Problems of performance appraisal:

Judgement errors: people commit mistakes while evaluating people and their performance biases and judgement errors of various kinds may spoil the show. Bias here refers to distortion of a measurement. These are of various types:

1. First impression (primacy effect): the appraiser's first impression of a candidate may colour his evaluation of all subsequent behaviour. In the case of negative primacy effect, the employee may seem to do nothing right, in the case of a positive primacy effect, the employee can do no wrong.

2. Halo: the halo error occurs when one aspect of the subordinate's performance affects the ratter's evaluation of other performance dimensions. If a worker has few absences, his supervisor might give the worker a high rating in all other areas of the work. Similarly, an employee might be rated high on performance because he has a good dress sense and comes to office punctually.

3. Horn effect: the ratter's bias is in the other direction, where one negative quality of the employee is being rated harshly. For example, the rate rarely smiles, so he cannot get along with people.

4. Leniency: depending on the ratter's own mental make- up at the time of appraisal, ratters may be rated by very strictly or very leniently. Appraisers generally find evaluating others difficult, especially where negative ratings have to be given. A professor might hesitate to fail a candidate when all other students have cleared the examination. The leniency error can render an appraisal system ineffective. If everyone is to be rated high, the system has not done anything to differentiate among employees.

5. Central tendency: an alternative to the leniency effect is the central tendency, which occurs when the appraisers rate all employees as average performers. For example, a professor, with a view to play it safe, might give a class grades nearly equal to B, regardless of the differences in individuals performance.