UNIT–II

HRD–Micro Perspective: Areas of HRD; HRD Interventions Performance Appraisal, Potential

Appraisal, Feedback and Performance Coaching, OD or Systems Development, Rewards, Employee
Welfare and Quality of Work Life and Human Resource Information; Staffing for HRD: Roles of HR
Developer; Physical and Financial Resources for HRD; HR Accounting; HRD Audit, Strategic HRD

HRD–Micro Perspective: Areas of HRD

HRD at Micro Level

Learning/Training
The core of HRD is learning. There are ' many other human Resource development areas in the
organization, but uniqueness of HRD is its use of learning to attain individual and
organizational objectives. Employees can learn a great deal through training programmes.

Career development
HRD focuses attention on the career development of individual employees. Employees are
encouraged to pursue career development through various training programmes. Such career
developments will not only help the employee concerned but also the organization to become
dynamic and growth oriented.

Upgrading manpower
HRD is basically concerned with the upgrading of manpower working in an organization. This
leads to improvement in the individual performance of an employee and also corresponding
improvement in the organizational performance.

Organizational Development
HRD also focuses on organizational development which is basically a long-term approach
meant to elevate the organization to a higher level of functioning by improving the
performance and satisfaction of its members. This area focuses attention on better
communication and relations throughout the organization. The organization development
experts help individuals and groups to solve any problems in respect of absenteeism. internal
conflicts, low productivity or resistance to change.

Team Spirit
HRD plays an important role in developing team spirit and co - operation. It emphasizes on
integration of different departments and various levels of management in a co- ordinate action.

Integrated use of sub–system

HRD system involves the integrated use of subsystem such as training and development,
career development, organizational development, performance appraisal, potential appraisal
etc. In other words, emphasis needs to be placed in all possible areas so that individual, group
and organizational efficiency is enhanced.
 Employee welfare
Theorganizationattemptstoprovidepossiblewelfaremeasurestotheemployees.
These measures include recreation facilities, educational allowances, medical insurance etc.
Adequate and timely provisions of welfare facilities motivate the employee in order to
achieve organizational objectives.

Multidisciplinary approach
HRD is dynamic, multidiscipline and evolving field that draws upon education, management
science, psychology, communication, economics, organization behaviour, philosophy and
sociology etc. HRD aims to improve individual, group and organizational effectiveness in all
possible areas. Therefore, it involves the uses of various disciplines of social sciences.

Continuous in nature
HRDisnotaone-timeaffair.Itisacontinuousprocess.Organizationshaveto change due to the
changes in the environment. Organizations will be in a position to change only when the
individuals and groups in the organization recognize change and adjust their behaviour and
activities as per the changing environment.

Potential appraisal

Through HRD, the potential of every employee, is assessed periodically. The superior can
judge the potential of his subordinates through interviews, observations or by delegating
authority, or by transfers, promotions and job rotation. A proper potential appraisal assists in
development planning as well as for proper placement.

Key element in coping with problems

Economic, technological and social trends have created acute problems for business and
industry. Asa result, management have focused attention on HRD as a key element coping
with these problems. This is because such problems can be solved with the help of creative
efforts and competencies of human resources.

Long term Benefits

HRD programmes are so designed as to generate long-term benefits not only to the individual
employees concerned but also to the organization as a whole.

Performance Improvement
HRD programmes aim at improving the performance of the employees. Through performance
appraisal programme, the organization can find out the strengths and
Weaknesses of the employees. The employees are given proper feed back of their performance.
Thus, the employees would make efforts to improve their performance.

In short, HRD is concerned with employees, both as individuals and as a group in attaining
goals. It is concerned with the development of human resources i.e. knowledge, capability,
skill, potentialities and attaining and maintaining employee - goals including job satisfaction.
HRD is a systematic and planned approach for the development of individuals in order to
achieve organizational, group and individual goals.

HRD covers employees at all levels and belonging to all categories. It applies to the employees
in all types of organization in the world. It helps organization attaining maximum profit and
productivity and individuals achieving job satisfaction. It is concerned mostly with
managinghumanresourcesatwork.HRDmanagersecurescooperationfromallemployeesinordertoa
chievepredeterminedgoals.HRDisthecentralsubsystemofanorganization and it permeates all
types of functional management viz. production management, marketing management and
financial management. HRD utilizes techniques like performance appraisal, training,
management development, counselling, worker's participation etc.

Principles of Human Resource Development system

a) HRD system should help the company to increase enabling capabilities that include
development of human resources in all aspects such as organizational health, improvements in
problem solving capabilities, diagnostic skills and capabilities to support all tile other systems
in the company.

b) It should help individuals to recognize their potential and help them to contribute
their best towards the various organizational roles they are expected to perform.

c) It should maximize individual autonomy through increased responsibility. It

should facilitate decentralization through delegation and shared responsibility.

d) It should facilitate participative decision-making

e) It should attempt to balance the current organizational culture with changing culture.

f) There should be balance between differentiation and integration.

g) There should be a balance between specializations of the function with its

diffusion into the others.

h) HRD system should ensure responsibility for the function.

i) It should build upon feedback and reinforcement mechanisms.

j) It should maintain a balance between quantification and qualitative decisions.

k) There should be a balance between external and internal help.

l) It s hould plan the evolution of the function,

m) There should be a continuous review and renewal of the function.

The scope of HRD is ever expanding' and evolving. Some important points with respect to
scope of HRD are as follows: -

SCOPE OF HRD

Performance appraisal
It is an important area of HRD. It's purpose is to study critically the performance of
employeeandtoguidehimtoimprovehisperformance.Anemployeeistoldabout his strengths and
weakness and assistance is given to remove weakness and make the plus point
(strengths)morestrong.Thistechniqueisusefulforbuildingateamofcapableemployees and is also
used for their self -development.

Potential appraisal
It relates to the study of capabilities of employees. It is useful for proper placement
andcareerdevelopmentofemployees.Potentialappraisalisusefulfordevelopingtheir
specialqualitieswhichcanbeusedfruitfullyalongwiththeexpansionanddiversificationof a
activities of the company.

Career planning and development

Under HRD, employees should be given guidance for their self - development
andcareerdevelopment.Theopportunitieslikelytodevelopintheorganizationshouldbe
broughttotheirnotice.Theyshouldbemotivatedforself-development,whichisusefulto
theorganizationinthelongrun.Superiorsaresupposedtoprovideinformationand guidance to their
juniors in this regard. Career development is an integral part of HRD.

Training and development

Training is integral part of HRD. This area focuses on identifying and helping to develop,
through planned learning the key competencies that enables individuals to perform current or
future jobs. The planned learning can take place either on-the-job training such as job rotation
or off-the-job training outside and in- house training program.

Employee welfare
It is within the scope of HRD. Welfare activities are useful for creating efficient and
satisfiedlabourforce.Suchfacilitiesraisethemoraleofemployee.Employeewelfare includes the
provision of medical and recreation facilities, subsidized canteen free transport
andmedicalinsurance.Suchfacilitiessupporttrainingandothermeasuresintroducedfor HRD.

Rewards and incentives

HRD includes provision of rewards and incentives to employee to encourage them to learn, to
grow and to develop new qualities, skills and experiences which will be useful in the near
future. Reward is an appreciation of good work. It may be in the form of promotion, higher
salary or higher status. Rewards and incentives motivate employee and raise their morale.
HRD aims at providing conflict free operations throughout the organization. It also keeps plans
ready to deal with problems like absenteeism, turnover, low productivity or industrial disputes.

Quality of worklife
Quality of work life depends on sound relations between employer and employee. A foreward
looking policy, an employee benefit like job security, attractive pay, participative
management and monetary and non -monetary rewards will go a long way in improving the
quality of work life. Improved quality of work life helps employees to strike an identity with
the organization.

Human Resource information system

Such system acts as an information bank and facilitates human resource planning and
development in a proper manner. It facilitates quick decision making in regard to HRD. Every
organization has to introduce such system for ready reference to HRD matters. Updating of
such information is also essential.

In short, the scope of HRD functions focuses attention on the following important aspects:-
1. The welfare aspect concerning with working conditions and amenities like canteens,
creches housing, personal problems of workers, schools, and recreation.

2. The labour or personnel aspect concerned with recruitment, placement of employees,

remuneration, promotion incentives, productivity etc.

3. The industrial relations aspect concerned with trade union negotiation, settlement of
industrial disputes, joint consultation and collective bargaining.

All three aspects are concerned with human element in industry as distinct from the mechanical
or technical
The functions of HRD can be broadly classified into 3 categories viz.
1) Managerial functions

(2) Operative function

(3) Advisory functions.

1. Managerial functions: - It involves (i) planning ii) organizing, iii) directing and iv)
controlling.

a) Planning:- According to the ultimate goals, the HRD plans for day to day activities as
well as long- term programmes. HRD involves planning of human resources,
requirements, recruitment, selection, training etc. It also involves forecasting of personnel
needs, changing values, attitudes and behaviour of employee and their impact on
organization.

b) Organizing: -An organization is a means to an end. It is necessary to carry out determined

courseofaction.HRDmaintainstherelationshipbetweenthespecializeddepartmentsand the
general department and gives them advice.

c) Directing: -To execute the plan HRD motivates commands, leads and activates people.
Through proper direction, it is possible to secure willing and effective cooperation of
employees. Sound industrial and human relations can be built through proper instructions.

d) Controlling: - It means to verify the performances whether they are in accordance with
the plans and directions. if in this process, any deviation is located, then correcting those
errors is also done immediately. Controlling is done by auditing training programmes,
analyzing labor turnover records, directing morale, surveys, conducting separate
 interviews etc.

2. Operative functions:- Giving job is the first function of HRM. For this, the development
has to go for job analysis, human resource planning, recruitment selection, placement,
induction and internal mobility.

a) Employment-creating jobs and recruiting people to those jobs is the first function:-

b) Job analysis: This involves studying and collecting information relating to the
operation sand responsibilities of a specific job.

c) Human Resource Planning: - It is a process for determination and assuring that the
organization will have an adequate number of qualified persons available at proper
time, performing jobs which would meet the requirements of the organization and
which can also give satisfaction to individuals

d) Recruitment:-it is the process of searching for prospective employees and

stimulating them to apply for jobs in an organization.

e) Selection-Arranging for interviews for selecting right kind of employees.

f) Placement:- Placing the selected candidate in suitable job positions.

g) Training-Inducingandorientingthenewcandidatestotheatmosphereoftheorganization
and developing proper attitudes among them.

h) Human Resource Development: - This is the process of improving, moulding and

changing the skills, knowledge, creative ability aptitude, values, attitude, commitment
etc. based on present and future job and organizational requirements.

i) Deterring salaries, wages or benefits etc: - This process involves job evaluation, wage
and salary survey and determining wage structure.

j) Human relations: -Practicing various human resource policies and programmes like
employmentdevelopmentandcompensation,andinteractionamongemployeescreatesa
sense of relationship between the individual worker and management, among
workers, trade unions and management.

k) EffectivenessofHumanresourcemanagement:-Thiscanbemeasuredbymeansof
organizational health and human resource auditing.

3. Advisory functions: - Human resource manager has specialized education and training in
managing human: relations. He is an expert in his area and so can give valuable advice on
matters relating to human resources of the organization. He offers his advice to :

a) Topmanagementinformulationandevaluationofpersonnelprogrammes,policiesand
procedures, achieving and maintain good human relations and high employee morale;
 b) Departmental heads on matters such as manpower planning ,job analysis an design,
recruitment and selection placement, training, performance appraisals etc.

HRD interventions
The HRD interventions are categorized as ‘formal interventions’ and ‘informal activities’ with
both requiring collaboration between HRD practitioners and senior/line managers to differing
degrees depending on the organizational context. Although these requirements are biased to
multinationals, many affect other types of organization to a lesser or greater extent. For
instance, non-profit organizations operating in several countries or regions and competing for
funding need senior managers to have effective global leadership skills; and, all organizations
operating in global markets, from small business to multinationals, need to understand about
change management. Formal interventions and activities have been categorized as training and
development, career development or organizational development (see key in table). Arguably,
all informal activities are forms of organizational development which depend on a mix of
facilitation and coaching skills by HRD practitioners and line managers.
Performance Appraisal:
After placed and trained as an employee on the job, the next important and essential
step in the management of human resources of an organisation is to evaluate the performance
of an employee on the job. The management must be able to recognize the level of an
employee’s job performance and then they can be rewarded on the basis of their contributions
to organizational goals. It is the process of deciding how employees do their jobs and if any
problems are identified, then immediately steps are taken to remedy them

As per the views of C. Heyel (1973), “performance appraisal 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 the 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”. It is organized on the principle of goals and management by objectives.

COMPONENTS OF PERFORMANCE APPRAISAL

The components that should be used in a performance appraisal system flow
directly from the specific objectives of appraisal. The following components are
being used in a number of Indian organisations.
1. Key Performance Areas (KPAs) / Key Result Areas (KRAs)
2. Tasks/targets/objectives; attributes/qualities/traits
3. Self appraisal
4. Performance analysis
5. Performance ratings
6. Performance review, discussion or counseling
7. Identification of training / development needs
8. Ratings / assessment by appraiser
9. Assessment / review by reviewing authority
10. Potential appraisal.

Performance Appraisal – Characteristics

A system which may have the following qualities or characteristics may become
sound appraisal system:

(1) It should be simple and understandable by the employees. Any complications need to be
avoidable.
(2) It should be suitable to be adopted for appraisal at regular intervals because periodic
appraisal enables the employees to improve.
(3) It should create the atmosphere of mutual understanding and confidence.
(4) The system should be capable of giving equitable justice to all employees. Therefore it
should be objective and free from personal bias.
(5) The employees should be taken in confidence while preparing performance appraisal.
(6) The system should be suitable to the organisation from the points of its structure, needs
and more essentially based on latest development in the area.
(7) It should be able to fulfill the desired purpose by locating potential for promotion,
increments, placements, transfers etc.
(8) Special training is given to evaluated” for making him more impartial and free from bias.
(9) Negative appraisal of any employee should be immediately communicated to him so that
he can adopt measures for improvement.
(10) The employee should be allowed to go in appeal in case his performance appraisal is
negative if he is not satisfied. By this the management will win the confidence of the
employees.
(11) The performance appraisal system should not be aimed at harassing the employees who
are vital human resources and play very important role in achieving organisational goals. On
the other hand the top bosses should be made aware that performance appraisal is aimed at
improving performance, organisational effectiveness and to accomplish organisational goals.
Significance of Performance Appraisals

Performance appraisals are significant in a variety of ways for both employees and
organizations. Here are some of the key reasons why performance appraisals are important:

 Feedback and development: Performance appraisals provide employees with

feedback about their job performance, identifying areas where they are excelling and
areas where they need to improve. This feedback can help employees to develop their
skills and improve their performance, which can increase their job satisfaction and
motivation.

 Goal setting: Performance appraisals often involve setting goals for the upcoming
year or performance period. This gives employees a clear understanding of what is
expected of them and provides a roadmap for their development.

 Performance-based decisions: Performance appraisals are often used as a basis for

making decisions about promotions, salary increases, and other job-related matters.
By providing an objective evaluation of an employee’s performance, performance
appraisals help to ensure that decisions are based on merit rather than favouritism or
personal biases.

 Communication and collaboration: Performance appraisals provide an opportunity

for managers and employees to have a conversation about the employee’s job
performance. This can help to build trust and improve communication and
collaboration between employee and their manager.
  Legal compliance: In some industries and jurisdictions, performance appraisals are
required by law or regulation. By conducting regular performance appraisals,
organizations can ensure that they comply with legal requirements.

 Alignment with organizational goals: Performance appraisals help to align

employee goals and performance with the overall goals of the organization. By
providing feedback on how an employee’s performance supports the organization’s
mission and objectives, performance appraisals can help to ensure that everyone is
working towards the same goals.

 Recognition and rewards: Performance appraisals can be used to recognize and

reward employees who are performing well. This can include bonuses, promotions, or
other forms of recognition that can help to boost employee morale and motivation.

 Identification of training needs: Performance appraisals can help to identify areas

where employees may need additional training or development. This can help
organizations to provide targeted training that addresses specific skills or knowledge
gaps.

Main Objectives of Performance Appraisal

Performance appraisal plans are designed to meet the needs of the organisation and the
individual. Itis viewed as core to good human resource management. According to
Cummings, “the overallobjective of performance appraisal is to improve the efficiency of an
enterprise by attempting to mobilize the best possible efforts from individuals employed in it.
Such appraisals achieve four objectives including the salary reviews, the development and
training of individuals, planning job rotation and assistance promotions.”

Performance Appraisal in HRM – Process

Performance appraisal is planned, developed and implemented in the following manner:

1. Establish Performance Standards:

The performance standards for each and every job should be developed and discussed with
thesuperiors after thorough analysis of the job. These standards should be clear and not
vague. They must be measurable after certain period.

2. Communicate the Standards:

After setting the performance standards of job, the next activity 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.
As per opinion De Cenzo and Robbins, “too many jobs have vague performance
standards and the problem is compound when these standards are set in isolation and do not
involve the employee.”

3. Measure Actual Performance:

Now the next activity 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 reports.

4. Compare Actual Performance with Standards:

The fourth activity 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 activity.

5. Feedback to the Employee:

In this activity 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.
6. Taking Corrective Action, if Necessary:
This is the final or last activity of the performance appraisal process. In this stage two types
ofcorrective 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 and counselling may be done if the performance is poor. If
necessary appraisee may be deputed for formal training courses.

METHODS OF PERFORMANCE APPRAISAL

a) Ranking Methods,
b) Graphic Rating Scale Method,
c) Critical Incidents Method,
d) Checklist Method and a Few Others

There are various methods for conducting performance appraisal to identify areas of
performance that should be modified or improved and to provide information to management
for specific actions suchas promotion, transfers and compensation adjustment.
Various methods of conducting performance appraisal are explained below:

1. Ranking Method:
This method requires the evaluator to list all salespeople in order of their
performance, beginning with the top performer. A number of ranking methods are used for
conducting the performance appraisal of employees.
Some of the important ones are listed as under:

(I) Simple Ranking Method:

In this method all the employees are rated on the same set of factors and ranks as
given to them on the basis of their performance in relation to others in the group. They are all
rated from the first to the last in order of their performance.

(II) Paired Comparison Method:

In this method all the employees’ performances are compared with other employees
but comparison is made with only one member at a time. The number of times each member
is preferred over the other is recorded. These numbers determine the ranks of members and
obviously the top performers will be those with highest ranks for more number of times.

(III) Forced Distribution Method:

It is a method to evaluate employee performance according to a predetermined
distribution scale. Generally the organisations use five grade scales where one end of the
scale represents the best job performance and the other represents the poorest job
performance. All the employees are rated somewhere on the scale according to their level of
performance in comparison to other employees.
The biggest advantage of using ranking method is its low cost, little time and effort, and
simplicity.
But the ranking method is not considered a very scientific and objective method because
there is lots of ambiguity and vagueness involved in ranking the various employees. Chances
of personal biasness and favouritism are many in this case as ranks are being assigned by
supervisors as per their own opinion and judgment.

2. Graphic Rating Scale Method:

Graphic rating scale method identifies specific desired traits, behaviour factors or
performance criteria, such as, quality and quantity of work, cooperativeness, analytical
ability, decisiveness, initiative, emotional stability, etc. Employees are rated on a scale based
on the extent to which they exhibit the desired behaviour or the extent to which they meet the
desired performance criteria.

The rating for each factor will be done on the basis of numbers (1, 2, 3, 4, and 5) or
descriptions (excellent, very good, average, poor, etc.) The central idea behind using rating
scales is to provide the appraiser with a continuous representation of various degrees of
particular qualities or characteristics being present in employees.

The total of the points obtained by an employee on all the rating factors constitutes
the overall ratings score of that employee in comparison to other employees in the
organisation. Many organisations use graphic rating scales because they are practical and cost
little to develop. As traits are defined in advance, there is less ambiguity in this technique of
evaluation. While, unfortunately, rating scales suffer from a major weakness, that is, the
uneven interpretation of performance criteria and rating. Unless each evaluator clearly
understands what each criterion means and what the rating means, confusion and
dissatisfaction can result.

3. Critical Incidents Method:

Under this method the immediate supervisor tries to make a continuous record of all
the good or bad incidents of a person’s work-related behaviour. Whenever employees are
found doing something good or positive which contribute towards increasing the overall
productivity of the organisation or creating a healthy work atmosphere it is recorded as their
positive contribution.
At the same time whenever they commit a mistake, a blunder or an error because of
which damage has been incurred to machinery or the overall productivity of the organisation
gets adversely affected it adds to their negative contributions. At the end of the rating period,
these recorded critical incidents whether positive or negative are used in the evaluation of the
employee’s performance. The biggest positive feature of this technique is that it measures
behaviours which are critical to the effective performance of the job. Using this method
facilitates a feedback by providing the employees with concrete examples of actual
behaviours committed by them. If proper records are maintained of these critical incidents it
provides the most realistic measurement of an employee’s performance on the job.

Although this method is an improvement and it tries to minimise the subjectivity

problems associated with other appraisal systems, it also suffers from certain limitations. As
employees are aware of the fact that they are being noticed by their supervisors, it might add
to their level of anxiety and hostility. Others tend to hide those behaviours which they feel
will adversely affect their performance reviews. In either case, the end results are distorted
performance reviews.

4. Checklist Method:
In this method the employer starts with a list of factors in their checklist, such as, does
the employee cooperate with other co-workers, do they keep their work place neat and clean,
do they follow their supervisors instructions closely, do they reach on their workplace in
time, and are they able to achieve the work targets assigned to them properly.
Each factor or item receives a numerical value based on its perceived importance to
successful job performance. Those items that are deemed more important are assigned higher
values. The actual performance of all the employees on the job is measured and is compared
against the checklist. Their scores on the appraisal are determined by summing the scores of
the factors checked by the rater.
One of the biggest advantages of using the checklist method is the convenience to the
supervisors as they simply have to say yes or no in front of the statements or the factors
provided to them. It saves their time and the same checklist can be discussed with the
employees and a feedback can be given to them.
However developing an effective checklist, measuring the performance against the
checklist and finally interpreting the results might not be very simple for the supervisors.

5. Essay Method:
Brief narratives by the manager describe the performance of an employee. A manager
may write a detailed write-up on the job knowledge and potential of the employee; employees
understanding of the company’s programs, policies, and objectives; employees promotability;
overall appraisal of the employees performance; and employees relation with their co-
workers and superiors; and so forth.
Essay method provides detailed information about the employee’s performance by the
managers who have seen them closely on the job. The essay method provides a great deal of
information about the employee, which provides a useful feedback to the employee for
further improvement in the job performance. Although this method allows more flexibility
and appears to be simple, it is not consistent and tends to be subjective as each supervisor has
a different writing style and emphasis.
They might evaluate the employee’s performance from altogether a different
perspective. Sometimes even the problem of halo effect can enter into their subjective
evaluation, where the evaluators may be biased by a generalized overall impression or image
of the person they are evaluating. If the manager does not like the way an employee dresses,
for instance, that attitude may bias all aspects of the manager’s evaluation.

6. Management by Objectives Method:

Management by objectives (MBO) is a comprehensive management approach which
is used for conducting performance appraisal. It is considered as one of the most scientific
and objective method as a set procedure is followed. The primary focus in this method is on
developing a set of objectives which are to be realised by the employees.
These objectives are later used as criteria for measuring the performance of the
employees, or in other words the extent to which these objectives have been achieved by the
employees. So in this method at the first stage detailed objectives for the employees are
clearly set. In the light of these objectives the individual employees’ responsibilities and tasks
are clearly laid down.
At the time of performance appraisal, a supervisor will measure the actual
performance of the employee on the job and the realisation of objectives by them. In case the
employees have been able to successfully realise the objectives they are rewarded
accordingly and in case they are not able to achieve the objectives, reasons for their
shortcomings are identified. Later in the light of these findings the objectives might be
redefined for future. MBO is considered a very objective approach because goals and
objectives are clearly determined before the appraisal begins. This gives employees clear-cut
directions as to what is expected of them and the standards against which their actual
performance will be measured and compared at a later date.If the objectives are unattainable
they are redefined and reset for future. However this method also
suffers from the limitation of involving lots of time and effort on the part of the
supervisor and the subordinate.
7. 360° Feedback Appraisal:
The term 360° feedback appraisal is also known as multi-rater feedback, multisource
feedback, full circle appraisal and group performance review. This concept was developed in
the US in the year 1998.
This concept involves a process of collecting information about a person’s behaviour
from the people around him – his boss (es), colleagues, fellow members in the team,
suppliers, as well as customers. The basic assumption underlying this approach is that a
person who works closely with an employee sees his or her behaviour in various settings and
circumstances that a supervisor might not be able to see. Thus, the term 360° implies that
everyone around is involved in evaluating the performance.
Unlike traditional methods, only supervisors do not evaluate the subordinate rather
literally everyone around gives the feedback. It tries to eliminate the subjectivity in
evaluation, as many people rate an employee on a fairly extensive list of attributes.
Companies prefer this method as they receive a broader and more accurate perception on
their employees from multiple sources.
This performance appraisal method is a very effective method as it provides an
individual an opportunity to learn about others perception of him. It provides a more open
culture and an opportunity to resort to self-development for employees. It increases the
overall communication networks in the organisation. The 360° feedback is widely accepted
as an effective performance tool, but if it is not managed properly then it does more harm
than benefit. As so many people are going to appraise employee’s performance, all of them
might not be closely familiar with him and might not be able to give an accurate judgement
or opinion about him.
So in order to use this method effectively every organisation must develop an
effective system and an appropriate procedure for generating enthusiasm amongst key
decision makers and participants, ensuring that all of them have the skills to support the
process. This might call for providing an orientation benefiting participants in one-to-one
meeting and providing organisational summary data.

8. Potential Appraisal:
This is done to predict whether an employee is capable of taking on more demanding
work, and the speed at which he or she is capable of advancing. This appraisal method tries to
judge the potential of employees for being promoted to higher positions. In this method it is
necessary to inform employees of their future prospects and give them an opportunity to
perform to the best of their capacity. The organisation also might have to modify and update
training and development programs and advice employees of what they must do to enhance
their career prospects. In the potential appraisal process, attempt is made to match the
employee’s abilities and aspirations with the organisation’s forecast of requirements for
higher-level managerial staff. This aspect of employee appraisal is considered as a highly
positive and motivating because this tries to give an employee an incentive to work hard as
they can look forward to growing up in their career path. The potential appraisal is concerned
with forecasting the direction in which subordinates career can and should go and the rate at
which he or she is expected to develop.
The assessment of potential requires an analysis of the existing skills, qualities, and
how they can be developed to the mutual advantage of the company and the employee. There
is also an important counseling aspect to the review of potential which consists of discussions
with the individual about his or her aspirations and how these can best be matched to the
future foreseen for him or her. They can also provide employees with additional motivation
and encouragement which they need to remain with the company. Finally, once the
employee’s performance has been evaluated with the help of any of the methods listed above,
the results should be reviewed in a meeting with the manager. This discussion should be
viewed as a counselling session, in which the manager explains the person’s achievements on
each evaluation factors and points out how the results compared with the standards.
Then the manager and the employee together may try to determine the reasons for the
performance variations above or below the standards. Based on their review of all evaluation
factors, the manager and the employee can then establish goals and an operating plan for the
coming period.

Suggestions for Improvement of Performance Appraisal

The fact that managers frequently encounter problems with performance appraisal should not
lead you to throw up your hands and give up on the concept. There are things that can be
done to make performance appraisal more effective.
The following are the suggestions in this regard:
(i) Behaviourally Based Measures:
Many traits often considered to be related to good performance may in fact, have little or no
performance relatively. Traits like loyalty, initiative, courage, reliability and self-expression
are intuitively appealing as desirable characteristics in employees. But the relevant question
is, are individual who are evaluated as high on those traits higher performances than those
who rate low?
We cannot answer this question. We know that there are employees who rate high on these
characteristics and are poor performers. We can find others who are excellent performers but
do not score well on traits such as these. Our conclusion is that traits like loyalty and
managers may prize initiative, but there is no evidence to support that certain traits will be
adequate synonyms for performance in a large cross-section of jobs.
A second weakness in traits is the judgement self. What is loyalty? “When is an employee
reliable?” What you consider ‘loyalty’, I may not. So traits suffer from weak interrater
agreement.
Behaviourally derived measures can deal with both of these objectives. Because they deal
with specific examples of performance-both good and bad-we avoid the problem of using
inappropriate substitute.
(ii) Trained Appraisers:
If you cannot find good raters, the alternative is to make good raters. The training of
appraisers can make these more accurate raters. Errors can be minimized through training
workers. Training workshops are usually intended to explain to raters the purpose of the
procedure, the mechanics of ‘how to do it’, pitfalls or biases they may encounter and answer
to their questions. The training may include trail runs evaluating other classmates to gain
some supervised experience. Companies even use videotapes and role playing evaluation
sessions to give raters both experience with and insight into the evaluation process. During
the training, the timing and scheduling of
evaluations are discussed.

(iii) Multiple Raters:

As the number of raters increases, the probability of attaining more accurate information
increases. If person has had ten supervisors, nine having rated him or her excellent and one
poor, we can discount the value of the one poor evaluation. Therefore, by moving employees
about within the organizations so as to gain a number of evaluations, we increase the
probability of achieving move valid and reliable evaluations.
(iv) Peer Evaluations:
Periodically, managers may find it difficult to evaluate their subordinates’ performance
because they are not working with them every day. Unfortunately, unless they have this
information, they may not be making an accurate assessment. And of their goal of the
performance evaluation is to identify deficient areas and provide constructive feedback to
their subordinates, they may be providing a disservice to these subordinates by not having all
the information.
Yet, how do they get this information? One of the easiest means is through peer evaluations.
Employees’ co-worker, people explicitly familiar with the jobs involved mainly because they
too are doing the same thing, conducts peer evaluations. They are the ones most aware of co-
workers’ day-to- day work behaviour and should be given the opportunity to provide the
management with some feedback.
The main advantages to peer evaluation are that (i) there is a tendency for co-workers to offer
more constructive insight to each other so that, as a unit, each will improve and (ii) their
recommendations tend to be more specific regarding job behaviour-unless specificity exists,
constructive measures are hard to gain. But necessary condition for this method is that the
environment in the organization must be such that politics and competition for promotion are
minimized. This environment can only be found in the most “mature” organizations.
(v) Evaluation Interviews:
Evaluation interviews are performance review sessions that give employees essential
feedback about their past performance or future potential. Their importance demands
preparation. Normally this includes a review of previous appraisals, identification of specific
behaviours to be reinforced during the evaluation interview and a plan or approach to be used
in providing the feedback.
The evaluator may provide this feedback through several appraisals – tell and sell, tell and
listen and problem solving. The tell and sell approach reviews the employee’s performance
and tries to persuade the employee to perform better. It works best with new employees.
The tell and listen allows the employee to explain reasons, give excuses and describe
defensive feelings about performance. It attempts to overcome these reactions by counselling
the employee on how to perform better. The problem solving approach identifies problem that
are interfering with employee performance. Then, through training, coaching or counselling
goals for future performance are set to remove these deficiencies.
Advantages of Performance Appraisal:
(i) It helps the supervisors to plan out the promotion programs for efficient employees.
(ii) It helps in planning compensation packages for employees. Compensation packages
which include bonus, high salary rates, extra benefits, allowances and pre-requisites are
dependent on performance appraisal.
(iii) The systematic procedure of PA helps the supervisors to frame training policies and
programs.
(iv) It helps the supervisors to understand the validity and importance of the selection
procedure.
(v) Systematic appraisal helps to identify the ability of the employees.
(vi) It serves as a motivation tool. Through evaluating performance of employees, a person’s
efficiency can be determined if the targets are achieved. This very well motivates a person for
better job and helps him to improve his performance in the future.
Disadvantages of Performance Appraisal:
(i) If not done right, they can create a negative experience.
(ii) Performance appraisals are very time consuming and can be overwhelming to managers
with many employees.
(iii) They are based on human assessment and are subject to errors and biases.
(iv) Can be a waste of time if not done appropriately.
(v) They can create a very stressful environment for everyone involved.

POTENTIAL APPRAISAL
In consonance with the philosophy of human resource development that has replaced the
erstwhile personnel management in many organisations, more emphasis has been laid on the
appraisal of the employees’ potential in addition to their performance. Performance is a thing
of the past, while potential includes the possible knowledge, skills, and attitudes the
employee may possess for better performance.
The purposes of a potential review are:
1. to inform employees of their future prospects;
2. to enable the organisation to draft a management succession programme;
3. to update training and recruitment activities;
4. to advise employees about the work to be done to enhance their career opportunities.
The following are some of the requirements and steps to be followed when introducing a
potential appraisal system:
Role Description: A good potential appraisal system would be based on clarity of roles and
functions associated with the different roles in an organisation. This requires extensive job
descriptions to be made available for each job. These job descriptions should spell out the
various functions involved in performing the job.
Qualities Required: Besides job descriptions, it is necessary to have a detailed list of
qualities required to perform each of these functions. These qualities may be broadly divided
into four categories - (1) technical knowledge and skills, (2) managerial capabilities and
qualities, (3) behavioural capabilities, and (4) conceptual capabilities.
Indicators of Qualities: A good potential appraisal system besides listing down the
functions and qualities would also have various mechanisms for judging these qualities in a
given individual. Some of the mechanisms for judging these qualities are - (a) rating by
others, (b) psychological tests, (c) simulation games and exercises, (d) performance appraisal
records.
Organising the System: Once the functions, the qualities required to perform these
functions, indicators of these qualities, and mechanisms for generating these indicators are
clear, the organisation is in a sound position to establish and operate the potential appraisal
system. Such establishment requires clarity in organisational policies and systematisation of
its efforts.