In order to make a performance appraisal system effective and successful, an organization comes across various challenges and problems. The main challenges involved in the performance appraisal process are:
Determining the evaluation criteria Identification of the appraisal criteria is one of the biggest problems faced by the top management. The performance data to be considered for evaluation should be carefully selected. For the purpose of evaluation, the criteria selected should be in quantifiable or measurable terms
Create a rating instrument The purpose of the performance appraisal process is to judge the performance of the employees rather than the employee. The focus
of the system should be on the development of the employees of the organization.
Lack of competence Top management should choose the raters or the evaluators carefully. They should have the required expertise and the knowledge to decide the criteria accurately. They should have the experience and the necessary training to carry out the appraisal process objectively.
Errors in rating and evaluation Many errors based on the personal bias like stereotyping, halo effect (i.e. one trait influencing the evaluator’s rating for all other traits) etc. may creep in the appraisal process. Therefore the rater should exercise objectivity and fairness in evaluating and rating the performance of the employees
Resistance The appraisal process may face resistance from the employees and the trade unions for the fear of negative ratings. Therefore, the employees should be communicated and clearly explained the purpose as well the process of appraisal. The standards should be clearly communicated and every employee should be made aware that what exactly is expected from him/her.