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  1. 1. PERFORMANCE APPRAISAL and CASE STUDY BY Akhil Ravula Devathi Manmohan (Leader) Aditya Shubhanayan Kiran Kumar Manjusha Vikranth Singh Yaswanth Harish PRINCIPLES OF MANAGEMENT (HU302) GROUP - 7
  2. 2. Contents  Brief view on the Topic  Case Study on Microsoft Coperation 2  Intro  Problem & Limitations  Solution and methods  Conclusion  Improvements / Recommendations  About  Process  Methods / Techniques  Advantages and Disadvantages
  3. 3. PERFORMANCE APPRAISAL 3 One of the step in Staffing
  4. 4. Performance Appraisal ?? ▸ Performance appraisal is the systematic evaluation of the individual with regard to his or her performance on the job and their potential for development”_ BEACH. ▸ According to DALE YODGER,” Performance appraisal to all formal procedures aimed working organization to evaluate personalities and contribution of one potential group members”. ▸ EDWIN B.FILIPPO, defined has the term performance appraisal as “ A systematic ,periodic and so far as humanly possible , an impartial rating of an employee’s excellence in matters pertaining to his present to his present job and his potentialities for a better job “. ▸ According to JOHN A. SHUBIN defined as “Merit rating is a systematic appraisal of the employee's personality and performance on the job and is designed to determine his contribution and relative worth to the firm”. ▸ In the words of L. A. LARKIN, “Performance appraisal is the systematic assessment by merit factors of the behaviour and /or ability of workers in their work and a means whereby each worker may be rewarded a percentage in addition to his wage according to his assessed merit value”. 4 Definition
  5. 5. ▸It is a process of evaluating an employee’s performance of a job in terms of its requirements. ▸It is the process of evaluating the performance of employees, sharing that information with them and searching for ways to improve their performance’’. ▸Performance appraisal is also known as “merit rating” or “efficiency rating”. 5 Performance Appraisal ?? Meaning
  6. 6. ▸ To review the performance of the employees. ▸ To judge the gap between the actual and the desired performance. ▸ To help the management in exercising organizational control. ▸ To diagnose the training and development needs of the future. ▸Provide information to assist in the HR decisions like promotions, transfers etc. 6 Purpose
  7. 7. ▸Provide clarity of the expectations and responsibilities of the functions to be performed by the employees. ▸ To judge the effectiveness of the other human resource functions. ▸ To reduce the grievances of the employees. ▸ Helps to strengthen the relationship and communication between superior –subordinates and management – employees 7 Purpose Cont…
  8. 8. Factors in evaluating the performance and progress of an employee: 1. Knowledge of work 8. Honesty 2. Initiative 9. Ambition 3. Quality of work 10. Crisis Management 4. Target attainment 11. Discipline 5. Aptitude 12. Punctuality etc. 6. Degree of skill 7. Extent of co-operation with colleagues and superiors. 8 Factors
  9. 9. 9 Process Setting Performance Standards Communicating Standards Measuring Standards Comparing Standards Discussing Results Taking Corrective Measures
  10. 10. 10 Methods of Performance Appraisal Traditional Methods • Graphic Rating Scales • Ranking Method • Paired Comparison Method • Forced Choice Description Method • Forced distribution Method • Checklist Method • Essay or free form Appraisal • Confidential Reports • Group Appraisal • Field Review Method Modern Methods • Assessment Center • Human Resources Accounting Method • Management by Objectives • Productivity Measures • Balance Score Card • Psychological Appraisal • Results Method • Productivity Measures • 3600 Appraisal
  11. 11. 11 Advantages / Benefits of using Performance Appraisal Benefit for the Individual •Gaining a better understanding of their role • Understanding more clearly how and where they fit in within the wider picture • A better understanding of how performance is assessed and monitored •Getting an insight •Improving understanding of their strengths and weaknesses and developmental needs •Identifying ways in which they can improve performance • Providing an opportunity to discuss and clarify developmental and training needs • Understanding and agreeing their objectives for the next year • An opportunity to discuss career direction and prospects. Benefit to Team Leader / Manager •hear and exchange views and opinions away from the normal pressure of work • to identify any potential difficulties o weaknesses •An improved understanding of the resources available • to plan for and set objectives for the next period • to think about and clarity their own role • to plan for achieving improved performance •to plan for further delegation and coaching • to motivate members of the team Benefit to Organisation •A structured means of identifying and assessing potential •Up-to-date information regarding the expectations and aspirations of employees •Information on which to base decisions about promotions and motivation •An opportunity to review succession planning •Information about training needs which can act as a basis for developing training plans •Updating of employee records (achievements, new competencies, etc) •Career counselling •Communication of information
  12. 12. 12 Disadvantages of using Performance Appraisal Subject to Rater errors and biases Very time Consuming Halo Effect Central Tendency Recency error Negative Approach and Resistance
  13. 13. Case Study on MICROSOFT ORGANISATION 13
  15. 15. Microsoft?? 15 ▸Computer hardware and software industry , most reliable and progressive computer software company in the world. ▸Established in 1975 by bill Gates.
  16. 16. 16 ▸During the 1990s, it could be recalled that the world’s computer software and hardware industry was being dominated by IBM, while Microsoft was still way behind but nonetheless was already providing excellent competition. At present, the situation has completely reversed. ▸During the height of its success, IBM decided to neglect the development of its organizational culture and its employees and concentrate more on efforts to sustain their profitability. They invested heavily in research and development activities to find out the most important computer products that were being needed by the people.
  17. 17. 17 ▸On the part of Microsoft, instead of worrying so much about maximizing their profits, Bill Gates prioritized on strengthening the organizational culture of the company. ▸ He helped instill the values, mission and vision that would remain as the solid foundations of achieving success in Microsoft. Bill Gates focused more in addressing the needs of the employees and making sure that they would be working in an environment that can bring out the best in their capabilities and skills.
  18. 18. 18 ▸Such was the vision of Bill Gates that he knew that profitability and progress would eventually come if he took care of Microsoft’s organizational culture first. ▸He did not worry about the big lead that IBM was having during the 1980s because he knew that Microsoft’s time to dominate the computer hardware and software industry would come. ▸He was not worried about the slow results because Gates realized that as the employees and leaders of Microsoft are given adequate time to understand the purpose and objectives of the company, the more productive and profitable the company is going to be in the long run.
  19. 19. 19 ▸The prophecy of Bill Gates turned out to be correct as the strong and solid organizational culture of Microsoft that took years to establish eventually proved to be the winning formula for Microsoft to go ahead of IBM in the computer hardware and software industry. ▸ However, it is important to know that there were plenty of challenges that Microsoft had to face especially in its human resource management prior to achieving an excellent organizational culture.
  20. 20. Problem and Limitations 20
  21. 21. Problem 21 Discrimination: Some Black American employees of Microsoft complained of unfair practices being done to them by the management which led them to eventually file cases. They were mentioning about their low salaries as compared to white Americans who were experiencing bonuses and incentives out of their performances. Black Americans also frequently did not get any high ratings during performance assessments that essentially prevented them from getting accepted with regard to their applications for higher office. These poor performance assessment scores also were usually used as basis for the management of Microsoft to expel what they believed were underperforming employees from their workforce and replace them more competent workers.
  22. 22. LIMITATIONS 22 ▸ Many factors from the internal and external business environment impact the performance appraisal process. ▸ As key external factors may be considered the employee unions and the law, whereas as internal factors may be considered the culture of the company and the increasing use of teams for the work execution. ▸ In Microsoft , there are no employee unions as a multinational enterprise is extremely careful to any legal issues. The culture of the company, although it emphasizes employee initiatives and team work, it could be said that it is rather strict and the employee has to follow the hierarchy instead of taking independent decisions. This actually is a hindrance to employee empowerment.
  23. 23. LEGAL RESTRICTIONS ▸The form of assessment chosen by the company should be reliable, accurate and above all legal. ▸ Otherwise, the conclusions would not be a sound basis for decisions on matters relating to personnel and potentially laws such as equal employment opportunities may be affected. Such issues arise when an employee is dismissed, demoted or his/her promotion is not realized. 23
  24. 24. LEGAL RESTRICTIONS ▸Microsoft is particularly careful on issues such as racial, religious and sex discrimination. ▸However, it is noticed that top management positions are mostly occupied by white males. 24 Cont…
  25. 25. ERROR OF CENTRAL TENDANCY ▸Some reviewers do not wish to present employees as fully effective or ineffective, and so they rate everyone near the accepted average, something that is the case in Microsoft. ▸ The findings provide assessments that are not comparable with themselves, and they are unsuitable for statistical analysis or other purposes. 25
  26. 26. INTERCULTURAL EFFECTS ▸Everyone expects others to develop responses and attitudes based on his/her own culture. Problems appear in the cases where people from different nationalities have to work together. ▸Microsoft is a multinational company and people from different nationalities have to cooperate. ▸ So far, there has not been a particular programme aiming at training people to work with people from other cultures. 26
  27. 27. PERSONAL BIAS ▸Negative perceptions of an evaluator for a group of people can distort the rating they receive. ▸For example, it has been observed that some male supervisors are unfair to women subordinates who hold traditionally male jobs. ▸The phenomenon of discrimination between men and women is something that still exists to a lesser degree than before. 27
  28. 28. Evaluators' prejudices ▸ The problem with subjective methods is the possible influence of the outcome by the evaluators and the personality traits, ideas and opinions that they have, or even the kind of relationships they have with the evaluated employee. ▸The training of managers that carry out assessments will help to reduce subjectivity. 28
  29. 29. Evaluators' prejudices ▸So far, only the Managing Directors of all subsidiaries have received training on employee performance appraisal and although subjectivity is not reduced, it was eliminated to a large extent. ▸The training should be expanded to the other managerial positions since it has been noticed that subjectivity played a crucial role in subordinates' performance appraisal. 29 Cont…
  30. 30. Grace and Rigor ▸In the first case, the assessor makes the assessment with relative ease and ranks favorably while the opposite happens with the manager that seeks to appear 'tough' and is negative in appraising employee performance. 30
  31. 31. Grace and Rigor ▸Effects of grace and hardness are extreme, causing grievances and problems and are usually presented in companies with vague ideal performance levels. ▸This is also the case with some qualitative jobs in Microsoft where as the performance levels were vague, the line of responsibility was also vague and the employee was subject to the assessors' personal grace or rigor. 31 Cont…
  32. 32. Solution and Methods of Performance Appraisal 32
  33. 33. Solution 33 Solution implemented was the change of the performance appraisal system from the forced ranking system towards other methods based on working conditions. ▸ The problem with the forced ranking system was that it was a biased process of determining the employees that are going to get the incentives for excellent performance.
  34. 34. Methods they came with 34 ▸ Rating scales ▸ Critical incident method ▸ Balanced scorecard ▸ 360 degree feedback ▸ Field review method
  35. 35. Rating scales 35 ▸ It is the oldest and most frequently occurring performance appraisal method that requires the existence of an evaluator who gives a score for the performance of each employee based on a scale ranging from the lowest to the highest level. ▸The responses of the assessor can be linked to numerical values allowing this way to export average scores for each employee which can then be compared. This is directly related to the reward system and salary increase.
  36. 36. Rating scales 36 ▸ Advantages of this method is the low development and management cost, the evaluators do not require significant training or a lot of time to complete the relevant criteria form as well as that it can be applied to a large number of employees. ▸The disadvantages are also pretty. Prejudices, perceptions and personality traits of the head may affect the assessment to be made as well as the relationship s/he has with each subordinate. ▸ This is the performance appraisal used for all Microsoft subs. Cont…
  37. 37. Critical incident method 37 ▸The evaluator observes and records very good and bad behaviours of the respective employee that occur during the period the appraisal takes place. ▸ The observations are grouped based on the criterion on which such cooperativity, work quality, consistency, etc. and then conclusions for the employee are drawn, his/her strong points as well as the points that need improvement. ▸ Employers often use this method in addition to the method of rating scales method. This ensures that the supervisor thinks of the subordinate throughout the year because these events have to be accumulated.
  38. 38. Critical incident method 38 ▸ The most useful feature of this method is to draw conclusions directly related to the job and benefit particularly the employee. In addition, it further reduces the effect of personal bias of the head. ▸ The main disadvantage is that the assessors record events in the beginning of the appraisal period, followed by a blank space where they neglect their duties and when the time of appraisal comes, they observe and record behaviours. In this case, the assessor is affected by the events of the recent past and the result can not be objective. Cont…
  39. 39. Critical incident method 39 ▸The method of critical incidents consumes much of supervisor's time. ▸ Of course, since many reviewers find difficult to remember all the facts relating to each employee throughout the assessment period, a calendar of critical events can be a very useful support tool for the other assessment methods. ▸This method has been used in Microsoft UK in combination with the rating scales method, mostly for qualitative jobs. Cont…
  40. 40. Balanced Scorecard 40 ▸ Customers' perspective ▸ Internal perspective ▸ Leadership and learning perspective ▸ Economic perspective
  41. 41. 360 Degree Feedback ▸It is an appraisal form where someone is appraised by assessors from different hierarchical levels, departments. ▸The results of the assessors are grouped aiming at seeing what others think on specific points of our performance in relation to what it is believed by the employee and his/her supervisor. 41
  42. 42. Field review method ▸ A specialized executive visits the workplace and assists supervisors in the performance appraisal process. ▸ The appraisal report is sent to the supervisor, who makes changes, comments or notes as accepts it as it is and then communicates it to the employee. 42
  43. 43. Conclusion 43
  44. 44. Problem Case ▸Brutal Performance appraisal: The management also demanded their workers to provide explanations especially with regard to their actions related to their responsibilities. Everybody received positive and negative feedbacks, and even those employees who were performing well were asked not to celebrate but to bring their efforts to even higher levels. Those underperforming employees were being threatened to be expelled from the company if their performances and outputs did not improve within a certain period. 44
  45. 45. Adverse Effects ▸ In order to find immediate replacements for the terminated Black Americans, Microsoft recruited contractual workers, but they too were not able to perform their responsibilities according to the standards of the company. ▸ Many contractual workers did not even bother to finish their contracts out of their disappointing experiences with Microsoft. ▸ An enjoyable and challenging place to work for eventually transformed into a frustrating, pressure-packed office where the leaders were very eager to find the faults and weaknesses of the employees ▸ Brought down their morale and motivation to work hard, promoted backstabbing within colleagues 45
  46. 46. Solutions by CEO Steve Ballmer 46 Improving communication lines Improved performance appraisal and compensation system Increase in employee benefits New Workplace Setups
  47. 47. Improved performance appraisal and compensation system 47 ▸ Change of the performance appraisal system from the forced ranking system towards commitment rating ▸ Problem with the forced ranking system was that it was a biased process of determining the employees that are going to get the incentives for excellent performance ▸ In the commitment rating, all employees of Microsoft will have equal opportunities to get incentives particularly in the management of their stocks in the company depending on their performance ▸ Put to rest those issues and controversies regarding its unfair performance evaluation process that even led to some Black American employees filing lawsuits against Microsoft
  48. 48. Suggestions from our group 48 Microsoft needs to focus more on their workers instead of thinking about their profits Microsoft has to focus to try and reduce its perfectionist organizational culture in an effort to lessen the pressure that is always being felt by their employees Performance appraisal needs to be more lenient and allow workers to have room for improvement and freedom Microsoft needs to give better benefits to their outstanding employees other than stock options
  49. 49. 49 THANKS!