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HRM/U4 Topic 1 Performance Appraisal: Nature and Objectives

A performance appraisal is a systematic and objective method of judging the quality of an employee in performing his job and a part of guiding and managing career development. It is the process to obtain, analyze, and record the information about the relative worth of an employee to the organization. Performance appraisal is an analysis of an employee’s recent successes and failures, personal strengths and weaknesses, and his/her suitability for promotion or further training.

It is also the judgment of an employee’s performance in a job based on considerations other than productivity alone.

Performance appraisal is done periodically, but on a continuous basis. It is a part of a larger performance management system and includes both managerial and non-managerial employees in its scope.

Objectives of Performance Appraisal

(i) To provide employees feedback on their performance.

(ii) Identify employee training needs.

(iii) Document criteria used to allocate organizational rewards.

(iv) A basis for decisions relating to salary increases, promotions, disciplinary actions, bonuses, etc.

(v) Provide the opportunity for organisational diagnosis and development.

(vi) Facilitate communication between employee and employer.

(vii) Validate selection techniques and human resource policies to meet regulatory requirements.

(viii) To improve performance through counseling, coaching and development.

(ix) To motivate employees through recognition and support.

Advantages of Performance Appraisal

It is said that performance appraisal is an investment for the company which can be justified by following advantages:

  1. Promotion: Performance Appraisal helps the supervisors to chalk out the promotion programmes for efficient employees. In this regards, inefficient workers can be dismissed or demoted in case.
  2. Compensation: Performance Appraisal helps in chalking out compensation packages for employees. Merit rating is possible through performance appraisal. Performance Appraisal tries to give worth to a performance. Compensation packages which includes bonus, high salary rates, extra benefits, allowances and pre-requisites are dependent on performance appraisal. The criteria should be merit rather than seniority.
  3. Employees Development: The systematic procedure of performance appraisal helps the supervisors to frame training policies and programmes. It helps to analyze strengths and weaknesses of employees so that new jobs can be designed for efficient employees. It also helps in framing future development programmes.
  4. Selection Validation: Performance Appraisal helps the supervisors to understand the validity and importance of the selection procedure. The supervisors come to know the validity and thereby the strengths and weaknesses of selection procedure. Future changes in selection methods can be made in this regard.
  5. Communication: For an organization, effective communication between employees and employers is very important. Through performance appraisal, communication can be sought for in the following ways:
  • Through performance appraisal, the employers can understand and accept skills of subordinates.
  • The subordinates can also understand and create a trust and confidence in superiors.
  • It also helps in maintaining cordial and congenial labour management relationship.
  • It develops the spirit of work and boosts the morale of employees.

All the above factors ensure effective communication.

  1. Motivation: Performance appraisal 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.
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