An organization’s productivity, profitability, and sustainable growth are dependent on the efficient and effective utilization of human resources. People or human resources are one of the most important assets for effective operations, and their skillful application is directly related to the organization’s overall performance. Various factors, including organization culture, unbiased appraisal system, the prospect of career growth, job responsibility, and so on, stimulate an employee’s performance or productivity level. In this topic, we are going to learn about the Benefits of Performance Appraisal.
The Appraisal system must be unbiased because it provides adequate feedback about an employee’s performance level, but it also gives data to managers for future job assignments and compensation and supports as a basis for transforming or changing the behavior pattern toward more effective habits which delivers results.
Definition of Performance Appraisal
The words performance appraisal or merit rating systems denote the evaluation process of performances of the employees of any small or big organization. It can be defined as a “process of systematic evaluation of personality and performance of each employee, measuring by supervisors or managers or some other persons trained in the techniques of merit rating, against some predefined parameters such as knowledge of job responsibility, quality of delivery, leadership ability, cooperation, initiative, creativity, attendance, judgment skill and so forth”.
Objectives of Performance Appraisal
The organizations adopt various performance rating system with certain objectives in mind. Those objectives are –
- To provide inputs for making decisions regarding transfers, promotions.
- To provide data for identifying the requirements of training and development programs for individuals.
- To help to make decisions for offering confirmation to the employees who have completed the probationary period.
- To take decisions regarding the hike of employee’s salary, incentives or variable pay.
- To enable clarification of expectations and facilitate communication between superiors and subordinates.
- To help employees to realize their performance level.
- To collect data and keep the record for different organizational purposes.
Methods of Evaluation Technique
In terms of designing the evaluation technique, each company considers various factors such as the size of employees, work schedule, company goal, and so on. Whatever method is used, it is important to select the right method for assessing the individual’s quality and quantity of work. There are many methods of merit rating which can be classified into two categories – traditional method and modern method.
1. Traditional method
- Ranking method
- Forced Distribution
- Forced Choice method and Checklist method
- Ranking
- Paired Comparison
- Grading
- Critical Incident method
- Graphic Scale
- Essay method
- Field Review
- Confidential Report
2. Modern method
- Management by Objectives [MBO]
- Behaviorally anchored rating scales
- Assessment centers
- 360-degree appraisal system
- Cost Accounting method
Benefits of Appraisal System
Though there are some debates regarding the merit rating system as it considers adding little value to the organisation’s performance, the annual reviews are taken by management and staff as a painful process. Sometimes it acts as detrimental to performance management.
Still appraising system is assumed as a performance measuring standard that has been fixed to give feedback to the employees to improve their performance level by eradicating deficiencies. It is acclaimed as an investment for the company, and this acclamation is quite justifiable after considering the following benefits –
1. Assist to Enhance Employee Performance
The evaluation process needs supervisors to note insufficiencies in employees’ performances and communicate to the respective employees accordingly. The manager or supervisor can give suggestions to overcome their deficits.
The logical appraisal system helps the line managers and HR people to design policies and programs for the progress of employees and business. Even it supports to plan daily work agreeably to assign the right people to an accurate job. The evaluation process must be unbiased and equally viewed that it can stimulate the development of every employee’s careers.
2. Promotions and Transfers
The merit evaluation system helps to recognize talented employees to groom them as competent. The organization admits the hard work and accomplishments of employees by giving promotion, deputation, and transfer. The evaluation system certifies that promotion and transfer are only offered on the basis of performance, not on seniority and nepotism.
3. Hike in Salary and Compensation
The rating system gives a clear view of an employee’s performance level, which is compensated by an enhancement in salary and offering other fringe benefits. A good point rating can be achieved only through the appraisal system, which offers handsome compensation packages like a bonus, extra reimbursement, various allowances, and requisites. Almost in all organizations, different categories of employees are paid good compensation packages for their high level of performance, which revealed in the evaluation system.
4. Planning for Providing Training and Development
Through the appraisal procedure, the superiors can comprehend their subordinates’ strengths and weaknesses, which also help the HR department design a training and development program. The content and method of training vary according to the requirement of employees. Even the appraisal system decreases the attrition rate because appreciation and bonus enhance the stability of an employee.
5. Improve Relationship Between Management Group and Employees
After the appraisal, the employees get the opportunity to discuss their concern with superiors which is not only helpful for resolving any grievance or dispute but also improves the liaison between the management group and employees.
6] Be Integrated with Strategic Vision
One of the important purposes of conducting an appraisal is to communicate employee goals that are a part of the organisation’s strategic vision.
7. the Tool of Inspiration
Performance appraisal acts as an inspirational tool for the employees because its process of weighing up the performance level and the recognition system after achieving the goal can boost the employees’ efficiency and productivity level.
8. Detect Valued Performers
Evaluation system aids in recognizing potential employees in the organization. At the time of taking personnel decisions like who will be promoted to an influential position or who will be laid-off, the employers take the decision on the basis of performance history, skill level, and experience. The appraisal system is also helpful for taking inventory of quality people in the organization. As per the valuation, the HR department takes the decision to recruit new employees or upgrade the existing workforce.
If the performance appraisal system is properly executed, it can become a powerful tool to establish an organizational culture where each employee acts for the broad strategic vision of the organization.
Recommended Articles
This is a guide to the Benefits of Performance Appraisal. Here we discuss the objectives and Benefits of Performance Appraisal and methods of Evaluation Techniques. You may also look at the following article to learn more –
- Types of Performance Appraisal
- Why is Project Management Important?
- Performance Appraisal Methods
- Principles of Human Resource Management