Project on

Performance Management System

Bachelor of Business Administration (HR)

Submitted in partial fulfillment of the requirements for award of Bachelor of Business Administration

ofTilak Maharashtra University, Pune

Submitted by(Tvishi Sharma)

PRN:07108016411

of Ansal Institute of Technology

Gurgaon Guided by Prof. Ms. Shikha Khandelwal

Tilak Maharashtra University

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Gultekdi, Pune 411037

Tilak Maharashtra University, Pune(Deemed Under Section 3 of UGC Act 1956 Vide NotificationNo. F.9-19/85-U3 dated 24th April 1987 By the Government of

India.)

Vidyapeeth Bhavan, Gultekdi, Pune-411037.

CERTIFICATE

This is to Certify that the project titled

PERFORMANCE MANAGEMENT SYSTEM is a

bonafide work carried out by

MS. TVISHI SHARMA a

student of Bachelor of Business Administration

Semester 6th, Specialization HUMAN RESOURCE

. PRN. 07108016411 under Tilak Maharashtra

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University, in the year 2010.

Head of Department Examiner ExaminerInternal External

Date:Place: University Seal

Certificate of Internal Guide

This is to certify that the project titled “PERFORMANCE MANAGEMENT SYSTEM” is a bonafide work carried out by TVISHI SHARMA a candidate for the award of Bachelor of Business Administration of Tilak Maharashtra University, Pune under my guidance and direction.

Signature of guide

Date: Name:Place: Designation:

Institute:

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Certificate

TO WHOMSOEVER IT MAY CONCERN

This is to certify that Ms. TVISHI SHARMA III YearBBA Student of Tilak Maharashtra University, Pune has successfully collected the

data for the project report for the award of Bachelor Degree of Business Administration.

The topic of his/her study was “PERFORMANCE MANAGEMENT SYSTEM”.

Company Name Company Seal

Mr./Ms.Designation

Signature

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ACKNOWLEDGMENT

I would like to take this opportunity to acknowledge the support and cooperation of all

those who enabled the successful completion of this project.

I deem it a great privilege to thank all those people who helped me to complete this

project work. I express my sincere thanks to the management of the Ansal Institute of

Technology, Gurgaon and our respected Head of the department Mr. R.K. Yadav for

giving me this opportunity to under take the project work.

I am deeply obliged to my project guide Ms. Shikha Khandelwal with out whose

guidance and encouragement at all levels; the study wouldn’t have been completed.

I would like to extend my sincere gratitude towards Mr. Aditya Sheel (Regional HR

manager) and Ms. Akanksha Katyal( of Micromax), under whose guidance I undertook

this project, for extending the advice and direction that is required to carry on a study of

this nature, and for helping me with the intricate details of the project every step of the

way.

I would like to thank all the employees who spared their precious time to answer all my

queries and helped me to complete this project.

Finally I would like to thank all the respective people of the company who helped me in

the completion of my project by giving me valuable insights on the Performance

Management System of their company.

Tvishi Sharma

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INDEX

Chapter1: General Introduction

Chapter2: Introduction to the Problem

Chapter3: Profile of the Company

Chapter4: Theoretical Perspective

Chapter5: Research Methodology

Chapter6: Data Analysis and Interpretations

Chapter7: Findings

Chapter8: Limitations

Chapter9: Conclusions and Recommendations

Appendix

Questionnaires

Bibliography

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BIBLIOGRAPHY

BOOKS & MAGAZINES REFERRED

1. HANDBOOK OF MICROMAX .

2. PERFORMANCE MANAGEMENT AND APPRAISAL SYSTEMS, “HR TOOLS FOR GLOBAL

COMPETIVENESS” BY T.V. RAO (2009), RESPONSE BOOKS, A DIVISION OF SAGE

PUBLICATIONS, THOUSAND OAKS, LONDON.

3. MANAGING & MEASURING EMPLOYEE PERFORMANCE BY ELIZABETH

HOULDSWORTH & DILUM JIRASINGHE (2006), KOGAN PAGE, 120 PENONVILLE

ROAD, LONDON, N1 9JN, UNITED KINGDOM

WEBSITES REFERRED

WWW.WIKIPEDIA.ORG

WWW.DATTNERCONSULTING.COM

WWW.PERFORMANCE-APPRAISAL.COM

WWW.MICROMAXINFO.COM

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QUESTIONAIRE

Q1. What is the purpose of a performance management system as per your knowledge?

a. Interactive session between you and the employee.b. Appraising the employee’s performance during the past year.c. Giving a platform to the employee to mention his/her achievements.d. All of them

Q2. Which one of the following must be incorporated in the appraisal form for sure?

a. Development needs.b. Job interest of the employee.c. Infrastructural needs of the employee.d. Problems faced by the employee.

Q3. Performance appraisal must take into consideration the following employee view point:

a. Employee.b. Employee + Supervisor.c. Employee + Supervisor + HOD.d. HOD.e. Supervisor + HOD.

Q4. The performance appraisal must be on a rating scale of ___________for accuracy in appraising:

a. 1-3b. 1-5c. 1-7d. 1-10

Q5. Biased ness in Performance Appraisal can be removed with the help of the following employee’s view:

a. Employee

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b. Supervisorc. Director

Q6. Telephonic or face to face interaction with the employee is essential for appropriate and exact appraisal:

a. yesb. No

Q7. The appraisal form must be in the following format:

a. Electronicb. Hardcopy

Q8. Please rate the following competencies in order of importance, with 1 being the most important:

1. Job knowledge & Technical competence2. Ethics & Integrity3. Systems & Process Orientation4. Soft Skills5. Customer Focus6. Ownership & Accountability for results7. Learn ability8. Personal drive & effectiveness9. Communication10. People management & Leadership11. Reporting & administration12. Meeting deadlines / commitment13. Team work14. Problem solving & decision making15. Time management16. Self discipline

Q9. Should there be any additional competencies for supervisors?

a. Yesb. No

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Q10. Please rate these additional competencies for supervisors in order of importance, with 1 being the most important:

1. Coaches/counsels, evaluates staff.2. Identifies areas for & supports employee development opportunities.3. Encourages teamwork and group achievement.4. Leads change/ achieves support for objectives.5. Enables and empowers staff; provides appropriate opportunities for growth.6. Strives to achieve diverse staff at all levels.7. Understands diversity issues and creates supportive environment for diverse

employees.

Q11. How regularly should the performance appraisal be done?

a. Quarterlyb. Half yearlyc. Yearly

Q12. Should there be a feedback given to employee regarding the appraisal?

a. Yesb. No

Q13. Should the ratings be shared with the employee?

a. Yesb. No

Q14. Should self evaluation be a part of the performance appraisal?

a. Yesb. No

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Chapter 1General Introduction (Industrial Background)

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Communications in India

A lot of water has flowed under the bridge from the time that mobiles were unheard of in India to the present where they have become almost ubiquitous. Beginning from those days, Indian subscribers paid around Rs. 16.40 for a mobile to mobile call and around Rs 32.80 for a mobile to a land-line call. Today, as per recent statistics, customers pay far lesser for calls and occasional text messages that add up to around Rs 300 a month and upwards.

Now that mobiles have moved into the affordable bracket, there is a great demand for additional mobile services such as mobiles, email, stock market quotes, and astrology services, just to name a few.

A recent survey pointed to the fact that for most customers, mobile phones have become an extension of their personality. Many go a step ahead to say that mobile phones define their individuality as well. In such a scenario, it is worthwhile to compare the growth of the mobile phone industry vis-a-vis the computer industry in India. According to recent statistics, there are nearly 300 million mobile phone subscribers as compared to just around 30 million PC's in the country. Additionally, around 8 million subscribers are signing up every month for mobile services alone.

For most individuals, mobile phones are becoming a single point of contact for the world surrounding them covering a wide range of utilities like emailing, entertainment, and banking.

More and more people are looking out for more than just talk time on their mobiles. All this is generating a lot of enthusiasm for mobile companies. A number of serious players in this industry are looking at a range of such value added services, which have the capability to boost their bottom line.

Not only are Indians enthralled, but they started spending a considerable amount on these services too. This figure amounted to around $250 million last year. This figure is expected to reach $1.7 billion by the year 2010. This is a boon in disguise for Indian cellular operators who are seriously looking forward to enhance their revenues. Currently, nearly 80% of the revenues come from services like ring tones and SMS. This makes India the second largest mobile market on earth.

The young mobile savvy generation currently feels less privileged in nearly every sector. And that's precisely what is fuelling the growth in mobile services across the country. As the market expands but fulfilling the needs of mobile users by providing them attractive services, mobile phones are becoming a new vehicle for reaching out to the mobile generation.

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Major players in the industry

Nokia BenQ

Sony Ericsson Spice

Samsung Fly

LG HTC

Motorola Haier

Apple INQ

Blackberry Intex

Karbonn Panasonic

Lemon Lava

Olive Huawei

Micromax holds 3rd position in Indian market.

About Micromax

Micromax is a New Delhi; India based Telecom Company with 23 domestic offices in all the telecom circles of India and international offices in Hong Kong, USA and now in Dubai. Besides India, Micromax devices are sold in Nepal, Bangladesh, Middle East, Africa and parts of Latin America.

Micromax has always been proud of being a one-point solution for their customers by

providing for Design, Development, Manufacturing, Marketing, distribution and after-

sales-support of all Micromax devices under the flagship of Micromax.

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Micromax has a lot of “firsts” to its credit on their mystic product portfolio and was the

first to introduce:

30 days battery backup- Mobile Phones

Dual SIM/Dual Standby- Mobile Phones

Network changing capability using gravitational force- Mobile Phones

Aspirational Qwerty- mobile Phones

Operator Branded 3G- Mobile Phones

OMH, CDMA – Mobile Phones

And many more

With a 360 degree advertising and marketing strategy sketched out, the company has an

optimistic outlook for the telecom consumer space. Currently present in more than 40,000

stores across the country, the company plans to have an aggressive market incursion to

reach out to its customers through 70,000 operational stores in the coming year.

Innovation, Cost-Effective, Credible and Interesting R&D, have now become

synonymous to Micromax in the telecom vertical. Today Micromax has become a brand

which people relate and look up to for realizing their individual device preferences and

other out-of-the-box solutions.

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Chapter 2

Introduction to Problem

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Title of the project:

Performance Management System

Performance Management is a whole work system that begins when a job is defined as

needed. It ends when an employee leaves your organization.

According to this definition, performance management involves creating work

environment for employees’ success rather than setting a tight control system as many

managers would believe.

Managing Performance is a year round process. An iterative process of observation and

communication to support, retain and develop employees for organizational success.

• it’s not just an annual performance appraisal

• it’s not imposing targets/goals on an employee by his supervisor

• it’s not only evaluating individual job performance

Statement of problem

Performance appraisal is a process of assessing, summarizing and developing the work

performance of an employee. In order to be effective and constructive, the performance

manager should make every effort to obtain as much objective information about the

employee's performance as possible. Low performance can push the organization back in

today’s tough competition scenario. The project is aimed at analyzing the performance

appraisal in companies.

What is it about:

• Goal Setting

• Coaching

• Rewarding

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• Disciplinary Action

• Performance Appraisal

• Documenting performance

Here we are looking at the pre-performance management system and the post-

performance management system:

Pre-performance management steps:

Designing of the forms: The forms that are to be filled are designed according

to the company’s requirement.

KRAs: Laying out the Key Result Areas for each department where the results

are required for company’s development.

Generic competencies: Thr generic competencies are layed out on the basis of

the requirements of the company. The competencies are same for every

department.

Filling the forms: The forms are to br filled by the HODs of each department

and then the director.

Analysis: Analysis is made according to the information provided by the

heads and the loopholes or the problem areas are identified(if any).

Increments: The employee’s are provided an increment according to their

contribution to the company.

Post-performance management:

The purpose of the performance system is fulfilled and the comparison of the results is

made.

Purpose of study:

The purpose is to study the Performance Management System at Micromax

Informatics Ltd.

To learn about the process of Performance Management System.

To know the effective method of Performance Management System.

Objective of study:

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1. The objective of study is to understand the performance management system and its

importance and recommend the solution for the problem area occurring in the process.

2. To examine why an appraisal system is important.3. To find the expectation of appraiser and appraisee.4. To determine the satisfaction level of the appraisee.5. To reveal the various loopholes in the appraisal system if any.6. To find the consequences of an inappropriately conducted appraisal system.

Scope of study:

The study was done to know the various methods of Performance Management

System.

The study’s emphasis is on the Performance Management System of Micromax

Informatics Ltd.

The study aims at understanding various issues involved in Performance Management

System.

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Chapter 3

Profile of the company

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Company profile

Inventing surprises

Vision

Our Vision is to develop innovative technologies and efficient processes that incubate

newer markets, enliven customer aspirations and continue to make Micromax a trusted

market leader.

Mission

With a futuristic vision and an exhaustive R&D at its helm, Micromax has successfully

generated innovative technologies that revolutionize the telecom consumer space.

Micromax is on a mission to successfully overcome the technological barriers and keep

powering “life enhancing solutions”.

Philosophy

Enthused with passion for innovation, Micromax has constantly strived to bring about the

much needed change in telecom products so as to fulfill the customer aspirations. At

Micromax, the mornings begin with a simple business philosophy; to use our talent and

technology to create superior products and services that contribute to a better and

satisfied global society.

People

Human Resource @ Micromax is the most treasured asset that makes Micromax stand

apart in the industry. People come from myriad backgrounds and spheres and work in

their individual work styles. This hybrid culture binds together to form a uniform work

ethos @ Micromax.

Values

The Micromax ideology stems from its rooted belief in ‘Innovation’ and delivering

nothing “short of the best”. At Micromax, a rigorous code of conduct and core values

form the basis of every decision made.

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Excellence

Passion at Micromax ensures an unfaltering commitment to deliver only the best

products and services to the customer.

Integrity

Operational efficiency is achieved by standing committed to the core ethics which

ensure work is always guided by a moral compass that entrusts fairness, respect

for all stakeholders and complete transparency in our everyday life.

The Advent

With young enthusiasts as its anchor, Micromax Informatics Limited has created a niche

for itself in the telecommunication industry. Micromax ventured into the

telecommunication industry with end-to-end solution of Fixed Wireless Devices and

Wireless Data cards. The devices were supplied to all parts of India and were supported

on the network of the GSM operators of India. Within a year of its operation, Micromax

provided for technical support of the installed base of devices across 150+ cities of India,

a no-mean achievement which made the customers trust and love the brand.

In the year 2008, after delivering upon the technology of fixed wireless, powering desired

products, the company forayed into one of the most predominant genres of

telecommunication – Mobile handsets. Since then Micromax has received commendable

response for its unique and interesting handsets. With groundbreaking mobile solutions

and technology, Micromax is completely primed to bring about a paradigm shift in the

perception of personal mobile devices. Micromax has successfully launched mobile

phones that meet the needs of a broad segment of customers. The range varies from entry

level handsets to high-end sophisticated mobile phones and the commercials starts from

being as low as Rs.1,100/- to as high as Rs. 14,000/-.

From its Inception, till date the company has firmly stood by its principle that; like

change, innovation too is constant and much required for human evolution.

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Chapters: 4

Theoretical perspective

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Performance Management System

What is performance management system?

Performance management is the process of creating a work environment or setting in which people are enabled to perform to the best of their abilities. Performance management is a whole work system that begins when a job is defined as needed. It ends when an employee leaves your organization. Performance Management System is also known as Performance Appraisal, Performance Evaluation or Performance Review.

Many writers and consultants are using the term “performance management” as a substitution for the traditional appraisal system. I encourage you to think of the term in this broader work system context. A performance management system includes the following actions.

Develop clear job descriptions.

Select appropriate people with an appropriate selection process. Negotiate requirements and accomplishment-based performance standards,

outcomes, and measures. Provide effective orientation, education, and training. Provide on-going coaching and feedback. Conduct quarterly performance development discussions. Design effective compensation and recognition systems that reward people for

their contributions. Provide promotional/career development opportunities for staff. Assist with exit interviews to understand WHY valued employees leave the

organization.

History of Performance Appraisal

The concept of Performance Appraisal dates back to the First World War and was then called “Merit Rating Programme”. Over a period of time, this concept has been through an ocean of change. The areas of evaluation have also changed.

Once an employee has been selected, trained and embarked on his duties, it is time for performance appraisal. What is performance appraisal? Why do companies need to take up this task?

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According to Carl Heyel, author/editor on management, philosopher and teacher, “it is the process of evaluating the performance and qualifications of the employees in terms of job requirements, for administrative purposes such as placement, selection and promotion, to provide financial rewards and other actions which require differential treatment among the members of a group as distinguished from actions affecting all members equally”.

The history of performance appraisal is quite brief. Its roots in the early 20th century can be traced to Taylor's pioneering Time and Motion studies. But this is not very helpful, for the same may be said about almost everything in the field of modern human resources management.

As a distinct and formal management procedure used in the evaluation of work performance, appraisal really dates from the time of the Second World War - not more than 60 years ago.

Yet in a broader sense, the practice of appraisal is a very ancient art. In the scale of things historical, it might well lay claim to being the world's second oldest profession!

There is, says Dulewicz (1989), "... a basic human tendency to make judgments about those one is working with, as well as about oneself." Appraisal, it seems, is both inevitable and universal. In the absence of a carefully structured system of appraisal, people will tend to judge the work performance of others, including subordinates, naturally, informally and arbitrarily.

The human inclination to judge can create serious motivational, ethical and legal problems in the workplace. Without a structured appraisal system, there is little chance of ensuring that the judgments made will be lawful, fair, defensible and accurate.

Performance appraisal systems began as simple methods of income justification. That is, appraisal was used to decide whether or not the salary or wage of an individual employee was justified.

The process was firmly linked to material outcomes. If an employee's performance was found to be less than ideal, a cut in pay would follow. On the other hand, if their performance was better than the supervisor expected, a pay rise was in order.

Little consideration, if any, was given to the developmental possibilities of appraisal. If was felt that a cut in pay, or a rise, should provide the only required impetus for an employee to either improve or continue to perform well.

Sometimes this basic system succeeded in getting the results that were intended; but more often than not, it failed.

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For example, early motivational researchers were aware that different people with roughly equal work abilities could be paid the same amount of money and yet have quite different levels of motivation and performance.

These observations were confirmed in empirical studies. Pay rates were important, yes; but they were not the only element that had an impact on employee performance. It was found that other issues, such as morale and self-esteem, could also have a major influence.

As a result, the traditional emphasis on reward outcomes was progressively rejected. In the 1950s in the United States, the potential usefulness of appraisal as tool for motivation and development was gradually recognized. The general model of performance appraisal, as it is known today, began from that time.

Modern approach

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 many organizations - but not all - appraisal results are used, either directly or indirectly, to help determine reward outcomes. That is, the appraisal results are used to identify the better performing employees who should get the majority of available merit pay increases, bonuses, and promotions.

By the same token, appraisal results are used to identify the poorer performers who may require some form of counseling, or in extreme cases, demotion, dismissal or decreases in pay. (Organizations need to be aware of laws in their country that might restrict their capacity to dismiss employees or decrease pay.)

Whether this is an appropriate use of performance appraisal - the assignment and justification of rewards and penalties - is a very uncertain and contentious matter.

Controversy, Controversy

Few issues in management stir up more controversy than performance appraisal.

There are many reputable sources - researchers, management commentators, psychometricians - who have expressed doubts about the validity and reliability of the performance appraisal process. Some have even suggested that the process is so inherently flawed that it may be impossible to perfect it (see Derven, 1990, for example).

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At the other extreme, there are many strong advocates of performance appraisal. Some view it as potentially "... the most crucial aspect of organizational life" (Lawrie, 1990).

Between these two extremes lie various schools of belief. While all endorse the use of performance appraisal, there are many different opinions on how and when to apply it.

There are those, for instance, who believe that performance appraisal has many important employee development uses, but scorn any attempt to link the process to reward outcomes - such as pay rises and promotions.

This group believes that the linkage to reward outcomes reduces or eliminates the developmental value of appraisals. Rather than an opportunity for constructive review and encouragement, the reward-linked process is perceived as judgmental, punitive and harrowing.

For example, how many people would gladly admit their work problems if, at the same time, they knew that their next pay rise or a much-wanted promotion was riding on an appraisal result? Very likely, in that situation, many people would deny or downplay their weaknesses.

Nor is the desire to distort or deny the truth confined to the person being appraised. Many appraisers feel uncomfortable with the combined role of judge and executioner.

Such reluctance is not difficult to understand. Appraisers often know their appraisees well, and are typically in a direct subordinate-supervisor relationship. They work together on a daily basis and may, at times, mix socially. Suggesting that a subordinate needs to brush up on certain work skills is one thing; giving an appraisal result that has the direct effect of negating a promotion is another.

The result can be resentment and serious morale damage, leading to workplace disruption, soured relationships and productivity declines.

On the other hand, there is a strong rival argument which claims that performance appraisal must unequivocally be linked to reward outcomes.

The advocates of this approach say that organizations must have a process by which rewards - which are not an unlimited resource - may be openly and fairly distributed to those most deserving on the basis of merit, effort and results.

There is a critical need for remunerative justice in organizations. Performance appraisal - whatever its practical flaws - is the only process available to help achieve fair, decent and consistent reward outcomes.

It has also been claimed that appraisees themselves are inclined to believe that appraisal results should be linked directly to reward outcomes - and are suspicious and

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disappointed when told this is not the case. Rather than feeling relieved, appraisees may suspect that they are not being told the whole truth, or that the appraisal process is a sham and waste of time.

The Link to RewardsResearch (Bannister & Balkin, 1990) has reported that appraisees seem to have greater acceptance of the appraisal process, and feel more satisfied with it, when the process is directly linked to rewards. Such findings are a serious challenge to those who feel that appraisal results and reward outcomes must be strictly isolated from each other.

There is also a group who argues that the evaluation of employees for reward purposes, and frank communication with them about their performance, are part of the basic responsibilities of management. The practice of not discussing reward issues while appraising performance is, say critics, based on inconsistent and muddled ideas of motivation.

In many organizations, this inconsistency is aggravated by the practice of having separate wage and salary reviews, in which merit rises and bonuses are decided arbitrarily, and often secretly, by supervisors and managers.

An integral part of performance management system:

Effective performance management requires a good deal of face-to-face supervisor-employee interaction. By knowing the subordinates, a supervisor can steer them onto a path of greater productivity and optimized output. Long-term successful business owners view performance appraisal as a process of getting to know the people who work for them. It is the most significant and indispensable tool for an organization. It provides information, which helps in taking important decisions for the development of an individual and the organization.

1. Thus, one phase of the annual performance management cycle is performance appraisal, the process of reviewing employee performance vis-à-vis the set expectations in a realistic manner, documenting the review, and delivering the review verbally in a face-to-face meeting, to raise performance standards year over year through honest and constructive feedback. In the process management expects to reinforce the employee’s strengths, identify improvement areas so that one can work on them and also set stretched goals for the coming year.

2. It is composed of the following two processes both of which are qualitative subject to human bias – a. observation and b. judgment

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4. The parameters of performance are a combination of technical expertise and behavioural attributes. The latter scores a high degree of relevance with regard to potential appraisal.

Concept Of Performance Appraisal:

The concept of Performance Appraisal can be explained with the analogy illustrated below:

The head of the key represents the uniqueness of the employee. No two employees are alike.

The ring represents the management’s requirement -the job content. The shaft represents the communication between the employee and the

company, the transmission of the task and the response from the performer.

Change:

1. A few decades ago, the employee used to be appraised by his department head. The department head used to communicate his feedback and comments only to the immediate superior of the employee. Thus the feedback was kept confidential in nature. As time passed by, the immediate superior started appraising his subordinate’s performance and sending his confidential report to the department head. These were the periods when the employee was not included in his appraisal process. The decisions used to be taken by his superiors relating to his pay hike, promotion etc. Thus the system was non-transparent.

2. The current process of performance appraisal is much more open and gives some scope for self-appraisal by the employee. The self-appraisal is followed by a joint discussion with superior and then a decision is taken by the department head on his promotion, pay hike etc. The feedback relating to his performance is directly given to the employee. Thus performance appraisal process has gone through the phase of non-transparency to transparency.

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3. In this transparency phase, a performance appraisal can be defined as a structured formal interaction between a subordinate and supervisor, that usually takes the form of a periodic interview (annual or bi-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.

4. Whether an organization accepts or not the usefulness of Performance Appraisal, whether it adopts a formal appraisal system or not, top management is constantly appraising the performance of its subordinate managers in day-to-day interaction. The latter are doing the same to their own subordinates. They are doing so because Performance Appraisal, formal or informal, lies at the heart of art of managing.

5. Managing is a dynamic process, concerned almost entirely with the present and the future, whereas Performance Appraisal, as generally used has been a static rating of an employee related almost entirely with the past. Recently, as some managements were recognizing that “rating” by itself had very limited utility, they began to appreciate that managing had evolved into an art. They saw that “management by hunch” could not longer be tolerated, and that measurements-no matter how vague – were essential for the future development of the art of managing.

6. The need for measurements gave birth to several “systems” of managing which attempted to apply measurements of various sorts to the different aspects and elements of the manager’s job. A number of these systems leaned on the better Performance Appraisal methods for their measuring devices or at least for a starting point for measurement. In some instances, these systems expanded or broadened the meaning of Performance Appraisal from a mere rating to include the whole concept of management with all its elements.

Foundations of performance appraisal

Performance Appraisal assesses how well people have been doing their jobs and what they must do to be better in their jobs. It deals with the content of the job and what they are expected to achieve in each aspect of their work. Following are the foundations in Performance Appraisal process:

I. Job Profile : Job description concentrates more on the definition of tasks the jobholder has to accomplish. It includes details of reporting relationship and normally covers the overall purpose of the job. It indicates how an individual’s job will contribute to the achievement of objectives of a team or a department and, ultimately the mission of the organization.

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II. Objectives : An objective describes something, which has to be accomplished. Objectives define what organizations, functions, departments, teams and individuals are expected to achieve.

There are four types of objectives:

i. Work or Operational Objectives: It refers to the results to be achieved or the contribution to be made to the accomplishment of team, departmental and corporate objectives.

ii. Developmental objectives: It is concerned with what individual should do and learn to improve their performance and/or their knowledge, skills and competencies (training and personal development plans).

Objectives of Performance Appraisal

Administrative Objective Self improvement objective

1. Transfer

2. Wage and salary administration

3. Promotion

4. Training and development

5. Personal Research

III. Competencies : Competencies refer to the behavioral dimensions of a role. It is the behavior required of people to carry out their work satisfactorily. Competencies are what people bring to a job in the form of different types and levels of behavior. They govern the process aspects of job performance.

IV. Values : Increasingly, organizations are setting out the core values that they think should govern the behavior of all their employees. Value statements may be prepared

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which define core values in areas such as care for customers, concern for people, competitiveness, excellence, growth, innovation.

Three essential steps for performance appraisal:

The process of getting to know the people who work for the organization involves three essential steps viz. training, evaluation and review.

I. Training: Successful training is the implementation of a system in which everyone in the workplace is geared towards improvement. It involves a hands on approach in which the employee is encouraged to evaluate himself or herself under the guidance of the appraiser.

How it works?First, the appraiser includes the employee in the appraisal process. When an employee knows that his or her opinion of other workers is taken into account, he or she also realizes that everyone else’s opinion matters just as much. This not only empowers the employee and improves relations in the workplace, but it encourages higher productivity as well. This interactive approach is made complete with the leadership of the appraiser. Carefully administering praise coupled with constructive criticism keeps the workforce on its toes.

II. Evaluation: The best methods for employee evaluation are based on results and behavior.While conducting performance appraisal based on employees’ characteristic traits is quite common, the results are often subjective and unsatisfactory. A results-based approach to performance appraisal is by far the cleanest, most objective method of tackling the complex task of evaluation. It uses a rating system to measure productivity within a given timescale. If an employee makes a certain number of sales in a certain week, he or she can be rated by sheer worth as well as ranked against other employees. The study of behavior is closely tied to productivity. The pace of work, willingness to put in overtime and ability to work with others all contribute to overall productivity.

III. Review: The review process should, again, employ the techniques of interactivity. Before sitting down together, the appraiser should give the employee a chance to review himself or herself. This not only empowers the employee, but also saves a lot of time and possible contention during the actual discussion. Initially the appraiser should walk the employee through the process. The successful supervisor starts out with an overview of why the review session is needed. Then the supervisor takes the employee down a point-by-point list of every aspect of the job. In each case, the employee should be given a chance to describe his or her achievements and shortcomings. The supervisor should always supplement this with added

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insight. While praising and applying criticism, the supervisor maintains authority throughout the review and indeed, the entire appraisal process.

The objectives and benefits of Performance Appraisal system can be summarized as under:

I. Objectives:

Data relating to Performance Appraisal of employees are recorded, stored and used for several purposes like:

Let the employees know where they stand in so far as their performance is concerned and to assist them with constructive criticism and guidance for the purpose of their development.

Assessment of skills within an organization.

Set targets for future performance.

Effect promotions based on competence and performance.

Strengthen relationship between superior and subordinate.

Assess the training and development needs of employees.

Identify the strengths and weaknesses of employees.

Decide upon a pay raise (increments).

Improve communication as it not only provides a system for dialogue between the superior and the subordinate, but also improves understanding of personal goals and concerns. This can also have the effect of increasing the trust between the appraiser and appraisee.

Determine whether human resource programs such, as selection, training and transfers have been effective or not.

II. Benefits:

The following are the benefits of a successful appraisal system:

1. For the Organization:

Improved performance throughout the organization due to:

Effective communication of organization’s objectives and values.

Increased sense of cohesiveness and loyalty.

Managers are better equipped to use their leadership skills and to develop their staff.

Improved overview of tasks performed by each member of a group.

Identification of ideas for improvement.

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Creation and maintenance of a culture of continuous improvement.

Communication to people that they are valued.

2. For the appraiser:

Opportunity to develop an overview of individual jobs.

Opportunity to identify strengths and weaknesses of appraisees.

Increased job satisfaction.

Opportunity to link team and individual objectives with department & organizational objectives.

Opportunity to clarify expectations that the manager has from teams and individuals.

Opportunity to re-prioritize targets

Means of forming a more productive relationship with staff based on mutual trust and understanding.

Due to all above Increased sense of personal value

3. For the appraisee:

Increased motivation and job satisfaction. Clear understanding of what is expected and what needs to be done to meet

expectations. Opportunity to discuss aspirations and any guidance, support or training needed to

fulfill these aspirations. Improved working relationships with the superior. Opportunity to overcome the weaknesses by way of counseling and guidance

from the superior Increased sense of personal value as he too is involved in the appraisal process

In line with the objectives of Performance Appraisal, to reap it’s benefits, this system has to be effective failing which it may mar the very purpose of performance appraisal. Effective appraisal process:

When it comes to performance appraisal, managers and employees agree about one thing: They hate going through them. Employees, managers and HR experts agree that fear, guilt, responsibility and resentment are the real reasons why most employees dread the appraisal process. Besides some think that it is a ritual that is mandatory to follow.

An effective review process helps organizations in three areas:

1. evaluation and improving personnel selection and training systems;

2. preventing wrongful termination; and

3. increasing real employee diversity

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I. Good appraisals start with information from multiple sources, and they evaluate employees at all levels from top to bottom.

II. This system requires both the appraisee and appraiser to jointly assess the employee’s ability to complete the duties and achieve the goals set forth in the previous appraisal.

III. HR professionals should consider the following steps and make the appraisal process simple yet effective:

The performance Appraisal form should reflect the strategic objectives of the company. Many organizations use a form that contains several sections.

The results and impact section should address accomplishments related to job responsibilities, goals and projects. It is a review of past performance.

A skills and abilities section should discuss the ways those results were accomplished. By listing the core competencies for each job classification – and for the entire organization – this section can address the kinds of behavior that are critical for success.

IV. Appraisal results, either directly or indirectly, determine reward outcomes. The better performing employees may get the majority of available merit pay increases, bonuses and promotions, while the poorer performers may require some form of counseling or in extreme cases no increases in pay. The assignment and justification of rewards and penalties through performance appraisal is a very uncertain and controversial matter and conveys both satisfaction as well as dissatisfaction with an employee’s job performance. Whatever is the case, organizations should foster a feeling that performance appraisals are positive opportunities that provide for overall development of the employee, in order to get the best out of the people and the process. Hence performance appraisals should be positive experiences and it should never be used to handle matters of discipline.

Identification of Key Result Areas(KRAs)-Goal setting

Setting of Key Result Areas i.e. goals is one of the various parameters of performance evaluation. These are also known as the Targets or Performance Indicators (PI). Target setting is the first step in the appraisal process, based on which the employee is appraised.

I. The Purpose or Objective of Target Setting

∙ Ensure that each individual is working towards clearly stated objectives that tie into the division goals.

∙ Provides a sound basis to improve performance.

∙ Encourages open communication concerning expected results and progress towards results.

∙ Helps the individual know “How he/she is doing” compared to what his/her manager expects.

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∙ Encourages comparison on individual objectives to identify overlapping or omitted objectives.

∙ Helps in salary review, and self-development.

The recent trend from a focus on traits or behavior to a results-oriented approach has seen the emergence of objectives setting as a key issue. However, managers should attempt to agree objectives with their staff rather than setting them themselves for the forthcoming period during appraisal discussion. These objectives or targets should comply with the mnemonic SMART i.e. Specific, Measurable, Achievable, Realistic and Time-bound.

II. SMART criteria for performance goals

SMART Performance Goals

Criteria Checklist

Specific

States in clear terms what outcome, result or behaviour is to be achieved.

∙ Does it specify

- Improved level of quality, quantity, time or use of resources.

- A new/innovative result, faster time line, or

- An improved behavioral outcome?

∙ Does it have a clearly stated singular result?

Measurable

Includes measurable results or a description of the desired outcome.

∙ Will you know from information, data or observation when it is achieved?

∙ Does it specify-What? How much? How well?

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SMART Performance Goals Criteria Checklist

Achievable

A realistic expectation, given time and resources

∙ Are resources, authority level, and requisite skills in place?

∙ Does it require a stretch of effort?

Realistic

There is a clear tie to goals of the department, division etc.

∙ Will it matter when it is done?

∙ Does the objective support relevant goals?

∙ Does it deal with a key aspect of the job?

Time Bound

There is a time limit or deadline by which the objective must be achieved and there may be a time frame to track phases of completion in an action plan.

∙ When are the goals to be completed?

∙ Is there a timetable for milestones or checkpoints?

III. Type of Goals:

One may have to set multiple goals combining goals at different levels viz. the long-term goal, the short-tem goal and the minimum or standard goal.

1. The long-term goal:

The long-term goals are the level of performance sought over a period of one to two years. Usually this level is significantly better than current performance. In some cases, the long-term goals are the ultimate level of performance, such as “zero defects” or “zero absenteeism”. Unlike the other two goals (described below), the long-term goals can be dictated by management without regard to past performance or to whether the long-term goals is currently perceived as attainable.

2. The short-term goal:

The short-term goals is the level of performance desired and perceived as being attainable with some effort within a period ranging from three months to one year. At the end of that time, short-term goals are re-evaluated based upon performance. The expectation is that when the short-term goal is consistently being met, it will be moved closer to the long-term goal.

∙ It must be less than or equal to the long-term goal

∙ It cannot be better than the best performance ever achieved; and

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∙ It must be better than the current average or typical performance. Short-term goals are negotiated. Usually employees and lower level managers recommend and develop short-term goals subject to approval by management.

3.The Minimum or Standard goal:

The minimum or standard goal is the cut-off point for signaling the existence of or potential for a performance problem. Like short-term goals, minimum standards are set for a limited period but for longer duration – perhaps one to two years. Minimums/standards are negotiated like short-term goals and must conform to the following criteria:

∙ They must be less than or equal to current average/typical performance; and

∙ They cannot be worse than the worst performance for any previous period.

IV. To aid goal setting the following steps may be adopted:

1. Consider the job on the following areas:- Routine responsibilities

- Problem solving responsibilities

- Innovative responsibilities

- Development responsibilities

2. Locate key tasks in each of the above areas.

3. Periodic Progress ReviewThe intent of this review is to provide a reconfirmation of direction to maintain commitment for the balance year. Targets, though should be stable over the performance period, should be flexible enough for revision when changes in priorities or responsibilities lead to the expectation of different results.

V. Key Steps to Goal Setting:

1. The appraiser should:

∙ in advance, review notes on employee’s performance;

∙ discuss targets, praise achievements and identify causes of targets not being met;

∙ discuss performance skills, reinforce good performance and identify causes for skills not being met;

∙ agree on the plan for corrective actions to be taken by both;

∙ where necessary, revise targets;

∙ create a non-threatening climate and express confidence.

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2. Joint Accountability:

Management must recognize that most results are achieved through the corporate efforts of two or more people. Therefore, the management style must encourage maximum individual contribution in co-operation with others.

Performance, Pay and Development

The outcome of the appraisal is either in the form of reward by way of increase in pay, additional bonus or incentive and/or promotion, or by way of not effecting any increase in pay, denying promotion etc. This gives emergence to the concept of Performance Related Pay (PRP).

I. Performance related pay is not an easy option. Before embarking on its introduction the following factors should be taken into account.

1. Matching the Culture:

Successful PRP schemes need to match the culture and core values of the organization. It is only by understanding and working with the culture that it is possible to develop schemes.

2. Linking PRP to the Performance Management process:

The focus when relating pay to performance needs to be one of the issues which emerge from the business planning process such as profitability, productivity, cost control, research initiatives, product and market development and generally increasing stakeholder value.

3. Balancing performance measures:

The performance measures used as a basis for rating must include a balanced mix of both input factors (skills and competences) and output factors (performance and contribution). The assessment upon which pay decisions are made should be based not only on performance in achieving objectives, contribution to organizational success and the levels of skill and competence achieved, but also on the degree to which the behavior of individuals support corporate values in such areas as teamwork, total quality management, customer services, innovation, etc.

4. Flexibility:

PRP arrangements should allow for some flexibility in the criteria for reward and the method of payment.

5. Teamwork:

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Poor PRP schemes can produce a lot of single-minded individuals. The importance of teamwork should be recognized in structuring the scheme and in defining critical success factors and performance indicators. Individuals should be aware that achieving their targets at the expense of others is not considered competent performance.

6. Avoiding Short-termism:

To avoid the danger of PRP focusing attention on short-term results at the expense of more important longer-term objectives, long-term as well as short-term goals should be set wherever appropriate and short-term objectives should be discussed in their overall context.

7. Involvement in the design process:

The design of PRP schemes is usually an iterative process- trying and testing ideas on measures and structure with those who will eventually be involved in the scheme. It is also a valuable learning process, which can throw up

fundamental strategic and business issues. Those due to participate in the scheme should have an input into agreeing critical success factors and performance indicators both for themselves and the organization.

8. Getting the message across:

PRP provides a very powerful form of communication. To get the right messages across, the following question will have to be dealt with:

a. Assess reasons for PRP

Why do we want to introduce PRP? What, realistically, do we expect to get out of it?

b. Assess readiness for PRP

Is PRP right for our culture? Do we have the Performance Management and other processes in

place required for successful PRP? Are the attitudes of management and other employees in favour of

PRP? (An attitude survey can be conducted to establish opinions). Do the people concerned with managing PRP have the required

skills and resources? Is PRP likely to make a significant enough impact on performance

to justify the costs of developing, introducing and operating the scheme?

c. Decide whether or not to introduce PRP

Does the result of the above assessment indicate that PRP is right for the organization?

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If no, what are the alternatives? There are many: Consider performance-related team pay, organization-wide profit sharing or profit-related pay plans, gain sharing, the use of incentive or bonus schemes, concentrating more on the motivational aspects of Performance Management, job re-design to increase motivation, performance-related training more intensive management coaching and training to improve leadership abilities, process re-engineering to improve organizational performance and productivity.

d. Brief, consult and involve employees

How should employees be informed of the organization’s objectives and intentions concerning the introduction of PRP?

How do we minimize concerns about PRP through this briefing process?

To what extent and how should we consult and involve employees?

e. Design scheme

What criteria should be used for determining PRP awards? It can be an appropriate mix of: Input criteria related to the skills and knowledge brought to

bear on fulfilling role responsibilities Process criteria related to the behavioral competencies used

successfully in achieving results Output performance indicators related to the achievement of

objectives and meeting performance requirements as set out in statements of principal accountabilities or main tasks

Outcome contribution indicators which measure how outputs contribute to the achievement of team, departmental and organizational objectives and how the behavior of individuals support corporate values

To what extent will it be possible to define the criteria in the key jobs for which PRP will operate?

Are performance measures available for these criteria, which will enable fair and consistent assessment to be made?

What form of rating system should be used? How are we going to ensure that ratings are fair and consistent? What are our policies be on the size of payments in relation to

performance, contribution, skill and competence? What should our policies to be on the rate of progression and any

limits to progression within pay ranges? Does the organization want to make provision for performance-

related lump sum bonuses for special achievement or sustained high-level performance at the top of a range?

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Should PRP reviews be separated in time from performance reviews conducted as part of the Performance Management process?

What rating, pay increase and budget guidelines are going to be issued to managers implementing PRP in their departments?

Should performance matrices be used? If so, how should they be constructed?

How PRP will be monitored and its effectiveness be evaluated? How the cost of PRP would be controlled? What is the program for developing and introducing PRP?

f. Brief and train

How the organization is going to brief and train line managers on the PRP scheme?

How the organization is going to brief employees in general on PRP so that they understand how it will operate and how they will benefit?

g. Implement

How the process should be started? Even after due care some unforeseeable problem will arise. It is often advisable to start with a pilot scheme, probably at management level so that they understand the principles, benefits and problem before applying PRP to the people for whom they are responsible.

How to monitor the introductory stages? It is essential to keep closely in touch with how things are going so that problems can be anticipated or dealt with swiftly when they arise.

h. Evaluate

Have clear objectives been established for the scheme the progress towards which can be measured and evaluated?

How to carry out a continuing monitoring and evaluation process? Who is responsible for evaluation and taking any corrective action

that may be required? What points should be covered?

9. Evaluating Performance Related Pay

It is essential to evaluate the acceptability and cost effectiveness of PRP. The following questions should be answered:

To what extent have the defined objectives of PRP been achieved? How much have been paid out under the scheme? What differentials have emerged between high/average performers over,

say, 2-3 years? What measurable benefits has PRP produced in the shape of improved

organizational, team and individual performance?

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How do managers regard PRP? Do they, for example, believe that it is operating fairly?

To what extent have rewards been linked to key and measurable areas of performance? Are rewards meeting people’s expectations?

Do Performance Management processes provide adequate support for PRP? Do the organization want to retain PRP in its present form? If not, what are

the alternatives?

10. Performance Related Pay (PRP) in practice

There is no doubt the system of PRP must be made to fit the culture of the organization. This either means that the existing culture can be receptive to the competitive and individual elements of PRP or the culture has to be changed. PRP can be used as part of the change process but, on its own, it is unlikely to be powerful enough to prove successful.11. Performance Related Pay (PRP) – a judgment?

Does Performance Related Pay work? Most experience in the United States is that greater use of performance pay results in improved organizational performance as measured by return on capital employed, particularly when applied to managerial pay. In the United Kingdom, the few studies have been largely negative or inconclusive.

Finally, all research has confirmed that employees regard positively the concept of PRP but deny quite strongly that it acts as a motivator for them in practice, and are mostly critical of the resulting procedural and distributive justice. It can be concluded that employees may work harder, in a more focused way and get better results through a PRP system which is under printed by a robust performance management scheme but employees may do this through a mixture of necessity and fear, rather than a genuine desire to do so.

Employees need to be developed for superior performance. PRP helps in identifying the development areas for an employee and where he needs to be counseled. The concept of counseling is discussed hereafter.

The counseling processCounseling is an act of providing professional guidance. It involves the long-term development and realization of the potential of an employee through the technique of advising. Performance management counseling is a valuable tool for superiors to use, particularly when subordinates show substandard performance.

I. The main objectives of counseling are:

• helping appraisee to realize his potential

• helping appraisee to understand himself i.e. his strengths and weaknesses

• providing appraisee an insight into his behavior.

• helping appraisee to have better understanding of the environment

• identifying performance problems or obstacles

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• encouraging appraisee to generate alternatives for dealing with various problems

II. The counseling process consists of three stages:

Recognition and Understanding:

Recognizing and understanding the Indications of problems and issues.

Empowering : Enabling the employee to recognize his own problem or situation and encouraging him to express it.

Resourcing : Managing the problems, this will include the decision on who is best able to act as counselor – the manager or a specialist.

III. Approaches to Counseling:

The following are different approaches to counseling:

1. The Tell and Sell Approach:

• Appraiser lets appraisee know how he/she is doing.• Gets appraisee’s acceptance of the evaluation.• Gets appraisee follow a plan outlined for improvement.

2. The Tell and Listen Approach:

• Appraiser lets appraisee know his performance.• Appraiser allows the appraisee to respond.• Appraisee is allowed to think and decide what needs to be done.

3. The Problem Solving Approach:

• Appraiser encourages appraisee to identify problem areas.• Appraisee discusses with appraiser in deciding what should be done about

the problems.• Steps are taken to solve problems.

Of the three approaches discussed above, the problem solving approach is the best approach. The below comparison justifies how:

The Tell and Sell Approach

The Tell and Listen Approach

The Problem Solving Approach

Requires considerable skill to get people to accept criticism

Requires skills on the part of appraiser in listening

Encourages appraisee to review his own performance and identify problem areas thus motivating appraisee

Is more of a one-way communication process, indicating authoritarianism

Better than the `tell and sell approach’ since it involves appraisee

Appraiser does not impose his decision but discusses problems with appraisee

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Such approach may not motivate the appraisee or even may turn counter-productive

Appraiser does not play a very active role

This also requires skills but is the most effective method of counseling where both appraiser and appraisee enjoy confidence of each other and work together in the direction of finding out solutions.

IV. Counseling is an art and requires skills, which are difficult to acquire in the normal course of work. It is, therefore, suggested that appraisers should be provided with special training by experts in counseling skills.

Counseling skills required by a good appraiser are:

Problem identification

: recognizing that the problem exists.

Probing :probing by open-ended, non-directing questions to make the appraisee more comfortable.

Listening : ability to listen attentively by probing, evaluating, interpreting and supporting.

Sensitivity : sensitivity to individual beliefs and values.

Reflecting : being able to restate the problem from appraisee’s point of view.

Empathy : having regard for feelings and anxieties of the individual.

Impartiality : ability to remain impartial.

Sincerity : having a genuine attitude of interest and openness to the individual’s problems.

Belief : having the belief that individuals have the resources to solve their own problem, with some help and guidance.

V. Follow-up of completed appraisal:

Post appraisal is very crucial for helping employee and the immediate superior i.e. appraiser playing the role of a Facilitator and Developer.

Enough time (say one week) should be given for the appraisee as well as appraiser to prepare for Post-Appraisal discussion.

This discussion should be devoted uninterrupted and sufficient time, say an hour or so.

Appraisee should be put at ease and allowed to first speak on his performance.

The appraiser should listen attentively without interruption with patience.

Appraiser should be supportive and objective on performance evaluation of the employee.

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Appraiser should discuss the training and development needs with the appraisee.

Finally, the meeting should conclude wherein the appraisee leaves with a feeling of empowerment.

Designing an appraisal process:

Before understanding the process of appraisal, the following terms are revised:

▪ Performance refers to an employee’s accomplishment of assigned tasks.

▪ Performance Appraisal is the systematic description of the job-relevant strengths and weaknesses of an individual or a group.

▪ Appraisal period is the length of time during which an employee’s job performance is observed in order to make a formal report of it.

▪ Performance Management is the total process of observing an employee’s performance in relation to job requirements over a period of time (i.e. clarifying expectations, setting goals, providing on-the-job coaching, storing and recalling information about performance) and then making an appraisal of it. Information gained from the process may be fed back via an appraisal interview to determine the relevance of individual and work-group performance to organizational purposes, improve the effectiveness of unit and improve work performance of employees.

Designing an appraisal program poses several questions, which need answers. They are:

1. Whose performance is to be assessed?

2. Who are the appraisers?

3. What should be evaluated?

4. When to appraise?

5. What problems are encountered?

6. How to solve the problems?

7. What methods of appraisal are to be used?

1. Whose performance should be assessed?

The answer is obvious – employees. When we say employees, it is individual or teams? Specifically, the appraisee may be defined as the individual, work group, division or organization.

2. Who are the appraisers?

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Appraisers can be immediate superiors, specialists from the human resource department, subordinates, peers, committees, clients, self-appraisals or a combination thereof.3. What should be evaluated?

One of the steps in designing an appraisal program is to determine the evaluation criteria. It is obvious that the criteria should be related to the job. The criteria for assessing performance can be:

a.Quality & Quantity

b. Timeliness

c.Cost Effectiveness

d. Need for supervision

e.Interpersonal impact

f. Innovation & Creativity

g. Problem Analysis

h. Customer orientation

i. Market Orientation

j. Entrepreneurial Drive

k. Negotiation skills etc.

This is not an exhaustive list, but several other parameters too can be added depending on job requirements and organizational needs.

4. When to appraise/rate?

The most frequent rating schedules are semi-annual and annual. New employees are rated more frequently than older ones. Some practices call for ratings:

∙ Annually as per company practice

∙ After first 6 months of employment

∙ Upon promotion or within 3 months after promotion

∙ When the job occupied has been reevaluated upward

∙ Upon special request, as when the employee’s salary is below the average pay

5. What are the problems related to Performance Appraisal?

An ideal Performance Appraisal is done when the evaluation is free from biases and idiosyncrasies of the evaluator. There are many factors of appraisal that lead to failure of the system:

a. Negative attitude towards Performance Appraisal:

There is a large population of managers who are hostile or indifferent to the Performance Appraisal processes and/or do it badly if they do it at all.

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i. Hostility from the appraiser:

The appraiser reacts indifferently to the appraising system because he believes that it is a waste of time. At times they feel that the scheme has nothing to do with their own needs and it exists to feed the personnel database.

ii. Hostility from the appraisee:

Hostility from the people at the receiving end arises because they feel Performance Appraisal is simply another method in the hands of the managers to exercise their command and control prerogatives. They feel that the data collected will be utilized as evidence against them. In some cases appraisees even have a feeling that the outcome of the performance evaluation is predetermined by the management or their superiors and the process is completed only as a formality, due to which appraisees lack interest in the entire appraisal process.

b. Halo Error:

Under this type of error, one marked characteristic or latest achievement or failure of the appraisee (either favourable or unfavourable) may be allowed to dominate the appraisal for the entire year.

c. Logical Error:

This is a dangerous pitfall for the inexperienced appraiser. He is very often inclined to arrive at similar assessments in respect of qualities that seem logically related.

d. Constant Error:

When two appraisers rate an appraisee their ratings may be different. One may show consistent leniency by giving him high scores, the other my consistently rate him by giving low scores.

e. Central Tendency:

It is also called as “Average Ratings”. Here, the appraiser tends to avoid giving frank views to the question asked or the appraiser is in doubt or he has inadequate information or he simply wants to play safe and don’t displease anyone.

f. Mirror-Image Error or Projection Error:

This error arises when an appraiser expects his own qualities, skills, and values in an appraisee. The appraiser may falsely believe that if the appraisee is good he has to be like him (appraiser) because the appraiser considers himself as the standard.

g. Contrast Error:

This error occurs in the sequencing of ratings. If superior performers are rated first, average performers are rated down, if poorer performers come first, the average performers will be rated more highly.

h. Biases of position, Sex, Race, Religion & Nationality:

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There is a tendency to rate the occupant at a higher position more favorably than the person in a lower position. Similarly rating can be biased based on sex, religion and nationality too.

i. Lack of Skill in conducting Appraisal discussion:

Conducting Performance Appraisal discussions require certain skills and training.

6. How to solve the appraiser’s problems?

The best way to overcome the problem is to give training to the appraiser. Training can help improve the appraisal system to the extent that distortion occurring due to appraiser errors such as halo, leniency, central tendency and bias are minimized.

a. Factors that help to improve accuracy:

The appraiser has observed and is familiar with behaviors to be appraised.

The appraiser has documented behaviors calling for improvement.

The appraiser has a checklist to obtain the review on job-related information.

The appraiser is aware of personal biases and is willing to take action to minimize their effects.

Rating scores by appraisers of one group or organization are summarized and compared with those by other appraisers.

The appraiser focuses attention on performance related behaviors over which he has better control than on other aspects of evaluation.

Higher levels of management are held accountable for reviewing all ratings.

b. Factors that may lower accuracy:

The appraiser rates only when administrative actions are contemplated.

The appraiser is unable to express herself/himself honestly and unambiguously.

Appraisal systems, processes and instruments fail to support the appraiser

The appraiser is unaware of causes of rating errors.

The appraiser has to rate employees on factors that are poorly defined.

7. Techniques/methods of appraisal to be used?

There are different types of systems for measuring the excellence of an employee. Each type has its own advantages and disadvantages. The earlier developed methods, still being used, are Traditional Methods that are non-transparent in nature. While other newer methods are transparent in nature. Each of the method has it’s own format of appraisal form.

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Methods

A common approach to assessing performance is to use a numerical or scalar rating system whereby managers are asked to score an individual against a number of objectives/attributes. In some companies, employees receive assessments from their manager, peers, subordinates, and customers, while also performing a self assessment. This is known as a 360-degree appraisal and forms good communication patterns.

Methods of Performance Appraisal

Traditional Methods Modern Methods

1. Unstructured appraisal 1. Management by Objectives

2. Employee Ranking (MBO)

3. Forced Distribution 2. Behaviourally anchored

4. Graphic rating scales rating scales

5. Check list 3. 360% appraisal

6. Critical incidents 4. Assessment centres

7. Field review

The most popular methods used in the performance appraisal process include the following:

Management by objectives 360-degree appraisal Behavioral observation scale Behaviorally anchored rating scales

Trait-based systems, which rely on factors such as integrity and conscientiousness, are also commonly used by businesses. The scientific literature on the subject provides evidence that assessing employees on factors such as these should be avoided. The reasons for this are two-fold:

1) Because trait-based systems are by definition based on personality traits, they make it difficult for a manager to provide feedback that can cause positive change in employee performance. This is caused by the fact that personality dimensions are for the most part

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static, and while an employee can change a specific behavior they cannot change their personality. For example, a person who lacks integrity may stop lying to a manager because they have been caught, but they still have low integrity and are likely to lie again when the threat of being caught is gone.

2) Trait-based systems, because they are vague, are more easily influenced by office politics, causing them to be less reliable as a source of information on an employee's true performance. The vagueness of these instruments allows managers to fill them out based on who they want to/feel should get a raise, rather than basing scores on specific behaviors employees should/should not be engaging in. These systems are also more likely to leave a company open to discrimination claims because a manager can make biased decisions without having to back them up with specific behavioral information.

Management by Objectives

The process of MBO

Setting organisational or departmental objectives

Goals or targets for subordinates

Check-points or key result areas

Periodic review of progress

Performance appraisal or councelling

Management by Objectives (MBO) is a process of agreeing upon objectives within an organization so that management and employees agree to the objectives and understand what they are in the organization.

The term "management by objectives" was first popularized by Peter Drucker in his 1954 book 'The Practice of Management'.

The essence of MBO is participative goal setting, choosing course of actions and decision making. An important part of the MBO is the measurement and the comparison of the

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employee’s actual performance with the standards set. Ideally, when employees themselves have been involved with the goal setting and choosing the course of action to be followed by them, they are more likely to fulfill their responsibilities.

Features and objectives

Unique features and advantage of the MBO process

The principle behind Management by Objectives (MBO) is basically for employees to have clarity of the roles and responsibilities expected of them. They then understand the objectives they must do and the over all achievement of the organization. They also help with the personal goals of each employee.

Some of the important features and advantages of MBO are:

1. Motivation – Involving employees in the whole process of goal setting and increasing employee empowerment increases employee job satisfaction and commitment.

2. Better communication and Coordination – Frequent reviews and interactions between superiors and subordinates helps to maintain harmonious relationships within the enterprise and also solve many problems faced during the period.

3. Clarity of goals 4. Subordinates have a higher commitment to objectives that they set themselves

than those imposed on them by their managers. 5. Managers can ensure that objectives of the subordinates are linked to the

organisation 's objectives.

Domains and levels

Objectives can be set in all domains of activities (production, marketing, services, sales, R&D, human resources, finance, information systems etc.).

Some objectives are collective, for a whole department or the whole company, others can be individualized.

Practice

Objectives need quantifying and monitoring. Reliable management information systems are needed to establish relevant objectives and monitor their "reach ratio" in an objective way. Pay incentives (bonuses) are often linked to results in reaching the objectives.

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Limitations

There are several limitations to the assumptive base underlying the impact of managing by objectives, including:

1. It over-emphasizes the setting of goals over the working of a plan as a driver of outcomes.

2. It underemphasizes the importance of the environment or context in which the goals are set. That context includes everything from the availability and quality of resources, to relative buy-in by leadership and stake-holders. As an example of the influence of management buy-in as a contextual influencer, in a 1991 comprehensive review of thirty years of research on the impact of Management by Objectives, Robert Rodgers and John Hunter concluded that companies whose CEOs demonstrated high commitment to MBO showed, on average, a 56% gain in productivity. Companies with CEOs who showed low commitment only saw a 6% gain in productivity.

3. Companies evaluated their employees by comparing them with the "ideal" employee. Trait appraisal only looks at what employees should be, not at what they should do.

When this approach is not properly set, agreed and managed by organizations, in self-centered thinking employees, it may trigger an unethical behavior of distorting the system of results and financial figures to falsely achieve targets that were set in a short-term, narrow, bottom-line fashion.How corporate culture impacts unethical distortion of financial numbers: managing by Objectives and Results could be counterproductive and contribute to a climate that may lead to distortion of the system, manipulation of accounting figures, and, ultimately, unethical behavior|publisher .

The use of MBO needs to be carefully aligned with the culture of the organization. While MBO is not as fashionable as it was before the 'empowerment' fad, it still has its place in management today. The key difference is that rather than 'set' objectives from a cascade process, objectives are discussed and agreed, based upon a more strategic picture being available to employees. Engagement of employees in the objective setting process is seen as a strategic advantage by many.

A saying around MBO -- "What gets measured gets done", ‘Why measure performance? Different purposes require different measures’, Public Administration Review, Italic text-- is perhaps the most famous aphorism of performance measurement; therefore, to avoid potential problems SMART and SMARTER objectives need to be agreed upon in the true sense rather than set.

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360 degree appraisal

The 360 360 degree appraisal involves rating of an employee or manager by everyone above, alongside and below him. The basic concept in 360 Performance Appraisal makes obvious sense -- soliciting performance feedback not only from our supervisor but also from our customers, employees, peers and all whom we interrelate with in the course of doing our job.According to Milliman and others,´ 360-degree appraisal is the process of systematically gathering data on a person¶s skills, abilities and behaviours from a variety of sources-the manager, peers, subordinates and even customers and clients.

History

The German Military first began gathering feedback from multiple sources in order to evaluate performance during World War II (Fleenor & Prince, 1997). Also during this time period, others explored the use of multi-rater feedback via the concept of T-groups.

One of the earliest recorded uses of surveys to gather information about employees occurred in the 1950s at Esso Research and Engineering Company (Bracken, Dalton, Jako, McCauley, & Pollman, 1997). From there, the idea of 360-degree feedback gained momentum, and by the 1990s most human resources and organization development professionals understood the concept. The problem was that collecting and collating the feedback demanded a paper-based effort including either complex manual calculations or lengthy delays. The first led to despair on the part of practitioners; the second to a gradual erosion of commitment by recipients.

Multi-rater feedback use steadily increased in popularity, due largely to the use of the Internet in conducting web-based surveys (Atkins & Wood, 2002). Today, studies suggest that over one-third of U.S. companies use some type of multi-source feedback (Bracken, Timmereck, & Church, 2001a). Others claim that this estimate is closer to 90% of all Fortune 500 firms (Edwards & Ewen, 1996). In recent years, Internet-based services have become the norm, with a growing menu of useful features (e.g., multi languages, comparative reporting, and aggregate reporting) (Bracken, Summers, & Fleenor, 1998).

Accuracy

A study on the patterns of rater accuracy shows that length of time that a rater has known the person being rated has the most significant effect on the accuracy of a 360-degree review. The study shows that subjects in the group “known for one to three years” are the most accurate, followed by “known for less than one year,” followed by “known for three to five years” and the least accurate being “known for more than five years.” The study concludes that the most accurate ratings come from knowing the person long enough to get past first impressions, but not so long as to begin to generalize favorably (Eichinger, 2004).

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It has been suggested that multi-rater assessments often generate conflicting opinions, and that there may be no way to determine whose feedback is accurate (Vinson, 1996). Studies have also indicated that self-ratings are generally significantly higher than the ratings of others (Lublin, 1994; Yammarino & Atwater, 1993; Nowack, 1992).

Results

Several studies (Hazucha et al., 1993; London & Wohlers, 1991; Walker & Smither, 1999) indicate that the use of 360-degree feedback helps people improve performance. In a 5-year Walker and Smither (1999) study, no improvement in overall ratings was found between the 1st and 2nd year, but higher scores were noted between 2nd and 3rd and 3rd and 4th years. A study by Reilly et al. (1996) found that performance increased between the 1st and 2nd administrations, and sustained this improvement 2 years later. Additional studies show that 360 feedback may be predictive of future performance (Maylett & Riboldi, 2007).

Some authors maintain that 360 processes are much too complex to make blanket generalizations about their effectiveness (Bracken, Timmreck, Fleenor, & Summers, 2001b; Smither, London, & Reilly, 2005). Smither et al. (2005) suggest, "We therefore think that it is time for researchers and practitioners to ask, 'Under what conditions and for whom is multisource feedback likely to be beneficial?' (rather than asking 'Does multisource feedback work?') (p. 60)." Their meta-analysis of 24 longitudinal studies looks at individual and organizational moderators that point to many potential determinants of behavior change, including positive feedback orientation, positive reactions to feedback, goal setting, and taking action.

Bracken et al. (2001b) and Bracken and Timmreck (2001) focus on process features that are likely to also have major effects in creating behavior change and offer best practices in those areas. Some of these factors have been researched and been shown to have significant impact. Greguras and Robie (1998) document how the number of raters used in each rater category (direct report, peer, manager) affects the reliability of the feedback, with direct reports being the least reliable and therefore requiring more participation. Multiple pieces of research (Bracken & Paul, 1993; Kaiser & Kaplan, 2006; Caputo & Roch, 2009; English, Rose, & McClellan, 2009) have demonstrated that the response scale can have a major effect on the results, and some response scales are indeed better than others. Goldsmith and Underhill (2001) report the powerful influence of the participant behavior of following up with raters to discuss their results. Other potentially powerful moderators of behavior change include how raters are selected, manager approval, instrument quality (reliability and validity), rater training and orientation, participant training, manager (supervisor) training, coaching, integration with HR systems, and accountability (Bracken et al., 2001b).

Others indicate that the use of multi-rater assessment may not improve company performance. A 2001 Watson Wyatt study found that 360-degree feedback was associated with a 10.6 percent decrease in market value. Others claim that "there is no data showing that [360-degree feedback] actually improves productivity, increases

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retention, decreases grievances, or is superior to forced ranking and standard performance appraisal systems. It sounds good, but there is no proof it works." (Pfau & Kay, 2002) Similarly, Seifert, Yukl, and McDonald (2003) state that there is little evidence that the multi-rater process results in change.

Additional studies (Maylett, 2005) found no correlation between an employee's multi-rater assessment scores and his or her top-down performance appraisal scores (provided by the person's supervisor), and advised that although multi-rater feedback can be effectively used for appraisal, care should be taken in its implementation (Maylett, 2009). This research suggests that 360-degree feedback and performance appraisals get at different outcomes, and that both 360-degree feedback and traditional performance appraisals should be used in evaluating overall performance.

Behaviour observation scale

Instructions: The use of the Behavior Observation Scale will assist with the assessment and rating of pain. Behavioral observations for the non-verbal are used for the resident with a severe cognitive impairment. Non-communicative residents who are unable to understand the rating scale and/or express the presence of pain need to be assessed for pain and treated accordingly. Make the following observations, indicating if the behaviors are “N” normal or “U” unusual for that resident. Describe how it is unusual. Assign one point for each unusual behavior. Total the points and determine the pain levelUsing the scale below. Observe the resident for 3 to 5 minutes for behaviors seen. Total unusual behaviors observed.

Example

DateTimeNoisy breathingFrightened facial expressionsActivityNegative vocalizationTense body languageHow is it usual?Total pointsConclusion:Mild,Moderate,Severe

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InitialsTotal Points:1-2 = Mild Distress3-4 = Moderate Distress4-5 = Severe Distress

Behaviorally anchored rating scale

Behaviorally Anchored Rating Scales (BARS) are scales used to report performance. 'BARS are normally presented vertically with scale points ranging from five to nine.'It is an appraisal method that aims to combine the benefits of narratives, critical incident incidents, and quantified ratings by anchoring a quantified scale with specific narrative examples of good or poor performance.

BARS Behaviorally Anchored Rating scales is a method that combines elements of the traditional rating scales and critical incidents methods. In order to construct BARS seven steps are followed as mentioned below

1. Examples of effective and ineffective behavior related to job are collected from people with knowledge of job.

2. These behaviors are converted in to performance dimensions. 3. A group of participants will be asked to reclassify the incidents. At this stage the

incidents for which there is not 75% agreement are discarded as being too subjective.

4. Then the above mentioned incidents are rated from one to nine on a scale. 5. Finally about six to seven incidents for each performance dimensions- all meeting

retranslation and standard deviation criteria will be used as BARS.

This is by far the best method used for a performance appraisal method.

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Chapter: 5

Research Methodology

1

Data collection methods and sources:

The data has been collected from a primary source and secondary sources

Primary Source:

In primary data collection, you collect the data yourself using methods such as interviews

and questionnaires. The key point here is that the data you collect is unique to you and

your research and, until you publish, no one else has access to it.

There are many methods of collecting primary data and the main methods include:

questionnaires

interviews focus group interviews observation case-studies diaries critical incidents Portfolios.

Secondary source:

All methods of data collection can supply quantitative data (numbers, statistics or financial) or qualitative data (usually words or text). Quantitative data may often be presented in tabular or graphical form. Secondary data is data that has already been collected by someone else for a different purpose to yours. For example, this could mean using:

data collected by a hotel on its customers through its guest history system

data supplied by a marketing organization annual company reports Government statistics.

Both the primary data collection as well as secondary method were used:

Primary sources: survey and interview directly from the company.

Secondary sources: books and internet.

Sampling plan

2

A sampling plan is a report that describes how you are going to measure water quality. A good sampling plan will help ensure that your measurements answer the right questions, and communicates to other people what you are trying to accomplish. Most sampling plans include the following report sections:

1. Project Goals 2. Parameters to be Measured 3. Sampling Areas 4. Sampling Timing and Frequency 5. Methods

3

Chapter: 6

Data Analysis and Interpretation

Purpose of performance management system

a. Interactive session between you and employee.b. Appraising the employee’s performance during the past year.c. Giving a platform to the employee to mention his/her achievements.d. All of them.

4

a

b

c

d

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

a b c d

Series1

Interpretation: The blue colored bars represent the different purposes for performance appraisal.The most preferred option is c. giving a platform to the employee to mention his/her achievements. The least preferred option is d. All of them.

A must for the appraisal form

a. Development needsb. Job interest of the employeec. Infrastructure needs of the employeed. Problems faced by the employee

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a

b

c d

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

a b c d

a

b

c

d

Interpretation: The purple bars represent the important factor for the performance appraisal form. The most apt option according to majority of people is a. Development needs.

Consideration taken while performance appraisal

a. Employeeb. Employee + Supervisorc. Employee + Supervisor + HODd. HODe. Supervisor + HOD

6

a

b

c

d

e

0%

10%

20%

30%

40%

50%

60%

70%

a b c d e

a

b

c

d

e

Interpretation: The most opted option is c. employee + supervisor + HOD. This is because all three must take part in the performance appraisal process because if we remove even 1 of them the link will break.

The Rating Scale for the appraisal method

a. 1-3b. 1-5c. 1-15d. 1-10

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a

b

c

d

0%

10%

20%

30%

40%

50%

60%

70%

80%

a b c d

a

b

c

d

Interpretation: The most accurate would be option d. 1-10 for rating scale.

Removal of biasedness can be removed with the help of:

a. Employee

b. Supervisor

c. Director

8

Employee

Supervisor

Director

Employee

Supervisor

Director

Interpretation: The pie-chart shows that the most preferred option is c. Director.

Is telephonic or face to face conversation essential for appropriate and

exact appraisal?

a. Yes

b. No

9

Yes

No

Yes

No

Interpretation : Most people said Yes telephonic or face to face conversation is essential

for the appraisal process.

Appropriate format of the appraisal form

a. Electronic

b. Hardcopy

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Electronic

Hardcopy

Electronic

Hardcopy

Interpretation: Majority of people say that b. hardcopy is most appropriate and some

people say that both are appropriate options.

Rating of competencies according to their importance

1. Job knowledge & Technical competence 22. Ethics & Integrity 113. Systems & Process Orientation 34. Soft Skills 105. Customer Focus 9

11

6. Ownership & Accountability for results 77. Learn ability 48. Personal drive & effectiveness 139. Communication 1210. People management & Leadership 1411. Reporting & administration 1512. Meeting deadlines / commitment 513. Team work 714. Problem solving & decision making 115. Time management 616. Self discipline 8

2

, 11

, 3

, 10, 9

, 7

, 4

, 13, 12

, 14, 15

, 5

, 7

, 1

, 6

, 8

0

2

4

6

8

10

12

14

16

2

The competencies have been rated according to their importance that got the most ratings.

Should there be any additional competencies for supervisor’s?

a. Yesb. No

12

Yes

No

Yes

No

Interpretation: Majority of people said yes.

Rating of additional competencies for supervisor in order of importance:

a. Coaches/counsels, evaluates staff. 6 b. Identifies areas for & supports employee development

opportunities. 1c. Encourages teamwork and group achievement. 2d. Leads change/ achieves support for objectives. 5

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e. Enables and empowers staff; provides appropriate opportunities for growth. 4

f. Strives to achieve diverse staff at all levels. 7g. Understands diversity issues and creates supportive environment

for diverse employees. 3

6

1

2

5

4

7

3

0

1

2

3

4

5

6

7

8

6

The additional competencies have been rated according to their importance on the basis of the majority of votes given by the people.

How regularly should the performance appraisal be done?

a. Quarterlyb. Half yearlyc. Yearly

14

QuarterlyHalf yearly

Yearly

Quarterly

Half yearly

Yearly

Interpretation: Majority of people voted for option a. Quarterly.

Should there be a feedback given to the employee regarding the appraisal?

a. Yesb. No

15

Yes, 100%

No, 0%

Yes

No

Interpretation: All said that the feedback should be given to the employee because there is no use of the process if the results are revealed to the employees.

Should the ratings be shared with the employees?

a. Yesb. No

16

Yes

No

Yes

No

Interpretation: about 70% of people voted for yes and 30% voted for no.

Should self evaluation be the part of the performance appraisal?

a. Yesb. No

17

Yes

No

Yes

No

Interpretation: 90% of people said that yes self evaluation should be the part of performance appraisal and 10% said no.

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Chapter: 7

Findings

Findings on the basis of the study

19

The data collected and analyzed and general observation has proven that Micromax has

done remarkable job in its Human resource development.

The main findings are as follows:

Each and every employee is well prepared to meet today’s challenges.

The organization gives encouragement in career planning for every employee.

There are employees in all experience level in the organization.

The internal department of core competencies and continuous process improvements

has made Micromax. One of the most exciting companies to work for.

The management showing their full efforts for the growth of the company.

The company is having skilled employees who can give prime solutions to the clients

more effectively.

The management is showing there individual attention to each and every employees

for their betterment and to groom there skills.

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Chapter: 8

Limitations

The following are the limitations of the study:

The study was completed with in short span of time that was available.

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All this study is limited to India Yamaha Motors Pvt. Ltd., Faridabad only.

The report also suffers from the limitations of exhaustiveness as far as the

information is concerned.

As the project is prepared for academic purpose only, it suffers from the limitations of

time and money, due to which analytical study into all the strategies adopted by the

organization was not possible.

There is no proper data base management which can ensure to have data analysis and

not even help in maintaining a proper report.

Sample was small in size because of time limit within which report was to be

submitted.

There are chances of personal bias.

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Chapter: 9Conclusion and Recommendations

Conclusion:

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After globalization telecom sector has grown like anything. The company ranks 2nd in the

Indian market and it has achieved this stature in a very short time period. The company’s

principal activity is to manufacture cell phones. Other products of the company include

fixed wireless devices and wireless data cards. The group comprises of 25 offices

throughout the country. The company has also introduced its products in international

markets like Bangladesh and Dubai

Apart from business it has contributed a lot for the society by as its customer social

responsibility.

Recommendation:

The KRAs should be set in the beginning of the year.

Immediate supervisor’s feedback should be taken. This would ensure accuracy.

Consideration should be taken for any mid-term corrections happening when

giving increments.

There should be a interview calendar in order to communicate properly both with the

client and the candidates and also conduct the interview effectively.

There should be a updated tracker for data base in order to ensure the data analysis so that

we can generate reports and have a proper database to tap in future too.

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