HUMAN RESOURCE MANAGEMENT

Human Resource Management (HRM) is the process of managing people in

organizations in a structured and thorough manner. This definition cover the fields of
staffing (hiring people), retention of people, pay and perks setting and and
management, performance management, change management and taking care of
exists from the company to round off the activities. It is concerned with the peoples
dimension in an organization.
According to Edwin Flippo Personnel management, or say, human resource
management is the planning, organising, directing and controlling of the
procurement, development, compensation, integration, maintenance and separation
of human resources to the end that individual, organisational, and social objectives
are accomplished.
Thus, HRM can be defined as a process of procuring, developing and maintaining
competent human resources in the organisation so that the goals of an organisation
are achieved in an effective and efficient manner.

The scope of HRM is, indeed, very vast and wide. It includes all activities starting
from manpower planning till employee leaves the organisation. Accordingly, the
scope of HRM consists of acquisition, development, maintenance/retention, and
control of human resources in the organisation. In this report, I will be focussing on
the performance appraisal function.

PERFORMANCE APPRAISAL
MEANING AND DEFINITION
Performance Appraisal is the systematic evaluation of the performance of employees
and to understand the abilities of a person for further growth and development. It is
also referred as merit rating, employee rating, and service rating.
In the words of Sexton Adams Performance appraisal is a method for management
to make fair and impartial analyses of the value of employees to the organisation.
Performance appraisal is the process of evaluation of employees abilities. The main
objective of the performance appraisal should be towards improvement in efficiency
and effectiveness. Performance evaluation or performance appraisal is the process of
assessing the performance and progress of employees on a given job and his
potential for future progress. It helps to have comparative worth of employees.

OBJECTIVES OF PERFORMANCE APPRAISAL

Promotions
PA broadly serves 4
Confirm probationary employees
objectives:
Assess training & development needs
1) Developmental
Decide upon pay raise
2) Administrative
Let employees know where they stand,
provide valuable guidance or their development

3) Organizational
maintenance

Improve Communication
4) Documentation
Determine whether HR programmes like selection,
training, transfers have been effective or not

NEED AND IMPORTANCE OF PERFORMANCE APPRAISAL

Performance appraisal is important in an organization due to the following purposes:

Performance feedback: Timely performance feedback is very important in

order to improve employees performance. By comparing the key responsibility
areas (KRAs) set for the employee with actual performance, inputs should be
given to the employee so that he knows where to focus on and improve.
Performance feedback, that is specific, timely, accurate, understandable and
presented in an atmosphere of cooperation and support can improve the quality
of employees future performance. It may also serve as a source of satisfaction

and motivation, and, when necessary, a guide to the adjustments for performance

improvement.
Promotions: Performance appraisal gives management a means of identifying
employees for promotion. Data is collected about employees performance and
the employee is noticed in the work culture. This can help the manager decide

whether the employee deserves a promotion.

Lay-off decisions: Employees can be ordered for lay-off is performance is not
impressive. Performance appraisal provides required information to the manager

to decide employees future in the organization.

Employee training and development decisions: Performance appraisal
information can be used to decide whether the employee needs formal training to
improve skills and knowledge to improve this performance. Additional skill
training and development program can be arranged by the management to fill the

gap between actual performance and expected performance.

Validation of selection process: Recruitment and selection process consume a
lot of time, effort and money resources and thus a test to validate the utilization
of resources is necessary. Performance appraisal provides a means of validating
both internal (promotions and transfers) and external (hiring new employees

from outside sources) selection programmes.

Grievance and discipline programmes: Performance appraisal reports can be
used as an important documentary evidence in case of disciplinary action taken

against some ineffective employees.

Higher morale of employees: It helps to improve the morale of employees as

they are aware that their work is recognized and rewarded by the management.
Human resource planning: Appraisal process helps in effective human
resource planning and plan resources. Accurate and current appraisal data

regarding employees may provide management with important information on

which to base decision for future employments.

PROCESS OF PERFORMANCE APPRAISAL

Here is the process involved in performance appraisal.

Establishing Performance Standards

Communicating Standards
Measuring the Actual Performance
Comparing the Actual with Desired
Performance
Disucussing Results
Decision Making
1. Establishing Performance Standards
In this we use as the base to compare the actual performance of the employees. In
this step it requires to set the criteria to judge the performance of the employees as
successful or unsuccessful and the degrees of their contribution to the organizational
goals and objectives. The standards set should be clear, easily understandable and in

measurable terms. If employee doesn't come up to expectance, then it should be

taken extra care for it.
2. Communicating the standards
It is the responsibility of the management to communicate the standards to all the
employees of the organization. The employees should be informed and the standards
should be clearly explained. This will help them to understand their roles and to
know what exactly is expected from them.
3. Measuring the actual Performance
The most difficult part of the performance appraisal process is measuring the actual
performance of the employees that is the work done by the employees during the
specified period of time. It is a nonstop process which involves monitors the
performance all over the year. This stage requires the watchful selection of the
suitable techniques of measurement, taking care that individual bias does not affect
the outcome of the process and providing assistance rather than interfering in an
employees work.
4. Comparing the Actual with the Desired Performance
In this the actual performance is compared with the desired or the standard
performance. The comparison tells the deviations in the performance of the
employees from the standards set. The result can show the actual performance being
more than the desired performance or, the actual performance being less than the
desired performance depicting a negative deviation in the organizational

performance. It includes recalling, evaluating and analysis of data related to the

employees' performance.
5. Discussing Results
The result of the appraisal is communicated and discussed with the employees on
one-to-one basis. The focus of this discussion is on communication and listening.
The results, the problems and the possible solutions are discussed with the aim of
problem solving and reaching consensus. The feedback should be given with a
positive attitude as this can have an effect on the employees' future performance.
The purpose of the meeting should be to solve the problems faced and motivate the
employees to perform better.
6. Decision Making
The last step of the process is to take decisions which can be taken either to improve
the performance of the employees, take the required corrective actions, or the related
HR decisions like rewards, promotions, demotions, transfers etc.

TECHNIQUES OF PERFORMANCE APPRAISAL

Each method of performance appraisal has its strengths and weaknesses may be
suitable for one organisation and non-suitable for another one. As such, there is no
single appraisal method accepted and used by all organisations to measure their
employees performance.
All the methods of appraisal devised so far have been classified differently by
different authors. While DeCenzo and Robbins have classified appraisal methods
into three categories: absolute methods, relative methods and objective methods;
Aswathappa has classified these into two categories past-oriented and futureoriented.
A more widely used classification of appraisal methods into two categories, viz.,
traditional methods and modem methods, is given by Strauss and Sayles. While
traditional methods lay emphasis on the rating of the individuals personality traits,
such as initiative, dependability, drive creativity, integrity, intelligence, leadership
potential, etc.; the modem methods, on the other hand, place more emphasis on the
evaluation of work results, i.e., job achievements than the personal traits! Modern
methods tend to be more objective and worthwhile.
In the discussion that follows, each method under both categories will be described
briefly.

TRADITIONAL METHODS

Ranking Method:

It is the oldest and simplest formal systematic method of performance appraisal in

which employee is compared with all others for the purpose of placing order of
worth. The employees are ranked from the highest to the lowest or from the best to
the worst.
In doing this the employee who is the highest on the characteristic being measured
and also the one who is L lowest, are indicated. Then, the next highest and the next
lowest between next highest and lowest until all the employees to be rated have been
ranked. Thus, if there are ten employees to be appraised, there will be ten ranks from
1 to 10.
However, the greatest limitations of this appraisal method are that:
(i) It does not tell that how much better or worse one is than another,
(ii) The task of ranking individuals is difficult when a large number of employees
are rated, and
(iii) It is very difficult to compare one individual with others having varying
behavioural traits. To remedy these defects, the paired comparison method of performance appraisal has been evolved.

Grading Method:

In this method, certain categories of worth are established in advance and carefully
defined. There can be three categories established for employees: outstanding,

satisfactory and unsatisfactory. There can be more than three grades. Employee
performance is compared with grade definitions. The employee is, then, allocated to
the grade that best describes his or her performance.
Such type of grading is done is Semester pattern of examinations and in the selection
of a candidate in the public service sector. One of the major drawbacks of this
method is that the rater may rate most of the employees on the higher side of their
performance.

Check-List Method:

The basic purpose of utilizing check-list method is to ease the evaluation burden
upon the rater. In this method, a series of statements, i.e., questions with their
answers in yes or no are prepared by the HR department (see Figure 28-2). The
check-list is, then, presented to the rater to tick appropriate answers relevant to the
appraisee. Each question carries a weight-age in relationship to their importance.

When the check-list is completed, it is sent to the HR department to prepare the final
scores for all appraises based on all questions. While preparing questions an attempt
is made to determine the degree of consistency of the rater by asking the same
question twice but in a different manner (see, numbers 3 and 6 in Figure 28-2).

However, one of the disadvantages of the check-list method is that it is difficult to

assemble, analyse and weigh a number of statements about employee characteristics
and contributions From a cost stand point also, this method may be inefficient
particularly if there are a number of job categories in the organisation, because a
check-list of questions must be prepared for each category of job. It will involve a
lot of money, time and efforts.

Critical Incidents Method:

In this method, the rater focuses his or her attention on those key or critical
behaviours that make the difference between performing a job in a noteworthy
manner (effectively or ineffectively). There are three steps involved in appraising
employees using this method.
First, a list of noteworthy (good or bad) on-the-job behaviour of specific incidents is
prepared. Second, a group of experts then assigns weightage or score to these
incidents, depending upon their degree of desirability to perform a job. Third, finally
a check-list indicating incidents that describe workers as good or bad is
constructed. Then, the check-list is given to the rater for evaluating the workers.
The basic idea behind this rating is to apprise the workers who can perform their
jobs effectively in critical situations. This is so because most people work alike in
normal situation. The strength of critical incident method is that it focuses on
behaviours and, thus, judges performance rather than personalities.
Its drawbacks are to regularly write down the critical incidents which become timeconsuming and burdensome for evaluators, i.e., managers. Generally, negative

incidents are positive ones. It is raters inference that determines which incidents are
critical to job performance. Hence, the method is subject to all the limitations
relating to subjective judgments.

Graphic Rating Scale Method:

The graphic rating scale is one of the most popular and simplest techniques for
appraising performance. It is also known as linear rating scale. In this method, the
printed appraisal form is used to appraise each employee.
The form lists traits (such as quality and reliability) and a range of job performance
characteristics (from unsatisfactory to outstanding) for each trait. The rating is done
on the basis of points on the continuum. The common practice is to follow five
points scale.
The rater rates each appraisee by checking the score that best describes his or her
performance for each trait all assigned values for the traits are then totaled. Figure
28-3 shows a typical graphic rating scale.

This method is good for measuring various job behaviours of an employee.

However, it is also subjected to raters bias while rating employees behaviour at
job. Occurrence of ambiguity in design- mg the graphic scale results in bias in
appraising employees performance.

Essay Method:

Essay method is the simplest one among various appraisal methods available. In this
method, the rater writes a narrative description on an employees strengths,
weaknesses, past performance, potential and suggestions for improvement. Its
positive point is that it is simple in use. It does not require complex formats and
extensive/specific training to complete it.
However, essay method, like other methods, is not free from drawbacks. In the
absence of any prescribed structure, the essays are likely to vary widely in terms of
length and content. And, of course, the quality of appraisal depends more upon
raters writing skill than the appraisers actual level of performance.

Moreover, because the essays are descriptive, the method provides only qualitative
information about the employee. In the absence of quantitative data, the evaluation
suffers from subjectivity problem. Nonetheless, the essay method is a good start and
is beneficial also if used in conjunction with other appraisal methods.

Confidential Report:

It is the traditional way of appraising employees mainly in the Government

Departments. Evaluation is made by the immediate boss or supervisor for giving
effect to promotion and transfer. Usually a structured format is devised to collect
information on employees strength weakness, intelligence, attitude, character,
attendance, discipline, etc. report.
MODERN METHODS

Management by Objectives (MBO):

Most of the traditional methods of performance appraisal are subject to the

antagonistic judgments of the raters. It was to overcome this problem; Peter F.
Drucker propounded a new concept, namely, management by objectives (MBO) way
back in 1954 in his book.
The Practice of management. The concept of MBO as was conceived by Drucker,
can be described as a process whereby the superior and subordinate managers of an
organization jointly identify its common goals, define each individuals major areas
of responsibility in terms of results expected of him and use these measures as
guides for operating the unit and assessing the contribution of each its members.

In other words, stripped to its essentials, MBO requires the manager to goals with
each employee and then periodically discuss his or her progress toward these goals.
In fact, MBO is not only a method of performance evaluation. It is viewed by the
Practicing managers and pedagogues as a philosophy of managerial practice because
it is a method by which managers and subordinates plan, organise, communicate,
control and debate.
An MBO programme consists of four main steps: goal setting, performance
standard, comparison, and periodic review. In goal-setting, goals are set which each
individual, s to attain. The superior and subordinate jointly establish these goals. The
goals refer to the desired outcome to be achieved by each individual employee.
In performance standards, the standards are set for the employees as per the
previously arranged time period. When the employees start performing their jobs,
they come to know what is to be done, what has been done, and what remains to be
done.
In the third step the actual level of goals attained are compared with the goals agreed
upon. This enables the evaluator to find out the reasons variation between the actual
and standard performance of the employees. Such a comparison helps devise
training needs for increasing employees performance it can also explore the
conditions having their bearings on employees performance but over which the
employees have no control.
Finally, in the periodic review step, corrective measure is initiated when actual
performance deviates from the slandered established in the first step-goal-setting

stage. Consistent with the MBO philosophy periodic progress reviews are conducted
in a constructive rather than punitive manner.
The purpose of conducting reviews is not to degrade the performer but to aid in
his/her future performance. From a motivational point of view, this would be
representative of McGregors theories.
Figure 28.4 present the MBO method of performance appraisal presently used by an
engineering giant i.e., Larsen and Turbro Limited.

Limitation of MBO:
MBO is not a panacea, cure for all organisational problems.
As with other methods, it also suffers from some limitations as catalogued below:
(i) Setting Un-measurable Objectives:
One of the problems MBO suffers from is unclear and un-measurable objectives set
for attainment. An objective such as will do a better job of training is useless as it
is un-measurable. Instead, well have four subordinates promoted during the year is
a clear and measurable objective.
(ii) Time-consuming:
The activities involved in an MBO programme such as setting goals, measuring
progress, and providing feedback can take a great deal of time.
(iii) Tug of War:
Setting objectives with the subordinates sometimes turns into a tug of war in the
sense that the manager pushes for higher quotas and the subordinates push for lower
ones. As such, goals so set are likely to be unrealistic.
(iv) Lack of Trust:
MBO is likely to be ineffective in an environment where management has little trust
in its employees. Or say, management makes decisions autocratically and relies
heavily on external controls.

Behaviourally Anchored Rating Scales (BARS):

The problem of judgmental performance evaluation inherent in the traditional

methods of performance evaluation led to some organisations to go for objective
evaluation by developing a technique known as Behaviourally Anchored Rating
Scales (BARS) around 1960s. BARS are descriptions of various degrees of
behaviour with regard to a specific performance dimension.
It combines the benefits of narratives, critical incidents, and quantified ratings by
anchoring a quantified scale with specific behavioural examples of good or poor
performance. The proponents of BARS claim that it offers better and more equitable
appraisals than do the other techniques of performance appraisal we discussed so far.
Developing BARS typically involves five steps:
1. Generating Critical Incidents:
Critical incidents (or say, behaviours) are those which are essential for the
performance of the job effectively Persons who are knowledgeable of the job in
question (jobholders and/or supervisors) are asked to describe specific critical
incidents of effective and ineffective performance. These critical incidents may be
described in a few short sentences or phrases using the terminology.
2. Developing Performance Dimensions:
The critical incidents are then clustered into a smaller set of performance
dimensions, usually five to ten. Each cluster, or say, dimension is then defined.

3. Reallocating Incidents:

Various critical incidents are reallocated dimensions by another group of people who
also know the job in question. Various critical incidents so reallocated to original
dimensions are clustered into various categories, with each cluster showing similar
critical incidents. Those critical incidents are retained which meet 50 to 80% of
agreement with the cluster as classified in step 2.
4. Scaling Incidents:
The same second group as in step 3 rates the behaviour described in each incident in
terms of effectiveness or ineffectiveness on the appropriate dimension by using
seven to nine points scale. Then, average effectiveness ratings for each incident are
determined to decide which incidents will be included in the final anchored scales.
5. Developing Final BARS Instrument:
A subset of the incidents (usually six or seven per cluster) is used as a behavioural
anchor for the final performance dimensions. Finally, a BARS instrument with
vertical scales is drawn to be used for performance appraisal, as in Figure 27-5.
How BARS is developed can be exemplified with an example of grocery checkout
clerks working in a large grocery chain.
A number of critical incidents involved in checking out of grocery can be clustered
into seven performance dimensions:
1. Knowledge and Judgment
2. Conscientiousness
3. Skill in Human Relations

4. Skill in Operation of Register

5. Skill in Bagging
6. Organisational Ability of Check stand Work
7. Skill in Monetary Transactions
8. Observational Ability
Now, a BARS for one of these performance dimensions, namely, knowledge and
judgment can be developed, as in Figure 28-5. Notice how the typical BARS is
behaviourally anchored with specific critical incidents.

BARS method of performance appraisal is considered better than the traditional

ones because it provides advantages like a more accurate gauge, clearer standards,
better feedback, and consistency in evaluation. However, BARS is not free from
limitations.

The research on BARS indicates that it too suffers from distortions inherent in most
rating scales. The research study concluded that it is clear that research on BARS to
date does not support the high promise regarding scale independence In short, while
BARS may outperform conventional rating techniques, it is clear that they are not a
panacea for obtaining high inter rater reliability

Assessment Centres:

The introduction of the concept of assessment centres as a method of performance

method is traced back in 1930s in the Germany used to appraise its army officers.
The concept gradually spread to the US and the UK in 1940s and to the Britain in
1960s.
The concept, then, traversed from the army to business arena during 1960s. The
concept of assessment centre is, of course, of a recent origin in India. In India,
Crompton Greaves, Eicher, Hindustan Lever and Modi Xerox have adopted this
technique of performance evaluation.
In business field, assessment centres are mainly used for evaluating executive or
supervisory potential. By definition, an assessment centre is a central location where
managers come together to participate in well-designed simulated exercises. They
are assessed by senior managers supplemented by the psychologists and the HR
specialists for 2-3 days.
Assessee is asked to participate in in-basket exercises, work groups, simulations, and
role playing which are essential for successful performance of actual job. Having
recorded the assessees behaviour the raters meet to discuss their pooled information

and observations and, based on it, they give their assessment about the assesee. At
the end of the process, feedback in terms of strengths and weaknesses is also
provided to the assesees.
The distinct advantages the assessment centres provide include more accurate
evaluation, minimum biasedness, right selection and promotion of executives, and
so on. Nonetheless, the technique of assessment centres is also plagued by certain
limitations and problems. The technique is relatively costly and time consuming,
causes suffocation to the solid performers, discourages to the poor performers
(rejected), breeds unhealthy competition among the assessees, and bears adverse
effects on those not selected for assessment.

360 Degree Appraisal:

Yet another method used to appraise the employees performance is 360 degree
appraisal. This method was first developed and formally used by General Electric
Company of USA in 1992. Then, it travelled to other countries including India. In
India, companies like Reliance Industries, Wipro Corporation, Infosys Technologies,
Thermax, Thomas Cook etc., have been using this method for appraising the
performance of their employees. This feedback based method is generally used for
ascertaining training and development requirements, rather than for pay increases.
Under 360 degree appraisal, performance information such as employees skills,
abilities and behaviours, is collected all around an employee, i.e., from his/her
supervisors, subordinates, peers and even customers and clients.

In other worlds, in 360-degree feedback appraisal system, an employee is appraised

by his supervisor, subordinates, peers, and customers with whom he interacts in the
course of his job performance. All these appraisers provide information or feedback
on an employee by completing survey questionnaires designed for this purpose.
All information so gathered is then compiled through the computerized system to
prepare individualized reports. These reports are presented to me employees being
rated. They then meet me appraiserbe it ones superior, subordinates or peers
and share the information they feel as pertinent and useful for developing a selfimprovement plan.
In 360 degree feedback, performance appraisal being based on feedback all
around, an employee is likely to be more correct and realistic. Nonetheless, like
other traditional methods, this method is also subject to suffer from the subjectivity
on the part of the appraiser. For example, while supervisor may penalise the
employee by providing negative feedback, a peer, being influenced by give and take
feeling may give a rave review on his/her colleague.

Role Analysis:

The role analysis method involves two parties, viz., the focal role and the role set
members. The focal role is the ratee. That is, he is a manager whose performance is
appraised. The role set members are the raters. That is, they are the managers who
come in close contact with the focal role while he is doing his job. The role set
members will judge the performance of the focal role. As per their judgements, the
focal role will make changes in his performance.

Human Resource Accounting (HRA):

Human Resource Accounting HRA measures the cost and contribution of human
resources in the organisation. The cost includes the cost of recruitment, selection,
induction, training, salaries and other facilities, etc. Contribution is the money value
of the service of the employees. This service is measured by labour productivity. If
the contribution is more than the cost, then the employee performance is positive
and vice-versa.

Psychological Appraisal Method:

Psychological appraisal is done to find out the conceptual skills, human skills,
technical skills, etc. of the employee. It is done by different methods, such as indepth interviews, psychological tests, consultations and discussions with the
employees, superiors, subordinates and others, who are working with the employee.

LIMITATIONS OF PERFORMANCE APPRAISAL

1. Halo Effect
The rater may base the full appraisal on the basis or one positive quality which was
found out earlier. For e.g. If a person is evaluated on one quality i.e. emotional
stability and if he scores very high in the case of emotional stability, then the rater
may also give him high scores (marks or grades) for other qualities such as
intelligence, creativity etc., even without judging these characteristics.
2. Problem of Leniency or Strictness
Many raters are too lenient (not strict) in their ratings. High scores may be given to
all employees, even if they have no merit. Also a reverse situation may take place,
where all employees are rated very strictly and very low scores are given.
3. Central Tendency
Sometimes a rater gives only middle range scores to all individuals. Extremely high
or low scores are avoided. This is called Central Tendency.
4. Personal Bias
Performance appraisal is affected by personal bias of the rater. If the rater has good
relations with the ratee (an employee who is getting rated), he may give higher
scores to the ratee, even though the ratee does not deserve such high scores. Personal
bias may lead to favoured treatment for some employees, and bad treatment to
others.

5. Paper Work
Some supervisors complain that performance appraisal is pointless paper work.
They complain because many times, performance appraisal reports are found only in
the files. It does not serve any practical purpose. In other words, the performance
appraisal reports are not used by some organisations. They are conducted just as a
formality or for the name sake.
6. Fear of Spoiling Relations
Performance appraisal may also affect superior-subordinate relations. An appraisal
makes the superior more of a judge than a coach. So, the subordinate may have a
feeling of suspicion and mistrust, about the superior.
7. Evaluate performance not person
The rater should evaluate the performance, i.e. output, new ideas, extraordinary
efforts, etc. and not the person. In reality, the person is evaluated and not his
performance. It should be noted that failure is an event and a not a person.
8. Horn Effect
Sometimes the raters may evaluate on the basis of one negative quality. This results
in overall lower rating of the particular employee.
9. Spillover Effect
In this case, the present performance appraisal is greatly influenced by past
performance. A person who has not done a good job in the past is considered
(assumed) to be bad for doing present work.

10. Latest Behaviour Effect

The rating is also influenced by the most recent behaviour. The rater may ignore an
average behaviour during the full appraisal period.

ETHICAL ASPECTS IN PERFORMANCE APPRAISAL

Ethics On The Part Of Appraiser

Objective Evaluation: The rater must evaluate the ratees performance

objectively. He must avoid personal bias while rating the performance of the
appraisee. If the rater has good relations with the rate, he may always tend to
give higher scores to the rate, even though the rate does not deserve it. Such bias

results in defective evaluation.

Adequate information: The appraiser must not conduct performance appraisal
for the sake. He must collect complete and relevant information about the ratee

to conduct effective performance appraisal.

Reliability: The appraisal conducted by the rater must be reliable. The appraisal
report prepared by the several raters for the given employee must closely agree

with each other.

Proper weightage and feedback: Various performance factors must be given
proper weightage as per their importance. Quality feedback must be
communicated to the employees so that they are aware of the scope of evaluation
and improvement.

Ethics On The Part Of Appraisee

Correct information: The appraisee must provide correct and adequate

information to the appraiser for the appraisal process to go smoothly. If the

information provided is false, appraisal process goes wrong.

Attitude towards ratings: The employee should have positive attitude towards
the ratings as assigned to him by the rater. He should not criticize the raters

remarks but should have the spirit of correcting his weaknesses.

Avoid confrontation: The ratee must avoid confrontation if he receives
unfavourable remarks from his rater. If he disagrees with the rater, then he may
make an appeal against the performance appraisal reports.

A Research Study on Examining the Best Practices in Performance

Appraisal

Abstract
This research study is conducted on one of the core activities of the human resource
department. Irrespective of whether a particular company is small or big in size,
companies do have a proper appraisal process in place. Wherever there are enough
employees to do appraisal, this activity is followed in that company.
Other than salary hike, performance appraisal has several objectives. It is also equally
important that it is a periodic, transparent, motivating, effective, and an unbiased
activity. It should not be a cause of disharmony amongst employees.
In this research study, what all best practices are observed in industry with respect to
performance appraisal are studied carefully. This is done so to improvise the appraisal
procedure followed at one of the major IT companies in India- L&T Infotech. Like most
big companies, L&T Infotech also has a well thought appraisal process to evaluate more
than 14,000 employees. To investigate any shortcomings, if any and further what all
new steps could be incorporated into the current appraisal process, a thorough
understanding of what other IT majors do, was crucial.
During the initial phase of the study, assimilation of L&T Infotechs appraisal process
was very important. This helped in giving the very first glimpse of how IT companies
evaluate employees. Based on this, the rest of the study was carried out by strictly
keeping in mind what practices are observed in L&T Infotech and what improvements it
needs.
To have a fair idea of the best practices followed at various companies, a few select
companies from both IT and Non-IT sector were considered.

INTRODUCTION
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.
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 judgements made will be lawful, fair, defensible and accurate. 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 counselling, or in
extreme cases, demotion, dismissal or decreases in pay.
Problem statement:
A research study conducted to examine the appraisal system followed in various IT and
Non-IT organisations.
Hypothesis:
An appraisal process if,

Customized exactly to the organisations requirements can be more effective in terms of

satisfying the very basis (intention) of conducting appraisal.
Not transparent, may cause lack of motivation amongst employees.
Objectives:

To understand how performance is measured and appraisals conducted.

To study pros and cons of the appraisal system followed.
To investigate the scope for improvement and suggest possible improvisations
(For appraisal procedure at L&T Infotech).

Research Methodology:
Research design
Exploratory design- Experience survey method

In exploratory research design any specific problem can be studied. Here, it is to study
the effectiveness of appraisal procedure followed in various organisations. To do so, the
Experience survey method of exploratory research design is adopted. According to this
method, people who have practical experience in the problem under study are
considered as respondents. These respondents are then interviewed by an investigator.
This gives the respondents the opportunity to give some thought and suggest possible
solutions to it. In this way they contribute effectively to the research. A questionnaire
was given to every respondent in this research. It is provided in the annexure for ready
reference. After filling it, respondents had to discuss it point wise, answering all queries
thus initiated.
SOURCES OF DATA
Primary
The primary data was collected with the help of a questionnaire. Also after getting the
questionnaire filled, the respondents were asked to explain once again the appraisal
procedure in detail. The key point is that data thus collected is unique to this research,
and does not form basis of any other study. The data however is nearer to perfect if not
accurate.
Secondary
The secondary data is collected from reference books, online books, newspapers,
magazines, and the internet.
Sampling plan
Universe of population

Universe: In this research, IT organisations and Non-IT organisations in India are

considered.
Population: It is a finite population. The inferences drawn in this study are on the topicPerformance appraisal system.
Population element: The broad elements of appraisal system that are included here aretype, way of calculating the appraisal, its shortcomings, and ways to overcome
limitations.
Sampling units
It is a Construction units as all are organisations from IT & Non-IT sector.
Size of the sample
In all 18 organizations are considered out of which, 11 are IT companies and 7 are NonIT companies.

Sampling frame

The source list is as given below-

Sr. IT Companies

Sr

No

No. Companies

1.

Accenture

1.

Non- IT

TATA Teleservices
Ltd

2.

Infosys

2.

Vodafone Essar

3.

Persistent Systems

3.

Ericsson

4.

Reliance

Ltd.
4.

Patni Computers

Communication
5.

Cognizant

5.

Reliance Industries

6.

Aditya Birla Retail-

Technology Solutions
6.

Satyam

more.
7.

TCS

8.

WIPRO

9.

Mphasis
Company

10. IBM
11. HP

7.

an EDS

General Mills

Sampling techniques

The technique used here is non-probability sampling as the researcher has chosen
the companies to be included in the study.

Statistical tools for analysis

The analysis of data is a process under which the relationships or differences

supporting or conflicting with the original or new hypothesis, should be subjected
to statistical tests of significance, to determine with what validity the data can be
said to indicate any conclusion. Here Microsoft Excel is used for doing data
analysis. Here the primary data collected is converted in the percentage format.
The data analysis is displayed in the form of pie-charts and bar-charts. The data is
converted to percentages of the total and these percentage segments give a clear
picture of the relationship among the components parts.

Questionnaire design and analysis

The questionnaire was designed in order to collect data relevant to the problem.
The questionnaire in all has 15 questions. Out of the total number of questions, 8
are open - ended and 7 are close - ended. Further, Q1 to Q3 provide companys

basic information and Q4 to Q14 provide information on the topic. Q15 was
specially added to obtain comments of the respondents.

Limitations

The sample space considered is small.

The data obtained is dependent on personal opinions.

LITERATURE SURVEY

PERFORMANCE APPRAISAL SYSTEM

Performance appraisal is the process of obtaining, analyzing and recording information

about the relative worth of an employee. The focus of the performance appraisal is
measuring and improving the actual performance of the employee and also the future
potential of the employee. Its aim is to measure what an employee does.

According to Flippo, a prominent personality in the field of Human resources,

Performance appraisal is the systematic, periodic and an impartial rating of an

employees excellence in the matters pertaining to his present job and his potential for a
better job."

Performance appraisal is a systematic way of reviewing and assessing the performance

of an employee during a given period of time and planning for his future. It is a powerful
tool to calibrate, refine and reward the performance of the employee. It helps to analyze
his achievements and evaluate his contribution towards the achievements of the overall
organizational goals. By focusing the attention on performance, performance appraisal
goes to the heart of personnel management and reflects the managements interest in the
progress of the employees.

DATA ANALYSIS AND INTERPRETATION

( I ) DATA COLLECTION

Performance appraisal system in L&T Infotech:

objectives :

Establish and document individual and unit performance commitments related to

committed work.

Regularly discuss the performance related to committed work in order to identify actions
that can improve it.
Identify areas of performance concerns and initate remedial actions.
Provide a foundation for planning future development.

The performance appraisal system is primary based on Commitment Setting.

Commitment is a simple, short and clear statement specifying what the appraisee wish to
achieve. It is mutually agreeable between the appraiser and appraisee.

This commitment setting should meet the S-M-A-R-T criteria. It has to be within the
framework mentioned below.

PRAGATI: A Customized Software: L&T Infotech makes use of a customized

software named as PRAGATI. It keeps track of the three types of appraisal conducted
in the company. They are

Project appraisal

Task appraisal

Annual appraisal

In the above appraisings, project manager is the defualt reviewer for an appraisee. Also
appraiser can be the reviewer.

There is a difference between the appraisal procedures followed at IT sector companies

and the Non-IT sector companies. Therefore the loopholes identified thus, are also
different. In next few pages of this report, the appraisal process at every above
mentioned company is explained. However the emphasis is more on IT companies
because

L&T InfoTech is an IT company and

Secondly, functioning, work profiles, work environment, qualifications of employee
and other similar aspects in these two sectors vary equally. Hence their appraisal
process also varies accordingly.

ACCENTURE
Appraisal process:

Has international presence with around 40,000 employees striving for delivering high
performance.

Bi-annually, 2 or 3 appraisers per employee, conduct the appraisal process.

The appraisal process is a combination of different methods, and it makes use of
customized software My Performance Tool.

INFOSYS
Appraisal process:

Has international presence with around 1,15,000 employee strength.

The appraisal is conducted bi-annually, by 1 or 2 appraisers per employee.

Every employee to be eligible for this process, has to complete six months for lateral
and trainees have to complete one year.
The appraisal process is a complex combination of various methods.

PERSISTENT SYSTEMS LIMITED

Appraisal process:
Has international presence with around 4,000+ employees.
Annually, 2 or 3 appraisers per employee, conduct the appraisal process.

The appraisal process is a combination of different methods like weighted checklist,

critical incident, management by objectives, and partly 360 degrees.
Every permanent employee is eligible for this process. No hire-n-train employees.

TATA CONSULTANCY SERVICES

Appraisal process:
Has international presence with around 1,40,000 employees.
Appraisal is conducted bi-annually, by 2 or 3 appraisers per employee.
The appraisal process is a combination of balanced scorecard and forced distribution.
Everyone is eligible for this process on completion of one year of service in TCS.

SATYAM COMPUTER SERVICES LIMITED

Appraisal process:
Has international presence with around 45,000 employees.
Appraisal is conducted bi-annually, by 2 or 3 appraisers per employee.
The appraisal process is a tailor-made activity to suit and satisfy the requirements of
Satyam.
Every employee who has joined on or before in the month of December of the previous
year, is eligible for this process.

PATNI COMPUTERS
Appraisal process:
Has international presence with around 14,000 employees.
Appraisal is conducted annually, by 2 or 3 appraisers per employee.
The appraisal process is a combination of 360 degree and MBO.
Every employee is eligible for this process on completion of one year of service.

WIPRO
Appraisal process:
Has international presence with around 90,000 employees.
Appraisal is conducted annually, by 4 to 6 appraisers per employee.
The appraisal process is a combination of forced ranking, weighted checklist
and paired comparison.
IBM
Appraisal process:
Has international presence with around 80,000 employees.
Appraisal is conducted annually, by 2 or 3 appraisers per employee.
The appraisal process is a combination of 360 degree.

Every employee is eligible for this process on completion of one year of service.
Employee is evaluated based on observation from Project manager and Peoples
manager.

COGNIZANT TECHNOLOGY SOLUTIONS

Appraisal process:
1. Has international presence with around 60,000+ employees.

Appraisal is conducted bi-annually, by 2 or 3 appraisers per employee.

The appraisal process is Forced distribution.
Every employee is eligible for this process on completion of one year of service.
M PHASIS
Appraisal process:
Has international presence with around 60,000+ employees. Appraisal is conducted biannually, by 2 or 3 appraisers per employee. The appraisal process is Forced
distribution.

Every employee is eligible for this process on completion of one year of service.
Employee is evaluated based on behaviour, ability to utilize resources efficiently,
feedback from others and likewise.

HEWLETT PACKARD
Appraisal process:

Has international presence with around 8,000 employees only in Bangalore office.

Appraisal is conducted bi-annually, by 2 or 3 appraisers per employee.

The appraisal process is combination of BARS, MBO and 360 degrees.

Every employee is eligible for this process on completion of six months of service.

TATA TELESERVICES LIMITED

Appraisal process:
Has international presence with around 7,500 employees.
Appraisal is conducted bi-annually, by 2 or 3 appraisers per employee.
The appraisal process is a combination of forced distribution and MBO.
Every employee who satisfies all KRAs allotted is eligible for appraisal.

ERICSSON INDIA PVT LTD

Appraisal process:

Has international presence and has around 4,000 employees.

Appraisal is conducted bi-annually, by 1 appraiser per employee.
The appraisal process is Forced distribution.
Every employee is evaluated on observation.

RELIANCE COMMUNICATIONS LTD

Appraisal process:
Has 1374 employees.

Appraisal is conducted quarterly, by 1 appraiser per employee.

The appraisal process is Balanced score card.
Every employee is evaluated on observation.

ADITYA BIRLA RETAIL LTD

Appraisal process:
Has around 11,000 employees.
Appraisal is conducted annually, by 2 or 3 appraiser per employee.
The appraisal process is Forced distribution and 360 degree.

Every employee is evaluated on data against KPIs and feedback from Supervisor and Function
Head
GENERAL MILLS INDIA PVT LTD
Appraisal process:
Has international presence and around 300+ employees in Mumbai office.
Appraisal is conducted annually, by 2 or 3 appraiser per employee.
The appraisal process is carried using a customized software My Performance Tool. It has
partly 360 degree.
Every employee is eligible for appraisal as soon as they join.

RELIANCE INDUSTRIES LIMITED

Appraisal process:
Has international presence and around 1, 50, 000 employees.

Appraisal is conducted annually, by 2 or 3 appraiser per employee.

The appraisal process is Balanced score card.
Every employee is eligible for appraisal completing one year.

DATA ANALYSIS

Based on data interpretation, following is the data analysis. A comparison between practices at
different companies is made here for easy understanding. However only those areas which have
scope for improvement are considered for this analysis.
Following is a colour code table depicting scope for improvement:

2 to 3

2 or 3

2 or 3

4 to 6

2 or 3

2 or 3

1 or 2

BARS +

FD

FD

FD

Highly

Complex

MBO+

customiz

Combinatio

360

degree

of many

appraisers do
appraising

Forced

Distribution
(FD)
method

methods

S-M-A-RGoal Setting

S-M-A-RS-M-A-R-T

BSC

North-

S-M-A-R-

star

MBOKRA

Allotting

Yes

Yes

Yes

Yes

Yes

Yes

weightage to
KRAs

Equivalent
practices

to

L&T

Is

Scope
Improvement

No change required

The reasons for choosing these companies for comparative analysis are:

for

L&T Infotech is an IT company. Hence the comparison has to be between IT companies

rather than non-IT companies.

Of total 11 companies studied, these six companies have a competent appraisal process
from which something new can be adapted.

With respect to areas of improvement required in L&T Infotechs process which are:
Change in number of appraisers.
Change in appraisal method followed. Change in goal setting technique.

Change in the process of appraising, by allotting weightage to KRAs. Percentage wise,

IT organisations using a particular Performance Appraisal System is as shown below:

Percentage wise, how many performance appraisals are conducted yearly is shown
below:

Number of appraisers performing appraisals (for every company) is shown below :

Bar-chart showing number of shortcomings identified in the respective PAS followed in

every company :

11

Bar- chart showing measures adopted to tackle the shortcomings in the PAS followed in
every company:

NON IT ORGANISATIOS

Percentage wise, Non-IT organisations following a particular performance appraisals

system is shown below:

RECOMMENDATIONS

Allotting weight ages to KRAs.

At L&T InfoTech, objective is not broken down into KRAs and also KPI concept is not
observed. This leads to people concentrating on many tasks at the same time leading to
poor performance. It would be much better if KRA KPI concept is implemented. Also
employees should be made to participate actively into this entire activity.

Appraisal method

Instead of having only forced distribution, there are three ways in which appraisal
method can be changed.

A combination of three to four different methods is a bit simpler option. The

combination can be of paired comparison- for comparing any two competing employees
with same job role, BARS- a ready set of descriptive statements for every job role, 360
degrees- so that peers can also input their contribution, and MBO- to breakdown
organizational goals into KRAs.

Appraisers

Like Wipro, having more number of appraisers will help reduce appraisers biasing. The
more appraisers contribute, the more accurate the evaluation will be.

Also colleagues or peers need to be included as any employee spends maximum time
with his colleagues in the office than with his superiors. So their opinion is also
important from evaluation point of view.

Goal Setting

Balanced score card considers four perspectives while setting goals for an employee.
Having individual employees goals in line with companys goals or objectives would
enhance the working of the organisation as a whole.

13

Having employee goals to be: specific-measurable-accountable-realistic-time bound, it

would be a better option to have them with respect to customers, financial, internal
business and learning & growth criteria. Because even L&T InfoTech ahs regular
interactions with its client customer, a financial dimension to the business and also
other two aspects.

Following is a suggestion as to how objective can be broken down and allotted

weightage and grades.

Here, the organizational objective constitutes to a total of 100%. This is broken down
into three different KRAs such that, KRA1 has maximum weightage of 80%, followed
by KRA 2 and KRA3 having equal weightage of 10% each. So when all 3 KRAs are
completed, that will complete the objective 100%.

IN THE NEWS

An article in The Hindu Business Line, a leading business daily, published on 16 th

February, 2015. The story talks about new entrants at the top management level of L&T
Infotech.

CONCLUSION

L&T InfoTech has been using Pragati for a long time now. However they are making
certain changes in it. Therefore it was important to understand the industry best
practices first. And then what changes can be incorporated to make it an effective
system. During this study, it was observed that if the appraisal process is not transparent
then, it becomes one of the causes for lack of motivation amongst employees. This
further may also lead to disharmony in the organization. Whether it was the information
technology companies or others, the bar chart for the same showed this very result.
Primarily the reason for this upsets is because every employee wants to be recognised
for the work he does. And if he feels that evaluation is an internal activity of
management then this leads to unrest in his mind and so he starts losing interest in the
job role.

12

Appraisers bias is yet another issue associated with appraising. It is hard to have an
unbiased system. However, companies like Persistent, Infosys, Satyam, HP have
managed to incorporate such practices within their system that, biasing is reduced to a
minimum level. It is even more important that a company has an exclusive appraisal
system just according to its needs, similar to what is observed at Satyam or Infosys.
Right from goal setting, an employee is made to participate in almost all activities.
Having just one method to determine the entire performance of an employee seems an
unfair practice. From immediate implementation point of view, it is better to have a
combination of various methods.

The appraisal process surely has scope for improvement. And when all the aspects are
modified, it will turn out into an effective appraisal system.

BIBLIOGRAPHY

Books:

Personnel Management by

Human Resource Management by Ashwathappa

Personnel Management by C B Mamoria

Websites:

www.citehr.com

http://books.google.co.in

http://www.yourarticlelibrary.com/performance-appraisal/performance-appraisalmethods-traditional-and-modern-methods-with-example/35492/

http://businesstoday.intoday.in/

http://appraisals.naukrihub.com

www.lntinfotech.com

http://studyvalue.com/_management_sciences/_hrm/limitations_of_performance_apprai
sal_36.html#.Vhoryfmqqko

http://kalyan-city.blogspot.in/2011/05/modern-methods-of-performance-appraisal.html

L&T InfoTech Intrasite

Business Week

Business Today

ANNEXURE

Questionnaire

Kindly fill the following questionnaire with appropriate choices in the boxes provided.

You can add comments wherever necessary in blue colour.

The information provided by you will be strictly used for academic purpose only.

Name of the organization:

Does your organization have international presence and / or offices outside India?

a) Yes b) No

3) Total number of employees:

Performance Appraisal

4) In the box below, please mention the eligibility criteria for an employee to be
considered for performance appraisal:

5) Performance appraisal is conducted: (More than one can be chosen)

a) Annually

b) Bi-annually c) Quarterly d) Monthly e) Project/ Assignment wise

6) Number of superiors / managers / appraisers appraising an employee during a

particular appraisal is

a) 1

b) 2-3

c) 4-6

d) more than 6

7) Performance Appraisal method being used in the organization:

Performance Appraisal Method

Put mark in respective
rows
(More than one can be chosen)

a)

Balance Scorecard

b)

Weighted checklist

c)

Critical incident method

Management

By

Objectives

d)

(MBO)

e)

Forced ranking / Bell Curve

15

Behaviourally anchored rating scales

360 degree performance

Paired comparison method

Other (specify)

Since how many years are you following the above mentioned method?

Goal setting

I] what is the approach adopted towards goal setting?

b) Balanced score card (financial, customer,
a) MBO - Key Result Area
(KRA) learning & growth) c)
S-M-A-R-T

internal, d) Other (please specify)

II] Are organizational goals broken down into KRAs so that they can be
cascaded to lower levels?

a) Yes b) No (please specify)

III] Are the KRAs allotted weightage according to KPIs?

a) Yes b) No (please specify)

Which parameters are used for evaluation of an employee (e.g. 1]

observation 2] feedback from other employees, etc)

How is the evaluation done for the objectives achieved?

what according to you are the shortcomings of the Performance

Appraisal System (PAS) followed?

Sr No

Shortcomings (More than one can be chosen) Put mark in respective rows

Appraisers bias

System not transparent enough

Inefficient procedure for feedback collection

Implementation issues

No single PAS followed for long period

Appraisal errors (specify)

16

Lack of motivation amongst employees

Other (Specify)

13) What measures are taken up to tackle above shortcomings?

Sr
Measures taken (More than one can be chosen)
No
Measurable Performance Parameters

Appraiser Training

Bonding between appraiser & appraisee

Multiple Feedback

Put mark in respective rows

Review Mechanism

Transparency

Normalizing

Others (Specify)

14) Does the HR dept. use the appraisal data thus obtained, for other
developmental decisions like job rotation, job enrichment, training & development
etc?

a) Yes b) No (please specify)

15) Any comments on the Performance Appraisal System followed in the

organisation?

THANK YOU!

17