Performance Management and Appraisal Systems: HR Tools for Global Competitiveness : By T V Rao, Response Books, New Delhi, 2004, pp. 330, Price: Rs. 680 // Management Review, IIM-B, Volume 17, Number 4, Article by Paramananda Chabungbam

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The book under review argues that the conventional approach to performance appraisal, which lurks in the background of performance management, shows a deplorable lack of practical acceptability and development orientation. Declaring war on the model appraisal form, the author avers that ‘reducing the human being to a mere statistic and using these statistics to take decisions that affect his prospects is not in consonance with the HRD philosophy’ (p. 202). There is a dire need to acknowledge and develop the potential of employees, through an understanding of the advantages of the Performance Management System (PMS) over the Performance Appraisal System (PAS). This book is about structuring and implementing PMS, and assigning PA its due place.

The author starts with a narration of dialogues he had with Larsen & Toubro’s managers on their PAS. These exchanges, the identification of mistakes, and 30 years of collective experience and empirical researches have enriched this book. PM is explicated in simple terms through the analogy of a schoolboy preparing for an exam. Output, Input, Focus, Time, Quality and Cost are identified as the dimensions of performance. Performance planning, a systematic outlining of the activities of individuals, ensures a sense of direction and economy in the company. The Key Performance Area (KPA) approach, which provides scope for quantification, is best suited for performance planning. Dynamic organisations are continuously in the process of change. This impacts particularly on managerial roles, which, the author feels, it is neither possible nor desirable to rigidly define. However, KPA helps people develop by making them understand their role and capability requirements, and each KPA can be monitored through the concept of Key Result Areas, which are similar to performance targets. Performance Analysis is about understanding the factors that cause performance through the performance equation: ‘Performance = Ability X Motivation X Organizational support or – Chance factor’ (p. 52). PMS attempts to ensure that employees deliver maximum output by using interventions that value the equation.

Performance ratings should define performance improvements and people development. However, PA ratings are essentially subjective since one cannot truly measure behaviour, nature of work etc. Bias enters the picture when the ratings assigned by appraiser to appraisee are determined not by the performance shown on the dimension under assessment but more by factors like the halo effect, leniency effect, averaging, first impression error, reflection of the way their bosses appraise them, inability to account for the individual and external factors and, above all, the ‘schemata’ they hold. Thus ratings become ‘the poison generated in the process of extracting nectar’ (p. 64). The author critically examines some performance rating methods and stresses the need for sophistication in the appraisal process. He differentiates performance ratings for development decisions from performance ratings for administrative decisions. Quality rating can be brought when one checks the tendency of inexperienced superordinates to attribute failure of their subordinates to internal (individual) factors rather than to external (environmental or task related) factors. Raters training programmes, rater participation in scale construction, and statistical control of rating errors reduce rater biases. Contrary to the Decotis and Petit model that prescribes confidentiality, Rao believes that for effective appraisal, openness between appraiser and the appraisee is required. This point could have done with a little more exploration.

Performance review discussion (PRD) is a proposed phrase to replace performance counselling in which a joint effort from appraiser and appraisee is vital. PRD has three processes (communication, influencing and helping) and three phases (rapport building, exploration and action planning). The effectiveness of PMS depends on how well the data generated by the system is utilised, and to what extent it is seen to be utilised. PMS data can be used to identify training needs and also in making administrative decisions. Relating performance and reward during PRD is not desirable as rewarding a high performer may demoralise a marginally inferior performer, while equal treatment between performer and non-performer may demotivate the performer.

While the author has treated in detail the past trends of PA practice in India as well in other countries, the PASs adopted by giant Indian banks, the managerial preferences and attitudes of Indian executives to appraisal, and the neglect of PA by Asian managers in comparison with their western counterparts, contemporary practice in India and elsewhere is inadequately explored. He cites the Japanese integrated appraisal system to show that open appraisal systems succeed when they cease to exist as formats and systems and come alive as norms, culture values and processes (p. 153). The author proposes linking of customer satisfaction measures and PA to serve as a driving force in organisation improvement and change.

Performance planning and development need to be monitored for years until the PMS becomes a matter of habit and a part of work life. Although it is a human tendency to differentiate individuals rather than integrating the efforts of individuals, focus on teams will yield better synergy and outcomes. Dyadic performance and team performance are always closer to organisational performance. However, PMS will not work if the spiritual, dynamic, abstract and unpredictable aspects are ignored. Understanding oneself and one’s motives and responsibilities, along with the desire to value self-discipline and organisational culture form the spiritual dimension of PMS. While surveys of Fortune companies indicate a high degree of dissatisfaction with PASs, real case examples of PMSs in BPCL, Titan, Infosys, Dr. Reddy’s, NSE, NOCIL and TISCO demonstrate the effectiveness of PMS vis-à-vis the challenges of the new economy.

The 360 Degree Appraisal is a multirater assessment and feedback system designed to measure critical behaviour for performance. Its objectivity, participative nature and suitability to new organisational cultures has won it many adherents. The author advocates this system with noteworthy examples of its effective use and discusses the practical constraints of potential appraisal, wherein employees may use feedback and reflect on their simulation experience to identify their strengths and weaknesses.

Written in an easy to read style, the book is peppered with valuable ideas, quotes, critical discussions, cases and examples. It would be useful to a large cross section of managers as it provides appraisers, appraisees and implementers information on performance management and appraisal systems. People who want to move away from a culture of appraisals and numbers to a culture of development, quality and synergistic processes must read this book. The author̢۪s incorporation of a spiritual approach and assessment centre on the platform of PM is highly commendable as it represents a new addition to the literature.

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Thanks & Regards,

Param