A Synopsis ReportOnTHE IMPACT OF PERFORMANCE APPRAISAL ON THE ACHIEVEMENT OF ORGANISATIONAL GOAL

For the partial fulfillment of the requirement ofMASTER OF BUSINESS ADMINISTRATIONAffiliated to Uttar Pradesh Technical University, Lucknow, (U.P.)(2013-2015)

Under The Guidance of: Submitted byDr. Avijit Dey Mr. Amit Aind

Roll No.1327270008

GNIT MBA Institute6-C, Knowledge Park-II, Greater Noida ( G. B. Nagar)

INTRODUCTION

Study of Performance Appraisal System and ItsEffectiveness in an OrganizationThe history of performance appraisal is quite brief.Its roots in the early 20th century can be traced to Taylor's pioneering Time and Motion studies. But this is not very helpful, for the same may be said about almost everything in the field of modern human resources management.As a distinct and formal management procedure used in the evaluation of work performance, appraisal really dates from the time of the Second World War -not more than 60 years ago.Yet in a broader sense, the practice of appraisal is a very ancient art. In the scale of things historical, it might well lay claim to being the world's second oldest profession!There is, says Dulewicz (1989), "... a basic human tendency to make judgments about those one is working with, as well as about oneself." Appraisal, it seems, is both inevitable and universal. In the absence of a carefully structured system of appraisal, people will tend to judge the work performance of others, including subordinates, naturally, informally and arbitrarily.The human inclination to judge can create serious motivational, ethical and legal problems in the workplace. Without a structured appraisal system, there is little chance of ensuring that the judgments made will be lawful, fair, defensible and accurate.Performance appraisal systems began as simple methods of income justification. That is, appraisal was used to decide whether or not the salary or wage of an individual employee was justified.The process was firmly linked to material outcomes. If an employee's performance was found to be less than ideal, a cut in pay would follow. On the other hand, if their performance was better than the supervisor expected, a pay rise was in order.Little consideration, if any, was given to the developmental possibilities of appraisal. If was felt that a cut in pay, or a rise, should provide the only required impetus for an employee to either improve or continue to perform well.Sometimes this basic system succeeded in getting the results that were intended; but more often than not, it failed.For example, early motivational researchers were aware that different people with roughly equal work abilities could be paid the same amount of money and yet have quite different levels of motivation and performance.These observations were confirmed in empirical studies. Pay rates were important, yes; but they were not the only element that had an impact on employee performance. It was found that other issues, such as morale and self-esteem, could also have a major influence.As a result, the traditional emphasis on reward outcomes was progressively rejected. In the 1950s in the United States, the potential usefulness of appraisal as tool for motivation and development was gradually recognized. The general model of performance appraisal, as it is known today, began from that time.

Modern AppraisalPerformance appraisal may be defined as a structured formal interaction between a subordinate and supervisor, that usually takes the form of a periodic interview (annual or in which the work performance of the subordinate is examined and discussed, with a view to identifying weaknesses and strengths as well as opportunities for improvement and skills development.In many organizations -but not all -appraisal results are used, either directly or indirectly, to help determine reward outcomes. That is, the appraisal results are used to identify the better performing employees who should get the majority of available merit pay increases, bonuses and promotions.By the same token, appraisal results are used to identify the poorer performers who may require some form of counseling, or in extreme cases, demotion, dismissal or decreases in pay. (Organizations need to be aware of laws in their country that might restrict their capacity to dismiss employees or decrease pay.)Whether this is an appropriate use of performance appraisal -the assignment and justification of rewards and penalties -is a very uncertain and contentious matter.Controversy, ControversyFew issues in management stir up more controversy than performance appraisal.There are many reputable sources -researchers, management commentators, psychometricians -who have expressed doubts about the validity and reliability of the performance appraisal process. Some have even suggested that the process is so inherently flawed that it may be impossible to perfect it (see Derven, 1990, for example). At the other extreme, there are many strong advocates of performance appraisal. Some view it as potentially "... the most crucial aspect of organizational life" (Lawrie, 1990).Between these two extremes lie various schools of belief. While all endorse the use of performance appraisal, there are many different opinions on how and when to apply it,There are those, for instance, who believe that performance appraisal has many important employee development uses, but scorn any attempt to link the process to reward outcomes -such as pay rises and promotions. This group believes that the linkage to reward outcomes reduces or eliminates the developmental value of appraisals. Rather than an opportunity for constructive review and encouragement, the reward- linked process is perceived as judgmental, punitive and harrowing. For example, how many people would gladly admit their work problems if, at the same time, they knew that their next pay rise or a much-wanted promotion was riding on an appraisal result? Very likely, in that situation, many people would deny or downplay their weaknesses.Nor is the desire to distort or deny the truth confined to the person being appraised. Many appraisers feel uncomfortable with the combined role of judge and executioner.Such reluctance is not difficult to understand. Appraisers often know their appraisees well, and are typically in a direct subordinate-supervisor relationship. They work together on a daily basis and may, at times, mix socially. Suggesting that a subordinate needs to brush up on certain work skills is one thing; giving an appraisal result that has the direct effect of negating a promotion is another.The result can be resentment and serious morale damage, leading to workplace disruption, soured relationships and productivity declines.On the other hand, there is a strong rival argument which claims that performance appraisal must unequivocally be linked to reward outcomes. The advocates of this approach say that organizations must have a process by which rewards -which are not an unlimited resource -may be openly and fairly distributed to those most deserving on the basis of merit, effort and results.There is a critical need for remunerative justice in organizations. Performance appraisal -whatever its practical flaws -is the only process available to help achieve fair, decent and consistent reward outcomes. It has also been claimed that appraisees themselves are inclined to believe that appraisal results should be linked directly to reward outcomes -and are suspicious and disappointed when told this is not the case. Rather than feeling relieved; appraisees may suspect that they are not being told the whole truth, or that the appraisal process is a sham and waste of time.The Link to RewardsRecent research (Bannister & Balkin, 1990) has reported that appraisees seem to have greater acceptance of the appraisal process, and feel more satisfied with it, when the process is directly linked to rewards. Such findings are a serious challenge to those who feel that appraisal results and reward outcomes must be strictly isolated from each other. There is also a group who argues that the evaluation of employees for reward purposes, and frank communication with them about their performance, are part of the basic responsibilities of management. The practice of not discussing reward issues while appraising performance is, say critics, based on inconsistent and muddled ideas of motivation.In many organizations, this inconsistency is aggravated by the practice of having separate wage and salary reviews, in which merit rises and bonuses are decided arbitrarily, and often secretly, by supervisors and managers.There are basically three purposes to which performance appraisal can be put. First, it can be used as a basis for reward allocation. Decision as to who gets salary increase, promotion, and other rewards are determined by their performance evaluation. Second, these appraisals can be used for identifying areas where development efforts are needed. The performance appraisal is a major tool for identifying deficiencies in individuals. Finally it can be used as a criterion against which selection devices and development programs are validated. As a key input into management's reward and punishment decision, performance appraisals can motivate or de-motivate employees.

PERFORMANCE APPRAISALSince organisation exist to achieve goals, the degree of success that individual employees have in reaching their individuals goals is important in determining organizational effectiveness. The assessment of how successful employees have been at meeting their individual goals, therefore, becomes a critical part of HRM. This leads us to the topic of performance appraisal.PURPOSEThere are basically three purposes to which performance appraisal can be put. First, it can be used as a basis for reward allocations. Decisions as to who gets salary jncreases, promotions, and other rewards are determined by their performance evaluation. Second, these appraisals can be used for identifying areas where development efforts are needed. Management needs to spot those individuals who have specific skill or knowledge deficiencies. The performance appraisals is a major tool for identifying these deficiencies. Finally the performance appraisal can be used as a criterion against which selection devices and development programs are validated. It is one thing to say, for example, that our selection process is successful in differentiating satisfactory performers from unsatisfactory performers.THE APPRAISAL PROCESSEstablished performance standardCommunicate performance expectations to employeeMeasure actual performanceCompare actual performance with standardsDiscuss the appraisal with the employees.If necessary, initiate the corrective actionThe appraisal process begins with the establishment of performance standards. These should have evolved out of job analysis and the job description discussed under human resource planning. These performance standards should also be clear and objective enough to be understood and measured. Too often, these standards are articulated in some such phrase as "a full day's work" or "a good job". Communication only takes place when the transference has taken place and has been received and understood by the subordinate. Therefore feedback is necessary from the subordinate to the manager. Satisfactory feedback censures that the information communicated by the manager has been received and understood in the way it was intended.The third step in the appraisal in the measurement of performance. To determine what actual performance. To determine what actual performance is, it is necessary to acquire information about it. We should be concerned with how we measure and what we measure.What we measure is probably more critical to the evaluation process than how we measure, since the selection of the wrong criteria can result in serious dysfunctional consequences. And what we measure determines, to a great extent, what people in the organization will attempt to excel at.One of the most challenging tasks facing managers is to present an . accurate appraisal to the subordinate and then have the subordinate accept the appraisal in a constructive manner. Appraising performance touches on one of the most emotionally charged activities the assessment of another individual's contribution and ability. The impression that subordinates receive about their assessment has a strong impact on their self-esteem and, very important, on their subsequent performance.The final step in the appraisal is the initiation of corrective action when necessary. Corrective action can, be of two types. One is immediate and deals predominantly with symptoms. The other is basic and delves into causes. Immediate corrective action often described as "putting out fires," whereas basic corrective action gets to the source of deviation and seeks to adjust the difference permanently.Immediate action corrects something right now and gets things back on track.

Three different approaches exist for doing appraisals. Employees can be appraised against1. Absolute standards 2. Relative standards3.Objectives

Potential benefits : There are a number of potential benefits of organizational performance management conducting formal performance appraisals (PAs). There has been a general consensus in the belief that PAs lead to positive implications of organizations. Furthermore, PAs can benefit an organization effectiveness. One way is PAs can often lead to giving individual workers feedback about their job performance. From this may spawn several potential benefits such as the individual workers becoming more productive. Other potential benefits include:

:Facilitation of communication: communication in organizations is considered an essential function of worker motivation. It has been proposed that feedback from PAs aid in minimizing employees perceptions of uncertainty. Fundamentally, feedback and management-employee communication can serve as a guide in job performance. Enhancement of employee focus through promoting trust: behaviors, thoughts, and/or issues may distract employees from their work, and trust issues may be among these distracting factors. Such factors that consume psychological energy can lower job performance and cause workers to lose sight of organizational goals. Properly constructed and utilized PAs have the ability to lower distracting factors and encourage trust within the organization. Goal setting and desired performance

reinforcement: organizations find it efficient to match individual worker goals and performance with organizational goals. PAs provide room for discussion in the collaboration of these individual and organizational goals. Collaboration can also be advantageous by resulting in employee acceptance and satisfaction of appraisal results.

Performance improvement: well constructed PAs can be valuable tools for communication with employees as pertaining to how their job performance stands with organizational expectations.At the organizational level, numerous studies have reported positive relationships between human resource management (HRM) practices" and performance improvement at both the individual and organizational levels.Determination of training needs: Employee training and development are crucial components in helping an organization achieve strategic initiatives. It has been argued that for PAs to truly be effective, post-appraisal opportunities for training and development in problem areas, as determined by the appraisal, must be offered. As can especially be instrumental for identifying training needs of new employees. Finally, PAs can help in the establishment and supervision of employees career goals.

PERFORMANCE MANAGEMENTSince organisations exits to achieve goals, the degree of success that individual employees have in reaching their individual goals is important in determining organisation effectiveness.Performance system is fundamentally, a feed back process, which require sustained commitment. The cost of failure to provide such feedback may result in a loss of key professional employees, the continued poor performance of employees who are not meeting performance standards and a loss of commitment by employees, in sum, the myth that the employee know what. they are doing without adequate feedback from management can be an expensive fantasy.

THE APPRAISAL PROCESS1. Establishing Performance Standard2. Communicate Performance expectations to employees3. Measure actual performance4. Compare actual performance with standards5. Discussion with the employees and identification development programs to bridge the gap.6. Initiate action

WHO SHOULD EVALUATE PERFORMANCE?The most fundamental requirement for any rater is that he or she has an . adequate opportunity to observe the rates job performance over a reasonable period of time. This suggest several possible raters.The immediate supervisor: Generally appraisal is done by this person. He is probably the most familiar with the individual's performance and in most jobs has had the best opportunity to observe actual job performance. Further more, the immediate supervisor is probably best able to relate the individual's performings to department and organisationalobjectives.In some jobs such as outside sales, law enforcement and teaching, the immediate supervisor may observe a subordinate's actual job performance rarely (and indirectly thru written reports). Here judgement of peers play important role. However, there is a danger of potential bias.Subordinates: Appraisal by subordinates can be useful input to the immediate development. Subordinates know first hand the extent to which the supervisor actually delegates, how well he communicates, the type of leadership he has and the extent to which he or she plans and orgamses.Self appraisal: On one hand it improves the rate's motivation and moral, on the other it tends to be more lenient, less variable and biased. The evidence on the accuracy of self assessment is fairly complex.In industry it is seen that feed back/ input is taken from various sources -Peers, subordinates, superiors etc. Some companies have gone step ahead in taking feedback from the customers and integrating it into the performance management process.A satisfactory performance implies doing a job effectively and efficiently, with a minimum degree of employee -created disruptions. Employees are performing well when they are productive. Yet productivity itself implies both concern for effectiveness and efficiency. Effectiveness refers to goal accomplishment. Efficiency evaluates the ratio of inputs consumed to outputs achieved. The greater the output for a given input, the more efficient the employees. Similarly, if output is a given, consumed to get that output results in greater efficiency.There are basically three purposes to which performance appraisal can be put. First, it can be used as a basis for reward allocations. Decisions as to who gets salary increases, promotions, and other rewards are determined by their performance evaluation. Second, these appraisals can be used for identifying areas where development efforts are needed. Management needs to spot those individuals who have specific skill or knowledge deficiencies. The performance appraisal is a major tool for identifying these deficiencies. Finally, the performance appraisal can be used as a criterion against which selection devices and development programs are validated.

Executive Summary

Performance Appraisal PURPOSE The purpose of any performance appraisal program is employee development. The value of perfor- mance appraisal is in the process of communication between supervisor and employee and not merely in the completion of the form. Specific objectives of the Performance Appraisal program are- to increase professional development, skill level and performance of each employee; to strengthen working relationships between supervisor and employee; to clarify job duties and responsibilities; to establish mutually understood standards for measuring performance and to aid in promotion, retention and salary decisions.

PREPARATION For the reviewer: Review the appraisal guidelines manual. Complete all three parts of this performance appraisal in advance of your conference with the employee and be prepared to discuss it in detail. For the employee being reviewed: Two weeks prior to your review, you will be given a blank appraisal form. Your completion of this form will serve as a self-evaluation and acquaint you with the perfor- mance factors to be evaluated.

THE APPRAISAL FORM Section I Appraisal Factors (Select the most appropriate statement [choose ONLY one]) Section II Administrative/Professional Personnel Only. (Only those employees with administrative responsibilities should be reviewed in this section) Section III Review Summary Sheet (includes overall summary and appropriate signatures)

1. Objective of the ResearchThis project aims at studying the system of performance appraisal and its effectiveness in an organisation. Performance appraisal is the most significant and indispensable tool for the management as it provide useful information for decision making in area of promotion and compensation reviews.Thus broad objectives of the study include: To know the present system of performance appraisal To know the extent of effectiveness of the appraisal system To identify and know the area for improvement system2. Sample of the studyThe population covered for the present study consisted of employee belonging to supervisory and the level above. For the purpose of this study, survey covered the employee of VATIKA LTD. falling under supervisor and the level above.The study covered a sample of 100 employee belonging to supervisory level an questionnaire with objective and question was communicated tested and finalize. Employees at VATIKA Ltd. by contacting them. The work relating to data entry compilation, data analysis and report writing constituted the third stage. Interview index was also used at some places to get information on the project subject.

Research Methodology Research methodology is simple framework or plan for the study that is as guide in collection and analyzing the data. It is the blue print that is followed in completes the study. Thus, good research methodology ensures the completion of project efficiency and affectivity. Since there are many aspect of research methodology, the line of action has to be chosen from the variety of alternatives, to choose the suitable method through the assessment from various alternatives. Research methodology gives the researcher an opportunity to put forward his argument for having opted for certain alternatives and also at the same time he can justify his ruling out some other possibility likes. Why research study has been undertaken, how the research problem has been formulated what data has been collected, what particular technique if analyzing the data has been used and lot of similar type question are usually answered when we talk of research problem in study. The details of the methodology adopted are presented below:The QuestionnaireKeeping in view the objective of the study, questionnaire was designed and tested on few employees. After getting the proper response and sanction from the concerned department the questionnaire was finalised.

PRIMARY DATA Market Survey. Personal Interview.

SECONDARY DATA

Magazines. Internet. Business Journal.

Response to QuestionnaireIn all 96 questionnaire were given to employees falling in the category of supervisors and above. Out of which 48 could be collected back duly completed. The researcher individually contacted the employees to get response on the questionnaire.Data entry and analysisIt has been an uphill task to enter the enormous data received through the questionnaire which consisted nearly 20 questions. Resgonse to the descriptive questions though very few but was valuable for the purpose of study. Hence these were further structured in time with the system adopted for compilation and data analysis.

REVIEW OF LITERATURE

Heidrick & Struggles an International Inc of Singapore published an article Internal versus external hiring decision in 2006 by Charles Moore, Managing partner.Is it better to hire from within or outside of your organization? This was the problem faced by Heidrick International Inc. The firm had strong internal candidates, but was adamant about entertaining outside talent for Friels successor. After a few months, the board met to review a shortlist of external candidates, but despite the exhaustive process chose an internal applicant. While some may argue that we could have saved time and money by only looking within, the process ensured that every possible option was considered, and that we arrived at the best solution for the firm.sHiring externally has a number of challenges. The more seniority a positioncarries, the greater the chance for failure. Unlike middle managers, the spotlight is immediately focused on the new senior executive. At many companies in Asia, the new executive will be confronted with a sink or swim situation: He will either adapt to the new culture in which he finds himself, or he will drown and the company will be left with little more than an expensive lesson.An internal hire, on the other hand, has proven his ability to operate within thecompanys culture. So why not, then, stick with only internal candidates? While certainly safer in the short term, relying only on internal promotions can lead to far greater long-term problems for an organization.Whether an external hire succeeds in his position often depends on the companys strong, forward-looking human resources team, which understands a companys business strategy and proactively puts systems in place to ensure new executives adjust to their new culture. They provide the new executive with a mentoring and coaching network that will guide him through the critical first 12 months on the job. As for the executive himself, he should refrain from making radical changes as much as possible from day one.The process includes formal mentoring and an external coaching program. And after six months, a 360-degree appraisal is conducted with the new executive. Interestingly, Goodyears on-boarding efforts apply not only to external candidates, but also to internal executives that take on a new role. Ultimately, the question to hire from within or outside an organization has no single correct answer, but clever companies answer yes to both. They promote from within when possible, provided their internal talent is first-rate, and from outside when they realize their internal resources fail to stack up to external benchmarks. The company must also ensure that the new senior executive has the support he needs to adapt to his new culture, which will help align his abilities with the organizations strategic objectives.

Bibliography

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