Analyzing Performance Appraisal System

By Amruta Shetty

1|Page

ACKNOWLEDGEMENT
Vital to every operation is co-operation. We really agree to this wonderful quotation put forth by Mr. Frank Tyger. This project was successful due to the co-operation extended by people who have truly contributed towards it. We want to thank the management of various companies who gave us the permission to conduct research. We would also like to thank all the employees and HR executives who empowered us with valuable information. And finally to those whose lives and writings has come the wisdom of the ages. We have tried to learn from your legacy.

2|Page

ABSTRACT
Appraisal is a continuous process and done annually as a formal exercise before completion of the financial year. Appraisal has tremendous motivational impact on people through meaningful feedback and is a powerful tool for recognition. This project explains performance appraisal system and tries to find out how efficiently Performance Appraisal is conducted. And if performance appraisal doesnt meet its objective then, what are the factors causing failure.

3|Page

TABLE OF CONTENTS
Sr. No 1 2 3 4 5 6 7 Title Introduction Research & Survey Results Findings and Recommendations Conclusion Appendices Bibliography Page No 1 5 6 23 26 27 31

4|Page

1.INTRODUCTION
In the business world investment is made in machinery, equipment and services. Quite naturally time and money is spent ensuring that they provide what their suppliers claim. In other words the performance is constantly appraised against the results expected. When it comes to one of the most expensive resources companies invest in, namely people, the job appraising performance against results is often carried out with the same objectivity. Each individual has a role to play and management has to ensure that the individuals objectives translate into overall corporate objectives of the company. Performance Management includes the performance appraisal process which in turn helps identifying the training needs and provides a direction for career and succession planning.

1.1

Understanding Performance Management

PER PERFORM ORMANCE NCE MANAGEMEN EMENT

CORP ORPORA ORATE GOA GOALS

DETER ETERMINE INDIVIDUAL OBJEC JECTIVES LINKED TO CORP ORPORA ORATE GOA GOALS ENSURE URE RESPONSIBILITY AND ACCOU COUNTABILITY

PERFORMANCE APPR PPRAISAL

PERFORMANCE LINKED INCREMEN EMENTS/ INCE NCENTIVES/ REWAR DS EWARD

1.2 What is Performance?

Performance is synonymous with behaviour; it is what people actually do. Performance includes those actions that are relevant to the organizational growth and can be measured in terms of each individuals proficiency (level of contribution). Effectiveness Performance 5|Page

refers to the evaluation of results of performance that is beyond the influence or control of the individual.

1.3 How is Performance managed?

Good performance by the employees creates a culture of excellence, which benefits the organization in the long run. The activity includes evaluation of jobs and people both, managing gender bias, career planning, and devising methods of employee satisfaction etc. the efforts are to make to generate the individuals aspirations with the objectives of the organization. Organization has to clear the way of career advancements for talented and hardworking people. Fear of any kind from the minds of the employees should be removed so that they give best to their organization. Allow free flow of information. Communication network should be designed in such a way no one should be allowed to become a hurdle. This enables the managers to take correct decisions and that too quickly.

1.4 Why Performance Appraisal?????

Todays working climate demands a great deal of commitment and effort from employees, who in turn naturally expect a great deal more from their employers. Performance appraisal is designed to maximize effectiveness by bringing participation to more individual level in that it provides a forum for consultation about standards of work, potential, aspirations and concerns. It is an opportunity for employees to have significantly greater influence upon the quality of their working lives. In these times of emphasis on quality, there is a natural equation: better quality goods and services from employees who enjoy better quality goods and services from their employers. Performance appraisal must be seen as an intrinsic part of a managers responsibility and not an unwelcome and time-consuming addition to them. It is about improving performance and ultimate effectiveness. Performance appraisal is a systematic means of ensuring that managers and their staff meet regularly to discuss post and present performance issues and to agree what future is appropriate on both sides. This meeting should be based on clear and mutual understanding of the job in question and the standards and outcomes, which are a part of it. In normal circumstances, employees 6|Page

should be appraised by their immediate managers on one to one basis. Often the distinction between performance and appraising is not made. Assessment concerns itself only with the past and the present. The staff is being appraised when they are encouraged to look ahead to improve effectiveness, utilize strengths, redress weaknesses and examine how potentials and aspirations should match up. It should also be understood that pushing a previously prepared report across and desk cursorily inviting comments, and expecting it to be neatly signed by the employee is not appraisal - this is merely a form filling exercise which achieves little in terms of giving staff any positive guidance and motivation. THE APPRAISAL OF PERFORMANCE SHOULD BE GEARED TO: Improving the ability of the jobholder; Identifying obstacles which are restricting performance. Agreeing a plan of action, that will lead to improved performance. It is widely accepted that the most important factor in organization effectiveness is the effectiveness of the individuals who make up the organization. If every individual in the organization becomes more effective, then the organization itself will become more effective. The task of reviewing situations and improving individual performance must therefore be a key task for all managers. For appraisal to be effective, which means producing results for the company, each manager has to develop and apply the skills of appraisal. These are: Setting standards on the performance required, which will contribute to the achievement of specific objectives. Monitoring performance in a cost effective manner, to ensure that previously agreed performance standards are actually being achieved on an ongoing basis.

7|Page

 Analyzing any differences between the actual performance and the required performance to establish the real cause of a shortfall rather than assume the fault to be in the jot holder. Interviewing having a discussion with the jobholder to verify the true cause of a shortfall, a developing a plan of action, which will provide the performance, required. Appraisal can then become a way of life, not concerned simply with the regulation of rewards and the identification of potential, but concerned with improving the performance of the company. The benefits of appraisal in these terms are immediate and accrue to the appraising manager, the subordinate manager/employee, and to the company as a whole.

8|Page

2. RESEARCH AND SURVEY:

Statement of the Problem:
Performance appraisal is a process of assessing, summarizing and developing the work performance of an employee. In order to be effective and constructive, the performance manager should make every effort to obtain as much objective information about the employee's performance as possible. Low performance can push the organization back in todays tough competition scenario. The project is aimed at analyzing the performance appraisal in companies.

Objective:
The various objectives of our research are as follows: To examine why an appraisal system is important. To study existing appraisal system in various organizations across sectors like BPO, IT & Telecom. To find the expectation of appraiser and appraise. To determine the satisfaction level of the appraise. To reveal the various loopholes in the appraisal system if any To find the consequences of an inappropriately conducted appraisal system

Research Methodology:
The data source: Primary as well as Secondary. The research approach: Survey Method. The research instrument: Questionnaire. The respondents: The Managers & Employees of various organizations. The primary data was collected with the help of survey information. A concise questionnaire was prepared keeping in mind the information specifications.

9|Page

3.RESULTS
Findings from Appraisee Survey
1. Expectations from Appraisal System :

Respondents were asked to rank the various options according to their preference. (Rank 1 being most preferred and rank 6 being least preferred). Then scoring was given on the basis of ranks. 1 mark was allotted to rank 1, 2 marks for rank 2 and so On . Particular Salary Administration and Benefits Determination of promotion or transfer Assistance in goal Guideline for training plan An insight into your strengths and weakness Decision to layoff Score 87 109 228 254 312 354 Overall Rank 1 2 3 4 5 6

From the above table it can be seen that employees expect Salary Administration and Benefits to be the main reason for conducting a Performance Appraisal. Decision to layoff is of least importance as per the appraisee. 2. Awareness about Responsibilities :

10 | P a g e

From the graph it can be seen that majority of employees are aware about their responsibilities, which implies that the appraisers have efficiently communicated to the appraises all the parameters that will be taken into account during appraisal.

3. Satisfaction Level among appraise regarding Appraisal System :

From graph it can be seen that majority of the respondents are satisfied with the appraisal system. Only a meager 30% were dissatisfied with the Performance Appraisal programs.

4. Awareness about performance ratings:

11 | P a g e

This clearly shows that majority of the employees are not aware about the performance ratings that are taken into account while conducting a performance appraisal.

5. Allowing Self ratings :

From graph it can be seen that majority of respondents want self-rating to be a method of conducting the appraisals. 6. Chance to rate your own performance

12 | P a g e

From the graph we can see that majority of the employees are not given a chance to rate their own performance in the organization. 7. Timing of Appraisals

This

shows

that

most

of

the

organizations

conduct

their

Performance

Appraisal programs annually. A very small percentage of the organizations conduct Performance Appraisals on a half yearly basis. The share of the quarterly and monthly appraisals is extremely minimal. 8. Credibility of Appraiser

13 | P a g e

This shows that according to the employees/appraisees the credibility of the appraiser is extremely important and it has an effect on the overall Performance appraisal program.

9. Complaint channel for employees

This shows that there is no proper complaint channel existing in the organizations for the employees who are dissatisfied with the performance appraisal system.

10. Standards communicated to employees 14 | P a g e

From this it can be seen that there is a clear majority among the employees who say that the standards on the basis of which the performance appraisal is carried out is not communicated to the employees beforehand. 11. Performance Appraisal

Almost all the Performance Appraisals are carried our by the Immediate Supervisor in these organisations. In very few organisations, Rating committees carry out the performance appraisals. None of the organisations use Peer Appraisals, Appraisals by subordinates and Self rating as a method of Performance Appraisal. 12. Clear understanding of Appraisees job 15 | P a g e

This shows that the performance Appraisal programs are successful in giving a clear understanding of the appraisees job to both appraiser and appraisee.

13. Objectives of Appraisal System

From the figure we can derive that the objective for conducting the Appraisal system is clear only to half of the employees. The remaining half are not clear about the objective for which the Performance Appraisal is carried out.

16 | P a g e

14. Good communication between top management and business goals

This shows that the appraisal systems do not provide a good communication flow of the top-management plans and business goals to the staff below. 15. Comments and suggestions to be considered

Almost all the employees expect that their comments and suggestions should be taken into consideration while conducting the Performance Appraisal.

17 | P a g e

16. Post Appraisal interview

As per the response from the employees we can see that there is no interview conducted after the appraisal program for majority of the employees.

Findings from Appraiser Survey

1. Purpose of Appraisal

Respondents were asked to rank the various options according to their preference. (Rank 1 being most preferred and rank 6 being least preferred). Then scoring was done on basis of these ranks. 1 mark was allotted to rank 1, 2 marks for rank 2 and so 18 | P a g e

on. Then the total score for each purpose was calculated and overall ranking was given. Particular Determination of promotion or transfer Salary Administration and Benefits Decision to layoff Guideline for training plan Assistance in goal An insight into your strengths and weakness Score 24 27 42 69 72 81 Overall Rank 1 2 3 4 5 6

From table it can be seen that appraiser considers Determination of promotion or transfer & Salary administration and Benefits as two important factors for conducting an Appraisal. 2. Appraisal System

In this question appraiser was asked to rate how helpful the appraisal system is, from the graph it can be seen that majority of appraisers have rated 5,4 & 3 which implies that Performance Appraisal system is very helpful in Planning their work. Also most of the appraisers are satisfied with the appraisal system.

3. Support from subordinate

19 | P a g e

This question was asked to find out how helpful appraisal system is in communicating the support that apprasier needs from appraisee. From results it is seen that the performance appraisal system is very helpful in communicating the support and help needed by the appraiser from the appraisee. 4. Type of Appraisal System

From results its clear that majority of companies prefer to use 360 degree feedback system for Performance Appraisal. As 360 degree feedback gives feedback of appraisee from everyone interacting with him, it is more reliable and hence most preferred. 5. Performance Appraisal criteria

20 | P a g e

From results we can see that Qualitative Process is considered as the most important criteria for which the Performance appraisal programs are carried out, which shows that companies consider Qualitiy of product & service and Customer satisfaction as most important factors.

6. Timing of Appraisals

From graphs we can see that most of companies conduct appraisals on annual basis. Some companies conduct quaterly also. 7. Effect of poor Appraisal System

21 | P a g e

It can be seen from results that most of the employees get De-motivated because of a poorly conducted appraisal. To some extent employees dont coordinate with their team members. Thus resulting in reduction of output.

8. Communication between top management and staff

All appraisers totally agree that performance appraisal helps in communicating the top management plans and business goals to staff at lower level. 9. Insight to Apprasiees strength and weakness

22 | P a g e

It is evident from the results that performance appraisal system doesnt help the appraiser in understanding strength and weakness of apraisee.

10. Appraisees comment and suggestion

From the results it can be seen that appraisees comments and suggestion are not taken into consideration before Performance Appraisal. Performance Appraisal system is designed by appraiser without consulting appraisee.

11. Performance Appraisal

23 | P a g e

It is evident from the results that performance appraisal is conducted by the Immediate Supervisor in all the companies.

12. Understanding of Apprasiees Job

From this it is clearly seen that according to appraiser there is a clear and joint understanding of the appraisees job.

13. Standards for Performance Appraisal

24 | P a g e

From results it is evident that Performance appraisal standards are very well communicated to Appraisee before the Appraisal is carried out.

14. Self rating in Performance Appraisal

From results it can be clearly seen that the Appraisee is not given a chance to rate his own performance.

15. Action after Performance Appraisal 25 | P a g e

This shows that most of the companies act upon the results of their Performance Appraisal program.

26 | P a g e

4.FINDINGS AND RECOMMENDATIONS

From the survey results its evident that both the appraisees and appraisers expectation from Performance appraisal system are the same i.e. Determination of Promotion or Transfer and Salary Administration and Benefits. Hence a single performance appraisal system can satisfy needs of both the Appraiser and appraisee. Therefore the Performance appraisal program would be designed in such a way that the appraiser would be able to analyse the contribution of the employee to the orgaisation periodically and all the employees who have been performing well would be rewarded suitably either by an increase in the salary or a promotion. Through this the appraiser can also motivate the employees who felt that they had no growth in the organisation and serves the purpose of employee development.Thus performance appraisals can be used as a significant tool fo career lanning. Analyzing ones own strengths and weaknesses is the best way of identifying the potentials available, rather than the other person telling. Self-appraisal is a tool to analyze oneself. One of the most important findings was that almost all the employees wanted self-rating to be a part of performance appraisal program carried out by the organisation. From the responses of the appraiser we can also see that Self rating is not encouraged by the organisations. This could therefore be an important factor which leads to dissatisfaction among the appraisees. At the end of the year of the appraisal period the appraisal process should begin with self-appraisal by every employee. To appraise ones own self on key performing targets and qualities, the appraisee would go through a process of reflection and review. It is an established fact that change is faster when it is self initiated. If any employee has to improve or do better, he must first feel the need to do so. Reflection and review is a process that enables him to feel the need and improve more upon his strengths and weaknesses

Another point to be noticed is that even in the other forms of Performance Appraisal also the employees expect that they should be given a chance to rate their own performance. This can allow the employee to analyze ones own 27 | P a g e

performance which gives new insights on how one is performing and what are the critical points where he has to put his best and improve upon

The existence of a proper complain channel was also of utmost importance to the appraisees. They should be given a chance to convey their greviences to the top management.

The appraisees also expect that their comments and suggestions should be taken in to account while conducting the appraisals. This expectation is not fulfilled as the appraisers do not take their comments and suggestions into consideration. Therefore they should look into this matter before it leads to dissatisfaction among the employees.

The results also indicate that the there is no communication of top management plans and business goal to the appraisee. The appraisers on the other hand feel that the goals and plans have been clearly communicated to the appraisees. Communication is very essential for any system to function efficiently. Therefore the appraisers should look into this matter and see to it that the goals and plans are communicated effectively.

The findings suggest that for success of Appraisal system the credibility of appraiser is of utmost importance.

As per the Appraiser, a poorly conducted appraisal system would lead to demotivation and ineffective teamwok which will result in inefficient functioning and low productivity in the organization. Therefore, if at all they feel there is dissatisfaction among the appraisees they should motivate them. Achievement, recogntion, invelvement, job satisfaction and development can motivate the employees to a large extent. Along with this satisfactory working conditions and appropraite awards also play an important role.

28 | P a g e

 Also a majority of employees were satisfied with the current appraisal system although they requested for some changes.

Most of the employees were also not clear about the criteria on which ratings were given to each employee while conducting the performance appraisal. Instead of secrecy there should be openess. Because of lack of communication, employees may not know how they are rated. The standards by which employees think they are being judged are sometimes different from those their superiors actually use. Proper communication of these ratings can help the employers achieve the level of acceptability and commitment which is required from the employ.

From the survey we can also derive that the appraisees expect a post appraisal interview to be conducted wherein they are given a proper feedback on their performance and they can also put forward their complaints if any. The appraisal should also be followed up with a session of counseling which is often neglected in many organizations. Counseling involves helping an employee to identify his strengths and weaknesses to contribute to his growth and development. Purpose is to help an employee improve his performance level, maintain his morale, guide him to identify and develop his strong points, overcome his weak points, develop new capabilities to handle more responsibilities, identify his training needs.

29 | P a g e

5.CONCLUSION
With rewards being directly linked to achievement of objectives, goal setting and Performance Appraisal assumes utmost importance. The Performance Appraisal System has been professionally designed and it is monitored by HRD. The implementation is the responsibility of each and every employee along with their supervisor. There should be adequate training to the evaluator that will go a long way in answering the quality of Performance Appraisal. In conclusion, a Performance Appraisal is a very important tool used to influence employees. A formal Performance review is important as it gives an opportunity to get an overall view of job performance and staff development. It encourages systematic and regular jointstocking and planning for the future. Good performance reviews therefore dont just summarize the past they help determine future performance.

30 | P a g e