Limitations of Performance Appraisal, Potential Appraisal

  1. Bias of Appraiser

The presence of ‘Halo Effect’ in evaluation of employees is the biggest weakness of this method.

A high rate is given to favoured employees whereas unfriendly employees are rated low.

  1. Ambiguity in Standards

If the standards are not clear, the supervisors may follow different standards for different employees.

  1. Insufficient Evidence

An employee who can impress the boss may get a positive evaluation though his impression in his own department may be very poor. In such cases, the performance appraisal will be superfluous.

  1. Several Qualities Remain Without Appraisal

Through performance appraisal, only few qualities of employees can be measured. All individuals differ from each other in terms of background, values and behaviour.

  1. Leniency or Strictness Tenancy

Every evaluator has his own valuation procedure which is regarded as his own standard for evaluation. For example, some teachers are strict in evaluation of answer books whereas others are lenient. The lenient tendency is known as ‘Positive Leniency Error’ whereas strict tendency is called as ‘Negative Leniency Error’. The rating may be high or low depending upon the nature of evaluators.

  1. Average Rating Problem

In order to give very low or very high rating, the top managers are required to give reasons to justify the rating. The most common error committed in performance appraisal is to give average rating to all employees. Moreover, low rating antagonizes the subordinates.

  1. Influence of Man’s Job

There is a tendency to give a high rating to highly paid jobs. So a senior employee may get a higher rating than a junior employee.

  1. Similarity Error

The evaluator tries to look those qualities in subordinates which he himself possesses. Those who show the similar characteristics are rated high.


The potential appraisal refers to the appraisal i.e. identification of the hidden talents and skills of a person. The person might or might not be aware of them. Potential appraisal is a future – oriented appraisal whose main objective is to identify and evaluate the potential of the employees to assume higher positions and responsibilities in the organizational hierarchy. Many organisations consider and use potential appraisal as a part of the performance appraisal processes..

  • To advise employees about their overall career development and future prospects
  • Help the organization to chalk out succession plans
  • Motivate the employees to further develop their skills and competencies.
  • To identify the training needs.

Techniques of potential appraisal

  • Self – appraisals
  • Peer appraisals
  • Superior appraisals
  • MBO
  • Psychological and psychometric tests
  • Management games like role playing
  • Leadership exercises etc.

Process of Performance Appraisal

  1. The first step in the process is the establishment of performance standards against which the output can be measured.
  2. These standards are them communicated the employees as well as to the evaluators. This step helps the employees know what is expected from them and the feedback from the employees can be used for making any require changes in these standards.
  3. The next step is to measure the actual performance against these standards a suitable technique for measurement is selected and the internal and external factors that influence the performance are also identified. Information on results is gathered and four sources are most commonly used to measure the actual performance. These are personal observations, Oral reports, written reports and statistical reports.
  4. The results of the appraisal are then shared with the employee so that he become aware of the deviation in performance and can also identify and analyze the cause behind this deviation. This help and employee in identifying his strengths and weaknesses and improve future performance.
  5. Corrective actions is then undertaken to improve the performance of the employees the common tools for corrective action are coaching, counseling and training.

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