CHAPTER-1

INTRODUCTION

1.1.1 ICICI Prudential is a joint venture between ICICI Bank and Prudential plc engaged

in the business of life insurance in India. ICICI Prudential is the largest private

insurance company and second largest insurance in India after LIC. ICICI Prudential

Life Insurance Company is a joint venture between ICICI Bank, a premier financial

powerhouse, and prudential plc, a leading international financial services group

headquartered in the United Kingdom.

1.1.2 ICICI Prudential was amongst the first private sector insurance companies to begin

operations in December 2000 after receiving approval from Insurance Regulatory

Development Authority (IRDA).ICICI Prudential Life's capital stands at Rs. 37.72

billion (as on March, 2008) with ICICI Bank and Prudential plc holding 74% and

26% stake respectively. For the year ended March 31, 2008, the company garnered

Retail New Business Weighted premium of Rs. 6,684 crores, registering a growth of

68% over the last year and has underwritten nearly 3 million retail policies during the

period. The company has assets held over Rs. 30,000 crore as on April 30,

2008.ICICI Prudential Life is also the only private life insurer in India to receive a

National Insurer Financial Strength rating of AAA (Ind) from Fitch ratings. The AAA

(Ind) rating is the highest rating, and is a clear assurance of ICICI Prudential's ability

to meet its obligations to customers at the time of maturity or claims.For the past

1
 seven years, ICICI Prudential Life has retained its leadership position in the life

insurance industry with a wide range of flexible products that meet the needs of the

Indian customer at every step in life.

1.1.3 Since the liberalization of Indian Insurance sector, ICICI Prudential Life Insurance

has been one of the earliest private players. Since the time, ICICI Pru Life has been

the leader in terms of market share as indicated by the IRDA (Insurance Regulatory

and Development Authority, the regulator for Indian Insurance Industry).

1.1.4 Arguably the most innovative Indian Life insurer in terms of customer services and

products, ICICI Prudential has one of the largest distribution and servicing network

with over 2,000 proprietary offices & customer touch points across India. The 30,000

employee strong organization has one of the largest agency distribution in the

industry.

1.1.5 With a growing product range to match the complex needs of the demanding

customers in a growing economy, the organization also has a history of successful.

1.1.6 During 2007-08, the organization's focus on rural business has proved its complex

project execution capability and strong partnerships for customer servicing.

2
The ICICI Prudential Edge

The ICICI Prudential edge comes from there commitment to their customers, in all that they do - be

it product development, distribution, the sales process or servicing. Here's a peek into what makes

them leaders.

1.2.1 ICICI products have been developed after a clear and thorough understanding of

customers' needs. It is this research that helps them develop Education planess that offer

the ideal way to truly guarantee your child's education, Retirement solutions that are a

hedge against inflation and yet promise a fixed income after you retire, or Health

insurance that arms you with the funds you might need to recover from a dreaded

disease.

1.2.2 Having the right products is the first step, but it's equally important to ensure that their

customers can access them easily and quickly. To this end, ICICI Prudential has an

advisor base across the length and breadth of the country, and also partners with leading

banks, corporate agents and brokers to distribute our products. Robust risk management

and underwriting practices form the core of our business. With clear guidelines in place,

they ensure equitable costing of risks, and thereby ensure a smooth and hassle-free

claims process.

1.2.3 Entrusted with helping their customers meet their long-term goals, they adopt an

investment philosophy that aims to achieve risk adjusted returns over the long-term.

3
 Last but definitely not the least, their team is given the opportunity to learn and grow, every

day in a multitude of ways. ICICI believe this keeps them engaged and enthusiastic, so that

they can deliver on our promise to cover you, at every step in life.

Vision & Values

Vision
1.3.1 The success of the company will be founded in its unflinching commitment to 5 core values

– Integrity, Customer First, Boundaryless, Ownership and Passion. Each of the values describe

what the company stands for, the qualities of their people and the way they work.

They do believe that they are on the threshold of an exciting new opportunity, where we can

play a significant role in redefining and reshaping the sector. Given the quality of parentage and

the commitment of team, there are no limits to growth.

Values
1.3. Every member of the ICICI Prudential team is committed to 5 core values: Integrity,
2
Customer First, Boundary less, Ownership, and Passion. These values shine forth in all they

do, and have become the keystones of their success.

4
Awards & Recognitions

 India's Most Customer Responsive Insurance Company. AGC Networks - Economic

Times, Customer Responsiveness Awards, 2010.

 The International Council of Customer Service Organizations (ICCSO) recently awarded

ICICI Prudential Life the International Service Excellence Awards 2009 in the categories

of Customer Charter – Winner, Service Excellence in Large Business – Highly

Commended and Customer Service Leader awarded to Ms. Priya Nayak, VP-Service

Quality.

 ICICI Prudential Life Insurance has won the first runner up award for the Best Defect

Elimination in Service & Transaction category at Asian Six Sigma Excellence Summit

2009.

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  ICICI Pru Life ranked as the Most Trusted Pvt Life Insurance brand in the Brand Equity

"Most Trusted Brands 2009" survey

 ICICI Prudential Life won a Gold award for AboutULIPS.com and Health Saver

campaign,innovation award for www.taxguru08-09.com and a silver award for its

Insurance yoga campaign at the ICICI Group Marketing Excellence award.

 Innovation Award for launching Diabetes Care – Prudence Award 2006. People Award

for excellence in training and people development - Prudence Award 2006.

 Silver Effie for Effectiveness of the ‘Retire from Work not life’ advertising campaign

Effie’s 2003

Organization with Innovative HR Practices Asia-Pacific H R Congress Awards for HR

Excellence.

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 CHAPTER – 2

FUNCTIONAL ANALYSIS OF ICICI PRUDENTIAL

This chapter presents the critical detailed analysis of ICICI prudential and its functional areas:-

Information Technology

2.1.1 The Information Technology function at ICICI Prudential is committed to enable

business through the use of technology. IT Infrastructure group is responsible for

providing hardware, software, network services to the whole organization. This group

runs the 'Digital Nervous System' of the Enterprise at the highest levels of efficiency

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 and provide robust, scalable and highly available platform for deployment of business

application.

2.1.2 Marketing

The Marketing function at ICICI Pru covers an array of activities - brand and media

management, channel support, direct marketing and corporate communications. The

Brand and Communications team is in charge of advertising, consumer research,

media planning & buying and Public Relations; that helps develop and nurture ICICI

Prudential's corporate identity while effectively communicating its varied product

offerings to the customer. The Direct marketing team was set up to generate high

quality leads for profitable business. The team achieves this through target database

acquisition and communicating customized product information through e-mailers,

telemarketing and innovative direct mailers.

2.1.3 Finance

Finance function in ICICI Prudential is committed to create an infrastructure that is

aligned to shareholder expectations. Finance basically comprises of four functions. .

Corporate Planning and MIS provide feedback on business strategies. This includes

driving the budgeting process, providing strategic inputs for decision-making and

management reporting and analysis. The Accounts function includes preparation and

maintenance of financial records, funds management, and expense processing and

treasury operations. Compliance ensures that every action is within the regulatory

framework. This includes reviewing compliance requirements and supporting the

ethical framework of ICICI Pru life. Internal audit provides assurance to the

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 management over the organizations' control framework and includes process risk

management, information security assessment and business continuity assessment.

2.1.4 Human Resource

The people strategy of ICICI Prudential is “To build a committed team with a culture of

innovation, learning and growth. The Human Resource Function at ICICI Prudential drives the

people strategy of the business. With its initial focus on operational excellence to deliver benefits

and services to staff members, HR is now committed to building capability through state of the

art processes. A robust performance management system compensation system and a segmented

training architecture enable it to deliver value to the organization.

SWOT ANALYSIS

2.2.1 SWOT analysis is done for a company, to find out its overall Strengths, Weaknesses,

Threats and opportunities leading to gauging the competitive potential of the company.

The SWOT Analysis enables a company to recognize its market standing and adopt

strategies accordingly. Here SWOT analysis of ICICI bank is made to understand the

positioning of the bank better:

STRENGTHS:

1. ICICI Prudential is No. 1 private life player in India.

2. Innovative insurance policies with rider benefits.

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 3. Motivation factors provided by the company.

4. One of the largest financial Institution of India’s.

5. Second largest bank with network of 469 branches and 1740 ATM’s across India.

6. A huge database of corporate clients, retail customer, and bank customers of ICICI.

7. Training provided to all people associating with ICICI prudential.

8. Highest paid up capital deposited in IRDA, in comparison to all players.

9. Assets base of ICICI is more then Rs 1, 08,000 Crores.

WEAKNESSES:

1. Very huge premiums of policies.

2. Compare to other insurance sector.

3. Minimum premium is 19000.(Expect tax saving policy only 10,000)

4. Target upper class people only.

5. Policy charges are very high.

6. And problematic to advisors also.

OPPORTUNITIES:

1. Tie up with more corporate agents all over India.

2. Tie up with broker also

3. No. of adopting new technology.

4. Strong Brand of Company Helps to boost sales inn market

5. Attract more people of providing customer centric products

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THREATS:

1. Threat from existing life insurance players

2. Threat from new entrance.

3. Threat to substitute products

4. Change in the policy of IRDA

5. Competition from more & more new players

6. People don’t aware of different distribution channel

HUMAN RESOURCE DEPARTMENT

2.2.1 ICICI Prudential is having two types of employees direct and indirect. They are
recruited from employment exchanges. Except PF there is no other fringe benefit for
temporary employees. There are different types of fringe benefit for permanent
employees. All the service matters of the organization are under the control of this
department . HR Department is working under leadership.

STRUCTURE OF HR DEPARTMENT

General
Manager

Manager (HR)

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 Assistant
Manager

Junior
Superintendent

Senior Assistant

Junior Assistant

Staff

Working period is from 9 am to 5 pm. Working days are from Monday to Saturday.
Production department, Quality control department work for 24 hrs .

The important functions performed by the department are

 Induction and Orientation

 Training
 Performance Appraisal
 Promotion
 Recruitment
 Welfare Measures

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 Recruitment

Temporary recruitment is done through employment exchanges. The duration of

temporary employee is 180 days. For permanent recruitment they first give notification in
minimum three newspapers. From the approved applications, candidates are selected for
written tests. Those who pass the written test are called for interview. The company has both
permanent and temporary employees. Permanent recruitment is done by the head office.

Training

Training is given to the permanent employees, both off the job and on the job training is
given. HR department is in charge of providing training to the permanent employee

Promotion

Promotions are of two types i.e. Seniority based promotion and performance based
promotion. Middle level employees are promoted on the basis of their seniority and top level
employees are promoted on the basis of performance.

Welfare Measure

ICICI Prudential has a welfare society. Most of the employees are the members of the
welfare society. The enrolment in the society is kept optional. There is a separate committee,
chairman and secretary for the welfare society. The members of the welfare society have to

13
 contribute an amount of Rs.50 every month as a welfare fund. From this fund cash award is
given to children of employees who scored high mark in public examinations.

Moreover certain amount from the fund is given to the marriage of the
concerned member, marriage of the member’s children etc .Certain percentage of the profit
from the company is given as ex-gratia to all the employees except to those employees who
availed bonus. Employee should present 240 days in a year to get full ex-gratia. Housing
subsidy is also given to the employees. Loan up to 2 lakhs and 1% subsidy is given to all the
employees.

Employee state Insurance (ESI) is given to employees whose salary is less

than 7500. Medical allowance of Rs.100 is given to those employees who do not prefer ESI.
Annually employee can take leave up to 33
days out of which 12 days are regarded as casual leave. If an employee is physically present
for 246 days he can enter in to Departmental Promotional Committee (DPC). For this
minimum of 5 years service is essential.

CHAPTER – 3

Introduction to Performance Appraisal:-

2.2.1 The history of performance appraisal is quite brief. Its roots in the early 20th

century can be traced to Taylor’s pioneering Time and Motion studies. But this is not

very helpful for the same may be said about almost everything in the field of modern

human resources management.As a distance and formal management procedure used in

the evaluation of work performance, appraisal really dates from the time of the Second

World War- not more than 60 years ago.

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Yet in a broader sense, the practice of appraisal is a very ancient art. In the scale of things

historical, it might well lay claim to being the world’s second oldest profession! There is, saying

by Dulewicz (1989)”. A basic human tendency to make judgments about those one is working

with, as well as about one self”. Appraisal, it seems, is both inevitable and universal. In the

absence of a carefully structured system of appraisal, people will tend to judge the work

performance of others, including subordinates, naturally, formally and arbitrarily.

The human inclination to judge can create serious motivational, ethical

and legal problems in the work place. Without a structured appraisal system, there is little

chance of ensuring that the judgments made will be lawful, fair, defensible and accurate.

Performance appraisal systems began as simple methods of income justification. That

is, appraisal was used to decide whether or not the salary or wage of an individual employee was

justified.The process was firmly linked to material outcomes. If an employee’s performance was

found to be less than ideal, a cut pay would follow. On other hand, if their performance was

better than the supervisor expected, a pay rise was in order.Little consideration, if any, was given

to the development possibilities of appraisal. If was felt that a cut in pay, or a rise, should

provide the only required impetus for an employee to either improve or continue to perform

well.

Some times this basic system succeeded in getting the

result that were intended, but more often than not, it failed.For example, early motivational

researchers were aware that different people with roughly equal work abilities could be paid the

same amount of money and yet have quite different levels of motivation and performance.These

observations were confirmed in empirical studies. Pay rates were important, yes, but they were

15
not only element that had an impact on employee performance. It was found that other issues,

such as morale and self-esteem, could also have a major influence.

As result, the traditional emphasis on reward outcomes was progressively rejected. In

the 1950s in the United States, the potential usefulness of appraisal as tool for motivation and

development was gradually recognized. The general model of performance appraisal, as it is

known today, began from that time.

 Modern Appraisals

Performance appraisal may be defined as a structured formal interaction between a

subordinate and supervisor, that usually takes the form of a periodic interview ( annual or semi

annual), in which the work performance of the subordinate is examined and discussed, with a

view to identifying weaknesses and strengths as well as opportunities for improvement and skills

development.

In many organizations -but not all- appraisal

results are used, either directly or indirectly, to help determine reward outcomes. That is, the

appraisal results are used to identify the better performing employees who should get the

majority of available merit pay increases, bonuses, and promotions.By the same token, appraisal

results are used to identify the poorer performers who may require some form of counseling, or

in extreme cases, demotion, dismissal or decreases in pay. (Organizations need to be aware of

laws in their country that might restrict their capacity to dismiss employees or decrease pay).

16
 Whether this is an appropriate use of performance appraisal - the assignment and

justification of rewards and penalties – is a very uncertain and contentious matter.

 Controversies :-

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

There are many reputable – researchers, management commentators, and psycho-metricians -

who have expressed doubts about the validity and reliability of the performance appraisal

process. Some have even suggested that the process is so inherently flawed that it may be

impossible to perfect it (see Derven, 1990, for example).At the other extreme, there are many

strong advocates of performance appraisal. Some view it as potentially”..” the most crucial

aspect of organization life” ( Lawrie, 1990).

Between these two extremes lie various schools of belief. While

all endorse the use of performance appraisal, there are many different opinions on how and when

to apply it.There are those, for instance, who believe that performance appraisal has many

important employees development uses, but scorn any attempt to link the process is perceived as

judgmental, punitive and harrowing.

This group believes that the linkage to reward out comes reduces or eliminates the

developmental value of appraisals. Rather than an opportunity for constructive review and

encouragement, the reward linked process is perceived as judgmental, punitive and harrowing.

For example, how many people would gladly admit their work problems if, at the same time,

they knew that their next pay rise or a much – wanted promotion was riding on an appraisal

result? Very likely, in that situation, many people would deny or downplay their weaknesses.

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 Nor is the desire to distort or deny the truth confined to the person being appraised.

Many appraisers feel uncomfortable with the combined role of judge and executioner.

Such reluctance is not difficult to understand. Appraisers often know their appraisee

well, and are typically in a direct subordinate-supervisor relationship. They work together on a

daily basis and may, at times, mix socially. Suggesting that a subordinate needs to brush up on

certain work skills is one thing, giving an appraisal result that has the direct effect of neglecting

a promotion is another.

The result can be resentment and serious morale damage, leading to workplace disruption, soured

relationships and productivity declines.On the other hand, there is a strong rival argument which

claims that performance appraisal must unequivocally be linked to reward outcomes.

The advocates of this approach say that organizations must have a process by which

rewards – which are not an unlimited resource – may be openly and fairly distributed to those

most deserving on the basis of merit, effort and results.

There is a critical need for remunerative justice in organizations. Performance appraisal

– whatever its practical flaws – is the only process available to help achieve fair, decent and

consistent reward outcomes.

It has also been claimed that appraises themselves are inclined to believe that appraisal

results should be linked directly to reward outcomes - and are suspicious and disappointed when

told this is not the case. Rather than feeling relieved, appraises may suspect that they are not

being told the whole truth, or that the appraisal process is a shame and waste of time.

 The Link to Rewards :-

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 Research (Bannister & Banklin, 1990) has reported that appraises seem to have greater

acceptance of the appraisal process, feel more satisfied with, when the process is directly linked to

rewards. Such findings are a serious challenge to those who feel that appraisal results and reward

outcomes must be strictly is isolated from each other.

There is also a group who argues that the evaluation of employees for reward purposes,

and frank communication with them about their performance, are part of the basic responsibilities

of management. The practice of not discussing reward issues while appraising performance is, say

critics, based on inconsistent and muddled ideas of motivation.In many organizations, this

inconsistency is aggravated by the practice of having separate wage and salary reviews, in which

merit rises and bonuses are decided arbitrarily, and often secretly, by supervisors and managers.

 Performance appraisal :-

Performance appraisal, also known as employee appraisal, is a method by which the job

performance of an employee is evaluated (generally in terms of quality, quantity, cost and

time). Performance appraisal is a part of career development.

Performance appraisals are regularly reviews of employee performance within

organization.

Generally, the aims of a performance appraisal are to :

♦ Give feedback on performance to employees.

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♦ Identity employee training need.

♦ Document criteria used to allocate organizational rewards.

♦ Form a basis for personnel decisions: salary increases, promotions, disciplinary actions,

etc.

♦ Provide the opportunity for organizational diagnosis and development

♦ Facilitate communication between employee ad administrators

♦ Validate selection techniques and human resource policies to meet federal Equal

Employment Opportunity requirements.

A common approach to assessing performance is to use a numerical or scalar rating system

whereby managers are asked to score an individual against a number of objectives/attributes. In

some companies, employees receive assessments from their manager, peers, subordinates and

customers while also performing a self assessment. This is known as 3600 appraisal.

The most popular methods that are being used as performance appraisal process are:

♦ Management by objectives.

♦ 360 degree appraisal

♦ Behavioral Observation Scale

♦ Behaviorally Anchored Rating Scale.

Trait based systems, which rely on factors such as integrity and conscientiousness, are

also commonly used by businesses. The scientific literature on the subject provides evidence that

20
assessing employees on factors such as these should be avoided. The reasons for this are two

fold:

1. Because trait based systems are by definition based on personality traits, they make it

difficult for a manager to provide feedback that can cause positive change in employee

performance. This is caused by the fact that personality dimensions are for the most part static,

and while an employee can change a specific behavior they cannot change their personality. For

example, a person who lacks integrity may stop lying to a manager because they have been

caught, but they still have low integrity and are likely to lie again when the treat of being caught

is gone.

3Trait based systems, because they are vague, are more easily influenced by office

politics, causing them to be less reliable as a source of information on an employee’s true

performance. The vagueness of these instruments allows managers to fill them out based

on who they want to /feel should get raise, rather than basing scores on specific behaviors

employees should/should not be engaging in. These systems are also more likely to leave

a company open to discrimination claims because a manager can make biased decisions

without having to back them up with specific behavioral information.

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PERFORMANCE APPRAISAL

The Definition:

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

about the relative worth of an employee. True focus of the performance appraisal is

measuring and improving the actual performance of the employee and also the future

potential of the employee. Its aim is to measure what an employee does. According to

Flippo, a prominent personality in the field of Human resources, “performance appraisal

is the systematic, periodic and an impartial rating of an employee’s excellence in the

22
 matters pertaining to his present job and his potential for a better job”. Performance

appraisal is a systematic way of reviewing an assessing the performance of an employee

during a given period of time and planning for his future.

It is a powerful tool to calibrate, refine and reward the performance

of the employee. It helps to analyze his achievements and evaluate his contribution towards the

achievements of the overall organizational goals. By focusing the attention on performance,

performance appraisal goes to the heart of personnel management and reflects the management’s

interest in the progress of the employees.

OBJECTIVES OF PERFORMANCE APPRAISAL

1. To review the performance of the employee over a given period of time.

2. To judge the gap between the actual and the desired performance.

3. To help the management in exercising organizational control.

4. To help strengthen the relationship and communication between superior – subordinates

and management – employees.

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5. To diagnose the strengths and weaknesses of the individuals so as to identify the training

and development needs of the future.

6. To provide feedback to the employees regarding their past performance.

7. To Provide information to assist in the other personal decisions in the organization.

8. To provide clarity of the expectations and responsibilities of the functions to be

performed by the employees.

9. To judge the effectiveness of the other human resource functions of the organization such

as recruitment, selection, training and development.

10. To reduce the grievances of the employees.

Literature Review

3.3.1 The Essence and Functions of Performance Appraisal Systems

Performance appraisal systems aim to evaluate the job performance of employees,

so that appropriate corrective action and management decisions can be taken. As

performance appraisal is part of organizational control, the components of the

control system are indispensable in the appraisal system. In general, a basic control

system consists of control standards, measurement, and corrective actions (Newman,

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 Warren & McGiIl, 1987). Among these three phases, control standards are based

primarily on organizational missions or departmental goals, which reflect the role a

performance appraisal plays in the organization. Measurement is concerned with the

actual appraisal process, including the appraiser, appraisal criteria, appraisal

methods, and appraisal timing. Corrective actions comprise the feedback processes

after the performance appraisal is completed. If there is an evident gap between

actual performance and performance standards, appropriate corrective actions

should be taken to change the behaviors of the employees concerned.

Apart from organizational control, Ilgen, Barnes-Farrell, and McKellin (1993)

concluded, from their extensive review of the literature since the 1 980s about

performance appraisal, that there are four important aspects that need to be

considered. They are as follows:

(1) Appraisal setting, the purpose of the performance appraisal;

(2) Characteristics of the rates

(3) Characteristics of the raters; and

(4) Natures of the scales used for the appraisal.

• In practice, performance appraisal systems cover a wide range of these aspects,

and seldom have exactly the same nature and functions. In order to integrate

findings in the area, Chu (2002) proposed a comprehensive framework including

25
 six categories, namely, appraisal purposes, appraisal personnel, appraisal criteria,

appraisal methods, appraisal timing, and appraisal feedback. This study will adopt

this framework to compare performance appraisal systems in the service and

manufacturing industries.

(5) Factors Affecting Performance Appraisal Systems

A company should take into consideration many factors when designing a performance appraisal

system. The performance appraisal system, as an important part of the organizational

management system, will be affected by the particular context within which the organization

operates. As stated earlier, Cleveland, Murphy and Williams ( 1 989) found that there was a

correlation between organizational characteristics and the uses of the performance appraisal .

Stonich ( 1 984) argued that performance measurement must be consistent with the

organization's structure and culture. For instance, when an organization emphasizes

decentralization, performance standards should be focused on results (like "return on equity").

On the other hand, if the organization is inclined toward centralization, the performance

appraisal should emphasize the processes of each management function.

♦ Adopting a cultural perspective, Ouchi (1981) compared American and Japanese

enterprises and found that that American enterprises are more concerned about personal

performance, while Japanese enterprises are more concerned about group performance. As far as

26
the size of an organization concerned, Jobber, Hooley & Shipley (1993) confirmed that a large

organization tends to adopt quantitative criteria, more formalized appraisal methods and pre-

determined performance standards, while a small organization is apt to use qualitative and

informal appraisal methods. Although these studies did not make direct comparisons between

service and manufacturing industries, their results can explain accounts the fact that there is a

link or relation between organizational characteristics and the functions of a performance

appraisal system.

3.3.2 Traditional Methods of Performance Appraisal

ESSAY APPRAISAL METHOD :- This traditional form of appraisal, also known as “Free

Form method” involves a description of the performance of an employee by his superior. The

description is an evaluation of the performance of any individual based on the facts and often

includes examples and evidences to support the information. A major draw back of the method is

the inseparability of the bias of the evaluator.

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STRIGHT RANKING METHOD :- This is one of the oldest and simplest techniques of

performance appraisal. In this method, the appraiser ranks the employees from the best to the

poorest on the basis of their overall performance. It is quite useful for a comparative evaluation.

3.3.3 MORDERN-METHOD

 ASSESSEMENT CENTRES: - An assessment centre typically involves the use of the

methods like social/ informal events, tests and exercises, assignments being given to a group of

employees to assess their competences to take higher responsibilities in the future. Generally,

employees are given an assignment similar to the job they would be expected to perform if

promoted. The trained evaluators observe and evaluate employees as they perform the assigned

jobs and are evaluated on job related characteristics. The major competencies that are judged in

assessment centers are interpersonal skills, intellectual capability, planning and organizing

28
capabilities, motivation, career orientation etc., assessment centers are also an effective way to

determine the training and development needs of the targeted employees.

 BEHAVIORALLLY ANCHORED RATING SCALES:-Behaviorally Anchored

Rating Scales (BARS) is a relatively new technique which combines the graphic rating

scale and critical incidents method. It consists of predetermined critical areas of jobs

performance or sets of behavioral statements describing important job performance

qualities as good or bad (for e.g. the qualities like inter-personal relationships,

adaptability and reliability, job knowledge etc). These statements are developed from

critical incidents. In this method, an employee’s actual behavior is judged against the

desired behavior by recording and comparing the behavior with BARS. Developing and

practicing BARS requires expert knowledge.

 HUMAN RESOURCE ACCOUNTING METHOD :

Human resources are valuable assets for every organization. Human resource accounting

methods tries to find the relative worth of these assets in the terms of money. In this

method the Performance appraisal of the employees is judges in terms of cost and

contribution of the employees. The cost of employees include all the expenses incurred

on them like their compensation, recruitment and selection costs, induction and training

costs etc whereas their contribution includes the total value added (in money terms). The

difference between the cost and the contribution will be the performance of the

29
 employees. Ideally, the contribution of the employees should be greater than the cost

incurred on them.

Process of Performance Appraisal

ESTABLISHING PERFORMANCE STANDARDS

The first step in the process of performance appraisal is the setting up of the standards which will

be used to as the base to compare the actual performance of the employees. This step requires

setting the criteria to judge the performance of the employees as successful or unsuccessful and

the degrees of their contribution to the organizational goals and objectives. The standards set

30
should be clear, easily understandable and in measurable terms. In case the performance of the

employee cannot be measured, great care should be taken to describe the standards.

COMMUNICATING THE STANDARDS

Once set, it is the responsibility of the management to communicate the standards to all the

employees of the organization. The employees should be informed and the standards should be

clearly explained to the. This will help them to understand their role and to know what exactly is

expected from them. The standards should also be communicated to the appraisers or the

evaluators and if required, the standards can also be modified at this stage itself according to the

relevant feedback from the employees or the evaluators.

Establishing performance standards

Communicating standards and

expectations

Measuring the actual performance

Comparing with standards

31
 Discussing results

( Providing feedback )

Decision making – taking corrective

actions

MEASSURING THE ACTUAL PERFORMANCE:-

The most difficult part of the Performance appraisal process is measuring the actual performance

of the employees that is the work done by the employees during the specified period of time. It is

a continuous process which involves monitoring the performance throughout the year. This stage

requires the careful selection of the appropriate techniques of measurement, taking care that

personal bias does not affect the outcome of the process and providing assistance rather than

interfering in an employees work.

32
COMPARING THE ACTUAL WITH THE DESIRED PERFORMANCE:-

The actual performance is compared with the desired or the standard performance. The

comparison tells the deviations in the performance of the employees from the standards set. The

result can show the actual performance being more than the desired performance or, the actual

performance being less than the desired performance depicting a negative deviation in the

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

employee’s performance.

DISCUSSION RESULTS:-

The result of the appraisal is communicated and discussed with the employees on one-to-one

basis. The focus of this discussion is on communication and listening. The results, the problems

and the possible solutions ate discussed with the aim of problem solving and reaching consensus.

The feedback should be given with appositive attitude as this can have an effect on the

employee’s future performance. The purpose of the meeting should be to solve the problems

faced and motivate the employees to perform better.

DECISSION MAKING:-

33
The last step of the process is to take decisions which can be taken either to improve the

performance of the employees, take the required corrective actions, or the related HR decisions

like rewards, promotions, demotions, transfer

Pre – requisites for Effective & Successful Performance Appraisal

The essentials of an effective performance system are as follows :

♦ Documentation – means continuous noting and documenting the performance. It also

helps the evaluators to give a proof and the basis of their ratings.

♦ Standards / Goals – the standards set should be clear, easy to understand, achievable,

motivating, time bound and measurable.

34
♦ Practical and simple format – The appraisal format should be simple, clear, fair and

objective. Long and complicated formats are time consuming, difficult to understand, and

do not elicit much useful information.

♦ Evaluation technique – An appropriate evaluation technique should be selected for the

appraisal system should be performance based and uniform. The criteria for evaluation

should be based on observable and measurable characteristics of the behavior of the

employee.

♦ Communication – Communication is an indispensable part of the performance appraisal

process. The desired behavior or the expected results should be communicated to the

employees as well as the evaluators. Communication also plays an important role in the

review or feedback meeting. Open communication system motivates the employees to

actively participate in the apprasal process.

♦ Feedback – The purpose of the feedback should be developmental rather than

judgmental. To maintain its utility, timely feedback should be provided to the employees

and the manner of giving feedback should be such that it should have a motivating effect

on the employees’ future performance.

♦ Personal Bias – Interpersonal relationships can influence the evaluation and the

decisions in the performance appraisal process. Therefore, the evaluators should be

trained to carry out the processes of appraisals without personal bias and effectively

35
 Purpose of performance Appraisal

Performance Appraisal is being practiced in 90% of the organizations worldwide. Self –

appraisal and potential appraisal also form a part of the performance appraisal processes.

Typically, performance Appraisal is aimed at :

♦ To review the performance of the employees over a given period of time.

36
 ♦ To judge the gap between the actual and the desired performance.

♦ To help the management in exercising organizational control.

♦ To diagnose the training and development needs of the future.

♦ Provide information to assist in the HR decisions like promotions, transfers etc.

♦ Provide clarity of the expectations and responsibilities of the functions to be performed

by the employed.

♦ To judge the effectiveness of the other human resource functions of the organizations

such as recruitment, selection, training and development.

♦ To reduce the grievances of the employees.

♦ Helps to strengthen the relationship and communication between superior – subordinates

and management – employees.

According to a recent survey, the percentage of organizations (out of the total organizations

surveyed i.e.50) using performance appraisal for the various purposes are as shown in the

diagram below;

The most significant reasons of using Performance appraisal are;

♦ Making payroll and compensation decisions – 80%

♦ Training and development needs – 71%

♦ Identifying the gaps in desired and actual performance and its cause - 76%

♦ Deciding future goals and course of action – 42%

♦ Promotions, demotions and transfers – 49%

37
 ♦ Other purposes – 6% (including job analysis and providing superior support, assistance

and counseling)

Chapter 4

ANALYSIS AND INTERPRETATION

Q1. Employees regularly receive feedback about their potential for higher level Jobs?

38
Frequency Table

Frequency Percent

Valid 1 1 2.0

2 4 8.0

3 9 18.0

4 36 72.0

Total 50 100.0

Table: 1

39
 Very True

True
Fig:1
Partly
True

Not true

Inference: 72% of the employees saying that this statement is “Not True” and appraisal system
did not helped them to know their potential to perform at higher level jobs. Whereas only 18%
and 8% employees felt that this statement was “True” and “Partly True” respectively.

Conclusion: The Frequency Percent

above inference
shows that the PA Valid 1 1 2.0
system in ICICI
Prudential does
not give feedback
about ‘planning 2 8 16.0
for performance’
to its employees. 3 7 14.0
It did not helped
4 34 68.0
them to anticipate
work needs in Total 50 100.0
order to arrange
work in logical order. Again due to flexibility in job content, some people may have found
problems in planning their performance systematically.

Q2. The performance appraisal provides an opportunity for self review and reflection?

Frequency Table

40
Table:2

41
 Q2

Very True

Figure:2 True

Partly
True

Not true

Inference: There is a general agreement on then fact that the PA system in ICICI Prudential does
provide ample opportunity for self-review and reflection. 14% of the people felt that it was
‘Partly True’ and 16% of the people said that it was “True”.

Conclusion: The absence of proper self-appraisal procedure in the PA system of ICICI is an

important reason for the above inference. Due to this fact, employees may have felt that they
were not participating actively in their own appraisal by self -review and reflection on various
issues.

42
Q3. Promotions to a larger extent are based on the results of the Performance Appraisal?

Frequency Table

Frequency Percent

Valid 1 8 16.0

2 18 36.0

3 24 48.0

Total 50 100.0

Table :3

43
 Q3

Very True

Figure :3 True

Partly
True

Not true

Inference: 48% of the respondents believe that the above statement is ‘Partly True’ . This was
closely followed by 36% of the respondents rating it as ‘ True’ and 16% of the respondents
feeling that it was ‘ Very True’.

Conclusion: The above inference shows that the promotions to a larger extent are based on the
results of the PA system.

44
Q4. The appraisal system gives each appraise an idea of what is expected of him in future?

Frequency Table

Frequency Percent

Valid 1 1 2.0

2 1 2.0

3 14 28.0

4 34 68.0

Total 50 100.0

45
 Q4

Figure : 4

Very True

True

Inference : 68% of the respondents felt that the above statement was Partly
‘Not True’. This was followed by 28% employees saying that the True
statement was “Partly True” and 2% and 2% of the respondents
Not true
feeling that it was ‘ True’ and ‘ Very True’ respectively.

Conclusion: Each employee needs to have an idea as to what accountabilities will he have if his
appraisal is given a good remark or a bad remark for working at higher level job. But at ICICI
prudential the appraise did not get any idea of his potential and what is expected of him in
future.

46
Q5. The appraisal procedure allows the appraise to express his developmental needs?

Frequency Table

Frequency Percent

Valid 1 1 2.0

2 9 18.0

3 26 52.0

4 14 28.0

Total 50 100.0

Table : 5

47
 Q5

Figure : 5 Very True

True

Partly
True
Inference: The most common response on above statement was an
astounding ‘Partly True’ with 52% people agreeing that the PA Not true
system was free of any biases. It was followed by 28% saying that it
was ‘ Not True’ and 18% saying that it was ‘ True’.

Conclusion: The above inference implies that people are partially satisfied with the PA system
in ICICI Prudential and believe that it provides scope for developing their potential. This may be
due to the fact that the self appraisal of the appraise invites suggestions on job enrichment,
training needs and steps to be taken to improve individual’s effectiveness.

48
Q6. The appraisal system provides for a frank discussion between appraiser and appraise?

Frequency Table

Frequency Percent

Valid 1 1 2.0

2 15 30.0

3 26 52.0

4 8 16.0

Total 50 100.0

49
 Table : 6

Q6

Figure : 6 Very True

True

Partly
True

Not true
50
Inference: An astounding 52% rated the above statement as ‘Partly True’ with 30% that it was
true.

Conclusion: Although, most of the people felt that there was mutuality and trust between
appraisers and appraise, it may again depend on the proximity and relationship shared by an
employee and his/her boss. The ratings may be based, as the employees may have felt that a
negative answer may adversely affect them.

51
Q7. The appraisal system brings out the training needs of the employees?

Frequency Table

Frequency Percent

Valid 1 1 2.0

2 2 4.0

3 27 54.0

4 20 40.0

Total 50 100.0

52
 Table : 7

Q7

Figure :7 Very True

True

Partly
53 True

Not true
Inference : 40% of the respondents believed the above statement to be ‘Not True’ closely
followed by 54% people believing it to be ‘Partly True’. Only 4% believed it to be ‘True’.

Conclusion: The above inference shows that, the few people get the training related to their
competencies skills that is needed to be enhanced for successful completion of their work.
Whereas most of the people do not get adequate training according to changes in their job
description i.e. responsibilities.

Q8. The performance appraisal system clarifies the career prospects, aspirations and
intentions?

Frequency Table

Frequency Percent

Valid 1 1 2.0

2 8 16.0

3 14 28.0

4 27 54.0

Total 50 100.0

54
 Table : 8

Q8

Figure : 8

Very True
Inference : The typical response 54% for the above statement was True
‘Not True’. 28% employees believed it to be ‘Partly True’ with 16%
Partly
employees believing it to be ‘True’.
True
Conclusion: The general picture drawn from the above inference is
Not true
that all the employees are not clear as to what the PA system is all
about and what is the reason behind its existence. This shows that PA
system has not acquired an important status in the organization, hence employees are not able to
acknowledge its presence and essence.

55
Q9. The appraisal system provides a rational basis for salary recommendations?

Frequency Table

Frequency Percent

Valid 1 1 2.0

2 2 4.0

3 13 26.0

4 34 68.0

Total 50 100.0

Table : 9

56
 Q9.

Figure :9

Very True
Inference : 68% of the respondents felt that the above statement was True
‘Not True’. 26% responses included ‘Partly True’ ratings whereas 4%
Partly
responses included ‘True’ ratings.
True
Conclusion: The employees do not want a fixed increment for their
Not true
great performance. The company should make recommendations
related to salary on the basis of regular performance feedback about
every employee since the frequency of performance measurement varies from department to
department; it is difficult to carry out this work smoothly.

57
Q10. What kind of an appraisal system will bring out the best of an employee?

Frequency Table

Frequency Percent

Valid 1 1 2.0

2 6 12.0

3 1 2.0

4 42 84.0

Total 50 100.0

Table :10

58
 Q10

360 degree Appraisal

Appraisal by
immediate superior
Figure :10
Appraisal by
reference team

Appraisal by
reference team and
self

59
Inference: 84% of the employees felt that ‘appraisal by reference team and self’ will bring out
the best of an employee. 12% felt that ‘Appraisal by immediate superior’ whereas 2% and 2% by
360 degree and ‘Appraisal by reference team’ respectively.

Conclusion: This shows that the relationship between appraiser and appraise, in ICICI
Prudential, with respect to planning the performance is quite good. The appraiser helps the
appraise in testing the soundness of his goals as well as of his plans for achieving them and
appraise himself can plan his performance. This implies that there is active participation of both
appraiser and appraise in performance planning.

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 Chapter 5

The Learning Summary

THE FINDINGS

5.1.1 The following findings have been derived from the study conducted. The most

common appraiser is the manager/supervisor/appraiser. The self-appraisal of an

employee is emphasized. The ICICI Prudential follows a combination of self-

appraisal and manager assessment.

The positive areas/benefits of the appraisal system are the inputs for training and development,

career planning and development. There is an opportunity for free and regular feedback because

of the open and transparent system. The manager appraisal and self-appraisals help in

comprehensive results, due to the appraisals there is scope for the growth of the employee and

organization. There is benefit of the objective setting for next six months. A clear distinction

between performers and non-performers is possible. Appraisal on performance as well as values

makes it a positive area where it makes it punctual and efficient. All variables are easily

quantified into a meaningful exercise and objective with work behavior, helping qualitative

contribution in building culture.

61
The criteria / measures to evaluate an employee in the company are performance, work

knowledge, achievement vs. objectives, contribution , common working capital, key result areas

set at the beginning of a specific period forming the result-oriented areas, leadership skills,

teamwork, attitude, communication, value system, conflict management, interpersonal skills, and

dependability forming the behavior-oriented areas .

ICICI Prudential obtain feedback on the person being

appraised. Manager gives the feedback in most cases while peer and mixed is used in few cases.

Feedback is given in the written form, manager assessed and self-assessed in most cases while

summarized in few cases. There is a combination of the type of feedback give into the

employers. Both positive and negative feedbacks are shared in the same meeting with appraise.

Almost all companies follow a self-assessment of an employer, which is integrated, into the

appraisal system followed compensation increase is related to performance and depends on the

performance code/rating given. If the appraise scores beyond the cut-off score based on the

grades, a raise is given. It is related to the increment and project allowance.

The appraiser sets targets for the employee being appraised

for a period of six months, 12 months and three months being lease. Targets are tracked by

constant monitoring, appraisal at the end of the project, input form customer, six months reviews,

weekly reports, by revenues and assignments.

62
Career planning is followed in ICICI Prudential for two to three months, six months, project

completion time, and current estimated potential. The appraisal system is manual with a few

companies following automated and few both.

The benefits of 360° feedback are that it gives an all round perspective restricting the

inconsistency factors that exists in traditional appraisal system. Evaluation and feedback is more

comprehensive and complete. It removes a lot off friction down the line improving boss-

subordinate relation. The limitations because of 360° feedback is not directly appreciated and not

well taken in application-oriented areas. .

The 360 feedback is an appropriate system to use as it helps the appraise to know the areas to be

focused for development. An appropriate system should be an open system, system that link

reward / recognition and pay for performance. It should provide for two-way feedback, reduce

subjectivity judgment factor.

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 CONCLUSIONS & RECOMMENDATIONS

1. This company proves that a major amount of work towards developing an

effective and efficient performance appraisal system has not been

accomplished to the fullest.

2. It seems that the organization is genuinely interested in improving the

efficiency and utility of performance appraisal system to succeed in today’s

dynamic environment.

Outward Orientation Performance Appraisal System

The appraisal system should be more sensitive and responsive to current competitive

environment. This is possible through making the organization.

♦ Customer oriented (internally as well as externally)

♦ Cost effective

♦ Technology oriented

♦ Focused towards collaboration and teamwork

♦ People oriented

♦ Focused towards performance standards

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 PERIODIC PERFORMANCE REVIEW AND PLANNING:

5.2.1 There should be some aspect in the PA forms, which deals with the effect of

Internal

Influences, organizational influences and external influences on performance of

employee to make the PA system more sensitive to changes.

♦ Increase awareness of company goals in order to integrate company and Individual

expectations.

♦ Conducting training workshops for appraisers to remove biases and errors in appraisal.

♦ Increasing transparency and open communication and minimizing confidentiality in

performance review discussions.

♦ The work done towards modifying and developing performance appraisal systems ,time

to time should be continued.

65
Integrating TQM into Performance Appraisal

♦ Individual rewards should be delinked with the PA system.

♦ To recognize individual excellence, the team should recommend rewards to tone up

motivation levels in the entire team.

♦ Continuous feedback and transparency in every system

♦ Focus on customer delight, both internal and external

Linkage with Rewards

Good performers should be recognized and rewarded, whereas weak performers need to be

encouraged to become better performers. PA systems when liked with individual rewards and

promotions create more problems than they help in motivating people. They encourage fewer

employees and discourage more. They do not develop the team Spirit but rather enhance

interpersonal comparisons and power politics. The focus should be shifted from rewarding the

performance of few to development of performance of many.

However there is also a need for recognition and

rewarding good work. Alternative systems of rewarding with multiple reward/recognition

66
mechanism are needed. But these systems should be separated from other systems (like career

planning).

Role of HRD

HRD should develop relevant competencies and work through empowering

the line managers.

♦ Development of subordinates and teams should be key function of line managers.

♦ HRD should facilitate the development of behavioral, managerial and technical (multi

functional) competencies in line managers.

♦ “Role analysis” should find a place in ICICI Prudential “role directories should be

published with key functions for each role.

♦ System effectiveness should be ensured through periodic review and survey of

organizational climate, ethos, organizational effectiveness and employee satisfaction

(concerning PA systems).

67
IMPLICATION OF THE PROJECT

5.3.1 In a simple way performance appraisal is meant to be an exercise to value a estimate

what a person has done and how has he done. The nature of Performance appraisal

and its effectiveness depends a great deal on how human resources in the

organization are viewed and treated. People are to be treated as resources of the

organization. Unlike the other resources, the human resources have the capability of

expanding to unlimited extents with proper investment in human capabilities.

Therefore, an organization interested in developing the capabilities of its employees,

should understand the nature and capabilities required to perform different functions

as well as the dynamics underlying the development of these capabilities in an

organizational content.

These capabilities can be considered to fall under four categories. They are:-

(i) Technical capabilities

(ii) Managerial capabilities

(iii) Behavioral (human) capabilities

(iv) Conceptual capabilities

68
The extents to which the various capabilities are required for the performance of the job differ

from level to level in the organizational hierarchy.

New Objective of Performance Appraisal

5.3.2 Performance appraisal system can serve the following purposes if designed properly;

(a) Help each employee to understand more and more about his role and become clear about his

functions.

(b) Helps each employee to understand his own strengths and weaknesses with respect to his role

and functions of the company.

(c) Helps identifying the developmental needs of employees.

(d) Helps increase mutuality between employee and his superiors.

(e) Provides an opportunity to the employees for self reflection and individual goal setting.

(f) Helps in preparing employees for performing at high levels by continuously enforcing the

required qualities.

(g) Create a positions and healthy climates in the organization.

69
 RECOMMENDATIONS

1. The company should try to reduce employee resistance, which is associated with change . This

for all kinds of systems be it Performance Appraisal. Change should be implemented gradually

not suddenly.

2. The HR Dept should attempt to obtain the maximum agreement of Managers in respect ot

needs and objectives and purpose of the systems .It improve the frequency of the trading

modules and workshops.

3. More stress relieving programmes should be conducted to the mentally stressed staff. For

example : Counselling Classes , training, meditation, movie .

4. Overtime should be taken care of at time of performance appraisal, which would motivate the

employees to perform better for longer hours.

5. Performance appraisal should carried out after at regular interval of time. For example: After 6

month or 1 year.

70
 6. Performance appraisal should be done by experts and the superior of the organization so

as to ensure effective performance system.

ANNEXTURE

QUESTIONNAIRE

Dear Sir/Madam,

I am a student of Institute of Information Technology and Management, conducting a survey

on “EMPLOYEE SATISFACTION WITH THE PERFORMANCE APPRAISAL SYSTEM AT

ICICI Prudential PRIORITY CIRCLE”. I request you to fill this questionnaire & I assure that

this data will be used only for study purpose & it will be kept confidential.

Name : ………………………………

Age : ………………………………

Designation : ………………………………

1. Employees regularly receive feedback about their potential for higher level Jobs?

a) very true b)true

c) partly true d) not true

2.The performance appraisal provides an opportunity for self review and

reflection?

71
a) very true b)true

c) partly true d) not true

3.Promotions to a larger extent are based on the results of the Performance Appraisal?

a) very true b)true

c) partly true d) not true

4.The appraisal system gives each appraise an idea of what is expected of him

In future?

a) very true b)true

c) partly true d) not true

5.The appraisal procedure allows the appraise to express his developmental

needs?

a) very true b)true

c) partly true d) not true

6. The appraisal system provides for a frank discussion between appraiser and

appraise?

a) very true b)true

c) partly true d) not true

72
7.The appraisal system brings out the training needs of the employees?

a) very true b)true

c) partly true d) not true

8. The performance appraisal system clarifies the career prospects, aspirations and

intentions?

a) very true b)true

c) partly true d) not true

9.The appraisal system provides a rational basis for salary recommendations?

a) very true b)true

c) partly true d) not true

10.What kind of an appraisal system will bring out the best of an employee?

a) 360 degree Appraisal b) appraisal by immediate superior

c) appraisal by reference team d) appraisal by reference team and self.

73
Bibliography

Books:
• Human Resource Management by V S P Rao
• Business Research Methods by Donald R Cooper and Pamela S Schindler

Websites:

• www.icicibank.com visited on 2.6.2010

• www.iciciprulife.com visited on 8.6.2010
• en.wikipedia.org/wiki/Main Page visited on 19.6.2010
• Brochures provided by the ICICI Prudential

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