People differ in their abilities and aptitudes. Therefore, it is necessary for management to know these differences so that the employees having better abilities may be rewarded and the wrong placements of employees may be rectified through transfers. The individual employee may also like to know the level of his performance in comparison to his fellow employees so that he may improve upon it. Thus, there is a great need to have a suitable performance appraisal system to measure the relative merit of each employee.
The basic purpose of performance appraisal is to facilitate orderly determination of an employee’s worth to the organization of which he is a part. However, a fair determination of the worth of an employee can take place only by appraising numerous factors, some of which are highly objective, as for instance, attendance; while others highly subjective; as for instance, attitude and personality. The objective factors can be assessed accurately on the basis of records maintained by the Human Resource or Personnel Department, but there is no device to measure the subjective factors precisely. Notwithstanding this, appraisal of these factors must be done to achieve the full appreciation of every employee’s merit.
Performance appraisal goes by various names, such as performance evaluation, progress rating, merit rating, merit evaluation. Performance appraisal means the systematic evaluation of the personality and performance of each employee by his supervisor or some other person trained in the techniques of merit rating. It implies employing various rating techniques for comparing individual employees in a workgroup in terms of their personal strengths and weakness with respect to the requirements of their respective jobs. To quote Dale Yoder, “Performance appraisal includes all formal procedures used to evaluate personalities and contributions and potentials of group members in a working organization. It is a continuous process to secure information necessary for making correct and objective decisions on employees”. The comparison of performance with job requirements helps in finding out the merit of the individual employee in a workgroup. Rating may be done by a supervisor or an independent appraiser.
Advantages of Performance Appraisal
The benefits which justify the existence of a system of performance appraisal in an enterprise are as under:
(i) A good system of performance appraisal helps the supervisor to evaluate the performance of his employees systematically and periodically. It also helps him to assign that work to individuals for which they are best suited.
(ii) Performance rating helps in guiding and improving the performance of employees. The supervisor may use the results of rating for the purpose of constructively guiding employees for the efficient performance of the work.
(iii) Performance appraisal can be used as a basis of sound personnel policy in relation to transfers and promotions. If the performance of an employee is better than others, he can be recommended for promotion, but if a person is not doing well on a job, he may be transferred to some other job.
(iv) Systematic appraisals prevent grievances and develop confidence amongst the employees if they are convinced of the impartial basis of evaluation. The records of merit rating are stored in the permanent form to protect the management against subsequent charges of discrimination which might be leveled by the trade union leaders.
Performance appraisal has a beneficial effect on both the persons doing the appraisal as well as those who are being appraised. The appraisal brings prominently to the attention of supervisors or executives the importance of knowing their subordinates as human resources. The necessity of performance appraisal leads the appraiser to a thoughtful analysis of the people rated and tends to make him more alive to the opportunities and responsibilities in developing the caliber of his subordinates.