else in this method, it is difficult to use this method when large number of people are involved.
4. Forced-distribution method:
When more than one employee are rated as almost the same, it becomes difficult for the rater to rate them as 1 or 2. As many employees are rated around a similar point on the rating scale, one employee is not given one rank; but a group of employees are placed in one rank.
For example, the manager might place 5% of the employees in rank 1.10% in rank 2, 20% in rank 3, 30% in rank 4 and remaining 35% in rank 5. In case of ranking 100 employees, therefore, 5 employees will be placed in rank 1 and 35 in rank 5. This method is suitable where supervisor has to rank a large number of employees and individual ranking is not possible.
5. Forced choice method:
This method of rating involves appraising the performance of employees by choosing between two or more statements that describe the characteristics of the employees. The statements may be positive or negative. They are closely similar to each other but the rater has to choose the most appropriate statement that describes the employee. Many sets of such statements (positive and negative) are prepared to analyse the performance of employees and the final rating is done on the basis of results of all the statements.
These statements could be as follows:
One Set of Statement:
1. He is an honest employee.
2. He is always fair in his dealings (financial and non-financial) with others.
1. He is very hard working.
2. He completes his assignments in scheduled time even if he has to work overtime.
1. He has leadership qualities that help him guide his peer group of friends.
2. People come to him for guidance to which he always gives the right advice.
The statements in each set describe characteristics like honesty, hard working and leadership which are very close in meaning to each other. The rater is forced to choose the most effective statement that describes the individual. This statement is most descriptive of the employee. Thus, one statement is chosen from different sets for final analysis. The final rating is done on the basis of statement chosen from all sets of statements.
This method avoids subjectivity in rating as the rater chooses the most appropriate statement out of those which closely describe the positive or negative behaviour of the employees.
8. Essentials of a Good Appraisal System:
Depending on the need to carry out performance appraisal of employees, i.e., whether work performance has to be evaluated or behaviour is to be evaluated or inter-employee comparisons have to be made, the appropriate method of performance appraisal should be selected.
Whatever method is adopted, it should have the following features:
1. It is easily understandable.
2. It is fit for organization’s operations.
3. It takes care of needs of the organisation and its work force.
4. It should adapt to the size of the organization.
5. It defines the responsibility of the manager and the work force.
6. It provides support to management to design the compensation plan.
7. It maintains balance between efforts and rewards.
8. It is result-oriented and focuses on customers and sales.
9. It minimizes procedural formalities in designing the appraisal system and compensation plan.
10. It must pinpoint that aspect of employee performance (behaviour or results) for which it is adopted.
11. It must be reliable, that is, free from errors.
9. Issues Involved in Performance Evaluation System:
A good performance evaluation system does not depend upon single criterion of performance. It involves multiple criteria to judge employees’ efficiency in achieving targets.
The following issues must be considered while designing the performance evaluation system:
1. Qualitative and quantitative criteria:
Employees cannot be judged purely on qualitative or quantitative basis. Qualitative assessment involves personal bias and subjective value judgment. Quantitative assessment based on statistical data, on the other hand, ignores important determinants of employee’s effectiveness like personal skills in handling problems, ability to impress clients etc. Judging the performance on the basis of only quantitative records does not provide adequate basis of comparison.
Sales made by different sales groups, for example, cannot be compared merely on the basis of the accounting data. Salesmen’s convincing power, customer friendliness also have to be taken into account. Managers should, therefore, have judicious mix of qualitative and quantitative criteria to evaluate their personnel.
2. Comparison amongst employees:
Comparison amongst employees cannot be made on ‘man-to-man’ basis as human element is involved in such comparisons which differs in different situations. Different employees work under different environmental conditions and deal with different products and customers differently.
3. Determining standards of performance:
The standards of performance should be scientific and realistic because the whole performance evaluation process depends upon standards. If standards are unrealistic, the purpose of performance evaluation gets defeated.
4. Periodicity of evaluation:
The period of evaluation should be neither too long nor too short. Very short-term evaluation ignores the factors valuable for the firm in the long-run like developing good customer relations. Very long-term evaluation also does not give satisfactory results because it ignores operating results of the company.
Though yearly evaluation is a common practice followed by companies, the period depends upon the type of product sold, practices followed in the industry and outlook of the management. Capital goods and industrial goods companies usually follow a period longer than one year.
10. Process of Performance Appraisal:
Performance appraisal process consists of the following steps:
1. Goal setting:
Goals are set for appraising performance which become standards. Standards should be applicable, adequate and objective. There should be scope for stretching human abilities. They should be high but reasonable and attainable in a given situation.
2. Measure performance:
Once standards are set, next job is to measure performance against standards. Measurement can be annual, periodic or continuous.
3. Find deviations:
Managers observe actual performance of employees, look at the environmental conditions and find deviations in performance.
4. Corrective action:
Some deviations are desirable and some are undesirable when compared against goals/ standards. Corrective actions are taken and in some cases, the goals are modified.
Diagrammatically, the performance appraisal process/control chart can be shown as follows:
In the performance evaluation system, manager should not just perform his role theoretically but really look forward to apply fundamentals to practice i.e. implementation. In addition to basic managerial functions, he should focus on other areas of concern like personality, cooperation, maturity, intelligence, loyalty, a good trainer etc.
These areas should be used in conjunction with appraisal of plans and goals. Appraisal system is a continuous and sequential activity performed by managers to institute a sound reward system for its personnel and also promote market share for its products.
11. Performance Appraisal for Promotion:
Though performance appraisal is usually related to measuring present performance of employees, it is not necessarily so. Employees of the organisation are trained and developed to perform present jobs and assume jobs of higher importance in future. The appraisal system should measure not only their present performance but also future performance on higher- order jobs.
Thus, a potential appraisal is carried to know the potential of employee’s success on future jobs. These are largely promotions which involve better status and responsibilities on the future jobs. The appraisal carried for this purpose is called potential appraisal. While performance appraisal is related to the present job, potential appraisal is related to future jobs. It discovers future talent of a person’s attributes to perform future jobs.
Promotion can take two forms:
1. Horizontal promotion:
It increases the position of a person with no change in the type of work performed by him. Promotion of a lecturer to senior lecturer has no added job assignment to the post. A lower division clerk promoted to an upper division clerk also has, by and large, same responsibilities to discharge.
2. Vertical promotion:
It increases the position and status of a person along with job assignment and responsibilities. A worker promoted as foreman or a foreman as superintendent performs jobs of higher importance.
Promotion is necessary as it provides satisfaction to employees in terms of jobs, morale and economic status. It increases organisational productivity and provides people from within the organisation who are familiar with its policies, procedures and structure.
The organisation, thus, saves time and money in conducting orientation programmes to acquaint new people to the organisation structure.
Promotion is, beneficial for both organisation and the members:
(a) It allows people to satisfy their growth needs within the organisation. Though people move from one organisation to the other for higher scales, promotions within the organisation reduce the labour turnover rate and thus, costs for the organisation.
(b) It motivates people to work hard as they know they will step up the organisational ladder and earn better financial and non-financial rewards. Promotion is, thus, an incentive to improve one’s work performance. If organisational policies allow for higher positions to be filled through outside recruitments only, members within the organisation will have no motivation to work hard.
Basis for Promotion:
Promotion can be done on two basis — Merit and Seniority:
(a) Promotion on the basis of merit:
It gives promotion on the basis of performance of employees. The best performing employee is promoted to the higher post. Competence of a person is, thus, the basis for promotion and ensures efficiency in the organisation as the person promoted can understand and perform the job of higher order based on his potential. Merit, thus, promotes people on the basis of their competence and potential to perform higher-order jobs.
Promotion on merit basis suffers from the following weaknesses:
(i) There is no objective criterion to measure merit. Though performance measures like test scores, skills and attitudes of a person can be used, they are not free from errors. They may involve biased judgment in favour of a person,
(ii) Though a person may be good at his present post, he may not be able to perform well at higher positions. Present knowledge may not necessarily be the criterion to judge a person’s future potential.
(b) Promotion on the basis of seniority:
It is a widely recognised basis of promotion where a person is promoted on the basis of his length of service. It is an objective method of promotion as people cannot be biased on the basis of non-measurable performance parameters.
Those who have served the organisation longest are considered for promotion followed by the chain of tenure. Most of the government organisations follow this basis of promotion though, however, it is a matter of dispute in business organisations between management and employees’ union.
While deciding seniority as the basis for promotion, the following points must be taken into consideration:
1. The basis of seniority should be clearly defined.
2. It should follow a defined set of rules to avoid conflicts amongst members. For example, if an employee goes on leave with pay and another employee goes on leave without pay, whether both the leave periods are counted for considering seniority or not should be clearly defined.
3. Seniority list should be maintained in the office and employees should have access to it. Transparency avoids conflicts amongst members while deciding about promotions.
4. Responsibilities at each level of seniority should be clearly laid down. Some senior positions have frequent touring or overtime without additional allowance, loss of vacation etc. People moving to higher positions should know the privileges or otherwise of the positions they are moving to. It is heard that some people do not move to managerial positions in banks as this position has transferable posts. People thus, refuse seniority and maintain their status quo for family or other considerations.
This system of promotion has the following merits:
(i) It is an objective basis of judgment as promotion depends upon the length of service which can be measured.
(ii) Since biased judgment is not involved, it does not affect employees’ morale and organisation’s productivity.
(iii) It reduces the labour turnover rate as employees are promoted on the basis of years of service in the organisation. People prefer to work in the same organisation rather than moving to other organisation. Long serving years also promote loyalty amongst employees and organisations save money on conducting orientation and training programmes for new employees.
Promotion on seniority suffers from the following limitations:
(i) After a specific point, length of service is not the criterion for promotions. Continued service does not bring much gain to employees and, therefore, they look for other jobs.
(ii) It promotes lethargy as employees are assured of promotion after a specific period of time.
Merit Versus Seniority:
Both merit and seniority have benefits and limitations. Neither of the two should be the sole criterion for promotion. Organisations maintain balance between seniority and merit and generally follow the practice of promoting people at lower levels on the basis of seniority and at higher levels on the basis of merit.
This assures people at lower levels of time-bound promotions and provides them the satisfaction of assured promotion. At higher levels, however, only those who are worthy of assuming positions of higher importance are considered for promotion. Length of service or merit should not be the sole factor affecting promotion. From the most able, the senior most should be selected and minimum specific length of service should be considered before recommending a case for promotion.
A combined ladder based on both merit and seniority at different levels can be analysed as follows:
1. Consider promotion on the basis of length of service (seniority).
2. After a particular level, ignore promotions for those who do not prove on the merit standards (merit).
3. Amongst those selected, consider those who have served for the longest time period (seniority).
4. Consider further promotion only on the basis of merit (merit).
12. Barriers to Performance Appraisal:
The following barriers may arise in making appraisals:
1. Despite best efforts to be objective in making appraisals, appraisers’ may become subjective in their judgment.
2. Appraisals based on the assumption that appraisal system is perfect cannot give accurate results. Targets and techniques of appraisal cannot be standardized forever.
3. Holding personal opinion about appraises can make appraisals a mere formality. Appraisers do not spend sufficient time in designing the appraisal system and completing the appraisal forms. This lacks a systematic review of performance, both present and potential.
4. Appraisal is like a check on employees’ performance. Therefore, they may be resistant to appraisals. They often tend to provide faulty or disguised information about their performance. This makes appraisal ineffective in nature.
5. Sometimes, appraisals are affected by psychological blocks to appraisals.
(a) Take appraisals as an added burden on them
(b) Dislike to find faults with appraises’ performance
(c) Dislike that employees’ promotions are withheld or deferred because of their rating.
(d) Be afraid of becoming unpopular amongst employees, etc.
These fears are a hindrance to effective appraisals resulting in subjective appraisals.
Appraisers tend to give high ratings to those whom they want to favour irrespective of their performance. This defeats the very purpose of appraisals.
6. Appraisals are done by comparing actual performance with standard performance as stated in the appraisal form. If these forms are not properly designed, the desired information cannot be extracted from the appraises. Performance criteria may be non-measurable (honesty, politeness etc.) or ambiguous (contribution to output or number of hours worked). When performance traits are not exactly measurable, they can be interpreted differently by different people. This fails to give effective ratings to employees’ performance.
7. Despite the best efforts in making performance appraisal error free, errors may occur, consciously or otherwise.