‘It means the analysis of an employee's performance and the caliber for his/her future growth and development.’ It is a systematic and logical review, conducted by the organization annually to judge his potential of employees in performing a task.
It is a continuous process of managing the employees in an organization. It is a process of planning, monitoring and evaluating the performance of the employees and their contribution to the organization. The main purpose is to encourage and increase the efficiency and effectiveness of the employees.
Performance appraisal is used in most of the companies when they need to promote their employees. Using various modern methods like Management by objectives, Behaviorally anchored rating scales, Assessment centers, Cost accounting methods and 360 degree appraisal. Companies like Wipro, Infosys, Reliance Industries limited, HCL Technologies go with 360 Degree appraisal. Tata Motors follows a comprehensive system of quarterly appraisal. It uses 90 degree appraisal system also called 2 tiers.
Performance management is gaining a lot of importance in recent times. According to a research by Deloitte, 70 percent of companies are reconsidering their performance management strategy. A few companies who manage to be on top with their strategy are General Electric, Accenture, PricewaterhouseCoopers, Coca-cola and Google. These companies have shifted from a rigid performance management system to a more fluid system where there is regular flow of feedback from the managers
Why doesn’t performance appraisal work?
Performance appraisal can be a boon or a bane depending on the manager. This is why companies started with performance management where you do not need to wait for a year to rectify any mistakes of the employees. It is a regular process, helps you to keep a quality check on the employee’s work. An effectively implemented performance management can benefit the company, manager and employees
Let’s see the benefits of it to all the 3 stakeholders: The Company, the manager and the employees
A clearly defined goal and regular assessments of employees will help the companies to bridge the major skill gaps. This will lead the company to design a corrective training and development plan for the employees.
However, not all is perfect with performance management as well. There are a few flaws with it.
It’s always good to keep a balance between performance appraisal and performance management. Depending on your company size, type, industry and other factors, the right mix of both has to there. A hybrid performance review can be made as per the company’s standard. A multinational company, Coca-Cola is an example that uses both review systems to get the best results out of the employees. They set long term goals at the start of the year and tell the employees about the goals. Also, they keep short-term goals for the employees, if they achieve then they are rewarded. Reward system is monthly, quarterly and annually based on the department, scale and job roles. They also prepare a 30-90 days Performance Improvement Plan (PIP) which includes specific and measurable actions with time line. The correct blend of Performance management and Performance appraisal will bring out the best results from the employees.