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Performance appraisals: Is it a fair way of evaluation?

Performance appraisal is one of the most effective evaluation criteria which most of the companies follow to evaluate their employees performance in a given period of time. Most of the times, Appraisal evaluation result is directly linked to compensation and benefits. So, it is very critical both from employer and employee perspective.

Appraisal process starts with goal setting for a stipulated period followed by goal execution, evaluation, discussion with appraise and formal closure process.

Broadly, there are three types of appraisals.

1.Objectives and Goals Method:

In this method, objectives and goals measured in quantitative terms are preset in the beginning of the appraisal cycle which are agreed by the appraise. Measurement is done against actual at the end of the period. The rating to be awarded is determined by below formula.

Rating = Actual performance/Objectives & Goals

This is the most transparent process used by many organizations.


1. Goal-setting takes place with the active participation of the appraise.

2. Since the objectives and goals are pre-determined and in quantitative terms, there is no ambiguity exist in the process.


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

2. Benchmark Method:

Actual performance of all peers is measured  and aggregated, average standard is arrived at. This average standard is taken as benchmark to judge the performance of an individual concerned. The rating in this method is decided as follows.

Rating = Actual performance of a person / Average Standard


1. Individual’s performance compared to the performance of peers indicates the extent of his/her contribution to the overall growth of the organization.

2. There is least scope for subjectivity and bias.


1. The individual differences are overlooked.

2. Tough to implement in large organizations as the head count is large, comparison becomes unfair in most of the cases.

3. This method wont take care of difficulty levels of work environments like simple, medium, complex etc.

3. Rater’s Expectations Method:

When evaluating the performance of an individual, one’s capacity is taken into consideration. The objective is to find out if a person has performed to his fullest ability. Whether a person has utilized all his knowledge and skills determines the rating to be awarded.

Rating = Actual Performance/Rater’s Expectations


1. A person’s performance is measured with respect to one’s capacity instead of any comparative yardstick.


1. Even if a person performs well, rater may increase the expectations after the actual performance. This results in awarding a lower rating to an individual than what he/she deserves.

2. In the absence of compensation/salary differential, this method of evaluation proves to be most ineffective way, especially for outstanding performers.

3. High chances of favoritism and discrimination by the appraiser.

I personally feel, none of the above methods give comfort level to both employees and organization at the same time. There is always a scope for good performers not getting deserved benefit and non-performers do get the benefit which they don’t deserve.

Most of the times, organizations do follow multiple methods of evaluation in order to derive the benefits of different methods.

Now a days, companies do have techniques like skip level meetings where you can skip your immediate manager and discuss the concerns with next level person. Arbitration is other process where employees can raise the concerns regarding the performance evaluation to an arbitration body to address the issues.

This body further investigate the case and settle the issue.

Remember that nothing in this world is perfect and we strive our self to come close to perfect 😎


V V.

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  • Hi Vinod,

    Good day!

    You are not VV. You are Victorious Vinod! 🙂 I believe like that.

    Different idea, excellent innovations. Nice blog.

    Very well! Explained about different methods.

    Keep up the good work! All the best!


    Hari Suseelan

  • Hi Vinod

    Another nice blog from you

    Many times if you earn good rating, you don’t get the hike you deserve and even people who got lesser rating may get more hike than you



  • Now if your going for new organisation we should ask which method is used in rating an employee. 😕 😕

    Good Blog keep it up 🙂 🙂

    thanks VV 🙂



  • Thanks Vivek, Shiva 🙂

    It is important to know about the organization structure and policies before joining (At least for laterals). I would prefer to get the feedback from existing employees rather than HR which might be little biased in many cases.


    V V

  • Very well written blog !

    I totally  agree with your views 🙂

    “companies do have techniques like skip level meetings where you can skip your immediate manager and discuss the concerns with next level person. Arbitration is other process where employees can raise the concerns regarding the performance evaluation to an arbitration body to address the issues.This body further investigate the case and settle the issue.”

    This approach is actually close to perfect i can say  😎   however improvement is still needed for all such evaluation criteria  ,it depends on organisation to follow which structure and how to deal with that !


    Praveen Srivastava

    • You are Right Krishna.

      It is a big pain for managers as well where they are forced to give lower rating to good employees due to limitations on number of higher rating slots. It is tough to communicate to your team member saying “You have done excellent job but your rating is low, Sorry!!!”. This will demotivate high performance employees. May be a true Win-Win process should be invented.

      I would be glad to know if some one already know such process and share here 🙂


      V V

      • Project wise , technology wise and peer group wise or what ever selection criteria you keep all the employees expect transperancy.

        If the employer cannot give let him say in a open forum. I always wonder why appraisal discussions take in a closed manner.

        Let the guy know what the other guy has done and what he has to do to achieve good ratings else most of the people think that it is a “Political decision”.


        Krishna Tangudu

        • You are right Krishna. I am still exploring why transparency is missing in most of the organizations 🙁

          May be some Hidden HR tactics???


          V V

  • There sholudn’t be given any chance where in after rating process the moral of employees goes down… 🙁 Instead the process can be made healthy compititive by displaying small motivational methods, like just commenting good and points to improve.. This will keep moral high and also the performance will rise rapidly.

    • Hello Sunita,

      I agree to your point. But, this happens in many cases specially when employee count is more than around 50000 in an organization. Practically it is not possible to justify every peer group. Some groups may have all good employees where few good employee may end up getting bad rating. Some group may have average employees, where an average employee in group 2 may get better rating than good employee in group1. So, peer group evaluation process is never an actual indicator of one’s performance. It is just to say where you stand in a selected group.

      Unfortunately, companies do link these ratings for compensation review 😥

      Personally I feel, rating should be solely based on own performance. Manager should set goals. If employee leads the goals, that person should be awarded accordingly. But this way might not help organizations to create competition between the best 😆

      So, we have to live with this system 😕


      V V