GITAM INSTITUTE OF INTERNATIONAL BUSINESS

Human Resource Management

Report on Live Porject

Topic: A study on the performance appraisal methods used in an organisation

Submitted to:
Prof. Archana Das

Submitted by:
Mridula Shivakumar- 128
Raghav Gupta- 138
Rohit Gupta- 141
Vinay Bhandari- 157
Vinita Prem Karnani- 158
MBA (IB)- 1st year
Section A
 INTRODUCTION

Performance appraisal is the process of obtaining, analyzing and recording information about
the relative worth of an employee. The 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 matters pertaining to his present job and his potential for a better job." Performance
appraisal is a systematic way of reviewing and 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.

People differ in their abilities and their aptitudes. There is always some difference between
the quality and quantity of the same work on the same job being done by two different
people. Performance appraisals of Employees are necessary to understand each employee’s
abilities, competencies and relative merit and worth for the organization. Performance
appraisal rates the employees in terms of their performance.
 HISTORY OF PERFORMANCE APPRAISAL

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.

As a distinct 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.
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, says Dulewicz (1989), "... a basic human tendency to make judgements about those
one is working with, as well as about oneself." 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, informally and
arbitrarily. The human inclination to judge can create serious motivational, ethical and legal
problems in the workplace. Without a structured appraisal system, there is little chance of
ensuring that the judgements 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 in pay would follow. On the 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 developmental 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.
Sometimes this basic system succeeded in getting the results 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 not the 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 a 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.

Performance appraisal is necessary to measure the performance of the employees and the
organization to check the progress towards the desired goals and aims.
 MODERN METHODS OF PERFORMANCE APPRAISAL

The latest mantra being followed by organizations across the world being – "get paid
according to what you contribute" – the focus of the organizations is turning to performance
management and specifically to individual performance. Performance appraisal helps to rate
the performance of the employees and evaluate their contribution towards the organizational
goals. If the process of performance appraisals is formal and properly structured, it helps the
employees to clearly understand their roles and responsibilities and give direction to the
individual’s performance. It helps to align the individual performances with the
organizational goals and also review their performance.

Performance appraisal is now 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 counselling, 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.)

Whether this is an appropriate use of performance appraisal - the assignment and justification
of rewards and penalties - is a very uncertain and contentious matter.

In a nutshell, Performance appraisal takes into account the past performance of the
employees and focuses on the improvement of the future performance of the employees.
 OBJETIVES OF PERFORMANCE APPRAISAL

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

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

• To help the management in exercising organizational control.

• Helps to strengthen the relationship and communication between superior –

subordinates and management – employees.

• To diagnose the strengths and weaknesses of the individuals so as to identify the

training and development needs of the future.

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

• Provide information to assist in the other personal decisions in the organization.

• Provide clarity of the expectations and responsibilities of the functions to be

performed by the employees.

• To judge the effectiveness of the other human resource functions of the organization
such as recruitment, selection, training and development.
• To reduce the grievances of the employees.
 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 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 them. This will help them to understand their
roles 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.
• MEASURING 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.

• 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 employees’ performance.

• DISCUSSING 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 are discussed with the aim of problem
solving and reaching consensus. The feedback should be given with a positive
attitude as this can have an effect on the employees’ future performance. The purpose
of the meeting should be to solve the problems faced and motivate the employees to
perform better.

• DECISION MAKING
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, transfers etc.
 METHODS OF PERFORMANCE APPRAISAL

Performance appraisal methods include 11 methods as follows:

• Critical incident method:
The critical incidents for performance appraisal is a method in which the manager
writes down positive and negative performance behaviour of employees throughout
the performance period
• Weighted checklist:

This method describe a performance appraisal method where rater familiar with the
jobs being evaluated prepared a large list of descriptive statements about effective and
ineffective behaviour on jobs

• Paired comparison analysis:

Paired comparison analysis is a good way of weighing up the relative importance of
options.
A range of plausible options is listed. Each option is compared against each of the
other options. The results are tallied and the option with the highest score is the
preferred option.
• Graphic rating scales:
The Rating Scale is a form on which the manager simply checks off the employee’s
level of performance.
This is the oldest and most widely method used for performance appraisal.
• Essay Evaluation:
This method asked managers / supervisors to describe strengths and weaknesses of an
employee’s behaviour. Essay evaluation is a non-quantitative technique.
This method usually use with the graphic rating scale method.
• Behaviourally anchored rating scales:
This method used to describe a performance rating that focused on specific
behaviours or sets as indicators of effective or ineffective performance.
It is a combination of the rating scale and critical incident techniques of employee
performance evaluation.
• Performance ranking method:
Ranking is a performance appraisal method that is used to evaluate employee
performance from best to worst.
Manager will compare an employee to another employee, rather than comparing each
one to a standard measurement.
• Management By Objectives (MBO):
MBO is a process in which managers / employees set objectives for the employee,
periodically evaluate the performance, and reward according to the result.
MBO focuses attention on what must be accomplished (goals) rather than how it is to
be accomplished (methods)
• 360 degree performance appraisal:

360 Degree Feedback is a system or process in which employees receive confidential,

anonymous feedback from the people who work around them.

• Forced ranking (forced distribution):

Forced ranking is a method of performance appraisal to rank employee but in order of

forced distribution.

For example, the distribution requested with 10 or 20 percent in the top category, 70
or 80 percent in the middle, and 10 percent in the bottom.

• Behavioural Observation Scales:

Behavioural Observation Scales is frequency rating of critical incidents that worker

has performed.
PROBLEMS IN PERFORMANCE APPRAISAL

Problems with leniency and strictness:

The leniency bias crops when some raters have a tendency to be liberal in their rating
by assigning higher rates consistently.
Equally damaging one is assigning consistently low rates.

Problems with central tendency:

Some raters appraise all the employees around the middle point of the rating scale and
they avoid rating the people higher or lower level.
They follow play safe policy because of answer ability to management or lack of
knowledge about the job and person he is rating or least interest in his job.

Problems with personal prejudice:

If the rater dislikes any employee, he may rate them at the lower end and this may
distort the rating purpose and affect the career of these employees.

Problems with halo effect:

A person outstanding in one area tends to receive outstanding or better than average
ratings in other areas as well, even when such a rating is undeserved.
To minimizing the halo effect, you should appraise all the employees by one trait
before going to rate on the basis of another trait.

LIVE APPRAISALS:
We have analysed the performance appraisal methods of Titan by sending the Questionnaire
to an employee of Titan. The following are some of the answers to our questionnaire.

We have analyzed the following appraisals and come to some conclusions of our own which
will be subsequently explained, so the next few pages will give you an idea of the questions
that we have asked.

It has been totally our own observation and we have concluded is based on our own research.
Titan Industries is the world's fifth largest and India's leading manufacturer of watches. The
company has manufactured more than a 100 million watches till date; and has a customer
base of over 80 million. The umbrella brand Titan is one of India's leading watch brands that
brought about a paradigm shift in the Indian watch market, offering quartz technology with
international styling.

The brand Titan is committed to offering its consumers watches that represent the compass of
their imagination. Titan's customers are therefore consistently introduced to exciting new
collections, which connect, with various facets of their deep−rooted yearnings for self-
expression. The new brand philosophy of Titan, encapsulated in the words "Be More",
touches this as well as all other aspects of the brand.

Today, the Titan portfolio has over 60% of the domestic market share in the organised watch
market. The company has 247 exclusive showrooms christened World of Titan', making it
amongst the largest chains in its category backed by 700 after−sales−service centers. The
company has a world−class design studio that constantly invents new trends in wrist watches
 TITAN

Name of employee: Vibhor Garg

Sex: Male

Location: Lucknow

• Do you have any written policy regarding the performance appraisal of employees?
(yes/no)
YES

• Is any post-appraisal interview is conducted?(yes/no)

NO

• Is there any action taken against the poor performance?(yes/no)

YES

• Is any employee is awarded with their better performance? yes/no)

YES

• Do you know the appraisers?(yes/no)

NO

• Does performance appraisal have any impact on the performance of the employees?
(yes/no)
YES

• whether it has any negative impact?(yes/no)

YES

• Does any partiality or dispute arise during this system?(yes/no)

NO

• Have you ever promoted from lower to higher post through yhis system?(yes/no)
NO

• Is there any dispute arise between the employees by this system?(yes/no)

 NO

• What elements of your job do you find most difficult?

CONVINCING THE CUSTOMERS

• State your understanding of your main duties and responsibilities.

DEALING WITH THE CUSTOMERS

• According to you which one would you prefer team work or working alone? TEAM
WORKING
• Do you ask for help to your superiors and colleagues while having to make an
important decision?
YES

• Do you get tensed or feel intimated by others while presenting something in your
office?
YES

• How well do you organize your timings in case of emergencies? Do you meet your
deadlines in time?
YES I NORMALY MEET THE DEADLINES

• Do you find your superiors and your subordinates listen to your suggestions in a
manner befitting to your satisfaction?
YES

• Do you think your appreciated enough for your work?

YES

• How well is your relation with your colleagues?

HERE WE HAVE GOOD PEER RELATIONS

• Do you find it difficult if u are asked to do overtime and are given extra work?
NO

• Are your co workers cooperative in case of troubleshooting?

YES
Titan defines performance appraisal as

• A regular activity conducted periodically to rate an employee

• An activity to identify the developmental need of the employee

• An activity to keep a check in the performance of the employee

• A system to help employees identify his own strengths and weakness with respect to
his job

• A system to assist various personnel decisions by generating data about each

employee periodically

• A means to improve communication between superior and subordinate

Objectives of performance appraisal

• To make decisions regarding salary increase

• To identify the training and developmental needs of the employees

• To facilitate communication between the superior and his subordinates

Method of appraisal

• Rating

• Critical incidents

• MBO

• 360 degrees appraisal

Basis of appraisal
 • Results

• Job behaviour

The performance of employees are appraised on the basis of results combined with the
process of achieving those results, i.e., job behaviour.

Titan uses performance appraisal to set goals for employees. It serves as a platform to
communicate the goal of the organisation to the employees as they understand what is their
role or what part do they play in achieving the goals. It gives them a clear view of what the
organisation expects from them. Also, at the time of appraisal, the employees at Titan speak
freely about their developmental needs and personal objectives.

Here at Titan, MBO is followed. The Top management decides the goal of the company and
then it is broken down for different departments and then to employees.

Problems in Appraisal

• Time consuming

• Untrained appraisers

• Difference of opinion between the appraiser and the appraise

Solutions to problems

• The appraisal is time consuming in nature in the sense that a lot of time is taken for
the appraisal process, starting from training the appraisers regarding the use of
appraisal, followed by target setting for the year, followed by review of performance,
then finding out the facilities and the hindering factors, then the discussions and
finally make the decision.
 • Lack of training is also a major problem faced by the company. Appraisers need to be
properly trained for the use of the appraisal system. The objective of the appraisal
system goes hay wire if the appraiser is untrained. Therefore the company must hire
professionals who are well trained to fulfil the purpose of appraisal.

• The difference of opinion between the appraiser and the appraise is usually solved by
interviews and discussions.

Rewards

Titan follows the concept of performance related pay

Appraisal is a motivating factor and it is all the more motivating when it is linked with
increased pay packets. Financial incentives play an important role in inducing employees to
perform better. Thus, most organisations normally link incentives with appraisals.
Performance related to pay allows good performance to receive material recognition for their
good performance.

Conclusion

Performance appraisal is an indispensable activity of the organisation

The employees are rated, appreciated and handed over various duties depending on his/her
capability. Goal setting is usually a part of appraisal. Also appraisal is successful when it is
linked to financial and semi-financial incentives like promotion, bonus, increments, etc. The
360 degrees system has been successful only in organisations which understand the comcept
of this system thoroughly.

Performance appraisal is a good method for the training, development and motivational
needs of the employee.