Potential Appraisal

The potential appraisal is made up of two words viz. potential and appraisal. Potential means the abilities of an employee which are required for meeting the challenges of future assignments while appraisal means the evaluation of that abilities in present status of an employee.

Thus, potential appraisal is the process of evaluation of the abilities of an employees that uses by employee in the future assignments. It is different from performance appraisal and needs to be carried out at regular intervals.

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.

The Potential for Improving Performance, or PIP, measures the performance of the average worker versus the best person performing a particular task. Large differences suggest that performance can be improved by bringing average performance up closer to the best performance. Small differences suggest little potential for improvement.

Potential appraisal refers to the identification of hidden skills, talents and abilities in a person which even he may be unaware of. It is a future oriented concept and is a powerful tool for employee advancement. The latent skills of a person are tracked and his true potential is evaluated.

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.

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.

Example of Potential appraisal

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.

Objectives of potential appraisal:

• 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;
• Help organization for suitable succession plan;
• Improve quality and quantity of performance of an employee; and
• Give proper feedback to the employees for their potential.

Features of Potential appraisal

Potential appraisal forms an important part of HRM in finding out the hidden talents of employees.

The following are the features of potential appraisal:

• Helps assess the employees’ capacities, which pave way for them to give their best performance
• Helps assess an organization’s ability to develop future managers
• Helps assess the employees’ analytical power, which indicates the ability to analyze problems and examine them critically
• Helps build creative imagination, which is the ability of presenting an existing thing in an unconventional and new manner
• Helps analyze the sense of reality, which refers to an employee’s way of interpreting a situation
• Helps develop leadership skills, which refer to the abilities to direct, control, and harmonize with people.

Four Main Mechanisms of Potential appraisal

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:

1. 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.

2. Psychological Tests

Managerial and behavioural dimensions can be measured through a battery of psychological tests.

3. Games

Simulation games and exercises (assessment centre, business games, in-basked, role play, etc.) could be used to uncover the potential of the candidate.

4. 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.