PERFORMANCE APPRAISAL

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OBJECTIVES OF STUDY
A) Primary Objectives
1) To get an insight into the relative importance of performance appraisal in organization. 2) To study the effectiveness of performance appraisal system in different organization. 3) To study the practical application of performance appraisal. 4) To compare appraisal system of different organization and find out the most common parameters for appraisal. 5) To study the performance appraisal system in different organization. 6) To study the transformation of performance appraisal form traditional to modern. 7) To get an insight into the relative importance of performance appraisal in organization. 8) To study the effectiveness of performance appraisal system in different organization. 9) To study the practical application of performance appraisal. 10) To compare appraisal system of different organization and find out the most common parameters for appraisal. 11) How can companies use performance appraisal as an effective tool to achieve organisational effectiveness and efficiency.

B) Secondary Objectives.
1) To observe the work environment in organization. 2) To get experience and expertise in making projects. 3) To enhance my communication skills. 4) To increase my confidence.

LIMITATIONS OF STUDY
1) To get contacts of HR Mangers for interviews was difficult. 2) Getting the views and opinion of the interviewee (HR Manager) was a difficult task. 2

OVERVIEW
Performance appraisals are a systematic way of evaluating the standard of an employees performance. Steps for developing a systematic performance appraisal 1. Identify key performance criteria Development of key performance criteria should be based on a comprehensive job description and undertaken in consultation with employees. 2. Develop appraisal measures In order to obtain accurate and valid performance appraisals, appraisal measures should be tailored to the specific job or job family (i.e., groups of similar jobs). An evaluation of factors in the work environment which help or hinder performance is also recommended. This ensures that realistic expectations are set for employees performance, and is also likely to increase the perceived fairness and acceptability of performance appraisals.

3. Collect performance information from different sources

Traditionally, it has been the sole responsibility of managers / supervisors to assess performance. However, other organisational members (e.g., clients, coworkers, subordinates) can be a valuable source of information as they are likely to have exposure to different aspects of an employees performance. Collecting information from multiple sources can increase the accuracy of performance evaluation (i.e., reduce bias), and increase employees perceptions of fairness.

4. Conduct an appraisal interview

The two central purposes of the appraisal interview are to: 1. Reflect on past performances to identify major achievements, areas for further improvement, and barriers / facilitators to effective performance 2. Identify goals and strategies for future work practice.

The appraisal interview should be a constructive, two-way exchange between the supervisor and employee, with preparation for the interview done by both parties beforehand.

5. Evaluate the appraisal process

The performance appraisal process should undergo regular review and improvement. For example, focus groups or surveys could be conducted to gauge employees perceptions of the appraisal process. A successful performance appraisal process should demonstrate a change in both the ratings of employees performance and aspects of the work environment that impact upon work performance.

Best practice in performance appraisal

In essence, best practice in performance appraisals involves: Integrating performance appraisal into a formal goal setting system Basing appraisals on accurate and current job descriptions Offering adequate support and assistance to employees to improve their performance (e.g., professional development opportunities) Ensuring that appraisers have adequate knowledge and direct experience of the employees performance Conducting appraisals on a regular basis.

MEANING AND DEFINITION OF PERFORMANCE APPRAISAL

erformance appraisal is a formal system that evaluates the quality of a employees performance. An appraisal should not be viewed as an end in itself, but rather as an

important process within a broader performance management system that links: Organisational objectives Day-to-day performance Professional development Rewards and incentives In simple terms, appraisal may be understood as the assessment of an individuals performance in a systematic way, the performance being measured against such factors as job knowledge, quality, and quantity of output, initiative, leadership abilities, supervision, dependability, cooperation, judgment, versatility, health, and the like. Assessment should not be confined to past performance alone. Potentials of the employee for future performance must also be assessed. A formal definition of performance appraisal is: It is the systematic evaluation of the individual with respect to his or her performance on the job and his or her potential for development. A more comprehensive definition is: Performance appraisal is a formal, structured system of measuring and evaluating an
employees job related behaviors and outcomes to discover how and why the employee is presently performing on the job and how the employee can perform more effectively in the future so that the employee, organization, and society all benefit.

ESSENTIALS FOR A SUCCESSFUL PERFORMANCE APPRAISAL SYSTEM

Basing appraisals on accurate and current job descriptions 5

 Ensuring that appraisers have adequate knowledge and direct experience of the employees performance Providing ratings via aggregated anonymous feedback when multiple sources of information are used Incorporating performance appraisals into a formal goal setting system Offering adequate support and assistance to employees such as professional development opportunities in order to improve their performance Conducting appraisals on a regular basis (at least two times a year) rather than annually. If resource constraints do not permit frequent formal appraisals, consider conducting one formal appraisal annually, with a review of progress in the mid-year and ongoing review in regular supervision meetings

USING PERFORMANCE APPRAISAL TO ADDRESS WORKFORCE DEVELOPMENT CHALLENGES

Regular performance appraisals provide a useful opportunity to conduct a check-up on various workforce development issues that may impact on employees effectiveness and well being. Performance appraisals can be used to: Recognise, reward and support effective performance Develop and reward effective teamwork Identify and manage issues likely to impact on retention Monitor and support employees well being.

Recognise, reward and support effective performance Ensuring employees receive adequate rewards and recognition is a key workforce development issue for the performance. Performance appraisals provide a good opportunity to formally recognise employees achievements and contributions to the organisation, and to ensure a clear link is maintained between performance and rewards. The appraisal interview can also be used as 6

a vehicle to demonstrate supervisory and organisational support for employees by discussing barriers and supports to effective performance, and strategies to address problems or difficulties.

Develop and reward effective teamwork The appraisal interview is also a useful vehicle for recognising and rewarding employees contributions to various teams in the organisation, especially if appraisal information is gained from team members. An appraisal of the team as a whole can also be a useful strategy to recognise and reward team performance, and to identify strategies to improve team functioning. Identify and manage issues likely to impact on retention Open and constructive performance appraisals can be useful to identify issues that are likely to impact on employees willingness to stay with the organisation in the longer-term. Key factors associated with retention include salary and remuneration, professional development opportunities, and work-related demands and stress. The appraisal interview provides a good opportunity for a check-up regarding employees satisfaction with their working conditions and environment, and a discussion of strategies to address any problems or issues. Monitor and support employees well being Performance appraisal interviews are a good opportunity to discuss employees health and well being in the workplace, particularly in regard to factors that contribute to feelings of stress and experiences that promote satisfaction with their work.

OBJECTIVES OF PERFORMANCE APPRAISAL

Salary Increase
Performance appraisal plays a role in making decision about salary increase. Normally salary increase of an employee depends upon on how he is performing his job. There is continuous

evaluation of his performance either formally or informally. This may disclose how well an employee is performing and how much he should be compensated by way of salary increase.

Promotion
Performance appraisal plays significant role where promotion is based on merit and seniority. Performance appraisal discloses how an employee is working in his present job and what are his strong and weak points. In the light of these, it can be decided whether he can be promoted to the next higher position.

Training and Development

Performance appraisal tries to identify the strengths and weakness of an employee on his present job. This information can be used for devising training and development programmes appropriate for overcoming weaknesses of employees.

Feedback
Performance appraisal provides feedback to employees about their performance. A person works better when he knows how he is working. This works in two ways, firstly, the person gets feedback about his performance. Secondly, when the person gets feedback about his performance, he can relate his work to the orgaisational objectives.

Pressure on Employees
Performance appraisal puts a sort of pressure on employees for better performance. If the employees are conscious that they are being appraised in respect of certain factors and their future largely depends on such appraisal.

Others
a) Identifying systemic factors that are barriers to, or facilitators of, effective performance.
b) To confirm the services of probationary employees upon their completing the probationary period satisfactorily. c) To improve communication. Performance appraisal provides a format for

dialogue between the superior and the subordinate, and improves understanding of personal goals and concerns. This can also have the effect of increasing the trust between the rater and the ratee. d) To determine whether HR programmes such as selection, training, and transfer have been effective or not.

HOW TO CONDUCT A PERFORMANCE APPRAISAL PROCESS

T he following five-step approach to conducting a systematic performance appraisal is recommended: 1) Identify key performance criteria 2) Develop appraisal measures 3) Collect performance information from different sources 4) Conduct an appraisal interview 5) Evaluate the appraisal process.

STEP 1: IDENTIFY KEY PERFORMANCE CRITERIA

Perhaps one of the most challenging aspects of setting up a performance appraisal is deciding what to assess. In essence, four key dimensions of performance should be considered in a performance appraisal. KEY DIMENSIONS OF PERFORMANCE Competencies Behaviours Results / outcomes Knowledge, skills, and abilities relevant to performance Specific actions conducted and / or tasks performed Outputs, quantifiable results, measurable outcomes and achievements, objectives attained Organizational citizenship behaviours Actions that are over and above usual job responsibilities

To ensure that the performance criteria are relevant to work practice and acceptable to appraisers and employees: i) Base the performance criteria on an up-to-date job description ii) Develop criteria in consultation with appraisers and employees.

i)

Base the performance criteria on an up-to-date job description:

Clear and explicit links between performance appraisal and a job description will ensure the relevance of the appraisal. If a detailed job description is not available or is out-of-date, it is strongly recommended that an accurate job description be developed prior to conducting a performance appraisal.

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ii) Develop criteria in consultation with appraisers and employee:

Linking performance appraisals with job descriptions can help to focus the appraisal process on the key competencies, behaviours and outcomes associated with a particular role or position. It can also be useful to consult with employees to:

Ensure that key aspects of a role / position are represented in the job description, for example: Conduct assessments Plan interventions Manage cases Liaise with and refer to other providers Keep up-to-date service records and case notes Write reports Develop a clear understanding of the relative importance of various competencies, Behaviours and outcomes Identify how these key competencies, behaviours and outcomes can be fairly and accurately assessed.
Employees are more likely to accept and be satisfied with the appraisal system if they participate in the development of appraisal criteria and measures, and in the process of conducting appraisals. Strategies for facilitating employees participation include:

Engagement in formal meetings or informal discussions with supervisors to seek input and / or feedback on appraisal measures and criteria. Representation on groups / committees involved in the design and implementation of performance appraisals Inclusion of self appraisals in the appraisal process Providing opportunities for employees to contribute to the performance appraisal of coworkers and managers / supervisors.

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It is also important that employees perceive the appraisal system to be equitable and fair.

STEP 2: DEVELOP APPRAISAL MEASURES

Once clear and specific performance criteria have been developed, the next step is to decide how to assess employees performance. It is recommended that a structured and systematic approach is taken to assessing performance. Problems that arise when an unstructured blank sheet approach is used include: Increased chance of appraiser errors (i.e., reduced accuracy) Knowledge, skills and abilities most critical to job performance may be overlooked (i.e., feedback may have limited impact on performance effectiveness) Reduced consistency between appraisers (i.e., evaluations may reflect differences between appraisers rather than actual differences in a employees performance) Perceptions of subjectivity in evaluations, which may in turn, reduce employees satisfaction with, and acceptance of appraisals. There are three important considerations in the design of appraisal measures: i) Generic versus individually tailored measures ii) Objective versus subjective assessments iii) Assessing the impact of the work environment on performance.

i)

Generic versus individually tailored measures

Many workplaces use a generic rating form for all employees irrespective of their role or position within the organisation. Although this approach can save time and minimise cost, the accuracy and relevance of appraisals may be significantly diminished. The one size fits all approach of generic measures may overlook important performance criteria that are relevant to particular jobs, and may also include criteria that are irrelevant to others. Where time and other resources permit, it is more appropriate to construct appraisal formats tailored to specific jobs or families of jobs. If the development of job-specific (i.e., individually tailored) appraisal formats is beyond the resource capacity of the organisation, an alternative would be to develop two groups of criteria: 12

1) Core competencies that have applicability to the performance appraisal of all employees

within the organisation 2) Additional competencies applicable only to some jobs and included in the performance appraisal if relevant.

ii) Objective versus subjective assessments

A basic distinction between different types of appraisal measures concerns the use of objective or subjective criteria.

Objective assessments of work performance

Objective measures of job performance involve counts of various work-related behaviours. Some common objective job performance measures include Absenteeism (number of days absent) Accidents (number of accidents) Incidents at work (number of incidents / assaults / altercations) Lateness (days late) Meeting deadlines. Objective measures can be relatively quick and easy to obtain (given good organisational record-keeping). However, it can be unwise to place too much emphasis on these types of objective measures. An exclusive focus on results / outcomes may mask factors that impact on employees performance that are beyond their control (e.g., client workload).

Subjective assessments of work performance

Subjective measures rely on the judgment of an appraiser (self, coworkers, or supervisor). Subjective assessments are commonly used in performance appraisals and often involve the use of rating scales. Subjective assessments are more likely to provide accurate performance appraisals when: The behaviours and outcomes being assessed are stated in clear behavioural terms The employee understands the measures (e.g., rating scales) being used to evaluate their

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 performance, and agree that the measures are fair and accurate (i.e., measures what it is supposed to) Measurement is as brief as possible whilst addressing essential behaviours and outcomes (frustration with long and unwieldy questionnaires may introduce error in responses).

iii) Assessing the impact of the work environment on performance

The goal of a performance appraisal is to support and improve employees performance and effectiveness. Therefore, it makes sense for an appraisal to include an assessment of factors in the work environment that help or hinder a employees capacity to perform effectively. Explicit assessment of environmental factors is also likely to increase the perceived fairness and acceptability of performance appraisals. For example, an employees capacity to provide effective treatment interventions is influenced by factors such as:

Access to private, soundproofed, adequately sized rooms for counselling Availability of validated, user-friendly assessment tools Availability of reliable and approachable management / administration.

STEP 3: COLLECT PERFORMANCE INFORMATION FROM DIFFERENT SOURCES

Once the appraisal measures are developed, the next step involves collection of accurate performance information. A common trap is to begin noting observations of employees just before conducting appraisals. This is likely to give an inaccurate picture of a employees performance. Ideally, employees performance should be observed in a systematic way over time (e.g., in a diary). This method ensures the accuracy of information about their performances. Many employees in the organisation operate with a relatively high degree of autonomy. This combined with the heavy workload of most managers / supervisors, may limit opportunities to

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conduct regular observation of employees performance. In addition, perceptions of ongoing monitoring may foster a sense of surveillance which can damage staff morale. A more suitable approach may be to keep critical incident reports that note specific examples of both excellent and unsatisfactory performances. Supervisors can also encourage employees to keep track of their own performance records such as emails or letters that commend them on their achievements. Traditionally, it has been the sole responsibility of managers / supervisors to assess performance. However, other organisational members can be a valuable source of information as they are likely to have exposure to different aspects of a employees performance. This approach is known as 360degree feedback. For instance, coworkers can provide valuable information on teamwork skills, and subordinates can provide useful information on leadership style. There are many advantages to obtaining feedback on performance from sources other than supervisors or managers. Key benefits include:

Accuracy and reduced bias (incorrect information from one source can be corrected from another) Increased likelihood that employees will perceive the performance appraisal system to be a fair and accurate reflection of their performance (compared to relying on supervisor ratings alone). If time and resources are limited, it is recommended that supervisor appraisals be conducted in conjunction with self-assessment. Including self-assessments as part of the appraisal process is likely to enhance employees commitment to, and satisfaction with, the appraisal process. It also provides employees with an opportunity to identify barriers and facilitators to effective performance in their work environment.

Five different sources of performance appraisal information are considered here: i) Manager / supervisor appraisals ii) Self appraisals iii) Coworker appraisals iv) Subordinate appraisals v) Client appraisals.

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i) Manager / supervisor appraisals:

Managers / supervisors play a central role in the appraisal process, and should always be included as one of the main appraisers. In essence, managers and supervisors have two roles in performance appraisal: 1. Judge: assessing performance 2. Coach: providing constructive feedback and identifying areas for improvement. Performing both roles simultaneously can be difficult. Employees may be reluctant to admit areas for improvement if performance assessment is linked with desired outcomes such as pay, promotion or opportunities to work in desired areas. One solution is to separate the judge and coach roles by conducting separate appraisal meetings.

ii) Self-appraisals:
The process of evaluating ones own performance can help to increase employees commitment to the appraisal process, perceptions of appraisal fairness, and satisfaction with the appraisal process. Self-appraisal can also be useful for identifying areas for development. Not surprisingly, self-appraisals are usually biased towards leniency. Strategies to increase the accuracy of self appraisals include: a. Using clear definitions of performance criteria linked to specific, observable behaviours b. Informing employees that their ratings will be checked and compared to other sources of c. appraisal (i.e., for accuracy) d. Ensuring employees receive regular feedback on their performance. It is recommended that self appraisals are used for professional development purposes, rather than for making administrative decisions (i.e., pay increases, promotion).

iii) Co-worker appraisals:

Coworkers can provide valuable feedback on performance, particularly where teamwork occurs. Coworkers are often aware of different aspects of a employees performance that managers /supervisors may not have the opportunity to observe. In addition, as there is usually more than one coworker who rates a workers performance, their evaluations tend 16

to be more reliable. Coworker evaluations, however, may be biased towards those individuals most well liked in an organisation (i.e., friendship bias). Furthermore, coworker appraisals may have a negative impact on teamwork and cooperation if employees are competing with one another for organizational incentives and rewards. It is recommended that coworker appraisals are used for professional development rather than administrative decisions.
iv)

Subordinate appraisals:
Subordinates are a valuable source of information regarding particular aspects of a supervisor or leaders performance such as communication, team building or delegation. Subordinates can provide feedback to help managers / supervisors develop their skills in these areas. The focus should be on aspects of managerial performance that subordinates are able to comment upon. This source of appraisal may only be appropriate in larger organisations where there are sufficient subordinates to allow anonymity.

v) Client appraisals:
Clients may also offer a different perspective on a employees performance, particularly for jobs that require a high degree of interaction with people. For example, client appraisals can be a valuable source of feedback regarding the quality of service provision (e.g., the quality of interaction, degree of empathy, level of support, degree of professionalism). Organisations often have performance contracts that specify goals and deliverables for client outcomes. Whilst it is important that organisational goals and deliverables are reflected in the appraisal criteria for individuals and teams, it is recommended that particular care be taken if incorporating client outcomes. Relying on client outcomes as an indicator of performance can have undesirable effects due to the complex and sensitive nature of work. A range of factors may influence client outcomes, many of which are outside the control of an individual employee. It is rare for a successful (or otherwise) outcome to be the sole result of one persons efforts. This makes client outcomes a poor reflection of the quality of treatment provided by the employee. For example, good employee performance will not always bring about client improvements, and client relapses may not be due to poor employee performance. 17

In addition to considering client outcomes, it may also be beneficial to focus on employees skills and abilities in providing services per se (i.e., independent of client outcomes).

Strategies to support appraisers and enhance appraisal accuracy

Rating another persons performance is not an easy task, particularly with complex jobs or performance criteria. Strategies to support appraisers and increase the likelihood of accurate assessments include:

Providing practical training in rating techniques, which includes opportunities to practice appraising performance and providing feedback Limiting the assessment to performance criteria that an appraiser has observed / experienced in regard to the employee Providing structured assessment tools with clear explanations regarding the criteria to be assessed, and performance standards.

STEP 4: CONDUCT AN APPRAISAL INTERVIEW

The next step in a performance appraisal is to conduct the appraisal interview. The two central purposes of the appraisal interview are to: Reflect on past performance to identify major achievements, areas that require further development, and barriers / facilitators to effective performance Identify goals and strategies for future work practice. As discussed below, supervisors and managers can use a range of strategies to ensure that the appraisal interview is positive, constructive and of greatest benefit for employees effectiveness.

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Before the interview: Help employees to become familiar and comfortable with talking about their performance engaging in regular, informal communication on work progress, potential obstacles and issues, possible solutions and assistance Encourage employees to prepare employees should be encouraged to review their own performance before the interview Do your own preparation plan ahead. Draft a list of the issues that you want to address with the employee (i.e., strengths and weaknesses of performance, strategies to improve performance). Give specific examples of the employees performances that you want to highlight. During the interview Encourage employee participation start by inviting the employee to share their views about their performance Begin with positive feedback to put the employee at ease Make it a two-way discussion Set goals mutually ensure employees participate in determining specific, challenging but attainable goals for future work performance Ensure that there is a clear agreement on performance objectives and the evaluation criteria for the next year Keep written records of the appraisal interview on which both parties have signed off.

After the interview: Coach employees regularly provide frequent feedback to help employees improve their performance Assess progress towards goals frequently periodic reviewing of progress towards goals helps keep behaviour on track and enhances commitment to effective performance.

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Relate rewards to performance by linking appraisal results to employment decisions such as promotions and salaries, employees are more likely to prepare for, participate in, and be satisfied with the appraisal system.

STEP 5: EVALUATE THE APPRAISAL PROCESS

As with any organisational system, the performance appraisal process should undergo regular review and improvement. For example, the process of performance appraisal could be evaluated by conducting focus groups or surveys with employees to gauge their satisfaction with the appraisal process (and suggestions for improvements). It may also be useful to monitor the types of issues raised by supervisors and employees over time. A successful performance appraisal process should demonstrate a change in both the ratings of employees performance (i.e., ideally performance ratings should improve, or at least remain at a satisfactorily stable level over time) and the work environment (i.e., evidence that significant barriers to work practice are being addressed by the organisation).

METHODS OF

PERFORMANCE APPRAISAL

Traditional methods
1) Rating Scales:
The rating scale method offers a high degree of structure for appraisals. Each employee trait or characteristic is rated on a bipolar scale that usually has several points ranging from poor to excellent (or some similar arrangement). The traits assessed on these scales include employee attributes such as cooperation, communications ability, initiative, punctuality and technical (work skills) competence. The 20

nature and scope of the traits selected for inclusion is limited only by the imagination of the scales designer, or by the organizations need to know. The one major provision in selecting traits is that they should be in some way relevant to the appraisees job. Advantages The greatest advantage of rating scales is that they are structured and standardised. This allows ratings to be easily compared and contrasted - even for entire workforces. Each employee is subjected to the same basic appraisal process and rating criteria, with the same range of responses. This encourages equality in treatment for all appraisees and imposes standard measures of performance across all parts of the organization. Rating scale methods are easy to use and understand. The concept of the rating scale makes obvious sense; both appraisers and appraisees have an intuitive appreciation for the simple and efficient logic of the bipolar scale. The result is widespread acceptance and popularity for this approach. Disadvantages Trait Relevance Are the selected rating-scale traits clearly relevant to the jobs of all the appraisees? It is inevitable that with a standardised and fixed system of appraisal that certain traits will have a greater relevance in some jobs than in others. For example, the trait initiative might not be very important in a job that is tightly defined and rigidly structured. In such cases, a low appraisal rating for initiative may not mean that an employee lacks initiative. Rather, it may reflect that fact that an employee has few opportunities to use and display that particular trait. The relevance of rating scales is therefore said to be context-sensitive. Job and workplace circumstances must be taken into account. Systemic Disadvantage Rating scales, and the traits they purport to measure, generally attempt to encapsulate all the relevant indicators of employee performance. There is an assumption that all the true and best indicators of performance are included, and all false and irrelevant indicators are excluded. This is an assumption very difficult to prove in practice. It is possible that an employees performance may depend on factors that have not been included in the selected traits. Such 21

employees may end up with ratings that do not truly or fairly reflect their effort or value to the organization. Employees in this class are systemically disadvantaged by the rating scale method. Perceptual Errors This includes various well-known problems of selective perception (such as the horns and halos effect) as well as problems of perceived meaning. Selective perception is the human tendency to make private and highly subjective assessments of what a person is really like, and then seek evidence to support that view (while ignoring or downplaying evidence that might contradict it). This is a common and normal psychological phenomenon. All human beings are affected by it. In other words, we see in others what we want to see in them. An example is the supervisor who believes that an employee is inherently good (halo effect) and so ignores evidence that might suggest otherwise. Instead of correcting the slackening employee, the supervisor covers for them and may even offer excuses for their declining performance. On the other hand, a supervisor may have formed the impression that an employee is bad (horns effect). The supervisor becomes unreasonably harsh in their assessment of the employee, and always ready to criticize and undermine them. The horns and halo effect is rarely seen in its extreme and obvious forms. But in its more subtle manifestations, it can be a significant threat to the effectiveness and credibility of performance appraisal. Perceived Meaning Problems of perceived meaning occur when appraisers do not share the same opinion about the meaning of the selected traits and the language used on the rating scales. For example, to one appraiser, an employee may demonstrate the trait of initiative by reporting work problems to a supervisor. To another appraiser, this might suggest an excessive dependence on supervisory assistance - and thus a lack of initiative. As well, the language and terms used to construct a scale - such as Performance exceeds expectations or Below average skill - may mean different things to different appraisers.

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Rating Errors The problem here is not so much errors in perception as errors in appraiser judgement and motive. Unlike perceptual errors, these errors may be (at times) deliberate. The most common rating error is central tendency. Busy appraisers, or those wary of confrontations and repercussions, may be tempted to dole out too many passive, middle-of-theroad ratings (e.g., satisfactory or adequate), regardless of the actual performance of a subordinate. Thus the spread of ratings tends to clump excessively around the middle of the scale. This problem is worsened in organizations where the appraisal process does not enjoy strong management support, or where the appraisers do not feel confident with the task of appraisal.

2) Check-list Method:
Under this method, checklist of Statements of Traits of employee in the form of Yes or No based questions is prepared. Here, the rater only does the reporting or checking and HR department does the actual evaluation. The rater concerned has to tick appropriate answers relevant to the appraisees. When the check-list is completed, it is sent to HR department for further processing. Various questions in the check list may have either equal weightage or more weightage may be given to those questions which are more important. The HR department then calculates the total scores which show the appraisal result of an employee. Advantages economy, ease of administration, limited training required, standardization. Disadvantages Raters biases, use of improper weights by HR Dept, does not allow rater to give relative ratings. 3) Force Choice Method: A series of statements arranged in the blocks of two or more are given and the rater indicates which statement is true or false. The rater is forced to make a choice. HR department does actual assessment. Advantages Absence of personal biases because of forced choice. Disadvantages Statements may not be correctly framed.

4) Force Distribution Method:

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One of the problems faced in large organizations is relative assessment tendencies of raters. Some are too lenient and others too severe. This method overcomes that problem. It forces every one to do a comparative rating of all the employees on a predetermined distribution pattern of good to bad. Say 10% employees in Excellent Grade, 20% in Good Grade, 40% in Average Grade, 20% in Below Average Grade and 10% in Unsatisfied grade. The real problem of this method occurs in organizations where there is a tendency to pack certain key departments with all good employees and some other departments with discards and laggards. Relatively good employees of key departments get poor rating and relatively poor employees of laggards departments get good rating.

5) Critical Incident Method:

In this method, only critical incidents and behavior associated with these incidents are taken for evaluation. This method involves three steps. A test of noteworthy on the job behavior is prepared. A group of experts then assigns scale values to them depending on the degree of desirability for the job. Finally, a checklist of incidents which define good and bad employees is prepared. Advantages ---This method is very useful for discovering potential of employees who can be useful in critical situation. Disadvantages --- a) Negative incidents are, generally, more noticeable than positive ones. b) The recording of incidents is a core to the superior and may be put off and easily forgotten. c) Overly close supervision may result.

6) Essay Method:
In the essay method approach, the appraiser prepares a written statement about the employee being appraised. The statement usually concentrates on describing specific strengths and weaknesses in job performance. It also suggests courses of action to remedy the identified problem areas. The statement may be written and edited by the appraiser alone, or it be composed in collaboration with the appraise.

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Advantages The essay method is far less structured and confining than the rating scale method. It permits the appraiser to examine almost any relevant issue or attribute of performance. This contrasts sharply with methods where the appraisal criteria are rigidly defined. Appraisers may place whatever degree of emphasis on issues or attributes that they feel appropriate. Thus the process is open-ended and very flexible. The appraiser is not locked into an appraisal system the limits expression or assumes that employee traits can be neatly dissected and scaled. Disadvantages Essay methods are time-consuming and difficult to administer. Appraisers often find the essay technique more demanding than methods such as rating scales. The techniques greatest advantage - freedom of expression - is also its greatest handicap. The varying writing skills of appraisers can upset and distort the whole process. The process is subjective and, in consequence, it is difficult to compare and contrast the results of individuals or to draw any broad conclusions about organizational needs.

7) Grading:
In this method, certain categories of abilities of performance are defined well in advance and person are put in particular category depending on their traits and characteristics. Such categories may be definitional like outstanding, good, average, poor, very poor or may be in terms of letter like A, B, C, D etc with A indicating the best and D indicating the worst. This method, however, suffers from one basic limitation that the rater may rate most of the employees at higher grades.

8) Performance Tests & Observations: This is based on the test of knowledge or skills.
The tests may be written or an actual presentation of skills. Tests must be reliable and validated to be useful. Advantage Tests only measure potential and not attitude. Actual performance is more a function of attitude of person than potential. Disadvantages Some times costs of test development or administration are high.

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9) Confidential Reports: Though popular with government departments, its application in

industry is not ruled out. Here the report is given in the form of Annual Confidentiality Report (ACR). The system is highly secretive and confidential. Feedback to the assessee is given only in case of an adverse entry. Disadvantage is that it is highly prone to biases and recency effect and ratings can be manipulated because the evaluations are linked to future rewards like promotions, good postings, etc.

10) Comparative Evaluation Method (Ranking & Paired Comparisons): These are
collection of different methods that compare performance with that of other co-workers. The usual techniques used may be ranking methods and paired comparison method. Ranking Method: administer. Paired Comparison Method: In this method each employee is paired with every Superior ranks his worker based on merit, from best to worst.

However how best and why best are not elaborated in this method. It is easy to

other employee in the same cadre and then comparative rating done in pairs so formed. The number of comparisons may be calculated with the help of a formula N x (N-1) / 2. The method is too tedious for large departments and often such exact details are not available with rater.

A)

Modern Methods

1) MBO

(Appraisal By Results) : The use of management objectives was first widely

advocated in the 1950s by the noted management theorist Peter Drucker. MBO (management by objectives) methods of performance appraisal are results-oriented. That is, they seek to measure employee performance by examining the extent to which predetermined work objectives have 26

been met. Usually the objectives are established jointly by the supervisor and subordinate. Once an objective is agreed, the employee is usually expected to self-audit; that is, to identify the skills needed to achieve the objective. Typically they do not rely on others to locate and specify their strengths and weaknesses. They are expected to monitor their own development and progress. Advantages The MBO approach overcomes some of the problems that arise as a result of assuming that the employee traits needed for job success can be reliably identified and measured. Instead of assuming traits, the MBO method concentrates on actual outcomes. If the employee meets or exceeds the set objectives, then he or she has demonstrated an acceptable level of job performance. Employees are judged according to real outcomes, and not on their potential for success, or on someones subjective opinion of their abilities. The guiding principle of the MBO approach is that direct results can be observed, whereas the traits and attributes of employees (which may or may not contribute to performance) must be guessed at or inferred. The MBO method recognizes the fact that it is difficult to neatly dissect all the complex and varied elements that go to make up employee performance. MBO advocates claim that the performance of employees cannot be broken up into so many constituent parts - as one might take apart an engine to study it. But put all the parts together and the performance may be directly observed and measured. Disadvantages MBO methods of performance appraisal can give employees a satisfying sense of autonomy and achievement. But on the downside, they can lead to unrealistic expectations about what can and cannot be reasonably accomplished. Supervisors and subordinates must have very good reality checking skills to use MBO appraisal methods. They will need these skills during the initial stage of objective setting, and for the purposes of self-auditing and self-monitoring. Unfortunately, research studies have shown repeatedly that human beings tend to lack the skills needed to do their own reality checking. Nor are these skills easily conveyed by training. Reality itself is an intensely personal experience, prone to all forms of perceptual bias. One of the strengths of the MBO method is the clarity of purpose that flows from a set of well-articulated objectives. But this can be a source of weakness also. It has become very apparent that the modern organization must be flexible to survive. Objectives, by their very nature, tend to impose 27

a certain rigidity. Of course, the obvious answer is to make the objectives more fluid and yielding. But the penalty for fluidity is loss of clarity. Variable objectives may cause employee confusion. It is also possible that fluid objectives may be distorted to disguise or justify failures in performance.

2) Assessment Center Method: This technique was first developed in USA and UK in
1943. An assessment centre is a central location where managers may come together to have their participation in job related exercises evaluated by trained observers. It is more focused on observation of behaviours across a series of select exercises or work samples. Assesses are requested to participate in in-basket exercises, work groups, computer simulations, role playing and other similar activities which require same attributes for successful performance in actual job. Advantages Well-conducted assessment centre can achieve better forecasts of future performance and progress than other methods of appraisals. Also reliability, content validity and predictive ability are said to be high in Assessment Centres. The tests also make sure that the wrong people are not hired or promoted. Finally, it clearly defines the criteria for selection and promotion. Disadvantages Concentrates on future performance potential. No assessment of past performance. Costs of employees travelling and lodging, psychologists. Ratings strongly influenced by assessees inter-personal skills. Solid performers may feel suffocated in simulated situations.

3) 360o Appraisal: It is a technique in which performance data/feedback/rating is collected

from all sections of people employee interacts in the course of his job like immediate supervisors, team members, customers, peers, subordinates and self with different weightage to each group of raters. This technique has been found to be extremely useful and effective. It is especially useful to measure inter-personal skills, customer satisfaction and team building skills. One of the biggest advantages of this system is that assesssees cannot afford to neglect any constituency and has to show all-round performance. However, on the negative side, receiving feedback from multiple sources can be intimidating, threatening, expensive and time consuming.

28

4) Psychological Appraisals: These appraisals are more directed to assess employees

potential for future performance rather than the past one. It is done in the form of in-depth interviews, psychological tests, and discussion with supervisors and review of other evaluations. It is more focused on employees emotional, intellectual, and motivational and other personal characteristics affecting his performance. This approach is slow and costly and may be useful for bright young members who may have considerable potential. However quality of these appraisals largely depends upon the skills of psychologists who perform the evaluation.

ESSENTIALS FOR A SUCCESSFUL PERFORMANCE APPRAISAL SYSTEM

Basing appraisals on accurate and current job descriptions Ensuring that appraisers have adequate knowledge and direct experience of the employees performance Providing ratings via aggregated anonymous feedback when multiple sources of information are used Incorporating performance appraisals into a formal goal setting system Offering adequate support and assistance to employees such as professional development opportunities in order to improve their performance Conducting appraisals on a regular basis (at least two times a year) rather than annually. If resource constraints do not permit frequent formal appraisals, consider conducting one formal appraisal annually, with a review of progress in the mid-year and ongoing review in regular supervision meetings

USING PERFORMANCE APPRAISAL TO ADDRESS WORKFORCE DEVELOPMENT CHALLENGES:

Regular performance appraisals provide a useful opportunity to conduct a check-up on

29

various workforce development issues that may impact on employees effectiveness and well being. Performance appraisals can be used to: Recognise, reward and support effective performance Develop and reward effective teamwork Identify and manage issues likely to impact on retention Monitor and support employees well being.

Recognize, reward and support effective performance

Ensuring employees receive adequate rewards and recognition is a key workforce development issue for the performance. Performance appraisals provide a good opportunity to formally recognize employees achievements and contributions to the organization, and to ensure a clear link is maintained between performance and rewards. The appraisal interview can also be used as a vehicle to demonstrate supervisory and organizational support for employees by discussing barriers and supports to effective performance, and strategies to address problems or difficulties.

Develop and reward effective teamwork

The appraisal interview is also a useful vehicle for recognizing and rewarding employees contributions to various teams in the organization, especially if appraisal information is gained from team members. An appraisal of the team as a whole can also be a useful strategy to recognize and reward team performance, and to identify strategies to improve team functioning.

Identify and manage issues likely to impact on retention

Open and constructive performance appraisals can be useful to identify issues that are likely to impact on employees willingness to stay with the organization in the longer-term. Key factors associated with retention include salary and remuneration, professional development opportunities, and work-related demands and stress. The appraisal interview provides a good opportunity for a check-up regarding employees satisfaction with their working conditions and environment, and a discussion of strategies to address any problems or issues.

30

Monitor and support employees well being

Performance appraisal interviews are a good opportunity to discuss employees health and well being in the workplace, particularly in regard to factors that contribute to feelings of stress and experiences that promote satisfaction with their work. interviews are a good opportunity to discuss employees health and well being in the workplace, particularly in regard to factors that contribute to feelings of stress and experiences that promote satisfaction with their work.

Merits of Performance Appraisal

Assistance in self-improvement. Incentive to grow and develop. Effective training programmes. Introduction of sound personnel policies. Cordial employer-employee relationship. HR planning and development. 31

Employee communication. High Employee morale.

Demerits of Performance Appraisal

Time consuming.

Ineffective communication.

Absence of uniform standards.

Absence of effective participation of employees.

Resistance of employees to appraisal.

32

Halo effect.

Personal Bias.

33

AXIS BANK

Achieving Performance Excellence Employee Handbook on Performance Management System

34

OBJECTIVE
The objective of the new Performance Management System (PMS) is to devise a tool for driving organizational success by effectively managing team and individual performances. This tool would provide the basis for other HR Systems like monetary rewards, promotions and training.

METHODOLOGY
As a first step, a workshop was conducted by Hewitt Associates, HR consultants and our partner in this project, with the CMD, the ED and all the Departmental Heads in Central Office, to arrive at the performance measures for the Bank as a whole. The measures discussed and finally decided are under three main heads:

1. Financial Measures - representing the relevant financial numbers that the bank wants
to achieve.

2. Customer Measures - representing the important customer measures that reflect the
intended service levels and positioning among customers that the bank desires to achieve.

3. Capability Measures representing the key capabilities that will improve and sustain
the competitiveness of the bank.

In order to cascade these corporate measures down to the Departments/Zones/Branches and, consequently, to all the employees in the bank, a number of performance management workshops were also conducted.

The objectives of these workshops were to identify unique roles across the bank and to decide the Basic Responsibilities (BRs) and Key Result Areas (KRAs) for all the role holders performing unique roles. A unique role is a role that is fairly distinct from the other roles in the 35

Bank. If the purpose and the outcome expected from two different roles are one then for the purpose of the exercise they were considered as one unique role. E.g. a Tier III Branch Heads role is a unique role but is being performed by all the Branch Heads of the branches in that category.

Workshops were also conducted for all the departments in Central Office, one of the Zonal Offices (Western Zonal Office) and a representative sample of branches. Seventeen such workshops were conducted in all. For the purpose of the exercise the branches were divided into three categories: Tier I: The Main Branches handling the entire gamut of services offered by our bank. Tier II: The medium category branches, which have some corporate business in addition to retail business. Tier III: Branches handling primarily retail business. One workshop was conducted for a branch in each category, as due to geographical constraints it was not possible to include all the branches for the workshops. However, Branch Heads from other zones were called for all the three workshops. The details of the participating branches are as below:

Tier I II III

Representati ve Branch Fort Andheri Bandra

Other Participating Branch Heads Delhi Main, Chennai Main, Kolkata main, & Bangalore Main Jaipur, Vadodara & Golpark Gurgaon, Jayanagar & ShyamBazar

For the Zonal Office workshop, Western Zone was chosen as a sample. The other three Zonal Heads were also present for the workshop to arrive at a consensus on the various roles in the Zonal Offices.

36

The BRs and KRAs were mutually discussed between the role holder and the official to whom the role holder reports. After extensive discussions and subsequent agreement between the supervisor and the role holder the BRs and KRAs were decided. After the completion of the workshops the components and processes of the new PMS were finalized. The final design was presented to the CMD and approved by him. Once the design was complete, seven Communication Workshops were conducted, at Delhi and Ambala for the North Zone, Kolkata for the East Zone, Ahmedabad and Mumbai for the West Zone and Bangalore and Chennai for the South Zone. These workshops covered all the Branch Heads and senior level Zonal Office functionaries. The objectives of these workshops were: 1. To communicate to the participants the details of the new Performance Management System. 2. To obtain further feedback from them, so as to improve the design of the system. The design of the new PMS is now complete. The new PMS will involve a movement away from only an Annual Performance Appraisal to a more comprehensive process of having a Performance Planning Exercise, a Mid-Year Review and finally a Year-End Review. It will be a highly participative exercise and involves mutual goal setting and Self-Appraisal.

The details of the process and the concepts involved are explained in the following pages.

A) COMPONENTS OF PERFORMANCE:
37

In the new system of performance management the following three dimensions of performance will be measured and evaluated.
BASIC RESPONSIBILITIES KEY RESULT AREAS Deliver The results that individuals are expected to achieve for the organization What one delivers
COMPETENCIES

Do
The essential duties (tasks & activities) that individuals perform in a job or role What one does

Display The competencies (skills & behaviors) that individuals need to perform the job / role What one displays

The three dimensions of performance are explained below:

1. Basic responsibilities (BRs): The essential duties (tasks & activities) that individuals
perform in a job or role. They are the basic performance requirements from an employee, the day-to-day activities that the role holder performs.

2. Key Result Areas (KRAs): These are defined as the results that individuals are
expected to achieve for the organization. These are the targets/goals mutually agreed upon by the Appraiser and the Appraisee. KRAs should be measurable or verifiable. The KRAs need to be SMART, i.e.: Specific: Should ideally not be less than two or more than five. Measurable: It can be objectively assessed to a fair extent. Ambitious: Should involve certain degree of stretch on the part of the role holder Realistic: The targets should be practically achievable.

Timebound: They should be measured for a predetermined time period (maximum upto one financial year)
It has been decided that for each grade in the Bank there will be a relative weightage between the BRs and KRAs. 38

The weightages are:

Designation Executive DM Manager and and

Basic (%)

Responsibilities

Key Result Areas (%) 40 60 80

60 40 20

AVP VP and above

The concept behind this is that at the lower level the role is process oriented and hence has higher number of Basic Responsibilities and lesser number of KRAs, whereas at higher levels the role gets more target or outcome oriented. These percentages will be fixed across the Bank to maintain uniformity. However it is accepted that there are certain roles that, irrespective of the grades, are highly outcome oriented and have clearly defined and measurable business targets. These roles should therefore have higher weightage on KRAs. Hence, it has been decided that for the roles of Branch Head and Branch Sales Officer, irrespective of their grades, the relative weightage will be 20% for BRs and 80% for KRAs. Similarly for SEs the relative weightage will be 20% for BRs and 80% for KRAs. In certain other cases if the appraiser feels that the role is more target or process oriented, he can change the above-mentioned weightages but only in consultation with the Zonal Head. These weightages should be one of the above-mentioned combinations, i.e., 60-40, 40-60 or 20-80, for BRs and KRAs respectively.

39

By pre-defining the weightage to be given to Basic Responsibilities and KRAs, the relative importance of each of these dimensions will be captured for each role.

3. Competencies: The competencies are a set of knowledge, skills & behaviours that are
critical to successful performance and which an individual displays while performing the job. Competencies are described in behavioural terms that are observable and measurable. They are derived from the values and culture of the organization. The competencies form a crucial aspect of performance, as: They capture how the role is performed They help to assess and therefore develop critical aspects of performance that are qualitative They drive behaviours that are desired in the Bank Hence, competencies are important factors to be considered while making promotion/ development decisions Based on our Banks culture and values, seven competencies have been identified. These are :

40

Sr. No. 1 Competency Planning and Organizing Ability 2 Achievement Orientation Competency Definition Translates goals into workable action plans through prioritization, target allocation and optimal utilization of resources. Plans work schedules and timelines, with attention to detail and commitment to meeting deadlines. Exhibits initiative and drive to aggressively pursue ambitious targets, with consistent determination to overcome obstacles and achieve outstanding results. Understands the criticality of satisfying the customer. Analyses the needs of both internal and external customers, to respond appropriately and build long-term relationships with them. Leads and works in teams as required by his role. Transcends boundaries between various constituents of the team, to motivate them towards achieving the shared vision and team objectives. Builds internal commitment and external credibility, through effective negotiation and suitable influencing styles, based on a clear understanding of organizational decision-making dynamics. Displays the ability to grasp and process information, and to articulate 6 Communication Skills thoughts and ideas to convey/ use information in an open, transparent and meaningful manner. Manages and develops employees in ways that allow them to fully 7 Capability Building contribute to improving the results of the business, engages them, and helps them to grow personally and professionally. Generates innovative ideas to enhance effectiveness and efficiency of existing work processes, methods etc.

Customer Focus

Team Effectiveness

Negotiation 5 Skills

Each of these competencies has been further grouped into four levels of proficiency. 41

These levels are hierarchical in nature. The levels, for each of the competencies, will be predecided and affixed to each employee in the bank depending on his/her role. Hence each employee will have pre-decided levels of competency attached to him, on each of the competencies. The HR department in consultation with the Department/Zonal Head will decide on these levels. A sample of the proficiency levels for Communication Skills competency is shown below: Level 1 is the lowest level and Level 4 is the highest level. Behavioural indicators have been shown against each proficiency level to help identify a particular level of competency.

Proficiency

Behavioural Indicators 42

Level 1. Delivers Basic written & verbal Communication

Verbally conveys information so the intended message is understood by others. Develops written information that clearly and concisely conveys information to reader. Listens carefully and asks probing questions to obtain more clarity. Presents and structures information both written and verbal in a prioritized manner that is clear and easily understandable. Adapts to different individuals and tailors communication style accordingly. Uses active listening skills to understand non-verbal cues during discussions. Transfers ideas and opinions through various media by summarizing into key points what others can easily understand. Anticipates queries and prepares thoughtful responses. Understands the criticality of open and effective communication for the success of the organization. Establishes communication channels for work groups and teams that facilitate free flow of information. Ensures transparency of processes and actions which demonstrate what is communicated.

2. Customizes Communication

3. Channels & Directs Communication

4. Fosters Open Communication

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B. ROLE HOLDERS IN THE NEW PERFORMANCE MANAGEMENT SYSTEM: Appraisee Is the employee whose performance will be assessed. In the new PMS he is the
key driver of the process.

Appraiser - Is the person to whom the employee is accountable and whom he reports to on a
regular basis. He / She is responsible for the appraisees work allocation. The appraiser will be closely associated with the appraisee in all aspects of his performance management performance planning, feedback and ongoing coaching, & appraisal. It is the appraisers responsibility to decide, after discussion with the appraisee, his performance plan for the year as well as his final ratings during the year-end feedback & appraisal session.

Reviewer - Is an individual senior to the Appraiser. He ensures that the assessment of an

employee has been conducted objectively, with adequate transparency and consistency. He/ She also takes note of any disagreements voiced by the appraisee during the process. The reviewer is however not present during the Performance Planning and Mid Year / Year-End Feedback discussions.

Human Resources - HR will maintain all the performance records and ensure that the
process is conducted as per schedule and as per the norms and guidelines.

C.PERFORMANCE MANAGEMENT CYCLE

44

AXIS Bank Measures (March/April)

Promotions Pay Action

Development al Activities

Functional Goals

Individual Performance Planning (April) (For this yr. July End)

Year End Review and Feedback on Performance (Post March)

Performance Parameters

Ongoing Feedback

Mid Year Feedback on Performance (October) (For this year mid Nov)

D. STAGES OF THE NEW PERFORMANCE MANAGEMENT SYSTEM:

45

Three stages in the new PMS, Performance Planning, Mid Year Review and Year End Review. The first two stages i.e. Performance Planning and Mid Year review have been introduced for the first time. The new system envisages that the employee must be told about the performance expectations There are from him, for a financial year in the Performance Planning stage and these expectations should be reviewed in the Mid Year Review, so as to provide feedback to the employee and to update the Performance Plan.

(a) Performance Planning:

This is the first stage of the PMS and the success of the PMS is largely influenced by the quality of performance planning. During the performance planning process an employee discusses his role with his appraiser and gets a clear understanding of the performance expectations of his appraiser from his role with regard to the three components of performance as explained earlier i.e. Basic Responsibilities (BRs), Key Result Areas (KRAs) and Competencies.

(i) Basic Responsibilities (BRs)

The appraiser in consultation with the appraisee should decide and list a maximum of eight and a minimum of two activities that are performed by the appraisee daily or on an ongoing basis. These would need to be listed in the Basic Responsibilities section of the Performance Management Form. Usually a person performs many activities in a given role, but for the purpose of appraisal only those activities should be considered on which the appraisee spends considerable amount of time.

(ii) Key Result Areas (KRAs)

During this session, the appraiser and appraisee together should identify a maximum of five and a minimum of two KRAs for the Performance Period. During the performance

planning stage, the appraisee and the appraiser need to discuss how the KRAs are
linked to the Banks and their departmental / functional performance measures for the year.

46

Allocating Weights: The appraiser and the appraisee will jointly decide an appropriate Weightage for each KRA. This reflects the relative importance of each KRA and depends on: The amount of effort and time spent by the employee on the KRA The organisational context and focus for the year.

The sum of all the weights should add up to 100. (iii) Competencies
Competencies refer to the critical skills & behaviors that individuals need to perform the role, or which are perceived as desirable behaviours by the Bank. The appraiser and the appraisee should at this stage also discuss these critical Competencies and their supporting behaviors that are required for successful performance in his role. The appraiser should explain to the appraisee, what level of proficiency the employee needs to exhibit on a particular competency by citing the expected behavioural norms. After the Performance Planning Stage, the appraiser will send a mail to HR confirming that the same has been completed in consultation with the employee.

(b) Mid-Year Feedback:

Mid-Year Feedback provides an opportunity to the appraiser and the appraisee to review the performance at the middle of the year and plan ahead for the remaining part of the year. It is a mid course correction mechanism to review & update the performance plan and react to any changes in organizational priorities. It also provides an opportunity to reset the BRs and

the KRAs in case an employee is transferred or moved to another role.

47

Mid-Year Feedback will take place in October. During the Mid-Year Feedback the appraiser will give his feedback regarding the employees performance on each of the components of performance. The appraiser is required to clearly communicate to the appraisee the current level of performance and expectations on future performance for the remaining Performance Period i.e. the coming 6 months. The appraiser should also state areas of improvement to the employee, if any. At this stage the appraisee can inform the appraiser about his efforts and also bring to his notice any constraints in the process of fulfilment of his goals or KRAs. After this discussion, the Appraiser will note his comments on the form in the sections pertaining to the appraisees KRAs, basic responsibilities and competencies. The focus of the meeting is to obtain feedback on the progress made in each area & to identify development needs of the employee. Hence no rating needs to be given at this stage.

(c) Year-End Review:

After March, the appraiser and the appraisee will meet for the Year-End Feedback session and final performance appraisal. Before going for this session the appraisee needs to complete his Self-Appraisal for each of the Key Result Areas, Competencies and for BRs taken together. In the Self-Appraisal the appraisee should essentially describe how, in his view, he performed compared to what was agreed upon in the Performance Planning. This session will be in the form of a formal discussion between the appraisee and the appraiser. During this session, the extent of appraisees accomplishment of his KRAs, Basic responsibilities and Competencies will be discussed. The Appraiser will share his/her comments on each area of performance, giving examples, wherever required. After this discussion the Appraiser will rate the employees performance on the KRAs, Basic Responsibilities and Competencies articulated at the beginning of the year and also identify developmental needs, if any.

48

(d) Rating scale:

The employee will be rated on each of the KRAs, the competencies and the BRs (BRs taken as a whole) on a 4 point rating scale as shown below: 1- Did Not Meet Expectations: Performance was below the required level in this area of responsibility; definite improvement is needed immediately 2 - Met Most Expectations: Generally demonstrated the ability required and performed at a satisfactory level, with some need for development 3- Consistently Met All Expectations: Consistently demonstrated good level of performance 4- Exceeded Expectations: Surpassed all expectations in this area to a degree deserving particular recognition In case of competencies, the appraisee and the appraiser should, ideally, discuss the incidents where the employee demonstrated or did not demonstrate the required competencies & proficiency specific to his role. Based on these discussions, the appraiser will give feedback. The appraiser will indicate a rating for each competency based on the behaviours and skills demonstrated throughout the year vis--vis the desired proficiency levels.

49

(e) Arriving at the performance score:

As discussed earlier in the section on Performance Planning, the ratings need to be given for: Basic Responsibilities (BRs) - collectively for all the BRs, Each of the Key Result areas (KRAs) Each of the Competencies.

Performance Score will be calculated based on the ratings for BRs and KRAs. The method is as follows:

Basic Responsibilities
A rating (ranging between 1 & 4) will be given on Basic Responsibilities. Unlike the KRAs, rating will not be given on individual BRs but there will be a composite rating for all BRs taken together.

Key Result Areas (KRAs)

The final Rating on KRAs for the year would be the Weighted KRA Score (WKS). This value is the sum of Individual KRA Scores (K) on all KRAs, divided by 100 Individual KRA Score (K) = Rating (R) x Weight (W) Weighted KRA Score (WKS) = (K1+K2+K3+K4+K5)/100

50

Calculation of Performance Score

There are pre-defined weightages that will be allocated between the Basic Responsibilities and KRAs. These would be based on the grade of the appraisee & his role in the bank. The relative weightages are enumerated in the table.

Relative Weightage Designation BRs(RB ) 60 40 20 20 KRAs(RK) 40 60 80 80

Executives & DMs Managers & AVPs VPs & Above All Branch Heads, BSOs & SEs

The final score on Basic Responsibilities is calculated by multiplying the final rating on BRs x weightage for BRs (RB) The final score on KRAs is calculated by multiplying the Weighted KRA Score (WKS) by the weightage assigned for KRAs (RK) .The performance Score is the sum of final score on KRAs and the final Score on BRs. Performance Score = Final BR Score (final BR rating x RB) + Final KRA Score (WKS x RK) Performance Score can have minimum value of 100 and maximum value of 400.

The

Illustration: Suppose an employee has six BRs and four KRAs. Suppose the weightage for
BRs and KRAs is 60/40. 51

Suppose the rating for all the BRs taken together is 3 and suppose there are 4 KRAs assigned with weightage allocated as enumerated in the table. Suppose further that the ratings (R) decided by the appraiser are as mentioned in column 3.

(1) KRA No.

(2) Weightage (W)

(3) Rating (R)

(4) Individual KRA Score (K) = (W x R) 100 60 60 100 =

KRA 1 KRA 2 KRA 3 KRA 4 320 Weighted KRA Score (WKS)

25 20 30 25

4 3 2 4

Sum of Individual KRA scores

Sum of Individual KRA scores divided by 100 = 320/100 = 3.2

The Performance Score will be calculated as under:

Performance Component BRs KRAs

Weightage (RB/RK) 60 40

Score (S) 3 3.2

Weighted Score [S x (RB or RK)] 180 128

Performance Score = Sum of the Final scores on BRs and KRAs = 180+128 = 308

E. LINKAGES TO REWARDS
Once the year-end assessment exercise is complete for all the employees in the bank, the HR Department will compile the Performance Scores.

52

The Performance Score will be the basis for decisions on Variable Pay, Fixed Pay increases & ESOPs. For the purpose of Promotions, the score on competencies will also be considered in conjunction with the Performance Score. An employee will be considered for promotion only when he/she: 1. Achieves a minimum acceptable level of performance 2. Attains desired score on competencies. 3. Has the requisite technical skills. 4. Has completed the minimum service period stipulated by the Bank from time to time.

The 3 Components of Performance

Rewards

53

Key Result Areas Basic Responsibiliti es

Performance Score

Fixed Pay Increments Variable Pay component ESOPs

Behavioural Competencies

Competency Rating

Job Rotations Training

Technical & Behavioural Competencies

Promotion Decisions Performance Score on BRs & KRAs

CONCLUSIONS AND SUGGESTIONS

Performance appraisal should not be perceived just as a regular activity but its importance should be recognized and communicated down the line to all the employees. 54

There should be a review of job analysis, job design and work It should bring more clarity to the goal and vision of the organisation. It should provide more empowerment to the employees. New methods of appraisal should be adopted so that both appraiser and the The employees who have excellent performance should be used as a Employees should be given feedback regarding their appraisal. This will Financial and non-financial incentives should be linked to the annual New mechanisms should be evolved to educe the time factor involved in The frequency of training program for the appraiser should be increased The awareness sessions for the employees/appraisees should be made

environment based on the performance appraisal.

appraisee take interest in the appraisal process. mentor for other employees which would motivate others to perform better. help them to improve on their weak areas. appraisal system so that employees would be motivated to perform better. the procedure of appraisal. Introducing online-appraisal can do this. and these sessions should be made interactive. more interactive and the views and opinion of the appraisees regarding appraisal should be given due consideration. Assistance should be sought from specialists for framing a proper appraisal system that suits the organisation climate. Constant monitoring of the appraisal system should be done through discussions, suggestions, interactions. Combining the different methods of appraisal can minimize the element of biasness in an appraisal. Like the Rating method combined with assessment.

Questionnaire for Performance Appraisal

Name of the company: Name of Hr manager:
55

No of employees: Range of products:

1) According to you what is performance appraisal system? ( )A regular activity conducted periodically to rate an employee. ( )An activity to identify the developmental need of the employee. ( )An activity to keep a check on the performance of employees. ( )A system to help employees identify his own strengths and weakness with his job.

respect to

( )An instrument to control employees behaviour through rewards, punishment and threats. ( )A system to assist a variety of personnel decisions by generating data about each employee periodically. ( )A means to improve communication between the superior and subordinate. 2) What is the objective of the performance appraisal system in your organisation? ( )To make decisions regarding salary increase. ( )To identify the training and developmental needs of the employees ( )To make decisions regarding transfers or promotions. ( )To facilitate communication between the superior and his subordinates. Any other (Please specify)

3) Do you have a separate Appraisal system for each class of employees? If yes, what is the classification? ( ) Executives ( ) Clerical jobs ( )Secretarial jobs. ( ) Supervisory staff ( ) New employees (Or any other classification, please specify)

4) How frequently is PA done in the organization? (Please type y for selecting a box) Frequency of Appraisal Class of employees Executives Daily Weekly Monthly Quaterly Half yearly Yearly

56

Supervisory Clerical jobs Managerial staff

5). How is Appraisal done?

)Formal

) Informal

( )Combination of these

6). Who appraises?

( )Immediate Supervisor ( ) Subordinates

( (

) Rating Committee ) HR Department

( (

) Peers ) HOD

7). Which method do you follow in these? ( )Rating method ( )Force choice description ( )Checklist method ( )Critical Incidents Method ( )Confidential Method ( )Psychological Appraisals (Any other, please specify) 8) On what basis do you appraise an employee?

( )Interview or discussion ( ) MBO ( )Human asset accounting ( )360 degree appraisal

( (

) Traits ) Job behaviour

( ) Results ( ) A combination of these. (Please specify)

9) Is goal setting a part of your PA system?

( )Yes

) No ) every week ( ) every month ( ) HR manager

If yes, when is it normally done? At the beginning of: ( ) every year ( ( ) every day Who does it. (

)Supervisors ( )HOD

( )Top Management

10) Is Performance Appraisal a motivating factor for employees?

)For all employees.

) For some employees.

57

) For very few employees.

) For none of the employees.

11) Does an Appraisal keep notes on the major achievements and failures of his/her appraise?

( ) Yes
If no, what are the reasons?

( (

) No ) It is not required.

) It is difficult to keep records or (

12) When was the current Performance Appraisal system introduced in the organization?

13) Has there been a change in the Performance Appraisal system in your organization over a period of time?, If yes, what are the changes? 14) What is the attitude of employees towards a Performance Appraisal System? Do employees consider PA just a regular activity to rate them. if yes , how many? ( ) All ( ) Some ( )Very few ( ) None Do employees work hard to get a better appraisal. If yes, how many? ( ) All ( ) Some ( )Very few ( ) None Do employees talk freely about their developmental need during the counseling session? ( ) All ( ) Some ( )Very few ( ) None 15) According to you, Performance Appraisal is a ------% correct indicator of an employees developmental/ training needs?

) 100%

) 75%

) 50%

) 25% ( )No
If

16) Is Self-Appraisal a part of your system? ( ) Yes yes, for which cadre of employees? ( )Executives level Management If other specify,

) Top

17) Is discussion or interaction between the Appraiser and the Appraisee a part of the system? ( ) Yes ( ) No If yes for which cadre of employees?(please specify)

18) Do you face any of the following problems with the Performance Appraisal 58

System in your organization? Administrative problems. ( ) Tedious task ( ) Time-consuming process. ( ) Casual approach of the Appraisor. ( ) Other Implementation problems. (

) Untrained Appraisers (
from appraisees.

) Resistance ( ) Other

Assessment problems.

( Y ) Bias attitude of the appraiser ( ) Difference of opinion between the appraisor

and the appraisee ( ) Other

Which of these do you think is a serious problem? 19) Do you give training to the appraises for the use of the Performance Appraisal system? ( ) Yes ( ) No If yes when are they held normally 20) Are any sessions held to make the employees aware of the PA system, its objectives & its importance in career development? ( ) Yes ( ) No If yes, when are they normally held? 21) Is the Performance Appraisal System in your organization linked to he incentives or the reward system? ( )Yes ( ) No If yes, how is it linked?

22) How do you use the Performance Appraisal data that is maintained for every employee? ( ) During retrenchment (as a proof performance) ( ) There is no use of the data maintained after a certain period of time. 23) Is there a constant monitoring to find out any loopholes in the PA system or do you take the feedback from the employee regarding the Appraisal system? If yes, how is it done?

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24) Do you have a separate committee to review the Performance Appraisal results? ( ) Yes ( ) No 25) Do you think the system of Performance Appraisal has been successful in your organization and is able to achieve the required objectives in your organization? ( ) Yes ( ) No What changes do you suggest in the system?

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A SMALL MESSAGE

Dont Cry Because It Is Over Now Laugh Because It Happened

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BIBLIOGRAPHY

Human Resource And Personnel Management - Aswathappa Human Resource Management Human Resource Management - Mamoria - Pande

WEBLIOGRAPHY
www. performance-appraisal.com www.humanresource.about.com

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