In the knowledge industry where people are the key determinants of the company performance, measuring people and their individual and collective performance is vital. Relating the individual’s contribution to the attainment of the company objective helps to redefine the company processes in such a way that it ensures smooth flow of the functions towards the goals. Performance appraisal system is one way of measuring the people performance in an organisation. The current system of performance appraisal includes the actual evaluation of the individual performance, and his potential to take on higher responsibilities in the organisation. On conducting a self appraisal in accordance to the standards set by the company, the individual has to evaluate the self rating and supervisor’s comments in a one-to-one meeting. This helps in identifying one’s strengths, and potential. It also provides an insight to the weaknesses and measures to overcome the same through training and developmental programs. The modern day appraisal system also includes helping the employee in career planning. Planning of career is crucial as this motivates the individual player to put in more and better efforts for self development. As planning of career is a long term objective, the individual tasks fall automatically in line with the career planned. With the career designed and redesigned with the aid of the supervisor incorporating the changes around him, the employee identifies the potential skills that are to be strengthened and those which are to be nullified. The modern system of appraisal was developed in India by two consultants from Indian Institute of Management, Ahmedabad, when they were invited by Larsen and Toubro to design an appraisal system suited to the market conditions. The two consultants, Pareek and Rao, suggested a new system on the basis of a survey conducted which includes performance appraisal, potential appraisal, feedback and counselling, career development and career planning, and training and development programs. Companies tailor make a structure that suits their business environment which helps in recognising the pivotal role played by the employee in a specified project allotted to him. Infosys has a system which measures individual promptness to performance of the task assigned, the quality of work and customer satisfaction, peer, subordinate and superior relationship maintained, analytical ability, decision making potential, etc. Companies generally checks whether the performance meets, exceeds or does not meet the expectations set by the company to drive away the competitors. People capability maturity model of rating is another system of evaluating individual performance. This model identifies how competent, and potential the employees are to the organisation. This rating is generally used by companies to assist in making decisions related to rewards, promotions, demotions, etc. The entire group generally falls under the ratio of 20:70:10 where the top 20% are key performers who must be retained within the organisation at any cost, next 70% are the people who contribute significantly to the operations of the company, and must therefore be rightly motivated. The bottom 10% is the low performers who might have to be counselled to improve their performance or must be terminated from their service. Performance evaluation tools thereby act as a guide to taking strategic and short term decisions related to people management.
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