Performance appraisal may be defined as a structured formal interaction between a subordinate and supervisor, that usually takes the form of a periodic interview (annual or semi-annual), in which the work performance of the subordinate is examined and discussed, with a view to identifying weaknesses and strengths as well as opportunities for improvement and skills development.
Performance evaluation can be divided into two general categories:Ranking and Rating. Former requires comparison of employees against each other to determine relative ordering of the group on some performance measure. Ranking can be Straight Ranking (Relative to each other), Alternation ranking (Best and worst employee are rated and then middle employees are rated accordingly) and Paired - Comparison Ranking (raters make ranking judgments about discreet pairs of people0.
Rating requires rater to evaluate employees on some absoulte standard rather than in relative terms. Performance standard is on a scale whereby appraiser can check the point that describes the employee's performance. performance variation in this way is described along a continuum from good to bad. Descriptors can be adjectives, behaviors or outcomes.
Where adjectives are used as anchors, the format is called as a standard rating scale- Well above avg. to well below avg.
BARS or Behaviorally Anchored Rating Scales are most common behavior descriptor formats.
When outcomes are used as standards the most common one used is Management by objectives (MBO) which is both a planning and appraisal tool that has many variations across firms.
Raters can be supervisors, self, customers, peers and subordinate.
A good performance evlaution depends on a sound basis for establishing performance dimensions and the scale associated with each dimension. It should be relevant to the strategic plan of the company. Also, we should involve employees in developing every stage of performance dimensions and building scales, so that employees have more positive reactions to ratings, regardless of how well they do. Raters should be properly trained and all employees should understand how the system operates and what it will be used for. Raters should be motivated to accurately.
And, lastly a diary or log should be maintained of employee performance for memory and for documentation.
Source: Milkovich and Newman, 2005. Compensation.
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