performance app.errors
performance app.errors
M. S. Vijaya Rao,
Research Scholar, Bharathiar University,
Coimbatore, Chennai, India.
Email: rao_vijay2k@yahoo.co.in
S. Sheela Rani,
Professor, MEASI Institute of Management,
Chennai, India.
________________________________________________________
Abstract
The purpose of this research article is to study and analyze the existing appraisal system, the
rating errors in banking sector with special reference to employee satisfaction. The research
design adopted for this study is exploratory in nature. Hypotheses are formulated and proved.
The researcher made use of convenient base to select the required number of samples. The
organizations selected for the study are basically banking organizations. The primary data
are collected through the distribution of structured questionnaires to middle level managers.
Literatures outlining fundamental aspects of performance appraisal and rating errors are
summarized, serving as a foundation for analyzing the effects of rating errors on employee
satisfaction and the interrelationships between them
___________________________________________________________________________
Key Words: Performance Appraisal, Halo effect, Horn Effect, Employee Satisfaction, 360
Degree Appraisal and Potential Appraisal.
1. Introduction
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“Performance appraisal isn‟t about the forms. The ultimate purpose of performance
appraisal is to allow employees and managers to improve continuously and to remove barriers
to job success, in other words, to make everyone better. Forms don‟t make people better, and
are simply a way of recording basic information for later reference. If the focus is getting the
forms „done‟, without thought and effort, the whole process becomes at best a waste of time,
and at worst, insulting”.- De Cenzo & Robbins, 2006.
Performance management, in its broadest context, is a managerial process that links
corporate objectives, performance standards and evaluation, to which the performance review,
or Performance Appraisal (PA) , are often applied (Pickett 2008).
Performance management is the process of planning or defining performance, appraising/
evaluating performance, giving its feedback, and Counselling an employee to improve his
performance. It is the process by which executives, managers, and supervisors work to align
employee performance with the firm‟s goals. Throughout the world both public and private
organizations use formal performance appraisal system, may be quarterly or half-yearly or
yearly depending on their organizational system, policies and procedures. Being a part of
employees‟ career progression, performance appraisals are regular A Study on Performance
Appraisal Errors of Bank Managers in Chennai city review of employees‟ performance within
the organization. According to Jaekson and Schuler, performance appraisal usually involves
„evaluating performance based on the judgments and opinions of subordinates, peers,
supervisors, other managers and even workers themselves‟. Performance appraisal, as a
process is seen as a key contributor to successful human resource management, as it is
strongly related to organizational performance (Erdogan 2010).
Performance appraisals are intended to evaluate the performance and potential of
employees. Still these may not be valid indicator of what these are intended to assess because
of a variety of limitations on their uses. Performance appraisal errors affect the validity and
dependability of the performance appraisal systems. The main purpose of this research is to
study and analyze the existing appraisal system, the rating errors in Bank sector with special
reference to job satisfaction.
2. Literature Review
According to Cardy and Dobbins (2004), performance appraisal as a process of enhancing
human performance has attracted the attention of both academics and practitioners. PAs are
introduced for multiple purposes. Bernardin and Beatty (2009), highlighted several objectives
of PA, like to improve the use of resources and serve as a basis for personnel actions.
Cleveland, Mohammed, Skattebo and Sin (2003), described four purposes of PA: to make
distinctions among people, distinguish a person‟s strengths from his or her weaknesses,
implement and evaluate human resource systems in organizations, and document personnel
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Proceedings of the Second International Conference on Global Business, Economics, Finance and
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decisions. Cleveland, et al. (2008) also described that appraisals are used to make between-
person decisions, for instance for promotions or termination decisions or salary
administration. PAs fairness is a hot issue. Researchers and practitioners are trying to devise
means in order to increase employees‟ productivity and reduce turnover, without adding a
significant increase in costs? The PA fairness has been cited as a way of achieving these goals
(Thomas & Bretz 2010). One of the preeminent purposes of appraisals is to positively affect
future performance (Cleveland, Murphy & Williams 2009; Huffrnan & Cain 2010; Swanson
& Holton 2011; Thomas & Bretz 2004). As Latham, et al. (2003), state the basic purpose of
conducting PAs is to improve the performance of the affected employees.
According to some studies (DeCarlo & Leigh 2006; Jaworksi & Kohli 2011), PA helps in
improving performance and building both job satisfaction and organizational commitment.
Alternately, this helps in lowering down the turnover levels (Babin & Boles 2006; Babakus,
Cravens, Johnston & Moncrief 2006; Brown & Peterson 2004). Bard Kuvaas (2006),
observed positive findings regarding turnover intention with PA satisfaction, that those
employees who are satisfied with how PA is conducted have lower turnover intentions.
From the above discussion it is clear that appraisal of employees serves several useful
purposes such as:
2.1 Compensation decisions
On the basis of performance appraisal, managers identify employees performing at or
above or below the expected levels. Employees are being compensated accordingly on the
basis of merit.
2.2 Promotion decisions
Performance appraisal plays a vital role in judging the employees to be promoted to
higher positions. Because performance appraisal considers merit as the basis of reward, the
employees having adequate talent are considered for getting promotion.
2.3 Training and development programs
Performance appraisal serves as one of the important criteria for assessing the training
needs of the employees. It determines which employee needs more training and evaluates the
post-training effects. Through performance appraisal employees can know their progress and
various skills they need to develop in order to get promotion and pay hike
2.4 Feedback
Performance appraisal helps the employees in knowing how well he is doing on the job. It
can serve as a basis for an ongoing discussion between superior and subordinate about the
job-related matters. Both the appraiser and appraise get to know each other with the help of
effective interaction and feedback process. The appraiser gets a clear picture of what he must
do to enhance his performance and to move ahead in the career ladder of the organization.
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Proceedings of the Second International Conference on Global Business, Economics, Finance and
Social Sciences (GB14Chennai Conference) ISBN: 978-1-941505-14-4
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Proceedings of the Second International Conference on Global Business, Economics, Finance and
Social Sciences (GB14Chennai Conference) ISBN: 978-1-941505-14-4
Chennai, India 11-13 July 2014 Paper ID: C474
• Judgment Error
• Poor Appraisal Forms
• Ineffective Organizational Policies and Practices
3. Judgment Error:
People commit mistake due to biasness and inadequate training while evaluating people
and their performance. These errors are also called as Rater Errors. The following types of
judgment errors/rater errors may emerge during performance evaluation.
3.1 First Impression (Primacy Effect)
It occurs when a manager or evaluator bases his or her entire assessment of an employee
or applicant on the first impression that the employee or applicant made. It can be either
positive or negative. In case of positive primacy effect, the rate is considered to be doing
everything and a good performer. But in case of negative primacy effect, the rate is
considered to be doing nothing and a bad performer.
3.2 Latest Behavior (Recency Effect)
Here the rater gives over emphasis on recent performance. The ratees are evaluated more
on the results of the past four weeks than on six months‟ average behavior.
Many employees being well aware about this difficulty and knowing the date of
evaluation make it their business to be visible and noticed in many positive ways for several
weeks in advance.
3.3 Halo Effect
Halo error occurs when a rater assigns ratings for several dimensions of performance on
the basis of an overall general impression of the rate. The individual‟s performance is
completely appraised on the basis of a perceived positive quality, feature or trait.
The reasons of halo error are: a rater may make an overall judgment about a worker and
then confirm all dimensional ratings to that judgment and/or a rater may make all ratings
consistent with the worker‟s performance level on a dimension that is important to the
supervisor. If Ramesh rates Suresh low on all four performance dimensions (job knowledge,
quality of work, quantity of work and inter-personal relation) even though his performance on
first three dimensions is high, then he has committed a halo error. Similarly an employee may
get high rating because of her punctuality, although he is not a good performer.
3.5 Stereotyping
It is mental picture the rater holds about rate because of the ratee‟s sex, age, religion, and
caste, etc. The rater generalizes the ratee‟s behavior on the basis of above characteristics and
that lead to overestimation or underestimation of the ratee‟s performance. For example a ratee
having Mudaliar caste is considered to be aggressive in achieving the organization‟s goals and
usually gets high rating.
3.6 Central Tendency
Appraisers rate all employees as average performers. That is, it is an attitude to rate
people as neither high nor low and follow the middle path. For example, a Manager, with a
view to play it safe, might give a class grade nearly equal to B, regardless of the differences in
individual performances.
3.7 Leniency
This occurs when ratings are restricted to the high portion of the rating scale. Some raters
consider everything as good and they are lenient raters. The leniency error can render a
system ineffective. If everyone in the organization is to be rated high, the system has not done
anything to differentiate among the employees.
3.8 Strictness
This occurs when ratings are restricted to the low portion of the rating scale. Some raters
consider everything as bad and they are strict or harsh raters.
*Central tendency errors, leniency errors and strictness errors are as a whole known as
Restriction of Range Error.
3.9 Spill over Effect
The present performance is evaluated much on the basis of past performance. “The person
who was a good performer in distant past is assured to be okay at present also”.
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Proceedings of the Second International Conference on Global Business, Economics, Finance and
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confidence. The rater may get confused when the objectives of the appraisal are somewhat
vague and unclear.
3.10.1 Poor Appraisal Forms:
The appraisal forms used by the raters also affect the appraisal process on the basis of the
below mentioned factors:
The rating scale may be quite vague and unclear.
A Study on Performance Appraisal Errors of Bank Managers in Chennai City Problems
with evaluation standards arise because of perceptual differences in the meaning of the words
used to evaluate employees. Thus good, adequate, satisfactory, and excellent may mean
different things to different evaluators.
• The rating form may ignore important aspects of job performance.
• The forms may be too long and complex.
3.10.2 Ineffective Organizational Policies and Practices:
Very often the sincere appraisal report put in by a rater is not suitably rewarded. This
reduces the motivation to do the job thoroughly and sincerely.
4. Objectives of the Study
Realizing the contribution of role of Performance appraisal to achieve the goal of
employee satisfaction, which is the need of the hour for every organization and after extensive
review of the literature, this research work has been preceded with the following objectives:
• To study the pervasiveness of performance appraisal in sample organizations.
• To analyze the views of management respondents regarding the effectiveness of
performance appraisal.
• To study the various rating errors in the existing appraisal system.
• To study the inter-relationship between various rating errors and their impact on employee
satisfaction.
4.1 Scope of the Study
The study has been undertaken in various Bank organizations in Chennai City, such as
Indian Bank, UCO Bank, and Union Bank of India.
4.2 Hypotheses
Based on the objectives as stated earlier, the following hypotheses have been proposed to
be tested.
• Elevation to higher level positions and salary restructuring are rarely based on performance
appraisal.
• Rating errors have significant impact on performance appraisal and hence on employee
satisfaction.
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Proceedings of the Second International Conference on Global Business, Economics, Finance and
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Table 2 represents the descriptive statistics of the variables. The various items (frequency
of appraisal, importance of appraisal mechanism, factors affecting appraisal system, halo
effect, horn effect, first impression, strictness, contrast effect, spill over effect, poor appraisal
forms, employee satisfaction and post appraisal effects) taken in the study are depicted in
Table-2 with their mean and standard deviation.
Table 2: Descriptive Statistics
Sl. No. Name of the Items Mean Standard Deviation
1 Frequency of appraisal 3.53 1.08
2 Importance of appraisal mechanism 5.65 2
3 Factors affecting appraisal system 3.54 1.62
4 Halo effect 3.17 1.96
5 Horn Effect 3.36 1.38
6 First impression 3.57 1.05
7 Strictness 3.55 1.6
8 Contrast effect 5 1.3
9 Spill over effect 3.25 1.27
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As shown in the table Employee Satisfaction is having the highest mean of 7.25. Halo
effect is having the lowest mean of 3.17.
Table 3: Inter-Relationship between Factors
Sl Factors 1 2 3 4 5 6 7 8 9 10 11 12
No.
1 Frequency 1
of
appraisal
2 Importance 0.44 1
of
appraisal
mechanism
3 Factors 0.65 0.64 1
affecting
appraisal
system
4 Halo effect -0.33 -0.21 0.34 1
5 Horn effect -0.33 -0.31 0.23 -0.84 1
6 First -0.4 -0.64 0.55 0.66 0.84 1
impression
7 Strictness 0.54 -0.43 0.67 0.54 0.75 0.35 1
8 Contrast 0.41 -0.45 0.43 0.82 -0.21 0.44 0.54 1
error
9 Disrespect -0.72 -0.15 0.24 0.84 -0.33 0.53 0.65 -0.21 1
to seniors
10 Poor -0.21 -0.23 0.84 -0.25 -0.66 -0.13 -0.42 -0.13 - 1
appraisal 0.21
forms
11 Employee 0.63 0.74 0.24 -0.36 -0.25 -0.45 -0.34 -0.2 -0.6 - 1
satisfaction 0.21
12 Post 0.47 0.44 0.10 -0.10 -0.20 0.20 0.21 -0.21 - -1.0 0.32 1
appraisal 0.41
outcomes
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2. Performance appraisal forms may be made more clear and precise, so that these can be
easily understandable by the appraisee.
3. One of the primary purposes of formal performance appraisals is to provide clear,
performance-based feedback to employees. (Carroll and Schneier, 2002; Ilgen et al.,
2009; Larson, 2004).Sample organizations may make it mandatory to have more effective
performance appraisal mechanism.
4. Very often the sincere appraisal report put in by a rater is not suitably rewarded. This
reduces the motivation to do the job thoroughly and sincerely. Hence sample
organizations may think of motivating the raters for the good job done.
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