By Arshi Naim
The Phrase Performance appraisal is composed of two words i.e. performance and appraisal. The word performance is used for the efforts extended to achieve the targets efficiently and effectively. The achievement of target involves the integrated use of human, financial and natural resources. Erich L. Kohler referred to performance as "A general term applied to a part of to all of the conduct of activities of an organisation over a period of time; often with reference to past or projected costs efficiency, management responsibility or accountability, or the like".
Appraisal refers to a critical review with a view to improve performance. It evaluates the actual performance in the light to targets fixed, measures deviation in between actual and targets, locates alternatives and suggests corrective action. As such the term performance appraisal may be defined as a critical assessment or evaluation of various activities in different areas of operations of an organisation. It is known that in the interest of good health, medical authorities generally advise every individual to have a periodical check-up and examination of his body system. Similarly, in the interest of good operating results every concern should have a periodical appraisal of its performance in different spheres. As a matter of fact, performance appraisal is both diagnostic as well as preventive in nature. In case of an already bad or deteriorating situation it locates the areas and indicates where to make an improvement, whereas in case of good condition, it shows the way to further improve the performance. We often use the words efficient and effective when referring to performance.
The dictionary meaning of performance refers to "achievmements"2. According to stoner the word performance communicates "how successful an organisation is in achieving its objectives"3. The subject of performance is much of debate. Ducker has argued that "performance can be measured in terms of two concepts : efficiency and effectiveness"4. As he puts it, efficiency means doing things right and effectiveness means doing the right things.5
Efficiency refers to the ability to get things done correctly with high proficiency. It is an input-output concept. A manager is termed efficient when "He achieves results or output that measure up to the inputs (labour, materials and time) used to achieve them Mangers who are able to minimise the cost of the resources, they use to attain their goals efficiently"6.
"Efficiency commonly refers to a ratio of output to input"7. For example, managers are said to be efficient if they produce more and better output with less labour, fewer materials and in a shorter period of time. These "efficiency implies something more, better, faster and cheaper"8. It means caring for more emergency room patients in hospital at a lower cost. It means doubling the number of students taught by a professor. Efficiency connotes the idea of doing well and without waste whatever is being done - whether it is worth doing or not. We are all familiar with people who are extremely efficient in doing something that should not be done in the first place. Someone once said, "there is no point in doing well, something that should not be done at all"8.
Effectiveness has a different connotation from efficiency. "Effectiveness is concerned with the effect of work on people, with the appropriateness of goals, with long-term results and with humanistic and idealistic values"10. According to stoner "Effectiveness is the ability to choose appropriate objectives. An effective manager who selects an inappropriate objective is an ineffective manager. No amount of efficiency can compensate for lack of efficiveness"11. Effectiveness is measured in terms the objectives, goals and targets. There is always a more effective way of performing work from the view point of recognizing the desire of people to use their intelligence and imagination and to develop their skill and talent fully and fruitfully. Jobs can always be improved so that they may meet human needs in a better way. Organization can be designed to be more congruent with human personality and with the goals, norms and values of the society. The Advanced Learner's Dictionary of Current Englishdefines effectiveness as the ability to bring about the result intended or making a striking impression. Therefore effectiveness refers to achieving the desired results well in time, so a person will be treated effective if he is performing the work in the desired fashion.
"The assessment of business performance is more complex and difficult, since it must deal with the effectiveness with which capital is employed, the efficiency and profitability of operations, and the value and safety of various claims against the business."
Appraisal of the performance of a company can be done through a careful and critical analysis of financial statements. The two important financial statements are the Balance Sheet and the profit and Loss Account. "Although any formal statement expressed in money values might be thought of as financial statement, the term has come to be limited by most accounting and business writers to mean the balance sheet and the profit and loss statement".