Performance Appraisal Private Sectors Banks Roll No 11
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Transcript of Performance Appraisal Private Sectors Banks Roll No 11
CHAPTER 1:
INTRODUCTION OF PERFORMANCE APPRAISAL
Once an employee has been selected, trained and placed on the job, the
next step is that of performance appraisal. Performance appraisal is the process of
evaluating the performance of the employee in the organization. Performance
appraisal is the process by which the management finds out how well or how badly
the employee is performing on the job.
Performance appraisal is beneficial both to the employee in the
organization. Performance appraisal is a kind of feedback to the employee. It
enables him to understand whether his work is satisfactory or whether he needs any
improvements in his performance. Performance appraisal will reveal to an
employee his strengths and weaknesses, enhancing his self – confidence in some
areas and encouraging him to improve his performance in other areas.
Every organization has certain goals and is interested in making
optimum profits. Performance appraisal provides feedback to the management
whether an employee’s performance is up to the mark and whether he is
contributing to the attainment of organizational goals. Important management
decisions such as promotions, transfers, demonstrations, raises in salary, training
and as on are made on the basis of the performance appraisal reports.
1
CHAPTER 2:
MEANING AND DEFINITION
A performance appraisal, employee appraisal, performance review, or (career)
development discussion is a method by which the job performance of an employee
is evaluated (generally in terms of quality, quantity, cost, and time) typically by the
corresponding manager or supervisor. A performance appraisal is a part of guiding
and managing career development. It is the process of obtaining, analyzing, and
recording information about the relative worth of an employee to the organization.
Performance appraisal is an analysis of an employee's recent successes and
failures, personal strengths and weaknesses, and suitability for promotion or
further training. It is also the judgment of an employee's performance in a job
based on considerations other than productivity alone.
According to the Indian national institute of personnel management,
“performance appraisal is a technique of assessing as impartially as possible, the
attributes, strengths, weaknesses, capacity and attitudes of individual employee in
relation to his job “
C. D. Fisher describe performance appraisal as “the process by which an
employee’s contribution to the organization during a specified period of time is
assessed.”
2
CHAPTER 3:
ADVANTAGES AND DISADVANTAGES
Advantages of Performance Appraisal
It is said that performance appraisal is an investment for the company which can be
justified by following advantages:
Promotion: Performance Appraisal helps the supervisors to chalk out the
promotion programmes for efficient employees. In this regards, inefficient workers
can be dismissed or demoted in case.
Compensation: Performance Appraisal helps in chalking out compensation
packages for employees. Merit rating is possible through performance appraisal.
Performance Appraisal tries to give worth to a performance. Compensation
packages which include bonus, high salary rates, extra benefits, allowances and
pre-requisites are dependent on performance appraisal. The criteria should be merit
rather than seniority.
Employees Development: The systematic procedure of performance appraisal
helps the supervisors to frame training policies and programmes. It helps to
analyses strengths and weaknesses of employees so that new jobs can be designed
for efficient employees. It also helps in framing future development programmes.
Selection Validation: Performance Appraisal helps the supervisors to understand
the validity and importance of the selection procedure. The supervisors come to
know the validity and thereby the strengths and weaknesses of selection procedure.
Future changes in selection methods can be made in this regard.
3
Communication: For an organization, effective communication between
employees and employers is very important. Through performance appraisal,
communication can be sought for in the following ways:
1) Through performance appraisal, the employers can understand and accept skills
of subordinates.
2) The subordinates can also understand and create a trust and confidence in
superiors.
3) It also helps in maintaining cordial and congenial labor management
relationship.
4) It develops the spirit of work and boosts the morale of employees.
All the above factors ensure effective communication.
Motivation: Performance appraisal serves as a motivation tool. Through
evaluating performance of employees, a person’s efficiency can be determined if
the targets are achieved. This very well motivates a person for better job and helps
him to improve his performance in the future.
Disadvantages
1. Time Consuming
It is recommended that a manager spend about an hour per employee writing
performance appraisals and depending on the number of people being evaluated, it
can take hours to write the department’s PA but also hours meeting with staff to
review the PA. I’ve know managers who had 100 plus people to write PAs on.
2. Discouragement
4
If the process is not a pleasant experience, it has the potential to discourage staff.
The process needs to be one of encouragement, positive reinforcement and a
celebration of a year’s worth of accomplishments. It is critical that managers
document not only issues that need to be corrected, but also the positive things an
employee does throughout the course of a year, and both should be discussed
during a PA.
3. Inconsistent Message
If a manager does not keep notes and accurate records of employee behavior, they
may not be successful in sending a consistent message to the employee. We all
struggle with memory with as busy as we all are so it is critical to document issues
(both positive and negative) when it is fresh in our minds.
4. Biases
It is difficult to keep biases out of the PA process and it takes a very structured,
objective process and a mature manager to remain unbiased through the process.
See Performance Appraisal Rater Errors Article.
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CHAPTER 4:
“PERFORMANCE APPRAISAL” –
A SYSTEMATIC APPROACH
“Performance Appraisal”, also known as employee appraisal, is a method by
which the job performance of an employee is evaluated (generally in terms of
quality, quantity, cost and time).
“Performance Appraisal” is a part of career development.
“Performance Appraisals” are regular reviews of employee performance within
organizations.
Generally, the aims of a “Performance Appraisal” are to:
1. Give feedback on performance to employees.
2. Identify employee training needs.
3. Document criteria used to allocate organizational rewards.
4. Form a basis for personnel decisions: salary increases, promotions, disciplinary
actions, etc.
5. Provide the opportunity for organizational diagnosis and development.
6. Facilitate communication between employee and administration
7. Validate selection techniques and human resource policies to meet federal Equal
Employment Opportunity requirements.
6
“Performance Appraisal” is a management tool which is helpful in motivating and
effectively utilizing human resources. Assessment of human potential is difficult,
no matter how well designed and appropriates the performance planning and
appraisal system is, the “Performance Appraisal” system should:
be correlated with the organizational mission, philosophies and value system;
cover assessment of performance as well as potential for development;
take care of organizational as well as individual needs; and
help in creating a clean environment by
- Linking rewards with achievements,
- generating information for the growth of the employee as well as of the
organization,
- suggesting appropriate person-task matching and career plans.
Feedback is an important component of “Performance Appraisal”. While positive
feedback is easily accepted, negative feedback often meets with resistance unless it
is objective, based on a credible source and given in a skilful manner.
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CHAPTER 5:
PROCESS OF PERFORMANCE APPRAISAL
8
(a) “Performance Appraisal” System: The Process
“Performance Appraisal” involves an evaluation of actual against desired
performance. It also helps in reviewing various factors which influence
performance. Managers should plan performance development strategies in a
structured manner for each employee. In doing so, they should keep the goals of
the organization in mind and aim at optimal utilization of all available resources,
including financial. “Performance Appraisal” is a multistage process in which
communication plays an important role.
Craig, Beatty and Baird (1986) suggested an eight-stage “Performance Appraisal”
process:
(i) Establishing Standards and Measures
The first step is to identify and establish measures which would differentiate
between successful and unsuccessful performances. These measures should be
under the control of the employees being appraised. The methods for assessing
performance should be decided next. Basically, management wants to:
know the behavior and personal characteristics of each employee; and
assess their performance and achievement in the job.
There are various methods available for assessing results, behavior and personal
characteristics of an employee. These methods can be used according to the
particular circumstances and requirements.
(ii) Communicating Job Expectations
The second step in the appraisal process is communicating to employees the
measures and standards which will be used in the appraisal process. Such
communication should clarify expectations and create a feeling of involvement.
(iii) Planning
9
In this stage, the manager plans for the realization of performance expectations,
arranging for the resources to be available which are required for attaining the
goals set. This is an enabling role.
(iv) Monitoring Performance
“Performance Appraisal” is a continuous process, involving ongoing feedback.
Even though performance is appraised annually, it has to be managed 'each day, all
year long.' Monitoring is a key part of the “Performance Appraisal” process. It
should involve providing assistance as necessary and removing obstacles rather
than interfering. The best way to effectively monitor is to walk around, thus
creating continuous contacts, providing first-hand information, and identifying
problems, which can then be solved promptly.
(v) Appraising
This stage involves documenting performance through observing, recalling,
evaluating, written communication, judgment and analysis of data. This is like
putting together an appraisal record.
(vi) Feedback
After the formal appraisal stage, a feedback session is desirable. This session
should involve verbal communication, listening, problem solving, negotiating,
compromising, conflict resolution and reaching consensus.
(vii) Decision Making
On the basis of appraisal and feedback results, various decisions can be made
about giving rewards (e.g., promotion, incentives, etc.) and punishments (e.g.,
demotion). The outcome of an appraisal system should also be used for career
development.
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(viii) Development of performance
The last stage of “Performance Appraisal” is 'development of performance,' or
professional development, by providing opportunities for upgrading skills and
professional interactions. This can be done by supporting participation in
professional conferences or by providing opportunities for further study. Such
opportunities can also act as incentives or rewards to employees.
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CHAPTER 6:
THE ESSENTIALS OF AN EFFECTIVE PERFORMANCE
SYSTEM
Documentation – means continuous noting and documenting the performance. It
also helps the evaluators to give a proof and the basis of their ratings.
Standards / Goals – the standards set should be clear, easy to understand,
achievable, motivating, time bound and measurable.
Practical and simple format - The appraisal format should be simple, clear, fair
and objective. Long and complicated formats are time consuming, difficult to
understand, and do not elicit much useful information.
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CHAPTER 7:
OBJECTIVES OF PERFORMANCE APPRAISAL
To review the performance of the employees over a given period of time.
To judge the gap between the actual and the desired performance.
To help the management in exercising organizational control.
Helps to strengthen the relationship and communication between superior –
subordinates and management – employees.
To diagnose the strengths and weaknesses of the individuals so as to identify
the training and development needs of the future.
To provide feedback to the employees regarding their past performance.
Provide information to assist in the other personal decisions in the
organization.
Provide clarity of the expectations and responsibilities of the functions to be
performed by the employees.
To judge the effectiveness of the other human resource functions of the
organization such as recruitment, selection, training and development.
To reduce the grievances of the employees.
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CHAPTER 8:
ROLE OF PERFORMANCE APPRAISAL SYSTEM
Promote better understanding of an employee's role and clarity about his or
her functions
Give a better understanding of personal strengths and weaknesses in relation
to expected roles and functions
Identify development needs of an employee
Establish common ground between the employee and the supervisor
Increase communication
Provide an employee with the opportunity for self-reflection and individual
goal setting
Help an employee internalize the culture, norms and values of the
organization. This helps develop an identity with and commitment to the
organization and prepares an employee for higher-level positions in the
hierarchy
Assist in a variety of personnel decisions
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CHAPTER 9:
METHODS OF PERFORMANCE APPRAISAL
There are several techniques of “Performance Appraisal”, each with some strong
points as well as limitations. Oberg (1972) has summarized some of the commonly
used “Performance Appraisal” techniques.
TRADITIONAL METHODS
(1) Graphic Rating Scale
A graphic scale 'assesses a person on the quality of his or her work (average; above
average; outstanding; or unsatisfactory).' Assessment could also be trait centered
and cover observable traits, such as reliability, adaptability, communication skills,
etc. Although graphic scales seem simplistic in construction, they have application
in a wide variety of job responsibilities and are more consistent and reliable in
comparison with essay appraisal. The utility of this technique can be enhanced by
using it in conjunction with the essay appraisal technique.
(2) Ranking Methods:
Some of the important forms of ranking for “Performance Appraisal” are given
below, based on Oberg, 1972; and Monga, 1983:
(a) Alteration Ranking Method
The Individual with the Best performance is chosen as the ideal employee. Other
employees are then ranked against this employee in descending order of
comparative performance on a scale of best to worst performance. The alteration
ranking method usually involves rating by more than one assessor. The ranks
15
assigned by each assessor are then averaged and a relative ranking of each member
in the group is determined. While this is a simple method, it is impractical for large
groups. In addition, there may be wide variations in ability between ranks for
different positions.
(b) Person-to-Person Rating:
In the person-to-person rating scales, the names of the actual individuals known to
all the assessors are used as a series of standards. These standards may be defined
as lowest, low, middle, high and highest performers. Individual employees in the
group are then compared with the individuals used as the standards, and rated for a
standard where they match the best. The advantage of this rating scale is that the
standards are concrete and are in terms of real individuals. The disadvantage is that
the standards set by different assessors may not be consistent. Each assessor
constructs their own person-to-person scale which makes comparison of different
ratings difficult.
(c) Checklist Method: The assessor is furnished with a checklist of pre-scaled
descriptions of behavior, which are then used to evaluate the personnel being rated
(Monga, 1983). The scale values of the behavior items are unknown to the
assessor, who has to check as many items as she or he believes describe the worker
being assessed. A final rating is obtained by averaging the scale values of the items
that have been marked.
(d) Behaviorally Anchored Rating Scales (BARS): This is a relatively new
technique. It consists of sets of behavioral statements describing good or bad
performance with respect to important qualities. These qualities may refer to inter-
personal relationships, planning and organizing abilities, adaptability and
16
reliability. These statements are developed from critical incidents collected both
from the assessor and the subject.
(e) Assessment centers: This technique is used to predict future performance of
employees were they to be promoted. The individual whose potential is to be
assessed has to work on individual as well as group assignments similar to those
they would be required to handle were they promoted. The judgment of observers
is pooled and paired comparison or alteration ranking is sometimes used to arrive
at a final assessment. The final assessment helps in making an order-of-merit
ranking for each employee. It also involves subjective judgment by observers.
A “Performance Appraisal” system could be designed based on intuition, self-
analysis, personality traits, behavioral methods and result-based techniques.
Different approaches and techniques could be blended, depending on the goals of
“Performance Appraisal” in the organization and the type of review. For example,
management by objectives, goal-setting and work standard methods are effective
for objective coaching, counseling and motivational purposes. Critical incident
appraisal is best suited when supervisor's personal assessment and criticism are
essential. A carefully developed and validated forced-choice rating can provide
valuable analysis of the individual when considering possible promotion to
supervisory positions. Combined graphic and essay form is simple, effective in
identifying training and development needs, and facilitates other management
decisions.
(3) Paired comparison method: =
In this method each employee is compared with every other employee in
the workgroup. Comparisons are made between two people at a time, and a
judgment is made about which of the pair is superior
17
The rater’s task is to merely state which of the two is better on the
dimension being rated. Final conclusion is drawn on the basis of the number of
time each person was selected as the better of the pair. Employee is ranked by the
number of superior ratings they receive.
The number of pairs compared when this method is used is determined
by the formula:
N (N-1)
2
Where N is the number of employee to be evaluated.
The disadvantage of the paired-comparison method is that it becomes
very complicated when the number of individuals to be evaluated is very large. For
example if 50 employees are to be evaluated then the rater will have to compare
1225 pairs.
(4) Forced distribution method
This method is used when the number of employees to be evaluated is
large. This method is based on the principle of normal distribution and assumes
that employee performance is normally distributed.
The forced distribution system is called by that name because the rater is
forced to assign (place) a definite percentage of the employees in each one of the
several predetermined categories. The standard distribution is as follows.
superior 10%
above average 20%
average 40%
below average 20%
poor 10%
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The main advantage of this method is that it does not allow the rater to
place all employees at the higher or lower end of the scale.
The drawback of this method is that it is not very popular with raters.
Raters feel that employee performance is not normally distributed. They also resent
the restriction placed on their freedom of choice.
(5) Confidential report
A confidential report is a report prepared by the employee’s immediate
superior. It describes the employee’s personality and behavior, this traditional
method of appraisal is used in government organization and is focused on
evaluating rather than developing the employee.
(6) Group appraisal
In this method employees are evaluated by a group of evaluators. This
group usually consists of the immediate superior of the employee, other superiors
having close contact with the employee’s work, head of the department and HR
expert.
The group of evaluators determines the standards of performance for
the job, measures the actual performance of the employee and offers suggestions
for improvements.
The advantage of this method is that it is more through. It also
reduces blas due to the presence of multiple evaluators.
The drawback of this method is that it is time consuming in nature.
(7) Critical Incident Appraisal Method
In this method, a supervisor describes critical incidents, giving details of both
positive and negative behavior of the employee. These are then discussed with the
employee. The discussion focuses on actual behavior rather than on traits. While
this technique is well suited for performance review interviews, it has the
19
drawback that the supervisor has to note down the critical incidents as and when
they occur. That may be impractical, and may delay feedback to employees. It
makes little sense to wait six months or a year to discuss a misdeed, a mistake or
good display of initiative
(8) Essay Appraisal Method:
The assessor writes a brief essay providing an assessment of the strengths,
weaknesses and potential of the subject. In order to do so objectively, it is
necessary that the assessor knows the subject well and should have interacted with
them. Since the length and contents of the essay vary between assessors, essay
ratings are difficult to compare.
(9) Field Review Method
Since individual assessors differ in their standards, they inadvertently introduce
bias in their ratings. To overcome this assessor-related bias, essay and graphic
rating techniques can be combined in a systematic review process. In the field
review method, 'a member of the HRM staff meets a small group of assessors from
the supervisory units to discuss each rating, systematically identifying areas of
inter-assessor disagreement.' It can then be a mechanism to help each assessor to
perceive the standards uniformly and thus match the other assessors. Although
field review assessment is considered valid and reliable, it is very time consuming.
(10) Forced-Choice Rating Method
Unlike the field review method, the forced-choice rating method does not involve
discussion with supervisors. Although this technique has several variations, the
most common method is to force the assessor to choose the best and worst fit
statements from a group of statements. These statements are weighted or scored in
advance to assess the employee. The scores or weights assigned to the individual
statements are not revealed to the assessor so that she or he cannot favor any
20
individual. In this way, the assessor bias is largely eliminated and comparable
standards of performance evolved for an objective. However, this technique is of
little value wherever “Performance Appraisal” interviews are conducted.
MODERN TECHNIQUES
(1) Management by Objectives
The employees are asked to set or help set their own performance goals. This
avoids the feeling among employees that they are being judged by unfairly high
standards. This method is currently widely used, but not always in its true spirit.
Even though the employees are consulted, in many cases management ends up by
imposing its standards and objectives. In some cases employees may not like 'self-
direction or authority.' To avoid such problems, the work standard approach is
used.
(2) Work Standard Approach
In this technique, management establishes the goals openly and sets targets against
realistic output standards. These standards are incorporated into the organizational
“Performance Appraisal” system. Thus each employee has a clear understanding of
their duties and knows well what is expected of them. “Performance Appraisal”
and interview comments are related to these duties. This makes the appraisal
process objective and more accurate. However, it is difficult to compare individual
ratings because standards for work may differ from job to job and from employee
to employee. This limitation can be overcome by some form of ranking using
pooled judgment.
21
(3) Assessment centers
The assessment center in an organization is the place where individuals are
assessed in as systematic and scientific manner as possible. An assessment center
is a place specially designed and equipped for a specific purpose – appraisal.
The objective of an assessment center is the evaluation of individuals for future
growth and development. The evaluation is made not on the job but is based on
observations of behavior and on the results obtained in psychological tests. In an
assessment center a thorough and complete evaluation is done of the individual –
his strengths, weaknesses and personality characteristics.
The common procedure in assessment centers is to evaluate a small group of
individuals over a period of 2 to 3 days. The group undergoes several types of
individual and group activities or exercises for 2 or 3 days under the watchful eyes
of a team of experts. The activities and exercise include such things as
management group discussions, psychological tests, interviews, self-ratings and
problem solving exercises. The results of assessments are used to make selection,
promotion and transfer decisions.
(4) Human assets accounting
This method is still in the early stages of development. It attempts to measure
the monetary value of the human resources of the organization. In this method,
evaluation is done in terms of costs and contributions of employees. Costs of
human resources consist of expenditure on human resources is the money value of
labor productivity of value added by human resources. The difference between cost
and contribution reflects the performance of employees.
OTHER METHODS OF PERFORMANCE APPRAISAL
(1) Appraisal by peers/buddy ratings
The main thought behind this method of appraisal is that an employee’s
colleagues or buddies are in a better position to observe his performance on the job
22
and to know and understand him better. Hence, it is possible that their rating would
be more accurate and reliable than the superior who is not so much in touch with
the employee. Also an employee is more likely to be his normal self when he is
with his peers and act differently when the superiors are around.
(2) Appraisal by subordinates
In this system of appraisal, the junior or subordinate evaluates his
immediate senior of superior. The major problem here is the fear of appraisal
(revenge). The subordinate may not express negative opinions out of fear that the
superior may create trouble for him. Besides a subordinate may rate the superior in
terms of the degree to which the superior has satisfied his personal motives and
desires rather than in terms of his contribution to the organizational goals.
(3) Psychological appraisal
A different type of appraisal is carried out by industrial psychologists
who have had some training in the techniques of personality assessment. Appraisal
reports are prepared after conducting extensive interview and administering
different psychological tests on the employee.
The psychologist attempts to get a clear understanding regarding the
personality of the employee. He tries to know the underlying intellectual (very
intelligent, average etc.), emotional (very sensitive, gets distributed quickly etc.)
and motivational (very ambitious, persistent etc.) characteristics of the person. The
psychologist then converts this information in to a picture of how such a person
might be expected to behave in the future.
(4) Self-evaluation
In this method of performance appraisal, the employees are asked to
assess their own abilities and job performance. They have to also evaluate their
strengths and weaknesses. The central idea behind self-rating is that no one knows
23
an individual better than the individual himself. Self appraisal can be useful when
combined with information obtained through other methods.
(5) 360-degree feedback
The 360-degree feedback method of performance appraisal is become
popular and is growing in use. Its growing popularity is reflected in a recent study,
which found that nearly 90 percent of fortune 1000 firms use 360-dgree feedback
for their employee appraisal. In India too, large organizations such as Reliance
industries, Infosys, Godrej Soaps, and Wipro have started using this system to
evaluate the performance of their employees.
A 360-degree feedback is a performance appraisal process that gathers
performance information from multiple people, including one’s subordinates,
peers, supervisors and customers. 360-degree aims at providing more accurate and
diverse input on an employee’s performance by seeking feedback from varied
sources.
The 360-degree feedback system recognizes that performance varies across
contexts and that individuals behave differently in different situations. This system
acknowledges the reality that an employee’s performance is made up of multiple
behaviors. By using multiple raters, 360-degree feedback attempts to capture this
variety of behavior and improve the quality of performance appraisal.
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CHAPTER 10:
NEEDS AND IMPORTANCE FOR “PERFORMANCE
APPRAISAL” IN BANKING
The butt of many a corporate joke, these hard working professionals are often
relegated to small back offices where their activities, viewed as little more than
administrative functions, are carried out without much recognition. But in an
increasingly aggressive corporate world, where every competitive edge counts,
leading organisations would do well to recognise the human potential that can be
unleashed by adopting effective human resource management strategies that realise
the potential of employees and earn their respect and loyalty.
Dealing with the mundane personal matters of corporate life has traditionally been
seen as the sole purpose of the HR department. From hiring workers and providing
transportation and meals services, to processing housing, medical and insurance
benefits, the functions of HR professionals have been recognised as essential, but
have not always inspired respect for those involved in executing them.
Essentially, people remain the strongest and most competitive assets of a
business.
This should, and is, changing. In a region where business growth is rapid, and
organisations are competing to secure talent from the same pool, investing in and
revering effective HR departments to find, train and help retain this talent is
increasingly important. Testament to the fact many banks in the region are now
recognising the value of developing their human resources, Abu Dhabi recently
hosted the Middle East Human Resource Summit - the annual conference and
25
exhibition for industry professionals. But can everyone be persuaded to take real
action in developing their HR departments
Banking industry is facing a cut throat completion in present banking scenario
where the motivation of the employee can be a competitive advantage to retain its
customer.
26
CHAPTER 11:
“PERFORMANCE APPRAISAL” IN BANKING SECTOR
“Performance Appraisal” is a vehicle to (1) validate and refine organizational
actions (e.g. selection, training); and (2) provide feedback to employees with an
eye on improving future performance.
Validating and refining organizational action or banks action
Employee selection, training and just about any cultural or management practice—
such as the introduction of a new pruning method or an incentive pay program—
may be evaluated in part by obtaining worker performance data.
The evaluation may provide ideas for refining established practices or instituting
new ones. For instance, appraisal data may show that a farm supervisor has had a
number of interpersonal conflicts with other managers and employees. Some
options include
(1) Paying more attention to interpersonal skills when selecting new
supervisors,
(2) Encouraging present supervisors to attend communication or conflict
management
Classes at the local community college, or
(3) Providing the supervisor one-on-one counseling.
Data from “Performance Appraisal’s can also help farmers
(1) Plan for long-term staffing and worker development,
27
(2) give pay raises or other rewards,
(3) Set up an employee counseling session, or
(4) Institute discipline or discharge procedures.
For validation purposes, it is easier to evaluate performance data when large
numbers of workers are involved such as in banks. Useful performance data may
still be collected when employees are evaluated singly, but it may take years to
obtain significant data trends.
28
CHAPTER 12:
CASE STUDY
Performance Appraisal And Performance Management in ICICI
Bank
The facilitation of high achievement by employees. Performance
management involves enabling people to perform their work to the best of
their ability, meeting and perhaps exceeding targets and standards.
Performance management can be coordinated by an interrelated framework
between manager and employee. Key areas of the framework to be agreed
are objectives, human resource management, standards and performance
indicators, and means of reward. For successful performance management in
ICICI , a culture of collective and individual responsibility for the
continuing improvement of business processes needs to be established, and
individual skills and contributions need to be encouraged and nurtured as the
bank deals in service sector where the employees are the main factor of
making the difference . One tool for monitoring performance management is
“Performance Appraisal” that the banks use for rewarding its employees. For
the bank, performance management is usually known as company
performance and is monitored through business appraisal.
Reasons for “Performance Appraisal” in ICICI
Increase motivation to perform effectively
Increase staff self-esteem
Gain new insight into staff and supervisors
Better clarify and define job functions and responsibilities
29
Develop valuable communication among appraisal participants
Encourage increased self-understanding among staff as well as insight into
the kind of development activities that are of value
Distribute rewards on a fair and credible basis
Clarify organizational goals so they can be more readily accepted
Improve institutional/departmental manpower planning, test validation, and
development of training programs
Modern Trends in Banks for P.A
A growing number of front running banks like ICICI, and others have adopted a
“Performance Appraisal” model in which best-to-worst ranking methods are used
to identify poor performers. The identified poor performers are then given a time
period during which they have to show an improvement in their performance.
In cases where the employee fails to improve his performance he is asked to leave
the organization gracefully and a severance package is offered to him. If the
employee refuses to leave then his service is terminated and no compensation is
offered. This system is called “rank and yank strategy”. Advocates of this system
feel that it continually motivates employees to better their performance since
nobody would like to be included in the poor performance band. But the flip side
of this strategy is that employees become too competitive and team spirit is not
nurtured.
Effective banks are not build merely on investment and returns but more on the
quality of the workforce, its commitment to the organizational goals and
investments made to attract train and retain superior human capital. An integrated
30
Performance Management system is essential to get the best out of its people.
Employee performance is linked to the bank’s performance. This helps in
achieving the organizational goal and creates a performance culture in the bank.
Invention, creativity, diversity of perspectives is fostered. Employees act as one
bank one brand.
ICICI bank performance appraisal environment
The bank is using the Management by Objectives (MBO) method. In this method
the subordinate in consultation with the supervisor chalks out short term objectives
followed by specific actions that he has to carry out. The goals are finally set and
are action oriented. The goals set are specific, measurable, achievable, review able
and time bound and most importantly they use to be aligned with the goal of the
organization. At the end of a specified time period, the activities are jointly
reviewed by both the subordinate and his supervisor. Depending on the
performance of the subordinate, the goals are modified or redesigned for the next
period of time.
The MBO is thus a performance oriented system. A well thought out MBO system
provides multiple benefits. It establishes a link between the performance of the
individual and the bank
It is easy to implement because those who carry out the plan also participates in
setting it up. Each employee becomes aware of the task he has to perform in the
bank. This leads to better utilization of capacity and talent. It promotes better
communication and information sharing. It provides guidelines for self evaluation
as well as evaluation by the superior against set tasks and goals. It facilitates
guidance and counseling.
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The Effective Components of ICICI P .A System
Performance Planning (includes employee goal setting / objective setting)
Ongoing Performance Communication
Data Gathering, Observation and Documentation
“Performance Appraisal” Meetings
Performance Diagnosis and Coaching
An effective “Performance Appraisal” system in ICICI bank emphasizes individual
objectives, Bank objectives and also mutual objectives. From the viewpoint of
individual objective the “Performance Appraisal” talks about
a) What task the individual is expected to do?
b) How well the individual has done the task?
c) How can his performance be further improved?
d) His reward for doing well.
From the bank view point a “Performance Appraisal” should generate manpower
information, improve efficiency and effectiveness serve as a mechanism of control
and provide a rational compensation structure. In short the appraisal system
establishes and upholds the principle of accountability in the absence of which
bank failure is the only possible outcome.
Finally, talking about mutual goals, the emphasis is on growth and development,
harmony, effectiveness and profitability of the bank
ICICI HR Philosophy on P.A
“Performance Appraisal” is one such method that allows for the optimization of
employees. In a broad sense , it is a formal structure that allows for the continued
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measuring and evaluation of individual behavior and performance, whilst
influencing an employee’s job related attributes through such factors as increased
job satisfaction and recognition (with the use of promotional aids such as better
equipment, duties, and salaries). The purpose of any such system, is not only to
measure the performance of human resources but also to find areas of skill deficit
for further development (through employee feedback), identify excess potential
that could be better utilized, and communicate objectives more accurately to
workers . By doing so, businesses move one step closer to the achievement of their
set goals and objectives. Included here is also one other factor that is not a direct
objective of appraisals, but becomes a valuable asset within itself. This simply is
the provision for maintaining records of workers that are legally viable, that can
protect the business when dealing in cases of dismissals and demotions. This is
especially important in today’s society because of the "increasing legislation and
regulation dealing with victimization and discrimination" making bank liable for
all their actions.
The annual “Performance Appraisal” is usually done in two steps. First, the
employees and their manager complete the “Performance Appraisal” form - doing
a self assessment. Often the bank also uses a 60 degree feedback process, asking
for input from peers. Secondly, the bank employees and manager participate in a
formal “Performance Appraisal” interview. The appraisal form, used in the first
step, consists of performance standards and criteria that are used to judge evaluate
your performance. The items comprising your job description are usually the
performance standards that are used in employees annual appraisal .The
performance standards are derived from a job analysis, which is a detailed list of
all of the skills involved in performing a task. For example, what are the skills
necessary to perform a complete blood count? The criteria are used to determine
the level of performance, which can be excellent, average, or poor (or alternatively
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meets, exceeds or does not meet standards). Once appraisal is complete, score is
averaged and merit raise (if applicable)
Forms Used By the Bank for P.A
1. General “Performance Appraisal” Form I
Six-page form includes evaluation sections for three categories: a) objectives from
last review period; b) current job duties (which are customizable), and c)
organization core values (e.g., maturity, vision).
2. General “Performance Appraisal” Form II
Four-page form has three sections: a) overall performance, b) communication
skills, and c) people/self development skills.
3. General “Performance Appraisal” Form III
Two-page "short form" has numerical rankings for two sections: a) general work
attributes and b) managerial attributes. Includes a weighted average calculation.
4. 360-Degree “Performance Appraisal” Form I
Two-page form for peers, outside suppliers and customers to fill out. Also can be
used for "upwards" feedback about managers.
5. 360-Degree “Performance Appraisal” Form II
Two-page form for peers and outsiders - all open-ended questions, without
numerical rankings.
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6. Manager “Performance Appraisal” Form
Six-page form with all sections related to managerial skills. Also includes a section
for listing future objectives.
7. Administrative/Technical “Performance Appraisal” Form
Four-page form perfect for administrative, technical and customer service workers.
8. Sales “Performance Appraisal” Form
Five-page form focused on sales personnel. Includes four sections: a) actual vs.
plan performance, b) lead generation, c) selling skills and d) account maintenance.
9. Project Evaluation Review Form
Four-page form geared towards specific projects, and an individuals' role on a
given project.
10. Employee Self-Assessment Form
Two-page open-ended form for an employee to fill-out before his or her own
review. Sections include: a) success in meeting goals from last review, b)
accomplishments and c) areas for improvement
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CHAPTER 13:
SUGGESTION AND RECOMMENDATION
Though it is the basic rule of the report writing that suggestion and
recommendation should not be given until it’s asked for but to keeping in the mind
the academic nature of the report we would like to recommend the followings
o Management and employees should see “Performance Appraisal” as a
positive tools to determine the organizational efficiency and
effectiveness
o Banks should use a well communicative method of “Performance
Appraisal” to avoid any resistance from the employees
o The outcome of the “Performance Appraisal” should be shared with
the concerned employees and corrective action should be taken in the
light of the outcome
o “Performance Appraisal” should be treated as an integral part of the
organizational development not just the formality
o If the external agency is hired for “Performance Appraisal” , it will be
appreciated to remove the possibility of biasness
o “Performance Appraisal” should be done on both basis qualitative and
quantitative
o There should be a cost and benefit study of “Performance Appraisal”
process
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CHAPTER 14:
CONCLUSION
To summarize our discussion we can say that the “Performance Appraisal” is an
integral part of performance management and has become the important
component of the HRM. Performance management includes activities to ensure
that goals are consistently being met in an effective and efficient manner.
Performance management can focus on performance of the organization, banks, a
department, processes to build a product or service, employees, etc
Performance management reminds us that being busy is not the same as producing
results. It reminds us that training, strong commitment and lots of hard works alone
are not results. The major contribution of performance management is its focus on
achieving results -- useful products and services for customers inside and outside
the bank and organization. Performance management redirects our efforts away
from busyness toward effectiveness.
Recently, organizations have been faced with challenges like never before.
Increasing competition from businesses across the world has meant that all
businesses must be much more careful about the choice of strategies to remain
competitive. Everyone (and everything) in the organization must be doing what
they're supposed to be doing to ensure strategies are implemented effectively.
This situation has put more focus on effectiveness, that systems and processes in
the organization be applied in the right way to the right things: to achieve results.
All of the results across the organization must continue to be aligned to achieve the
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overall results desired by the organization for it to survive and thrive. Only then it
be said that the organization and its various parts are really performing.
We can say that
Performance management should be:
Strategic - it is about broader issues and longer-term goals
Integrated - it should link various aspects of the business, people
management, and individuals and teams.
A well designed “Performance Appraisal” system helps an organization, bank
know and understand what is expected of them
have the skills and ability to deliver on these expectations
are supported by the organization to develop the capacity to meet
these expectations are given feedback on their performance
Have the opportunity to discuss and contribute to individual and
team aims and objectives.
Ongoing banking scenario has changed the scope of the performance
management system as the competition is extensive and to retain the employees
has become the challenging task for the management. With the help of
“Performance Appraisal” the bank can recognize its true personnel inventory
and formulate the strategy for man power planning and career development.
“Performance Appraisal” directly affects the other sub system of HRM such as
manpower planning, selection, career development, potential development,
recruitment, compensation etc.
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To wind up our discussion we can say that “Performance Appraisal” is an
integrated and widen approach to guide the employees in the right direction to
achieve organizational as well as individual objectives mainly in banking sector
because of the dominancy of personal skill and service level to interact with the
customers
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BIBLIOGRAPHY
1- Books and journals
2- Internal report of banks
3- Corporate bulletin and finance magazine
4- Internet and bank’s website
5- Personal sources
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