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POTENTIAL APPRAISAL
The potential appraisal refers to the appraisal involving identification of the hidden talents and skills of a person. The person might or might not be aware of them. Potential appraisal is a future-oriented appraisal whose main objective is to identify and evaluate the potential of the employees to assume higher positions and responsibilities in the organizational hierarchy. Many organizations consider and use potential appraisal as a part of the performance appraisal processes. Potential appraising is different from appraising performance. Potential refers to abilities of an employee which are currently not brought to use by an organization. Potential means the talent capacity to undertake higher challenges on job in future. Learn about:-
- Introduction to Potential Appraisal 2. Meaning of Potential Appraisal 3. Objectives 4. Features
- Purpose 6. Mechanisms 7. Process
- Parameters 9. Methods 10. Quality Determination. 11. Techniques 12. System 13. How to Discern the Potential Appraisal 14. Uses. Potential Appraisal: Meaning, Features, Purpose, Mechanisms, Process, Parameters, Methods, Techniques and Other Details Potential Appraisal – Introduction (According to Modern Era) A fundamental premise behind potential appraisal is that every individual has certain hidden qualities in varying proportion. When these qualities are not properly tapped and utilized, these remain dormant. For example, K. Ramchandran, Director, Human Resource and Operational Policy, Philips India Limited, where potential appraisal is undertaken in a very systematic way, has observed as follows- “People are like icebergs. What you see above the surface (performance) is only a small part. A large part of the attributes needed to perform excellently in a future job, which I call potential, is not immediately visible. It is hidden below surface.” Potential appraisal is concerned with unfolding these hidden attributes. These attributes may be in the form of analytical power, creative imagination, sense of reality, ability to see future, ability to work in varied environment, risk propensity, initiative, being proactive, passion for high achievement, problem-solving and decision-making skills, and so on.
All these attributes constitute potential of an individual and through potential appraisal, all these are identified. From this point of view, potential appraisal differs from performance appraisal; the former is related to future role of an individual while latter is concerned with his present role. In the modern era of human resource management, appraisal system lays greater emphasis on the development of employees rather than on their evaluation. This is better fulfilled by the potential appraisal which involves assessing the capability of an employee which he possesses but that is not being utilized fully. It may be mentioned that an employee who is doing his present job effectively may not be equally effective in a higher-order job specially when transferability of skills relevant to his present job is limited because of the nature of different jobs. Potential appraisal is used in a number of human resource management functions such as human resource planning, career planning, succession planning, promotion/termination decisions, and employee training and development. Because of different uses of potential appraisal, it has become one of the important tools for managing human resources throughout the world including India. Many companies in India undertake potential appraisal either independently of performance appraisal or integrating both the systems into one. However, potential appraisal system works better when it is taken independently. In this context, potential means a prospective employee who is capable to undertake different challenging assignments. Potential of employees need to be discovered for organizational effectiveness. Organizations must aim to utilize the full potential of the workforce, institute an environment to unleash the latent creativity, create conditions promoting innovation and team working, and so forth. Potential is actually a useful succession term if you filter it through the leadership pipeline model. Three categories of potential are turn potential, growth potential, and mastery potential- i. Turn potential is the ability to do the work at the next level in an organizational hierarchy in the next three to five years, or sooner. ii. Growth potential refers to the ability to do work which is complex, more challenging, needs innovative skills, pioneering expertise, etc., at the same level in the near future. iii. Mastery potential is the ability to do the same type of work that is currently being done, in a better. ● Assessing the Potential of the Employee:
An employee with high potential is a good candidate for assuming more responsibilities in future. In western countries, many organizations use potential appraisal as a part of performance appraisal process. However, in India, not many managers are aware of this term though informally every organization makes potential assessments. Higher officials often determine whether a particular employee has the potential to take added responsibilities in future. Potential appraisals help in deciding a career plan for the employees. It also helps to evaluate candidates for promotions and developing a suitable employee base for succession planning. This method is based on the aptitude of the employee, his willingness to take additional responsibility and his motivation for accomplishing tasks. Potential appraising is different from appraising performance. Potential refers to abilities of an employee which are currently not brought to use by an organization. Potential means the talent capacity to undertake higher challenges on job in future. The latent capacity of an individual may mean an individual’s ability to foresee opportunities and their impact on current decisions, ability to identify resource gaps, ability to perform in very tough or diverse settings, displaying a high degree of personal and intellectual integrity at all times. The main objective of potential appraisal is to know the employees potentials and to use those later by putting on them higher responsibilities. It is a normal practice to promote employees based on their past performance. Past performance gives us a feedback regarding the ability of the person to do a given job at a given level successfully or not and it could be a future indicator of potential if the jobs are similar. However, capabilities required to perform one role may not be the same as those required to perform a higher role having different functions. Therefore, past performance is not necessarily a good indicator of the suitability of the individual for a higher role. Example: A good salesman need not be a good manager in the sales function since the job of a sales manager requires managerial qualities apart from selling skills. Potential appraisal aims at identifying and assessing the capabilities of an individual to perform higher level of functions or responsibilities. It forms the basis for decisions associated with the promotions and succession planning. In potential appraisal, attributes like velocity (speed and direction in which the employee is progressing), people and customer (listening skills, interpersonal relationship) orientation, focus on results, initiative etc. are assessed.
They have become significant in the changing world today because: (a) They help the management to have a blue print of their succession plan. With the data available to them, the management can easily identify who all to be given leadership positions in future. (b) Organizations today take the responsibility about advising their employees with potential to improve themselves for career advancement in the organization. It is very essential for organizations to do so because if the employee with potential leaves the organization, it may be difficult to fill up the gap. (c) The organizations have to train employees within specific areas from time to time so that they gain “core competence” in the specific areas. Potential Appraisal – 8 Basic Objectives Generally, people earn promotions on the basis of their past performance. The past performance is considered a good indicator of future job success. This should be true if the roles to be played by the promotes are similar. However, in actual practice, the roles that a job holder has played in the past may not be the same if he assumes a different job after his transfer or promotion to a new position. Past performance, therefore, may not be a good indicator of the suitability of an indicator for a higher role. To overcome this inadequacy, organizations must initiate the process of potential appraisal. The main purpose of potential appraisal is to identify the potential of a given employee to occupy higher positions in the organizational hierarchy and undertake higher responsibilities. The basic objectives of potential appraisal are to:
- Identify the abilities of an employee in order to evaluate whether that employee is suitable for future assignments or otherwise, and
- Occupy higher positions in the organizational hierarchy and undertake higher responsibilities because past performance may not be a good indicator for future and higher role.
- Inform employees about their future roles;
- Make suitable corrections in training efforts from time to time;
- Inform employees about they must do something for their career prospects;
A consensus should be reached as to the employees’ goals for the next evaluation period and the assistance and the resources to be provided by the management. This aspect of employee appraisal should be the most positive element in the entire process of employees’ development and help the employee focus on behaviour that will produce positive results for all concern. The objective, thus, of the potential appraisal system is to help the top management make decisions regarding the suitable persons for a particular job by generating data about the employees and their potential for performing different, and often, higher level roles. It also helps in giving some pointers on how the organization can develop the managerial talent by identifying developmental inputs required by promising employees. Performance review serves a positive purpose in this direction. The potential appraisal is concerned with forecasting the direction in which subordinates’ career can and should go, and the rate at which he/ she is expected to develop. The assessment of potential requires an analysis of the existing skills, qualities, and how they can be developed to the mutual advantage of the company and the employee. There is also an important counselling aspect to the review of potential which consists of discussions with the individual about his/her aspirations and how these can best be matched to the future foreseen for him/her. These discussions are a vital part of the procedure because they can provide management with information about employees’ feeling on the subject, which may have a direct impact on the plans for development, including training and job rotation. They can also provide employees with additional motivation and encouragement which they need to remain with the company. Potential Appraisal – 4 Main Mechanisms Potential appraisal presupposes the existence of clear-cut ‘job or role descriptions’ and ‘job or role specifications’, i.e., qualities needed to perform the role. The mechanisms that could be used for potential appraisal are discussed below: (i) Rating by Superior – The potential of a candidate could be rated by the immediate supervisor who is acquainted with the candidate’s work and also his technical capabilities. (ii) Psychological Tests – Managerial and behavioural dimensions can be measured through a battery of psychological tests. (iii) Games – Simulation games and exercises (assessment centre, business games, in-basked, role play, etc.) could be used to uncover the potential of the candidate.
(iv) Performance Records – Performance records and ratings of the candidate on his previous jobs could be examined carefully on various dimensions such as initiative, creativity, risk-taking ability, etc., which might play a key role in discharging his duties in a new job. Potential Appraisal – Process: Role Descriptions, Rating Mechanisms, Organizing the System and Feedback Potential appraisal proceeds in the same way as the performance appraisal with some adjustment. It is to identify the potential of a given employee to occupy higher positions in the organizational hierarchy and undertake higher responsibilities. Many organizations consider and use potential appraisal as a part of the performance appraisal processes. Many Indian organizations like Glaxo, Cadbury, Pfizer, Proctor and Gamble, and Philips use potential-cum- performance appraisal system. Potential appraisals are required to- inform employees about their future prospects, help the organization chalk out a suitable succession plan, update training efforts from time to time, motivates the employees to further develop their skills and competencies and to identify training needs. Potential appraisal follows a four step process which is explained below:
- Role Descriptions: Organizational roles and functions must be defined clearly. For this job descriptions must be prepared for each job. Qualities needed to perform the roles- Based on job descriptions the roles to be played by people must be prepared (i.e. technical, managerial jobs and behavioural dimensions).
- Rating Mechanisms: The various mechanisms to judge the qualities of the candidates are: a. Rating by others to examine technical capabilities. b. Psychological tests to know managerial and behavioural dimensions. c. Simulation games to uncover the potential of the candidate. d. Performance records and ratings on candidates’ previous jobs can be examined on dimensions like creativity, risk taking ability etc.
Combining the potential appraisal with performance appraisal may be appropriate under the following conditions: a. There is no significant difference in the current job of the individual and the future job for which his potential is being tested. b. The current job offers adequate opportunity for the individual to demonstrate the competencies needed for the future job. c. The reporting officer or the reviewing officer is experienced enough and unbiased so as to judge accurately the potential of the individual. d. It is useful to supplement the data with 360-degree feedback and assessment centers. Potential Appraisal – Behavioural Parameter (To Measure Future Potential of an Employee) The potential appraisal is a future-oriented appraisal by which the potential of an employee to occupy higher positions and to assume higher responsibilities is evaluated. The potential appraisal can help the extension staff to know their strengths and weaknesses and can motivate them to further develop their skills. Thus the potential appraisal helps in planning overall career development of employees. Some of the techniques used for the appraisal are self-appraisals, peer rating, the management by objectives (MBO) approach, psychological test and simulated work exercises, case analyses and leadership exercises. The future potentials of an employee can be measured using certain performance and behavioural parameters. Performance Parameters : (i) Targets accomplished in the current appraisal period. (ii) Particular areas where superior performance is shown. (iii) Overall performance rating. (iv) Skills, knowledge and talents which have scope for development. (v) Steps taken by the employee for improving his performance and furthering his career development. (vi) Knowledge of the employee regarding his job and related fields.
Behavioural Parameters: (i) Level of independence and autonomy. (ii) Decision-making capabilities. (iii) How the employee handles stress and work pressure. (iv) Degree of confidence. (v) Communication and interpersonal skills. (vi) Leadership and motivation. (vii) How he handles and diffuses conflicts at work place. Potential Appraisal – 4 Main Methods Potential appraisal can be made with the help of following mechanisms : (1) Rating by Superior – The potential of a candidate can be rated by his immediate superior who is in regular touch with him on the job. The superior can rate him on his technical as well as behavioral capabilities. (2) Simulation games – Simulation games and exercises could be used by managers to unearth the hidden potentials of employees. (3) Performance records in previous job – Present employer may check previous job ratings of the employee to know his initiative, creativity and risk taking ability etc. If these dimensions are indicating very high ratings, the employee has good potential for growth with the present employer also. (4) Psychological testing – These days some organizations take up some scientifically proven psychological tests to measure managerial and behavioral dimensions. Potential Appraisal – Quality Determination (According to Philips Model) Potential appraisal means assessing the potential; that is, the highest level of work a person could ultimately be expected to perform without being overstretched. Parameters for assessing potential appraisal include strength of character, ability to work under pressure, personal drive, and emotional stability. The following qualities determine the potential of an employee:
