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 regular reviews of employee performance within

organizations

Generally, the aims of a performance appraisal are to:

1) Give feedback on performance to employees.

2) Identify employee training needs.

3) Document criteria used to allocate organizational rewards.

4) Form a basis for personnel decisions: salary increases, promotions,

disciplinary actions, etc.

5) Provide the opportunity for organizational diagnosis and development.

6) Facilitate communication between employee and administrator.

7) 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 360° appraisal.

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

1) Management by objectives

2) 360 degree appraisal

3) Behavioral Observation Scale

4) 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 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

2) Trait based systems, because they are vague, are more easily influenced
by office politics, causing them to be less reliable as a source of information
on an employee's true performance.

Effective performance appraisal

A tricky issue facing most organizations is the carrying out of effective and
fair performance appraisal. Far too often companies find that many
employees are left grumbling about “unfairness” and bias.

While first accepting that there is probably no system which is close to

perfect, let us look at some key criteria that an appraisal system must
satisfy.

At a macro-level, the aim of the performance appraisal from the company’s

point of view cannot be to just determine increments or promotions. Yes,
that is how it affects the individuals, but it cannot be the organization’s aim.
The organization’s aim has to be to put in place a system that actually
improves performance.

Let us now look at the specific criteria for the system.

The first step must be to understand clearly what is expected from each
employee / position in the organization. And this must be done well before
appraisal time, even before the appraisal year starts, in fact.

For instance, if the job of the Corporate Communications manager is to

ensure that all mass communication about the brands and about the
company is effective and in cohesion, then these should be laid out as her
primary performance appraisal criteria. Once the criteria are clearly laid out,
they should be communicated to her in unambiguous fashion so that she
knows what to work towards and how she is going to be evaluated.
It is useful if these goals can be quantified. For example, one goal for a
brand manager could be that his brand must have at least X per cent
awareness in the market

Making the goals quantitative in nature makes evaluation easier and less
subjective; and therefore less susceptible to suspicions of “unfairness”.

However, it is not a good idea to get caught up in making all goals

quantitative. It is a fact of life that not all things can be measured or
quantified; for instance, courtesy. If a front desk’s performance is to be
evaluated on the level of courtesy shown to visitors, then this cannot be
quantified very easily but certain pointers can be got from the number of
complaints about discourtesy and general observations about the person’s
deportment, among others.

Such non-quantifiable measures will involve a certain amount of subjectivity.

Subjectivity need not automatically mean bias. There are steps that ensure
that subjectivity does not degenerate to bias in the performance appraisal
context

One such step is periodicity. It is useful if some form of appraisal can be

done every three months. This would tell the person whether he / she is
going in the right direction, and what extra efforts / course correction are
required to improve the performance.

Another crucial requirement is transparency. Too often, people are told

something like “your performance has been good, but I wouldn’t say
excellent” and that they need to try harder. Such feedback is little better
than useless as it offers no direction whatsoever to the individual. The
individual needs to know what scores he / she is being given and why.

One of the main reasons why transparency is a casualty in most appraisals is

that most managers are not comfortable giving negative feedback.

Maybe it is a cultural issue, but pointing out problems or giving negative

feedback in a one-on-one face-to-face setting and in a calm matter-of-fact
manner is not something most managers are comfortable doing. For that
matter, most individuals are not comfortable receiving this either.

This can only be tackled through extensive counseling and this too needs to
start well before appraisal time.
Employees also need to be counseled that the amount of increment given is
dependent on the appraisal score, but is equally dependent on the
company’s financial performance and outlook. This again has to be handled
with a certain degree of tact.

In many companies, such decisions are veiled in secrecy and there is talk of
“normalization” which no one really understands. Transparency is again
crucial to dispel lingering doubts of bias.

Effective performance appraisal clearly needs a lot more than the few points
outlined here, but attention given to these points will go a long way indeed.

Establishment of Maruti Udyog Limited

• Incorporated on February 24, 1981.

• MOU signed on April 4, 1982.

• License and JV agreement signed on Oct 2,

1982.

• Plants located at Gurgaon, Haryana.

• Head office located at New Delhi.

• Ownership - GOI 49.74%, SMC 50%,

VISION

“The leader in the Indian Automobile Industry,

creating customer delight and shareholders’

wealth; A pride of India.”

HR VISION

Lead and Facilitate continuous

change towards organisational

excellence ; create a learning

and vibrant organisation with

high sense of pride amongst its

members

APPRAISAL & REWARD

APPRAISAL

· New Appraisal System based on KRAs &

Targets

· Review of Targets at regular Intervals

· People Development an important KRA

REWARD

· Promotions based on Performance

· Productivity & Profit-linked Incentive

Schemes

· Training including Long-term SMC Japan Trg.

· Highest paid workforce in the Industry, if

not the Country

CAREER DESIGN

• Performance & Potential based Appraisals

• Fast Track Option for High-performers

• Promotions after Managers Vacancy based

• Interviews for promotions above Managers

• Selection of Supervisors:

– Performance / Attendance / Discipline record

– Written Test & Interview

• Job Rotation - including Inter-functional

RETENTION & EMPLOYEE WELFARE

· Employee Welfare

- Residential Colonies for Employees – Chakkarpur & Bhondsi

- Hospitalisation Reimbursement – on actuals without Ceiling

- Vehicle Loans

- Household Equipment Loans

- House Building Advance

- Annual Advance

· MUL PF Trust – for better Mgt., Service & speedy

redress

· Proposed MUL Pension Scheme

· Learning Opportunity - Benchmark in Auto Technology

· Professional Value addition through Training

· Opportunity for foreign training at SMC, Japan

· Job Rotation & Job enrichment

EMPLOYEE ENGAGEMENT -

ESOPs

• Maruti Udyog Ltd. Employees Mutual

Benefit Fund Scheme

• Managed by a 10-member Trust

• Fixed Equity of 0.26%

• Lock-in period of 3 years

• Transferable Internally

SUGGESTION SCHEME &

QUALITY CIRCLES

• For better quality and productivity

• Through involvement of all employees and teamwork

• During the year 1999-2000 :-

i) Suggestions Implemented - 52,054

ii) Cost Saving (in crores) - Rs. 131.69 Crores

iii) Number of QC Groups - 510

iv) QC Meetings held - 7189

• Target for SS & QC for 2000-01:

Suggestions Implemented - Prod. & VI - 1implmented/employee/month

Other areas - 8.4 implemented/employee/month

Cost Saving Rs. 165 crores (25%)increase for the Company

QC Meeting - 13 meetings/QC Gp./ Year

Targ • Company-wide QC Groups (8-15 members per group)

• Monthly QC Meetings on the First Wednesday each Month

• Company-wide QC Competitions - Best Team sent to SMC

• MD’s lunch with Best QC Team & Best Suggestion Winner

• SUGGESTION MERIT EVALUATION : 5 LEVELS (A to E)

Criteria - Cost Saving (per annum/one time)

- Ingenuity of Suggestion (depth of study)

- Applicability (in work area/entire plant)

• SUGGESTIONS : Monetary Reward

Criteria - Idea

- Efforts

- Result : Cost reduction / Q Improvement / Productivity

Improvement

FUTURE CHALLENGES

- HR INITIATIVES

• REALIGNING ORGANISATION CULTURE BASED ON

NEW VISION & VALUES

• OBJECTIVE PERFORMANCE MANAGEMENT & DEVELOPMENT SYSTEM

• TRANSPARENT JOB ROTATION & JOB ENRICHMENT

• PERFORMANCE LINKED REWARD AND RECOGNITION SYSTEM

• CAREER PLANNING & PROMOTION POLICY

• REVISED RECRUITMENT POLICY

• COMPETENCY MAPPING

• STRONG FUCUS ON TRAINING INITIATIVES

- BUILD A LEARNNG ORGANISATION

- CONTINUOUS VALUE ADDITION TO PROFESSIONAL SKILL

- CUSTOMISED TRAINING

- TRAINING TO THE PERSONNEL OF BUSINESS PARTNERS

• INTERNAL COMMUNICATION

• UNION ALIGNMENT

• EMPLOYEE INVOLVMENT & PARTICIPATION

et - 34 marks / suggestion

MUL to change gear on performance appraisal -- 100% link

between pay, productivity

RENEWING its efforts at cutting costs and improving productivity, Maruti

Udyog Ltd (MUL) has drawn up a new human resources policy, which for the
first time, entirely links performance to pay packets for all its executives and
managers.

MUL has traditionally had a performance-based component of about 30 per

cent in its compensation package for its executives. But now it has gone the
whole hog and decided that in addition to the hike in individual perquisites,
increments to even the basi c salary will now depend on the employees'
performance during the year.

The new performance appraisal and compensation system is likely to affect

over 1,000 employees -- executives and senior and middle level managers.
Company officials said the changeover to a completely performance-based
compensation system has been under discussion amongst MUL's senior
management and directors for quite sometime now.

So, the new appraisal process has not come as a surprise for most of the
employees and has been accepted by them, the official said. ``Over the past
week, the principle underlying the new system has been communicated at
length throughout the company and feedback has been obtained,'' the
official said.

In the run-up to the new remuneration system, the company has also
developed a new performance measurement and development method along
with the noted consultant, Mr M.B. Athreya. The performance measurement
process will complement the new remuneration s ystem.

MUL sources said rather than appraise employees through confidential

reports, the new performance measurement system involves an interactive
process of goal setting, review and counselling by managers throughout the
year. It incorporates qualitative aspe cts, along with quantitative targets.

The employees are being put through workshops to train them on the
various aspects of the system developed with Mr Athreya. The new system
will take effect from this year.

The new system is expected to help enhance managerial performance and

skills, while making the organisation more capable of assessing its costs and
returns. The move is also indicative of the company's renewed stress on
increasing per employee productivi ty.

MUL, which has been beleaguered by low margins and a falling bottomline,
has also been forced to take a hard look at its costs this year. For the first
time, MUL has slipped into the red and recorded a loss during the year 2000-
01.
 MUL has also drawn up a voluntary retirement scheme (VRS) for
its employees. The VRS programme received in-principle approval from the
board last month. While the VRS proposal is yet to be formally notified and
offered to the company's employees, it is e xpected to apply equally to all
the staff members, including the shop floor workers, company sources said.

Maruti adopts `360 degree' appraisal system ( February '5,2007,

HBL)

Maruti has introduced a unique 360-degree feedback system, starting with

its senior leadership. The new system has been co-developed with Ernst &
Young and has been put in place recently.

Under the 360-degree feedback system, the employee is rated not just by
his superiors, but also by his peers and subordinates.

"We are starting the 360-degree feedback process with employees in the top
management such as chief general managers and general managers, whose
performance will now be assessed based on feedback from their peers and
junior management employees within the same department. Till last year,
their performance was being appraised only by the Directors and the
Managing Director," says Maruti's Chief General Manager (HR), Mr S.Y.
Siddiqui.

Ernst & Young, in consultation with Maruti, has listed a set of leadership
competencies that are expected in a general manager. Based on that, it has
prepared a questionnaire to which peers and subordinates can respond
online.

Although acknowledged as an effective tool for leadership development in

the West, Indian companies have been shy of introducing such a feedback
system for fear of disturbing traditional hierarchical structures.

HR consultants feel that the critical issues in implementing such a system

include assuring respondents that their feedback will remain confidential and
convincing the person receiving the feedback that this is a development tool
and not an appraisal tool. Maruti has handled this by getting E&Y and other
consultants to make detailed presentations to the senior management
personnel before the process got under way. The company has a committee
of general managers, called Human Resource Inter Divisional Committee
(HRIDC), which is consulted on all major HR issues.

The initiative has been unveiled with an e-mail by Maruti's Managing

Director, Mr Jagdish Khattar, asking people to support the online

questionnaire process. The 360-degree feedback system will also

include a self-appraisal by the general manager. At the end of the process,
he can compare his self-appraisal with the assessment of his subordinates
and peers.

One of the benefits that Maruti is hoping to get out of the 360-degree
feedback process is the sense of empowerment and importance felt by
subordinates, when they are asked to offer their feedback about their
superiors. Maruti currently has over 4,000 employees on its rolls.