......our answer to all your banking needs


Follow AllBankingSolutions


    Follow allbanking on Twitter


Types of Performance Appraisal - An Overview 

Ads by Google






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.


(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.




Ads by Google


(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.



(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




You can give your feedback / comments about this Article.   Please give only relevant comments as irrelevant comments are waste of time for yourself and our other readers.



blog comments powered by Disqus