PERFORMANCE APPRAISAL, EMPLOYEE MOTIVATION & COMPENSATION

PERFORMANCE APPRAISAL

1. Introduction to Performance Appraisal

Performance Appraisal is a systematic and periodic process of evaluating an employee’s job performance and productivity in relation to pre-determined standards.

In simple words, performance appraisal means judging how well an employee is doing his or her job.

In the hotel industry, performance appraisal is very important because service quality depends directly on employee behavior, attitude, and efficiency.

Example (Hotel Industry):

• A Front Office Executive is evaluated on:

  • Guest handling

  • Communication skills

  • Check-in / check-out efficiency

  • Complaint handling

2. Meaning of Performance Appraisal

Performance appraisal is the process of:

• Measuring employee performance

• Identifying strengths and weaknesses

• Providing feedback

• Planning training and development

Definition:

Performance appraisal is a formal assessment of an employee’s work performance and contribution to organizational goals.

3. Purpose of Performance Appraisal

The main purposes of performance appraisal are:

1. Performance Evaluation

To measure how effectively an employee performs assigned duties.

2. Employee Development

To identify training and development needs.

3. Promotion and Salary Decisions

To decide promotion, increments, incentives, and rewards.

4. Motivation

To motivate employees by recognizing good performance.

5. Career Planning

To help employees plan their career growth.

4. Process of Performance Appraisal

The performance appraisal process involves the following steps:

Step 1: Setting Performance Standards

Standards are set based on job responsibilities.

Example:

• Time taken for guest check-in

• Room cleaning standards

Step 2: Communicating Standards

Employees are informed about expectations and performance criteria.

Step 3: Measuring Actual Performance

Actual performance is measured through observation, reports, and records.

Step 4: Comparing Performance with Standards

Actual performance is compared with expected performance.

Step 5: Discussing Results

Feedback is given to employees about strengths and areas of improvement.

Step 6: Taking Corrective Action

Training, counseling, promotion, or corrective measures are taken.

5. Methods of Performance Appraisal

(A) Traditional Methods

1. Confidential Report

Used mainly in government organizations.
Supervisor writes a confidential report about employee performance.

2. Essay Method

Manager writes a descriptive report about employee performance.

3. Rating Scale Method

Employees are rated on factors like punctuality, teamwork, communication, etc.

4. Ranking Method

Employees are ranked from best to worst.

5. Checklist Method

A checklist of statements is used, and the evaluator marks Yes/No.

(B) Modern Methods

1. Management by Objectives (MBO)

Employees and managers jointly set goals and performance is measured accordingly.

2. Behaviorally Anchored Rating Scale (BARS)

Combines rating scales with specific behavioral examples.

3. Assessment Centres

Employees are evaluated through simulations, role plays, and group discussions.

4. 360-Degree Feedback System

Performance is evaluated by:

• Superiors

• Peers

• Subordinates

• Customers

• Self-evaluation

6. 360-Degree Feedback System

Meaning:

360-degree feedback is a modern appraisal method where feedback is collected from all directions around the employee.

Sources of Feedback:

• Supervisor

• Co-workers

• Subordinates

• Customers

• Self-assessment

Advantages:

• Fair and unbiased

• Holistic evaluation

• Improves self-awareness

Disadvantages:

• Time-consuming

• Possibility of bias

• Needs training to implement

Example (Hotel):

Guest feedback, supervisor review, and peer feedback are combined to evaluate a front office executive.

PART – 2 : EMPLOYEE MOTIVATION

1. Concept of Motivation

Motivation is the internal force that drives a person to act in a certain way.

In simple words:

Motivation is the reason why people work willingly and enthusiastically.

2. Importance of Motivation

• Improves job performance

• Increases job satisfaction

• Reduces employee turnover

• Enhances productivity

• Builds positive work culture

3. Theories of Motivation

(A) Maslow’s Need Hierarchy Theory

Maslow suggested that human needs are arranged in a hierarchy:

1. Physiological Needs – food, water, salary

2. Safety Needs – job security, safety

3. Social Needs – friendship, belongingness

4. Esteem Needs – respect, recognition

5. Self-Actualization – self-growth and creativity

👉 A higher-level need becomes important only after lower-level needs are satisfied.

(B) Herzberg’s Two-Factor Theory

Herzberg classified factors into:

1. Hygiene Factors

Salary, working conditions, company policy, supervision
(These prevent dissatisfaction but do not motivate)

2. Motivators

Achievement, recognition, responsibility, growth
(These create job satisfaction)

(C) Adam’s Equity Theory

This theory states that employees compare their effort and reward with others.

If they feel treated unfairly → dissatisfaction occurs.

Formula:
Effort / Reward = Others’ Effort / Others’ Reward

(D) B.F. Skinner’s Reinforcement Theory

This theory states that behavior is influenced by its consequences.

Types of reinforcement:

• Positive reinforcement (reward)

• Negative reinforcement (removal of unpleasant condition)

• Punishment

• Extinction

PART – 3 : COMPENSATION

1. Meaning of Compensation

Compensation refers to all forms of financial and non-financial rewards given to employees for their work.

2. Objectives of Compensation

• Attract talented employees

• Retain skilled staff

• Motivate employees

• Ensure job satisfaction

• Maintain internal and external equity

3. Compensation Policies

Compensation policies are guidelines that determine:

• Wage structure

• Salary increments

• Incentives and bonuses

• Allowances

Good compensation policy ensures:

• Fairness

• Consistency

• Legal compliance

4. Types of Compensation

(A) Direct Compensation

• Basic salary

• Wages

• Bonus

• Incentives

(B) Indirect Compensation

• Provident fund

• Gratuity

• Insurance

• Paid leave

• Medical benefits

5. Employee Compensation Practices in India

In India, compensation practices depend on:

• Government laws

• Industry standards

• Skill level

• Experience

Common Practices:

• Minimum wages (as per law)

• Performance-linked incentives

• Annual increments

• Dearness allowance (DA)

• Employee State Insurance (ESI)

• Provident Fund (PF)

Hotel Industry Example:

• Service charge distribution

• Tips

• Night shift allowance

• Incentive for upselling