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The potential appraisal refers to the appraisal i.e. 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 Appraisal is another powerful tool of employee development. Whether managersrealize it or not, they are accustomed to making potential assessments. Every time a manager

recommends or fails to recommend an employee for a promotion, a potential assessment has, in fact,

been made. The process of assessing the managerial potential of employees deals with the question of

whether or not they have the ability to handle positions in the future which involve considerably more

responsibility than what they have right now. As long as individuals are viewed as being able to handle

increased or different responsibilities, they would be considered to have potential (either latent or

visible).

Potential appraisal may thus be defined as a process of determining an employees strengths

and weaknesses with a view to use this as a predictor of his future performance. This would help

determine the promotabilty of an individual to a higher position and helpchalk out his career plan. The

fundamental difference between reviewing performance and assessing potential is in the criteria used.

In reviewing performance, the criterion used is what goals the employee achieved and what skills he

or she currently possesses that could be indicators of his or her ability to assume different or more

advanced responsibilities.

Potential appraisal can serve the following purposes:

To advise employees about their overall career development and future prospects

Help the organization to chalk out succession plans

Motivate the employees to further develop their skills and competencies.

To identify the training needs.

Techniques of potential appraisal:

Self appraisalsPeer appraisalSuperior appraisalsMBOPsychological and psychometric testsManagement games like role playingLeadership exercises etc.

Potential appraisal helps to identify what can happen in future so that it can be guided and directedtowards the achievement of individual and organizational growth and goals. Therefore, potentialshould be included as a part of thePerformance appraisalin organizations.

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POTENTIAL APPRAISAL

In consonance with the philosophy of human resource development that has replaced theerstwhile personnel management in many organizations, more emphasis has been laid on the

appraisal of the employees potential in addition to their performance. Performance is a thing of

the past, while potential includes the possible knowledge, skills, and attitudes the employee maypossess for better performance.

The purposes of a potential review are:

to inform employees of their future prospects;

to enable the organization to draft a management succession programme;

to update training and recruitment activities;

to advise employees about the work to be done to enhance their career opportunities.

The following are some of the requirements and steps to be followed when introducing a

potential appraisal system:

Role Description: A good potential appraisal system would be based on clarity of roles and

functions associated with the different roles in an organization. This requires extensive job

descriptions to be made available for each job. These job descriptions should spell out thevarious functions involved in performing the job.

Qualities Required: Besides job descriptions, it is necessary to have a detailed list of qualitiesrequired to perform each of these functions. These qualities may be broadly divided into four

categories - (1) technical knowledge and skills, (2) managerial capabilities and qualities, (3)

behavioural capabilities, and (4) conceptual capabilities.

Indicators of Qualities: A good potential appraisal system besides listing down the functions

and qualities would also have various mechanisms for judging these qualities in a given

individual. Some of the mechanisms for judging these qualities are - (a) rating by others, (b)psychological tests, (c) simulation games and exercises, (d) performance appraisal records.

Organizing the System: Once the functions, the qualities required to perform these functions,indicators of these qualities, and mechanisms for generating these indicators are clear, the

organization is in a sound position to establish and operate the potential appraisal system. Such

establishment requires clarity in organizational policies and systematization of its efforts.

Feedback: If the organization believes in the development of human resources it should attempt

to generate a climate of openness. Such a climate is required for helping the employees to

understand their strengths and weaknesses and to create opportunities for development. A good

potential appraisal system should provide an opportunity for every employee to know the resultsof assessment. He should be helped to understand the qualities actually required for performing

the role for which he thinks he has the potential, the mechanisms used by the organization to

appraise his potential, and the results of such an appraisal.

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A good potential appraisal system provides opportunities continuously for the employee

to know his strengths and weaknesses. These are done through periodic counseling and guidance

sessions by either the personnel department or the managers concerned. This should enable theemployee to develop realistic self-perceptions and plan his own career and development.

DIFFERENCES BETWEEN PERFORMANCE APPRAISAL & POTENTIALAPPRAISAL:Performance appraisal is the procedure done after the performance of the current year or

by monthly basis also

Potential appraisal is done with the skills which are present in the individual eg:-Leadership qualities, Communication Skills etc

Performance appraisal is the procedure done after the performance of the current year or

by monthly basis also

Potential appraisal is done with the skills which are present in the individual eg:-Leadership qualities, Communication Skills etc

Potential Appraisal is the other end of Performance Appraisal, and should not be

confused with it. In performance appraisal, we compare how one has performed as compared towhat was expected from the role/post.

In Potential Appraisal, the objective is to identify where the employee has strengths/skills

that can be utilized/exploited by the company. Very often people perform in roles that are givento them, but they may not be best suited for that role.

Performance appraisal uses the skills and potential of the employee, even through usinginherent qualities and training/coaching the person to get the best out of that particular strength.

No point in a person doing something at a mediocre level, when the same person's potential

could be maximized elsewhere.

For example.. a software engineer may be used only for technical issues, but if the person

has an ability to speak well, he could be used in sales or customer service, and at the same time

he could leverage his technical knowledge. This would ensure faster growth for the employee,and better utilization of company's human resources. Most 'techies' lose out because they are not

considered HR enabled, and may lose out on those profiles. Potential Appraisal identifies even

unused/undeveloped potential in a win-win manner.