Performance Appraisal System Impact on Employees Apollo Tyres

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1.1 Introduction

According to Mayo, 2000, Human resources management is an important function of a firm because the machines can be easily directed, repaired and utilised but employees are living beings with emotions and prejudices and cannot be easily directed, repaired and utilised. In 20th century the theoretical as well as practical aspects of the Human resources management got a scientific dimension, the consistent efforts of the management to improve the performance of the firm has resulted in the performance evaluation of human resources or employees. The employees are the building blocks of a firm and the defective block will deform the entire firm so it is the responsibility of the management to shape these building blocks according to the needs. The performance appraisal system is not new concept it has an age old history to tell but the modern appraisal system has evolved in the mid of 20th century.

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The performance appraisal system, which integrates many departments of the firm, is aimed at the enhancement of performance of the employees. The employees who are not scoring in the performance appraisal period are required to undergo training and skill development programme. The performance appraisal was believed to be a motivation factor but in practise many studies have shown that it is not always act as a motivational factor but sometimes has de-motivational effects on the appraised. The system which formulates the rules and regulations to motivate the employees to perform better in the next appraisal period can be called as a best suited system for that particular firm because there is no optimum method or procedure to be followed in a performance appraisal system in a firm. (Nishad, 2005)

The motivation and de-motivation factors may be present in the same performance appraisal system. The appraisal may be motivational to some employees meanwhile it is de-motivating for others. The combined effect is a general thing in all appraisal system but the proportion of motivation to de-motivation factors should be high otherwise the entire objective of the Performance appraisal will be failed. (Seong and Lewis, 2009)

There are many factors which affect the result of performance appraisal the main factor is the appraisal procedure and the evaluation criteria, the next important factors are social, cultural, economical and political aspects of the employees. The social and cultural aspects are known as permanent factors which cannot be nullified so it becomes the duty of the employer to plan a PA system which suits the socio-cultural aspects of the employees in addition to the due consideration for the political as well as the economics factors. (Nishad, 2005)

1.2 Background and justification of the study

1.2.1 Background of the Study

Apollo Tyres Ltd is a multinational company having many divisions all around the world. It is a private sector company with limited liability. The performance track of ATL has attracted many foreign firms to initiate joint venture with this company in UK, US and African continent. The performance of this company and the varied product categories it offers to the customers are the key for its success. (Company profile, 2010)

Apollo Tyres Ltd is emerging as a global tyre manufactures and it finds its strength in the availability of materials and labour at a lower price than its competitors. The annual revenue for 2009 financial year was 1.2 Billion USD. The main source of income is form the domestic production; recently the firm has acquired many other international firms such as the Dunlop Tyres in 2006 and VBBV of Netherlands as well as the Russia's largest tyre manufacturing company Amtel-Vredestein NV. ATL has a direct market strategy and has 2500 showroom all over the world; majority of it are in India. There are 4000 dealerships India and more than 100 dealers internationally. (Company profile, 2010 and Stanley, 2009)

The globalisation has brought many challenges to ATL as new multinational companies have entered the health care sector in India. ATL has coped with challenges with diversified product plan and for that it has invested billion of Indian Rupee, as a result the company has major market share in India. It is a matter of credit that around 10% of Tyre Products available all over world belong to ATL because of the export activities of the company. The company is so successful because of the work force it got. (Company profile, 2009)

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The workers are being provided by good facilities such as good working environment, good salary, flexible time schedule and holiday and festive allowances…etc. The Management has already providing them a contributory pension fund and insurance scheme for the employees. The educational scholar ships and education facility up to high school for the children of employees are provided by the company itself, apart from the residential facility. (Company profile, 2010 and Stanley, 2009)

The annual report from financial year 2006 to 2009 has proved that the productivity has been getting decreased year by year. In 2006 it was 2.6% decrease and in 2009 it has reached the alarming 18% decrease. The management has a performance appraisal system since 1971 and counselling programme as well as skill development programmes are provided for the underperformed employees. Still the productivity graph records a downward growth. And this proposed study indents to find out the effectiveness and impact of the appraisal system on the employees and the productivity. (Stanley, 2009)

1.2.2 Justification of the study

Every organisation around the world has vision and mission, whatever the philosophy behind the vision and mission there will be a common factor in the philosophy improved performance. The improved performance might bring profit to the organisation. The overall development of the organisation may be one side of the 'improved performance' of the firm. the improved performance means the enhanced performance of the its various departments such as Human resources management, financial management, production and operations management, sales management, marketing management, customer care management…etc. In all of these departments the human factor is a matter of serious consideration. The right people for the right job make all the differences. (Taylor, 2001)

All the firms have some or other method to measure and analyse the performance of it. The analysis of this performance and the actions plans to be taken to improve the performance are of great importance of every firm. To manage the performance appraisal of its employees the firms have a separate appraisal department under the human resources department. The functions of appraisal department are integrated with other department such as financial department to coordinate the appraisal rewards and punishments, if any. (Qureshi, 2005)

The performance appraisal is a complicated disciple of study because the appraisal result might not be the intended and assumed motivation of the employees. The studies have revealed that in many firms around world the appraisal process and remedial measures have resulted in the declined performance of the employees indicating the de-motivational effect of the appraisal system. (Nishad, 2005)

The appraisal methods and criteria should be defined particularly for each firm because the appraisal results and the impact of the employees are very much depended on the external internal factor of the firm. The external factors such as socio-cultural traits of the employees, the economic and political situation of the geographical location of the firm…etc. The internal factors mean the nature of the jobs, the leisure and pleasure in the job, the working conditions, organisational culture…etc. (Nishad, 2005)

The appraisal theories when applied to the Asian countries the result may be devastating because the western appraisal theories have a great limitation in the Asian countries because of the social and cultural difference of the Asian people. So it is imperative to analyse the appraisal system on the basis of local factor which influence the management and the organisational behaviour of the employees. (Taylor, 2001and Nishad, 2005)

In the proposed study, ATL- Kalamassery, in the Kerala state, India, is taken because the political and the economical situations of the state. The Kerala is world famous for the various political ideologies such as communism and socialism. The economic backwardness of the state is also factor to take this unit of ATL for the study. According to Taylor (2001) the social- cultural traits of the employees in India are very much different from the western countries. The social behaviour of Indians is sometimes unacceptable social etiquettes for westerners. The social bond and relations are different from that of the western countries. The proposed study would like to analyse the impact of the factors in the appraisal system and how far the appraisal system of ATL can manage its employees in the improvement of performance.

1.2.3 Literature Review

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Performance appraisal has a long history it emerged with the civilisation. When the people are interacting to each other in an orderly fashion then it may require some laws to govern the conduct of the people in the group. This preliminary law formation is called "grundnorm" which means the base norm, and these base norms were designed to control the conduct and also the distributed duties. The distribution of duties include various works; later on when these works required efficiency then performance of the individual and the groups were began to analyse. So it can be said that the performance appraisal was there in the primitive societies and in the course of time the application and the method of evaluation has been changed a lot. (Rajeev, 2000)

According to Mayo, (2000), in the modern world, where everything is measured in time, the performance evaluation has great importance. The performance of each member of a group is important for the purpose of performance evaluation. After the industrial revolution new management theories came in to being and many of them went in to oblivion, those survived gave emphasis on the evaluation of the performance on the basis of scientific criteria. The industrial world tries to motivate its man power so that better performance can be obtained from each of the employees.

The motivational aspect of the performance appraisal has been subject for deep rooted debates which are based on the many disciplines of study such as psychology, anthropology, sociology...etc. The complexity of the subject matter indicates the intricacies involved in the performance appraisal process and its impact on the employees. (Nishad, 2005)

The motivational theories such as Vroom's expectancy theory and hygiene theory suggest that the employees are not motivated by giving them better facilities or salary but there is a mental dimension such as appreciation, recognition, career growth... etc. The modern appraisal theory which is based on these concepts where as the classical theory of performance appraisal only support the deterrent method, that is, the employees who are performing well will be paid better and those who are not will be sacked. This approach has many loop holes such as the mental strain during the appraisal period the employees have and the lack of loyalty from the part of the employees and it was proved to be ineffective in motivating the employees. (Rajeev, 2000)

The modern approach, meanwhile, support more over a lenient approach towards the employees. The basic philosophy is to understand the basic problem in the underperformance of the employees. The root cause may not be related to the employment or it may be related of some physiological problems, whatever it may the manager or the supervisor who is in charge of the appraisal process is responsible to understand it. The counselling process is designed to understand the problems and give suggestions to solve the problems of the employees. The training and improvement programmes are also conducted in many modern industries to increase the performance level of the employees. (Rajeev, 2000)

The performance appraisal is usually begins with the formulation of the criteria on which each and every employee will be analysed. The criteria formation is very complex and will be unique according to the nature of employment as well as the philosophy of the management. The criteria then communicated to the employees and a time period will be given to them to opine about the criteria and after the evaluation of the suggestions from the various sources the management may change the criteria or stick on with it. The appraisal process will start and the each employee will be informed about the appraisal period. The appraisal result will be published publically and remedial measures will be taken thereafter. The remedial measures include the training and improvement programme and even the removal of the underperformance form the employment. (North, 2006)

The problem with the performance appraisal begins when the employees are instructed to undergo the remedial measures. According to Nishad (2005), the social and cultural factors of the employees as well as the political strength are important factors that dictate the appraisal process. Unlike the western world in Asian countries the political strength of the employee's unions is much stronger and the labour laws are much lenient to support the employees. The appraisal system in the Asian countries shall not follow the procedures of the western firms. The motivational factors and the de-motivational factors are different and contradictory in western and eastern world. The factors which motivate a westerner may a factor for de-motivation in Asian countries.

According to Taylor (2001), the social-cultural aspects of the employees have significant effect on the appraisal system in the Asian countries. The trade unionism and the political inclination of these unions are other factors which will affect the appraisal system adversely. The behavioural pattern of the employees have to be analysed before the formulating the appraisal strategy.

The political philosophy of the political parties in Kerala varies from leftist ideology to the rightist capitalism. The political parties strongly support one or the other political ideologies; communism and socialism are the major philosophies which are being followed in the state for more than a century. The trade unions of the state are affiliated to anyone of the political parties and the trade unions enjoys the protection of labour laws of the land. (Ashok, 2007)

Situation in the ATL is not different from the political situation of the state. The political parties have a great influence on the trade unions and the lives of the employees. Every employee in the ATL is affiliated to any one of the political parties. This is basically a survival strategy for the employees as well as the trade unions. (Ashok, 2007)

The collective bargaining of the trade unions and the threat of strikes hampered the growth of many industries in the state. The current situation in the firm is also same and the management have to discuss and reach in a consensus to implement any change in work schedule or in bonus or in the salary. The strength of the management is in the bargaining power and that of the trade unions is in the unity and threat to strike. (Uppal, 2009)

The performance appraisal system of any industry is under the scrutiny of the trade unions, the performance criteria should be passed by the trade union so that it can be smoothly run. The remedial measures are also supervised by the trade unions and any action which will be a potential threat will be strongly resisted by the unions. (Uppal, 2009)

1.2.4 Aim

The present study aims to analyse the Performance Appraisal System of the Apollo Tyres Ltd and the motivating as well as the de-motivating effects of the appraisal system on the basis of the socio-cultural and politico-economical situations and to suggest the strategies and procedures to improve the performance of the employees.

1.2.5 Hypothesis

(A) Null hypothesis H0

"Impact of a performance appraisal system on the employees is depended on the social, cultural, political and economic environment of the firm and the employees"

(B) Alternative Hyposthesis

H1: "Impact of a performance appraisal system on the employees is NOT depended on the social and Cultural environment of the firm and the employees"

H2: "Impact of a performance appraisal system on the employees is NOT depended on the political and economic environment of the firm and the employees"

The null hypothesis is "statistical hypothesis that is tested for possible rejection under the assumption that it is true (usually those observations are the result of chance). The concept was introduced by R. A. Fisher" (Gonick and Smith, 2006)

In this proposed study, the null hypothesis considers the independent variables such as social, cultural, political and economic factors of the environment in which the firm operates. The null hypothesis is assumed to be trued based on the various secondary data. The alternative hypothesis is divided in to two part one with the factors such social and cultural factors and the second one is political and economic factors.

According to Malhotra (2008), the social and cultural factors cannot be separated as it is has strong influence on each other. The social factor is formed based on the cultural factor and the cultural is nurtured and propagated through social circumstances. According to Cumbler (2003), The political philosophy is always related with the economy of the country, the political affiliation is more over has direct influence on the economy of the people. It is noteworthy that the communism and other labourer favoured philosophies are flourishing the third world countries because of the poor economic conditions. Once these countries become developed nations the leftist philosophies will cease to exist in course of time.

1.2.6 Primary Objectives of the Study

1. To analyse the performance appraisal system in general and particularly in the Apollo Tyres Ltd (ATL)

2. To understand analyse the significance of the performance appraisal system in achieving the goals and objectives of a firm

3. To study and analyse the transition of performance appraisal from conventional to modern and the major factors influenced the transition

4. To understand the motivating and de-motivating effect of the appraisal system on the employees in general and particularly in the ATL

5. To analyse effect of social and cultural factors and political and economical factors of the employees on the appraisal system in general and particularly in the ATL.

1.2.7 Research Questions

To fulfil the primary objective of the study the following research questions are proposed

Performance Appraisal its meaning and definitions

What are the significance of performance evaluation system in accomplishing the organisational objective and goals?

What are the differences in the modern as well as in the conventional appraisal system?

What is the relation between the motivation of the employee and appraisal system?

How do the socio-cultural and politico-economical factors of the employee affect the Appraisal System in a firm?

Does the performance appraisal system in the Apollo Tyres Ltd have a motivational effect on the employees?

What are the strategies that the ATL follows in the appraisal process to enhance the performance of the employees in the particular socio-cultural and politico-economical background?

2. Research method and Approach

2.1 Introduction

The research method and approach is devised to study and understand Performance Appraisal System in the Apollo Tyres Ltd (ATL). The study involves the opinion of the employees and the management on the present appraisal system in ATL. The interview method will be used to understand the management side of story on the Performance Appraisal system in the ATL. The questionnaire method is used to understand the employee side story. The literature reviews are depended to make a frame work on the theoretical concept of the study. Various statistical methods will be used to analyse the data and it will be explained on the basis of relevant literature. The span of the research will be six months. In the month of March, 2010 the study will be commenced and the final report will be submitted in September, 2010.

2.2 Research Methodology of the study

The research methodology of the study is designed to understand the Performance Appraisal System in the ATL and the impact of present system on the employees.

According to Kothari, (2002) the research method suitable for a study where the relevant literatures as well as the primary data are used the two research methods are generally used such as the exploratory methods and the constructive methods. The constructive methods are used when the subject matter of the research needs some frame of reference to handle the entire research results. For example, in international marketing research, sometimes, the cultural traits of customers have to be taken the basis or frame of reference of the study because this trait will affect all the research questions under study.

2.2.1 Exploratory research methods

Exploratory research methods are wildly used in the secondary data accumulation. In this present study the literature review will be used to understand and to formulate the theoretical frame work of the entire study. The history of the appraisal system, the relevance of the appraisal system, the motivational as well as the de-motivational aspects of the PA system, the social and cultural factors as well as the political and economic factors will be extensively studied through relevant literature. The relevant sources will be explored to understand the subject matter of the study deeply thus exploratory research methods. (Kothari, 2002)

2.2.2 Constructive Research Methods

Constructive research methods are used when the research result cannot be generalised due the influence of dominant factors in the study. (Kothari, 2002)

In the present study the performance appraisal system is analysed based on the social and cultural aspect of the employees. The political and economical aspects are also considered for the study because all these factors have a dominant effect on the study. In other words, without taking these factors under consideration the research will be completed. The geographical location of the unit under study is in the Kerala state, India, which is an economically backward place and the political philosophies, such communism and socialism have formidable impact on the people living there. The social and cultural factors are different from the western world and the social bonds and family cohesions are very important aspects this culture. The social interaction and etiquettes are different from that of the western world so the theories applicable in the western world no longer stand good in these situations. So it is mandatory for this study to form a frame work on these factors to analyse the subject matter of the research.

2.2.3 Questionnaire and interview method

Interview and questionnaire methods are generally used to collect the data first hand (Kothari, 2002). In this study these methods are preferred to get the information on the appraisal system of ATL and the impact of such system on the employees. The questionnaires will be used to get the opinions of the employees on the performance appraisal system as well as the appraisal rewards and the methods of the PA system.

According to Saunders et al., 2003 the open end interviews are useful to gather data in a larger perspective. The open end interview questions and the answers to it will give the interviewer the opportunity to ask other relevant questions to the interviewee based on the previous answer and can get more details from the interviewer.

The interview questions are open end in nature and the questions will be asked to the officials of ATL. According to the answers of these officials other related questions will be asked to get more comprehensive view on the subject. This method is used to interview the officials only because there are very few in number.

The questionnaire will be distributed to the employees and the responses will be collected back within one month of distribution. This method is adopted because in this unit there are 2100 employees and interviewing all them will not be possible due to time constrain.

2.3 Method of Study

The proposed study requires both primary data as well as the secondary data to meet the objectives of the study. The method of study thus designed to collect the primary as well as the secondary data. The primary data will be collected from the management staffs and from the employees. The secondary data will be collected by referring books, Articles, the e-journals and paper journals, web sites…etc.

2.4 Primary data collections methods

Primary data will be collected from the employees and the managers of the ATL directly. The employees will be distributed the self-structured close end questionnaire to be answered and 2 weeks time will be given to them to fill it and return. Managerial staff will be interview with open end interview questions. According to Saunders et al., 2003, the open end questions are very apt for interviewing a small sample in a study it also very effective because the open end questions will provide enough opportunity to ask more questions based on the answer for the previous questions and clarify the doubts on the statements if any.

2.5 Secondary Data collection methods

The secondary data collection is highly recommended information gathering process in any research work. The researcher should be diligent enough to select apt resources and updated information. In management subjects the data collection should be done through updated resources and latest editions books, articles and journals because new concept and theories and its applications are emerging day by day and it is the responsibility of the researcher to find out the up dated information for his research work. (Kumar, 2005)

The secondary data collection method includes access to the relevant and updated books, journals and articles. The website will be extensively used if the authenticities of the sites are known. The university library and online facility will be extensively used for this research. The data regarding the company profile will be gathered though company website and referring the ISO manual of ATL and the annual report which is available in the web site of ATL.

2.6 Method of Data analysis

In the proposed study the primary data as well as the secondary data will be used to reach a conclusion and the recommendations. The primary data will be analysed with various statistical tools such as chi square test, ANOVA …etc and the variance analysis will be done to understand the impact of the statement with the literature review. Both the primary and secondary data will be simultaneously used to interpret the results of the research.

2.7 Scope, Ethics and Limitation of the Study

Scope

The proposed study is on the performance appraisal system and the impact of it on the employees. The scope of the research includes the analysis of the various factors such as the social-cultural aspects and the political-economic factors of the environment in which the Apollo Tyres Limited is operating. The social and cultural aspect of the employees will be analysed and the suitable strategy for the appraisal system will be studied. The political and economic situation of the employees will be analysed and the performance appraisal approach of the management will be studied based on these factors. The scope of the research will be on the formulation appraisal strategy which will be suitable under the various research variables. The motivational and the de-motivational impact of the appraisal system will be analysed based on the four above mentioned aspects of the employees.

Ethics

According to Kothari (2002), a research study will provide accurate results and will provide a valid conclusion if it has followed a research ethics. In this proposed study the permission to do the research is obtained from the management of Apollo Tyres Limited, Kalamassery Unit, Kerala state, India. The survey among the employees of the ATL will be conducted confidentially. The questionnaire will not contain any whereabouts of the employees only the service, age, gender and positions. It will not ask for any personal details such as the address, name or any name of unique post. The research will seek the written permission from the management for the interview of the Management staffs so the evidence of opinion can be adduced in the Dissertation. Relevant literature will be collected and analysed to gather the knowledge base on the subject matter so that the research should have a through theoretical support.

Limitations

Short span of time is problem in the research as the time period is limited to three months. The data collection and the analysis of the primary data will be done with maximum speed and there is a chance the responses of the employees is not 100% true to the fact. The literature available on the performance appraisal is numerous and reading the relevant one requires great time. The limited time may limit the number of literature that can be analysed by the researcher.

The data will be gathered through research aid wing of Indian Management Association (IMA). The representative of IMA will be hired for the purpose of the data collection; the knowledge limit of the person on the research objective may prove to be a problem in translating the questionnaire to the employees.

The cooperation from the part of the employees and other management staff is essential for the success of the research. The research will suffer if there is limited cooperation from the staffs of the Apollo Tyres Limited.

2..8 Conclusion and Recommendations

Conclusion

The trade unionism and the political inclination of these unions are other factors which will affect the appraisal system adversely. The behavioural pattern of the employees have to be analysed before the formulating the appraisal strategy. The political philosophy of the political parties in Kerala varies from leftist ideology to the rightist capitalism. The political parties strongly support one or the other political ideologies; communism and socialism are the major philosophies which are being followed in the state for more than a century. The trade unions of the state are affiliated to anyone of the political parties and the trade unions enjoys the protection of labour laws of the land. Situation in the ATL is not different from the political situation of the state. The political parties have a great influence on the trade unions and the lives of the employees. Every employee in the ATL is affiliated to any one of the political parties. This is basically a survival strategy for the employees as well as the trade unions. The collective bargaining of the trade unions and the threat of strikes hampered the growth of many industries in the state. The current situation in the firm is also same and the management have to discuss and reach in a consensus to implement any change in work schedule or in bonus or in the salary. The strength of the management is in the bargaining power and that of the trade unions is in the unity and threat to strike. The performance appraisal system of any industry is under the scrutiny of the trade unions, the performance criteria should be passed by the trade union so that it can be smoothly run. The remedial measures are also supervised by the trade unions and any action which will be a potential threat will be strongly resisted by the unions

Recommendations

The recommendation of this proposed study is based on the literature review. Apollo Tyres Limited is operating in a politically active environment, the economic situation of the employees also average and the influence of the political parties on the trade unions is strong thus it is recommended that the firm should formulate an appraisal strategy with the consent of the trade unions so that it can be implemented with resistance from the employees. The social and cultural aspects of the employees is against the counselling process and remedial measures such as demotion or salary cut or removal from the service so it will be good for ATL to focus on such remedial measures which ensures better performance such a training and development programme. The counselling process has not use in the present situation so it can be avoided. The appraisal criteria can be modified and the time schedule can be reorganised to ensure a higher productivity. The monetary rewards can be maintained for the employees for their higher performance.

2.9 Gantt Chart

Tasks

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