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An Overview on Performance Appraisal in Banks (Part 1)





Performance Appraisal is one of the major H.R.D. functions in an organization. It is used not only to evaluate an individual's performance, but to design compensation policies and programmes. Performance Appraisal is also used as a powerful O. D. intervention, in modern organizations. Performance appraisal starts with goal-setting and it is a continuous process that includes performance feed back, performance interview and performance counselling. To be more effective, performance appraisal must include potential appraisal and personal development initiatives. Performance Appraisal in an organizational context can be broadly classified into three types. Each of these 3 types is briefly explained hereunder and their chief merits and demerits are also discussed.

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(A)  Objectives and Goals Method :

In this approach, performance is measured in terms of objectives and goals that were pre-determined, expressed preferably in quantitative terms and properly communicated to and understood by the personnel concerned, at the beginning of the period of reckoning itself. The rating to be awarded in this method is determined by using this formula.

Rating=Performance/Objectives & Goals



1.   In this approach, goal-setting takes place with the active participation of the personnel concerned.

2. Since the objectives and goals are invariably pre-determined and expressed in quantitative terms, there is no ambiguity or misconception, at any point of time.
3. This is by far the most versatile and transparent exercise and used extensively in organizations.



1.  In the absence of express acceptance of the goals and objectives by the personnel concerned, their consent and willingness are taken for granted.

2. The qualitative dimensions of performance, many a  time, are less emphasized.


(B) 2. Benchmark Method :

Here, the actual performance of all one's peers is measured  and aggregated and then, the average standard is arrived at. This average standard will serve as a benchmark to judge the performance of an individual concerned. The rating in this method is decided as follows.:

Rating = Performance / Average Standard or Benchmark

Merits :


1.       An individual's performance in relation to the performance of his counterparts will indicate the extent of his contribution to the overall growth and  development of the organization.

2. There is lesser scope for subjectivity, bias and prejudice in this method of evaluation.

3. Since benchmarks are created for various levels of   performance, individuals are enabled to know where

exactly they stand.



1.   The individual differences are overlooked, in this method.

2.  The average standard tends to disregard the   uniqueness and differing aspects of the circumstances,  to which various individuals are exposed to.

3.  This method will unduly project a person in good or   bad light, as compared to others.

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(C)  Rater's Expectations Method :


In this method, while evaluating the performance of a person, his capacity and stature are taken into consideration. The rationale is to find out whether a person has performed to his fullest ability. The question whether the person has utilized all his knowledge and skills, in the course of his performance, will determine the rating to be awarded to him.


Thus, Rating = Performance/Rater's Expectations




1.       A person's performance in absolute terms is measured, without any comparative yardstick.

2.       It can easily be found out, if a person wilfully reduces his output, but yet manages to get a fair name amongst all the individuals in his group.





1.       Even if a person performs exceedingly well, his rater may be tempted to increase his expectations from him,  after the actual performance. This results in awarding a lower rating to an individual than what he deserves.


2. In the absence of compensation differential, this method   of evaluation proves to be disastrous, especially for outstanding performers.


3. Since the rater's expectations are not either  communicated to or known by the ratee in advance,  there is room for manipulation, especially when the whole appraisal activity is couched in secrecy.


4. Finally, this is the most non-standardized method of  evaluation, leading to favouritism and discrimination shown by the appraiser. This results in conflicts, quarrels and disputes and greater workers turnover


Now that we have a good understanding of the type of Performance Appraisals, we can summarise what is the broad outline of a performance appraisal through the following points:

1.    The basic objective of performance appraisal is not just to distinguish good performers from the poor performers, for the purpose of rewards and recognition. 

2.    But, the noble objective of any performance appraisal can only be to improve the future performance of the officer and to develop his knowledge and skills, eventually paving way for his self realization.

3.    In the goal setting activity, the participative and consultative approach must be adopted at the beginning of the period (usually a calendar year) under reckoning.

4.    The appraiser has a sacred duty towards the appraised in the sense he (the appraiser) must act fairly, with utmost care and concern for the appraised.

5.    The errors in rating like error of subjectivity, error of bias and prejudice, error of proximity, error of central tendency, error of rigidity, error of leniency etc. must be eliminated at any cost.

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6.    Performance Appraisal must always be accompanied by Performance Interview, Performance Feedback, Performance Counselling and Mentoring.

7.    Identification of the areas where the officer has performed well, the areas where the officer could have performed still better and the areas where his performance was below par/unsatisfactory must be done objectively, with the help of modern scientific tools. 

8.    Highlights of one's performance in each important dimension must be shared with him/her without any reservation.

9.    Mere communication of the aggregate marks/score at the end of the year will not suffice.

10.  Skill gaps or deficiencies must be identified through potential appraisal and communicated to the appraised person.  Then they must be made up with suitable 'on the job training', 'superior-subordinate coaching' (on a 'one to one' basis), conventional training through classroom lectures, seminars and workshops and 'simulation studies'.

11.  'Psychodrama' may be employed as a tool to improve the emotional quotient of the appraised, help him have a realistic self-assessment through introspection, help him develop healthy inter-personal relationship skills and to boost his self-esteem.

12.  It will help him/her to work in a team enthusiastically and share the benefits of his/her successes with the other members of the team.

13.  The various motivational factors must be analyzed and given due weightage.

14.  The social needs of a person can never be overlooked.

15.  Proper attention needs to be paid to the health of the officer and his family members and there shall be no compromise whatsoever on this score.

16.  Similarly, it will be quite unfair to expect that an employee will give his maximum output, even when he is far away from his family and/or native place.

17.  The bank must realize that when it expects the officer to perform well and show results, the officer is also entitled to have reasonable expectations from the bank and it is the duty of the management to fulfill his/her aspirations and demands within a specific time limit.

18.  Finally, an organization shall never aspire to grow at the expense of its own personnel.

Disclaimer: [The articles written by author contains only the academic view of the writer and purely for discussions and updation of the knowledge of the bankers. The views expressed in the articles may not at all be subscribed by the organisation where the author is working and / or]

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