CHAPTER-2

REVIEW OF LITRETURE

Many books and case studies have conducted about the topic, which affects the life of both
industries and employees. The concept of performance appraisal is a new trend in human
resource department.

Srinivas Rao (October 2007) has conducted a study which focuses on the factors responsible
for effectiveness of the performance management systems and its alignment with organization
goals. As part of the study, antecedents and consequences of effective implementers of
performance management systems in the Indian context were also examined. It was found that
managers having good academic backgrounds with high profiles are effective implementers of
the system. Further, it was found that personality characteristics/consequences such as system
discipline, exposure to the system, effective interpersonal relations and team working are
essentially required for the effective implementation of the system

Sanjeet Singh (March 2011) has conducted a study to analyse the effects of Performance
appraisal system according to him Performance Appraisal has been considered as the most
significant and an indispensable tool for an organization, for the information it provides, is
highly useful in making decisions regarding various personnel aspects such as promotion and
merit increases. Performance measures also link information gathering and decision-making
processes which provide a basis for judging the effectiveness of personnel sub-divisions such
as recruiting, selection, training and compensation. This research was concentrated on
examination of the effect of the performance appraisal on an individual as well as on the
organizations. The findings of the research show that there was a noticeable effect of the
performance appraisal on the organization as well as on the Individual.

Divya Selvarajan (December 2012) has worked on a study on the performance appraisal
system in the Praveen Chem Industry. The objectives of Study were to find out the satisfactory
level of the employer about performance appraisal and the ways and means to improve the
effectiveness of the existing performance appraisal system
The study had confirmed that the company has a good Performance Appraisal System. From
this study, it was found that majority of the workers were satisfied with the Performance
Appraisal System. To make the performance appraisal system more efficient and excellent, the
company should give importance to the employees and create awareness among the employees,
and it shall consider some of the ways and means suggested by the employees like addition of
parameters such as Interpersonal skill, dependability and conducting regular training program
on the appraisal system. I hope that the suggestion given in the report may be implemented in
future course for the benefit of the workers and the company

Arshad Zaheer (October 2009) has conducted a study which aims at analysing outcomes of
performance appraisal and exploring factors that can make harm to the effectiveness of
performance appraisal system in the perspective of Pakistani public and private sector
organizations. Overall results reveal that in Pakistani public and private sector organizations,
awareness level about outcomes of effective performance appraisal is more than factors that
can make harm to the effectiveness of performance appraisal. Managers have different views
from employees regarding detriments to effectiveness of performance appraisal system,
whereas, regarding outcomes of PA effectiveness, male and female managers/operatives have
different views.

Anup Bhurtel and Eka Raj Adhikari (April 2016) have worked on the study, to explore the
perceptions of supervisors on performance appraisal in relation to employee development
adopting a qualitative design. The study brought forth that supervisors perceived the existing
performance appraisal system was less effective as it was used merely for getting employee-
promotion. The supervisors were unable to appraise non-permanent employees, and even for
permanent classed employees, they were obliged to keep the results confidential. They were
thus unable to discuss the results with the concerned employees and jointly set goals for their
further development. The study calls for establishing a comprehensive performance appraisal
system for all employees in which results were analysed and linked with plans for employee
development.
In many organizations, reward decisions depend on subjective performance evaluations.
However, evaluating an employee's performance is often difficult. Faseeh Ullah Khan
(January 2013) has develop a model in which the employee is uncertain about his own
performance and about the manager's ability to assess him. The manager gives an employee a
performance appraisal with a view of affecting the employee's self-perception, and the
employee's perception of the manager's ability to assess performance. The predictions of his
model were consistent with various empirical findings. Those comprise the observation that
managers tend to give positive appraisals, the finding that on average positive appraisals
motivate more than negative appraisals, and the observation that the effects of appraisals
depend on the employee's perception of the manager's ability to assess performance accurately.

Muhammad Imran (January 2014) has worked on a study for the purpose of checking the
effectiveness of the performance appraisal system in private school. Data were collected by
survey questionnaire from a random sample of 44 teaching staff in City school Bahawalpur
branch. As a result of this study they perceived that performance system works effectively and
the performance appraisal system has more impact on motivation of the employees.

Jan Willem van Prooijen (March 2016) has conducted a survey to develop a conceptual
framework for the effectiveness of performance appraisal (PA) systems by using a competing
values approach. The review employs a three-step approach: first, the study discusses the
existing criteria to determine the effectiveness of Performance Appraisal systems and presents
criticisms of these criteria. Second, the paper reviews the literature on the competing values
model of organizational effectiveness. Third, the paper integrates the Performance Appraisal
system in the competing values model to develop a comprehensive framework for the
effectiveness of Performance Appraisal systems. A practical model has been developed,
considering the processes and procedures involved in Performance Appraisal systems. The
study was designed to provide a guideline for managers to consider the effectiveness of a
Performance Appraisal system. The study suggested that assessing the effectiveness of a
Performance Appraisal system on any single criterion ignores various important aspects of the
system. Moreover, the effectiveness of a Performance Appraisal system should be based on the
values and preferences of all major stakeholders of the system, i.e., appraisers, appraisees and
the organization.
Managing human resources in today's dynamic environment is becoming more and more
complex as well as important. Recognition of people as a valuable resource in the organization
has led to increased trends in Employee maintenance, job security, etc. this Research deals
with "Performance Appraisal" as carried out in Larsen and toubro. In this report, D. B. Bagul
(May 2014) studied & evaluated the performance appraisal process as it is carried out in the
company. In this study, he has given brief conceptual explanation of performance appraisal. It
contains the definition, process and significance of performance appraisal. The study reveals
that the Performance Appraisal is a systematic means of ensuring that Manager's and staff meet
regularly to discuss post and present performance issues and to agree what future is appropriate
on both sides. L&T implemented the new performance method- robust system. From the survey
results it’s evident that both the appraises and appraiser’s expectation from Performance
appraisal system were the same i.e. "Determination of Promotion or Transfer" and "Salary
Administration and Benefits". Hence a single performance appraisal system can satisfy needs
of both the appraiser and appraisee .Therefore the Performance appraisal program would be
designed in such a way that the appraiser would be able to analyze the contribution of the
employee to the organization periodically and all the employees who have been performing
well would be rewarded suitably either by an increase in the salary or a promotion. Through
this the appraiser can also motivate the employees who felt that they had no growth in the
organization and serves the purpose of employee development. Thus, performance appraisals
can be used as a significant tool.

An empirical study was undertaken by Prof. J.C.O Bekker (November 2010) to solicit
opinions of the public officials on the relationship between the Performance appraisal System
and accountability; and their understanding of the Performance appraisal system concept and
its implementation in Lesotho. The study utilised a survey method of scientific inquiry

It has been concluded that the implementation of the Performance appraisal system has been
handled with less enthusiasm, commitment and was not wholly embraced by all relevant
stakeholders. The performance appraisal system related management tools such as strategic
planning, job descriptions, work plans and performance standards were not strongly
emphasized during the implementation of the Performance appraisal System. The lack of strong
emphasis did not assist to enhance the implementation of Performance appraisal system. The
above were identified as deficiencies that warranted prompt attention by the Government of
Lesotho, particularly the Ministry of the Public Service.

A study was conducted by Yali Edessa Woyessa (November 2015) with the objective of
evaluating the effectiveness of the performance management system. The research objectives
were to know How was the planning of performance management conducted, which steps were
followed for ongoing feedback and employee input, how effective was the evaluation and
review of the performance management process and, how effective was the overall
implementation of the performance management system. The findings of the study were
consistent with the general proposition that effective performance management systems should
be supported by practices and organisational contexts with certain characteristics. Indeed, as
reported in this study, the institution needs to provide more performance management training,
engage employees and emphasise employee recognition. In this way the performance
management system will be effective, deliver more value and meet the desired outcomes

Brown Chris (2003) studied the systems that aim to improve workforce performance. In his
opinion an appraisal system should have the full support of senior management. Without this,
the system will eventually collapse. The appraisal system should first have been piloted and
then reviewed and the intentions of the appraisal system should be clearly communicated to all
staff. All staff should have training in appraisal techniques. Interviewing skills, giving feedback
and objective setting are all elements that require training to be carried out effectively. The
system should enable all staff to have clearly established aims and objectives that are linked
with the business strategy. The appraisal system should follow a cycle of defining the
performance that is required, measuring and evaluating it, giving feedback and sharing
information with other parts of the organization. The system should have simple and easily
understood documentation supporting it. It should not be a part of the standard disciplinary
procedures of the company, be adaptable and encompass all levels of staff in the organization,
must be subject to ongoing monitoring, review, evaluation and updating.

Sayantani G and Nilad.D (2013) studied the impact of performance reward systems mainly
Performance Related Pay, the role of resources in influencing educational outcomes and the
reliability of existing methods of assessing educational performance. They reported the
findings which identify the methods of Performance Appraisal System in Indian and
international education sector by introducing a new model in performance management system.
This model uses three forms to collect information regarding the faculty from various sources
that are the faculty, students and Head of the Department. All this information will be sent to
the Management for analysis and feedback. Major benefit is transparency.

Sruchita Maheswari Rath (2011) has conducted a study on the performance of an employee.
According to her performance appraisal is influenced with various factors. The socio
demographic factored has influenced in many ways. In this study the researcher tries to find
out the effectiveness of the performance appraisal system in Tamil Nadu based manufacturing
industry, India. It is a descriptive type of research, simple random sampling was adopted, and
self-prepared, structured questionnaire with the five-point scale was used to collect the primary
data. The finding were the socio demographic factors and the overall performance of the
employee that has the influence on the performance of the employees

Zvavahera P (2013) has conducted “An evaluation of the effectiveness of performance

Dr. J. Vincent Xavier (2015) has worked on the study in which the operative function in the
human resource department is analyzed with respect to performance evaluation system of the
company. Performance appraisal system is considered as a significant tool in all organizations
for achieving goals effectively and efficiently. The study recommends the need to ensure
fairness so that it does not demotivate an employee or have a negative impact on goal
accomplishment. The findings revealed that the company has a very well-designed
Performance appraisal system, which involves feedback as well as a reward system and the
employees, are satisfied with the existing Performance appraisal system. But more efforts are
to be made to make the approach more effective to ensure increased productivity and high
morale among the employees, which would lead to further growth of the company in all
respects.

Sridharan Renganayaki (2013) has conducted a study to evaluate the performance of the
employees in G. B. Engineering Enterprises Pvt Ltd. Thuvakudi, Trichy, Tamil Nadu, India.
For this purpose, a sample of 150 employees out of 500 employees was randomly selected. The
findings were that the performance appraisal helps in job promotion, formulating a suitable
Training and development program to improve the quality of performance, serves as a feed
back to the employee, serves as a means for evaluating the effectiveness of devices used for
the selection and classification of workers. But the appraisal of performance must be done
carefully and cautiously. Otherwise, it may result in Halo or Horns effect, lenient effect etc

Abhinanda Gautam (2014) has conducted a study through survey, among executives and
managers of Simbhaoli Sugar Limited. It is one of the biggest Sugar Mills in UP and considered
as an icon in the manufacturing capacity of sugar in northern India. the study reveals that
Performance appraisal System has a significant impact on employees’ motivation at Simbhaoli
Sugar Limited. It was also observed in survey that Simbhaoli Sugar Limited put extra emphasis
on setting Key Result Areas (KRAs) and performance of employee is measured based on the
achievement of set KRAs. Emphasis on training is required after the completion of
Performance Appraisal procedure at SSL. Some recommendations were also suggested for
increasing the motivation level of SSL employees.

The exploratory study was undertaken by Saumi Rai (1993) to specifically understand
Performance management systems, their applicability and effectiveness in relation to the Indian
construction sector. Factor analysis and chi-square test was conducted to understand factors
that contributed significantly to the effectiveness of performance appraisal system in Indian
construction firms. Results showed fair understanding of PMS systems and its linkage to HR
sub-systems (Training & Development and Pay & Rewards). Major concern areas outlined in
the study related to managerial aspects of ‘understanding appraisee viewpoint’, ‘objectivity in
review’ and ‘periodic review’. Recommendations have been provided with an outlook to
improve effectiveness of PMS in Indian construction firms.
Scholastica Seem Matunge (2013) has conducted a study on “Employee perception on
effectiveness of performance appraisal system the objective of this study was to investigate
employee perception of the effectiveness of performance appraisal system at the Teachers
Service Commission, Kenya. The study adopted a descriptive survey of the Teachers’ Service
Commission. The researcher collected primary qualitative data from employees of TSC.
Stratified and simple random sampling techniques were applied in arriving at the sample size.
The study established that the performance appraisal system used by the Teachers Service
Commission is simple and has been consistent over time. All the employees of the commission
are subjected to the same standards as far as the performance appraisal system is concerned.
However, the system does not seem to involve all the employees during the development
process. It also has several loopholes that encourage subjective evaluation of the employees.
They include lack of knowledge of the appraisee, lack of clarity on the parameters used, lack
of communication to enhance feedback on performance, personal differences between
appraiser and appraise and collective responsibility in organizational activities. The study
recommends that the entire system needs to be overhauled since it has some loopholes that
need to be addressed. The study also recommends that the performance appraisal system needs
to be reviewed in order to ensure that it is based on ideals that are more realistic.

this research was conducted with objective to investigate the effectiveness of performance
appraisal system and its relationship with the employee motivation, involvement and
commitment in leading Small and Medium scale Enterprises (SMEs), Tiruchirapalli-District,
Tamil Nadu. This study gives a new dimension to Performance Appraisal System for
employees and employers in Indian SME’s. Also, many relevant results were showing that the
following subsequent components such as Appraisal Method, Fairness outcome, Fairness
Process, Goal congruity, vi Employee Participation, Performance Feedback, Performance
Based Pay and Performance appraisal Feedback have a strong relationship with the Effective
performance appraisal process in SMEs.