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CHAPTER 1

1. INTRODUCTION

Appraising the performance of individuals, groups and organizations is a common


practice of all societies. While in some instances the appraisal processes are structured and
formally sanctioned, in other instances they are an informal and integral part of daily
activities. Thus, teachers evaluate the performance of students, bankers evaluate the
performance of creditors, parents evaluate the behaviour of the children, and all of us,
consciously or unconsciously evaluate our own actions from time to time.

“Performance Appraisal” has been identified as one of the most complex of man-
management activities. It is often a difficult and emotion laden process. Performance
appraisal has become part of organizational life. Every organization has some kind of
evaluating the performance of its personnel.

“Performance Appraisal” or “Merit rating” is one of the oldest and universal


practices of management. This approach resulted in an appraisal system in which the
employee’s merits like initiative, dependability, personality etc., were compared with others
and ranked or rated.

HISTORY
During and after World War I, systematic performance appraisal was quite prominent.
Credit goes to Walter Dill Scot for systematic performance appraisal technique of “man-to-
man rating system” (merit rating). It was used for evaluating military officers. Industrial
concerns also used this system during 1920s and 1940s for evaluating hourly paid workers.
However, with the increase in training and management development programs from 1950s,
management started adopting performance appraisal for evaluating technical, skilled,
professional and managerial personnel as a part of training and executive development
programmes. With this evolutionary process, the term merit rating had been changed into
employee appraisal or performance appraisal.
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MEANING
Performance Appraisal is a method of evaluating the behaviour of employees in the
work spot, normally including both the quantitative and qualitative aspects of job
performance. Performance here refers to the degree of accomplishment of the tasks the
makeup an individual’s job. It indicates how well an individual is fulfilling the job demands.
Often the term is confused with effort, which means performance is always measured in
terms of results.

“Performance Appraisal” is a systematic evaluation of present and potential


capabilities of personnel and employees by their superiors, superior’s superior or a
professional from outside. “It is a process of estimating or judging the value, excellent
qualities or status of a person or thing.”

CHARACTERISTICS OF PERFORMANCE APPRAISAL


According to ‘C.P. Gupta’“The main characteristics of performance appraisal are as
follows.’’

1. Performance appraisal is a process of consisting of a series of steps.


2. It is a systematic evaluation of employee’s strength and weakness in terms of the job.
3. Performance appraisal is a scientific or objective study. Formal procedures are used in
the study. The same approach is adopted for all jobholders so that the results are
comparable.
4. It is an on-going or continuous process where in the evaluations arranged periodically
according to a definite plan.
5. The main purpose of performance appraisal is to secure information necessary for
making objective and correct decisions on employees.
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STAGES OF PERFORMANCE APPRAISAL


1. At the first stage performance standards are established based on job description and
job specification.
2. The second stage is to inform these standards to all employees including appraisers.
3. The third stage is following the instructions given for appraisal measurement of
employee performance by the appraisers through observations, interview, records and
reports.
4. The fourth stage is finding out the influence of various internal and external factors
on actual performance of the employee and others.
5. The fifth stage is comparing the actual performance with the standards and finding
out the deviations.
6. The sixth stage is communicating the annual performance of the employee and other
employees doing the same job and discuss with him about the reason for positive or
negative deviations.
7. The seventh stage is suggesting necessary changes in standards, job analysis, and
internal and external environment.
8. The eighth stage is follow-up of performance appraisal report.

METHODS OF PERFORMANCE APPRAISAL


There are several methods and techniques used for evaluating employee performance. These
may be classified into two broad categories as stated by ‘C.B. Gupta’ (1998)
1. Traditional methods
2. Modern methods

TRADITIONAL METHODS

“Traditional method” envisages the following: -

1. CONFIDENTIAL REPORT
A confidential report is a report prepared by the employee’s immediate
superior. It covers the strength and weakness, main achievements and failure, personality
and behaviour of the employee. It is descriptive appraisal used for promotions and
transfers of employees.
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2. FREE FORM OR ESSAY METHOD


Under this method, the evaluator writes a short essay on the employee’s
performance on the basis of overall impression. The description is expected to be a
factual and as concrete as possible. An essay can provide a good deal of information
about the employee especially if the evaluator gives examples of each one of his
judgment.

3. STRAIGHT RANKING METHOD

In this technique, the evaluator assigns relative ranks to all the employees in
the same work unit doing the same job. Employees are ranked from the best to the
poorest on the basis of overall performance. The relative position of an employee is
reflected in this numerical bank.

4. PAIRED COMPARISON METHOD

Each employee is compared with all the others, in pair one at a time. The
number of times an employee is judged better than the others determine his rank.
Comparison is made based on overall performance. The number of comparisons to be
made can be decided based on the following: N (N-1)/2. Where N is the number of
person to be compared.

5. FORCED DISTRIBUTION METHOD

In this technique, the rate is required to distribute his rating in the form of a
normal frequency distribution. This method eliminates the rate bias of central
tendency. It helps to reduce bias involved in straight ranking and paired comparison.

6. GRAPHIC RATINGS SCALE METHOD

The rater is given numeric scale indicating different degrees of a particular


trait. The rate is given a printed form for each employee to be rated. The form
contains several characteristics relating to the personality and performance of
employees. Intelligence, quality of work, leadership skills, judgment etc., are some of
the characteristics. The rater records his judgment on the employee’s trait on the scale.
The numerical points given are added up, to find out his overall performance standing
in the group.
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7. CHECK LIST

A checklist of statements that describe the characteristics and performance of


employee in his job. The rater checks to indicate if the behaviour of an employee is
positive or negative to each statement. The performance of an employee is rated on
the basis of number of positive checks.

8. CRITICAL INCIDENT METHOD

In this method supervisor keeps a written record of critical (either good or


bad) events and how different employees behaved during such events. The rating of
an employee depends on his positive/negative behaviour during these events.

9. GROUP APPRAISAL METHOD

Under this method, a group of evaluators assess the employees. This group
consists of the immediate supervisor of the employee, other supervisor having close
contact with the employee’s work, head of the department and a personnel expert.
The group determines the standards of performance for the job, measures actual
performance and offer suggestions for improvement in future.

10. FIELD REVIEW METHOD

In this method a training officer from the personnel department interviews line
supervisors to evaluate their respective subordinates, the interview prepares in
advance the questions to be asked. By answering these questions the supervisors gives
his opinion about the level of performance of his subordinate, the subordinate work
progress, his strength and weakness, promotion potential etc. The evaluator takes
detailed notes of the answers which are then approved by the concerned supervisor.
These are then placed in the employee personnel service file.

MODERN METHODS
1. Appraisal by results MBO
This method has been evolved by “Peter Drucker”. MBO is potentially a
powerful philosophy of managing and an effective way for operationalizing the
evaluation process.
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MBO can be described as a “Process whereby the supervisor and subordinate


managers of an organization jointly identifies its common goals, define each
individuals major area of responsibility in terms of results expected of him and use
these measures as guides for operating the unit and assessing the contributions of each
of its members.

2. Assessment centre method

The assessment centre concept was initially applied to military situations by


Simoniet in the German Army in the1930 and the war office selection board of the
British Army in the year 1960s. The purpose of this method and is to test candidate in
a social situation. Assessments are made to determine employee potential for purpose
of promotion.

3. 360 degree performance appraisal


The appraisal may be a person who thorough knowledge about the job has
done by contents to be appraised. Standards of contents and who observes the
employee while performing a job.The 360 degree feedback is understood as
systematic collection of performance data on an individual or group, derived from a
number of stakeholders-the stakeholders being the immediate supervisors, team
members, customers, peers and self.

FACTORS AFFECTING PERFORMANCE APPRAISAL


According to Chakraborthy(1978) performance appraisal should be done with caution.
It is always advisable to make a preliminary survey of the following constraints within which
the employees of an organization are working.

1. Environmental constraints

These are several environmental constraints, which may outside the control of worker
and to ignore this fact in judging his performance would be unjust. For example: The quality
of raw material in an organization may deteriorate over a period or the machinery may break
down unexpectedly. As a result, both productivity and quality may suffer. But if selection of
materials and maintenance of machinery are done at higher levels in the organization the
performance appraisal of the worker should not be affected.
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2. Organizational leadership

The style of the top leadership of an organization should also be looked into. It is
nature of leadership at the top, which determines largely the loyalty and commitment of
employees to the goals of an organization for better performance. Employees at every level
become highly performance conscious. Performance appraisal under such conditions is liked
by everybody but in opposite conditions it is considered as an imposition.

3. Interdependence of sub-systems

Since every organization is a big system composed of a number of interdependent


sub-systems, the success or failure of any one sub-system has got to be interpreted in the
context of all other sub-systems to which it is related. For example, the sub-standard output
of the production department may be due to the poor quality of purchases made by the
purchasing Department or the trouble may be at some higher level sub-systems where
planning for the production and purchase departments has been done.

It is precisely because of this interdependence of sub-systems that suggestion is often


made to start performance appraisal from the apex. This leads to more systematic and logical
cause-and-effect tracing of performance at all levels within the organization.

4. Organizational structure

Initiative, drive and innovation thrive best in a flexible structure. These qualities do
not receive encouragement in a rigid structure. This is because in this type of structure the
authority to approve innovation is often place several levels above the people who innovate.
This makes the proposal pass from person to person and robs the information reaching the
ultimate decision-makers of much of its logic and understanding. What is needed is a direct
relationship between the doer and approver. No matter how strategically wise or strong a
boxer is if he has to call New Delhi to clear each punch during his fight in Udaipur, he is
doomed. In rigid structures, ponderous planning and controls make people give up innovating
and become resigned and bitter. Rather than beg for the acceptance of their innovative ideas
they take their ideas and creativity home and become dead wood at work.
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ETHICS OF APPRAISAL SYSTEM


In any performance appraisal, due consideration must be given to the ethics of appraisal, failing
which many organizational problems may crop up and the very purpose of appraisal may be defeated.
M.S. Kellogg has suggested following do’s and don’ts.

1. Do not appraise without knowing why the appraisal is needed.

2. Appraise based on representative information.

3. Appraise on the basis of sufficient information.

4. Appraise on the basis of relevant information.

5. Be honest on your assessment of all the facts you have obtained.

6. Do not write one thing and say another.

7. In offering an appraisal, make it plain that this is only your personal opinion of the
facts as you see them.

8. Pass on appraisal information only to those who have good reason to want it.

9. Don’t imply the existence of an appraisal that has not been made.

Do not accept another’s appraisal without knowing the basis on which it was made.

1.1 Objectives of the study

Primary objective:

 To analyse the effectiveness of performance appraisal system prevailing in


Suguna foods Ltd, Coimbatore.

Secondary objective:

 To examine the usefulness of SPAS for the goal setting, to the employees.
 To evaluate the impact of the feedbacks of the reporting managers towards the
development of the employees.
 To ascertain the effectiveness of review process for the periodical and
continuous improvement in the performance.
 To analyse the suitability of the appraisal method being adopted by the
organisation.
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1.2 Need of the study

 Provide information about goals is communicated to the employees or not.


 Provide feedback information about the level of achievement and behaviour of
subordinate. This information helps to review the performance of the employees
rectifying deficiencies and to set new standard of work.
 Provide information about their work progress through periodical review.
 Provide information about the present appraisal method helps to say their
achievements and factors helped for that achievement.
 To prevent grievances and in disciplinary activities.

1.3 Scope of the study

 The study has been conducted with respect to effectiveness towards performance
appraisal system existing in the organization.
 This study is useful to known whether the goal setting effective or not, feedback is
given in appropriate period so it helps to improves performance, periodical review
helps to known the employee progress, through current appraisal method we can
express our views and thoughts. Therefore, the management can update system with
necessary changes.
 These findings of the study can be used for conducting further study.
 This study helps in giving suggestion to improve the effectiveness of the organization.

1.4 Limitations of the study

 It was difficult to access the employees.


 Due to lack of response the size is restricted to 100.
 Time constraint exists.
 The respondents may be biased in answering.
 Due to busy schedule of the employees, they didn’t give more importance to fill the
questions.

CHAPTER 2
REVIEW OF LITERATURE
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Performance appraisal is systematic way of judging the relative importance of an


employee in performing his/her task. It is undertaken for the variety of purpose such as to
consider employees for salary increases, promotions, transfer and termination of services, to
determine training and developmentneeds of the employee, and to establish basis for research
and reference relating to employee matters.

Denhardt (1991) defines performance appraisal as a specific evaluation with respect to an


individual’s progress in completing specified tasks. Devries, Morrison, Shullman and Gerlach
(1981) define performance appraisal as a process by which an organization measures and
evaluates an individual employee’s behaviour and accomplishments for a finite period.

Moulder (2001) states that performance appraisals are valued for defining
expectations and measuring the extent to which expectations are met. She goes on to state
that appraisals can make clear to employees where they are having success and where they
need to improve performance. Moulder indicates that appraisals are useful in setting goals
and in fostering improved communications among work groups and between employees and
supervisors.

Before the 1960’s, performance evaluations were designed primarily as tools for the
organization to use in controlling employees (Eichel and Bender, 1981). Eichel and Bender
go on to state that past performance was used to guide or justify management’s actions in
dealing with the employee. At the time, according to these authors, performance
appraisal provided the basis for salary, retention, discharge, or promotional decisions.

Vroom (1990) states that formal performance appraisal plans can be designed to meet
the following key needs: (a) the organization; (b) the supervisor; and the employee. He
stresses the need for effective evaluation as it can effectively serve these critical areas.
ICMA (2005) states that almost all employees are eager to know how well they are doing in
their jobs, but many dread the meetings in which their performance is to be discussed.
The amount of research regarding the topic “Effectiveness of Performance Appraisal”
is so vast. The topic is literally not new; it is as old as the formation of the organizations.
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Before the early 1980’s, majority of theoretical studies emphasized on revamping the rating
system within the organization.The actions were a great thing to reduce the chaotic of
employee’s performance appraisal (Feldman, 1981). With the passage of the time the methods
and rating system among the employees got enhanced and received an immense appreciation
and attentions of the managers.

Behavioural Observation Scale (BOS) is one of the best techniques utilized by the
managers to arte the employees. The dilemma was on the peak in the 1960s and 1970s. In the
same period couple of new innovated rating scales were introduced, which was Behaviourally
Anchored Rating Scale (BARS) and the Mixed Standard Scale (MSS). The innovations were
dominant one which condensed the errors and improved the observation skills from the
performance appraisal practice. According to the research of Arvey and Murphy (1998), there
were hundreds of thousands of researches had been taken place between the periods of 1950
to 1980, which merely focused on the different types of rating scales.

Landy and Farr (1980) reviewed and researched the methods of performance appraisal
in totally a different manner, in which they understand the rater and process in an
organizational context. Other Performance appraisal reports include the rater characteristics
in their report like race, gender and likeability. After the year 1980 the biasness among the
performance appraisal system occurred outrageously and appraisal had been granted on the
favouritism or race and gender basis rather examined the knowledge, skills and style of the
work of the employee. The accuracy criteria among the performance appraisal system
clutched its grip in the start of the 1980s, where the researches were emphasized on common
psychometric biases which include the diversified rating errors like leniency, central tendency
and halo, which were termed as rating errors in the appraisal method. It has been observed
that the bias free appraisals were inevitably true or more precisely we can say more accurate,
but the concept was totally refused by the research of Hulin in 1982. According to them the
biasfree appraisals were not necessarily accurate (Murphy &Balzer, 1989).
Researches which had been done in the year 1980 were found the most dominating
one which contributed the appraisal system in a great deal. The researches of the1980 also
helped out to clarify some presumed assumptions regarding the performance appraisal, just
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like the work of Murphy (1982). Research has included the measure of employee attitudes
towards the system of performance appraisal and its acceptance (Roberts, 1990). Bernardian
and Beatty (1984), suggested in their research that behavioural and attitudinal kinds of
measure ultimately prove to be better anticipator as compared with the traditional
psychometric variables, which we have declared earlier as well, like leniency, halo and
discriminability. A Performance Appraisal system is totally ineffective in practice due to the
dearth of approval from the end users (Roberts, 1990).

According to a number of researchers, the enhanced and upgraded performance


appraisal procedure and method will enhance the satisfaction level of the employees and
definitely will improve the process of goal setting within the organization.

CHAPTER 8
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Appendices

Questionnaire for Effectiveness of Performance Appraisal with special


reference to Nitroware Technologies Pvt Limited, Coimbatore.

Dear respondent,

The questionnaire aims to study the effectiveness of performance appraisal system of


Nitroware Technologies Pvt Ltd. The information provided by you will be used for the
academic purpose and it will be confidential. Your valuable responses will contribute to bring
positive changes in the organisation.

Personal details

1) Gender : Male Female

2) Age (in years) : 20-30 31-40 41-50 51& above

3) Educational Qualification : Diploma UG PG others

4) Employee level : FS FL JM MM SM TM

5) Work experience (in years): 5&below 6-10 11-15 16-20 20 & above

6) Department : HR Projects Audit HK & security SCM

Finance Development Training IT

Legal MIS R& D

7) Monthly salary (in Rs) : 10,000&below 10,001-20,000 20,001- 40,000

40,001-60,000 61,000& above

Please give your opinion about the following statements as

5 –Strongly agree,4–Agree,3– Neutral,2 –Disagree,1 -Strongly disagree

S. No Goal setting Ratings


1. My objectives are defined according to my roles and responsibilities.
2. The time period required to achieve my target is agreed by me and my reporting
manager.
3. My targets are measurable.
4. My targets are achievable.
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5. Nitroware performance appraisal system ensures the importance of each employee’s


contribution to the development of organisation.
Providing feedback
6. Feedback given by my reporting manager will help to identify the areas where I
need to improve.
7. The feedback given by my reporting manager will help me to develop my
career growth.
8. Feedback improves communication between myself and my reporting manager
9. Feedback given by my reporting manager is improving my motivational and morale.
Periodical review
10. My performance is periodically reviewed, so I try to improve my performance better
as to compare to the previous year.
11. I will actively take part in review discussion / meeting organized to review the
feedback given about me.
12. I consider review discussion process as mutually beneficial to understand the
expectations of myself and my reporting manager.
Appraisal method
13. The self Appraisal method helps to say my achievements in the given period.
14. The self appraisal method helps to say the factors that helped me for that
achievement.
15. The self appraisal method helps to say the support expected from the reporting
manager and the other departments.
16. The self appraisal method helps to say the adequate infrastructure and facilities are
available to perform my job.
17. The reporting manager’s appraisal is related to work behaviour measurements.
18. The reporting manager’s appraisal is related to work attitude measurements.
19. The Nitroware performance appraisal system creates opportunity to develop my
leadership and managerial skills.
20. The Nitroware performance appraisal system creates opportunity to develop my
decision making skills.

Please give your suggestions regarding performance appraisal system in your


organization.......................................................................................................................................
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Thank you for your valuable response.

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