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EMPLOYEE PERFORMANCE APPRAISAL: COMPARISON
BETWEEN PRIVATE AND PUBLIC SECTOR COMMERCIAL
BANKS OF NEPAL
NeerabPudasaini
Exam Roll No. : 19
IAU Registration Number: 101802
A Graduate Research Project Submitted to
International American University
Submitted for the degree of
Master of Business Administration
Kathmandu October, 2013
CERTIFICATE OF AUTHORSHIP
I proclaim that this submission is my own work and that, to the best of my knowledge and
research. It contains no materials previously published or written by another person nor
material which to substantial extent has been accepted for the award of any other degree of a
university or other institutions of other higher learning expect where due acknowledgements
is made in the acknowledgements.
………………...
Date: Neerab Pudasaini
TABLE OF CONTENTS
CONTENTS Page No.
Certificate of Authorship
Approval Sheet
Acknowledgements
List of Tables
List of Figures
Abbreviations
Executive Summary
CHAPTER I: INTRODUCTION 1-10
1.1 Background of the Study 1
1.2 Statement of the Problem 3
1.3 Objectives of the Study 5
1.4 Research Questions and Hypothesis 6
1.5 Significance of the Study 7
1.6 Organization of the Study 8
1.7 Operational Definitions 9
CHAPTER II: REVIEW OF LITERATURE AND THEORETICAL
FRAMEWORK 11-44
2.1Review of Literature 11
2.2 Conceptual Framework 28
2.2.1 Conceptual Context 28
2.2.2 Steps and standards in Performance Appraisal 29
2.2.3 Performance Appraisal Process 35
2.2.4 Methods of Performance Appraisal 37
2.2.5 Performance Appraisal Purpose 40
2.2.6 Performance Appraisal System in Nepal 41
2.2.7 Theoretical Framework 42
CHAPTER III: RESEARCH DESIGN AND METHODOLOGY 45-47
3.1 Introduction 45
3.2 Research Plan and Design 45
3.3 Description of the Sample 46
3.4 Instrumentation 46
3.5 Nature and Sources of Data 47
3.6 Data Collection Procedure 47
3.6 Statistical Analysis Plan 47
CHAPTER IV: RESULTS AND DISCUSSIONS 48 - 69
4.1 Respondents' profile 48
4.2 Factor that affect performance of employees 52
4.2.1 Knowledge of Job and Employee performance 52
4.2.2 Training and Employee performance 53
4.2.3 Education and Employee performance 55
4.2.4 Team work and Employee performance 56
4.2.5 Attendance and Employee performance 58
4.2.6 Communication and Employee performance 60
4.2.7 Working Environment and Employee performance 62
4.3 Employees Satisfaction with Existing Compensation Package 63
4.4 Employees Satisfaction with Existing Performance Appraisal 65
4.4 Discussions 67
CHAPTER IV: SUMMARY, CONCLUSION
AND RECOMMENDATIONS 70 – 76
5.1 Summary 70
5.2 Conclusion 74
5.3 Recommendations 76
BIBLIOGRAPHY
APPENDIX
LIST OF TABLES
Table No. Page No.
Table 4.1 Gender of Respondents 48
Table 4.2Age of Respondents 49
Table 4.3 Educational Qualification of Respondents 50
Table 4.4 Relationship between demographic factors and employee
Performance 51
Table 4.5 Frequency distribution of Job Knowledge 52
Table 4.6 Frequency distribution of training 53
Table 4.7 Relationship between training and employee performance 55
Table 4.8 Frequency distribution of education 55
Table 4.9 Frequency distribution of teamwork 57
Table 4.10 Relationship between teamwork and employee performance 58
Table 4.11 Frequency distribution of attendance 58
Table 4.12 Relationship between attendance and employee performance 60
Table 4.13 Frequency distribution of communication 60
Table 4.14 Relationship between communication and employee performance 61
Table 4.15 Frequency distribution of working environment 62
Table 4.16 Relationship between working environment and employee
Performance 63
Table 4.17 Employee satisfaction level with existing compensation package 63
Table 4.18 Relationship between compensation and employee performance65
Table 4.19 Satisfaction with existing employee performance appraisal 65
LIST OF FIGURES
Figure No. Page No.
Figure 2.1 Theoretical Framework 42
Figure 4.1 Gender of respondents 49
Figure 4.2Age respondents 50
Figure 4.3Educational Qualification of respondents 51
Figure 4.4Knowledge of Job and Employee Performance 53
Figure 4.5Training and Employee Performance 54
Figure 4.6Education and Employee Performance 56
Figure 4.7 Teamwork and Employee Performance 57
Figure 4.8 Attendance and Employee Performance 59
Figure 4.9 Communication and Employee Performance 61
Figure 4.10 Working environment and Employee Performance 62
Figure 4.11 Satisfaction level with existing compensation package 64
Figure 4.12 Satisfaction with existing employee performance appraisal 66
LIST OF ABBREVIATIONS
Df Degree of Freedom
GRP Graduate Research Project
H0 Null Hypothesis
JBL Janata Bank Limited
NBB Nepal Bangladesh Bank Limited
MBA Masters in Business Administration
NBL Nepal Bank Limited
No Number
IAU International American University
RBBL RastriyaBanijya Bank Limited
NRB Nepal Rastra Bank
Executive Summary
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. Performance
appraisal is an important process for influencing both the extrinsic and intrinsic motivations
of employee, that is, increasing employee perceptions and understanding of job tasks and
subsequently their job satisfaction.Performance 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 semi-annual), 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 Nepal commercial banks are doing good business and general people have great faith in
them as compared to other financial institutions. The numbers of commercial banks are
increasing day by day. Currently there are 31 commercial banks (Class A) and 3 public
commercial banks which are providing services in Nepalese economy. They are smoothly
functioning and providing services to Nepalese people.
The study is focused on the analysis of private and public commercial bank of Nepal. For
public sector banks Nepal Bank Limited and Rastriya Banijya Bank has been selected, and
for private sector banksNepal Bangladesh Bank Limited and Janata Bank Limited has been
selected. The analysis of research is conducted through the collection of primary data.
Primary data was collected through questionnaire filled up by different level employees of
NBL, RBBL, JBL and NBBL. Out of the total population, 120 sample sizeswere selected but
response rate was only 83% that was from bothPrivate and Public commercial banks and the
response from public commercial banks is comparatively less than of Private Banks.
The research study used descriptive and statistical tools for the analysis of collected data.
Computation of frequency distribution of different factors, percentage of frequency, chi-
square test and the presentation on different charts made the whole analysis of data more
transparent and precise.
Researcher has also tried to examine the relationship between various factors like
demographic which include age, gender and education with the employee performance,
relationship between independents factors such as job knowledge, training, communication,
attendance, teamwork with employee performance, relationship between the compensation
packages, working environment with employee performance. From the Chi-Square test it is
found that demographic factor education, compensation package, teamwork, working
environment, job knowledge, training have significant relationship with employee
performance but attendance don’t have significant relationship with employee performance.
After analyzing and interpretation of the data provided by the research work, the researcher
comes up with findings. These finding will be worthy for making conclusion about the
employee performance and its factors affect on performance of employee of both private and
public commercial bank of Nepal. Result indicates that employee of private commercial
banks of Nepal were not also satisfied with existing performance appraisal but as comparison
with public commercial banks of Nepal they were quite satisfied with performance appraisal
system even though there is still a lots of room for improvement on employee performance
appraisal of both public and private commercial banks of Nepal.
1
CHAPTER 1
INTRODUCTION
1.1 Background of the Study
We can’t imagine an organization without people, it operate and steer only by the people. It is
people who set the goal and achieve the result. So the performance of the stakeholders of the
organization gives the clear path to the organization for the future destination. According to
Peter Drunker, an organization is like a tune; it is not constituted by individual sound but by
their syntheses. The success of an organization will therefore depend on its ability to measure
accurately the performance of its members and use it objectivity to optimize them as a vital
resource. Performance 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
semi-annual), 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.
The performance of employees through the activity and their productivity which can
easily observed and evaluated.Employee’s performance helps to aligning the
employee’s performance with the organization objectives. So each and every
organization puts the employee performance on the top. Employee’s performance
helps to link the individual objective with the organization’s mission and goal and fit
with its strategies plan. Performance can be measured by some combination of
quantity, quality, time and cost. Organization always gives the feedback as per the
performance of the employee and even the employee doesn’t learn unless they are
given the feedback on their performance. For learning to take place, feedback must be
provided regularly and it should register both successes and failures and should follow
soon after the relevant action. Performance appraisal properly describes a process of
judging past performance of the employee and clear direction is given, in short
management take the corrective action against the performance of its employee.
Performance appraisal systems provides management an opportunity to recall as well
as feedback to people as to how they are doing, so that they can correct their mistake
and acquire new skills. In most of the organizations 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. Dessler (2008).
2
Performance appraisal may be defined as a structured formal interaction between a
subordinate and supervisor, that usually take the form of periodic interview, annual or
semiannual in which the work performance of the subordinates is examined and
discussed, with a view of identifying weakness, strength as well as opportunities for
the improvement and skill development. An effective system of performance
appraisal helps the supervisor to evaluate the performance of his/her employee
systematically and periodically. It helps in the placement of the employee on the job
as per their expertise. Performances measures are always tied to goal and tell us if and
where important are necessary.
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. It is
the process of obtaining, analyzing and recording information about the relative worth
of an employee. The focus of the performance appraisal is measuring and improving
the actual performance of the employee and also the future potential of the employee.
Its aim is to measure what an employee does. According to Flippo, a prominent
personality in the field of Human resources, "performance appraisal is the systematic,
periodic and an impartial rating of an employee excellence in the matters pertaining to
his present job and his potential for a better job." Performance appraisal is a
systematic way of reviewing and assessing the performance of employee during a
given period of time and planning for his future.
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. Performance appraisal is an important process for influencing both the
extrinsic and intrinsic motivations of employee, that is, increasing employee
perceptions and understanding of job tasks and subsequently their job satisfaction.
Performance appraisal also serves to focus employee efforts and attention on critical
tasks through the use of performance feedback, which therefore assists employee in
reducing job errors and minimizing the risks of learning through trial and error.
3
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 skillful manner. In addition,
where employee desire jobs that allow them to make good use of their skills and
talents, performance appraisal increases job task "fit” through the identification of
training and development needs that are consistent with individual and organizational
goals.
There are several enduring issues relative to performance appraisal system
implementation in both private and public commercial bank of Nepal. They include
the controversy over combining developmental purposes, the absence of rater training,
the lack of organizational commitment and top-level support, rating errors, employee
dissatisfaction with the amount of performance feedback received, and the absence of
specific performance documentation.
1.2 Statement of the Problem
This research study on employee performance appraisal in both private and public
sector commercial banks of Nepal focus on the problem related to the existing
employee performance appraisal of commercial banks of Nepal. Employees are the
valuable assets of an organization. The turnover of experienced, qualified and skilled
employee due to lack of effective performance appraisal brings lots of obstacles in
day to day operation as well as effect on the image of the banks. The turnover of
human resources is expensive for the company in the sense of cost as well as loss of
skilled personnel. In today’s business world retaining the employee is one of the very
challenging jobs of each manager both in private and public enterprise. It is very
difficult for organization to hire new people in that position within a short period of
time. The losses of managerial position resources are more risky as compared to low
level of employee in the organization. Therefore effective performance appraisal
system may help to minimize these kinds of problems within the organizations. This
research study focused on the important factors which have significant effect on the
Performance of the employee in organization, and emphasis is given to the
commercial banks of Nepal.
In Nepal commercial banks are doing good business and general people have great
faith in them as compared to other financial institutions. The numbers of commercial
4
banks are increasing day by day. Currently there are 31 private commercial banks and
3 public commercial banks which are providing services in Nepalese economy. They
are smoothly functioning and providing services to Nepalese people.
The organization should be conscious about the possible factors which affect the
performance of the employees at the work place. The related factors like job
knowledge, attendance, teamwork, responsibility, and quality of work, creativity,
communication, working environment and relationship with co-workers will affect the
performance of the employees.
By analyzing the different major aspects of employee performance, the problem
related to this issue can be minimized into large extent. Generally, employee
performance has the positive relationship with the performance of the organization as
a whole. This research tries to solve out the problems associated with the employee
performance appraisal in the private and public commercial banks of Nepal. It will
guide to identify the important factors and analyze the impact of performance.
This research is based to find out the current situation of performance appraisal
systems and practices in both private and public sectors banks. There are some other
problems that need to be explored to establish the effective, systematic and efficient
performance appraisal systems and practices in both private and public sectors banks.
The research is directed towards solving of following research issues,
What are the factors that affect the performance of the employees?
What can be done for establishing effective, efficient and systematic performance
appraisal in your organizations?
5
1.3 Objectives of the Study
The general objective of this study is to understand the current performance appraisal
systems and practices in both private and public sector banks. The specific objectives
of this study are:
To determine the organizational training and development needs.
To find the current status of performance appraisal program.
To help in improving individual efforts and consequently organizational performance.
To help to improve the productivity through this motivational technique.
To identify the administrative decisions such as pay, promotion, placement and
termination based on employee‘s performance.
To identify the factors that is facilitators of effective performance of employees.
To study the employee perception on existing performance appraisal and factors
affecting employee’s performance between private and public commercial banks of
Nepal.
Though the system of pay for performance is very effective in increasing performance
and motivation. Yet it is complex process that demands a large investment from those
who seek to use it. The effectiveness of pay for performance system can be
undermined by flaws in the design, implementation and operational phases.
6
1.4 Research Questions/Hypothesis
Research questions are the basic guidelines to carry out the study successfully.
Keeping in view the objectives of the study, following research questions have been
developed.
• What are the perceptions of employee towards the existing performance
appraisal system?
• What are the factors that influence the performance ofemployee?
Hypothesis
Basically the following hypothesis will be tested:
H01: There is no significant association between demographic factors (age, gender
and education) and employee performance.
H02: There is no significant relationship between job knowledge and employee
performance.
H03: There is no significant association between training and employee performance.
H04: There is no significant association between teamwork and employee
performance.
H05: There is no significant association between attendance and employee
performance.
H06: There is no significant association between organizational communication and
employee performance.
H07: There is no significant relationship between working environment and employee
performance
H08: There is no significant association between compensation package and employee
performance.
7
1.5 Significance of the Study
The financial institutions including both private and public sector banks are the pillars
of any nation to attain its sustainable growth of overall economy of country.
Especially the commercial banks including both private and public ownership whose
primary objectives are to mobilize the available financial resource for the overall
development of the economy, who can work in various sectors. Since Nepal is in its
crucial phase to develop in the banking sectors. Now there are 32 commercial, 88
development and 69 finance companies are exist in our markets. But we can see that
there are no efficient practices of HRM as well as systematic performance appraisal
systems. Most of public sector banks have no HR department and functions related
with HR is conduct through other department. Talking about the private sectors
commercial banks, they are in transition phase of establishing HR department and its
activities like compensation management, performance appraisal, potential appraisal,
training and development. Though there is HR department in the private commercial
banks, but most of the Hr related issues were handling by the top management or
CEO. Hr department are just kept to conduct the compliance related task of human
resources. The success of any organization depends on the productivity of available
human resource of an organization and the productivity of employees can be
measured through the evaluation of their contribution for the achievement of
organizational goal as a whole. So this study will help to understand performance
appraisal systems being adopted by the both private and public sectors commercial
banks, how they determining organizational training and developments needs, how
they make and validate administrative decisions such as pay, promotion, placement
and terminations, identifying systematic factors that are barriers, facilitators of
effective performance of employees, Providing information about human resources
and their developments, Measuring the efficiency with which HR or employees are
being used and improved and so on.
It can be used as a reference for researchers who want to know more about employee
performance appraisal in both private and public sector bank of Nepal and what type
of trend exist in private and public commercial bank of Nepal. As, this will be a good
reference for the upcoming researcher and academicians.
8
The comparative study of public and private commercial banks of Nepal provides the
overall framework of employee performance appraisal which is exist currently. There
is different major significance of the study. The detail analysis of the factors affecting
employee performance appraisal in commercial bank provides the basis for the
academicians and new researcher who want to analyze or carryout other related
research paper in this dimension.
This research work also emphasizes on the problems related to employee performance
appraisal exist both in private and public commercial banks of Nepal. This analysis
will be useful for the selected banks to identify why they have only adopted existing
appraisal system, how they can minimize the rate of turnover based on their current
employees, the current strategies for the retention of competent employees for the
bank. The human resource department will be conscious about the policy making
regarding the incentive plans and benefits for employee to increase the level of job
satisfaction based on employee performance.
1.6 Organization of the Study
The study consists of five chapters- Introduction, Literature Review, Research
Methodology, Data Analysis and Presentation and last chapters include Summary,
Conclusion and Recommendation.
Chapter 1: Introduction
This chapter consists of background of the study, research statements problems,
objective of the study, and significance of the study and limitation of the study.
Chapter 2: Review of literature and theoretical framework
This chapter consists of review of the materials related to the study, reviews of
various related books, research papers, articles. It also includes basic theory of
performance appraisal, Performance appraisal process, purposes etc.
Chapter 3: Research Methodology
This chapter contains research design, the populations, the sampling procedure, data
collection procedures, statistical analysis and data processing procedures.
Chapter 4: Data Analysis and Presentation
This chapter includes the analysis of the data which are gathering from the research
and presentation of this analysis. This chapter also includes graphs, tables, and other
findings of this study.
9
Chapter 5: Summary, Conclusion and Recommendations
Fifth chapter summarizes the major findings, conclusion and recommendations.
1.7 Operational Definitions
1. Dependent Variable
Performance appraisal refers to all those procedures that are use to evaluate the
personality, the performance, and the potential of its group members. 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 of employees is his resultant behavior on takes which
can be observed and evaluated. It refers to the contribution made by an individual
in the accomplishment of organizational objectives. Performance can be measured
by some combination of quantity, quality, time and cost.
2. Independent Variables
• Job Knowledge
The demonstration of technical, administrative, managerial, supervisory, or
other specialized knowledge required to perform the job. Consider the degree
of job knowledge relative to length of time in the current position, able to
answer difficult questions, effectively learns new skills, and maintains up-to-
date job related information.
• Attendance
The extent to which the employee can be depended upon to be available for
work and to fulfill position responsibilities, reports to work on time,
communicates schedule changes promptly to supervisor, maintains regular
attendance.
• Teamwork
The degree to which the employee works well in a team setting. Interacts and
exchanges idea, observes the abilities and ideas of fellow team members,
works fairly and attempts to share an equal work-load with others.
10
• Working environment
The ability to set high standards for own personal performance, strive for
quality work put forth extra effort to ensure quality work, develops and
implements new solutions, procedures and concepts, demonstrates accuracy,
thoroughness, and reliability, shows organization and completeness, pays
attention to detail, consistently delivers what is required when required.
• Training
Extent to which employee are provided training program by the
organizationsalso affects the performance of the employee. Training provides
the new insight to the employee and will increase the horizon of the
knowledge.
• Communication
The extent to which the employee effectively listens, conveys and receives
ideas, information and direction, seeks to clarify and confirm the accuracy of
their understanding of unfamiliar or vague terms and instructions, makes oral
and written communication clear, assesses and takes steps to improve ability
to communicate (written and verbal) so ideas and consultations are conveyed
with precision and efficiency. Effective communication helps on improving
performance of the employee.
11
CHAPTER 2
REVIEW OF LITERATURE AND THEORETICAL FRAMEWORK
Review of the literature depicts the ideas and views of different persons concerning a
subject matter. Review of literature means re-viewing the past experience or
experiment or research done by researcher. Under this topic, the past researcher's
thesis is reviewed and articles, books, newspapers are also reviewed. Past experience
or researcher will help us to collect important knowledge or information as a support
of our research. The review of literature provides the foundation for developing
comprehensive theoretical framework. The literature survey also minimizes the risk of
pursuing the dead ends in research.
2.1 Review of Literature
According to Storrs (2010) on his articles seeks to identify the key elements of
performance measurement systems initially adopted by the business management
sector and now prevalent in the public and private sector. He examined the body of
research and learning in this area and open up the possibilities of developing a system
that is appropriate for application in the development public and private sector.
Evaluation can also assist organizations and individuals in maintaining purpose and
clarity around their mission, goals and objectives and to sustain them in the delivery
of their desired outcomes.
Performance appraisal systems offer us a feedback mechanism on what works and
what needs change or adjustment. They provide valuable information on the impacts,
intended and unintended, of our actions and initiatives, and as such is a vital part of all
learning, living systems. Well-constructed Performance appraisal systems can ensure
a consistent stream of direct and concise feedback in areas vital to the aims and
objectives of a organizations and its success. This article will outline the core
essentials of performance appraisal systems and place them firmly in the framework
of a strategic planning process. The article will review performance systems and in
particular look at the ‘balanced scorecard’ (Kaplan & Norton, 1992) as a model
worthy of analysis and reflection. Rather than proposing an off-the-shelf solution the
12
article argues for a model that will embrace the strategic planning process to capture
the added value of development education in all its aspects.
Resistance to performance measurement
Due to the fear or lack of confidence most of the employee always tries to resist the
performance measurement adopted by employer. Performance. This can arise from a
fear by those being measured that they will be harshly judged, or that the
measurement system adopted will not reflect the full range of contributions and added
value of individuals. Some may believe that it is not possible to measure the particular
type of work performed. Evaluation and measurement are often viewed negatively
with mental images of judgment, competition, failure, and being monitored and
observed. A more positive mental model of performance management and
measurement needs to be constructed, if it is to serve us well. Evaluation with
appropriate measurement systems is a powerful asset and the learning from that
evaluation must be handed back to those who can gain most from the process:
Performance appraisal
Prior to the development of strategic planning and project evaluation in the business
sector, individual performance appraisal was practiced in a large number of
organizations. An examination of the issues and insights surrounding the practice of
performance appraisal is worthwhile when moving to consider strategic planning
process. Perhaps the most groundbreaking piece of research into individual
performance appraisal was carried out in General electric during the early part of the
1960s. This research arose from the perception that performance appraisal was
resisted and where practiced it produced little if any positive outcome. Surveys
generally show that people think that the idea of performance appraisal is good...in
actual practice it is the extremely rare operating manager who will employ such a
programmed on his own initiative...few indeed can cite examples of constructive
action taken - or significant improvement achieved – which stem from suggestions
received in a performance appraisal interview with their boss (Meyer, et al.,
1965:123).
13
At the General Electric Company we felt it was important that a truly scientific study
be done to test the effectiveness of our traditional performance appraisal programs
[and] we found out some very interesting things – among them the following:
criticism has a negative effect on achievement of goals; praise has little effect one
way or the other; performance improves most when specific goals are established;
defensiveness resulting from critical appraisal produces inferior performance;
coaching should be a day-to-day activity, not a once a year activity; mutual goal-
setting, not criticism, improves performance; and participation by the employee in the
goal-setting procedure helps produce favorable results(Meyer, et al., 1965:124). This
piece of research and practice in General Electric provides foundation stones for the
construction of enlightened measurement and evaluation systems to meet the needs of
all stakeholders. Our challenge is to build measurement and evaluation systems based
on the body of learning and research mixed with innovation and creativity. The
research uncovered some interesting insights on what works in individual
performance assessment and yet these basic principles are often ignored in the design
of and practice of modern evaluation systems.
According to Fay (2007) .The corporate experience shows us that the system used to
manage employee performance does not exist in a vacuum. Companies routinely rely
on management practices that send the message to employees: "Good performance is
a priority and essential for this company's financial success." Every employee
understands and at some level accepts that reality when accepting a corporate job.
Employee performance management is consistent with that message.
The public and private sectors do not differ significantly in the practices associated
with managing employee performance. That is to say, the participants in the
Risher/Fay survey tend to rely on similar practices, as if they used the same textbooks
and consultants. For example, comparative results show each of the groups provides
training for managers and those directly reporting to them on performance
management principles. The results also show that manager and employee
involvement in planning the performance system is common. We conclude from the
survey data that the continued reinforcement of performance by a multiplicity of
practices is responsible for creating a performance culture. The system or process for
14
evaluating employee performance by itself is not enough to define the culture. Pay for
performance as an isolated practice would similarly not define the culture. Of course,
when employee performance is ignored or has no consequences, it sends a very clear
message: performance is not a priority.
According to Grote (2010)on his articles “Painless performance appraisals focus on
results, behaviors - includes related article on techniques in creating a new appraisal
system” he found that Performance appraisals are like seat belts. Everyone agrees
them re a good idea, but lots of people find them awkward to use. Every company has
a system, but few extol the system they have. Most managers loathe doing appraisals-
if they thought they could get away with it, they would skip the repulsive chore
completely. And everyone expects the HR manager to be an expert on the process.
Still, organizations want the results that a reliable performance appraisal system can
deliver: clear and specific goals so people know exactly what is expected; solid
information on just how well they are doing; senior management's awareness of the
contributions they have made; data on where they are doing a great job and where
some shaping up is needed; fair and equitable pay for performance; and a thumbs-up
"antibody" when they hit a home run.
Whether you have a great appraisal form, a second-rate checklist, or no form at all,
the process matters more than the paper. Good managers are consistent in making
performance management a key component of their personal job responsibilities. Here
is their advice on making performance appraisals work for them and for the
organization - advice that will assist those managers who ask you how they can get
the best from their people.
Start with goals and employee self-appraisals
At the first of the year, ask each of your subordinates to set two goals for what they
are going to do in the next 12 months to make the organization more efficient,
service-oriented, client-friendly and admirable. Don't accept generalities. Ask the
employees exactly how they will measure whether or not the goal has been achieved.
For example, ask "Just what will you accept as evidence that we are meeting
15
ourclients' needs better?" Or, "What will have to happen for you to know that we
really are operating more as a team?"
Focus on both people's results and the way they are produced. One malevolent myth
claims that as long as employees are doing the specific tasks laid out in the job
description, we can't ask them to have a good attitude and be the perky cheerleader
type. Nonsense! Nothing prevents managers from telling subordinates that because of
the nature of the business, it's important for everyone to display a helpful, cheerful,
outgoing demeanor. If Charlie says, "That's not in my job description!" just grab his
job description and write it in. When it is time to write the appraisals, start by asking
people to write their own. There is nothing more powerful than giving everyone in
your department a blank copy of the performance appraisal form and asking them to
generate a self-appraisal. Even if you don't request a complete self-appraisal, at least
ask for a list of what employees believe was their most important accomplishments
and contributions over the past year. If nothing else, that simple request will prevent
you from being blind-sided when the employee wails, "You didn't even mention the
Thompson contract I landed last February!"
Prepare the core message
Most managers find that putting words on paper is the toughest part. In writing the
appraisal, start by getting the big picture clearly in mind. Research on performance
appraisal consistently shows two dismaying facts: First, people rarely remember what
they are told in appraisal discussions; second, what little they do remember they
usually get wrong. To minimize those problems, start by asking yourself, "What is the
single most important message I want to send Sally about her performance over the
past year? If I could have her remember only one thing a month after our talk, what
would it be?"
That is called the core message. Once you have it clearly in mind, fill out the form
and then identify a few key elements you want to concentrate on during the appraisal
discussion. A reasonable target might be two areas of genuine strength that need to be
continued and enhanced, one area that needs immediate improvement and one skill
that should be a target for development. Make it easy on yourself. Instead of trying to
16
cover 20 different things during the discussion, you will have far more success if you
talk about four important things five different ways. If Sally can accurately remember
the core message and the key elements a month after the meeting, you have done a
terrific job. The most important requirement for successful performance appraisals
has nothing to do with the elegance of the form or the sophistication of the process.
The critical requirement is courage-the courage to tell the truth. Draft your.-appraisal
of Sally's performance before you read her self-appraisal or list of achievements; write
the final version afterward. Highlight the best evidence you have and give more
examples to support especially high or low ratings. Tell it like it is; avoid promises or
assurances.
Conduct the appraisal discussion
Now comes the moment of truth - the meeting between the two of you. Here are some
tips for simplifying an admittedly challenging job. First, if you have several appraisal
discussions to conduct, start with the easiest-your best performers. Remember John
Dillinger's advice: "Before you rob your first bank, knock off a couple of gas
stations."
Second, give the employee a chance to prepare. Don't waste time and increase
discomfort by calling the employee into your office, handing him or her appraisal to
read while you pretend to be busy doing something else. The employee will race
through the form missing half of what you have said, and you will be all pins-and-
needles trying to gauge his or her reaction. A far better approach is to walk up to the
person a half-hour or so before your meeting and say, "Sally, we'll be meeting at 3
o'clock to discuss your appraisal. Here's a copy of it. Read it through so you'll be
ready when we get together." Giving her a chance to read it in advance of the meeting
reduces tension for both of you and increases the odds that some genuine good will
actually come of the process.
It’s 3 o'clock and Sally is standing in your doorway. "Ready?" she asks. Here is a
script for the opening few seconds that will get things off to a great start:
17
Sit down, Sally. I've been looking forward to this chance to talk with you about your
work last year. I think this discussion can be helpful to both of us.
I'd like to go through the process slowly and carefully. I've put aside 45 minutes for us
to talk together. This is one of the most important things you and I will do together all
year.
I want to start by having you tell me how you see your own performance over the past
year-what you feel you did particularly well and where you think you might have
achieved more. Then I'd like to talk about the appraisal I wrote.
I think the most effective way to start is by discussing those areas where you and I
generally agree. Then we'll talk about those in which our views seem to differ. I'll
give you my reasons, and I want to get your point of view.
The most important part of the process is reviewing the specific goals and objectives
of your job. I'd like to start there and spend most of our time together talking about
the results you achieved this year. Then I'd like to look at the section that deals with
job skills and competencies and any other key elements of the appraisal. When we've
completed that, I'd like to talk about my overall rating and how I arrived at it. Why
don't you start by telling me how you feel this past year has gone? For areas where the
two of you agree, acknowledge the merits of the individual's reactions and add
information of your own. For areas of disagreement, begin with your highest ratings
and proceed toward your lowest (remember Dillinger's advice). Give specific
examples, use active listening and remember that the two of you will not agree on
every single item. Your goal is not to get Sally's agreement, but to get her
understanding. As long as she gets the core messages, you have done your job,
whether she agrees with what you say or not.
Awkwardness still can arise during the discussion because the process and virtually
every appraisal form being used require managers to make absolute judgments about
subordinates. Few people like doing that, and fewer still enjoy being judged - even
when the judgment is positive.
18
According to Clinton (2009), Performance appraisal is perceived to be a critical
human resource management function in most organizations in the U.S. Research
estimates that over 90% of all large private sector organizations in this country
employ some form of systematic employee appraisal and review.(1) At the same time,
the number of public sector organizations employing the formal appraisal process
continues to steadily increase.(2) This article will explore the potential benefits and
problems associated with performance appraisal in the public sector and discuss ways
to improve this pervasive practice.
In recent years, widespread attention has been paid to the role of the formal appraisal
process because of the belief that an effectively designed and implemented appraisal
system can provide the employee, the manager, and the organization with a host of
positive benefits. The literature on performance appraisal generally concludes that the
appraisal process can: 1) provide managers with a useful communication tool for
employee goal setting and performance planning; 2) increase employee motivation
and productivity; 3) facilitate discussions concerning employee growth and
development; 4) provide a solid basis for wage and salary administration; and 5)
provide data for a host of human resource decisions. (3)
The problems associated with the design, implementation, and operation of formal
performance appraisal systems are well documented, and they continue to frustrate
both academics and practitioners alike. Researchers have concluded that there is no
such thing as an "ideal" appraisal format and system. Every organization must design
an appraisal instrument and process that supports the organizational goals that it
wishes to accomplish.(4) In addition, participant acceptance of an organization's
performance appraisal system is perceived to be a critical factor in appraisal
effectiveness.(5)
Further research suggests that having a technically sound appraisal system and
procedure is no guarantee that an organization's appraisal process will be effective.(6)
Managers and subordinates must have a shared perception of the purposes and
functions of the process and the belief that the appraisal process is useful to them on
an individual basis.(7) To this end, an effective appraisal system is one that satisfies
the needs of the parties involved in the process.(8) In addition, an effective appraisal
system requires that managers not only have the skills necessary to conduct the
appraisals, but also the willingness to do so.(9)
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Serious questions have been raised concerning the functions actually served by the
appraisal process. (10) Are formal appraisals worth all the time and effort devoted to
them? What do public sector organizations actually accomplish in conducting formal
appraisals? The functions effectively served by the appraisal process are a source of
continuing debate as academics seek to better understand the appraisal process while
practitioners seek ways to increase appraisal effectiveness.
Research has found that employees react more favorably to the appraisal process
when it satisfied their needs and included an opportunity to state their position; when
factors on which they were being evaluated were job-related; and when objectives and
plans were discussed openly.(11) Managers and subordinates do not always agree on
what constitutes an effective appraisal. When managers and subordinates have a
shared understanding of the purpose of the appraisal as well as each party's role in the
appraisal, the subordinate's acceptance of the appraisal is increased.(12)
Both research and organizational practice suggest, however, that managers and
subordinates have different needs and expectations regarding the appraisal event.
Research strongly indicates that the manager's (rater) purpose, intentions, and
perceptions of the rating process may differ significantly from those of the
subordinate (ratee).(13) In a recent study conducted in a medium-sized organization,
researchers found that managers and subordinates differed significantly in their
perceptions of both the role and effectiveness of the appraisal process on such key
issues as: the purpose of the appraisal process; the level of fairness; the link between
pay and performance; honesty of communication; completeness of feedback; means to
improve the manager-subordinate relationship; and the extent to which an appraisal
lets subordinates know where they stand.(14) The overall effectiveness of the
appraisal process received mixed reviews.
Research concludes that it is critically important for managers and their subordinates
to have shared perceptions surrounding the performance appraisal event both in terms
of its intended purpose and process. When the needs of either party are not being met,
the effectiveness of the appraisal process is in jeopardy. Yet, surprisingly there is little
research in this aspect of appraisal effectiveness in public sector organizations despite
the expanded use of this practice.
20
The Development of Asian Performance Management Systems
According to Rowley (2009)on hispublication “The Development of Asian
Performance Management Systems: The Example of South Korea” PMS developed in
within Korea’s Confucian traditions and HRM was characterized as paternalistic and
collectivistic with a seniority-basis of lifetime employment and tenure-based pay
(Rowley and Bee, 2001; 2003). Within that tradition employees were paid and
promoted based on their seniority.
The triggers that made such existing PMS less workable can be classified into two
groups. First, the internal constraints inherent in seniority-based systems. Basically,
such systems could be maintained while companies rapidly grew and the average
tenure of workforces was relatively short. However, if growth and expansion slowed
and tenure and seniority increased, the burden of labor costs under seniority-based
systems rises steeply and inexorably (Kim, 2005). Second, external factors gave
further momentum to pressures for change. The most conspicuous were the following.
First, the 1987 Proclamation of Democratization (Rowley and Bae, 2004b) as this
removed major restrictions on individual freedoms and rights to organize unions,
bargain collectively and take collective action were granted. Workers’ collective
voices, combined with labor market tightness, were big challenges to management. In
addition, the 1997 Asian Financial Crisis highlighted how vulnerable companies were
to environmental uncertainties as well as threats of heightened global market
competition. In turn these encouraged firms to change their overarching management
views (Rowley and Bae, 2004b). As a result of these factors and developments,
Korean companies began to shift their management orientation towards being more
individualistic, contract-based and meritocratic, emphasizing greater performance and
competencies in HRM. Some managers tried to orient employees’ mindsets away
from seniority by establishing new performance appraisal (PA) systems with
performance more central to evaluation criteria and intending to more closely link pay
to performance. Indeed, some pay-for-performance systems (‘Yunbongje’ or ‘Annual
Gross Pay Systems’) were adopted, especially by large companies.
These trends have been regarded as pivotal for changing organizational culture as well
as managing HR in a new fashion. Accordingly, PMS became an important
21
underpinning element within newly oriented HRM systems. Data on the performance
of employees obtained from PMS began to replace information on personal
characteristics (e.g., seniority, educational and social backgrounds) in making
decisions about important HRM issues such as pay, promotion, training, and so forth.
Part of the new PMS involved feedback to employees about their performance. This
began to happen. One survey (KRIVET, 2005) found PA results were provided to
workers in over one-third (37%) of companies (with 100 or more employees).
However, Korean managers still tend to feel uncomfortable articulating what their
subordinates have done in their jobs against performance criteria in face-to-face
meetings. Managers may feel that teamwork and relationships with subordinates
could be damaged if they articulate their staff’s performance and differentiate staff
based on their performance. Although managers have to rate their subordinates for
business purposes, many would prefer not talking with staff about their performance
directly face-to-face.
In addition, combined with a traditional seniority-based ranking system, a face-saving
culture encourages people to care about their titles (e.g. on their business cards),
which show whether they have been promoted in a timely manner in accordance with
seniority. Even though senior employees may accept the changing reality that they
could be outpaced by junior employees in terms of pay and promotion, they still want
their face to be saved among their family members and acquaintances. Indeed,
companies try to prevent morale from declining due to merit-based PMS and PA
systems by letting employees use their traditional titles corresponding to their tenure.
Key Challenges Facing PMS
Companies face big challenges with cultural fit. In most companies which adopted
PMS they are used as a key to trying to shift traditional culture towards meritocracy.
However, challenging and transforming existing culture deeply rooted in ways of
thinking and life is very difficult since there is very strong inertia as culturally-
influenced behaviors remains embedded and mutually reinforced in society. One risk
for PMS is in being defeated by cultural inertia. Fairness issues have been a major
concern in Korea. Combined with prevalent favoritism in Korean society, PMS using
more subjective PA has been assumed to be highly vulnerable to rater arbitrariness or
22
intentional distortions in rating performance. This is one reason why companies have
tried to find more objective measures for performance. For some people, objective
performance measures are themselves just or fair, while subjective measures are
unjust or unfair. However, fairness is not guaranteed with more objective performance
measures. If construct validity of, and controllability toward, a measured performance
is not secured, fairness issues would not be ameliorated. Rating inflation is another
major concern. Management worries that raters engaging in lenient rating can defeat
the desire to more firmly embedded meritocracy in organizations. Raters have a
strong tendency to give ratings leniently since low
Ratings can lead to resentment and perceptions of inequity while lenient ratings are
helpful in maintaining or improving a positive climate in the workgroup (Murphy and
Cleveland, 1995). This phenomenon is more understandable if we take into account
that raters’ goals are not necessarily consistent with the organization’s goals. For
raters, the ability to maintain positive interpersonal relationships with subordinates
might be viewed as much more important as turning in ‘accurate’ PA or completing
the paperwork and filling the boxes in administrative schemes. Some companies in
Korea have tried to tackle rater leniency problems by forced distribution schemes.
Such PMS assume employee performances within a rater’s span of control follow a
certain kind of probability distribution. However, forced distribution PA can bring
their own side effects and issues (Rowley, 2003). Furthermore, most Korean
companies adopting PMS have not paid sufficient and careful attention to raters’
abilities to evaluate accurately and fairly. It has been assumed the abilities to appraise
performance accurately are somehow ‘inherent’ in managers, which is a common
myth (Rowley, 2003). Few companies have provided raters with training on how to
evaluate. According to one survey (of the top 300 companies in Korea) the lack of
raters’ abilities to evaluate appropriately was a problem to be urgently handled for
improving PA systems (SERI, 2002).
Finally, and linked to the above, is the blithely ignored fact that PMS is not ‘cost-free’
and that they impact on those in professions. Thus, in addition to the corrosive
relationship issues noted, the transaction and opportunity costs across the whole
organization of undertaking more verbose and lengthy PMS needs to be considered
against any robustly calculable ‘benefits’. Also, there is the notion of an ethos in
23
many professions which by their nature PMS contradict. Without considering these
issues, a backlash against PMS may be expected.
Performance Management System in Europe
According to Batley (2008) on his articles “Performance Management System in
Europe” he found that few countries during the past decade have escaped increased
scrutiny of public sector budgets and pressures to improve productivity. Similarly,
public services have been subject to pressures for greater service quality and
accountability to consumer demand. Several further common themes emerge: an
active encouragement of private sector practices; a rethinking of the role of
management and a devolvement of management responsibility further down the line
including the responsibility for human resources, an emphasis on performance
measurement and accountability, and a cost consciousness.
Although these trends have general validity in the public sector as such, they certainly
are characteristic of local authorities. And they represent dramatic changes in demand
on those who hold managerial positions, as well as determining the possibilities of
management development.
Trends in role expectation of local authority managers can be classified under the
following headings:
Performance manager: Across Europe, public sector organizations are assumed to
perform more, at a lower cost and at a higher (and often different) quality. The local
authority manager plays a key role in this performance management process. This
explains why we have focused on the compensation systems (variable pay,
merit/performance-based pay, etc.) by which the manager can (ideally) influence
subordinate behavior. We have shown, based on the Cranfield data, how these
remuneration schemes are widely used across the six examined countries.
Strategic ambassador: We have discussed how the local authority manager constitutes
a communication link between top management, the subordinates and relevant
stakeholders in and outside the organization. Transmitting – vertically and laterally –
24
ideas, information and attitudes is a key role, in particular for the middle manager.
The corporate identity, mission and objectives, received from above, are transmitted
to lower levels, and feedback from the employees is transmitted to top management.
External information from stakeholders (in the case of local authorities, often the
citizens) is taken into the organization and acted on. The organization is trying to
make an impact on the environment by information, corporate image activities, etc.
These four directions of communication meet at a crossroads, i.e. the manager.
People manager: The responsibility for human resources is to an increasing extent
assigned to line managers, so the manager should, professionally, be able to deal with
remuneration schemes, performance appraisal, training, career development, poor
performers, etc. On behalf of the organization, the manager is initially establishing
(and continuously renegotiating) the psychological contract which encompasses the
match between the employee, the job and the organization. The “success criterion” for
a “good” contract is an employee-organization match characterized by high
performance and commitment.
Other roles could also be defined, but we have selected these because they are crucial
to the present (and future) demands on the local authorities sector.
In this paper we have also discussed how managers prepare themselves for the new
managerial role. We have shown that formal training activities are given high priority
by local authorities and that manager’s play an important role in this, but that people
management skills, particularly in some countries, are underdeveloped both
absolutely and in comparison with the private sector. We have also discussed,
however, the range of experiential learning opportunities on the job. The turbulent
environment as well as change processes within the organization represents a learning
potential which can be activated as a “learning ground”.
The preceding analysis has shown that within these general themes responses vary
considerably between, and across, countries. Local authorities in Germany appear to
have seen little change to existing practices and very little redistribution of
responsibility, whether between HR departments and the line or central and local
agencies. While German public sector literature similarly talks about new challenges
25
and the need for accountability and greater closeness to citizens and consumers, so far
this has led to few general changes in human resource management. This stability of
existing practices is confirmed by the reaction to the demands of reunification: West
German public sector employment practices were introduced wholesale into East
Germany, and rather than seeing this as a chance to introduce reforms, it at least
momentarily slowed down the voices pushing for reform.
The Nordic countries and the UK, on the other hand, have seen change in many areas,
often showing stronger movements than the private sector. In the Nordic countries,
reforms have happened within a general acceptance of the public sector. In the UK,
they have been driven by a conviction that the public sector should not only learn
from private sector practices, but that the balance and division of responsibility
between private and public sector providers should be reconsidered – thus questioning
the very notion of public sector services. In this, however, the Scandinavian countries,
particularly Denmark and Norway, have moved further than the UK in terms of
decentralization and deregulation, particularly by experimenting in the field of pay
determination.
While the survey does not allow us to assess the extent of a particular practice within
an organization, it does show that the spreading of practices across the local authority
sector is not uniform. More research is needed on the factors that influence the local
decision-making process with regard to new employment practices.
26
A New Look at Performance Appraisal Systems
Developments in information technology (IT) and communications have made life
very simple. Now performance planning, review discussions, and assessments can all
take place on-line. Using an in-house network or web based support will go a long
way to have conversations on performance planning and performance reviews.
Performance plans can be developed and reviewed online. Performance development
needs can be identified and even met on-line. There are many on-line training
packages that could be linked with the development needs. Such needs should be
identified at the beginning of the year along with performance plans rather than at the
end of the year on the basis of performance reviews. In the past, one of the reasons for
most managers for not completing their performance plans on time has been the lack
of finding a common time when the entire department or the seniors and juniors can
meet together to plan, review, and discuss performance. Availability of IT and the
changing nature of work due to technological improvements make implementation of
PMS much easier by reducing the meeting time and perhaps the meeting need. Every
employee can plan his work, get it checked, modified, and assessed on-line. The
problems and difficulties can be presented and solved online using an IT-supported
PMS. The following is a recommended system of on-line performance management
with IT support:
Step1: The Company formulates its annual plan and posts it on-line on the basis of a
review of its last year’s performance and business opportunities and aspirations for
the subsequent year. Line managers could be invited to offer their comments if any to
enhance participation.
Step2: Each department or work team plans its goals and results in alignment with the
company goals and plans. This is done along with the departmental plans and
budgeting exercises. This could be done through virtual meetings on line.
Step 3: Each individual plans his own work inputs and results in terms of KPAs,
KRAs, activities, and time allocations and posts them on the net. This should be
available for viewing by anyone in the company. Performance plans should encourage
new benchmarks and learning from one another. For example, a Sales Manager
working in Mumbai or London may learn from the activities of his counterparts (other
Sales Managers) in Colombo or Singapore or Bangalore. They also should learn from
the activities of their seniors and juniors. All this is possible with IT-aided PMS.
27
Step 4: The individual development needs should be identified and posted along with
performance plans on the intranet to be accessed for intervention planning by the
concerned agencies including the departmental head and the HR Department or the
training centre.
Step 5: The performance plans are accessed and approved by the seniors and
reporting officers on the net. The reading and approval may also take place at a time
Convenient to the appraiser as he carries the laptop and the net access with him all the
time.
Step 6: The HR or the Training Department intimates the plans for training and
development interventions to the concerned individuals and departments again on the
net through appropriately designed IT packages and emails.
Step 7: A quarterly review of performance is conducted in relation to the performance
plans and quarterly accomplishments by each individual performer and simultaneous
assessment by the reporting officers. Assessments are to be made confidentially and
revealed to the candidate only after both self-assessment and boss’s assessment are
complete. It should be so designed as to facilitate independent assessments and
dialogue subsequently.
Step 8: Performance plans are modified and reviewed at the departmental and
individual levels on the basis of the quarterly performance review of the firm, the
department team, and the individuals. The modifications could also be carried out on
the net. The process could continue for quarters 2 and 3 as in Step 9.
Step 9: Annual individual performance review to be conducted after the departmental
reviews and assessments are shared on-line, similar to the process in Step 7.
Step 10: Annual assessment of the internal customer service to be assessed on-line by
a simple assessment tool. The on-line system should not take more than five to ten
minutes per assessment. Assessments should be done by all internal customers
individually and anonymously.
Step 11: Annual assessment of the performance of the individual manager to be
conducted by all his next line juniors anonymously on parameters like time spent in
developing them, support provided, and effort put in to utilize their talent and develop
them, etc.
Step 12: Annual performance index to be computed with IT assistance, possibly by
developing appropriate programmers.
28
The revised Performance Management System in operation in Steel Authority of
India is a good illustration of how to use IT effectively for PMS. In the SAIL system,
the KPAs, activities, accomplishments, and difficulties are all recorded on-line and
are available for all the concerned employees. It saves a lot of energy, time, and cost
to the company. It encourages more participation and on-line discussions. The
technology should be developed to suit the PMS philosophy and requirements rather
than adapting PMS to suit the technological capabilities. Experiences of organizations
like the SAIL in recent times have demonstrated how indigenously developed IT
support can be of use in implementing a good PMS, according to Rao., (2008)
2.2 Conceptual Framework
2.2.1 Performance Appraisal: Conceptual Context
People are the source of all productive effort in an organization. Organizational
performance depends upon individual performance. To fulfill the objectives of the
organizations there should be well management of human resources. Actually the true
meaning of human resource management is the "get result through people". We can
make brilliant plans, we can draw clear organizational charts, we can set up modern
assembly lines and can use sophisticated accounting controls but still we fail if we
can't choose right human resource in right place and time.
Human resource influences the efficiency of organization. People set overall goals,
strategies and objectives e the organization, without effective people it is simply
impossible for an organization to achieve predetermined goals and objectives. Human
resources are the major cost and expense of doing business, they have profound effect
on productivity, they are unique, and they demand fairness and equity. Properly
trained human resource manager will protect the organizations from unnecessary law
suits and penalty. Managing human resources is a central concern of every manager in
any organization. Recently, a number of developments have combined to make
effective management of human resource even more important, and more complex.
Not only are workers and work organizations changing but organizations are also
changing. Government regulations of the employment relationship, economic
competition on a global scale and host of other factors has forced this change
(Dessler, 5th edition, Human Resource Management).
HRM has been given importance in the banking and professionals fields because of
the role it plays in enhancing organizational performance. Presently, organizations are
29
successful on the account of competent human resources. Thus, according to Katuwal
(2007) human resource management is the requirement in facing competition
successfully rather that fulfilling the legal and mandatory requirements. The role of
HRM in Anglo-American Organizations is said to be action-oriented, individual-
oriented and future-oriented. However, in the case of Nepal, although the scenario of
HRM has been gradually shifting from record keeping of employees and providing
piecemeal solution to HR related problems, it has not improved to the extent desired.
Hence, Nepalese organizations are unable to face HR related challenges, achieve
business strategies and make them competitive and advantageous.
2.2.2 Steps and Standards in Performance Appraisal
Developing a performance appraisal system
A formal performance appraisal system can provide a framework within which
appraisers and appraises van operate. A performance appraisal system can be
developed through a program comprising the following stages: determine overall
approach to performance appraisal. The decisions on the overall approach to introduce
performance appraisal should cover the followings:
a. What are the objectives of introducing performance appraisal?
b. What benefits are anticipated from introducing performance appraisal?
c. What are the main features of the approach to performance appraisal?
d. Decide who is to be covered?
At one time most schemes were restricted to manage but performance appraisal is
now being extended to all the members of professionals, administrative, employees.
The decisions as to who is to be covered should be made at the outset itself. Decide on
whether the same approach should be adopted at each level. In most cases, the essence
of the approach is the same for all levels, though performance measures vary for
different levels.
Set up project tea, that team consists of managers and other employees and facilitated
by a member of the human resources department and an outside consultant are a
valuable means of getting involvement and ownership. Define role of human resource
department, the role of HR department in developing and implementing performance
appraisal system is to convince top management that it's introduce will make a
significant impact on the organizational performance. Decide whether to use outside
consultant or not, external consultant can be used to advice on and facilitate the
30
introduction of performance appraisal to run training program and, to carry on
evaluation studies including the conduct of attitude surveys. But as they are costly,
care must be taken in selecting consultants who have the required level of experience
and expertise.
Introducing and Operating Performance Appraisal System
The introduction of performance appraisal should have been planned in the
development stage. The main steps are to train everyone on performance appraisal,
and once in operation, to monitor and evaluate how the system is working out in
practice. These aspects are discussed in detail.
Training
The importance of thorough training for both appraisers and appraises in the skills
required to carry out performance appraisal effectively cannot be overemphasized.
Both parties in the performance appraisal process will need guidance and training in
the preparation of performance agreements and plans, conduct of performance
reviews, and the completion of review forms. There is also a need to develop skills
required to conduct appraisal discussions, including interpersonal skills.
Training can be provided by formal courses or workshop. It is probably best to
develop a series of training modules as it might be difficult to get people to go
through all the training enquired at one time which, in any case, they would be unable
to absorb. The modules could consist of:
a. Introduction to performance appraisal system
b. Defining key takes and setting objectives
c. Working with attributes and competence
d. Preparing performance and development
e. Conducting appraisal discussions
f. Rating
g. Providing feedback
h. Coaching and counseling
Monitoring and Evaluating Performance Appraisal
It is not only important to monitor the introduction of performance appraisal very
carefully, but it is equally vital to continue to monitor and evaluate it regularly, so that
31
any drawbacks can be corrected. The ultimate test, of course, is analyzing
organizational performance to establish the extent to which improvements can be
arrtibuted to performance appraisal. It may be difficult to establish a direct connection
but more detailed assessment with managers and staffs on the impact of the process
may reveal specific areas in which there have been improvements.
Distinction between performance appraisal and potential appraisal is designed to look
backward in order to look phony. The best prediction of potential, using performance
appraisal as the basis, is made when the next job is quit similar to the previous one.
But, in many cases the next job may be quit different and thus the past performance
will not be adequate as predictor of future performance. It is important for us to
clearly understand differences between the current performance and promotion
potential of subordinates.
As mentioned earlier, performance is the resultant behavior of the subordinate on the
task which can be observed or evaluated. Potential, on the other hand, refers to
employee's abilities to fit into future role. Many managers default in amassing that a
person with abilities to perform well in one job will automatically perform well in
amore responsible position. It is for this reason; people are often promoted to position
in which they cannot perform adequately. This has been amply summarized in Peter's
principle. In any organization, everyone rises to his level of incompetence. We must
remember that by promoting an employee with no promotion potential, we lose a
good worker and get a bad executive. Most performance appraisal forms have a
column for potential for promotion in which a score is required to be filled up.
Though this is supported by words, only the numerical score is recorded for
manpower planning purposes. In addition, a statement such as 'ready for promotion in
X months/years', if seen by the appraiser, is likely to be constructed as a promise.
There are many methods available for identifying. These include assessment centers,
psychological tests, assignments, peer and self assessment and action learning
program. Ideally, potential assessment should involve the use of more than one
technique. This is likely to result in more reliable judgment.
Performance Criteria
In order to be effective the criteria for performance appraisal should be genuinely
related to success to failure in the job and should be amenable to objective judgment.
It should also be easy to appraisers to administer and appear just and relevant to the
32
employees and strike a fair balance between sensitivity to the needs of the present
jobs and applicability to the Organization. The earlier concept of merit rating system,
merit was based upon personality traits such as leadership, ability to get along with
others, decisiveness, creativity, industry, judgment, initiative and drive. It was
difficult to apply this system reliably since it demanded to much on the quality of
personal relationship rather thenemployee's performance. Personality measurement is
so much dangerous because we use like to quantify. The focus earlier was on ‘what he
is'.
In performance appraisal, the focus is shifted to ‘how he performs’ in work-oriented
activities such as job knowledge, accuracy, clarity, analytical mind , ability to carry
on operation to their logical ends. Performance appraisal is thus, competence,
contribution and commitments and not chance, chemistry and connivance. Merit
rating was generally used for blue-cellared jobs whereas performance appraisal is
more comprehensive and can be used for all categories workers, supervisors and
managers. Management by objectives (MBO) is an example of performance based
appraisal approach that involves setting objectives and comparing performance
against those objectives. Objectives give greater freedom to both management and
employees in deciding how performance is to be measured. They also have greater
motivational effect since the standards are discussed and agreed upon both by the
management and the employees.
Benefits of Performance Appraisal
Performance appraisal is a formal exercise carried out for all executive and worker
witth respect to their contribution made towards the growth of the organization. The
aim is to measure the overall performance of an employee over a period of time,
usually once a year, by his immediate supervisor so as to provide a feedback to the
employees and aid the management.
Performance appraisal does not merely measure the performance of the people but has
many other benefits. The benefits of a successful appraisal system can be summed up
as follows:
For the Appraise
a. Better understanding of his role in the organizations-what is expected and
what needs to be done to meet those expectations.
33
b. Clear understanding of his strength and weaknesses so they develop
themselves into a better performer in the future.
c. Increased motivation, job satisfaction, and self-esteem.
d. Opportunity to discuss work problems and how they can be over come
e. Improved working relationships with the supervisors
f. Opportunity to discuss aspirations and any guidance, support or training
needed to fulfill these aspirations
For the Management
a. Identification of performers and non-performers and their development
towards better performance
b. Opportunity to prepare employed for assuming highest responsibilities
c. Opportunity to improve communication between the employees and
management
d. Identification of training and developments needs
e. Generations of ideas for improvements
f. Better identification of potential and formulations of cares plans
For the Organization
a. Improved performance throughout the organization
b. Creation of a culture of continuous improvements and success
c. Conveyance of message that people are valued
The above benefits will be realized only if performance appraisal is considered as a
process of management. It should not become a ‘scheme’ devised by the personnel
department for managers to use in accordance with the directives of that department
and generate completed forms which are stored away in employees’ dossier and then
forgotten. Performance appraisal is a process for establishing sound understanding
about what is to be achieved, and an approach to manage and develop people in a way
which will increase the profitability of achieving the goal whether it is short term or
ling term.
Performance appraisal helps management to collect data on human resource and use it
for enhancing openness of the organization. Since performance appraisal is done by
peoplewho have emotions; there will be always some objectivity. Though criterion
could be stipulated, personal linking and biases will influence the evaluation. Every
34
assessor has a price expectation of a particular type of behavior. An appraise who
meets it, will get higher assessment. Being subjective in nature, there are certain
pitfalls which need to be guarded against. It must be appreciated that the issue of
performance appraisal is very sensitive to the appraise because it effect his present
position, status and self-esteem along with career growth. Performance appraisal
system must not only if the system has in-built transparency. Some of the common
pitfalls encountered in performance appraisal are the following:
Shifting Standards
Performance appraisal should be based on uniform and fair standards, employees
might get confused and the organization might not be able to decide as to who it
suitable and therefore should be promoted. For example, last year Quality was the
criteria for performance evaluation but the superior decides to judge them this year on
the basis of quantity.
Different Rater’s Patterns
Managers differ in rating style some rate harshly whereas others are quite lenient.
This can be reduced by precise definition on the appraisal form. For instance,
dependability may be defined as confidence you have in the employee to carry out
instructions and the extent to which you can rely on his ability, punctuality and
attendance.
Subjectivity
It can also be moderated through a multi-layer appraisal system, where the immediate
superior initiates the respect which is reviewed by next higher level.
Central Tendency
Many appraisal forms require the appraiser to justify outstanding or poor assessments.
So many raters may prefer an easier path of rating most people as average.
First Impression
Some rates may form an overall impression based on some specific qualities of
features of the rate in the first meeting itself and carry it forward. Making assessment
on too short a time span and inadequate knowledge is incorrect.
35
Latest Behavior
At times, the appraisal is influenced by the most recent behavior ignoring the most
commonly engendered behavior during the entire period. Thus, a usually sober person
may be treated as arrogant because he expressed his opinions.
Halo Effect
Some rates have a tendency to rate high/low on all performance measuring based on
only one of their characteristics.
Horn Effect
Highly critical bosses have a tendency to compare performance of their subordinates
with what they did. This is not correct because the performance also depends upon the
situation. For example, a salesman now operates in a buyer market as against the
seller’s market of yesteryears.
Stereotype
Some rater have a standard mental picture about a person because of that person’s
sex, color, caste, religion, age, style of clothing, political view etc. stereotyping results
in an oversimplified view. Such assessment are based on false assumption and feeling
rather that facts. Discretion should not become discrimination.
Spill-Over Effect
This is allowing past performance to influence present evaluation. In some
organization, when an employee reports on transfer, his earlier reports are also
transferred along. This biases the mind of the new boss. There are other pitfalls such
as taking too short appraisal interviews and falling to support opinions with evidence
inadequate briefing of the appraise and pre-judging performance. In some of the
organization, such as PSU, there is a system called CCR (Character confidential roll)
a system started by East India Co. Since it is confidential, it can be manipulated. The
corporate world realized its disadvantage and introduced self-appraisal systems.
2.2.3 Performance Appraisal Process
Performance appraisal identifies performance deficiencies and actions to rectify
deficiencies. The performance evaluation process consists of the following steps
36
a. Set Performance Standards: The starting point of performance appraisal is the
establishment of performance standards. They serve as the criteria of
performance what is to be done and how well it is to be done. They establish
job expectations:
• Job analysis, consisting of job description and job specification, serves
as the basis for setting performance standards.
• The standards should be specific and clear to understand. They should
be measurable, reasonable and attainable.
• Standards can be in term of quantity, quality, time and cost.
b. Communicate Performance Standard to Employee
The performance standards are communicated to employees. There should be
no room for guesswork about what is expected in terms of performance from
employees. The objectives of standards should be made clear.
c. Measure the Actual Performance
The actual performance of the employee during a specified period is
measured. The sources of information for measuring actual performance can
be
• Personal observation
• Internal Report
• Special Report
d. Find Deviation
The actual performance is compared with performance standard. Deviation is
noted. The magnitude, nature, causes and incidence of deviation are analyzed.
Deviation is performance deficiencies.
e. Discuss Evaluation with Employees
The result of performance evaluation is discussed with the employee. The
discussion is based on comparison of actual result with standards.
f. Initiate Corrective Action
The corrective actions are limited to,
• Correct deviation
• Change standards
• Training assignment
37
2.2.4 Methods of Performance Appraisal
There are two methods of performance appraisal
Job Standard-Oriented Performance Appraisal Methods
They are based on absolute standards. They include:
1. Essay Method: The essay method is based on qualities impression of the
rater. The rater writes a narrative essay describing employees
• Job performance during the evaluating period
• Technical effectiveness
• Leadership ability
• Promotional potentials
• Training and development needs
• Suggestions for improvements
2. Checklist Method (Confidence Report)
Confidential performance evaluation report uses this method. It is widely used
by government organization. The checklist can be simple or weighted.
Simple checklist: T check list is a list of description statements of employee
behavior and characteristics. The rater checks off ‘yes’ or ‘no’ for behavior
that apply to the employee.
Weighted Checklist: The statement in simple checklist is weighted by
assigning points according to their importance. The weights are assigned by
Human Resource Department for scoring the simple checklist. Feedback is
given to the rater and the employee.
3. Forced Choice Method
It consists of a special type of checklist and they are arranged in a group. The
rater is forced to choice between two or more behavior related statements that
are most or least description of the employees being appraised. The human
resource department arrives at overall scoring for each employee by applying
a scoring key. Items important to job performance are considered for scoring.
38
4. Critical Incident Method
This method consists of written description of effective or influence workers
behavior related to job performance in critical situation. Such situations are
termed as incidents and the supervisor records such incidents. The critical
incidents are analyzed to evaluate employee performance.
5. Rating Scale Method
It is the most widely used method of performance evaluation. The rater
provides a subjective evaluation of the employee’s performance and traits
along a scale. The following are evaluated,
Quality and quantity of work
• Job knowledge
• Attendance
• Appearance
• Loyalty and dependability
• Honesty and integrity
• Attitudes, initiative and cooperation etc.
6. Behaviorally Anchored Rating Scale
This method is a combination of critical incident method and rating scale
method. The rating scale is anchored with critical incident to make the
evaluation of job specific. The critical incidents serve as example of effective
or ineffective performance; the rating scale represents a range of description
statement of job behavior varying from extreme poor to extremely
outstanding.
The steps involved in BARS
a. Identify performance dimension
b. Collect critical incidents
c. Reclassify incidents
d. Assign scale values to incidents
Comparison-Oriented Performance Appraisal Method
They are based on relative standards. They can be
39
1. Individual Ranking: The evaluator lists the employees in a rank order
from the higher to the lower on the basis of overall performance. Only one
employee can be the best or the worst
2. Group Order Ranking
The evaluation places employees in particulars classifications, such as top
twenty percent, second twenty percent, bottom twenty percent etc.
3. Paired Comparison
The evaluator compares each employee with every other employee on a
one-one basis in terms of overall performance. Pairs of employees are
formed, better performers in each pair is identified. The overall rank of the
employee is determined by the number of time chosen as better performers
in total pairs.
4. 360 Degree Feedback
This method uses performance feedback information from multiple raters
such as supervisor, peers, subordinate, creditors and self for performance
evaluation. It is generally used for evaluating managerial performance.
This method provides a comprehensive picture of managerial performance.
Development needs of managers can be identified.
5. Management By Objectives
It is based on how well the time bound objectives have been accomplished.
The objectives are jointly set by the managers and the subordinate. The
emphasis is not on activities but on results achieved. This approach is
known as MBO. It converts organizational objectives into individual
objectives. The steps involved in MBO are
a. Collaborative goal setting
b. Action planning
c. Performance Review
d. Performance evaluation
40
2.2.5 Performance Appraisal Purpose
Performance appraisal has been used for basically three purpose remedial,
maintenance and development. A performance appraisal needs to cover these three
purposes with the same focus. If any purpose predominates, the system will become
out of balance. For instance, if remedial purpose is foremost, then the performance
appraisal may become a disciplinary tool, a form of a charge sheet, a tool of power
instead of instrument of evaluation. If maintenance is the main objective, then the
process may become a short, skimmed and per functions rituals. If there is too much
emphasis on development, then the focus falls on the future assignments rather than
the current job. Purpose of performance appraisal systems can be illustrate as below
a. Performance improvement: Job related strength and weakness of employee are
identified. Feedback can be to employee about their performance rating.
Performance improvements plan can be worked out for the employee.
Employee effectiveness can be enhanced. Work alienated can be reduced,
potential can be predicted.
b. Reward Management: The result of performance evaluation serves as an
objectives basis for decision regarding reward and punishment. The linkage
between efforts- performance-reward increases the motivation of employees
for increased efforts. Pay rise is generally based on performance of employees.
c. Training and Development Decisions: Performance appraisal indicates
performance deficiencies in employees. They serve as a guide for identifying
training and development needs. Management development needs of managers
can also be identified to realize future potential of managers.
d. Promotion, Transfer, Terminations Decisions: Performance appraisal results
serve as a basis for the following human resource decisions.
• Promotion outstanding and promoting performers for upward
movement in organizational hierarchy
• Transfer employees to achieve a better fit between people and job
• Termination of employee to weed out low performers through
dismissal, lay-off or downsizing etc.
e. Validation of Selection Tests: Performance appraisal results can be done
compared with the scores of selection tests to find out the validation of
selection test.
41
f. Supervisory understanding: Periodic performance evaluation encourages
supervisors to observe the job performance of their subordinate and take an
interest in helping them. This improves communication and mutual
understanding between the supervisors and subordinate. Relationship gets
strengthened and grievances are reduced.
g. Career and Succession Planning: Performance appraisal facilitates career
palnning of employees. It helps an employee to asses the effectiveness of their
career goals and paths for self development. Organization can use it for
succession planning to identify managers who are ready to move into higher
positions.
h. Policy formulation: Performance appraisal results provide information for
policy formulation. Such policies can be related to performance appraisal,
promotion, transfer, training, management development and reward
management.
2.2.6 Performance Appraisal System in Nepal
Performance appraisal system has not received adequate priority in Human Resource
department of Nepalese Organization. It is largely confined to appraising current
performance on the job. Most public sector banks as well as organization in Nepal
lack systematic performance appraisal system where as we can found some positive
sign in private sector banks as well as organization, they are in transition phase of
establishing effective HR department for adopting performance appraisal system.
Personal judgment and subjective assessment of owner-manager serve as the key
criteria for performance appraisal. The main purpose of performance appraisal system
in Nepalese enterprise is the promotion of employees. It does not provide the
feedback to employees, not used for reward management or identification of training
and development needs. Most organization carries out “wholesale” performance
appraisal when employee is up for promotion and performance appraisal of Nepalese
organization also suffering from lack of transparency. (Agrawal, GR, Human
Resource Management in Nepalese Perspective, Edition 3rd).
42
2.2.7 Theoretical Framework
Variables Independent Dependent
Figure 2.1: Theoretical Framework
Measurement Criteria of Variables
1. Dependent Variable
Performance appraisal refers to all those procedures that are use to evaluate the
personality, the performance, and the potential of its group members.Performance
Job Knowledge
Attendance
Working environment
Team work Employees at different level
Training
Communication
Employee performance
43
appraisal systems provides management an opportunity to recall as well as
feedback to people as to how they are doing, so that they can correct their mistake
and acquire new skills. 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 employee who should
get the majority of available merit pay increases, bonuses, and promotions.
Assessment of human potential is difficult, no matter how well designed and
appropriates the performance planning and appraisal system is. The performance
of employee is his resultant behavior on takes which can be observed and
evaluated. It refers to the contribution made by an individual in the
accomplishment of organizational objectives. Performance can be measured by
some combination of quantity, quality, time and cost.
2. Independent Variables
• Job Knowledge
Consider the degree of job knowledge technical, administrative, managerial,
supervisory relative to length of time in the current position, able to answer
difficult questions, effectively learns new skills, and maintains up-to-date job
related information. Level of knowledge directly affect to the employee
performance.
• Attendance
The extent to which the employee can be depended upon to be available for
work and to fulfill position responsibilities, reports to work on time,
communicates schedule changes promptly to supervisor, maintains regular
attendance. Attendance directly affect to the employee performance.
• Teamwork
How the employeeare able to works well in a team for the achievement of
organizational goal, interacts and exchanges idea with each other, observes the
abilities and ideas of fellow team members, works fairly and attempts to share
an equal work-load with fellow, peer and supervisor. Theory shows that there
is positive relationship between the teamwork and employee performance.
• Working environment
Different theory shows that working environment has positive impact on
44
employee performance. The ability to set high standards for own personal
performance, strive for quality work put forth extra effort to ensure quality
work, develops and implements new solutions, procedures and concepts,
demonstrates accuracy, thoroughness, and reliability, shows organization and
completeness, pays attention to detail, consistently delivers what is required
when required.
• Training
Training will help to increase the existing level of knowledge and have
positive impacts on employee performance. Extent to which employee are
provided training program by the organizationsalso affects the performance of
the employee. It is directly positively related with employee performance.
• Communication
Organizational communication includes how the employee are exchange their
ideas with each other, communicate with fellow, peer and supervisor about the
result, idea, activities, directions, authority etc. The extent to which the
employee effectively listens, conveys and receives ideas, information and
direction, seeks to clarify and confirm the accuracy of their understanding of
unfamiliar or vague terms and instructions, makes oral and written
communication clear, assesses and takes steps to improve ability to
communicate. So ideas and consultations are conveyed with precision and
efficiency. Effective communication helps on improving performance of the
employee.
45
CHAPTER 3
RESEARCH DESIGN AND METHODOLOGY
3.1 Introduction
This chapter is designed to explain the research methods used to meet the stated
objectives of the study. A research methodology helps to solve the research problem
in a systemic way .The methodology undertaken in relation to the research paradigm,
sampling process, and data collection and analysis techniques used to study
theemployee performance appraisal in private and public sector commercial banks of
Nepal is explained. This chapter explains the collection procedure of data and the
methodology used by researcher for analyzing the available data. This study covers
qualitative methodology in a greater extent and also uses the descriptive part based on
both technical aspect and logical aspect.
3.2 Research Plan and Design
Research design is a master plan specifying the methods and procedures for collecting
and analyzing the needed information. The study is conducted to analyze the
employee performance appraisal in both private and public sector commercial banks
of Nepal. This type of research work on the banking sector of Nepal has not been
conducted before. So this research work will be fruitful for the other researcher who
wants to analysis different dimension of employee performance of different level
employees. Therefore this study is exploratory in nature and direct questionnaire filled
up from the respondents help to identify the perception of respondents,Zikmund
(2007)
The overall research work is conducted through collection of primary data. Primary
data is collected through questionnaire filled up by employees at different levels of
both private and public commercial banks. The questionnaire is simple and
understandable by all level of employees, which focused on the identification of
factors which are related with their performance.
46
3.3Description of the Sample
The study has focused on the analysis of the employee performance appraisal in
banking sector of Nepal. The researcher has used convincing sampling method. This
research has selected the commercial bank as a population sector. Currently there are
32 commercial banks are functioning. Out of the total commercial banks there are
three banks in the public sector and the rest are from the private sector. Agriculture
Development Bank, Nepal Bank Limited and RastriyaBanijya Bank Limited are
public commercial banks of Nepal. Nepal Rastra Bank worked as a regulatory body of
commercial banks.
The researcher has selected two private banks and two public banks as sample for the
analysis. Nepal Bank Limited and RastriyaBanijya Bank Limited selected as public
commercial banks and Nepal Bangladesh Bank Limited and Janata Bank Nepal
Limited were selected as private sector commercial banks. Further, for the primary
analysis of the respondent’s perception, researcher selected the employees of both
public and private sector banks.
The samples are collected as per the convenience for the study and some criteria for
the samples are as follows:
• The sample banks are taken from” A” class commercial bank of Nepal.
• The sample bank needs to have minimum of 10 branches.
• The sample private commercial bank must need to be listed in NEPSE.
3.4 Instrumentation
For the study of employeeperformance appraisal in commercial banks of Nepal, the
main instruments of the study will be structured questionnaire. A questionnaire is
formal list of questions designed to gather responses from the respondents on a given
topic. The structured questionnaire has been designed to collect the opinions from the
respondents towards factors affecting employeeperformance.There are total 23
structured questionnaire are design and 3 moderating variable are used like age,
gender and education.
47
3.5 Nature and Sources of data
The study will be based on primary data. Primary data will be based on structured
questionnaire, as well as unstructured dialogues and discussions with the
employeeabout performance appraisal in commercial banks of Nepal. For the primary
data respondents were asked to indicate their response towards different aspects of
employee performance.
3.6 Data Collection Procedure
Collection of primary data related to the employee performance appraisal of both
public and private bank will be done through filling structured questionnaire. On the
basis of review of literature a systematically compiled and organized series of
questions were developed. The data was collected through the self-administered
questionnaire at respondents place at mutually convenience time. The questionnaire
consists of information regarding the respondents. It deals with the knowledge of job,
working environment, punctuality, personality traits, communication, assertiveness,
problem solving. They were asked to answer the question related to the factors which
related with the employee performance appraisal, their perception about the
performance appraisal systems and its implication on the overall performance of the
organizations.
3.7Statistical Analysis Plan
Data obtained from various sources cannot be directly used in their original form. The raw
data’s will not useful if they are not presented in an understandable form. Analysis
part is important part of study under which the data’s are presented and analyzed in
useful format. Under this part the data’s are analyzed to achieve the desired objective
of the study.
As we know that data’s collected from different sources are need to be processed in a
manner so that they were accurate and consistent with the intent plan. They need to be
correctly and uniformly entered and tabulated. All the information acquired need to be
properly used for finding the result of the study.
48
CHAPTER IV
RESULTS AND DISCUSSION
This chapter is based on the analyzing and interpretation of data collected during the
study.Here the data are analyzed with the objective of drawing valuable conclusion
and recommendation. The main objective of this research will be fulfilled with the
outcome derived from analysis of the data. The collected data is related with Nepal
Bank Limited, RastriyaBanijya Bank Limited, Nepal Bangladesh Bank Limited and
Janata Bank Nepal Limited.
Analysisis based on primary data which are collected through the questionnaire, filled
by different level of employees of Nepal Bank Limited, RastriyaBanijya Bank
Limited, Nepal Bangladesh Bank Limited and Janata Bank Nepal Limited. Further,
this section is sub- divided in to two parts. First part deals with the respondent’s
profile. It gives detail information regarding the respondent’s age, gender and
educational qualification. Second part analyzes and interprets the collected data
through descriptive analysis. To identify the respondents’ perception regarding factors
affectingemployee performance, frequency is calculated. From this calculation
conclusion is derived about the perception of private and public banks’ different level
employees’ on employee performance appraisal and its factors.
4.1 Respondents’ Profile
Thissection deals with the detail analysis and interpretation of primary data collected
through the questionnaire distributed to different level ofemployees. This section is
sub divided in to two parts. In the first part, it incorporates the respondents profile and
second part contains result and discussion of data related to employee performance
appraisal.
Table 4.1: Gender of respondents
Gender Public Private
Frequency Percentage Frequency Percentage
Male 40 80 20 40
Female 10 20 30 60
Total 50 100 55 100
49
Figure 4.1 Gender of respondents
Table 4.1 and Figure 4.1 show the gender distribution of the respondents including
both private and public commercial banks. The numbers of male respondents of
public commercial banks were 80% and female were 20% while numbers of male
respondents of private commercial banks were 40% and female were 60%. Researcher
has been selected sample through using convincing sampling method.
Table 4.2: Age of respondents
Age Public Private
frequency percentage frequency Percentage
Less than 20 0 0 0 0
21 to 30 year 26 52 35 70
31 to 40 year 13 26 10 20
41 to 50 year 9 18 5 10
50 above 2 4 0 0
Total 50 100 50 100
0
10
20
30
40
50
60
70
80
90
public private
Percentage male
female
50
Figure 4.2: Age of respondents
Table 4.2 and Figure 4.2 show the age distribution. In this research there are 5
categories of age which includes less than 20, 21 to 30, 31 to 40, and 41 to 50 and
above 50. Talking about the public commercial banks out of 50 respondents 18%
were from the category of 41 to 50 age group but only 10% respondents in private
banks from same category and out of 50 respondents in private commercials banks
70% were from category of 21 to 30 age group but researcher found only 52%
respondents were from same age category in public banks which indicate that younger
people were actively working in private banks as compare with public banks.
Similarly 4% respondents were represents age category of above 50 in public banks
but didn't found anyemployees in private banks upto officer level.
Table 4.3: Educational qualification of respondents
0
10
20
30
40
50
60
70
80
public private
percentage
less than 20
21 to 30
31 to 40
41 to 50
Above 50
Qualification Public Private
frequency percentage frequency Percentage
Master 29 58 31 62
Bachelor 19 38 19 38
Intermediate 2 4 0 0
SLC 0 0 0 0
Total 50 100 50 100
51
Figure 4.3: Educational qualification of respondents
Table 4.3 and Figure 4.3 showthe educational qualification of the respondents. The
educational qualification was divided into four category and they are master,
bachelor, intermediate and SLC. Talking about the public banks 58% did master, 38%
did bachelor, 4% did intermediate, while talking about the private banks 62% did
master, 38% did bachelor, and no respondents found did only SLC and intermediate.
By analyzing these Figure researcher found that private commercial banks has
employed people having more educational qualification as comparison with public
commercial banks.
Relationship between demographic factors and employee performance was
studied
The following results were found through chi square test.
Null hypothesis (H0): There is no significant association between demographic
factors and employee performance.
Table 4.4: Relationship between demographic factors and employee performance
Value df Asymp.sig(p value)
Gender 1.504 1 0.22
Education 4.85 1 0.0276
Age 1.3 1 0.254
N of valid cases 100
0
10
20
30
40
50
60
70
public private
Percentagemaster
bachelor
intermediate
SLC
52
Table 4.4show the sig. value (p value) is greater than 0.05 with demographic factor
gender and age. So we accept null hypothesis, that there is no significant association
between gender, age and performance of employees but p value is smaller than 0.05 in
case of education which shows that there is significant relationship between level of
education and performance of employees.
4.2 Factors that affect performance of employees
Researcher tries to analyze the perception of different levels of employees including
both public and private commercial banks about the different factors that affects the
performance of the employee at different level such as assistant, supervisor and
officer level. The descriptive findings were analyzed to make the clear vision of
factors which affect the performance of the employees. The different perceptions of
different categories of respondents were analyzed clearly to draw the concrete output
regarding the employeeperformance appraisal.
4.2.1 Knowledge of Job and Employee Performance
Job knowledge is one of the important variables that affect the performance of the
employee.The demonstration of technical, administrative, managerial, supervisory, or
other specialized knowledge required for the better performancethe job.
Table 4.5: Frequency distribution of Job Knowledge
Job knowledge
affects the
performance
Public Private
Frequency Percentage Frequency Percentage
Strongly disagree 0 0 0 0
Disagree 0 0 1 2
Neutral 5 10 9 18
Agree 37 74 26 52
Strongly agree 8 16 14 28
Total 50 100 50 100
53
Figure 4.4: Knowledge of Job and Employee Performance
Table 4.5 and Figure 4.4 showthe opinion of respondents regarding whether job
knowledge affect employee performance or not including both public and private
commercial banks. 16% respondents of public banks was strongly agree that
knowledge of job affect the performance of the employees and 74% was agree where
as 28% respondents of private banks was strongly agree, 52% agree and only 18%
was neutral about the opinion of whether job knowledge affect employee performance
or not which indicate that in order to do better performance, employee need to
broaden their existing horizon of knowledge.
4.2.1 Training and Employee Performance
Training helps to generate new knowledge, competency and ability which are
essential for the better performance of the job.
Table 4.6: Frequency distribution of Training
My organization
provides training
frequently
Public Private
Frequency Percentage Frequency Percentage
Strongly disagree 0 0 1 2
Disagree 3 6 14 28
0
10
20
30
40
50
60
70
80
Public Private
PercentageDisagree
Neutral
Agree
Strongly agree
54
Neutral 23 46 19 38
Agree 22 44 14 28
Strongly agree 2 4 2 4
Total 50 100 50 100
Figure 4.5: Training and Employee Performance
Table 4.6 and Figure 4.5 showthe opinion of respondents regarding whether their
banks provide training or not which affect employee performance. Only 4%
respondents of public banks was strongly agree that their banks provides them
training frequently and 6% respondents disagree that their banks provide training, no
respondents was strongly disagree, 46% respondents was remain neutral and 44%
respondents was agree regarding the statement banks provides them training
frequentlyfor their development whereas 4% respondents of private banks was
strongly agree that their banks provide training frequently and only 2% respondents
was strongly disagree that their banks provide training for their personal development,
28% respondents was disagree,38% respondents was neutral and 28% respondents
was agree that their banks provide training for their personal development which
indicate that employee need lots of training in order to perform as expected by the
organization.
0
5
10
15
20
25
30
35
40
45
50
Public Private
Percentage
Strongly disagree
Disagree
Neutral
Agree
Strongly agree
55
Relationship between training and employee performance was studied
The following results were found through chi square test.
Null hypothesis (H0): There is no significant association between training and
employee performance.
Table 4.7: Relationship between training and employee performance
Value df Asymp.sig(p value)
Job knowledge 5.723 1 0.016
N of valid cases 100
Table 4.7show the sig. value (p value) is less than 0.05 with training. So we reject null
hypothesis, that there is significant association between training and performance of
employees.
4.2.3 Educationand Employee Performance
University education helps to update the latest theory and model regarding different
subject and will help in practical life of employees at workplace.
Table 4.8: Frequency distribution of Education
University
education affects
performance
Public Private
Frequency Percentage Frequency Percentage
Strongly disagree 0 0 1 2
Disagree 3 6 5 10
Neutral 7 14 11 22
Agree 24 48 26 52
Strongly agree 16 32 7 14
Total 50 100 50 100
56
Figure 4.6: Educationand Employee performance
Table 4.8 and Figure 4.6 showthe opinion of respondents regarding whether education
affects employee performance or not including both public and private commercial
banks. 32% respondents of public banks was strongly agree that education affect the
performance of the employees and only 0% respondents was strongly disagree, 6%
respondents was disagree, 14% respondents was remain neutral and 48% respondents
was agree that education affects their performance where as 14% respondents of
private banks was strongly agree and only 2% respondents was strongly disagree and
10% respondents was disagree, 22% respondents was remain neutral and 52%
respondents was agree that education affect their performance.This result indicates
that there is positive relationship between the education and performance of the
employees. Some of respondents was agree that university education did not affect the
performance of the employees, they believe that practical exposure, experience,
initiation play the important role for doing better performance rather than university
education.
4.2.4 Teamwork and Employee Performance
Working with team creates the creative and friendly environment that will positively
affect the performance of the employee.
0
10
20
30
40
50
60
Public Private
Percentage
Strongly disagree
Disagree
Neutral
Agree
Strongly agree
57
Table 4.9: Frequency distribution of Teamwork
Teamwork affects
performance
Public Private
Frequency Percentage Frequency Percentage
Strongly disagree 0 0 0 0
Disagree 3 6 4 8
Neutral 5 10 10 20
Agree 37 74 21 42
Strongly agree 5 10 15 30
Total 50 100 50 100
Figure 4.7: Teamwork and Employee Performance
Table 4.9 and Figure 4.7 showthe opinion of respondents regarding whether
teamwork affect employee performance or not including both public and private
commercial banks. 10% respondents of public banks was strongly agree and 0%
respondents was strongly disagree, 6% respondents was disagree, 74% respondents
was agree and 10% respondents was remain neutral regarding the opinion of
teamwork affect the performance of the employees where as 30% respondents of
private banks was strongly agree, 0% respondents was strongly disagree, 8%
respondents was disagree, 20% respondents was remain neutral and 42% respondents
was agree regarding the opinion of teamwork affect the employee performance. This
0
10
20
30
40
50
60
70
80
Public Private
Percentage
Strongly disagree
Disagree
Neutral
Agree
Strongly agree
58
data shows that teamwork really play the decisive role for the better performance of
the employees. Above 40% respondents of both public and private commercial banks
of Nepal was agree that their performance is really affected by the teamwork.
Relationship between teamwork and employee performance was studied
The following results were found through chi square test.
Null hypothesis (H0): There is no significant association between teamwork and
employee performance.
Table 4.10: Relationship between teamwork and employee performance
Value df Asymp.sig(p value)
Job knowledge 4.926 1 0.026
N of valid cases 100
Table 4.10show the sig. value (p value) is less than 0.05 with teamwork. So we reject
null hypothesis, that there is significant association between teamwork and
performance of employee.
4.2.5 Attendance and Employee Performance
Absent trends of employees will negatively affect the performance of the employee at
the time of appraisal but it may not affect employee daily work.
Table 4.11: Frequency distribution of Attendance
Attendance affects
performance
Public Private
Frequency Percentage Frequency Percentage
Strongly disagree 3 6 4 8
Disagree 24 48 8 16
Neutral 10 20 7 14
Agree 13 26 27 54
Strongly agree 0 0 4 8
Total 50 100 50 100
59
Figure 4.8: Attendance and Employee Performance
Table 4.11 and Figure 4.8 showthe opinion of respondents regarding whether
attendance affect employee performance or not including both public and private
commercial banks. 0% respondents of public banks was strongly agree, 6% strongly
disagree, 48% respondents was disagree, 20% respondents was remain neutral and
26% respondents was agree regarding the opinionthat attendance affect their
performance where as 8% respondents of private banks was strongly agree, 8%
respondents was strongly disagree, 16% respondents was disagree, 14% respondents
was neutral and 54% respondents was agree regarding theopinion that attendance
affect their performance. Similarly 20% respondents of public and 14% respondents
of private banks wereremaining neutral about the statement of attendance affect the
performance of the employees. After date presented researcher found that attendance
didn't affect employee daily performance but it was affect their performance during
the time of performance appraisal.
Relationship between attendance and employee performance was studied
The following results were found through chi square test.
Null hypothesis (H0): There is no significant association between attendance and
employee performance.
0
10
20
30
40
50
60
Public Private
Percentage
Strongly disagree
Disagree
Neutral
Agree
Strongly agree
60
Table 4.12: Relationship between attendance and employee performance
Value df Asymp.sig(p value)
Job knowledge 1.125 1 0.288
N of valid cases 100
Table 4.12show the sig. value (p value) is greater than 0.05 with attendance. So we
accept null hypothesis, that there is no significant association between attendance and
performance of employee.
4.2.6 Communication and Employee Performance
The extent, to which the employee effectively listens, conveys and receives ideas,
information and direction, seeks to clarify and confirm theaccuracy of their
understanding of unfamiliar or vague terms and instructions, makes oral and written
communication clear, assesses and takes steps to improve ability to communicate will
have positive impacts on performance of the employee.
Table 4.13: Frequency distribution of Communication
Communication
affects
performance
Public Private
Frequency Percentage Frequency Percentage
Strongly disagree 0 0 3 6
Disagree 0 0 3 6
Neutral 11 22 13 26
Agree 31 62 20 40
Strongly agree 8 16 11 22
Total 50 100 50 100
61
Figure 4.9: Communication and Employee Performance
Table 4.13 and Figure 4.9 showthe opinion of respondents regarding whether
communication affect their performance or not including both public and private
commercial banks. 16% respondents of public banks was strongly agree, no
respondents was strongly disagree, no respondents was disagree, 22% respondents
was neutral and 62% respondents was agree about the opinion of employee
performance is affected by the communication whereas 40% respondents of private
banks was agree, 6% respondents was strongly disagree, 6% respondents was
disagree, 26% respondents was neutral and 22% respondents was strongly agree about
the opinion of employee performance is affected by the communication. This
quantitative presentation of date shows that communication directly affects the
performance of the employees.
Relationship between communication and employee performance was studied
The following results were found through chi square test.
Null hypothesis (H0): There is no significant association between communication and
employee performance.
Table 4.14: Relationship between communication and employee performance
Value df Asymp.sig(p value)
Job knowledge 4.684 1 0.030
N of valid cases 100
0
10
20
30
40
50
60
70
Public Private
Percentage
Strongly disagreeDisagree
Neutral
62
Table 4.14 show the sig. value (p value) is less than 0.05 with communication. So we
reject null hypothesis, that there is significant association between communication
and performance of employee.
4.2.7 Working Environmentand Employee Performance
Working environment is also influential factor of employee performance.
Table 4.15: Frequency distribution of Working Environment
Working
environment
affects
performance
Public Private
Frequency Percentage Frequency Percentage
Strongly disagree 0 0 1 2
Disagree 2 4 2 4
Neutral 5 10 4 8
Agree 8 16 21 42
Strongly agree 35 70 22 44
Total 50 100 50 100
Figure 4.10: Working environment and Employee Performance
Table 4.15 and Figure 4.10 showthe opinion of respondents regarding whether
working environment affect their performance or not including both public and
0
10
20
30
40
50
60
70
80
Public Private
Percentage
Disagree
Neutral
Agree
63
private commercial banks. 70% respondents of public banks was strongly agree, no
any respondents was disagree, 16% respondents was agree, 10% respondents was
neutral regarding the statement working environment affects the performance of the
employees whereas out of 50respondents from private commercial banks, 44%
respondents was strongly agree, 8% respondents was remain neutral and 42%
respondents was agreeregarding the opinion working environment affects
performance of the employees. This quantitative presentation of date shows that
working environment directly affects the performance of the employees.
Relationship between working environment and employee performance was
studied
The following results were found through chi square test.
Null hypothesis (H0): There is no significant relationship between working
environment and employee performance.
Table 4.16: Relationship between working environment and employee
performance
Value df Asymp.sig(p value)
Job knowledge 4.263 1 0.039
N of valid cases 100
Table 4.16 show the sig. value (p value) is less than 0.05 with working environment.
So we reject null hypothesis, that there is significant association between working
environment and performance of employee.
4.3 Employee Satisfaction Level with Existing Compensation Package
Compensation package which includes salary, bonus, commissions, allowances etc
will motivate the employee for the accomplishment of the assign job.
Table 4.17:EmployeeSatisfaction level with existing compensation package
Compensationpackage Public Private
Frequency Percentage Frequency Percentage
Strongly disagree 5 10 7 14
64
Disagree 16 32 20 40
Neutral 14 28 16 32
Agree 11 22 3 6
Strongly agree 4 8 4 8
Total 50 100 50 100
Figure 4.11:Satisfaction level with existing compensation package
Table 4.17 and Figure 4.11 showthat whether employee are satisfied or not with the
compensation package regarding the statement getting payment as per their
performance in both private and public commercials banks of Nepal. Out of 50
respondents of public commercial banks, 8% respondents was strongly agree, 22%
respondents was agree, 28% respondents was neutral, 32% respondents was disagree
and 10% respondents was strongly disagree regarding the compensation package
which indicate that almost 22%employees of public commercial bank were satisfied
with existing compensation package of their respective banks. Talking about the
private commercial banks, out of 50 respondents, only 8% respondents was strongly
agree, 6% respondents was agree, 32% respondents was neutral, 40% respondents was
disagree and only 14% respondents was strongly disagree regarding the compensation
package provided by their respective bank which indicate that employee of private
commercial banks of Nepal were not dissatisfied with existing compensation package
0
5
10
15
20
25
30
35
40
45
Public Private
Percentage
Strongly disagree
Disagree
Neutral
Agree
Strongly agree
65
but as comparison with public commercial banks of Nepal they were quite dissatisfied
with existing compensation package. This result indicates that private bank's
employee are not satisfied with compensation as per their performance, it means if
private commercial bank provide adequate compensation package then performance
of employee may be better in comparison with past.
Relationship between compensation package and employee performance was
studied
The following results were found through chi square test.
Null hypothesis (H0): There is no significant association between compensation
package and employee performance.
Table 4.18: Relationship between compensation package and employee
performance
Value df Asymp.sig(p value)
Job knowledge 5.342 1 0.0208
N of valid cases 100
Table 4.18show the sig. value (p value) is less than 0.05 with compensation package.
So we reject null hypothesis, that there is significant association between
compensation package and performance of employees.
4.4 Employee Satisfaction with Existing Performance Appraisal
Table 4.19: Satisfaction with existing performance appraisal
Existing
performance
appraisal
Public Private
Frequency Percentage Frequency Percentage
Strongly disagree 5 10 3 6
Disagree 27 54 11 22
Neutral 10 20 26 52
Agree 6 12 9 18
Strongly agree 2 4 1 2
Total 50 100 50 100
66
Figure 4.12: Satisfaction with existing Performance Appraisal
Table 4.19 and Figure 4.12 showsthat whether the employees were satisfied or not
regarding the opinion there is need of improvement on existing employee
performance appraisal in both private and public commercials banks of Nepal. Out of
50 respondents of public commercial banks, 4% respondents was strongly agree, 12%
respondents was agree and 20% respondents was neutral regarding the improvement
of existing employee performance appraisal which indicate that employees were not
satisfied with existing performance appraisal of their respective banks. Talking about
the private commercial banks, out of 50 respondents, 2% respondents was strongly
agree, 18% respondents was agree and 52% respondents was neutralregarding the
improvement of existing employee performance appraisal which indicate that
employee of private commercial banks of Nepal were not also satisfied with existing
performance appraisal but as comparison with public commercial banks of Nepal they
were quite satisfied with performance appraisal system even though there is still a lots
of room for improvement on employee performance appraisal.
0
10
20
30
40
50
60
Public Private
Percentage
Neutral
agree
Strongly agree
67
4.3 Discussions
The study has been taken to identify the factors which affect the employee
performance of both public and private commercial banks of Nepal.The general
objective of this study is to understand the current performance appraisal systems and
identification of factors that affect the performance of the employees in both private
and public sector banks. The researcher has focused on major factors which influence
the performance of the employees including both Private commercial banks which
include Nepal Bangladesh Bank Limited and Janata Bank Nepal Limited and Public
commercial banks which include RastriyaBanijya Bank Limited and Nepal Bank
Limited.
Researcher has also tried to examine the relationship between various factors like
demographic which include age, gender and education with the employee
performance, relationship between independents factors such as job knowledge,
training, communication, attendance, teamwork with employee performance,
relationship between the compensation packages, working environment with
employee performance. Therefore the followings are the discussion regarding results
obtained from data analysis.
From the analysis, researcher found that demographic factor like education directly
affects the performance of the employees. Some of respondents was agree that
university education did not affect the performance of the employees, they believe
that practical exposure, experience, initiation play the important role for doing better
performance rather than university education. But relationship between other
demographic factor like age and gender with employee performance shows no
relationship it means other demographic factors like gender and age doesn't affect the
performance of the employee.
The researcher found that compensation package highly affects the performance of
the employees which is shown by the relationship between compensation package and
employee performance. Employee of public commercial banks are more satisfied as
compare with private sector banks employees on the basis of compensation package
provided by their banks and there is high deviation between the satisfied and
dissatisfied employee but in average, employee of private commercial banks are
satisfied with current compensation package because there is low deviation between
68
the satisfied and dissatisfied employees.By analyzing the employee’s perception of
public and private commercial bank, the researcher found that employees of both
banks provide high preference to the compensation package.
Employees of both public and private commercial banks have given more emphasis
on working environment. Result shows that there is significant association between
working environment and performance of employees. Even though employee of
private commercial banks are more satisfied as comparison with public commercial
banks.In the study the researcher found that both private and public commercial banks
employees gave high priority for making friendly working environment as a major
factor which leads them to for better performance in the favor of organization.
Researcher also found relationship between the other factors like job knowledge,
training, teamwork, education, attendance, communication with the employee
performance. Result shows there is positive relationship between the job knowledge
and employee performance it means job knowledge directly affect the employee
performance. Similarly there is also positive relationship between the training,
education, teamwork and communication with employee performance which indicate
that these factors directly affect the employee performance. Among them teamwork
highly affect the employee performance as comparison with training, education and
communication. Similarly result also shows that there is no relationship between the
attendance and employeeperformance which indicates that attendance doesn't
significantly affect the employee performance and researcher found that attendance
didn't affect employee daily performance but it was affect their performance during
the time of performance appraisal.
From the Chi-Square test it is found that demographic factor education, compensation
package, teamwork, working environment, job knowledge, training have significant
relationship with employee performance but attendance don’t have significant
relationship with employee performance.
After analyzing and interpretation of the data provided by the research work, the
researcher comes up with findings. These finding will be worthy for making
conclusion about the employee performance and its factorsaffecton performance
69
ofemployee of both private and public commercial bank of Nepal. Result indicates
thatemployee of private commercial banks of Nepal were not also satisfied with
existing performance appraisal but as comparison with public commercial banks of
Nepal they were quite satisfied with performance appraisal system even though there
is still a lots of room for improvement on employee performance appraisal of both
public and private commercial banks of Nepal.
70
CHAPTER V
SUMMARYAND CONCLUSION
5.1 Summary
No Doubt employees are valuable assets of the organization. May be due to this
reason one of the renowned management experts says that take my all assets but just
leave my satisfied employee, I can regain it and can stand in today’s position in very
short span of time. The success of the organization depends upon the efficiency,
quality and competence of its employees. But even a highly capable employee will
not give his/her best until he/she is motivated towards the work. 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.
Performance appraisal is an important process for influencing both the extrinsic and
intrinsic motivations of employees, that is, increasing employees' perceptions and
understanding of job tasks and subsequently their job satisfaction. Performance
appraisal also serves to focus employee efforts and attention on critical tasks through
the use of performance feedback, which therefore assists employees in reducing job
errors and minimizing the risks of learning through trial and error. 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 skillful manner. In addition, where employees
desire jobs that allow them to make good use of their skills and talents, performance
appraisal increases job task "fit” through the identification of training and
development needs that are consistent with individual and organizational goals.
Employee performance is a dependent variable which is influence by different
independent variables. Assessment of human potential is difficult, no matter how well
designed and appropriates the performance planning and appraisal system is. The
performance of employees is his resultant behavior on takes which can be observed
and evaluated. It refers to the contribution made by an individual in the
accomplishment of organizational objectives. Performance can be measured by some
combination of quantity, quality, time and cost. Even though there are some
independent variable that influences the performance of the employees and such
variable is job knowledge, training, education, teamwork, working environment,
71
compensation, communication, attendance. If organization gives more consideration
on such independent variable then it will help for achieving the predetermined goals
of the organization as a whole.
This study has been taken to know the opinion of employee regarding the factors
which influence their performance in the both public and private commercial banks of
Nepal. The general objective of this study is to understand the current performance
appraisal systems and identification of factors that affect the performance of the
employees in both private and public sector banks. In addition to this it also analyze
the overall perception of existing employee about the factors which influence their
performance including both public which include RastriyaBanijya Bank Limited and
Nepal Bank Limited and private commercial banks which include Nepal Bangladesh
Bank Limited and Janata Bank Nepal Limited.
The research has addressed the following important issues.
To determine the organizational training and development needs.
To identify the administrative decisions such as pay, promotion, placement and
termination based on employee‘s performance.
To identify the factors that is facilitators of effective performance of employees.
To study the employee perception on existing performance appraisal and factors
affecting employee’s performance between private and public commercial banks of
Nepal.
Researcher has been used convincing sampling method for collecting primary data.
Primary data were collected through questionnaire filled by different level employees
of Nepal Bank Limited, RastriyaBanijya Bank Limited, Nepal Bangladesh Bank
Limited and Janata Bank Nepal Limited. Questionnaire method was used for
identifying the perception of existing employees about factors affecting employee
performance. The collected data were analyzed and interpreted by using statistical
tools and charts like frequency, percentage, different table and charts. Chi-Square test
was done to find out whether hypothesis is accepted or rejected.
The major factors which influence employee performance and opinion regarding these
factors are already discussed in chapter II and chapter IV. This in-depth analysis leads
to certain findings and conclusion which are mentioned below.
72
• From the Chi-Square test it is found that demographic factors like education
have significant relationship with the employee performance but other
demographic factors like age and gender don't have significant relationship
with employee performance.
• Frequency distribution show that respondents of public commercial banks
have given most priority to knowledge of job as a major factor of affecting
their performance, 16% respondents was strongly agree that job knowledge
highly affect their performance whereas the least preference was given to
working environment, only 70% respondents was strongly agree that working
environment affect their performance.. While analyzing the perception of
private commercial banks employee’s researcher found that they gave first
priority to teamwork as a major factor of affecting their performance, 30%
respondents was strongly agree that teamwork highly affect their performance
whereas the least preference was given to existing performance appraisal ,
only 2% respondents was strongly agree that existing performance appraisal
is not satisfactory.
• From Chi-Square test researcher found that compensation package highly
affect the performance of the employee because p value of compensation
package is 0.0208 whereas p value of training, teamwork, communication,
working environment are 0.016, 0.026, 0.030 and 0.039 respectively. This p
value shows that working environment is least factor among other
independents factors that affect employee performance.
• Researcher found that Chi-Square test accept the hypothesis that there is no
significant relationship between the attendance and employee performance
because p value is 0.288 which indicate that employee of both public and
private commercial banks perceived that attendance don't significantly affect
their performance.
73
• Researcher also found that among the 6 independent variables working
environment is less important factor that affects employee performance of
both private and public commercial banks of Nepal.
• The researcher found that employee satisfaction level of public commercial
banks is high as comparison with employees of private commercial banks with
existing employee performance appraisal because 4% respondents of public
commercial banks was strongly agree that their organization has good
employee performance appraisal system whereas only 2% respondents of
private commercial banks was strongly agree that their banks has good
employee performance appraisal system.
74
5.2 Conclusion
Commercial banks including both private and public sector banks are the pillars of
any nation to attain its sustainable growth of overall economy of country. Especially
the commercial banks including both private and public ownership whose primary
objectives are to mobilize the available financial resource for the overall development
of the economy, who can work in various sectors. Since Nepal is in its crucial phase
to develop in the banking sectors. But we can see that there are no efficient practices
of HRM as well as systematic performance appraisal systems. Most of public sector
banks have no HR department and functions related with HR is conduct through other
department. Talking about the private sectors commercial banks, they are in transition
phase of establishing HR department and its activities like compensation
management, performance appraisal, potential appraisal, training and development.
The success of any organization depends on the productivity of available human
resource of an organization and the productivity of employees can be measured
through the evaluation of their contribution for the achievement of organizational goal
as a whole. So this study will help to understand performance appraisal systems being
adopted by the both private and public sectors commercial banks, how they
determining organizational training and development’s needs, how they make and
validate administrative decisions such as pay, promotion, placement and terminations,
identifying systematic factors that are barriers, facilitators of effective performance of
employees, Providing information about human resources and their developments,
Measuring the efficiency with which HR or employees are being used and improved
and so on.
The comparative study of public and private commercial banks of Nepal provides the
overall framework of employee performance appraisal which is exist currently. The
detail analysis of the factors affecting employee performance appraisal in commercial
bank provides the basis for the academicians and new researcher who want to analyze
or carryout other related research paper in this dimension.
This research work also emphasizes on the problems related to employee performance
appraisal exist both in private and public commercial banks of Nepal. This analysis
will be useful for the selected banks to identify why they have only adopted existing
appraisal system, how they can minimize the rate of turnover based on their current
75
employees, the current strategies for the retention of competent employees for the
bank. The human resource department will be conscious about the policy making
regarding the incentive plans and benefits for employee to increase the level of job
satisfaction based on employee performance.
Similarly, the analysis of the primary data through the structured questionnaire filled
by different level of employees support to identify the major factors of their
performance and the overall perception of existing employees regarding these
independent variables. The computation of frequency, percentage, charts and chi-
square test helps to make clear conclusion about these factors. Through this in-depth
study it is revealed that both private and public commercial banks at different level
employees give first priority to compensation package as an important factor affecting
employee performance and working environment as least important factors whereas
employee of both public and private commercial banks perceived that attendance
doesn't affect their performance.
76
5.3 Recommendations
This research study will be ground base for other researcher who wants to analyze the
factor affecting employee performance. By analyzing the primary data of both private
and public commercial banks researcher is able to identify some weaknesses of these
banks. Some valuable recommendations for both private and public commercial banks
are listed below:
• After collecting the data from private commercial banks, researcher also found
that employee at their banks was not satisfied with compensation package. So
private commercial banks should provide compensation as per the employee
performance.
• Banks should provide training frequently to their employee for the
enhancement of ability, competence and efficiency.
• The banks should adopt the different modes of motivational schemes and tools
according to time and requirement of employee.
• Banks should involve at least some representative of employees from each
department during the formation of plan and setting goals.
• Bank should provide the flexible working hour for employee's personal work
like paying telephone bill, paying electricity bill, paying children fees etc.
• Banks should adopt the open performance appraisal so that employee's got
feedback and can improve their weaknesses.
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Job Level:
Organization Name:
Gender
• Male • Female
Age
• Less than 20 • 21 to 30 years • 31 to 40 years • 41 to 50 years • Above 50
Education
• Master • Bachelor • Plus 2 • SLC • Under SLC
1. There is positive relationship between my job and my performance
(1=Strongly Disagree, 2=Disagree, 3=Neutral, 4=Agree, 5=Strongly Agree) 1 2 3 4 5
2. Working environment affect in my performance (1=Strongly Disagree, 2=Disagree, 3=Neutral, 4=Agree, 5=Strongly Agree) 1 2 3 4 5
3. My education Level affect in my daily work (1=Strongly Disagree, 2=Disagree, 3=Neutral, 4=Agree, 5=Strongly Agree) 1 2 3 4 5
4. My Organization provides me training frequently (1=Strongly Disagree, 2=Disagree, 3=Neutral, 4=Agree, 5=Strongly Agree) 1 2 3 4 5
5. My performance is influenced by communication skill (1=Strongly Disagree, 2=Disagree, 3=Neutral, 4=Agree, 5=Strongly Agree)
1 2 3 4 5
6. I avoide all the problems without taking any risk or pushing them to other (1=Strongly Disagree, 2=Disagree, 3=Neutral, 4=Agree, 5=Strongly Agree) 1 2 3 4 5
7. I can only lead a group of people under guidance of other
(1=Strongly Disagree, 2=Disagree, 3=Neutral, 4=Agree, 5=Strongly Agree) 1 2 3 4 5
8. I believe teamwork influenced my daily performance (1=Strongly Disagree, 2=Disagree, 3=Neutral, 4=Agree, 5=Strongly Agree) 1 2 3 4 5
9. Delegation of authority is required to attain performance (1=Strongly Disagree, 2=Disagree, 3=Neutral, 4=Agree, 5=Strongly Agree) 1 2 3 4 5
10. I am actively involved to make plan or setting goals (1=Strongly Disagree, 2=Disagree, 3=Neutral, 4=Agree, 5=Strongly Agree) 1 2 3 4 5
11. I am very good at all kinds of figure-work (Calculation)
(1=Strongly Disagree, 2=Disagree, 3=Neutral, 4=Agree, 5=Strongly Agree) 1 2 3 4 5
12. Active relationship exist’s between the absenteeism and performance
(1=Strongly Disagree, 2=Disagree, 3=Neutral, 4=Agree, 5=Strongly Agree) 1 2 3 4 5
13. I can work well under stress and pressure
(1=Strongly Disagree, 2=Disagree, 3=Neutral, 4=Agree, 5=Strongly Agree) 1 2 3 4 5
14. I am mostly dependable and loyal company man (1=Strongly Disagree, 2=Disagree, 3=Neutral, 4=Agree, 5=Strongly Agree) 1 2 3 4 5
15. I feel very difficult to work in group (1=Strongly Disagree, 2=Disagree, 3=Neutral, 4=Agree, 5=Strongly Agree) 1 2 3 4 5
16. I do effectively delegate authority to subordinate with clear direction (1=Strongly Disagree, 2=Disagree, 3=Neutral, 4=Agree, 5=Strongly Agree) 1 2 3 4 5
17. I constantly advice and provide feedback to junior for the best
(1=Strongly Disagree, 2=Disagree, 3=Neutral, 4=Agree, 5=Strongly Agree) 1 2 3 4 5
18. Age doesnot affects my daily performance (1=Strongly Disagree, 2=Disagree, 3=Neutral, 4=Agree, 5=Strongly Agree) 1 2 3 4 5
19. There should be open performance appraisal in my company
(1=Strongly Disagree, 2=Disagree, 3=Neutral, 4=Agree, 5=Strongly Agree) 1 2 3 4 5
20. Comment from supervisor creates frustration at my daily work
(1=Strongly Disagree, 2=Disagree, 3=Neutral, 4=Agree, 5=Strongly Agree) 1 2 3 4 5
21. My Organization should adopt self-appraisal system
(1=Strongly Disagree, 2=Disagree, 3=Neutral, 4=Agree, 5=Strongly Agree) 1 2 3 4 5
22. I am getting payment as per my performance
(1=Strongly Disagree, 2=Disagree, 3=Neutral, 4=Agree, 5=Strongly Agree) 1 2 3 4 5
23. My Organization has good performance appraisal (1=Strongly Disagree, 2=Disagree, 3=Neutral, 4=Agree, 5=Strongly Agree) 1 2 3 4 5
