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An Overview on Performance Appraisal in Banks (Part 2)

"Errors in Ratings"





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. At the same time, there are multiple errors that can creep into the Rating system. Following are some scenarios listed out for our readers:

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Name of the Error

What does it mean?

Further explanation

How to eliminate this error?



Evaluating a person's merits or performance, basing on one's personal ideas, beliefs and faith.  Here, looking at others from one's own standpoint prevents him to be fair and honest to everybody.

The rater looks at the ratee through the prism of his personal whims and fancies.


Those who conform to his ideals are given higher rating.  Those who figure at the other end of the spectrum are given lower rating.

By structuring and broad-basing the appraisal activity by a small team comprising members from diverse backgrounds, this error can be eliminated.  Especially when there is a known friendship/relationship or strained relationship between the appraiser and the appraisee, such supervisor must be excluded from the team entrusted with the appraising work.



Bias means partisan attitude. It manifests itself through an inclination to favour one group or view or opinion over alternatives.  As a natural consequence, other deserving persons or groups are left out of reckoning.

Basing on one's personal likes and dislikes, the evaluation is done. Therefore, certain people are always given a high score, while certain people are always given a low score or unsatisfactory rating.


This gives rise to the emergence of 'in groups' and 'out groups'.

It must be realized that both bias and favouritism are harmful and will lead to higher attrition rate and finally, degeneration and death of the organization itself in the long run.


By introducing openness and transparency, this error can be avoided to a maximum extent.  By ranking and publicizing the list of all persons with brief but important particulars, the credibility in the appraisal activity will rise rapidly and it will remain intact for a long period.



It is also known as possessing a pre-conceived notion about a person or a group. This word always has a negative connotation.

Prejudices based on one's caste, region, religion etc. influence the score awarded. Presumptions and suppositions bars the rater from looking at the facts objectively and making rational judgements.  These mental blocks lead to faulty appraisal always.

A professional approach must be adopted while evaluating a person's performance.  If necessary, an outside professional or HR Agency may be engaged to assist the management in the appraisal activity.  Such professional or the H R Agency must be allowed reasonable freedom and extended unqualified support.



A widely held but fixed and oversimplified image or idea of a particular type of person or thing.  It is generalization of a particular trait by attributing it to the entire class/group.

Some of the typical stereotypes are:

a)     A person sporting a big moustache must be a ruffian and a non-conformist.  

b)    A person who works even during late hours is a loyal worker.                   

c)     A person who looks very pious and simple can be easily trusted.

A person exposed to cosmopolitan culture and possessing fair and broad-mindedness only will be chosen to appraise, although he collects inputs from various individuals, groups and departments within the bank to aid his decision.  However, the reviewing official must perform his role properly, in order to eliminate the errors that might have crept into the appraisal.


First Impression

An impression created at the first meeting with the ratee lasts long and it will influence the rater's decision.   This is also one sort of bias only.

Here the rater refuses to change his opinion about the ratee, even though he inwardly knows that it is wrong on his part.   If the ratee comes to know that he was not awarded the rating he deserves, he may directly take up the issue with his rater, have an open dialogue with him and amicably sort out the matter.

It is difficult to know what was the first impression formed in the rater's mind about the ratee.  But, with the help of historical events (involving the rater and the ratee) arranged sequentially, the ill effects of this error can be minimized.  That will be a big challenge to the H.R. Department.  People with impeccable character and excellent persuasive skills must be employed to remove the negative effects of this error.

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Name of the Error

What does it mean?

Further explanation

How to eliminate this error?


Holding a grudge

'Grudge' means 'a feeling of ill will or resentment because of some real or fancied wrong'.


This perceived wrong may result in strong dislike and deep seated enmity towards the other person concerned.

If one holds a grudge against another, one doesn't let it go very easily. It may lead one to developing revengeful attitudes.


People tend to show their dislike for a person, at the time of rating that person's performance.  Thus, performance appraisal is used to settle personal scores.

This is a psychological problem which will do more harm to both the rater and the ratee.  To obviate or overcome this problem, the rating of the person concerned, as awarded by at least 3 raters in the recent past may be taken into account and the average arrived at.   If done, it will even out the ups and downs in one's rating, to the satisfaction of all.



Showing undue positive bias or favour to someone on the basis of caste, region, religion or any other identity.  Personal relationships also play a vital role in the emergence of favouritism.

By showing favouritism to a particular person or a group, the rater may commit injustice to the really deserving candidates. It leads to demoralization, disputes, fall in output and sometimes exit of key persons from the organization.

If there is total transparency in the performance appraisal activity, the appraisers will fear to exhibit their bias and favouritism openly.  In addition, there must be a standard mechanism in place to offset, overturn and nullify the effect of favouritism shown.



Discrimination usually carries a negative connotation.  It shows that the rater has a conspicuous bias towards the ratee.  It results in negative preference of the ratee.

In the garb of showing favouritism to the persons liked, the rater may tend to exclude some talented and successful persons from good rating.  The former is nothing but 'reverse discrimination'.

Discrimination can happen at the personal level or a group level.  The discrimination at the personal level is difficult to find and establish.  But at the group level, it can be easily found and necessary corrective steps taken.  Here, 'job rotation' at all the levels of hierarchy plays an excellent role.



Blood relationship with the ratee influences the rating, often to the detriment of all other persons being rated.

On one side, the undeserving people will receive high positive rating and on the other, injustice will be done to deserving persons.

It must be the duty of a responsible management to avoid a person getting rated by another who happens to be related to him in some way.  Relationship in any way must be made a disqualification, as far as appraisal process is concerned.



Being very rigid in evaluating the performance of every one, because of high and unreasonable expectations of the rater. 

Giving only 'Satisfactory' grade or not giving more than 'above average' score to everybody whose performance is being measured.  Raters with very high and unreasonable expectations commit this error.

When the average score of the whole group appraised is not more than 60%, the management must add another 20% to each individual's overall score.  Thus, almost everybody will get a better rating that is usually one notch above the original rating awarded.


Central Tendency

All the persons in the group are given average score/rating.  The assessor has the tendency to avoid extreme values of the evaluation scale and assigns average grades more often than what the Gaussian distribution justifies.

The Gaussian distribution is also called the 'Normal Distribution'.  It is often called as a 'Bell-shaped curve', because the most of the values are clustered around the 'mean value'.


Regardless of one's performance, one gets a minimum assured rating.  On the other hand, irrespective of one's stupendous performance, one cannot expect a high rating.

Additional weights to certain critical parameters may be given, in comparison to less important parameters.  Thus, the aggregate score of each person may be recalculated and the new score will be reflective of the overall performance of a person in a realistic manner.


If necessary, fresh rating exercise may be undertaken to award correct rating to the persons being rated.

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Name of the Error

What does it mean?

Further explanation

How to eliminate this error?


Leniency  (also

known as the Sunflower Effect)

Rating everyone high, regardless of their performance, to earn their goodwill, trust, friendship and gratitude.  These raters in fact do more harm than good, because of their leniency that is liable for misuse.

In the name of kindness and nobility, all are awarded a decent score.  Thus, the average score of the group appraised is higher than the average score of other comparable groups.  This kind of rating will only promote laziness and inertia and unhealthy competition, jealousy and rivalry.

This type of rating everyone high will discourage and disappoint high performers.  Therefore, attractive awards and prizes for individual performances in certain important areas may be announced. It will increase healthy competition and stoke up motivation.



Excusing below-standard performance, because "it is widespread; everyone does it."  


It is one way of showing one's indifference to things that are good or bad.

This is different from error of leniency.  In case of error of leniency, liberal approach is intentionally adopted to earn the goodwill of everyone and not to displease anyone.  In case of 'grouping', raising the tolerance threshold is noticed.  So, in case of grouping, everybody gets minimum acceptable rating. 

When nobody gets a bad or poor rating, there is something wrong with the appraiser himself.  First, change him.


Entrust the task of appraisal to someone who is neutral, well balanced and fair to everyone.



Social psychologists tell us that we tend to gravitate toward people who are similar to us (birds of same feather flock together syndrome). We like people who are like us.  Because of this sub-conscious process, managers may tend to give higher ratings to the persons who are similar to them rather than giving them an accurate rating.

Giving a high score to a person who regularly travels or plays or dines with the appraiser.


As a natural corollary, the rater gives a low score to a person whose interests and beliefs vastly differ from his own psyche.


Another way this error can be interpreted is through in-groups and out-groups.

It is the management's responsibility to ensure that the rater shall not belong to the in-group or the out-group of the person rated and vice versa.


When there is positive or negative bias of the rater towards the ratee that is well known to everyone in the same unit, it is better to engage a different person for rating.



'Proximity' means 'nearness in time and space'.


Dimensions of performance that appear near each other on the rating sheet are sometimes affected by the ratings of other performance dimensions.


For example, an evaluator may rate an employee lower on one dimension simply because of rating him as average on the previous dimension.


This error stems out of an involuntary action on the part of the appraiser.

The rater may tend to presume that an employee who has not performed well in one area must be a poor performer in other areas too.  But, this presumption may be wrong and prove to be disastrous.


Similarly, an employee who has performed exceedingly well in one single area or only a few areas need not be a good performer, if his overall performance is considered.  Yet, he may end up getting an excellent overall rating that he does not deserve at all.

This is one of the most common errors and it has ruined the career of innumerable number of the bright and successful employees. 


This error has also catapulted inefficient people to the top.  People promoted to higher positions were subsequently found to be having bad integrity or poor management skills.  But before any corrective measures could be initiated, it was too late.   Enough damage was already done. 


Where the goals and objectives in each area/dimension were expressed in quantitative terms and communicated to the ratee in advance too, the adverse effects of this error can be minimized.


Guilt by association

Judging a person, by the company he keeps.  Here, the negative qualities and traits of one person have a bearing on other individuals keeping company/friendship with him.

Since 'X' is a friend of 'Y', it is assumed that he also must possess the characteristics of 'Y'.  So whatever bad impression the rater has on 'Y', it gets reflected in the rating awarded to 'X'.

The management must impart suitable skills to their supervisors to overcome this kind of errors.


Those who are still found wanting in this area may be divested of their rating powers.

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Name of the Error

What does it mean?

Further explanation

How to eliminate this error?


Honour by association

This is opposite of 'Guilt by Association'.  It is transferring the positive attributes of one person to another.


"If 'M' works under 'R', then he ('M) must have been a talented person.  Only really meritorious people can stay with him ('R') for long".


Since the rater's respect for 'R' is positive and high too, it gets reflected in the rating given to 'M'. 

Most of the employees will tend to join managerial personnel who have a good reputation within the organization.


But once their wish fructifies, they will not show interest in work.


They expect such powerful person will protect and save them, even if they err.


Godfathers and yes men will emerge within the organization and they may spoil the fair image of the organization itself.

Giving importance to accidental associations must be done away with.  Transferring the positive attributes of one person to all others associated with him is absurd.  There will not be a realistic assessment of the strengths and weaknesses of the people in an organization.  Therefore, the SWOT analysis of the organization itself cannot be done properly.  Hence, if this error is left unchecked, it will become counter-productive and ruin the prospects of the organization.


Contrast Error

This error occurs if the evaluator after rating an employee whose performance was exemplary, rates another employee lower than his/her true performance, just because he/she has not performed as high as the previous employee. 

The contrast between the two employees causes the evaluator to be too harsh on the second person rated.


Likewise, there is another possibility that is opposite to the above. After evaluating the bad performance of an employee, if an above average employee's performance is taken up for evaluation, the latter may get a higher rating than what he/she deserves.

Unnecessary comparisons in individual performances must not be done. 


In any group, the level of performance of the top performer shall not be the benchmark for others.


The individual differences must be acknowledged and accepted.  This is what the village elders say "all the fingers in a hand are not alike".


The Halo Effect

This error occurs when a single attribute or achievement clouds all other ratings of an individual.  For example, rating an employee good in all areas of performance just because he/she was able to win a big contract or meet the sales target or could recover a big debt that has remained bad and was thought to be irrecoverable.

It is a well-known fact that a person cannot be equally successful in all the areas that have been identified for evaluation.  But it is anticipated that the performance of a person in majority of the key areas must be good.  The number of key areas here must be limited to only a few say 4 or 5.

A person with a single outstanding achievement to his credit is given an excellent rating, even if his performance is below average or sometimes 'Zero' in all other areas. That will pave way for 'hero worship'. A professionally managed organization cannot afford to have such bad H.R. culture and climate, as it will prove to be suicidal in the long run.


The Horns Effect

The individual's performance is completely appraised on the basis of a negative quality or feature perceived. This results in an overall lower rating than may be warranted.   This is a kind of perceptual distortion.

Some examples of 'Horn Effect' are:

1. A person who is not formally dressed up in the office is considered to be casual in his attitude towards work too.

2. A person who is rigid with regard to his working hours, may be a shirker of responsibility.

3. An employee who frequently goes on leave that is legitimately due to him may not show real interest in meeting the targets given.

People must be sensitized with regard the benefit of presenting a decent look.  If a person pays more attention to certain small things in life, he/she may command better respect than now.  Similarly, the raters shall be told not to give undue importance to certain extraneous factors and less relevant features/aspects.



Rating only recent performance, good or bad.


Recent successes or failures, promptness or delay in responses, adhering to the time schedules or not, good or bad behavior of the person appraised etc. influence his rating.

By diarizing all important events with regard to the person appraised viz. his leave and attendance, health, highlights of his performance, critical events and his general behavior throughout the year, this error can easily be eliminated.


Succession Effect

This error refers to the fact that the assessor can be influenced by the previous results.



Finding fault with the present incumbent for the mess created by his predecessor is also very common (bad inherited legacy).


Similarly, the unsatisfactory performance of the same employee in the past years may prevent the rater from revising his opinion, even if the employee produces good results during the current year.


Very rarely, one may be given a good rating for his good performances in the past.

The raters must realize that setting right the irregularities committed by one's predecessor is not that easy.  It is not only time consuming, but it will be a big challenge and a painful ordeal too.  The persons succeeding a bad performer must be given all round support and encouragement by the management, instead of faulting him for the pre-existing ills that were certainly not his creation.


For instance, a substantial reduction in accumulated losses itself must be considered an achievement and it must be rewarded with better rating, instead of merely going by the absolute figures of continuing losses.

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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