The need for a performance appraisal

Talking about Indian scenario, the problem of employee attrition continues to surge ahead, employee morale is falling, and problem of hiring is giving sleepless nights to the HR people.HR is no longer a non-core function and in the ongoing talent war, it will play a critical role in employee engagement and retention. Taking example from Infosys, T.V. Mohandas Pai traded his CFO Job for the position of HR head, something virtually in conceivable a few years ago. Progressive companies are now walking up to the importance of HR function. India Inc continues to see a double-digit attrition rate, this time of 13.8 per cent — the highest in Asia Pacific region – despite economic uncertainty, says a survey. As per global HR consultancy Hewitt Associates’ annual Asia Pacific Salary Increase survey for 2009-10, most Asian companies have continued to experience double-digit voluntary employee turnover rate amid the economic downturn. “The top four markets reporting the highest turnover rate are India (13.8 per cent), Australia (11 per cent), New Zealand and China (10.3 per cent),” the report stated. Turnover rate refers to the ratio of the number of workers that had to be replaced in a given time period to the average number of workers. “While many would believe the economic uncertainty should help ease pain on high employee voluntary turnover, the Hewitt 2009/2010 Annual Asia Pacific Salary Increase Survey does not reveal the same. The comparatively high turnover rate…raises an alarm to the world,” Hewitt Associates Regional Leader Broad-Based Compensation practice Stella Hou said (Economic Times 25 Oct 2009).

The survey stated that ‘better external opportunity’ was consistently cited as the top reason for employees voluntarily leaving their organizations across all markets.

“This means companies continue to search for talented people even under a tough economic situation… organizations will continue to face a tight talent market,” it added.

Other economies in the Asia-Pacific market, including Singapore, Korea and Thailand, are on high single digits in terms of employee turnover rates in the range of 8.8 per cent to 9.3 per cent (Economic Times 25 Oct 2009).

In short, what is required is effective and timely performance appraisal of human capital. In India there is an increasing demand and supply gap for professionals. It is sometimes difficult for HR managers to maintain consistency in performance and keep the motivation levels high especially when the work is monotonous. To ensure that attrition rates are kept to a minimum, businesses need to redesign their reward and recognition packages to help the industry hold onto staff and to find the right kind of people who can keep pace with the unique work patterns. According to Oscar De Mello, country head of Hay Group’s Reward Information Services in India, adjusting pay might not automatically lead to higher operating costs for BPO companies. By creatively designing their total reward package towards more short-term incentives and benefits, and linking the package to performance, companies can ensure that they get higher productivity without hefty increases in salary costs and minimize attrition costs and issues at the same time.Hay’s Group recommends providing a better balance of short- and long-term benefits such as performance bonuses, employee stock option plans and retention bonuses; effectively communicating details of compensation plans to encourage employee buy-in; and promoting non-financial benefits such as career development, job rotation and transparent performance management systems (Mike 2009).

OBJECTIVES:

A) Primary Objectives

To study the performance appraisal system in different organization.

To study the transformation of performance appraisal form traditional to modern.

To get an insight into the relative importance of performance appraisal in organization.

To study the effectiveness of performance appraisal system in different organization.

To study the practical application of performance appraisal.

To compare appraisal system of different organization and find out the most common parameters for appraisal.

How can companies use performance appraisal as an effective tool to achieve organizational effectiveness and efficiency.

B) Secondary Objectives.

To observe the work environment in organization.

To get experience and expertise in making projects.

To enhance my communication skills.

To increase my confidence.

DELIVERABLES

The key outcomes of the study will be

The report will theoretically reveal what India Inc wants.

It will give an insight into what Indian executives are looking for in their career.

It will ascertain the demands of high flying executives in corporate India.

The study will be helpful to HR people as to how to keep employee morale high and motivation level when the work is monotonous.

The study will reveal key causes of increasing employee attrition and how to manage the surge in attrition rate.

The study also gives an insight into the performance appraisal system of some of the Indian companies.

In short, the study is helpful for the companies to modify their appraisal systems as per changing scenario.

PROJECT INTEREST

Who will be benefited & what purpose this study serves for the industry?

Motivation and Satisfaction

Performance appraisal can have a profound effect on levels of employee motivation and satisfaction – for better as well as for worse. Performance appraisal provides employees with recognition for their work efforts. The power of social recognition as an incentive has been long noted. In fact, there is evidence that human beings will even prefer negative recognition in preference to no recognition at all. If nothing else, the existence of an appraisal program indicates to an employee that the organization is genuinely interested in their individual performance and development. This alone can have a positive influence on the individual’s sense of worth, commitment and belonging.

Training and Development

Performance appraisal offers an excellent opportunity – perhaps the best that will ever occur – for a supervisor and subordinate to recognize and agree upon individual training and development needs. During the discussion of an employee’s work performance, the presence or absence of work skills can become very obvious – even to those who habitually reject the idea of training for them! Performance appraisal can make the need for training more pressing and relevant by linking it clearly to performance outcomes and future career aspirations. From the point of view of the organization as a whole, consolidated appraisal data can form a picture of the overall demand for training. This data may be analyzed by variables such as sex, department, etc. In this respect, performance appraisal can provide a regular and efficient training needs audit for the entire organization.

Recruitment and Induction

Appraisal data can be used to monitor the success of the organization’s recruitment and induction practices. For example, how well are the employees performing who were hired in the past two years? Appraisal data can also be used to monitor the effectiveness of changes in recruitment strategies. By following the yearly data related to new hires (and given sufficient numbers on which to base the analysis) it is possible to assess whether the general quality of the workforce is improving, staying steady, or declining. (Archer North & Associates 2006).

RESEARCH METHODOLOGY

To carry this study, broadly the method adopted is collection of secondary data and its analysis pertaining to the project title.

Data can be classified into two broad categories:

Primary data

Primary data is the first hand information and is collected for some specific purpose. The use of primary data results in less errors and more reliability. Collecting primary data is time consuming and is generally carried out by a trained personal.

Secondary data

Whereas on the other hand, the data that serves the completion of this study is secondary data. It is generally the previously collected data, i.e., published sources such as reports and journals. Collecting this information is inexpensive and anybody can collect this data.

Research methods for collecting primary data:

Surveys, Observation, Focus Groups, Diaries and Case Studies.

Justification for not using the above methods:

The above methods involve gathering of information based on communication with a representative or sample of individuals such as questionnaires and interviews.

To get contacts of HR Mangers for interviews was difficult.

Considering the limited time available and using online articles, reports and journals the above methods were not feasible.

Research methods adopted for collecting secondary data:

Cross sectional data, longitudinal data, Analysis of online reports and articles.

Justification for using the above methods:

The main reason for using the secondary data for this study was available resources such as Internet, Books, Articles, News papers.

Getting the views and opinion of the interviewee (HR Manager) was a difficult task.

To gather the information from employees of different Indian companies was not feasible with the time and resources available.

To get an insight into some of the appraisal methods followed by Indian companies, online information available was well suiting the report’s requirement.

SECONDARY DATA SOURCES

Secondary data is classified in terms of its source – either internal or external. Internal, or in-house data, is secondary information acquired within the organization where research is being carried out. External secondary data is obtained from outside sources (Steppingstones 2004).

To conduct this study external secondary data sources have been used as it was not feasible to get into the organization for analyzing the in-house data.

Various External Secondary Data Sources (via online) used are:

Newspapers (Economic Times, Business Line)

Survey Figures (HR consultancy Hewitt Associates’ annual Asia Pacific Salary Increase survey for 2009-10)

Articles (Pertaining to HRM and Performance Appraisal)

General Business Publications (Indian Companies)

Publications and write-ups by other agencies

Library sources

DRAFT CHAPTER HEADINGS

To understand the concept of performance appraisal, the data analyzed goes as follows:

Meaning/point of Performance Appraisal

Performance Appraisal – Traditional Approach

Performance Appraisal – Modern Approach

Requisites of Performance Appraisal

Systematic steps towards Effective Performance Appraisal

Various techniques of Performance Appraisal

Performance Appraisal Drawbacks

Performance Appraisal System of some of the Indian Companies:

HPCL

MARUTI

RELIANCE ENERGY

INFOSYS

MARRIOTT HOTELS INDIA

Conclusions and Suggestions

List of References

GANTT CHART

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Final Review

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DETAILED LITERATURE REVIEW

MEANING/POINT OF PERFORMANCE APPRAISAL

Probably the most misused and abused and disused management tool in history is the performance appraisal. It’s the strangest thing. Ask any manager or human resources person whether they think performance appraisal is an important thing to do, they are almost unanimous. “Of course it is”, is the common response. If you ask why it’s important, they will tell you and tell you and tell you. The odd thing is that they often don’t get done, and managers, supervisors and employees hate the darned things. Human resource professionals spend a lot of time whipping people into doing them, while managers look for a variety of reasons to delay and delay. Why is that? It’s uncomfortable to do performance appraisals. But why is it uncomfortable? Because people undertake them for the wrong reasons and wrong perspective, which ends up putting the manager and the employee on different “sides”. Appraisals are used for determining pay increases, who gets let go, who gets promoted. Often they are used to focus on what people have done wrong. So what is the point of performance appraisals? Here’s a starting point that actually works. The most important purpose or goal of the appraisal is to improve performance in the future…and not just for the employee. Managers can get valuable information from employees to help them make employee’s jobs more productive. Work units and organizations can identify problems that interfere with everyone’s work (Robert Bacal n.d.).

PERFORMANCE APPRAISAL – TRADITIONAL APPROACH

In the conventional performance appraisal or review process, the manager annually writes his opinions of the performance of a reporting staff member on a document supplied by the HR department. In some organizations, the staff member is asked to fill out a self-review to share with the supervisor. Most of the time, the appraisal reflects what the manager can remember; this is usually the most recent events. Almost always, the appraisal is based on opinions as real performance measurement takes time and follow-up to do well. The documents in use in many organizations also ask the supervisor to make judgments based on concepts and words such as excellent performance (what’s that?), exhibits enthusiasm (hmmm, laughs a lot?) and achievement oriented (likes to score?).Many managers are uncomfortable in the role of judge, so uncomfortable, in fact, that performance appraisals are often months overdue. The HR professional, who manages the appraisal system, finds his most important roles are to develop the form and maintain an employee official file, notify supervisors of due dates, and then nag, nag, nag when the review is long overdue. Despite the fact that annual raises are often tied to the performance evaluation, managers avoid doing them as long as possible. This results in an unmotivated employee who feels his manager doesn’t care about him enough to facilitate his annual raise (Susan M. Heathfield n.d.)

PERFORMANCE APPRAISAL – MODERN APPROACH

Nowadays, in many of the organizations, performance appraisal is used either directly or indirectly in order to help determine the reward outcomes. This greatly helps in identifying the better performing employee who should be paid more and rewarded with promotions and bonuses. Performance appraisal systems are considered to be more structured and formal between the subordinate and the supervisor. Appraisal is conducted periodically, either annually or twice a year. The weaknesses and strengths and opportunities for improvement and skill development of the subordinate are discussed on a healthy platform. Poor performers are counseled to perform better. In extreme cases, demotion, dismissal or decrease of pay is resorted to. The modern approach to performance appraisal is a developmental approach. This recognizes employees as individuals and encompasses the goal setting process (Directory Portal for women 2009).

REQUISITES OF PERFORMANCE APPRAISAL

Performance appraisal requisites:

The manager must have the capability to translate the goals of an organization into individual job objectives.

The manager should be a good communicator and must have the ability to communicate the management’s expectations regarding employee performance to the employee.

Feedback to the employee about the job performance is vital to the performance appraisal exercise.

The employee has to understand job requirements vis-à-vis the management’s objectives.

Diagnosis of employee strengths and weaknesses must be done sans prejudice.

It is essential to determine developmental activities that will help the employee to perform better (Directory Portal for women 2009).

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SYSTEMATIC STEPS TOWARDS EFFECTIVE PERFORMANCE APPRAISAL

Performance appraisal process:

The first step is to establish a common understanding between the evaluator or the manager and the evaluate or the employee. The work expectations from the management point of view, and the work accomplished by the employee and how the work is evaluated is explained in this process.

The second step is to perform the assessment based on the progress against work expectation. Provisions for feedback have to be made. Information should be disseminated to the employee on what are the goals and expectations of the management and what performance of the employee is unacceptable. At the same time, superior performance of the employee should be praised and recognized.

The next step is formal documentation of the performance through completion of a performance appraisal form.

The last step is to discuss and appraise the performance and development of the employee based on the completed appraisal form. A development plan for the employee should also be drawn. (Directory Portal for women 2009).

VARIOUS TECHNIQUES OF PERFORMANCE APPRAISAL

Performance appraisal techniques:

Essay appraisal: The appraiser is asked to write an essay on the employee’s strengths, weaknesses and potentials. This technique is more valid and formal than complicated methods of appraisal. The biggest drawback in this method is that it is difficult to combine and compare the essays as it may touch upon various aspects of one’s performance and qualifications. Another drawback is the variability of length and content in the essays.

Graphic rating scale: This method is both consistent and reliable. A person’s quality and quantity of work is assessed in a graphic scale. A variety of factors are taken into consideration including his/her personal traits like cooperation and reliability. Although the graphic scale is widely used, it is under frequent controversy. But the graphic scale is more economical to develop and it is not complicated. Therefore it is easily acceptable by raters.

Forced choice rating: This technique is unbiased in comparison to other techniques. This also does not involve the intervention of a third party in appraisal. In this method, the raters are asked to choose from among groups of statements those that best fit the individual employee who is rated and those that least fit him/her. The statements are then weighed and scored the same way psychological tests are scored. This technique is limited to lower and middle management levels in companies as the levels of jobs are similar to make standard common forms with this group.

Field review: The field review is a group judgement technique and it tends to be fairer and more valid than individual ratings. Here a member of the personnel department meets with small groups of raters from each supervisory unit and goes over each employee’s ratings with them. In this way, each rater conceives uniform standards, arrives at group consensus and identify areas of disagreement between inter raters. But it is time consuming and arduous.

Critical incident appraisal: This technique is appreciated by many employees and employers because it is natural and gives a supervisor actual factual incidents to discuss with the employee. In this method, supervisors are asked to keep a record on each employee and to record actual incidents of positive and negative behavior. The discussion between the supervisor and his subordinate deals with actual behavior and not on traits. Here the performance of the employee and not his personality gets criticized. The employee will specifically get to know how to perform differently if he wants to be rated higher the next time.

Work standards approach: In this technique the organizations set the daily work standards for the employees instead of asking the employees to set their own performance goals. This technique aims at improving productivity and makes possible an accurate and objective appraisal of work of employees and supervisors. Considerable amount of time is spent on observing the employees on the job, simplifying and improving the job where possible and arriving at realistic output standards. Different people are evaluated differently and it becomes difficult to rate them for comparison especially at the time of deciding promotions and salary increase.

Ranking methods: This method is useful when it becomes necessary to compare people who work for different supervisors, when there are several individual ratings an when appraisal forms are not particularly useful. This method is also employed to compare people in different units of an organization.

Assessment centers: In assessment centers, the assessment for future performance or potential of the employee is assessed in contrast to the past performance. Individuals from different departments are brought together and they spend two to three working days on group assignments similar to ones they will be handling if they were promoted. The pooled judgement of the observers leads to order of merit ranking on the participants (Directory Portal for women 2009).

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PERFORMANCE APPRAISAL DRAWBACKS

Performance appraisal drawbacks:

Performance appraisal program demands and depends too much on supervisors.

Sometimes certain standard ratings tend to vary widely and unfairly.

Some raters can be tough, and some lenient. Some departments have highly competent people whereas others have less competent people.

Personal bias can replace organizational standards. Because of the bias, some non competent employees may get a favored treatment.

Sometimes there tends to be lack of communication. The employees may not even know they are being judged. No performance appraisal system can be effective if the appraised do not know the criteria under which they have been appraised and judged.

No appraisal program can substitute for sound selection, placement and training programs.

Performance appraisal ratings can boomerang when communicated to employees. Negative feedback not only fails to motivate the employee but can also cause him/her to perform worse.

A constructive congenial relationship should exist between the supervisor and his subordinate. Performance appraisal programs tend to emphasize the superiority of the supervisor which may be particularly damaging in organizations which strive at participative organizational climate (Directory Portal for women 2009).

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PERFORMANCE APPRAISAL SYSTEM OF SOME OF THE INDIAN COMPANIES

HPCL

In their endeavor to effectively analyze the performance of their training and mentoring programs, HPCL has developed robust and objective performance management processes which strive to effectively tread through the employees’ hopes and aspirations. It is all about endorsing an empowering environment which gives you to your best. And the company assures to give valuable feedback, coaching, and knowledge from the people working in.Career progression at HPCL is ensured through objective appraisal of performance. Here performance appraisal process is based on Balanced Scorecard Approach and is more than just assessment. It enables the employees to identify and develop their strengths and weaknesses and align them towards organizational objectives through counseling, mentoring and additional inputs through specific training programmes (HPCL 2008).

“Arousing passion and emotional involvement is the best possible way to align the employees around a common purpose.” With this objective, HPCL embarked upon a process of Organizational Transformation called Project ACE – Achieving Continuous Excellence. Project ACE was conceived to develop a co-created vision shared by the organizational members at large, thereby transforming HPCL into an innovative and learning organization where employees continuously acquire new skills and capabilities to excel, and achieve