Study of Performance Appraisal system in ZVSL

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The meaning of Performance Appraisal is explained thru this project work, and various methods used to rate the performance of employees, and the benefits provided by the system. Efforts have been made to understand the problems associated with performance appraisal and varous measures to be adopted to overcome these issues.

Efforts have been made to find correlation between employee satisfaction and performance rating to find if any such relation exists between the good performers and satisfied employees.


One of the most crucial activity in the HR area in any organization is Performance Appraisal. Organizations looking for growth and maximization of profits have to eveluate the performance of their employees to maxmise the output.

Report starts with the background and explains its importance in the Performance Management System and also it's changed scenario.

The essential components of a performance appraisal system consist of understanding the basics and the essential steps that are requierd to lay the foundation of the system. Objectives and Benefits of the system are also necessary to be understood. For proper clarity and realization of the benefits, it is necessary to Identify Key Result Areas (KRAs) i.e. Target Setting and monitoring so that a meaningful relationship between performance, reward and development of skills, can be established. Lot of brainstorming is required to devise a sound appraisal system by examining available techniques and processes. It may be kept in mind that performance Appraisal is a human process and quite challengeing to implement successfully.

Over a period of time, the Performance appraisal system has undergone through a sea change. Initially the process was non-transparent and the employee was kept in dark about his performance. No systematic exercise was done and the process was arbitrary.

The current processes of performance appraisal involve self-appraisal by the employee too. Thus the system has under gone through the paredigm shift of non-transparency to transparency. Now the appraisee is taken into confidence in the transparent system of appraisals and the process is quite interactive. Reviewing process is designed in such a way that the employee becomes aware of what is expected from him; receive timely feedback and recognition for the achievements. Some of these relatively transparent methods are Appraisal Discussion-Dialogue Method of Appraisal, Competency Based Appraisal System, Potential Appraisal, Performance and Development Planning. New frontiers to performance appraisal include modern techniques like Management by Objectives, 360° Feedback, Balanced Scorecard and E-Appraisal.

Finally, the report is rounded up by presenting a case study on my present organization m/s Zoom Vallabh Steel Limited as Chapter 9 and concluded in Chapter 10.

In conclusion, this project report will help to understand benefits and drawbacks of appraisal systems. Most importantly, the report will also try to find a corelation between the performance and employee satisfaction.


The study of the topic "Performance Appraisal" has been done through various sources.

The primary source includes the personal experience and the appraisal data of company employees and the satisfaction survey conducted, which has been added in this project as the `Sample of Current Practice-Case Study' in Chapter 9.

The secondary sources include:

information gathered through surfing the internet;

information available on intranet site on Knowledge Management;

different study materials;

deliberations with practicing consultants and experts in the field;

Chapter 1



The concept of Performance Appraisal dates back to prehistoric days and first time the reference is mentioned in the work by Kautilya in his noob Arthashastra. In this book, he has discribed about how to judge the performance and lotyalty of the subjects by the king. During the earlier days of ninteenth century performance approasal system was intorduced and was then called "Merit Rating Program".

After the selection of an employee, he is required to be trained and put on his duties, then it is time for reviewing the performance. the question asked is what is performance appraisal?

According to Carl Heyel, author/editor on management, philosopher and teacher, "it is the process of evaluating the performance and qualifications of the employees in terms of job requirements, for administrative purposes such as placement, selection and promotion, to provide financial rewards and other actions which require differential treatment among the members of a group as distinguished from actions affecting all members equally".

Systematic Flow of process from job analysis to performance appraisal is shown in the chart below:

Job Analysis

Performance Standards

Performance Appraisal

Describes Work and Personnel Requirement of a Particular Job

Translate Job Requirements into Labels of Acceptable or UN Acceptable Performance

Describe the job-relevant strengths and weakness of each individual

Fig. Relationship of Performance Appraisal and Job Analysis

integral part of performance management system:

An Effective performance management requires a good deal of face-to-face manager-employee interaction. Performance appraisal system is viewed by long-term successful business owners as a process of knowing the people who work for them. It is considered to be the most significant and indispensable tool for an organization, as it provides information helping in taking important decisions for the development of an individual and the organization.

Thus, performance appraisal is a vital phase of the annual performance management cycle, the process of reviewing employee performance vis-à-vis the set goals in a realistic manner, documenting the process of review, and providing the feedback verbally in a face-to-face meeting, in order to raise performance standards. The management expects to reinforce the employee's strengths, and identify improvement areas thru this process so that one can work on them and also set stretched goals for the coming year.

Performance appraisal process is composed of the following two processes both of which are qualitative and are subject to human bias -

observation and


The performance parameters are a combination of technical expertise and behavioral attributes. The latter assumes a high degree of importance with regard to appraisal.


Earlier, the appraisal process used to be the employee being appraised by his departmental head. The head used to give feedback and comments only to the immediate superior of the employee. The feedback was kept confidential. As time passed by, immediate superior started appraising his subordinate's performance and sending his confidential report to his department head. During this period employee was not included in his appraisal process. The decisions used to be taken by his superiors relating to his pay hike, promotion etc without his involvement. It may be concluded that the system was not transparent.

Current process of performance appraisal is quite open and gives some scope for self-appraisal by the employee. Self-appraisal provides a chance to introspect and is followed by a joint discussion with superior and then a decision is taken by the department head on his career growth. Feedback regarding his performance is given to the employee directly during interraction. Thus performance appraisal process has gone through the phase of non-transparency to transparency.

Thus a performance appraisal can be defined as a structured formal interaction between a subordinate and supervisor, that usually takes the form of a periodic interview (annual or bi-annual), in which the work performance of the subordinate is examined and discussed, with a view to identifying weaknesses and strengths as well as opportunities for career growth.

irrespective of an organization accepting the usefulness of Performance Appraisal, opting for a formal appraisal system or not, the top management constantly appraises the performance of its subordinate managers in day-to-day interaction, and the process is repeated down the corporate ladder. it is done because Performance Appraisal, formal or informal, lies at the heart of art of managing.

Recently, it is felt that "rating" by itself had very limited utility, the appreciation has come to the fact that managing had evolved into an art. it is seen that "management by hunch" can no longer be tolerated, and that measurement, no matter how vague, are essential for the future development of the art of managing.

This requirement for measuring the performance gave birth to several systems which attempted to apply measurements of various types to the different aspects of the employee's job. Number of these systems depended on the better Performance Appraisal methods for their measuring devices for a starting point for measurement. Slowly, these systems expanded or broadened the meaning of Performance Appraisal from a mere rating to include the whole concept of management with all its elements.

Chapter 2


Performance Appraisal examines how well an employee has been doing his job and what he must do to do better in his jobs. It deals with the content of the job and what is expected of him to achieve in each aspect of his work. Discussed further are the foundations in Performance Appraisal process:

Job Description:

Job description is the written down statement on the definition of tasks the jobholder has to accomplish. It contains details of reporting relationship and normally covers the overall purpose of the job. It indicates the contribution expected from an individual's job to the achievement of objectives of a team or a department and, ultimately of the organization.


An objective describes the goal or end-result, which has to be accomplished. Objectives define what an organization, or its functions, departments, teams and individuals are expected to achieve.

There are two types of objectives:

Operational Objectives:

These are the results to be achieved or the contribution to be made to the accomplishment of team, departmental and corporate objectives.

Developmental objectives:

Are concerned with what individual should do and learn to improve his/ her performance and/or knowledge, skills and competencies (training and personal development plans).


These refer to the behavioural dimensions of a role. It is the behaviour required of people to carry out their work up to the expectations. Competencies are what people bring to a job in the form of different types and levels of behaviour. Process aspects of job performance are governed by compatencies.


Values are the attributes which govern the behaviour of the employee. Increasingly, organizations are setting out the core values which are expected to govern the behaviour of all their employees. Value statements are prepared defining core values in areas such as customer care, concern for people, competitiveness, excellence, innovation, growth etc.

Chapter 3


The process of knowing the people, who work for the organization, involves three essential steps viz. training, evaluation and review.


Successful training is the implementation of a system in which everyone in the workplace is geared towards improvement. It involves a hands on approach in which the employee is encouraged to evaluate himself or herself under the guidance of the appraiser.

First, the appraiser includes the employee in the appraisal process. When an employee knows that his or her opinion of other workers is taken into account, he or she also realizes that everyone else's opinion matters just as much. This not only empowers the employee and improves relations in the workplace, but it encourages higher productivity as well. This interactive approach is made complete with the leadership of the appraiser. Carefully administering praise coupled with constructive criticism keeps the workforce on its toes.


Methods for evaluation are based on results and behavior. While conducting performance appraisal based on employee's characteristic traits is quite common, the results are often subjective and unsatisfactory. Result -based approach to performance appraisal is by far the most objective method of tackling the complex task of evaluation. It uses a rating system to measure productivity within a given timescale. If an employee attains a specified target in a fixed period, he or she can be rated as well as ranked against other employees. The study of behavior is closely tied to productivity. The pace of work, willingness to put in overtime and ability to work with others all contribute to overall productivity.


Review process employs the techniques of interactivity. Before sitting down, the employee should review himself or herself. This saves a lot of time and possible contention during the discussion. Initially the appraiser should walk the employee through the process. The successful supervisor should start with an overview of why the review session is needed. Then the supervisor should take the employee down a point-by-point list of every aspect of the job, the employee should be given a chance to describe his or her achievements and shortcomings. The supervisor should always supplement this with added insight. While praising and applying criticism, the supervisor must maintain authority throughout the review and the entire appraisal process.

Chapter 4


The objectives and benefits of Performance Appraisal system can be summarized as under:


Data relating to Performance Appraisal of employees are recorded, stored and used for various purposes like:

Letting the employee know about his standing in so far as his performance is concerned and to assist with constructive criticism and guidance for the purpose of their development.

Assessment of skills.

Setting targets for future.

Affecting promotions based on competence and performance.

Strengthening of relationship between superior and subordinate.

Assesing the training and development needs of employees.

Identifying strengths and weaknesses of employees.

Decision regarding increments.

Improving communication by providing a system for dialogue between the superior and the subordinate, and also improving understanding of personal goals and concerns. This can also increase the trust between the superior and subordinate.

Determining the effectiveness of human resource programs such, as selection, training and transfers


The following are the benefits of a good appraisal system:

For the Organization:

Improved performance throughout the organization due to:

Effective communication of organization's objectives and values.

Increased sense of cohesiveness and loyalty.

Better equipping the Managers to use their leadership skills and to develop their staff.

Improved overview of tasks performed by each member of a group.

Identification of ideas for improvement.

Creating and maintaining a culture of continuous improvement.

Communicating to the people that they are valued and wanted by the organization.

For the appraiser:

Providing Opportunity to

Develop an overview of individual jobs.

Identify strengths and weaknesses of appraises.

Increased job satisfaction.

Link team and individual goals with departmental & organizational goals.

Clarify expectations of the management from teams and individuals.

to re-prioritize targets

Means of forming a productive relationship with staff based on mutual trust and understanding.

Due to all above cited fectors increased sense of personal value

For the appraise:

Increased motivation and job satisfaction.

Clear understanding of expectations and needs to meet expectations.

Opportunity to discuss aspirations and any guidance, support or training needed to fulfill these aspirations.

Improved working relationships with the superior.

Opportunity to overcome the weaknesses by way of counseling and guidance from the superior

Increased sense of personal value as he too is involved in the appraisal process

In line with the objectives of Performance Appraisal, to reap its benefits, this system has to be effective failing which it may nullify the very purpose of performance appraisal.

Chapter 5


Coming to performance appraisal, managers and employees agree about one thing that they hate going through the process. Fear, guilt, responsibility and resentment are the some of the reasons why most employees dread the process. Many employees feel that it is a ritual that they have to somehow follow.

An effective review process helps organizations in three areas:

evaluation of and improving the personnel selection and training systems;

preventing unfair termination; and

increasing real employee multiplicity

Quality appraisal starts with gathering information from multiple sources, and evaluate employees at all levels from top to bottom.

This means that both appraisee and appraiser jointly assess ability to complete the job and accomplish the goals set forth in the previous appraisals.

The following steps must be considered to make the process simple and effective:

The performance Appraisal form should be simple & must reflect the strategic goals of the company.

The results & impact section should highlight accomplishments related to responsibilities, and goals.

Skills and abilities section should highlight how those results were accomplished. By listing the core competencies for each job classification, this section can address the kinds of behavior that are required for success.

Appraisal results determine reward outcomes either directly or indirectly. Good performers may get pay increases, bonuses and promotions, while the poorer performers might require counseling and in extreme cases no increases in pay. Assigning and justifying rewards through performance appraisal is uncertain and controversial matter and conveys both satisfaction/ dissatisfaction with respect to an employee's performance. Whatever the case may be, organizations must generate feeling that performance appraisals are opportunities which provide for overall development of the employee to get the best out of the him and the process. Hence performance appraisals should be positive experiences and it should not be used to handle matters of discipline.

Chapter 6



Setting of Key Result Areas (KRA) is one of the most important parameters of performance evaluation process. These are also known as Targets or Performance Indicators (PI). This is considered to be the first step in the appraisal process.

The objectives of Target Setting

To ensure that each employee is working towards clearly stated objectives which converg into the organization goals.

To provide a basis to improve performance.

Encourage communication regarding expected results and progress towards results.

Helps the individual know about his performance versus what his manager expects.

Encourages comparison on individual objectives to identify overlap or omitted objectives.

Helps in salary review, and self-development.

This has seen the emergence of objectives setting as a key issue. Managers must attempt to agree objectives with their staff rather than setting them themselves.

These objectives or targets should comply with the mnemonic SMART i.e. Specific, Measurable, Achievable, Realistic and Time-bound.

SMART criteria for performance goals

SMART Performance Goals

Criteria Checklist


States in clear terms what is to be achieved.

Does it specify

Improved level of quality, quantity, time or use of resources.

A new/innovative result, faster time line, or

An improved behavioural outcome?

Does it have a clearly stated result?


Includes measurable results of the desired outcome.

Will you know from information, data or observation when it is achieved?

Does it specify-What? How much? How well?


realistic expectation, given time and resources

Are resources, authority level, and requisite skills in place?

Does it require a stretch of effort?


There is a clear tie to goals of the department, division etc.

Will it matter when it is done?

Does the objective support relevant goals?

Does it deal with a key aspect of the job?

Time Bound

There is a time limit or deadline by which the objective must be achieved.

When are the goals to be completed?

Is there a timetable for milestones or checkpoints?

Type of Goals:

One may be required to set multiple goals combining goals at different levels as described below.

long-term goals:

Long-term goals are the level of performance sought over a period of one to two years. Usually this level is significantly better than current performance. In some cases, the long-term goals are the ultimate level of performance, e.g. "zero absenteeism" or "zero defects". The long-term goals may be dictated by management without having regard to the past performance.

short-term goal:

Short-term goals are the level of performance desired and perceived as being attainable with some effort within a period ranging from three months to one year. The expectation is that when the short-term goal is consistently being met, it will be moved closer to the long-term goal.

It must be less than or equal to the long-term goal

It cannot be better than the best performance ever achieved; and

It must be better than the current average or typical performance. Short-term goals are negotiated. Usually employees and lower level managers recommend and develop short-term goals subject to approval by management.

The Minimum or Standard goal:

The minimum or standard goal is the cut-off point for signalling the existence of or potential for a performance problem. Minimum standards are set for a limited period but for longer duration - perhaps one to two years. Minimums/standards goals must conform to the following criteria:

It can not be more than or equal to current average/typical performance; and

It cannot be lower than the lowest performance achieved for any previous period.

To aid goal setting the following steps may be adopted:

Considering the job on the following areas:

Routine tasks

Problem solving skills

Innovative nature


Locate key tasks in each of the above areas.

Periodic Progress Review

The intent of this review is to provide a reconfirmation of direction to maintain commitment for the balance year. Targets, though should be stable over the performance period, should be flexible enough for revision when changes in priorities or responsibilities lead to the expectation of different results.

Key Steps to Goal Setting:

The appraiser should:

in advance, review feedback on employee's past performance;

discuss targets, praise achievements and identify causes of targets missed

discuss performance skills, reinforce good performance and identify causes for skills not achieved

jointly agree on the plan for corrective actions to be taken

where necessary, revise targets

Create a non-threatening climate and express confidence.

Joint Accountability:

Management must recognize that most results are achieved through the combined efforts of a team of two or more people. Therefore, the management style must encourage maximum individual contribution in co-operation with others.

Chapter 7


The outcome of the appraisal is either in the form of reward by way of pay increase, bonus or incentive and/or promotion, or by way of not affecting any increase in pay, denying promotion etc. This concept is known as Performance Related Pay (PRP).

Before embarking on its introduction the following factors should be taken into account.

Matching the Culture:

Successful PRP schemes must match the culture and core values of the organization. It is only by understanding and working in the culture that it is possible to develop schemes.

Linking PRP to the Performance Management process:

The focus when relating pay to performance needs to be one of the issues which emerge from the business planning process such as profitability, productivity, cost reduction, research & development, product and market development and in general increasing stakeholder value.

Balancing performance measures:

The performance measures used as a basis for rating must include a balanced mix of factors both input (skills and competences) and output (performance and contribution). The assessment based on which pay decisions are made should be based not only on performance in achieving objectives, contribution to organizational success and the levels of skill and competence achieved, but also on the degree to which the behavior of individuals support corporate values in areas such as team work, TQM, customer services, innovation, etc.


PRP arrangements should allow for some amount of flexibility in the criteria for reward and the mode of payment.


The importance of teamwork must be recognized in designing the scheme and in defining important success factors and performance indicators. Individuals should be made aware that achieving their targets at the expense of others is not considered competent performance.

Avoiding Short-term goals:

In order to avoid the danger of PRP paying attention at short term results ignoring more important longer term objectives, both long term and short term goals should be set wherever appropriate and short term objectives should be discussed in their over all context.

Involvement in the design process:

The design of PRP scheme is an iterative process - trying and testing ideas on measuring and structuring with the members of the scheme. It is also a learning process, which can pose fundamental strategic and business issues. Participants to the scheme should be allowed to have an input into agreeing upon critical success factors and performance indicators both for themselves and the organization.

Getting the message across:

PRP is a very powerful form of communication. In order to get the right messages across, the following question will have to be dealt with:

Assess reasons for PRP

Why is it necessary to introduce PRP?

What can be expected to get out of it?

Assessing readiness for PRP

Is PRP right for our culture?

Are the Performance Management and other relevant processes in place required for successful PRP?

Is the attitude of management and other employees favoring PRP

Are people concerned with managing PRP skilled and trained enough and have been provided required resources

Is PRP scheme likely to make a significant impact on performance to justify the costs of developing, introducing and operating the scheme

Decide whether or not to introduce PRP

Does the result of above assessment indicate that PRP is right for the organization?

What are the other alternatives to PRP.

Brief, consult and involve employees

How to brief the employees of the organization's objectives and intentions concerning the introduction of PRP scheme

How to reduce concerns about PRP through this briefing process

Up to what extent and how to consult and involve employees

Design scheme

What are the criteria to be used for determining PRP awards? It can be an appropriate mix of:

Input related to the skills and knowledge to fulfill role responsibilities

Process related to the behavioral competencies in achieving results

Output performance indicators related to the achievement of set Targets.

Outcome indicators which measure how these contribute to the achievement of team, departmental and organizational objectives.

What is the extent by it will be feasible to define the criteria in the key jobs

Are measures available for these criteria,

What form of rating system to be used

How to ensure that ratings are done in a fair and consistent way

Policies on the amount of payments in relation to performance, contribution, skill and competence

Policies to be on the rate of progress and any limits to progress within pay range

If the organization wants to make provision for performance-related lump sum bonus for special achievement

What rating, increment and budget are going to be given to managers

Should performance matrices be used? If yes, how to construct them

How to monitor PRP and its effectiveness

How the cost of PRP would be controlled

What process for developing and introducing PRP

Briefing and training

How to brief and train managers on the PRP scheme

How to educate employees in general on PRP so that they understand its operation and what are the benefits


Even after taking all due care some unforeseeable problem might arise. It is advisable to start with a pilot scheme, probably at senior management level so that they understand the principles, benefits and problem before applying PRP to the remaining people

It is essential to keep a close watch on the progress so that problems can be anticipated and dealt with when they arise.


If clear objectives have been established and which can be measured and evaluated

Methods to carry out a continuing monitoring and evaluation process

Person responsible for evaluation and taking any corrective action

Any other points, which need to be covered

Evaluating Performance Related Pay

It is essential to evaluate the acceptability and cost effectiveness of PRP. The following questions need to be considered:

Extent by which the defined objectives of PRP are achieved

What has been paid out under the scheme

Improvements, which have emerged between high/average performers over a period

What measurable benefits has PRP produced

How do managers rate PRP? for example, do they believe that it is operating fairly

Extent to which the rewards been linked to key and measurable areas of performance? Do these rewards meet people's expectations

Does the process provide adequate support for PRP

Does the organization want to retain PRP? what are the other alternatives available

Performance Related Pay (PRP) in practice

There is no doubt that the system of PRP must be made to fit the culture of the organization. This means that the existing culture should be receptive to the elements of PRP else the culture has to be changed. PRP can be used as part of the change management process but on its own, it is unlikely to be powerful enough to prove any useful in this regard.

Chapter 8


While designing an appraisal program several questions need to be answered. They are:

Who is to be assessed?

Who are the appraisers?

What to be evaluated?

When to evaluate?

What problems are foreseen?

How to solve these problems?

What appraisal methods to be used?

Whose is to be assessed?

Though the answer is obvious - employees. Specifically, appraisee may be defined as the individual, work group, or organization itself.

Who are the appraisers?

Appraisers can be immediate superiors, specialists from the human resource department, subordinates, peers, suppliers, customers, self appraisals or a combination thereof.

What should be evaluated?

Evaluation criteria are the basic steps in designing an appraisal program. The criteria for assessing performance can be:




Cost Effectiveness

Need for supervision

Inter-personal impact

Creativity & Innovation

Problem solving

Customer centric orientation

Entrepreneurship etc.

This is not an exhaustive list; several other parameters can be added depending on job requirements and organizational needs.

When to appraise/rate?

The most frequently used rating schedules are semi-annual and annual. Some practices for ratings are:

Annually as per company practice

After first 6 months of employment

Upon confirming probation or within 3 months after promotion

When the job occupied has been reevaluated upward

Upon special request, as when the salary is below the average pay in compatible jobs

What are the problems related to Performance Appraisal?

It is said that Ideal Performance Appraisal is when the evaluation is free from biases. There are many other factors of appraisal which lead to failure of the system:

Negative attitude towards Performance Appraisal:

Large population of managers are indifferent to the Performance Appraisal processes and/or do it badly if they do it at all.

Hostility from the appraiser:

The appraiser reacts indifferently to the appraisal system because he thinks it is a waste of time.

Hostility from the appraise:

Hostility from the appraisee arises because they feel Performance Appraisal is simply another tool in the hands of the managers to exercise their command and control prerogatives. They even feel that the data collected will be utilized as evidence against them. In some cases there is even a feeling that the outcome of the performance evaluation is predetermined by their superiors and the process is completed only as a formality, due to which appraises lack interest in the entire process.

Halo Error:

One marked characteristic or latest achievement or failure may be allowed to dominate the appraisal for the entire year.

Logical Error:

This is a pitfall for the inexperienced appraiser, who very often is inclined to arrive at similar assessments in respect of qualities that seem logically related.

Constant Error:

When two appraisers do the rating of appraisees, their ratings may be different. One may show consistent leniency by giving high scores, the other may consistently rate by giving low scores.

Central Tendency:

It is also known as "Average Ratings". The appraiser tends to avoid giving frank views or the appraiser is in doubt or has inadequate information or simply wants to play safe and don't displease anyone.

Mirror-Image Error or Projection Error:

When an appraiser expects his own qualities, skills, and values in appraise.

Contrast Error:

This occurs in the sequencing of ratings. If superior performers are rated first, average performers are rated down, and vice versa.

Biases of position, Sex, Race, Religion & Nationality:

Often people are biased towards a particular sex, race, caste, or nationality etc. There is a tendency to rate the person of favorable bias more favorably than the person in a unfavorable bias.

Lack of Skill in conducting Appraisal discussion:

Conducting Performance Appraisal discussions require certain skills and training and lack of such training may hamper the process

How to solve the appraiser's problems?

Training can greatly improve the appraisal system. By proper training to the managers distortion occurring due to appraiser errors such as halo, leniency, central tendency and bias can be minimized.

Factors that help to improve accuracy:

The appraiser is observant and is familiar with behaviors to be appraised.

The appraiser has documented behaviors calling for improvement.

The appraiser has made a checklist to obtain the review on job related information.

The appraiser is aware of biases and is willing to take action to minimize their effects.

Comparing scores of one group with those by other appraisers.

The appraiser should focus attention on performance related behaviors over which he has better control

Higher levels of management should be held accountable for reviewing all ratings.

Factors that may lower accuracy:

The appraiser rates under compulsion when administrative actions are contemplated.

The appraiser is unable to express honestly.

Appraisal systems, & processes fail to support the appraiser

The appraiser is not aware of causes of rating errors.

The appraiser has to rate employees on poorly defined factors.

Techniques/methods of appraisal to be used?

Different types of systems for measuring the excellence of an employee are available. Each type has its own pros and cons.

Earlier developed methods, still in use, are Traditional Methods which are non transparent in nature. Newer methods are more transparent in nature.

Chapter -9


About the company under study m/s ZOOM VALLABH STEEL LTD (ZVSL).


ZVSL is located in the Dugdha Village, Gamharia, and Dist: Seraikella-Kharswan, Jharkhand, Dist. West Singhbum, in an area of around 120 acres of land purchased directly from the Villagers by the erstwhile Management by entering into various terms and conditions. Then management had established two units namely Vallabh Steels Limited (VSL) & Vardhman Industries Limited (VIL) in the same premises. VSL was for production of Sponge Iron using one 350 TPD kiln and VIL was to produce 8 MW power using waste heat of kiln of VSL and had 2X8T induction furnaces and continuous casting machine for production of steel billets.

Project commissioning work started in 2004 and the commercial production of the units declared as follows by the Industries Department.

Power Plant from 25.03.06.

DRI (Sponge Iron) from 27.3.2006

Steel Melting from 22.9.2006

Mainly the following Departments exist in the Plant:

Personnel & Admn. (Safety, Security, etc)

Commercial (Raw Material Procurement, Purchase & Stores)

Finance & Accounts

DRI Process

Power Plant


Quality Control Lab.

Mechanical Maintenance

Electrical & Instrumentation

Raw Material Handling Services



Zoom Developers Pvt Limited (ZDPL) had taken over the charge of Vallabh Steels Ltd., w.e.f. 14th August, 2006 as Zoom Vallabh Steel Ltd., (ZVSL) and during transition period, ZVSL Management was only an Observer as the VSL management continued till January, 2007 due to non transfer of management. ZDPL took reigns of VSL & VIL and amalgamated into Zoom Vallabh Steel Limited (ZVSL) in January, 2007.

Vision of ZVSL was to enhance the steel making capacity to 0.6 mTPA and put up a seamless pipe plant (procured from UK) and rolling mill as a part of forward integration.


As on 14th August, 2006, the man-power availability including Executives, Non-executives and Workers was 497 and contract labor 600 nos.

As per the agreement with the land-sellers, VSL was supposed to provide employment to 347 Wards of land sellers in phase-wise manner.

In first phase 175 wards of the land-sellers were provided employment w.e.f. 3.4.2006.

The remaining 120 land-sellers are required to be absorbed in the 2nd phase.

As on date total 380 employees are on rolls of ZVSL and around 100 contractor labor are engaged in various activities

HR Department in ZVSL

HR department in ZVSL was formed in the year 2006, and is presently headed by Head (HR) in the rank of AGM. Head (HR) reports to the COO. HR is an independent department serving all service functions to the line organization. Various functions undertaken by HRA are as follows:

HR Related activities


Performance review

Employees' records maintenance

Wages and Salary Determination

Administration related activities



Grievance handling

Transport and Canteen services

Safety & First Aid


Functions Organization chart of ZVSL showing HR tree is as per below:


The performance appraisal system at ZVSL has been evolved after reviewing systems at many organizations like TISCO, Ispat Industries, Zoom Developers, and other units of similar business and size in the vicinity

The goal setting starts with the meeting of all department heads and the KRA's are set for the department. sample sheets giving KRA for all the drpartments and COO are given at annexure 1 at page no 38, care is taken that only measurauble jobs are listed, whic can be quantified, measured and are critical to the functioning of the organization.

After departmental KRS's are defined, individual KRA are fixed with respective controlling officers and they in term fix KRA for the persons reporting to them down below. sample KRA for individuals are placed at annexure 2 at page no 42.

performance review takes place on quartelry basis and individuals are intimated about the action plan to be followed. individual training needs are also identified and listed for further implimentation. preformance apprasial format being followed is placed at Annexure 3 at page no 46. analysis of performance of employees is discussed in the next chapter.

employee's satisfaction survey has been conducted and the findings are summarised in the next chapter.sample form of employee satisfaction survey is at Annexure 4 at page 47.

individual performnce ratings for last three years and their satisfaction has been placed in the file attached below this chapter.

(work sheet having details of survey and 3 years appraisalsrating for employees)

Chapter 10


It is seen that majority of employees are in excellent to good performers. from the records available, only two employees were found to be in the poor catagory. Classification of performance rating has been as under

Rating Classification

0 - 3 Poor,

3-5 Average,

5-7 Good and

>7 Excellent.

Year wise analysis of employees of ZVSL is as below:

From the three year data it can be seen that number of poor performers have come down in last three years from 12 to 6 and excellent gone up from 33 to 47, good performers have gone up from 117 to 172. Ratio of performing levels has been dipected in the next page.

Employee satisfaction:

Employee satisfaction survey was conducted to find about the satisfaction level and to find is any corealltion exists between the performnce and the employee satisfaction level. employee satisfaction survey questionnaire is placed at annexure 4 at page 97.

Of all the 362 employees surveyed, the findings are tabulated in the table below:


Performance rating

Over all





No of employees






Satisfaction levels






Goal Setting






Job Content






Phy Environment.






Social Environment.
























Reward & Recognition






Trg & Davp






The Company






Overall Satisfaction






From the survey results indicated above, it is seen that employees rated excellent in their appraisals have also displayed higher satisfaction with satisfaction level reaching 3.89 on a scale of 5. They have shown highest satisfection in welfare followed by social envoirnment and communication, whereas emloyees rated poor have shown over satisfaction level of only 2.08. Their highest satisfaction is in physical enviornment and Goal setting at 2.28 each displaying an indifferent attitude to various factors.They are not very sastisfied with Leadership, Welfare, Rewards etc indicating that they are not too concerned about rewards or welfare etc as they think that these not meant for them, but are for performers.

This attribute calls for a councelling of these people to encourage their acceptance of company enviornment and goals. so far the company has not introduced monetary rewards and incentive scheme, and may be if these schemes are introduced, some change may be expected.

Top performers are much motivated by their performance and the recognition they get by being top performers.

It may not be out of place to mention here that employee satisfaction survey has been done for the first tme in the company, and if done on regular intervals, it may be used as another tool for bringing over all improvment in the company functioning.

Towards conclusion, it may be said that Performance Management System (PMS) is a key role of Human Resource Department of any organization. These systems are needed to support pay for performance, making performance appraisal as an indispensable part of it. To retain good performers and for keeping the employees motivated, a transparent and rational performance appraisal is, hence, very strongly recommended.

On evaluating the processes following conclusions can be drawn:

The methods appearing to be arbitrary in nature to be avoided in today's scenario where employees are more empowered and their suggestions are sought in management decisions. Hence the transparent systems should be encouraged.

The appraisal process calls for investment of time and energy by respective people, and hence involves cost as whole. The costs are incurred on preparing and designing the appraisals, conducting reviews, copying / printing / filling / distributing the appraisal forms, communicating the appraisal process, training the appraisers as well as appraisee in the process, handling post appraisal grievances etc. Hence top management must get involved to decide how much time and money to allocate for this purpose and should critically evaluate the entire process.

The management should communicate the importance and benefits of this process to all the employees and to avoid the negative emotional feelings, worrying depression, stress, and anguish on part of those giving as well as receiving appraisals.

According to study conducted, a satisfied employee contributes significantly to the company business. therefore regular surveys of employee satisfaction and action plan to improve satisfaction level achieve paramount importance.

The management should try to have a balanced blend of several systems incorporating the benefits while avoiding the complexities of each method.

Finally while concluding this report I one again wish to express my gratitude and sincere thanks to Dr M Srimannaraya for kindly accepting to be my guide and mentor and for providing with an opportunity to this very insightful study which has helped understand Human Resources Management better.

Param Saxena

DB 9054/2405915