Master of Business Administration-MBA Semester IV

Subject Code – MU0007

Subject Name – Performance Management and Appraisal
Assignment Set- 1 (30 Marks)

Q1. Define Performance Management? Explain the principles of developing a performance

management plan.

Ans. Performance Management is an ongoing, continuous process of communicating and

clarifying job responsibilities, priorities and performance expectations in order to ensure mutual
understanding between supervisor and employee. It is a philosophy which values and encourages
employee development through style of management which provides frequent feedback and
fosters teamwork. It emphasizes teamwork and focuses on adding value to the organization by
promoting improved job performance and encouraging skill development. Performance
management involves clarifying the job duties, defining performance standards and
documenting, evaluating and discussing performance with each employee.

The objectives of performance management are :

1. Increased two way communications between supervisors and employees.

2. Clarify mission, goals, responsibilities, priorities and expectations.
3. Recognize quality performance.
4. Provide a basis for administrative decisions such as promotions, succession and strategic
planning and pay for performance.

Principles of developing a performance management plan.

Development of performance management plan should be consistent with the following

principles:

1. Performance Management is considered a process, not an event. It follows good

management practice in which continual coaching, feedback and communication are
integral to success.
2. The performance management plan is primarily a communication tool to ensure mutual
understanding of work responsibilities, priorities and performance expectations.
3. Elements for discussion and evaluation should be job specific- not generalized
personality traits. The major duties and responsibilities of specific job should be defined
and communicated.
 4. Employee involvement is encouraged in identifying major duties and defining
performance standards.
5. Professional development should be an important component of the plan.
6. The formal evaluation period should be long enough to allow for full performance and to
establish a history such that evaluations are fir and meaningful. One year is common
evaluation period.
7. Documentation of performance will occur as often as needed to record the continuum of
dialogue between supervisor and employee.
8. If formal ratings are included, they should reflect the incumbent’s actual performance in
relation to the performance standard for that major duty.
9. The supervisor should be evaluated on the successful administration of the plan and
ongoing performance management responsibilities.
10. Training for supervisors and employees is encouraged.
11. The performance management plan should be consistent with federal and state laws
which address non-discrimination.

Q2. Letts, Ryan and Grossman suggested four key capacities for organizational
effectiveness.-Elucidate.

Ans. Letts, Ryan and Grossman suggested four key capacities for organizational effectiveness.
These capacities were suggested for non-profit organizations. However they also apply to
organizations in general and thus their descriptions are modified in the following paragraphs to
apply to organizations in general.

1. Adaptive Capacity
It is the ability of an organization to maintain focus on external environment of the
organization, particularly on performing while continually adjusting and aligning itself to
respond to those needs and influences. Adaptive capacity is cultivated through attention
to assessments, collaborating and networking, assessments and planning.
2. Leadership capacity
It is the ability to set direction for the organization and its resources and also guide
activities to follow that direction. Leadership capacity is cultivated through attention to
vision, establishing goals, directing, motivating, making decisions and solving problems.
3. Management Capacity
It is the ability to ensure effective and efficient use of the resources in the organization.
Management capacity is accomplished through careful development and coordination of
resources including people, money and facilities.
4. Technical Capacity
 It is the ability to design and operate products and services to customers. The nature of
that technical capacity depends on the particular type of products and services provided
by the organization.

5. Generative Capacity
It is the ability of the of the organization to positively change its external environment.
This capacity is exercised by engaging in activities to inform, educate and persuade
policy makers, community leaders and other stakeholders.

Q.3 Explain the process of performance management

Ans. Performance Management is a systematic process by which the agency involves its
employees, as individuals and members of a group in improving organizations
effectiveness in the accomplishment of an agency mission and goals.
Performance Management process involves 5 steps
1. Planning
In an effective organization work is planned out in advance. Planning refers to setting
performance expectations and goals for groups and individuals to channelize their efforts
towards achieving organizational objectives. Getting employees involved in planning
process will help them understand the goals of the organization, what needs to be done,
why it needs to be done, and how well it should be done.
The regularity requirements for planning employee’s performance include establishing
the elements and standards of their performance appraisal plans. Performance elements
and standards should be measurable, understandable, verifiable, equitable, and
achievable. Through critical elements, employees are held accountable as individuals for
work assignments and responsibilities. Employee performance plans should be flexible so
that they can be adjusted for changing program objectives and job requirements. When
used effectively these plans can be beneficial working documents that are discussed often
and not merely paperwork that is filed in a drawer and seen only when ratings of record
are required.
2. Monitoring
In an effective organization assignments and projects are monitored continually.
Monitoring well means consistently measuring performance and providing ongoing
feedback to employees and work groups for their progress toward reaching their
goals.
Regulatory requirements for monitoring performance includes conducting progress
reviews with employees where their performance is compared against their elements
and standards. Ongoing monitoring provides the opportunity to check how well
employees are meeting predetermined standards and to make changes to unrealistic
and problematic standards. By monitoring continually unexpected performance can
be identified at any time during the appraisal period and assistance provided to
 address such performance rather than wait until the end of the period when summary
rating levels are assigned.

3. Developing
In an effective organization, employee developmental needs are evaluated and
addressed. Developing in this instance means increasing the capacity to perform
through training, giving assignments that introduce new skills or higher levels of
responsibility, improving work processes or other methods. Providing employees
with training and developmental opportunities encourages good performance,
strengthens job related skills and competencies, and helps employees keep up with
changes in the workplace, such as the introduction of new technologies.
Carrying out process of performance management provides an excellent opportunity
to identify developmental needs. During planning and monitoring of work,
deficiencies in performance become evident and can be addressed. Areas of
improving good performance also stand out, and action can be taken to help
successful employees improve even further.
4. Rating
From time to time organizations find it useful to summarize employee performance.
This can be helpful for looking at and comparing performance overtime or among
various employees. Organizations need to know who their best performers are.
Within the context of the formal performance appraisal requirements, rating means
evaluating employee or group performance against the elements and standards in an
employee’s performance plan and assigning a summary rating of the record. The
rating of record is assigned according to procedures included in the organizations
appraisal program. It is based on work performed during entire appraisal period. The
rating of record has a bearing on other personal actions, such as granting within grade
pay increases and determining additional retention service credit in a reduction in
force.
5. Rewarding
In an effective organization, rewards are used well. It means recognizing employees,
individually and as members of groups, for their performance and acknowledging
their contributions to the agencies mission. A basic principle of effective management
is that all behavior is controlled by its consequences. Those consequences should be
both formal and informal and both positive and negative.
Good performance is recognized without waiting for nominations for formal awards
to be solicited. Recognition is an ongoing, natural part of day to day experience. A lot
of actions that reward good performance don’t require a specific regulatory authority.

Master of Business Administration-MBA Semester IV

 Subject Code – MU0007
Subject Name – Performance Management and Appraisal

Assignment Set- 2

Q.1 Explain the role of ethics in performance appraisal.

Ans. Ethics has a very important role to play in performance management. To

abandon the performance appraisal process is a breach of business ethics. The ethical
ramifications of performance review have caused managers and employees at all the
levels to become frustrated, cynical and withdrawn. Many managers talk about ethics
but do not act upon ethical issues in day to day managerial responsibilities. Most
ethical questions arise from peoples relationship with the organization. Managers
must realize that ethics is the process of deciding and acting. Employees have a big
stake in the way managers evaluate and operate. Managers and non supervisory
employees alike cite concern about politics and lack of fair treatment, honesty and
truthfulness in connection with the performance review.

Sometimes major miscommunications occur in performance review sessions due to

basic differences in ethical orientation. Unless the employee and the reviewer are
successful in negotiating an ethical balance each may review other as taking unfair
shots.

The overall objective of high ethics performance review should be to provide an

honest assessment of performance and to mutually develop a plan to improve
individual’s effectiveness. That requires telling people where they stand and being
straight with them.

Some managers feel that being legal in performance review is enough. If they comply
with rules and regulations and are careful about their documentations they feel they
are secure enough and have a defensible position. However being legal does not
always equate to being ethical. A perfunctory review is an ethical strike out- without
taking a swing. If the person being reviewed feels ignored, his feelings of personal
worth will suffer. In the worst scenario low ethics managers use the performance
review process as a form of forced humility for individuals reporting to them.
Performance appraisal must be recognized and treated as an ethical issue of high pay
off and peril.
When a performance review helps the individual recognize that his or her objectives
are closely assigned with the organizations, the individual is more likely to perform at
a higher level and the organization is less likely to lose a valuable employee. The
objective of the performance review is to develop the person, not to threaten self
 esteem. Treatment of people is the most fundamental ethical issue. Performance
review as a matter of ethics.

Q.2 Mr. Sunil is a manager in a manufacturing company. He thinks that his

subordinates are inherently lazy, avoid work and they needs supervision to perform
tasks and therefore he shows authority over his subordinates’. According to
McGregor theory, what assumptions Mr. Sunil is having of his subordinates. And also
elucidate McGregor both the theories.
Ans. According to McGregor’s theory Mr. Sunil follows theory X, an authoritarian
style of leadership. The assumptions that Mr. Sunil has on his subordinates are :
1. The average person dislikes work and will avoid it.
2. Therefore most people must be forced with the threat of punishment to work
towards organizational objectives.
3. The average person prefers to be directed; to avoid responsibility is relatively not
ambitious and wants security above all else.
4. Employees shirk responsibilities and seek formal direction whenever needed.

McGregor’s X-Y theory

Douglas McGregor proposed two different sets of assumptions as to what motivates people –
theory X and theory Y.

In theory X McGregor proposes that management assumes employees are inherently lazy and
will avoid work if they can. Due of this workers need to be closely supervised and
comprehensive systems of control developed. A hierarchical system is needed with arrow span of
control at each level. According to this theory employees will show little ambition without an
enticing incentive program and will avoid responsibility whenever they can. Usually managers
feel the sole purpose of employees interest in job is money. They will blame the person first in
most situations, without questioning whether it may be the system, policy or lack of training that
deserves the blame.

In theory Y McGregor proposes that management assumes employees may be ambitious, self
motivated, anxious to accept greater responsibility and exercise self control, self direction,
autonomy and empowerment. It is believed that employees enjoy their mental and physical work
duties. It is also believed that if given the chance employees have the desire to be creative and
forward thinking in the workplace. There is a chance of greater productivity by giving employees
the freedom to perform at the best of their abilities without being bogged down by rules.

Assumptions under theory Y (participative management style)

1. Effort in work is as natural as work and play.

2. People will apply self control and self direction in pursuit of organizational objectives,
without external control or the threat of punishment.
 3. Commitment to objectives is a function of rewards associated with their achievement.
4. People usually accept and often seek responsibility.
5. The capacity to use a higher degree of imagination, ingenuity and creativity in solving
organizational problems is widely not narrowly distributed in the population.
6. In industry the intellectual potential of the average person is only partly utilized.

Q.3 Write notes on:

 Management by Objectives
 Behavioral Anchored Rating Scales
 Graphic Rating scale
 Behavioral checklist

Ans. 1. Management by Objectives

It evaluates how well an employee has accomplished objectives determined to be critical in the
job performance. The method aligns objectives with quantitative performance measures such as
sales, profits, zero defect units produced.

2. Behavioral Anchored Rating Scales( BARS)

This combines elements from critical incident and graphic rating scale approaches. The
supervisor rates employees according to items on the numerical scale.

3. Graphic Rating scale

This method lists a set of performance factors such as job knowledge, work quality, cooperation
that the supervisor uses to rate employee performance using an incremental scale.

4. Behavioral checklist

The rater is given a checklist of descriptions of the behavior of the employee on the
job. The checklist contains a list of statements on the basis of which the rater describes the on the
job performance of the employees.