Module- 4 Performance appraisal, Promotion, transfers

Introduction

Organizations are run and steered by people. It is through people that goals are set and objectives realized.
The performance of an organization is thus dependent upon the sum total of the performance of its members.
According to Peter Drucker, “An organization is like a tune; it is not constituted by individual sounds but by their
synthesis.” The success of an organization will therefore depend on its ability to measure accurately the
performance of its members and use it objectively to optimize them as a vital resource. The performance of an
employee is his resultant behaviour on the task which can be observed and evaluated. It refers to the
contribution made by an individual in the accomplishment of organizational objectives. Performance can be
measured by some combination of quantity, quality, time and cost. People do not learn unless they are given
feedback on the result of their action. For learning to take place, feedback must be provided regularly and
should register both success and failures, and should follow soon after the relevant actions. Performance
appraisal system provides the management an opportunity to recall as well as give feedback to people as to
how they are doing, so that they can correct their mistakes and acquire new skills.

Performance appraisal

Meaning

Performance appraisal can be viewed as the process of assessing and recording staff performance for the
purpose of making judgments about staff that lead to decisions. Performance appraisal should also be viewed
as a system of highly interactive processes which involve personnel at all levels in different degrees in
determining job expectations, writing job descriptions, selecting relevant appraisal criteria, developing
assessment tools and procedures, and collecting interpreting, and reporting results.

The scope of transferring may be in two categories company-initiated or employee-initiated. In first instance, a
company may initiate a transfer to place employees in positions where they are likely to be more effective or
where they are likely to get greater satisfaction or where they are able to meet the work schedules of the
organisation.

In the second instance, employees may initiate transfers for several reasons. They may demand a change of
bosses or of locations. They may try to obtain more allowances or specific working conditions which are affixed
to a new position. They may want to join their friends and relatives or they may try to avoid interpersonal
conflicts with their present colleagues.

Definition

To Maurice, B. Coming performance appraisal means “attempts to recognize and reward for personnel abilities
that an individual brings to his job, measured by the extent to which his output or quality of his work exceeds
the minimum that is fixed as the basic rate of pay”.

Or

To Yoder Performance Appraisal refers to “the formal procedure used in an organization to evaluate
personalities, contributions and potentials of group members”.

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Examples of performance appraisal

• Is the employee late for more than two days a week? (Yes/No)
• Does the employee achieve 80% or more of their goals? (Yes/ No)

Purpose of Performance Appraisal

Objectives for performance appraisal policy can best be understood in terms of potential benefits, identify the
following:

Increase motivation to perform effectively

Increase staff self-esteem
Gain new insight into staff and supervisor
Better clarify and define job functions and responsibilities
Develop valuable communication among appraisal participants
Encourage increased self-understanding among staff as well as insight into the kind of
development activities that are of value
Distribute rewards on a fair and credible basis
Clarify organizational goals so they can be more readily accepted
Improve institutional/departmental manpower planning, test validation, and development of
training programs
Performance appraisal should be viewed as a process, and not simply as the creation of
ubiquitous standards.

The overriding purpose of performance appraisal is to help staff to improve and, thus, to improve
organizational effectiveness. Performance appraisal therefore addresses institutional needs as well as staff
member needs, abilities, motivation, and expectancies.

The Integrated staffing model suggests two integrated functions toward this purpose: the evaluation of staff
relative to job requirements and the development of staff for improved performance. Thus, performance
appraisal and staff development are closely related and should operate in concert with one another.

Uses of Performance appraisal:

• Internal Employee Relations: Performance appraisal evaluation can provide crucial information used in
making decision about the internal employee relations i.e promotion, demotion, transfers and dismisses
etc. For example, performance appraisal data are also used for decisions in several areas of internal
employee relations, including promotion, demotion, termination, layoff, and transfer.

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• Compensation Programs: Performance appraisal evaluations help in making decisions dealing with
wage or salary regulations. It is believed that organisations should reward employees with increase in
pay when excellent performance is achieved.
• Career Planning and Development:Is a more formal approach used by organisations. It involves
recruiting suitable qualified and experienced people when required. Performance appraisal can
determine an employee’s potential through assessing its weaknesses and strengths.

• Recruitment and Induction: Appraisal data can be used to monitor the success of the organization’s
recruitment and induction practices. Appraisal data can also be used to monitor the effectiveness of
changes in recruitment strategies.

• Employee Evaluation: Evaluation is a major objective of performance appraisal. Performance appraisal

is the process of examining and evaluating the performance of an individual. The need to evaluate
employees is to encourage and develop them.

• It can serve as a useful basis for promotion and job rotation. On the basis of this, the future
requirements can be projected or curtailed.

• It helps in determining appropriate salary increase and bonus for workers based on performance
measure.

• It can provide suitable information for formulating training and development programmes. If an
employee is not performing up to expectations, a training programme may enable him to correct any
skill or knowledge deficiencies.

• It can motivate employees by showing them where they stand and establishing a data bank on
appraised for rendering assistance in personal decisions.

• The data are useful tool for differentiating between good and poor employees performance. “For
example, in 1992, IBM set new guidelines to its performance appraisal system with the objective of
more strictly enforcing its existing method of ranking employees on a numerical scale of 1 to 4.

Methods of Performance Appraisals

Performance appraisals come in many forms. Managers and human resources staff responsible for these
appraisals need to choose the best methods based on the size of their organization and what sorts of
responsibilities the employees fulfil.

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1. 720-Degree Feedback

This method doubles what you would get from the 360-degree feedback! The 720-degree feedback method
collects information not only from within the organization but also from the outside, from customers,
investors, suppliers, and other financial-related groups.

2. The Assessment Center Method

This method consists of exercises conducted at the company’s designated assessment center, including
computer simulations, discussions, role-playing, and other methods. Employees are evaluated based on
communication skills, confidence, emotional intelligence, Mental alertness, and administrative abilities. The
rater observes the proceedings and then evaluates the employee’s performance at the end.

3. Behaviourally Anchored Rating Scale (BARS)

This appraisal measures the employee’s performance by comparing it with specific established behaviour
examples. Each example has a rating to help collect the data.

The job being appraised belongs to a customer service representative:

A level four rating might assume the rep answers the phone after 1 to 2 rings with a friendly greeting , A
level six rating might assume the rep answers phone after 1 ring with the correct company greeting

4. Checklist Method

This simple method consists of a checklist with a series of questions that have yes/no answers for different
traits. Each statement has two options, Yes & No or True or False. The rater can choose one out of two
options which he thinks correctly describes the behavior of the employee.

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5. Critical Incidents Method

Critical incidents could be good or bad. In either case, the supervisor takes the employee’s critical
behaviour into account.

For example,

On July 22 the manager efficiently handled an annoyed customer. He was very prompt and polite in solving
the issue ? It is a positive critical incident.

On July 22, the manager was very rude in handling an annoyed customer ? it is a negative critical incident.

6. Customer/Client Reviews

This method fits best for employees who offer goods and services to customers. The manager asks clients
and customers for feedback, especially how they perceive the employee and, by extension, the business.

7. Field Review Method

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An HR department or corporate office representative conducts the employee’s performance evaluation.
Field review method of performance appraisal is conducted by the rater who does not belong to the

employees’ department. The rater is someone from the corporate, especially from HR department

8. Forced Choice Method

This method, the manager is forced to distribute employees on the basis of their performance on all points
of the bell shaped scale. Some fall into outstanding zone, some into average and some into the bottom
region of the curved scale.

9. General Performance Appraisal

This method involves continuous interaction between the manager and the employee, including setting
goals and seeing how they are met.

10. Human Resource Accounting Method

Alternately called the “accounting method” or “cost accounting method,” this method looks at the monetary
value the employee brings to the company. It also includes the company’s cost to retain the employee.

11. Confidential appraisal method

This method is mostly used in government organizations to make decisions regarding promotion and
transfer of the employees. The senior prepares the confidential report on the performance, behaviour and
other traits of the employee.

Objectives of Performance Appraisal

The main objectives of Performance Appraisal are as follows:-

To provide feedback to employees so that they come to

know where they stand and can improve their job
performance.

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To provide a valid database for personnel decisions
concerning placements, pay, promotion, transfer,
punishment, etc.
To diagnose the strength and weakness of individuals so
as to identify further training needs.
To improve coaching, counselling, career planning and
motivation to subordinates.
To develop positive superior-subordinate relations and
thereby reduces grievances.
To facilitate research in personnel management.
To test the effectiveness of recruitment, selection,
placement and induction programmers.

Thus, Performance Appraisal aims at both judgment and developmental efforts. The first two objectives are
judgmental whereas the remaining is developmental. Under developmental efforts employees are helped to
identify their weakness and take steps to overcome them.

Advantages of Performance Appraisal are:

1. Find The True Potential of The Employee

Performance appraisal helps the HR department and the company learn about the strengths and weaknesses
of an employee. This process can, therefore, be used to truly learn about the employee’s interests and
potentials. This analysis also helps the HR department to choose the right employees for a job. The HR
department can even suggest the employee switch to a department that fits them better.

2. Promotes Employee Development

The quickest way to improve an employee’s performance is by providing them with specific feedback. The
performance appraisal process includes giving employees feedback about their strengths as well as weakness.
The employees can use this information to develop themselves further.

3. Acts as a Motivator

Employees crave feedback. When they receive that it can act as a motivator for them. Knowing their
weaknesses can help employees give their best and improve upon the areas they’ve missed out on. After all
this can work as a boost to the entire office or team.

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4. Focused Employee Training & Development

Planning and development programs are important for any organization. The performance appraisal can show
exactly where a majority of the employees lack in terms of training as well as in development. The HR
department can then create programs according to those gaps. This will be more beneficial for the employees
and will be a successful program of training and development.

5. Improves Employee, as well as Management Relationship

In general, the performance appraisal gives employees an opportunity to truly share and discuss the problems
that they are facing in their role. This builds a healthy environment for both the manager and the employee.

6. Promotion & Transfers

It is difficult to make the correct decision about who to promote and who to transfer without any data. The
performance appraisal can be useful for learning in which talents should be rewarded and which need to be
pushed to do better. It ensures that the decision is made based on facts and figures rather than personal
biases.

7. Mentoring From Superiors

Managers are a crucial part of any appraisal system. They are the ones handling the administrative as well as
feedback work in an appraisal.

Limitations of The Performance Appraisal Are as follows:

• Consuming Process

It requires resources, time and costs the company money.

It requires the HR department to create the forms, ask everyone to fill them as well as analyze the results for
specific feedback while going through the correct procedures.

Sometimes, the organization has to hire professional experts from outside the company to conduct the
evaluation process.

• Personal Bias or Incorrect Ratings

It is possible that managers, in order to not look bad, give a decent rating to all employees. This can be the
case with managers that try to avoid conflicts or arguments. Furthermore, personal bias can play a huge role in
the ratings. Also, if a manager has a liking for an employee they will rate them better and visa versa. This can
be the case even if they are a good employee

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• Horn & Halo Effect
The horn and halo effect is a human tendency to see only the good or the bad in a person. For
example, an employer might just see that the employee is never on time and will rate the employee
low on all the brackets because of that. However, he might not notice that the employee works for
long hours every day and completes the work on time. This can affect an employee’s overall ratings.

• Spillover Effect
This refers to human behavior. It means that while judging the employee for performance appraisal it
is possible that the manager simply marks an employee high because of their past performances
instead of their current ones. They rank the employee by taking into account the overall overview that
they have for the employee.

• . Attitude of Evaluator
The mindset and the mood of the manager is also a cause of concern. If the manager has high
expectations they might mark their employees lower. Thereby, making the team look lower than
others on average. Also, this makes the process of evaluation and improving the performance in the
organization a difficult task to achieve.

Process of performance appraisal can be described as follows:

1. Establish Performance Standards:

The performance standards for each and every job should be developed and discussed with the
superiors after thorough analysis of the job. These standards should be clear and not vague. They
must be measurable after certain period. Ex- Sales role, a performance standard could be set for
achieving a certain monthly sales target, maintaining a customer satisfaction rating of at least 90%,
and submitting timely sales reports

2. Communicate the Standards:

After setting the performance standards of job, the next process is to communicate these standards
to all concerned; at least two parties – (a) appraiser (b) appraisee. It is necessary, these standards
must be modified. The appraiser must ensure that the information communicated by him has been
received by appraisee and understood clearly .
Ex- Using sales reports, customer feedback, and other relevant metrics, the sales manager tracks each sales
team member’s actual performance against the established standards throughout the month.

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3.Measure Actual Performance:

Now the next process is to measure actual performance of appraisee on the job after certain period.
Generally four common sources are used by appraiser to measure actual performance, personal
observation, statistical reports, oral reports and written standard.

Ex - At the end of the month, the sales manager compares each team member’s actual sales figures,
customer satisfaction scores, and report submission timeliness with the predetermined performance
standards.

4. Compare Actual Performance with Standards:

The fourth process is the comparison of actual performance with standards. Sometimes actual
performance may be better than standards and sometimes it may go off the track. Any deviations
between actual performance and standard performance may be noted carefully for next process.

5. Feedback to the Employee:

In this process the results of stage forth are discussed with employee. The information which is
received by appraisee about his assessment has a great impact on his performance. Communicating
poor performance is difficult task of appraiser.

Ex- For those who met or exceeded standards, positive feedback is given, highlighting specific
achievements. For those who fell short, constructive feedback is provided, outlining areas for
improvement.

6. Taking Corrective Action, if Necessary:

This is the final process of the performance appraisal. In this stage two types of corrective action
may be recommended by the appraiser. One is positive means salary increase or promotion if actual
performance of appraisee is up to the mark and second is negative means coaching a nd counselling
may be done if the performance is poor. If necessary appraisee may be deputed for formal training
courses

Ex- If a sales team member consistently fails to meet the monthly sales target, the sales manager
may identify the root cause, provide additional training or resources, and set specific improvement
goals.

Promotion: Meaning, Purpose of Promotion, Basis of promotion

Promotion is vertical movement of an employee within the organisation. In other words, promotion refers to the
upward movement of an employee from one job to another higher one, with increase in salary, status and
responsibilities. Promotion may be temporary or permanent, depending upon the needs of the organisation.

For example, if a University Professor is promoted to the next higher level of the faculty position, i.e., Dean of
the faculty, he will not receive any increase in salary. Such promotion is called dry promotion

Purpose
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1.To recognize an employee’s skill and knowledge and utilize it to improve the organisational
effectiveness.

2. To reward and motivate employees to higher productivity.

3.To develop competitive spirit and inculcate the zeal in the employees to acquire skill, knowledge
etc.

4. To promote employees satisfaction and boost their morale.

5. To build loyalty among the employees toward organisation.

6. To promote good human relations

7.To increase sense of belongingness.

8. To retain skilled and talented people.

9. To attract trained, competent and hard working people.

10. To impress the other employees that opportunities are available to them too if they also perform
well.

Basis of promotion

Organisations adopt different bases of promotion depending on their nature, size, managerial policy
etc. The well established bases of promotion are seniority and merit.

1. Seniority based promotion

If seniority is the bases for promotion, an employee with the longest period of service will get
promoted, irrespective of whether he is competent or not.

Advantages

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It is easy to administer.

It is easy to measure the length of service and judge the seniority.

With the base of seniority there is no scope for favoritism, discrimination and subjective judgement.

By seniority everyone is sure of getting promotion one day.

Subordinates are more willing to work under an older boss who has given many years of service to
the company.

Disadvantages

The learning capabilities of senior (older) employees may diminish.

It de-motivates the younger and more competent employees and it results in more employee
turnover.

The organisation is deprived of external talent which is very necessary due to technological
advancements and multi-culture organisation.

Judging the seniority is highly difficult as the problems like job seniority, company seniority, regional
seniority, service in different organizations, trainee experience, research experience etc., will crop up.

2. Merit or competence based promotion

Merit based promotion occur when an employee is promoted because of superior performance in the
current job. Merit means an individual’s knowledge, skills, abilities as measured from his educational
qualifications, experience, training, and past employment record.To get promotion on the basis of
merit requires hard work and sincerity on the part of the employee

Advantages

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Promotion by merit is a reward to encourage those employees who make a successful effort to
increase their knowledge or skill and who maintain a high level of productivity.

It helps the employer to focus on talented employees recognize their talent and reward their
contributions.

Efficiency is encouraged, recognized and rewarded.

Competent people are retained as better prospects are open to them.

It inspires other employees to improve their standards of performance through active participation in
all activities and putting in more efforts.

Disadvantages

It is not easy to measure merit. Personal prejudices, biases, and union pressures may come in the
way of promoting the best performer.

When young employees get ahead of senior employees in the organization this creates frustration
among senior employees .They feel insecure and may also quit the organization.

The past performance may not guarantee future success of an employee.

Loyalty and length of service is not properly rewarded .

3. Seniority-Cum-Merit/Merit-Cum-Seniority:
Managements mostly prefer merit as the basis of promotion as they are interested in enriching
organizational effectiveness by enriching its human resources. But trade unions favour seniority as
the sole basis for promotion in order to satisfy the interests of majority of their members.

Transfer

Definition

According to Edwin B. Flippo

Transfer is a change in job where the new job is substantially equal to the old in terms of pay, status, and
responsibilities.

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Employee Transfer is the process of horizontal movement of an employee, wherein there is a change in the
job, without any changes or revision in the remuneration, pay, and modification of responsibilities.

Transfer can either be temporary or permanent depending on the decision of the organization, and it is initiated
by any of the two, i.e. employer or employee. Sometimes, it also includes promotion, demotion or even no
change In the status and responsibility.

Temporary transfers may be due to :

Temporary absenteeism

Shifts in the workload

Vacations

Permanent transfers may be due to

Shifts in the workload

Vacancies requiring the special skill of the transferred employee

Ill-health of the employee

Transfer requests might come from the worker himself, from his superior, from the head of another department
or may be made necessary by changes in the volume of trading activities. When the transfer request comes
from the employee himself, it is because he does not like the work or the place of work or the co-workers.

Requests for transfers should be favourably considered especially when it comes from an employee. An
unsatisfied employee is more of a liability than an asset. It is true that no company can comply with all requests
for transfers.

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Demotion

A demotion is a compulsory reduction in an employee’s rank or job title within the organizational hierarchy of a
company, public service department, or other body.

Types of transfer

Types Explanation

Production transfer
• Production transfers
are normally made
from one department
to another where the
need for the
employee is more.
• This type of transfer is
made to avoid lay-off
of efficient employees
by providing them
with alternative
positions in the same
organisation.

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• These are transfers in which a long- service
Replacement transfer
employee is transferred to a similar job where he
replaces or “bumps” an employee with shorter
service. This type of transfer is made when all
operations are declining but management wants
to retain the long-service employee as long as
possible
Versatility transfer
• The versatility transfer (better called ‘rotation’) is for the
purpose of providing management with a more versatile
group of employees.
• This type of transfer will increase the versatility of the
employee by shifting him from one job to another. The
employee gets an opportunity for varied job experience.
This helps the employee through job enlargement.
Remedial transfer
• These transfers are made to remedy the
situation. Remedial transfers provide
management with a procedure whereby an
unsatisfactory placement can be
corrected. Initial placement might be faulty
or the type of job might not suit his health.
In such cases the worker would benefit by
transfer to a different kind of work
Shift transfer
• Shift transfers are transfers of workers
from one shift to another on the same
type of work. Workers generally dislike
second or third shift as it affects their
participation in community life. To
minimise this, shift transfers are
effected.

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Precautionary Transfers
• These transfers are made within the
department from one section to another.
The main purpose of such transfers may
be to train the workers and prepare them
to handle the operations of different
sections of the department.
Departmental Transfers
• Transfers from one department to
another department within the plant is
called departmental transfer. Such
transfers are made if the nature of work
is the same or substantially the same in
both the departments such as clerical or
routine job.

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