You are on page 1of 64

INTRODUCTION

HUMAN RESOURCE MANAGEMENT

Human resource management (HRM) is the strategic and coherent management of


an organization’s most valued assets – the people working there who individually and
collectively contributes to the achievement of the objectives of the business.

The terms “human resource management” and “human resources” (HR) have largely
replaced the term “personnel management” as a description of the processes involved
in managing people in organizations. In simple words, HRM means employing
people, developing their capacities, utilizing, maintaining and compensating their
services in tune with the job and organizational requirement.

While Miller (1987) suggests that HRM relates to:

“…….those decisions and actions which concern the management of employees at all
levels in the business and which are related to the implementation of strategies
directed towards creating and sustaining competitive advantage” (p. 352).

Academic theory

The goal of human resource management is to help an organization to meet strategic


goals by attracting, and maintaining employees and also to manage them effectively.
The key word here perhaps is “fit”, i.e. a HRM approach seeks to ensure a fit between
the management of an organization’s employees, and the overall strategic direction of
the company (Miller, 1989).

The basic premise of the academic theory of HRM is that humans are not machines,
therefore we need to have an interdisciplinary examination of people in the
workplace. Fields such as psychology, industrial relations, industrial engineering,
sociology, economics, and critical theories: postmodernism, post-structuralism play a
major role. Many colleges and universities offer bachelor and master degrees in
Human Resources Management or in Human Resources and Industrial Relations.

1
One widely used scheme to describe the role of HRM, developed by Dave Ulrich,
defines 4 fields for the HRM function:

 Strategic business partner


 Change management
 Employee champion
 Administration

However, many HR functions these days struggle to get beyond the roles of
administration and employee champion, and are seen as reactive rather than
strategically proactive partners for the top management. In addition, HR organizations
also have difficulty in proving how their activities and processes add value to the
company. Only in recent years have HR scholars and professionals focused on
developing models that can measure the value added by HR.

2
Business practice

Human resources management involves several processes. Together they are


supposed to achieve the above mentioned goal. These processes can be performed in
an HR department, but some tasks can also be outsourced or performed by line-
managers or other departments. When effectively integrated they provide significant
economic benefit to the company.

 Workforce planning

 Recruitment (sometimes separated into attraction and selection)

 Induction, Orientation and On boarding

 Skills management

 Training and development

 Personnel administration

 Compensation in wage or salary

 Time management

 Travel management (sometimes assigned to accounting rather than HRM)

 Payroll (sometimes assigned to accounting rather than HRM)

 Employee benefits administration

 Personnel cost planning

 Performance appraisal

 Labor relations

3
HRM strategy

An HRM strategy pertains to the means as to how to implement the specific functions
of HRM. An organization’s HR function may possess recruitment and selection
policies, disciplinary procedures, reward/recognition policies, an HR plan, or learning
and development policies, however all of these functional areas of HRM need to be
aligned and correlated, in order to correspond with the overall business strategy. An
HRM strategy thus is an overall plan, concerning the implementation of specific
HRM functional areas.

An HRM strategy typically consists of the following factors:

 “Best fit” and “best practice” – meaning that there is correlation between the
HRM strategy and the overall corporate strategy. As HRM as a field seeks to
manage human resources in order to achieve properly organizational goals, an
organization’s HRM strategy seeks to accomplish such management by
applying a firm’s personnel needs with the goals/objectives of the
organization. As an example, a firm selling cars could have a corporate
strategy of increasing car sales by 10% over a five year period. Accordingly,
the HRM strategy would seek to facilitate how exactly to manage personnel in
order to achieve the 10% figure. Specific HRM functions, such as recruitment
and selection, reward/recognition, an HR plan, or learning and development
policies, would be tailored to achieve the corporate objectives.

 Close co-operation (at least in theory) between HR and the top/senior


management, in the development of the corporate strategy. Theoretically, a
senior HR representative should be present when an organization’s corporate
objectives are devised. This is so, since it is a firm’s personnel who actually
construct a good, or provide a service. The personnel’s proper management is
vital in the firm being successful, or even existing as a going concern. Thus,
HR can be seen as one of the critical departments within the functional area of
an organization.

 Continual monitoring of the strategy, via employee feedback, surveys, etc.

4
The implementation of an HR strategy is not always required, and may depend on a
number of factors, namely the size of the firm, the organizational culture within the
firm or the industry that the firm operates in and also the people in the firm.

An HRM strategy can be divided, in general, into two facets – the people strategy and
the HR functional strategy. The people strategy pertains to the point listed in the first
paragraph, namely the careful correlation of HRM policies/actions to attain the goals
laid down in the corporate strategy. The HR functional strategy relates to the policies
employed within the HR functional area itself, regarding the management of persons
internal to it, to ensure its own departmental goals are met.

Careers and education

Several universities offer programs of study pertaining to HRM and broader fields.
Cornell University created the world’s first school for college-level study in HRM
(ILR School).[9] University of Illinois at Urbana-Champaign also now has a school
dedicated to the study of HRM, while several business schools also house a center or
department dedicated to such studies; e.g., University of Minnesota, Michigan State
University, Ohio State University, and Purdue University.

There are both generalist and specialist HRM jobs. There are careers involved with
employment, recruitment and placement and these are usually conducted by
interviewers, EEO (Equal Employment Opportunity) specialists or college recruiters.
Training and development specialism is often conducted by trainers and orientation
specialists. Compensation and benefits tasks are handled by compensation analysts,
salary administrators, and benefits administrators.

Professional organizations

Professional organizations in HRM include the Society for Human Resource


Management, the Australian Human Resources Institute (AHRI), the Chartered
Institute of Personnel and Development (CIPD), the International Public Management
Association for HR (IPMA-HR), Management Association of Nepal (MAN) and the

5
International Personnel Management Association of Canada (IPMA-Canada), Human
Capital Institute. National Human Resource Development Network in India.

Functions of HRM

The Human Resources Management (HRM) function includes a variety of activities,


and key among them is deciding what staffing needs you have and whether to use
independent contractors or hire employees to fill these needs, recruiting and training
the best employees, ensuring they are high performers, dealing with performance
issues, and ensuring your personnel and management practices conform to various
regulations. Activities also include managing your approach to employee benefits and
compensation, employee records and personnel policies. Usually small businesses
(for-profit or nonprofit) have to carry out these activities themselves because they
can’t yet afford part- or full-time help. However, they should always ensure that
employees have—and are aware of—personnel policies which conform to current
regulations. These policies are often in the form of employee manuals, which all
employees have.

Note that some people distinguish a difference between HRM (a major management
activity) and HRD (Human Resource Development, a profession). Those people
might include HRM in HRD, explaining that HRD includes the broader range of
activities to develop personnel inside of organizations, including, e.g., career
development, training, organization development, etc.

There is a long-standing argument about where HR-related functions should be


organized into large organizations, e.g., “should HR be in the Organization
Development department or the other way around?”

The HRM function and HRD profession have undergone major changes over the past
20–30 years. Many years ago, large organizations looked to the “Personnel
Department,” mostly to manage the paperwork around hiring and paying people.
More recently, organizations consider the “HR Department” as playing an important
role in staffing, at maximum capability in a highly fulfilling manner.

6
PERFORMANCE APPRAISAL

INTRODUCTION

Performance Appraisal is one of the most versatile instruments for the practitioners of
modern management. As a concept it is not new to us. But traditionally, it was either
used in a limited, casual a haphazard way or it was abused. Enlightened managers
have questioned. This sights developed by the recent researchers in behavioural
sciences provides us much guidance to make the performance Appraisal system
effective.

Performance Appraisal is a systematic, orderly and objective method of evaluating the


present potential resources of the employees in an organization. It helps the employee
and the organization for their growth and development.

Definition of Performance Appraisal:

Performance Appraisal is the process of assessing the actual performance of the


human resources.

Performance appraisal is a process of evaluating the performance and qualifications of


the employee in terms of requirements of the job for including placement, selection
for promotion, providing financial rewards and other actions which requires
differential treatment among the members of a group as distinguished from actions
affecting all members equally.
Most important and frequently stated purposes of performance appraisal are,
1. To know the current performance and
2. To build an adequate managerial reserve.

Among these two the first importance goes to the first one itself. Why because
without knowing how is the current performance we can’t build an adequate
managerial reserve. So the first priority must be given to the current performance.

7
To develop effective personnel and a good performance appraisal plan each
subordinate must know the vital needs like:

1. Know what is expected by the individual(objectives)


2. Have an opportunity to perform (DELEGATION BY SENIORS)
3. Know how well he is performing (APPRAISAL)
4. Review the assistance needed (TRAINING AND DEVELOPMENT)
5. Be awarded or punished on the basis of the results. (APPROVAL)

Performance appraisal system provides information of great importance regarding the


behavior and performance of the individuals in organization uses this information in
three ways.
1. Individual evaluation.
2. Individual development
3. Organizational planning

Performance Appraisal system will give feedback to the individuals regarding their
strengths and weaknesses. SWOT analysis provides the valid information about the
feedback to the individuals and they can act according to that. The result is that, the
individual’s performance is good, and they the feedback itself acts as a motivator by
increasing feelings of self-esteem and personal competence. And if the result is good
then the feedback will act as a stimulus and he will identify his weakness and to
overcome it. He will go for training.

PERFORMANCE PARAMETERS:
Performance parameters can be defined as the information that helps to measure the
performance level of an individual employee working in the organization. These can
be broadly divided classified into four categories.
1. Personal variables
2. Job performance factors
3. Managerial ability factors & performance attributes
4. Training needs

8
Personal variables include the information of the individual like Name, Date of birth,
Educational Qualifications, Age, Destination, Experience etc., and this will help the
superior to identify the employee easily while rating.

Managerial ability factors and performance attributes gives the vital information
regarding planning organization, teamwork, leadership, decision making etc., the
evaluation of these qualities enables an individual employee for better relations and
there is also scope for individual and organizational development.

Objectives of Performance Appraisal:

The objectives of performance appraisal focus on both employee and organization


development. Some of them are given below.
Performance appraisal helps the employee to know their strengths and weaknesses
and thus enables them to improve their performance.

 To know the feedback, from the superiors to the employee

 To determine whom should be given rewards, salary increments,


appreciations, promotions ,training etc.,

 Helps the employees to know about the goals of the organization and enables
them to set their individual goals, which match to the organization goals.

 Helps in motivating, training and developing employees.

9
Appraisal Process
1. Establish performance standards.

2. Communicate performance expectations to employees.

3. Measure actual performance

4. Compare actual performance with standards.

5. Discuss the appraisal with the employee.

6. If necessary indicate corrective action.

Step1: The appraisal process begins with the establishments of performance


standards. These should have evolved out of job analysis and the job description.
Performance standards should be clear and objective enough to be understood and
measured.

Step2: Once performance standards are established it is necessary to communicate


these expectations. And this should be the part of the employees job to guess what is
expected of them. Problems may arise when the standards are not communicated to
the employee when the transference of information has taken place and has been
received & understood by the sub-ordinate. Therefore feedback is necessary from the
sub-ordinate to the manager.

Step3: The third step in the appraisal process is the measurement of performance.
The required information should be acquired to determine what actual performance is
for this we should be concerned with ‘how we measure’ an ‘what we measure’.

Step4: To measure the actual performance four common sources of information used
frequently by the managers are:-

 Personal observation.

 Statistical reports.

 Oral reports&

 Written reports.

10
Fourth step is the appraisal process is the comparison of actual performance with
standards one of the most challenging tasks facing managers is to present an accurate
appraisal to the subordinate and have them accept the appraisal is a corrective manner,
conveying good news in less difficult for both managers and the sub-ordinates than
conveying the bad news. The impression that subordinates receive about their
assessment has a strong impact on their self-esteem and importance in subsequent
performance.

Step5: Fifth step is the appraisal is top discuss the appraisal with employee. This
discussion of the appraisal can have negative as well as motivational consequences
towards the employee.

Step6: The final step in the appraisal is the initiation of corrective action while
necessary this corrective action can be or two types.

First one is immediate and deals predominantly with symptoms. This


immediate corrective action often described as “putting out fires” , and it also corrects
something right now and gets things back on track.
Second one is basic and delves into causes. This basic corrective action gets to the
source of deviation to adjust the difference permanently. It also inquires how and why
performance is deviated.

Performance Appraisal Methods

Traditional Methods Modern Methods

 Ranking Method # Management by Objectives


 Graphic Rating Scales # Behaviorally Anchored Rating Scale (BARS)
 Critical Incident Method # Humans Resource Accounting
 Narrative Essays # Assessment Centers
# 360 Degree Appraisal

Source: P. Subba Rao, Human Resource Management, 2004, P.289


11
TRADITIONAL METHODS:

Traditional methods of performance appraisal are all based on the judgment of the
superior regarding the performance of the sub-ordinates. The rate may use

1. Ranking Method:
Under this method, the employees are ranked from best to worst on some
characteristics. The rater first finds the employee with the highest performance and
the employees with the lowest performance in that particular job category and rates
the former as the best and the latter as the poorest. Then the rater selects the next
highest and next lowest and so on until he rates all the employees in that group.

2. Graphic Rating Scale:


It is one of the oldest and most popular methods. This method arises the factor such as
quantity of work, job knowledge, co-operation, loyalty, dependability etc., the rater
will record their opinions indicating the degree on a graphic-rating scale may be
alphabetical and descriptive objective. The degrees of an attribute may be exceptional
above average, average, below average, poor and weight age can be assigned as
5,4,3,2,1.

3. Critical Incident Method:


The rater’s focuses on the critical/key behaviors that makes difference between doing
a job effectively, strengths of this appraisal in it looks behaviors’, employees can
know which behavior is desirable and which ones call for improvement. Drawbacks
appraisers are required to write regularly and it may be burdensome for managers,
critical incidents may suffer from their comparison problem, therefore comparison
and ranking of subordinates is difficult.

4. Narrative Essays: In this the rater will write a narrative describing employees
strengths, weaknesses, past performance, potential and suggestions for improvement.
The strength of this method lies in its simplicity , and no complex forms or extensive
training to complete weaknesses are, it is unstructured, varies widely in terms of
length & content, difficult to compare individuals also the raters writing skills may
vary.

12
MODERN METHODS:
1) Behaviorally Anchored Rating Scales (BARS):
BARS are also referred as behavioral expectation scales (BES). These were first
developed by SMITH & KENDAL is the year 1963. BARS and graphic rating scales
are similar to each other. Both appraisal which the rater is asked to rate or appraise the
persons being evaluated. However, BARS differ dramatically from the rating scale as
below.
The way is which the various dimensions along with sub-ordinates are to be rated are
identified. And, also the way in which alternative responses along the rating scale has
been described or “anchored” in a systematic procedure.

The common rating errors to which individuals are prone when making judgments are
The major drawbacks or distorting factors are

 Halo error

 Similarity error

 Regency Error

 Post record anchoring

 Rater-effect

 Leniency

 Central tendency

Halo error: Tendency to rate high or low on all factors due to the impression of a
high or low rating on some specific factors.

Similarity error: When evaluators rate other people in the same way that the
evaluators perceive themselves, thus are making similarity error.

Regency error: The performance Appraisal process is distorted by recent incidents or


employee behaviors that occur shortly before the evaluations.

Post-record Anchoring: Regardless of an employee’s current level of performance


ratings have been high, supervisors will continue to rate the level of performance as
high.
13
Rater-Effect: This includes favoritism stereotyping and hostility. Extensively high or
low scores are given only to certain individuals or groups based on rather attitudes
toward the rate, not on actual behaviors or outcomes.

Leniency: Ratings for employees are generally at the high end of the scale regardless
of their actual performances. In general there are 2 types leniency.

Positive Leniency: When Evaluators mark high irrespective of the actual


performance

Negative Leniency: When the ranking is low regardless of the actual performance of
the employee.

Behavioral expectation scales (BES) utilize behavioral descriptions at various


positions on the scales. Each scale represents a dimension considered important to
performance.

Behavioral expectation scales [BES] were compared to summated scales for leniency
error, discriminability [among rates] inter rater agreement, and Constancy of rater
individual differences across dimensions less leniency error and greater inter rater
agreement were found for item- analyzed summated scales.

Emphasis is also placed on BARS as an observation rating system that provides data
for the assessment of estimates of accuracy for individual raters.
A great deal of research work has gone into the effects of rater response biases on
using behaviourally rating scales. BARS are advantageous that they reduce rating
errors by.

1. Job dimensions are clearly designed for the rater and relevant to the job
performed.

2. The behavioural anchors (critical incidents) clearly designed the response


categories available to the rater.

14
Nevertheless some of the rating errors are still present leniency error and composite
halo error are present in all ratings, there was no evidence of relative or absolute halo
errors in any ratings. There was some evidence that use of scales for desired
dimensions reduced leniency errors and increased the amount of variance attributable
to rate difference.

Human Resources Accounting:


Human resources accounting (HRA) is deals with the concept of cost and contribution
of human resources in a particular organization. Cost of the employee includes cost of
manpower planning, recruitment, selection, induction, placement, training,
development, wages and benefits etc. Employee contribution is the money value of
employee service which can be measured by labour productivity or value added by
human resources.
Cost of human resources may be taken as standard. Employee performance can be
measured in terms of employee contribution to the organization. Employee
performance can be taken as positive when contribution is more than cost and
performance can be viewed as negative if cost is more than contribution.

Management By Objectives (MBO):


Management by objectives is a process that concerts organizational objectives into
individual objectives. MBO system can serve as the basic for the design of an
organization’s performance appraisal system, and in particularly well-suited to higher-
level managerial jobs for which techniques such as BARS and BOS may be
inappropriate or inapplicable.
MBO is an example of a result-based method of performance appraisal under MBO
individuals are evaluated on the basis of what they accomplish, not how they get the
job done. There are four important steps involved in the application of MBO to
performance appraisal. They are
 goal setting
 action setting
 self-control
 periodic reviews

15
In goal setting the organizational goals are divided into departmental and individual
goals. In the individual level manager & sub-ordinate identifies the critical ones in
order to fulfill the requirements of the job. These goals then become standards by
which the employees’ results will be evaluated.

In action planning, the realistic plans are developed to attain the objectives. This step
included identifying the activities, establishing the critical relationships estimating the
time requirements and determining the resources required to compete each activity.

Self- control refers to the systematic monitoring and measuring of performance. MBO
philosophy is built on the assumption that individual can be responsible, self-directive
but doesn’t require external control & threats of punishment to motivate them to
work. In periodic progress reviews, corrective action is taken when behavior deviates
standards. According to MBO philosophy, manager subordinates reviews are
concluded in a constructive than positive manner.

There are many behavioral problems involved in adapting to change, interpersonal


skills, selling objectives, measurement and management by objectives.

Assessment Centre:
This method of appraising was first applied in the German army in 1930 later,
business and industrial houses started using this method .This is not a technique of
performance appraisal by itself. In fact, it is a system or organization, where
assessment of several individuals is done by various experts by using techniques.
These include the methods like role playing, case studies, stimulation exercises,
structured in sight, transactional analysis etc.

360 Degree of Appraisal:


The appraiser may be any person who has thorough knowledge about the job content,
contents to be appraised, standards of contents and who observes the employee while
performing a job. The appraiser should be capable of determining what is more
important and what is relatively less important. He should prepare reports and make
judgements without bias. Typical appraisers are supervisors, peers, subordinates,
employees themselves, users of service and consultants. Performance appraisal by all
these parties is called “360 degree performance appraisal”.
16
NEED AND SIGNIFICANCE OF THE STUDY

Today organizations believes that every individual has potential strengths and those
human capabilities can be sharpened, developed and utilized better. Human Resources
are the most important resources for any organization goal. It is important to analyze
the performance towards reaching the organization goals. If the employees are
satisfied with present appraisal system and also with the rewards they are getting for
their performance then only they perform better in the organization. In this context
effectiveness of performance appraisal system among the employees of Sasya Auto
has undertaken.

17
SCOPE OF THE STUDY

The scope of the present study is confine to explore the existing performance
appraisal system in Sasya Auto only. Further, is an attempt to know the actual
implementation of performance appraisal techniques in general and some other
aspects, such as awareness of the workers, current performance appraisal system and
its impact on employee performance regarding to Sasya Auto in Kurnool. Particularly,
researcher selects this unit because it is located within accessible area where the
researcher is pursuing this study.

18
OBJECTIVES OF THE STUDY

1. To study the Performance Appraisal System of Sasya Auto in Kurnool.


2. To examine the status of performance appraisal system of the in terms of
reliability and validity, quality and effectiveness.
3. To identify the gaps in the implementation of the appraisal system of the
company.
4. To analyze the impact of the performance appraisal system on performance of
the employees in the terms of commitment, skills and responsibilities.
5. To provide suggestions for Sasya Auto based on the study results.

19
RESEARCH DESIGN & METHODOLOGY

This research is an empirical study in nature. The descriptive research method is


adopted for describing the present performance appraisal system in Sasya Auto.

Sources of Data:

For the present study, the data will be collect from both primary and secondary
sources. The primary data will collect by administrate a structured questionnaire and
personal interviews from the employees of Sasya Auto in Kurnool. The secondary
data has been gathered from Internet, books, research articles, survey reports,
newsletters, various journals and magazines.

Sampling Technique:
Sampling Population: The sample universe is employees of Sasya Auto in Kurnool.

Sample Frame work: Employees from non-executive level.

Sampling Unit: The Sasya Auto branch in Kurnool City.

Sample size: 79

Sampling Technique: The survey method will apply to collect the data from the
employees.

Data Collection Instruments


Questionnaire method was adopted to collect the primary data from the respondents.
A well designed structured questionnaire was administered among the select
respondents.

Statistical tolls and techniques

Based on the advice of experts a structure questionnaire is going to be design by


following the procedure developed by Rensis Likert. On a Likert scale, the respondent
is asked to respond to each of the statements in terms of several degrees ranging from
“Strongly Agree” to “Strongly Disagree”.

20
Statistical tolls and techniques

The present study is a qualitative analysis of the responses and results based on
scheduled interviews with respondents. The collected data is analyzed and interpreted
based on frequency analysis with the aid of SPSS-20 Version.

Field Work
The fieldwork on the study started during April 2016 and continued up to May 2016.
And, the data was collected from the Sasya Auto in Kurnool City.

Limitations of the study

Because of the time, finance and other constrains, the present study has been confined
to only Sasya Auto in Kurnool City. Apart from this limitation some of the other
limitations are as under;

1. This study is confined to Sasya Auto in Kurnool City only.

2. As the survey was conducted at work place, the respondents may pay little
time for answering questions and also may have some bias while
answering the questions.

3. The base for accuracy of the information is only the opinions express by
the employees and there is a great tendency for fluctuations in response
and behaviour.

4. Time and Finance also other constrains of the study.

Chapters Layout of the Study

The study is organized and presented in as many as six chapters;

Chapter 1: Conceptual framework of Performance Appraisal,

Chapter 2: Research Design and Methodology,

Chapter 3: Profile of Automobile Industry,

Chapter 4: Profile of Hero Motocorp. Ltd, And Sasya Auto,

Chapter 5: Data Analysis and Interpretation,

Chapter 6: Findings, Conclusions and Suggestions.

21
INDUSTRY PROFILE
The history of the motorcycles in India dates back to the year 1995, when the
government of India required strong, rough, and tough motorcycles for the Indian
army and police force in the western part of the country which had a rough and
craggy terrain.

The 350cc ‘bullet’ manufactured by the royal Enfield company of United Kingdom
was the first batch of motorcycles in India. These motorcycles were put together in
Chennai. This was the beginning for the Indian two-wheelers industry. The
motorcycles customers in India cater to variety of needs of the consumers, and are
preferred by the daily commuters. The segment motorcycles in India went through a
tremendous change in the 90s and the two wheeler market, especially the motorcycle
market filled with options.

The main cause of the growth in the motorcycles in India segment is the fuel efficient
4 stroke engine. In the present scenario, the motorcycles in India constitute for 81.5%
of the total Indian two-wheeler market. The company’s manufacturing motorcycles in
India are making necessary innovations to make the motorcycles safer, more
comfortable, user-friendly, and ergonomic.

Two wheeler industry volume growth in 5m 2014-15 gears up to 14.8% YoY, the
fastest pace of growth since 2010-11 The Indian two-wheeler (2W) industry, the
largest in the world in terms of volumes, had demonstrated positive volume growth in
the last three years (2011-14) even when some of the other automobile segments such
as passenger vehicles and commercial vehicles experienced volume contraction in at
least one of the last three fiscals. In 5m 2014-15, the 2W industry’s growth was even
stronger with sales volumes expanding by a healthy 14.8% YoY, the fastest pace of
growth since 2010-11. While strong demand for scooters (contributed 27% to
domestic 2W industry sales volumes in 5m 2014-15) has been the primary driving
force behind overall 2W industry expansion in the last three years, the motorcycle
segment’s contribution to 2W industry growth too gained force in 5m 2014-15 by
virtue of greater replacement demand and new model launches by various Original
Equipment Manufacturers (OEMs). Volume growth of scooters at 30.7% in 5m 2014-

22
15 stays robust; strong segment growth over the years induces proliferation of new
model launches In the last five years, the share of scooters in total domestic 2W sales
volumes has increased from 15% in 2008-09 to 24% in 2013- 14 (27% in 5m 2014-
15). In terms of recent trends, while domestic motorcycle sales volumes grew by
10.0% YoY in 5m 2014-15, the volumes of scooters expanded by a robust 30.7%
YoY during the same period. The fast expansion of the scooter segment’s pie has
encouraged most OEMs in India to launch new models to capitalize on the growing
opportunity offered by this segment. In 2012- 13, three new scooter brands were
launched in India, but the count of new brands introduced increased to six in 2013-14;
and in 5m 2014-15, already four new models have been launched by various OEMs
with more being in the pipeline. Compared to motorcycles (targeted at males), the
penetration of scooters (targeted at both males and females) remains lower by a factor
of 3-4 times which has been one of the primary drivers of demand for scooters as
positioning of this product segment has become sharper. As scooters get increasingly
targeted at both the sexes and as more women adopt mobile lifestyles, the case for
continued penetration-led growth for the scooters segment remains strong. The
increased supply push in the form of new scooter launches should only add to the
growth momentum. Motorcycle sales volume growth improved in 5m 2014-15, but
high penetration in addressable income segment to remain an overhang Over the last
three years, motorcycle segment volumes have grown only at a moderate CAGR of
5% as slowdown in India’s economic growth and persistently high inflation weighed
on disposable income of buyers, particularly those who buy entry segment (at price
point near Rs. 40,000) and executive segment (in price range of Rs. 45,000-50,000)
bikes. Thus, pressure on household income growth leading to reduction in proportion
of first-time buyers weighed on demand for motorcycles. However, the recent uptick
in sales volumes of motorcycles, reflected in growth of 10.0% YoY in 5m 2014-15,
does insinuate improved growth prospects for 2014-15. While motorcycle volumes in
2014-15 may indeed grow faster than the CAGR of last three years, in our view, this
would largely be driven by increase in replacement demand and incremental
wholesale volume contribution of new models. Fast expansion of the scooter
segment’s pie has encouraged most OEMs in India to launch new models Motorcycle
volume growth in 2014- 15 to be driven by increase in replacement demand and
incremental wholesale volume contribution of new models ICRA LIMITED.
23
As for replacement demand, this would be attributable primarily to customers who
had purchased 2Ws in 2009-10 and 2010-11 (which were two years of 20%+ volume
growth for the industry) and who would now be ripe to replace their existing vehicles.
As for incremental wholesale volume contribution of new motorcycle launches, our
estimates suggest that on excluding sales volumes of five new models launched in
recent months, the volume growth of motorcycles segment in 5m 2014-15 was around
350 basis points (bps) lower than the headline growth of 10.0% YoY. Overall, we
expect the domestic motorcycles segment to grow only at a moderate pace over the
medium term till such time as the pie of households having the threshold purchasing
power to buy a 2W expands. This in turn would depend on the pace of India’s
economic growth recovery that could (a) boost personal disposable incomes and
resultant consumption growth, (b) pull up the un-penetrated households from the low
income segment to the next higher income segment, (c) further enable increase in the
number multiple two-wheeler households, enabling penetration supported rise in 2W
demand.

Honda continues to grow its market share; new model launches by TVS support its
volume growth in 5m 2014-15  In terms of market share, Hero Motocorp continues
to remain the distant leader with a share of 41.4% in 5m 2014-15, compared to 41.3%
in 2013-14, although this is much lower than the highs of ~45% it enjoyed till 2011-
12. The other two leading Indian OEMs too, namely, Bajaj Auto and TVS Motor have
experienced decline in their respective share in the domestic 2W market in the last
few years.  The loss in market share of Hero Motocorp, Bajaj Auto and TVS has
been Honda’s gain as it continues to demonstrate steady gains in market share across
the board. Honda has strengthened its market share in the domestic 2W industry to
25.6% in 5m 2014-15 from 14.9% in 2011-12 on the strength of its strong brand
(particularly in the scooters segment), growing distribution network and new product
launches.  For Bajaj Auto, market share erosion has been the steepest with its share
in the motorcycles segment dipping to 16.6% in 5m 2014-15 (versus 24.4% in 2012-
13) due to reduced demand for the OEM’s Discover series of bikes.

24
Evolution of the Indian two-wheeler industry:

The two-wheeler industry in India has been in existence since 1955. It consists of
three segments viz., scooters, motorcycles, and mopeds. The increase in sales volume
of this industry is proof of its high growth. In 1971, sales were around 0.1 million
units per annum. But by 1998, this figure had risen to 3 million units per annum.
Similarly, capacities of production have also increased from about 0.2 million units of
annual capacity in the seventies to more than 4 million unit in the late nineties.

The TWI in India began operations within the framework of the national industrial
policy as espoused by the Industrial Policy Resolution of 1956. This resolution
divided the entire industrial sector into three groups, of which one contained
industries whose development was the exclusive responsibility of the State, another
included those industries in which both the State and the private sector could
participate and the last set of industries that could be developed exclusively under
private initiative within the guidelines and objectives laid out by the Five Year Plans
(CMIE, 1990). Private investment was channelized and regulated through the
extensive use of licensing giving the State comprehensive control over the direction
and pattern of investment. Entry of firms, capacity expansion, choice of product and
capacity mix and technology, were all effectively controlled by the State in a bid to
prevent the concentration of economic power. However due to lapses in the system,
fresh policies were brought in at the end of the sixties. All sales figures are from
various issues of ACMA, capacity figures from various Five Year Plan documents.
These consisted of MRTP of 1969 and FERA of 1973, which were aimed at
regulating monopoly and foreign investment respectively. Firms that came under the
purview of these Acts were allowed to invest only in a select set of industries.

This net of controls on the economy in the seventies caused several firms to:

a) Operate below the minimum scale of efficiency (henceforth MES)

b) Under-utilize capacity and

c) Use outdated technology.

25
While operation below MES resulted from the fact that several incentives were given
to smaller firms, the capacity under-utilization was the result of the capacity mix
being determined independent of the market demand.

The two-wheeler industry in India has to a great extent been shaped by the evolution
of the industrial policy of the country. Regulatory policies like FERA and MRTP
caused the growth of some segments in the industry like motorcycles to stagnate.
These were later able to grow (both in terms of overall sales volumes and number of
players) once foreign investments were allowed in 1981. The reforms in the eighties
like ‘broad banding’ caused the entry of several new firms and products which caused
the existing technologically outdated products to lose sales volume and/or exit the
market. Finally, with liberalization in the nineties, the industry witnessed a
proliferation in brands.

A description of the evolution of the two wheeler industry in India is usefully split up
into four ten year periods. This division traces significant changes in economic policy
making. The first time-period, 1960-1969, was one during which the growth of the
two-wheeler industry was fostered through means like permitting foreign
collaborations and phasing out of 7 The Indian economy was faced with several
problems at this time. Foreign exchange reserves were down to two month’s imports,
there was a large budget deficit, double digit inflation, and with India’s credit rating
downgraded, private foreign lending was cut off. Also the Gulf war in 1990 brought
about an increase in oil prices, and India had to import oil for over US$ 2 billion
(GATT Secretariat, 1993) non-manufacturing firms in the industry. The period 1970-
1980 saw state controls, through the use of the licensing system and certain regulatory
acts over the economy, at their peak.

During 1981-1990 significant reforms were initiated in the country. The final time-
period covers the period 1991-1999 during which the reform process was deepened.
These reforms encompassed several areas like finance, trade, tax, industrial policy etc.
We now discuss in somewhat greater detail the principal characteristics of each sub
period.

26
a) 1960 – 1969

The automobile industry being classified as one of importance under the Industrial
Policy Resolution of 1948 was therefore controlled and regulated by the Government.
In order to encourage manufacturing, besides restricting import of complete vehicles,
automobile assembler firms were phased out by 1952 (Tariff Commission, 1968), and
only manufacturing firms allowed to continue. Production of automobiles was
licensed, which meant that a firm required a licensing approval in order to open a
plant. It also meant that a firm’s capacity of production was determined by the
Government. During this period, collaborations with foreign firms were encouraged.
Most firms existing in this period had some form of collaboration with foreign firms.
The various firms that existed in the industry during this time period and the product/s
they manufactured.

b) 1970 – 1980

This was a period during which the overall growth rate of the two-wheeler industry
was high (around 15% per annum). Furthermore, the levels of restriction and control
over the industry were also high. The former was the result of the steep oil price hikes
in 1974 following which two-wheelers became popular modes of personal transport
because they offered higher fuel efficiency over cars/jeeps. On the other hand, the
introduction of regulatory policies such as MRTP and FERA resulted in a controlled
industry. The impact of MRTP was limited as it affected only large firms like Bajaj
Auto Ltd. whose growth rates were curbed as they came under the purview of this
Act. However, FERA had a more far-reaching effect as it caused foreign investment
in India to be restricted. In the motorcycle segment FERA did not because
technological stagnation, as a consequence of which, new products nor firms entered
the market since this segment depended almost entirely on foreign collaborations for
technology. The scooter and moped segments on the other hand were technologically
more self-sufficient and thus there were two new entrants in the scooter segment and
three in the moped segment.

27
c) 1981 – 1990

The technological backwardness of the Indian two-wheeler industry was one of the
reasons for the initiation of reforms in 1981. Foreign collaborations were allowed for
all two-wheelers up to an engine capacity of 100 cc. This prompted a spate of new
entries into the industry the majority of which entered the motorcycle segment,
bringing with them new technology that resulted in more efficient production
processes and products. The variety in products available also improved after ‘broad
banding’ was allowed in the industry in 1985 as Between 1974-79, sales of two-
wheelers increased by 60%, while that of cars declined by 21% and jeeps grew only
by 11%. Indian motorcycles in the seventies had two major drawbacks viz., low fuel-
efficiency and high weight. Worldwide however, there was a trend towards using
high-strength, low-weight materials for various components which resulted in
vehicles that were compact and had lower weight. Since fuel-consumption of a two-
wheeler depended on its weight, lighter vehicles meant greater mileage. These
drawbacks were overcome in the eighties when foreign collaborations were once
again allowed a part of NEP. This, coupled with the announcement of the MES of
production for the two wheeler industry, gave firms the flexibility to choose an
optimal product and capacity mix which could better incorporate market demand into
their production strategy and thereby improve their capacity utilization and efficiency.
These reforms had two major effects on the industry: First, licensed capacities went
up to 1.1 million units per annum overshooting the 0.675 million units per annum
target set in the Sixth Plan. Second, several existing but weaker players died out
giving way to new entrants and superior products

d) 1991 – 1999

The reforms that began in the late seventies underwent their most significant change
in 1991 through the liberalization of the economy. The two-wheeler industry was
completely deregulated. In the area of trade, several reforms were introduced with the
goal of making Indian exports competitive.

28
The two-wheeler industry in the nineties was characterized by an increase in the
number of brands available in the market which caused firms to compete on the basis
of Fuel-efficiency improved by (60-100) % in the new vehicles. In the seventies,
motorcycle mileage was on an average between 25 to 50 kmpl (kilometre per litre),
which had now improved to 50 to 80 kmpl. For mopeds it improved from 50 kmpl to
80 kmpl. Output of the engines also increased from 3-4 HP to 10 HP per 100 cc. In
the two-wheeler industry, MES was pegged at 2, 00,000 units and 5, 00,000 units of
annual licensed capacity for non-exporting and exporting firms respectively (CMIE,
1990). In the scooter segment, models with features like self-starter facility, automatic
transmission system, gear-less riding etc. were introduced that were traditionally not
available in scooters. In the motorcycle segment, the new 100 cc models compared
well against the existing heavier models of 250 cc, 350 cc etc. as these were lighter
and more fuel-efficient Joshi and Little (1996) discuss the economic crisis of 1991
and the policy response of the Indian government. The EXIM Scrip was introduced
which granted exporters entitlements worth 40% of their export earnings. Similarly
quantitative restrictions were replaced with import duties which were around 85% of
the two-wheeler industry (GATT Secretariat, 1993). Product features and increase in
sales volumes in the motorcycle segment vis-à-vis the scooter segment reversing the
traditional trend.

History of two wheelers industry:


Motorcycles have made their debut around the 1950s; this section looks at the two
wheelers which have over the years caught the imagination of country. It was in the
year 1954 that the Indian government ordered for totalling number of 800
motorcycles to man the Pakistani borders. In came the Bullets which were initially
launched in England as a 350cc bike and it was upgraded to 500cc a year or so later.
These bikes have remained unaltered, barring some cosmetic changes which have
undergone over the years. Thus one can say without much of a doubt that the 1955
Bullet was one of the initial hits of the Indian two-wheeler industry and till today it
continues to be a darling of the motorcycle enthusiasts.

Enfield Bullet had a close competition with another sturdy bike named Rajdoot; as
the bike was strong enough to handle the rough Indian roads. The company had roped

29
in Indian He-man Dharmendra for the promotion of the bike. With more than 1.6
million vehicles on the road the Rajdoot motorcycle was one of the initial hits of the
earlier years of two-wheeler history in the country.

When heavy motorcycles were the order of the day, a relatively lighter bike had
caught on the imagination of the Indian two wheeler user. Ind- Suzuki bike launched
by the then TVS Suzuki group was an instant hit; however the bike could not sustain
its initial success due to the high import content in the vehicle and less of localization.
In scooters Bajaj Chetak has been hugely responsible for adding momentum to the
transport system of the country, till today it remains one of the most successful brands
to have come out of the Bajaj stable. The scooter is named after the horse of
legendary RanaPratap Singh. These sets of two wheels have become a part of the
Indian milieu and are often considered a representative of the Indian middle class
aspiration. Very few two-wheelers have been able to emulate the success, which Bajaj
Chetak has achieved over the years.

Similarly LML Motors enjoyed a reasonable success with the launch of LML Select
which came with new age technology and improved performance. Today newer
models of two-wheeler are entering the market every day, slowly pushing these names
down the memory lane. However names like Chetak, Rajdoot and Bullet will always
find a mention in the history of two-wheelers in the country.

Profile of two-wheeler industry:


The two-wheeler industry in India has been in existence since 1955. It consists of
three segments
 Scooters
 Motorcycles
 Mopeds

The increase in sales volume of this industry is proof of its high growth. In 1971,
sales were around 0.1 million units per annum. But by 1998, this figure had risen to 3
million units per annum. Similarly, capacities of production have also increased
from about 0.2 million units of annual capacity in the seventies to more than 4 million
units in the late nineties. The two-wheeler industry in India began operations within
30
the framework of the national industrial policy as espoused by the Industrial Policy
Resolution of 1956. This resolution divided the entire industrial sector into three
groups, of which one contained industries whose development was the exclusive
responsibility of the State, another included those industries in which both the State
and the private sector could participate and the last set of industries that could be
developed exclusively under private initiative within the guidelines and objectives
laid out by the Five Year Plans.

Private investment was channelized and regulated through the extensive use of
licensing giving the State comprehensive control over the direction and pattern of
investment. Entry of firms, capacity expansion, choice of product and capacity mix
and technology, were all effectively controlled by the State in a bid to prevent the
concentration of economic power. However due to lapses in the system, fresh policies
were brought in at the end of the sixties. These consisted of MRTP of 1969 and FERA
of 1973, which were aimed at regulating monopoly and foreign investment
respectively. Firms that came under the purview of these acts were allowed to invest
only in a select set of industries. This net of controls on the economy in the seventies
caused several firms to. Operate below the minimum scale of efficiency Under-utilize
capacity and Use outdated technology. While operating below the minimum scale of
efficiency resulted from the fact that several incentives were given to smaller firms,
the capacity under-utilization was the result of the capacity mix being determined
independent of the market demand.

The policy of distributing imports based on capacity, causing firms to expand beyond
levels determined by demand so as to be eligible for more imports. Use of outdated
technology resulted from the restrictions placed on import of technology through the
provisions of FERA. Recognition of the deleterious effects of these policies led to the
initiation of reforms. In 1975 which took on a more pronounced shape and acquired
wider scope under the New Economic Policy (NEP) in 1985. As part of these reforms,
several groups of industries were deli censed and ‘broad banding’ was permitted in
select industries. Controls over capacity expansion were relaxed through the
specification of the operate below the minimum scale of efficiency of production for
several industries.

31
Foreign investment was allowed in select industries and norms under the MRTP Act
were relaxed. These reforms led to a rise in the trend rate of growth of real GDP from
3.7% in the seventies to 5.4% in the eighties. However the major set of reforms came
in 1991 in response to a series of macroeconomic crises that hit the Indian economy in
1990-91. Several industries were deregulated, the Indian rupee was devalued and
made convertible on the current account and tariffs replaced quantitative restrictions
in the area of trade. The initiation of reforms led to a drop in the growth of real GDP
1990 – 1992, but this averaged at about 5.5% per annum after 1992. The decline in
GDP in the years after reforms was the outcome of devaluation and the contractionary
fiscal and monetary policies taken in 1991 to address the foreign exchange crisis.

Thus the Industrial Policy in India moved from a position of regulation and tight
control in the sixties and seventies, to a more liberalized one in the eighties and
nineties. The two-wheeler industry in India has to a great extent been shaped by the
evolution of the industrial policy of the country. Regulatory policies like FERA and
MRTP caused the growth of some segments in the industry like motorcycles to
stagnate. These were later able to grow (both in terms of overall sales volumes and
number of players) once foreign investments were allowed in 1981.

Present role of two wheeler industry:


The growth story for the Indian automobile industry in 2014 rode on the two-wheeler
segment and not on passenger cars or commercial vehicles, as high interest rates and a
stuttering manufacturing industry kept a check on demand. The year also saw
Competition Commission of India (CCI) levying a penalty of Rs.2, 544.65 crore
($415) on 14 car makers for their restrictive trade practices by preventing independent
repairers coming into the market. Some of the leading car makers also had to recall
some models over defective components.

India sales analysis: February


With four of the Big Five car manufacturers registering gains in their February 2015
sales, the mood is somewhat good in the Indian automobile industry. Other than
Mahindra & Mahindra, Maruti Suzuki, Hyundai Motor India, Honda Cars India and
Tata Motors all posted decent to good growth year on year. Coming on the back of

32
January 2015’s overall sales growth of 3.14 percent for the passenger car sector, this
will be good news for an industry battling high interest rates and lacklustre consumer
interest, along with the withdrawal of excise sales sops in 2015.

In comparison, two-wheeler manufacturers are feeling the pressure of slowing


motorcycle sales, particularly in the rural market, and leading players have reported
YoY declines in their bike numbers. Scooter sales though continue to perform with
aplomb, giving a helping hand to overall numbers. Importantly, commercial vehicle
sales numbers for February continued to be in positive territory. The medium and
heavy commercial vehicle (M&HCV) segment that has seen an uptick continues with
double-digit growth and the LCV sector, which has been subdued, seems to be
gaining momentum as well.
So, here’s looking at each of three vehicle categories.

Scooters keep up the sales act but bikes falter:


February 2015 turned out to be a relatively tough month for motorcycle sales, while
scooters continued to grow yet again. In a corporate announcement made on Bombay
Stock Exchange’s (BSE) website, India’s largest motorcycle manufacturer, Hero
Motocorp has communicated that its monthly sales for February 2015 stands at
484,769 units as against 504,181 units sold in February 2014. The company has
registered a fall of 3.85 percent YoY for this month. However, it is known that in the
near future, Hero Motocorp is gearing up to launch its new scooters, starting from its
110cc Honda Active competitor, Hero Dash, which was earlier unveiled at the Auto
Expo in Greater Noida last year. To prepare itself on the front of the production
capacity of scooters, the listed company is in the process of ramping up its capacity
from 75,000-80,000 units per month to 100,000-150,000 units per month. According
to sources, this process is estimated to end by mid-2015.

Hero, which has lined up a couple of new two-wheeler launches for 2015, has been
boosting its R&D strengths over time. The company is known to have filed over 15
patents and also has registered 77 designs in FY2013-14. These developments
included the idle start-stop switch (on the Splendor smart model), side-stand indicator,
integrated braking system (brake actuator primarily for scooters), fuel lid, gas liquid
separation apparatus, vehicle operation status monitoring system and several other
33
features. Furthermore, the company is also known to have carried operations in the
areas of new model technology absorption, indigenisation of the CKD parts, multi-
source approval, meeting legislative norms, and gearing up for future automobile
regulations in India during that financial year.

February 2015 marked the highest domestic market share of 29 percent for Honda
Motorcycle & Scooter India (HMSI). The company sold a total of 361,493 units
during the month, marking a growth of 10.05 percent (including exports as well).
HMSI’s February 2014 sales stood at 328,468 units. However, on the motorcycle
sales front, even HMSI witnessed a marginal dip of 2.25 percent during the said
month, when it sold 139,334 units (February 2014 bike sales: 142,549 units).

34
COMPANY PROFILE

Introduction to the company:


Hero Motocorp Ltd. (Formyl Hero Honda Motors Ltd.) is the world's largest
manufacturer of two -wheelers, based in India.

In 2001, the company achieved the coveted position of being the largest two-wheeler
manufacturing company in India and also, the’ World No.1'two wheeler company in
terms of unit volume sales in calendar year . Hero Motocorp Ltd. Continues to
maintain this position till date.
Company profile:
''Hero'' is the brand name used by the munjal brothers for their flagship company,
Hero cycles Ltd. a joint venture between the Hero Group and Honda motor company
was established in 1984 as the Hero Honda motors Ltd at dharruhera, India Munjal
family and Honda group both owned 26% stake in the company. In 2010, it was
reported that Honda planned to sell its stake in the venture to the munjal family.
During the 1980's the company introduced motorcycles that were popular in India for
their fuel economy and low cost. A popular advertising campaign based on the slogan
FILL IT-SHUT -IT -FORGET IT' that emphasized the motorcycle's fuel efficiency
helped the company grow at a double -digit pace since inception .The technology in
the bikes of Hero Honda for almost 26 years.
 Hero Motocorp Sasya auto was established in December 12, 2002 in
Kurnool.
 It is located near the cross roads of Bellary (chow rastha), fly over bridge.
 Sasya auto showroom located in 10,000 square feet and only servicing centre
is located nearly 5,000 square feet.
 In this company total servicing work employees are 80.
 Daily servicing timings are 8 AM to 8 PM.
 Per day 75-100 bikes they will allow for the services.
 Works manager of Hero Sasya Kurnool is Mr. Narayana Swamy.

35
Vision:
The story began with a simple vision – the vision of a mobile and an empowered
India, powered by its bikes. Hero Motocorp Ltd., company’s new identity, reflects its
commitment towards providing world class mobility solutions with renewed focus on
expanding company’s footprint in the global arena.

Mission:
Hero Motocorp mission is to become a global enterprise fulfilling its customers’
needs and aspirations for mobility, setting benchmarks in technology, styling and
quality so that it converts its customers into its brand advocates. The Company will
provide an engaging environment for its people to perform to their true potential. It
will continue its focus on value creation and enduring relationships with its partners.
Strategy:
Hero Motocorp key strategies are to build a robust product portfolio across categories,
explore growth opportunities globally , continuously improve its operational
efficiency, aggressively expand its reach to customers ,continue to invest in brand
building activities and ensure customer and shareholder delight.

Manufacturing:
Hero group bikes are manufactured across three globally benchmarked manufacturing
facilities. Two of these are based at Gurgaon and dharruhera which are located in the
state of Haryana in north India. The third and the latest manufacturing plant is based
at Haridwar, in the hill of state of Uttarakand.

Technology:
In 1980’s the company pioneered the introduction of fuel-efficient, environment
friendly four-stroke motorcycles in the country. It became the first company to launch
the fuel injection (FI) technology in India motorcycles, with the launch of the glamour
FI in 2006.

36
Product range of the company includes:
 CD Dawn
 CD Deluxe
 Pleasure
 Splendor +
 Splendor NXG
 Passion PRO
 Passion Plus
 Super Splendor
 Glamour
 Glamour PGM FI
 Achiever
 CBZ Extreme
 Hunk
 Karizma

The Indian two-wheeler (2W) industry, the largest in the world in terms of volumes,
had demonstrated positive volume growth in the last three years (2011-14) even when
some of the other automobile segments such as passenger vehicles and commercial
vehicles experienced volume contraction in at least one of the last three fiscals. In 5m
2014-15, the 2W industry’s growth was even stronger with sales volumes expanding
by a healthy 14.8% YOY, the fastest pace of growth since 2010-11. While strong
demand for scooters (contributed 27% to domestic 2W industry sales volumes in 5m
2014-15) has been the primary driving force behind overall.

2W industry expansion in the last three years, the motorcycle segment’s contribution
to 2W industry growth too gained force in 5m 2014-15 by virtue of greater
replacement demand and new model launches by various Original Equipment
Manufacturers (OEMs). Hero Motocorp Limited is the World's single largest two-
wheeler motorcycle company. The company is engaged in the manufacture of two
wheelers motorcycles and its parts. The company has three manufacturing facilities
namely Dharuhera, Gurgaon at Haryana and Haridwar at Uttarakhand. The company
is based in New Delhi, India. The company offers a range of bikes starting from CD

37
Dawn, CD Deluxe, Splendor Plus, Splendor NXG, Passion and Passion Pro. The 125
cubic centimetre segment offers Glamour, Super Splendor and Glamour F1. It also
has an offering called Achiever in 135 cubic centimetre segment. In the 150 cubic
centimetre and above the company offers brands like Hunk, CBZ X-treme, Karizma
and the Karizma ZMR. It also offers a 100 cubic centimetre scooter, Pleasure. Hero
MotoCorp Limited was incorporated in the year 1984 with the name Hero Honda
Motors Ltd. The company was established as a joint venture company between Honda
Motor Company of Japan and Hero Group. In the year 1983, they signed a joint
collaboration agreement and formed the company. The joint venture between India's
Hero Group and Honda Motor Company, Japan has not only created the world's
single largest two wheeler company but also one of the most successful joint ventures
worldwide.

In the year 1985, the company commenced their commercial production at Dharuhera
plant in Haryana and introduced their first motorcycle, CD 100 in the market. In the
year 1989, they launched the new motorcycle model, Sleek in the market and in the
year 1991, they introduced new motorcycle model, CD 100 SS in the market. In the
year 1995, the company introduced their extraordinary product, Splendor in the
market. In the year 1997, the company inaugurated their second manufacturing
facility at Gurgaon in Haryana. Also, they introduced new motorcycle model, Street
in the market. In the year 1999, they launched Hero Honda CBZ, the first 150cc
motorcycle in the Indian two wheeler industry. In the year 2001, the company
introduced new models, Passion and Joy in the market. In the next year, they
introduced new models, Dawn and Ambition in the market. In the year 2003, the
company launched new motorcycle models namely, CD Dawn, Splendor+ and
Passion Plus in the market. Also, they launched Hero Honda Karizma, the industry's
first 223cc motorcycle. In the year 2004, they introduced new models, Ambition 135
and CBZ* in the market. During the year, they renewed the joint technical agreement
with the Honda Motors Company, Japan. In the year 2005, the company launched
Super Splendor, CD Deluxe, Glamour and Achiever in the market. In the year 2006,
the company forayed into scotter segment and launched 100cc gearless scotter,
Pleasure in the market. In the year 2007, the company launched Splendor NXG, CD

38
Deluxe, Passion Plus and Hunk in the market. During the year 2007-08, the company
commissioned their third plant at Haridwar in Uttarakhand with an initial installed
capacity of 500,000 units. This plant had lean manufacturing and practices that ensure
efficiency. During the year, the company launched new models (including variants)
including Splendor NXG, Hunk, New Super Splendor, New Passion Plus,
Commemorative Splendor+ and a refreshed version of Pleasure. During the year
2008-09, the company increased the installed capacity of Motorised 2 wheelers upto
350CC engine by 1800000 to 5200000 Nos. Also, they launched eight models:
Passion Pro (100 cubic capacity-4 Stroke), CBZ-Extreme (150 cubic capacity - 4
Stroke), Pleasure New Aesthetics, Splendor NXG (Self Start), CD Deluxe (Self Start),
Glamour FI, Glamour (Carb) and HUNK Special Edition. Also, they launched new

Motorcycle model, Karizma- ZMR in the market. During the year 2009-10, the
company increased the installed capacity of Motorized 2 wheelers upto 350CC engine
by 200000 to 5400000 Nos. The company launched nine new models during the year.
During the year 2010-11, the company launched six new models including variants of
existing models successfully. They refreshed Glamour and Glamour FI. They
introduced the New Hunk, Super Splendor and Splendor Pro. The company launched
the new upgraded versions of CBZ Xtreme and Karizma. Also, they breached the
landmark 5 million figure cumulative sales in a single year. During the year, the
Indian Promoter Group of the company, which comprised of Hero Investments Pvt
Ltd (HIPL), Bahadur Chand Investment Pvt Ltd (BCIPL) and Hero Cycles Limited
(Hero Cycles) re-aligned the shareholding in the company, following a family
agreement. Also, during the year, the Indian Promoter Group and Honda Motor Co
Ltd, Japan (Honda) entered into a Share Transfer Agreement (the Agreement) on
January 22, 2011. As per the terms of the Agreement, Honda had agreed to transfer its
entire shareholding of 26% in the Company to the Indian Promoter Group, bringing
an end to the joint venture between the two promoter groups of the company. The
acquisition was completed on March 22, 2011 and the shares held by Honda were
transferred to the Indian joint venture partner. In addition to the Agreement, the
Indian Promoter Group and Honda also entered into a License Agreement on January
1, 2011. As per this agreement, Honda has given to the company, the right and license
to manufacture, assemble, sell and distribute certain products and their service parts

39
under their Intellectual Property Rights. In February 2012, the company entered into a
strategic partnership with Erik Buell Racing (EBR) Of USA for contemporary
technology and design inputs to enable the company to launch high end bikes for the
domestic and international markets.

Introduction to Sasya auto:

Sasya auto was established in the year 2002 as spares and service of hero Honda
Motocorp. Chair persons of Sasya auto are M. Srinivas Rao and M. Krishna Mohan
Rao after that they got three years excellence award in spares and services of Hero
Honda. In 2007 company gave the dealership of Hero Honda Two wheelers in
Kurnool to Sasya auto. At the time two of the establishment of the dealership the sales
manager Lakshmikanth Reddy, work manager and customer care manager is
Narayana Swamy. Sasya Auto has got a Skilled human resources in the firm and are
as follow, 8 supervisors,14 technicians, assistant Technicians 14 members, computer
operator 1member, telephone operator 1 member are internal employees , and
external employees are as follows , Sales Executives 7 females and 5 males working
in the firm for more than 3 years.

In the year 2012 due to the solvency of the collaboration Hero and Honda the Sasya
Auto Dealership changed from "Hero Honda" to only “Hero” .The Sasya Auto Sales
is 15-20 bikes regularly and during the special occasions the sales move to more than
30 bikes per a day . Regional sales manager is Kiriti Krishna puri. At the same time
Sasya auto is serving its 100 customers regularly .Which in act both free service and
pay service. Sasya Auto also conducts a monthly once camps to promote the newly
launched two wheelers of hero, viz Hero Extreme, Hunk. Sasya Auto conducts the
Exchange mela under special discount offers twice or trice in a year in various parts
of bikes, this offer is in Kurnool District like Bethamcharla, Shanti agar, dhone,
Pathikonda etc.

40
DATA ANALYSIS AND INTERPRETATION

TABLE – 5.1: Gender

S .No Employee Gender No. of Respondents Percentage


1 Male 69 87.34%

2 Female 10 12.66%

Total 79 100%

Source: Primary Data

GRAPH – 5.1

87.34%

12.66%

Male Female

Interpretation:

The above graph reveals that 87.34% of the respondents are male and 12.66% of the
respondents are female. Hence, it is found that majority of the employees in Sasya
Auto are male.

41
TABLE – 5.2: Marital Status

S. No Employee Marital Status No. of Respondents Percentage


1 Married 57 72.15%

2 Unmarried 22 27.84%

3 Divorced 0 0

Total 79 100%
Source: Primary Data

GRAPH – 5.2

72.15%

27.84%

Married Unmarried Divorced

Interpretation:

The above graph reveals that 72.15% of the respondents are married and 27.84% of
the respondents are unmarried. Hence, it is found that majority of the employees in
Sasya Auto are married.

42
TABLE – 5.3: Employee Experience

S. No Employee Experience No. of Respondents Percentage


1 0-5 years 20 25.31%

2 6-10 years 35 44.30 %

3 11-15 years 16 20.25%

4 15 years & above 8 10.14%

Total 79 100%
Source: Primary Data

GRAPH – 5.3

44.30%

25.31%
20.25%

10.14%

0-5 years 6-10 years 11-15 years 15 years & above

Interpretation:

The above graph reveals that 25.31% of the respondents are 0-5 years experience and
44.30% of the respondents are 6-10 years experience and 20.25% of the respondents
are 11-15 years experience and 10.14% of the respondents are 15years and above
experience.

43
TABLE – 5.4: Appraisal in the company is purely based on work
performance?

S. No Employee Opinion No. of Respondents Percentage

1 Strongly Agree 25 31.6%

2 Agree 24 30.4%

3 Undecided - -

4 Disagree 30 38%

5 Strongly Disagree - -

Total 79 100%

Source: Primary Data

GRAPH – 5.4

38%

31.60%
30.40%

0 0

Strongly Agree Agree Undecided Disagree Strongly Disagree

Interpretation:

The above graph reveals that 61.10% of the respondents are agreed and 38% of the
respondents are disagree. Hence, it is found that majority of the employees in Sasya
Auto are agreed that appraisal in the company is purely based on work performance.

44
TABLE – 5.5: Does group characteristics affect the employee’s
appraisal?

S. No Employees Opinion No. of Respondents Percentage

1 Strongly Agree 21 26.6%

2 Agree 39 49.4%

3 Un Decided - -

4 Disagree 19 24%

5 Strongly Disagree - -

Total 79 100%

Source: Primary Data

GRAPH – 5.5

49.40%

26.60%
24%

0 0

Strongly Agree Agree Un Decided Disagree Strongly Disagree

Interpretation:

The above graph reveals that 75.10% of the respondents are agreed and 24% of the
respondents are disagree. Hence, it is found that majority of the employees in Sasya
Auto are agreed that group characteristics affect the employee’s appraisal.
45
TABLE – 5.6: Appraisal serves the following purposes in your
organization?

S.No Options No of respondents Percentages

1 Determining rewards 19 24%

2 Promotions 5 6.3%

3 Assessing training needs 39 49.4%

4 Goal setting 16 20.3.%

Total 79 100%

Source: Primary Data

GRAPH – 5.6

37% 38%

12% 13%

Determining rewards Promotions Assessing training needs Goal setting

Interpretation:
Among the selected 79 respondents, 24% respondents agreed that appraisal is done
for determining the rewards, 12% agreed as it is done for promotions and majority of
the 49.4% respondents have an opinion that appraisal is done for assessing training
needs and only 20.3% respondents feel that it is meant for setting goals.
46
TABLE – 5.7: What factors are being considered in appraising the
performance of the employees in your organization?

S.No Options No. of Respondents Percentage

1 Managerial factors 24 30.4%

2 Job related factors 40 50.6%

3 Personal factors 15 19%

Total 79 100 %

Source: Primary Data

GRAPH – 5.7

50.60%

30.40%

19%

Managerial factors Job related factors Personal factors

Interpretation:

Among the 79 respondents, 30.40% of the respondents are considered managerial


factors and 50.60% of the respondents are considered job related factors and 19% of
the respondents are considered personal factors. Hence, Majority of the 50.60%
respondents’ opinion that job related factors are being considered in appraising the
performance of the employees.

47
TABLE – 5.8: Do you feel that performance appraisal is done to get
the feedback?

S. No Employees opinion No. of Respondents Percentage

1 Yes 67 84.8%

2 No 12 15.2%

Total 79 100%

Source: Primary Data

GRAPH – 5.8

84.80%

15.20%

Yes No

Interpretation:

The above graph reveals that 84.8% of the respondents opinion are yes and 15.20% of
the respondents opinion are no. Hence, it is found that majority of the employees in
Sasya Auto are feel that performance appraisal is done to get the feedback.

48
TABLE - 5.9: The appraisal system provides for a frank discussion
between the appraiser and the appraise?

S. No Employee Opinion No. of Respondents Percentage

1 Strongly Agree 10 12.6%

2 Agree 40 50.6%

3 Undecided - -

4 Disagree 24 30.4%

5 Strongly Disagree 5 6.4%

Total 79 100

Source: Primary Data

GRAPH –5.9

50.60%

30.40%

12.60%
6.40%
0

Strongly Agree Agree Undecided Disagree Strongly Disagree

Interpretation:
The graph-5.9 shows the opinions of the respondents about frank discussion between
the appraiser and appraise. Here, overall 63.2% of the respondents are agreed with the
statement, whilst 36.8% of the respondents disagreed with the statement.

49
TABLE – 5.10: Do you feel that performance appraisal identifies the
employee training needs and therefore facilitates development?

S. No Employee opinion No. of Respondents Percentage

1 Yes 69 87.4%

2 No 10 12.6%

Total 79 100%

Source: Primary Data

GRAPH – 5.10

87.40%

12.60%

Yes No

Interpretation:

The above graph reveals that 87.40% of the respondents opinion are yes and 12.60%
of the respondents opinion are no. Hence, it is found that majority of the employees in
Sasya Auto are feel that performance appraisal identifies the employee training needs
and therefore facilitates development.

50
TABLE – 5.11: Are you satisfied with current appraisal Method
followed by your organization?

S. No Employee opinion No. of Respondents Percentage

1 Fully Satisfied 52 65.8%

2 Satisfied 18 22.8%

3 Not Satisfied 9 11.4 %

Total 79 100%

Source: Primary Data

GRAPH – 5.11

65.80%

22.80%

11.40%

Fully Satisfied Satisfied Not Satisfied

Interpretation:

The above graph reveals that 87.16% of the respondents are satisfied and 11.40% of
the respondents are not satisfied. Hence, it is found that majority of the employees in
Sasya Auto are satisfied with current performance appraisal system.

51
TABLE – 5.12: Does the appraisal system provide an opportunity of
self –review and realization of potential?

S. No Employee opinion No. of Respondents Percentage

1 Strongly Agree 10 12.6%

2 Agree 39 49.4%

3 Undecided - -

4 Disagree 21 26.6%

5 Strongly Disagree 9 11.4%

Total 79 100%
Source: Primary Data

GRAPH – 5.12

49.40%

26.60%

12.60% 11.40%

Strongly Agree Agree Undecided Disagree Strongly Disagree

Interpretation:

The above graph reveals that 61.10% of the respondents are agree and 37.10% of the
respondents are disagree. Hence, it is found that majority of the employees in Sasya
Auto are agreed.

52
TABLE – 5.13: Performance appraisal system increases the level of
employee Moral?

S. No Employees opinion No. of Respondents Percentage

1 Yes 40 50.6%

2 No 9 11.4%

3 Uncertain 30 38%

Total 79 100%

Source: Primary Data

GRAPH – 5.13

50.60%

38%

11.40%

Yes No Uncertain

Interpretation:

The above graph reveals that 50.60% of the respondents opinion are yes and 11.40%
of the respondents opinion are no and 38% of the respondents opinion are uncertain.
Hence, it is found that majority of the employees in Sasya Auto are feel that
performance appraisal system increases the level of employee Moral.
53
TABLE – 5.14: Do you feel that performance appraisal system helps
to assist career planning decision?

S. No Options No. of respondents Percentage

1 Yes 39 49.4%

2 No 20 25.3%

Uncertain 20 25.3%

Total 79 100%

Source: Primary Data

GRAPH – 5.14

49.40%

25.30% 25.30%

Yes No Uncertain

Interpretation:

The above graph reveals that 49.40% of the respondents opinion are yes and 25.30%
of the respondents opinion are no and 25.30% of the respondents opinion are
uncertain. Hence, it is found that majority of the employees in Sasya Auto are feel
that performance appraisal system helps to assist career planning decision.

54
TABLE – 5.15: On What basis goals are identified?

S.No Response No.of respondents percentage

1 Activity based 43 54.4%

2 Outcome based 28 35.4%

3 Both 8 10.2%

Total 79 100%

Source: Primary Data

GRAPH – 5.15

54.40%

35.40%

10.20%

Activity based Outcome based Both

Interpretation:

From the above graph 5.15 54.40% of the respondents are activity basis and 35.40%
of the respondents are outcome basis 10.20% of the respondents are both.

55
TABLE – 5.16: How often do you have performance discussions with
your superiors?

S.No Response No. of Respondents Percentage

1 Only at the time of review 12 15.2%

2 In case of achievement and 38 48.1%


failure

3 Weekly 10 12.6%

4 Monthly 19 24.1%

Total 79 100%

Source: Primary Data

GRAPH – 5.16

48.10%

24.10%

15.20%
12.60%

Only at the time of In case of achievement Weekly Monthly


review and failure

Interpretation:
From the above options 15.20% of the respondents discuss with their superiors only at
the time of review, 48.10% of the respondents discuss, in case of achievement and
failure, while 12.60% of the respondents discuss weekly once, and remaining 24.10%
of the respondents discuss with their superiors monthly once.

56
TABLE – 5.17: Did you face any problem with present performance
appraisal system?

S. No Opinion No. of respondents Percentage

1 Yes 43 54.4%

2 No 36 45.6%

3 Can’t Say - -

Total 79 100%

Source: Primary Data

GRAPH – 5.17

54.40%

45.60%

Yes No Can’t Say

Interpretation:

The above graph 5.17 reveals that 54.40% of the respondents opinion are yes and
45.60% of the respondents opinion are no and 0% of the respondents opinion are can’t
say. Hence, it is found that majority of the employees in Sasya Auto are face any
problem with present performance appraisal system.

57
FINDINGS

 Majority of the employees in Sasya Auto are male.

 Majority of the employees in Sasya Auto are agreed that appraisal in the company
is purely based on work performance.

 Majority of the employees in Sasya Auto are agreed that group characteristics
affect the employee’s appraisal.

 Majority of the employees in Sasya Auto are feel that performance appraisal is
done to get the feedback.

 Majority of the employees in Sasya Auto are feel that performance appraisal
identifies the employee training needs and therefore facilitates development.

 Majority of the employees in Sasya Auto are satisfied with current performance
appraisal system.

 Majority of the employees in Sasya Auto are feel that performance appraisal
system helps to assist career planning decision.

 Majority of the employees in Sasya Auto are face any problem with present
performance appraisal system.

58
SUGGESTIONS

 Training programs should be improved by conducting career counseling.

 The management designs a more effective appraisal than the existing system and
reveals the factors they consider to appraise the performance of all employees.

 An effective performance appraisal system which facilitates mutual goal setting


and feedback should be designed.

 The management may appoint a reviewing officer so as to reduce bias in


appraising employee’s performance.

 Management should reward employees based on performance.

59
CONCLUSION

Due to dynamic working conditions and increased significance of human resource


talent, today employee performance appraisal system play a vital role in all sorts of
the service organizations, especially in the Automobile Industry. Because, employees
in service sector have frequent contacts with the customer, they usually serve as
representatives of the organization and their services to the customer at the contact
point. According to experts satisfied employees able to produce satisfied customers.
Service interactions, service quality and customer satisfaction or dissatisfaction
merely depend on employee participation, involvement and commitment.

The present study confirms that there is a significant relationship among employee
performance appraisal system and its impact on employee performance. Personal
goals, Feedback, Superior support, Training, and Career planning are recognized as
the critical success factors of performance appraisal system. In present scenario,
Sasya Auto is practicing better performance appraisal system intend to satisfy their
employees.

60
BIBLIOGRAPHY

1. Anupama and D. M.B.T. and Dulababu T., “The Need of „720 Degree
Performance Appraisal in the New Economy Companies”, International Journal of
Multidisciplinary Research,vol.1(4),2011.
2. Blstakova I.J. ,“Employees‟ Appraisal is an indicator of the quality of human
resource management in organizations in slovakia”,MegaTrend Review:The
International Review of Applied Economics,vol.7(2),2010.
3. Bracken, Timmreck and Church H., Handbook of Multisource Feedback, First
Edition,Jossey Bass Inc,2001.
4. Byham W.C.,The Assessment Center Method and Methodology:New
Applications and Methodologies,Development Dimensions International,1986.
5. Castillo, “The User Reported Critical Incident Method for Remote Usability
Evaluation”, 1997.
6. Decenzo Stephen P.Robbins, Human Resource Management, Tenth Edition,
Prentice Hall, 2011.
7. Elverfeldt “Performance Appraisal-how to improve its effectiveness, University of
Twenty, Enschede, 2005.
8. Jafari, Bourouni and Amiri, “A New Framework for selection of the best
performance appraisal method, European Journal of Social Sciences, vol.7 (3),
2009.
9. Johanson et al., “Human Resource Costing and Accounting versus the Balanced
ScoreCard: A Literature Survey of Experience with the concepts, OECD, Paris,
1998.
10. Kohli A.S. & Deb T., Performance Management, First Edition, Oxford University
Press, 2008.
11. O.R Krishnaswami and M. Ranganatham: Methodology of Research in Social
Sciences,2005, ISBN 81-8318-454-5

12. Subbarao, P., “Human Resource Management” Eight Edition, Himalaya


Publications, 2005.

61
QUESTIONNAIRE

Respected Sir/Madam,

I, K. SINDHU PRIYA, a student of G. Pullaiah College of Engineering &


Technology, Kurnool. I am doing my M.B.A project work (HR Stream) entitled
“PERFORMANCE APPRAISAL AND EMPLOYEE PERFORMANCE WITH
SPECIAL REFERNCE TO SASYA AUTO, KURNOOL)”. So, I request you to
respond to the questionnaire with your valuable inputs.

Demographic Details:
Name:
Designation:
Organisation Name:
1. Gender: ( )
(a) Male (b) Female
2. Marital Status: ( )
(a) Married (b) Unmarried (c) Divorced
3. Experience: ( )
(a) 0-5 years (b) 6-10 years
(c) 11-15 years (d) 15 years & above

Psychographic Details:
4. Appraisal in the company is purely based on work performance. ( )

(a) Strongly Agree (b) Agree (c) Un Decided


(d) Disagree (e) Strongly Disagree

5. Group characteristics affect the employees’ appraisal ( )

(a) Strongly Agree (b) Agree (c) Un Decided


(e) Disagree (e) Strongly Disagree

62
6. Appraisal serves the following purposes. ( )

(a) Determining rewards (b) Promotion


(c) Assessing Training Needs (d) Goal Setting

7. What factors are being considered in appraising the performance of the


employees in the organization? ( )

(a) Managerial factors (b) Job related factors


(c) Personal factors

8. Performance appraisal is done to get the feedback. ( )

(a) Yes (b) No

9. The appraisal system provides for a frank discussion between the appraiser and
the appraise. ( )

(a) Strongly Agree (b) Agree (c) UnDecided


(f) Disagree (e) Strongly Disagree

10. Performance appraisal identifies the employee training needs and


therefore facilitates development. ( )

(a) Yes (b) No

11. Are you satisfied with current appraisal Method? ( )

(a) Fully Satisfied (b) Satisfied (c) Not Satisfied

12. The appraisal system provides an opportunity of self –review and realization
of potential. ( )

(a) Strongly Agree (b) Agree (c) UnDecided


(g) Disagree (e) Strongly Disagree

63
13. Performance appraisal system increases the level of employee Moral.
( )
(a) Yes (b) No (c) Uncertain

14. Performance appraisal system helps to assist career planning decision.


( )

(a) Yes (b) No (c) Uncertain

15. On what basis goals are identified ( )

(a) Activity based (b) Outcome based (c) Both

16. How often do you have performance discussions with your superiors?
( )
(a) Only at the time of review (b) In case of achievement and failure
(c) Weekly (d) Monthly

17. Did you face any problems with the present performance appraisal system?
( )

(a) Yes (specify): (b) No (c) Can’t Say

64

You might also like