Specially Uploaded for ProjectsParadise.

com PERFORMANCE APPRAISAL SYSTEM -1-

Specially Uploaded for ProjectsParadise.com INDEX SR.NO 1. TOPIC MEASURING PERFORMANCE V/S ACTION PERFORMANCE APPRAISAL OBJECTIVES OF PERFORMANCE APPRAISAL PERFORMANCE APPRAISAL AND COMPETITIVE ADVANTAGE APPRAISAL PROCESS MET HODS OF APPRAISAL MANAGEMENT BY BJECTIVES(MBO) LARSEN AND TOUBRO, HUMAN RESOURCE DEVELOPMENT PERFORMANCE APPRAISAL SYSTEM ASSESSMENT CENTRES 360-DEGREE FEEDBACK APPRAISE THE PERFORMANCE PERFORMANCE INTERVIEW GUIDELINES FOR EFFECTIVE APPRAISA L INTERVIEW PAGE NO 2-3 2. 3. 4-5 6-7 4. 8-11 5. 6. 7. 8. 12-29 30-41 42-43 44--46 9. 10. 11. 12. 13. 47-49 50 51 52 53 -2-

Specially Uploaded for ProjectsParadise.com 14. USE OF APPRAISAL DATA 54 EDWARD DEMING ON PERFORMANCE APPRAISAL 15. 16. CHALLENGES OF PERFORMANCE APPRAIS AL PIRAMYD MEGASTORE - STORY OUTLINE 18. 19. HR VISION OF PIRAMYD MEGASTORE PERF ORMANCE APPRAISAL METHODS USED AT PIRAMYD 55 56-60 17. 61-62 63-64 65-70 -3-

Specially Uploaded for ProjectsParadise.com MEASURING PERFORMANCE V/S ACTION Come appraisal time and one of the most debated aspects of completing the fair-a ndsquare appraisal revolves around what is 'measured' and what is 'achieved'. An d the fable of the Bees and the Bee Keepers is a very popular paradigm that ofte n gets quoted at such times. It goes thus: The Story: Once upon a time there were two beekeepers that each had a beehive. The beekeepers worked for a company called Bees, Inc. The company's customers lo ved its honey and demand for the product was increasing. So Bees, Inc. assigned each beekeeper a goal for increased honey production. The beekeepers had differe nt ideas about how to meet their goal and designed different approaches to impro ve the performance of their hives. The first beekeeper established a bee perform ance management approach that measured the number of flowers each bee visited. A t considerable cost to the beekeeper, an extensive measurement system was create d to count the flowers each bee visited. He also provided feedback to each bee a t mid-season on his individual performance. He also created special awards for t he bees who visited the most number of flowers. However, the bees were never tol d about the hive's goal to produce more honey so that the company could increase honey sales. The second beekeeper also established a bee performance management approach but this approach communicated to each bee the goal of the hive for in creased honey production. The beekeeper and his bees measured two aspects of the ir performance the amount of nectar each bee brought back to the hive and the am ount of honey the hive produced. The performance of each bee and the hive's over all performance were charted and posted on the hive's bulletin board for all the bees to see. The beekeeper created a few awards for the bees that gathered the most nectar. But he also established a hive incentive program that rewarded each bee in the hive based on the hive's overall honey production the more honey pro duced, the more recognition each bee would receive. -4-

Specially Uploaded for ProjectsParadise.com At the end of the season, the beekee pers evaluated their approaches. The first beekeeper found that his hive had ind eed increased the number of flowers visited ,but the amount of honey produced by the hive had dropped. The Queen Bee reported that because the bees were so busy trying to visit as many flowers as possible, they limited the amount of nectar they would carry so they could fly faster. Also, since only the top performers w ould be recognized, the bees felt they were competing against each other for awa rds. As a result, they would not share valuable information with each other that could have helped improve the performance of all the bees (like the location of the flower filled fields they'd spotted on the way back to the hive). As the be ekeeper handed out the awards to individual bees, unhappy buzzing was heard in t he background. After all was said and done, one of the high performing bees told the beekeeper that if he had known that the real goal was to make more honey, h e would have worked totally differently. The second beekeeper, however, had very different results. Because each bee in his hive was focused on the hive's goal of producing more honey. This Bess had concentrated their efforts on gathering m ore nectar in order to produce more honey than ever before. The bees worked toge ther to determine the highest nectar yielding flowers and to create quicker proc esses for depositing the nectar they had gathered. They also worked together to help increase the amount of nectar gathered by the poorer performers. Tile Queen Bee of this hive reported that the poor performers either improved their perfor mance or transferred to hive No.1, because the hive had reached its goal. The be ekeeper rewarded each bee his portion of the hive incentive. The keeper was also surprised to hear a loud, happy buzz and a jubilant flapping of wings as he rew arded the individual highperforming bees with special recognition. Should you me asure performance or mere activities of employees? is the one who does silent wo rk but does not show of himself/herself or the one who puts up a show but hardly performs to be recognized and rewarded? This and other related questions are an swered in this chapter. -5-

Specially Uploaded for ProjectsParadise.com PERFORMANCE APPRAISAL An organizations goals can be achieved only when people put in their best efforts . How to ascertain whether an employee has shown his or her best performance on a given job? The answer is performance appraisal. Employee assessment is one of the fundamental jobs of HRM. But not an easy one though. This chapter is devoted to a detailed discussion of the nature and process of conducting performance ap praisal. Meaning and Definition In simple terms, performance appraisal may be understood as the assessment of an individual s performance in a systematic way, the performance being measured ag ainst such factors as job knowledge, quality and quantity of output, initiative, leadership abilities, supervision, dependability, co-operation, judgement, vers atility, health, and the like. Assessment should not be confined to past perform ance alone. Potentials of the employee for future performance must also be asses sed. A formal definition of performance appraisal is: It is the systematic evalu ation of the individual with respect to his or her performance on the job and hi s or her potential for development. A more comprehensive definition is: Performa nce appraisal is a formal structured system of measuring and evaluating an empl oyees job related behaviors and outcomes to discover how and why the employee is presently performing on the job and how the employee can perform more effectivel y in the future so that the employee organization and society all benefit. The s econd definition includes employees behaviour as part of the assessment. Behaviou r can be active or passive--do something or do nothing. Either way behaviour aff ects job results. The other terms used for performance appraisal arc: performanc e rating, employee assessment. Employees performance review, personnel appraisal , -6-

Specially Uploaded for ProjectsParadise.com performance evaluation employee eval uation and (perhaps the oldest of the terms used) merit rating. In a formal sens e, employee assessment is as old as, the concept of management and in an informa l sense; it is probably as old as mankind. Nor performance appraisal is done in isolation. It is linked to job analysis as shown in Fig. Performance Appraisal Job Analysis Performance Standards Describes work personnel requirement of a particular job and Translate job requirements I into levels of acceptable or I mance

Describes the job-relevant strengths and weaknesses of each individual Fig. Relationship of Performance Appraisal and Job Analysis Job analysis sets out requirements, which are translated into performance standa rds, which in turn from the basis for performance appraisal. -7-

unacceptable perfor

Specially Uploaded for ProjectsParadise.com OBJECTIVES OF Data relating sed for seven ct promotions probationary rily. PERFORMANCE APPRAISAL to performance assessment of employees arc recorded, stored. and u purposes. The main purposes of employee assessment are: 1. To effe based on competence and performance. 2. To confirm the services of employees upon their completing the probationary period satisfacto

3. To assess the training and development needs of employees. 4. To decide upon a pay raise where (as in the unorganized sector) regular pay scales have not bee n fixed. 5. To let the employees know where they stand insofar as their performa nce is concerned and to assist them with constructive criticism and guidance for the purpose of their development. 6. To improve communication. Performance appr aisal provides a format for dialogue between the superior and the subordinate, a nd improves understanding of personal goals and concerns. This can also have the effect of increasing the trust between the rater and the ratee. 7. Finally, per formance appraisal can be used to determine whether HR programmes such a selecti on, training, and transfers have been effective or not. Broadly, performance app raisal serves four objectives(i) (ii) (iii) (iv) developmental uses, administrat ive uses/decisions, organizational maintenance/objectives, and documentation pur poses -8-

Specially Uploaded for ProjectsParadise.com Table below outlines these and specific uses more clearly:Multiple Purposes of Performance Assessment General Applications Developmental Uses Specific Purpose Identification of individual needs Performance feedback Determining transfers an d job assignments Identification of individual strengths ad development needs Sa lary Promotion Administrative Uses/Decisions Retention or termination Recognition of individual performance Lay-offs Identifi cation of poor performers HR planning Determining organization training needs Ev aluation of organizational goal achievement Information for goal identification Evaluation of HR systems Reinforcement of organizational development needs Crite ria for validation research Documentation for HR decisions Helping to meet legal requirements Organizational Maintenance/ Objectives Documentation -9-

Specially Uploaded for ProjectsParadise.com PERFORMANCE APPRAISAL AND COMPETITIVE ADVANTAGE The objectives of performance appraisal, listed above, point out the purpose whi ch such an exercise seeks to meet. What needs emphasis is that performance evalu ation contributes to firm s competitive strength. Besides encouraging high level s of performance, the evaluation system helps identify employees with potential, reward performance equitably and determine employee s need for training. Specif ically, performance appraisal helps an organization gain competitive edge in the following ways (see Fig below) Strategy and Behavior Improving Performance Making correct decisions Competitive Advantage Values and Behaviour Minimizing dissatisfaction and turnover Ensuring Legal Compliance - 10 -

Specially Uploaded for ProjectsParadise.com Fig: How Performance Appraisal can contribute to Firm s Competitive Advantage? Improving Performance An effective appraisal system can contribute to competitive advantage by improvi ng employee job performance in two ways-by directing employee behaviour towards organizational goals, as was done by the second beekeeper (see opening case), an d by monitoring that behaviour to ensure that the goals are met. Making Correct Decisions As stated above, appraisal is a critical input in making decisions on such issue s as pay raise, promotion, transfer, training, discharges and completion of prob ationary periods. Right decision on each of these can contribute to competitive strength of an organization. If promotion, for example, is made on performance, the promotee feels motivated to enhance his or her performance. Ensuring Legal Compliance Promotions made on factors other than performance might land up a firm in a lega l battle, thus diverting its focus on non-productive areas, as it happened to Wi lliamson Magar. Organizations can minimize costly performance-related litigation by using appraisal systems that give fair and accurate ratings. Minimizing Job Dissatisfaction and Turnover Employees tend to become emotional and frustrated if they perceive that the rati ngs they get are unfair and inaccurate. Such employees find that the efforts the y had put in became futile and obviously get de-motivated. Dissatisfaction in th e job sets in and one of the outcomes of job dissatisfaction is increased turnov er. Fair and accurate appraisal results in high motivation and increased - 11 -

Specially Uploaded for ProjectsParadise.com job satisfaction. An organization ha ving satisfied and motivated employees will have an edge over its competitors. Consistency between Organizational Strategy and Behaviour An organization needs a strategy consistent with the behaviour of its employees if it were to realize its goals. A truism of organizational life is that people engage themselves in behaviours that they perceive will be rewarded. As employee s want to be rewarded, they tend to occupy themselves more with those activities on which the organization emphasizes. For example, if the focus is on service, employees will behave in ways that will help them in gaining rewards associated with service delivery. If the focus is on cost control, employees will seek to c ontrol cost and thus be recongnised and rewarded. If the focus is on rewarding p roductivity, employees will strive for productivity. The performance appraisal b ecomes not only a means of knowing if the employees behaviour is consistent wit h the overall strategic focus, but also a way of bringing to the fore any negati ve consequence of the strategy- behaviour fit For example, a single point produc tivity focus may include potential negative consequences such as decreased quali ty and co-operations. Thus, the performance appraisal system is an important org anizational mechanism to elicit feedback on the consistency of the strategy-beha viour link. Organizational Strategy and Performance Appraisal The performance appraisal system serves many organizational objectives and goals . Besides encouraging high level of performance, the evaluation system is useful in identifying employees with potential, rewarding performance equitably. And d etermining employees needs for development. These are all the activities that s hould support the organizations strategic orientation. Although these activities are clearly instrumental in achieving corporate plans and long-term growth, typi cal appraisal systems in most organizations have been focused on short-term goal s. - 12 -

Specially Uploaded for ProjectsParadise.com From the strategic management point of view, organizations can be grouped into three categories defenders, prospecto rs and analyzers. Performance appraisal has definite roles in all the three stra tegies. Typically, defenders have a narrow and relatively stable product-market domain. Because of this narrow focus, these organizations seldom need to make ma jor adjustments in their technology. Structure or methods of operations. They de vote primary attention to improving the efficiency of their existing operations. Because of the emphasis 011building skills within the organization, successful defenders use performance appraisal for identifying training needs. Performance appraisal is usually more behaviour oriented. Organizations with a prospector st rategy continuously search for different product and market opportunities. In ad dition, these organizations regularly experiment with potential responses to new and emerging environmental trends. Prospectors are often the harbingers of chan ge. Because of the emphasis on skills identification and acquisition of human re sources from external sources, as opposed to skills building with the organizati on, prospectors often use the performance appraisal as a means of identifying st affing needs. The emphasis is on results. Finally, the focus is on division and corporate performance evaluation as they compare with other companies during the same evaluation period. Organizations with an analyzer strategy operate in two types of product-.market domains. One domain is stable while the other is changi ng. In their more innovative areas, managers watch their competitors closely and rapidly adopt the ideas that appear promising. In general, analyzers use cost e ffective technologies for stable products and project or matrix technologies for new product. Analyzers tend to emphasize both skill building and skill i1cquisi lion and employ extensive training programmes. Thus, these organizations attempt to identify both training as well as staffing needs. The appraisal systems are considered at the individual, group and divisional levels. Finally, successful a nalyzers have a tendency to examine current performance with past performance wi thin the organization. Cross-sectional comparisons (comparisons among companies ) may also occur. Whatever the category, a performance appraisal system has stra tegic importance to a firm in three ways: - 13 -

Specially Uploaded for ProjectsParadise.com 1. Feedback mechanism, 2. Consistenc y between organizational strategy and job behaviour, and 3. Consistency between organizational values and job behaviour. APPRAISAL PROCESS Figure below outlines the performance- appraisal process. Each step in the proce ss is crucial and is arranged logically. The process as shown in Fig. Below is s omewhat idea1ised. Many organizations make every effort to approximate the ideal process, resulting in first-rate appraisal systems. Unfortunately, many others fail to consider one or more of the steps and, therefore, have less-effective ap praisal system. Objectives of Appraisal Establish job Expectation Design an appr aisal performance Performance interview Use appraisal data for appropriate purpo ses 1. Objectives of Appraisal Objectives of appraisal as stated above include effec ting promotions and transfers, assessing training needs, awarding pay increases, and the like. The emphasis in all these is to correct problems. Theses objectiv es are appropriate as long as the approach in - 14 -

Specially Uploaded for ProjectsParadise.com appraisal is individual. Appraisal i n future, would assume systems orientations. In the systems approach, the object ives of appraisal stretch beyond the traditional ones. In the systems approach, appraisal aims at improving the performance, instead of merely assessing it. Tow ards this end, an appraisal system seeks to evaluate opportunity factors. Opport unity factors include the physical environment such as noise, ventilation and li ghtings, available resources such as human and computer assistance and social pr ocesses such as leadership effectiveness. These opportunity variables are more i mportant than individual abilities in determining work performance. In the syste ms approach the emphasis is not on individual assessment and rewards or punishme nts. But it is on how work the work system affects an individuals. In the systems approach the emphasis is not on individual assessment and rewards or punishment s. But it is on how the work systems affect an individuals performance. In order to use a systems approach, managers must learn to appreciate the impact that sys tems levels factors have on individual performance and subordinates must adjust to lack of competition among individuals. Thus, if a systems approach is going t o be successful, the employee must believe that by working towards shared goals, everyone will benefit. Not that the role of the individual is undermined. The i ndividual is responsible for a large percentage of his or her work performance. Employees should not be encouraged to seek organizational reasons for his failur es. The identifications of systems obstacles should be used to facilitate develo pment and motivation, not as an excuse to poor performance. The following table displays some of the differences between the traditional approach and the system s-oriented one. PERFORMANCE APPRAISAL SYSTEMS Traditional Attribution to individ ual Control, documentation Directional, evaluative Occasional High Individual or ientation Systems Attribution to systems Development, problem solving Facilitati ve, coaching Frequent Low Group orientation Guiding value Primary roles Leadership practices Appraisal frequency Degree of f ormality Reward practices - 15 -

Specially Uploaded for ProjectsParadise.com 2. Establish Job Expectations The second step in the appraisal process is to establish job expectations. This includes informing the employee what is expected of him or her on the job. Norma lly, a discussion is held with his or her superior to review the major duties co ntained in the job place of formal performance evaluation. 3. Design Appraisal Programme Designing an appraisal programme poses several questions which we need to answer s. They are: 1. Formals versus informal appraisal 2. Whose performance is to be assessed? 3. Who are the raters? 4. What problems are encountered? 5. How to solve the proble ms? 6. What should be evaluated? 7. When to evaluate? 8. What methods of apprais al are to be used? What methods? Formal V/s Informal Whose performanc e When to evaluate? Appraisal design What are the raters? What to evaluate? How to solve? What problems - 16 -

Specially Uploaded for ProjectsParadise.com 1. Whose performance should be rated? To the question as to whose performance should be rated, the answer is obviousemployees, is it individual or teams? Specifically the rate may be defined as the individual, work group, divis ion, or organizations. It is also possible to define the rate at multiple levels . For example, under some condition, it may be desirable to appraise performance both at work-group level for merit-pay increases and at the individual level to assess training needs. Two conditions necessitate a group level appraisalgroup c ohesiveness and difficulty in identifying individual performance. Description. I ndividual should not be expected to begin the job until they understand what is expected out of them. 2. Formal V/s informal appraisal: - the first step in designing an appraisal pro gramme is to decide whether the appraisal should be formal or informal. Formal a ppraisal usually occurs at specified time periodsonce or twice year. Formal appra isals are most often required by the organizations for the purposes of employee evaluation. Informal performance appraisal can occur whenever the superior feels the need for communication. For example, if the employee has been consistently meeting or executing standards, an informal appraisal may be in order to simply recognize this fact. Discussions can take place anywhere in the organizations, r anging from the managers office to the canteen. But care needs to be taken to en sure that the discussion is held in private. Many organizations encourage a mixt ure of both formal and informal appraisal. The formal appraisal is most often us ed as primary evaluation. However, the informal appraisal is very helpful for mo re performance feedback. Informal appraisal should not take the Group cohesivene ss refers to shared feeling among work-team members. There is cooperation and cl ear understanding to accomplish tasks which are - 17 -

Specially Uploaded for ProjectsParadise.com interdependent. Any attempt to asses s individual performance shall undermine group cohesiveness and tend to promote individualistic or even competitive orientation. The difficulty in identifying i ndividual contribution is also important to consider. In some cases, interdepend ent of tasks is so complete that it is difficult to identify who has contributed what. There is no other choice but to view that task as a team effort. But the point to be remembered is that the performance of all employees must be rated. A ll must become raters. 3. Who are Raters? Raters can be immediate supervisors, specialist from the HR d epartment, subordinates. Peers, committees, clients, self appraisal, or a combin ation of several. a. Immediate supervisor is the fit candidate to appraise the performance of his or her subordinate. There are 3 reasons in support of this choice. No one is fam iliar with the subordinates performance than his or her superior. Another reason is that the superior has the responsibility of managing a particular unit. When the tasks of evaluating a subordinate is given to another person, the superior a uthority may be undermined seriously. Finally, training and development of subor dinate is am portent element in every mangers job. Since appraisal programme are often clearly linked to training and development, the immediate superior may be the legal choice to conduct the performance evaluation. b. Subordinate can asse ss the performance of their superiors. The use of this choice may be useful in a ssessing an employee ability to communicate, delegate work, allocate resources, disseminate information, resolve intrapersonal conflict, and deal with employees on a fair basis. But the problem with the subordinate evaluation is that superv isors tend to become popular, not by effective leadership, but by mere gimmicks. c. Peers are in better position to evaluate certain facts of job performance whi ch the subordinates or supervisors cannot do. Such facts include - 18 -

Specially Uploaded for ProjectsParadise.com contribution skills, reliability and initiative. Closeness of the working relationships and the amount of personal c ontacts place peers in a better position to make accurate assessments. Unfortuna tely friendship or animosity may result in distortion of evaluation. Further whe n reward allocation is based on peer evaluation, series conflicts among co-worke rs may develop. Finally join together to rate each other high. d. Although clients are seldom used for rating employee performance, nothing pre vents an organization from using this source. Clients may be members within the organization who have direct contact with the rate and make use of an output (go ods or services) this employee provides. Interest, courtesy, dependability and i nnovativeness are but a few of the qualities for which clients can offer rating information. Clients, external to the organization can also offer similar kinds of information. Where appraisal is made by the superior, peers, subordinates and clients, it is called the 360-degree system of appraisal. First developed at Ge neral Electric, US in 1992 the system has become popular in our country too. GE (India). Reliance Industries, Crompton Greaves, Godrej Soaps, Wipro, Infosys, Th ermax and Thomas Cook are using the method with greater benefits. The Arthur And erson Survey 1997 reveals that 20% of the organization use 360 degree method. In the 360 degree method, besides assessing performance. Other attributes of the a ssesstalents, behavioral quirks, values, ethical standards, tempers and loyalty a re evaluated by the people who are best placed to do it. Many employees use rati ng committees to evaluate employees. These committees are often composed of the employees immediate supervisor and three or four other supervisors who come in co ntact with the employee. This choice is welcome when an employee in the course o f his or her job performs a variety of tasks in different environment. For e.g. 1supervisor may work with the employee when technical aspects of a job are being performed and another supervisor may deal with the same employee in situations where communications skills are crucial. There are several benefits in - 19 -

Specially Uploaded for ProjectsParadise.com using multiple raters. First there m ay be objectivity in rating as more than rater is involved in the assessment. Fu rthermore where there are differences in the rater ought ratings they usually st em from the fact that raters at different level in the organization often observ e different facets of an employee performance-the appraisal to reflect these dif ferences. The disadvantages of committee rating are that it diminishes the role of the immediate supervisor in the area of training and development. e. In self appraisal employee himself or herself evaluates his or her own perform ance. Indian Telephone Industries has been following the selfappraisal system fo r executives in grade I to IV. Hewlett-Packard and Texas Instruments too ask the ir performance to prepare their own appraisal. On the positive side it may be st ated that in self-appraisal there is an opportunity to participate in evaluation particularly if it is combine with goal setti9ng and this should be improve the mangers motivation. Managers are less defensive in self-evaluation than when su pervisors tell them what they are. Self-appraisal is best suited where executive development is the main purpose of evaluation as the approach enablers managers to clearly assess their areas of differences. Unfortunately selfappraisal falls short almost by any criterion. They tend to be more lenient compared to other so urces of evaluation, even that of peers who are more lenient than their superior s. Self-appraisal is also more likely to be less biased and less in agreement wi th judgment of others. In practice a combination of methods is followed for empl oyee. For example evaluation by self may be followed by a superior, the personal department or the HR department (following diagram). - 20 -

Specially Uploaded for ProjectsParadise.com Different Raters of Performance- L&T, Bangalore works PROCEDURE AND SCHEDULE FOR PERFORMANCE APPRAISL PROCESS Action by/Date Form/Section Brief description of A ctivities Annual Performance Review Form 2 Sec: Employee by 15.4.1999 Describes actual res ults against objectives set earlier. Not more than five Carries out self-review highlighting significant contributions and factors influencing performance Keeps himself or herself ready for appraisal interview by analyzing his performance, strengths and weakness and development needs. Form 2 Sec: B, C From 3 From 1 From 2 Sec C Sec D - 21 Prepares for the appraisal interview by analyzing results against objectives, st rengths and weakness and recalling significant incidents. Related to critical at tributes. Discusses with the employees and provides feedback on critical attribu tes and rate on performance and attributes. Carries out development planning wit h the employee Carries out performance planning for 1994-1995 with employee, sel ects and describes role related attributes. Describes strengths and weakness and comments on potential areas for growth Records training needs and apecific deve lopments plans.

Specially Uploaded for ProjectsParadise.com From 2 Sec E Next superior(s) By 15.6.1994 Comments on specific developments plans Makes overall observations on the employ ees performance Forwards the forms if necessary to his superior to ensure: 1. Covenants are reviewed by a superiors at least at DGM level 2. Superiors/ exe cutives are reviewed by covenanted officers. Immediate superior(s) By 15.6.1994 From 2 Notes the comments by the next superiors and conveys significant observations to employee Forwards for convents to HRD depts. and for superiors/executives to An alyses rating and comments and furnishes data to all concerned for necessary act ions Co-ordinates Development Action Proposals at Respective Group/ unit level P lans training programme and other actions Complies Pa data for aggregate analysi s Comments on Pa exercise and send report to GMs and corporate management From 2 Personnel/ HRD dept. By 15.7.1994 HRD dept. By 30.7.1994 From 2 Immediate Superior From 1 From 3 Reviews performance and objectives and writes comments as necessar y Reviews development action taken and records status. - 22 -

Specially Uploaded for ProjectsParadise.com 2. PERIODIC REVIEW (during the year) Whoever may be the rater two requisites must be fulfilled. First the rater must be free from bias. Second the rater must have an opportunity to observe the full spectrum of activities and behavior of the rate over an extended time period.] 4. Problems of Rating: - Performance appraisals are subject to a wide variety of inaccurate and biases referred to as rating errors. These errors occur in the r aters observations, judgments and information processing and can seriously affect assessment result. The most common rating errors are leniency or severity, cent ral tendency, halo effect, primary and recency effects, perceptual set, performa nce dimension behavior, spill over effect and status effect. 5. Leniency or Severity: - Leniency or severity on the part of the rater makes t he assessment subjective. Subjective assessments defeat the very purpose of perf ormance appraisal. Ratings are lenient for the following reasons. The rater may feel that anyone under his or her jurisdictions who is rated unfav orably will reflect poorly on his or her own worthiness. He or she may feel that anyone who could have been rated unfavorably has already been discharged from t he organization He or she may feel that a derogatory rating will be revealed to the rate to the determinant of the relations between the rater and rate. He or s he may rate leniently in order to win promotions for the subordinates and theref ore indirectly increase his or her hold over them. He or she may be projecting H e or she feels it necessary to always approve of others in order to gain approva l for him or herself. - 23 -

Specially Uploaded for ProjectsParadise.com He or she may be operating on the pr emise, whoever associates with me is meritorious therefore, and I am meritorious. He or she may rate leniently because there exists, in the culture, a response se t approve rather than disapprove. WC according to a Severe rater WC according to a lenient rater True amount WC LOW written communication Skills (WC) HIGH

4. Central tendency: - this occurs when employees are incorrectly rated near the average or middle of the scale. The attitude of the rate is to play safe. This safeplaying attitude stems from certain doubts and anxieties which the raters ha ve while assessing the ratees. Such doubts and anxieties are : Do I know the m sufficiently well to be able to give a fair assessment of him? If I rate him the way I think I should what will be its influence on his relations with me and on his performance in the future? If I rate him the way I think I should what will b e its effect on my relations with the others subordinates? If I rate him the way I think I should what will be its effect on his relationship within the group or subordinates? Will I able to be objective in view of pressures from peers, subordi nates and trade union? If I rate him the way I think I should will be accused to b eing partial? - 24 -

Specially Uploaded for ProjectsParadise.com How will my boss view the appraisal I make and how will that influences the way he appraises the man? What standards wi ll my peers adopt to appreciate their subordinates? And in view of this am I lik ely to affect adversely the future of my subordinates? Naturally the rates use su ch expressions as satisfactory and average to describe the performance of the ra tes. For example the principal of a college while giving character certificates to the outgoing students describe the character of each student as satisfactory. Obviously its become difficult to distinguish between excellent performance and poor performance. In small organization it is common to label all employees as a n average. But in large companies errors of this type tend to obviate the value of evaluations. Close to error of central tendency is the problem of range restr iction. Range restriction may involve clustering all employees around any point on a scale, often in combination with leniency errors at very top. What is disti nctive in the error of central tendency and the error of range restriction is a failure to note real performance differences, either intentionally or due to ins ufficient attention. Halo Error - it takes place when one aspect of an individual performance influen ces the evaluation of the entire performance of the individual just as the asses sment of the performance of a student in his or her examination being influence by the opening paragraph of every answer. If the introductory paragraph is poorl y written the chances of scoring high marks in that answer are diminished howeve r good the subsequent portion of the essay may be In an organization a halo erro r occurs when an emplopuee who work late constantly might be rated high on produ ctivity and quality of output as well as on motivation. Similarly an attractive or popular employee might be given a high overall rating. Rating employees separ ately can each of a number of performance and encouraging raters to guard agains t the halo effect are two ways to reduce halo effect. Rater effect: this includes favoritism, stereotyping and hostility. Excessively high or low scores are given only to certain individual or groups based on the r aters attitude towards - 25 -

Specially Uploaded for ProjectsParadise.com the rate, not on actual outcomes or behavior. Sex, age, race and friendship biases are example of this type of error . Primary and recency effects: - the raters ratings are heavily influenced either b y behavior exhibited by the rate during the early stage of the review period or by outcomes or behavior exhibited by the rate near the end of the review period (recency). For example if a salesperson captures an important contract/ sales ju st before the completion of the appraisal the timing of the incident may inflate his or her standing even though the overall performance of the salesperson may not have been encouraging. Likewise a blunder committed just before the appraisa l period may diminish chance of securing a favorable rating even if the performa nce is good. One way of guarding against such an error is to ask rater to consid er the composite performance of the ratee and not to be influenced by one incide nt or own achievement. The rater must also be aware of tendency on the part of t he rates to improve odds in their favors or suppress weak points during the rati ng period. Perceptual Set: - this occurs when the raters assessment is influenced by previou sly held beliefs. If the supervisors for example have a belief that employee hai ling from 1 particular region is intelligent and hard working his subsequent rat ing of an employee hailing from that region tends to be favorably high. Performance Dimension order: 2 or more dimensions on a performance instrument fo llows or closely follow each other and both describe or rotate to a similar qual ity. The rater rates first dimension accurately and then rates the second dimens ion similar to the first because of their proximity. If the dimension had been a rranged in a significant different order the rating might have been different. Spillover effect: This refers to allowing past performance appraisal ratings to unjustifiably influence current ratings. Past ratings, good or bad result for th e period although the demonstrated behavior does not deserve the rating good or bad. - 26 -

Specially Uploaded for ProjectsParadise.com Status effect: - it refers to overra ting of employee in higher-level jobs held in high esteem, and underrating emplo yees in lower-level-job or jobs held in low esteem. It is not the raters errors a lone that are barriers to accurate and valid measurement of employee performance . Barriers lie deep within the genetic and acquired make-up of all people concer ned with performance appraisal. A wide variety of emotional, psychological, inte llectual and physical factors that at first glance may appear to be separate and irrelevant may combine in any numbers of ways during the appraisal process. Exh ibit 10.2 Here is a bizarre case of performance appraisal. A pulp making unit lo cated at Harihae in Karnataka, hired 40 engineers in 1994, as management trainee s. The new hires were fresh from, REC, Suratkal, and other prestigious instituti ons. Obviously they were toppers in their respective branches and institutions. The management of the plant adopted a freakish policy with regard to performance appraisal 10 percent of all the employees were to be rated below average. The m anagement did not want all the employees to be ranked high, notwithstanding thei r excellent performance. The axe fell on the trainees. The raters rated all the 40 trainees below average. Humiliated, these 40 put in their papers even before their training period expired. Solving Raters Problems the best way to overcome the problems is to provide train ing to the raters. At HewlettPackard, a 2 day training course is organized every year to prepare managers to handle appraisals better. Not that training is a cur e-all for all the ills of appraisal systems. From a practical point of view, seve ral factors, including the extent which pay is related to performance ratings, u nion pressure, turnover rates, time constraints and the need to justify ratings may be more important than training, influencing the ratings they actually give. This means that improving rating systems involves not just training the raters but remedying outside factors such ass union pressure. And it means that rater t raining, to be effective, should also add real life problems such as the fact th at union representatives will try to influence supervisors to rate everyone high . - 27 -

Specially Uploaded for ProjectsParadise.com But training can help improve the ap praisal system to the extent of distortion that occurs due to the raters error su ch as halo, leniency, central tendency and bias. In a typical training, raters a re shown a video-tape of jobs being performed and are asked to rate the workers. Ratings made by each participant are then placed on a flip chart and the variou s charts are explained. For e.g., a trainee is rated on all criteria (such as qu antity and quality) about the same, the trainer might explain that halo error ha d occurred. If, on the other hand, a trainer rated all video-taped workers very high, this might be explained as a leniency error. Typically, the trainer gives the correct rating and then illustrates the rating errors made. In effect, train ing of raters must help strengthen the factors that tend to improve accuracy of ratings and weaken those that lower the accuracy of the performance measurement. Factors that help improve accuracy: 1. The rater has observed and is familiar wi th behaviors to be appraised. 2. The rater has documented the behaviors to impro ve the recall. 3. The rater has a checklist to obtain and review job-related inf ormation. 4. The rater is aware of personal biases and is willing to take action to minimize their effect. 5. Rating scores by raters of one group or organizati on are summarized and compared with those by other raters. 6. The rater focuses attention on performance-related behaviors over which the rater has better contr ol than in other aspects of evaluation. 7. Higher levels of management are held accountable for reviewing all ratings. 8. The raters own performance ratings are related to the quality of rating given and the performance of units. 9. Performa nce factors are properly defined. Factors that may lower accuracy: 1. The rater rates ratees only when administrat ive actions are contemplated. 2. The rater tends to inflate ratings when the rat ees receive scores and results of appraisals. - 28 -

Specially Uploaded for ProjectsParadise.com 3. The rater tends to recall more be haviours known to be of particular interest to higher level managers, whether or not they are pertinent, when his or her ratings are reviewed by such authoritie s. 4. The rater is unable to express him or herself honestly and unambiguously. 5. Appraisal systems, processes and instruments fail to support the rater. 6. Th e rater has to rate employees on factors that are poorly defined. 7. Finally, th e supervisor/rater must be trained to conduct the appraisal interview. For many raters, this is a difficult task, especially when the appraisal is unfavorable t o the rater. Favorable or unfavorable rating, it is the job of the rater to conv ince the ratee about the appraisal, and advise him or her about the future cours e of action the rate should take. What should be rated? One of the steps in designing an appraisal programme is to determine the evaluation criteria. It is obvious that the criteria should be re lated to the job. The six criteria for assessing performance are: 1. Quality: Th e degree to which the result or process of carrying out an activity approaches p erfection in terms of either conforming to some ideal way of performing the acti vity, or fulfilling the activitys intended purpose. 2. Quantity: The amount produ ced, expressed in monetary terms, number of units, or number of completed activi ty cycles. 3. Timeliness: the degree to which an activity is completed or a resu lt produced, at the earliest time desirable from the standpoints of both co-coor dinating with the outputs of others and of maximizing the time available for oth er activities. 4. Cost Effectiveness: the degree to which the use of the organiz ations resources (e.g. human, monetary, technological and material) is maximized in the sense of getting the highest gain or reduction in loss from each unit or instance of use of a resource. 5. Need for supervision: the degree to which a jo b performer can carry out a job function without either having to request superv isory assistance or requiring supervisory intervention to prevent an adverse out come. 6. Interpersonal impact: the degree to which as performer promotes feeling of selfesteem, goodwill and co-operation among co-workers and sub-ordinates. - 29 -

Specially Uploaded for ProjectsParadise.com These criteria relate to past perfor mance and behavior of an employee. There is also the need for assessing, as was pointed out earlier, the potential of an employee for future performance, partic ularly when the employee is tipped for assuming greater responsibilities. Exhibi t 10.3 Appraisal of Potential at Philips More and more number of organizations a re trying to assess potential of their employees, particularly at the managerial level. Cadbury India, Sandoz, Pfizer, Mafatlal, Philips, National Organic Chemi cal Industries, Glaxo and P&G are a few of the companies which seek to top manag erial potential. At Philips a 2 by 2 matrix is used to assess performance and po tential to perform. The vertical axis measures potential while the horizontal, a ctual performance. Both are further subdivided into parameters high and low resu lting in 4 quadrants of classification. High Potential Low Problem Children Problem Separation Low Performance Stars Solid Citizens High The Philips Model Low Potential-Low Performance: these employees are categorized as question marks. The company asks such employees to improve their performance levels. Failure to improve would result in their planned separation. High Poten tial-Low Performance: these are the problem children. In order to help them impr ove their performance, these employees are shifted to new locations to work and are closely monitored. If performance levels do not improve, these employees are reclassified as question marks and the separation process initiated. - 30 -

Specially Uploaded for ProjectsParadise.com High Potential-High Performance: the se are the star performers. They have to be kept engaged with complex assignment s all the time and groomed to take up the top positions. Otherwise, they might l eave. Low Potential-High Performance: these are called as solid citizens and con stitute 70 to 75 % of the total number of employees in any organization. They ha ve skills but lack the potential to grow beyond their current job-profile. The o rganization has to constantly recognize their limitations and take care of their needs. In order to assess employee potential, Philips has adopted the system th at prevails at Philips NV, Holland. The system at Philips NV uses 4 broad attrib utes conceptual effectiveness, operational effectiveness, interpersonal effectiv eness and achievement effectiveness and achievement motivation. Each attribute h as a 5-point grading scale excellent, very good, good/adequate, weak and insuffi cient. Coming to the six criteria, it may be stated that the first 4 quality, quantity, timeliness and cost effectiveness are objective in nature; and the last 2 - nee d for supervision and interpersonal impact are subjective. Objective measures ar e quantifiable and are therefore highly useful in measuring the performance of a n employee. But performance of employees should not always be evaluated against the amount of deposits mobilized for his or her bank. The effort put in by him/h er, the contacts he/she has established, the image about the bank he/she has cre ated in the eyes of public, and if relationships he/she has maintained with subo rdinates speak more reliably about the managers performance. Here comes the relev ance of the subjective criteria. However, as subjective measures are dependent u pon human judgments, they are prone to the kinds of errors we noted earlier leni ency or severity, central tendency, halo and the like. To be useful, subjective measures must be based on a careful analysis of the behaviors viewed as necessar y and important for job performance. Of late, there has been a shift in focus of appraisals. This shift is from performance of the individual to the systems app roach. As stated earlier, in the systems approach the emphasis is on improving o nes performance. Work performance of an individual depends on organizational fact ors in addition to his or her abilities. The focus in the systems approach is, t herefore, the entire organization. - 31 -

Specially Uploaded for ProjectsParadise.com Timing of Evaluation How often shoul d an employee be assessed? The general trend is to evaluate once in 3 months, or six months, or once in a year. According to a survey conducted in 1997 by Arthu r Anderson, 70 percent of the organizations conduct performance appraisal once a year. Newly hired employees are rated more frequently than the older ones. Freq uent assessment is better than phased evaluation. Feedback in the latter is dela yed and the advantage of timely remedial measures by the employee is lost. Frequ ent evaluation gives constant feedback to the rate, thus enabling him or her to improve performance if there is any deficiency. The performance of trainees and probationers should be evaluated at the end of respective programmes. METHODS OF APPRAISAL The last to be addressed in the process of designing an appraisal programme is t o determine methods of evaluation. Numerous methods have been devised to measure the quantity and quality of employees job performance. Each of the methods discu ssed could be effective for some purposes, for some organizations. None should b e dismissed or accepted as appropriate except as they relate to the particular n eeds of the organization or of a particular type of employees. Broadly, all the approaches to appraisal can be identified into (i) past-oriented methods, and (i i) future-oriented methods. Each group has several techniques as shown in the fi gure below: - 32 -

Specially Uploaded for ProjectsParadise.com Appraisal Methods Past-Oriented Methods Rating Scales: This is the simplest and most popular techn ique for appraising employee performance; the typical rating-scale system consis ts of several numerical scales, each representing a job-related performance crit erion such as dependability, initiative, output, attendance, attitude, co-operat ion, and the like. Each scale ranges from excellent to poor. The rater checks th e appropriate performance level on each criterion, then computes the employees to tal numerical score. The number of points scored may be linked to salary increas es, whereby so many points equal a rise of some percentage. RATING SCALE Instructions: For the following performances factors, please indicate on the rat ing Scale your evaluation of the employee named below: Employees Name: Raters Name Department Date. - 33 -

Specially Uploaded for ProjectsParadise.com Excellent 5 Good 4 Acceptable 3 Fair 2 Poor 1 1. Dependability 2. Initiative 3. Overall Output 4. Attendance 5. Attitude 6. Co -Operation ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------20. Quality of Work -----TOTAL + + TOTAL SCORE + + Rating scales offer the advantages of adaptability, relatively easy use and low cost. Nearly every type of job can be evaluated in a short time, and the rater d oes not need any training to use the scale. The disadvantages of this method are several. The raters biases are likely to influence evaluation, and the biases ar e particularly pronounced on subjective criteria such as cooperation, attitude a nd initiative. Furthermore, numerical scoring gives an illusion of precision tha t is really unfounded. Checklist: Under this method a checklist of statements on the traits of the empl oyee and his or her job is prepared in 2 columns viz., a Yes column and a No column. All that - 34 -

Specially Uploaded for ProjectsParadise.com the rater (immediate superior) shoul d is tick the Yes column if the answer to the statement is positive and in column N o if the answer is negative. A typical checklist is given in the table below. Aft er ticking off against each item, the rater forwards the list to the HR departme nt. The HR department assigns certain points to each Yes ticked. Depending upon th e number of Yes the total score is arrived at. When points are allotted to the che cklist, the technique becomes a weighted checklist. The advantages of as checkli st are economy, ease of administration, limited training of rater, and standardi zation. The disadvantages include susceptibility to raters biases (especially the halo effect), use of personality criteria instead of performance criteria, misi nterpretation of checklist items, and the use of improper weights by the HR depa rtment. Another disadvantage of this approach is that it does not allow the rate r to give up relative ratings. Table: - Checklist for Operators SR. NO. 1. 2. 3. 4. 5. 6. Is the employee really interested in the job? Does he or she possess adequate knowledge about the job Is his or her attendance satisfa ctory? Does he/she maintain his/her equipment in good condition? Does he/she cooperate with co-workers? Does he/she keep his/her temper? QUESTIONS YES NO - 35 -

Specially Uploaded for ProjectsParadise.com 7. 8. 9. 10. Does he/she obey orders ? Does he/she observe safety precautions? Does he/she complete what he/she comme nces? Does he/she evade responsibility? Forced Choice Method: In this, the rater is given a series of statements about a n employee. These statements are arranged in blocks of 2 or more, and the rater indicates which statement is most or least descriptive of the employee. Typical statements are : 1. Learns fast _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ works hard 2 . Work is reliable_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ performance is a good example for 3. Absents often_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ others usually tardy. As i n the checklist method, the rater is simply expected to select the statements th at describe the rate. Actual assessment is done by the HR Department. This appro ach is known as the forced choice method because the rater is forced to select s tatements, which are readymade. The advantage of this method is the absence of p ersonal bias in rating. The disadvantage is that the statements may not be prope rly framed they may not be precisely descriptive of the ratees traits. Forced Distribution Method: One of the errors in rating is leniency clustering a large number of employees around a high point on a rating scale. The forced dis tribution method seeks to overcome the problem by compelling the rater to distri bute the ratees on all points on the rating scale. The method operates under an assumption that the employee performance level conforms to a normal statistical distribution. Generally, it is assumed that employee performance levels conform to a bell shaped curve. For example, the following distribution might be assumed to exist excellent 10 %, good 20 %, average 40 %, below average 20 %, and unsat isfactory 10 %. The major weakness of the forced distribution method lies in the assumption that the employee performance levels always conform to a normal dist ribution. In organizations that have done a good job of selecting and retaining only the good performers, the use of - 36 -

Specially Uploaded for ProjectsParadise.com forced distribution approach would b e unrealistic, as well as possibly destructive to the employee morale. The error of central tendency may also occur, as the rater resists from placing an employ ee in the lowest or in the highest group. Difficulties also arise for the rater to explain to the rate why he or she has been placed in a particular group. One merit of this approach is that it seeks to eliminate the error of leniency. Howe ver, the forced choice method is not acceptable to raters and ratees, especially , in small groups or when group members are of high ability. Critical Incidents Method: The critical incidents method of employee assessment has generated a lot of interest these days. The approach focuses on certain crit ical behaviors of an employee that make all the difference between effective and non-effective performance of a job. The supervisors as and when they occur reco rd such incidents. Examples of critical incidents of a plant manager are given i n the following table: Examples of Critical Incidents for an Assistant Plant Manager - 37 -

Specially Uploaded for ProjectsParadise.com One of the advantages of the critical incidents methods is that the evaluation i s based on

CONTINUING TARGETS CRITICAL DUTIES INCIDENTS Schedule Production for Plant Instituted new production scheduling system; decre ased late orders by 10% last month; increased machine utilization in plant by20% last month Supervise procurement of raw Minimize inventory Let inventory storag e costs materials and inventory control costs while keeping rise 15% last month; adequate supplies on Over Ordered parts A hand and B by 20%; Under Ordered part C 0% Supervise machinery No shutdowns due to Instituted new preventive maintenance faulty machinery maintenance system for plant; Prevented a machine breakdown by discovering faulty part. actual job behavior. Further, the approach has descrip tions in support of particular ratings of an employee. Giving job-related feedba ck to the ratee is also easy. It also reduces the personal biases, if raters rec ord incidents throughout the rating period. Finally, this approach can increase the chances that the subordinates will improve because they learn more precisely what is expected of them. The method however has significant limitations. These include: 1. Negative incidents are generally more noticeable that positive ones . 2. The recording of incidents is a chore to the supervisor and may be put off an easily forgotten. 3. Overly close supervision may result. 4. Managers may unl oad a series of complaints about incidents during an annual performance review s ession. The feedback may be too much at one time and thus Full Utilization of pe rsonnel and machinery in the plant, order delivered on time - 38 -

Specially Uploaded for ProjectsParadise.com appearing as a punishment to the rat e. More appropriately, the management should use incidents of poor performance a s opportunities for immediate training and counseling. Behaviorally Anchored Rating Scales: Behaviorally Anchored Scales, sometimes cal led behavioral expectation scales, are rating scales whose scale points are dete rmined by statements of effective and ineffective behaviors. They are said to be behaviorally anchored in that the scales represent a range of descriptive state ments of behavior varying from the least to the most effective. A rater must ind icate which behavior on each scale best describes an employees performance. Behav iorally anchored rating scales (BARS) have the following features: 1. Areas of p erformance to be evaluated are identified and defined by people who will use the scales. 2. The scales are anchored by descriptions of actual job behavior that, supervisors agree, represent specific levels of performance. The result is a se t of rating scales in which both dimensions and anchors are precisely defined. 3 . All dimensions of performance to be evaluated are based on observable behavior s and are relevant to the job being evaluated since BARS are tailor-made for the job. 4. Since the raters who will actually use the scales are actively involved in the development process. They are more likely to be committed to the final p roduct. BARS were developed to provide results which subordinates could use to i mprove performance. Superiors would feel comfortable to give feedback to the rat es. Further, BARS help overcome rating errors. Unfortunately, this method too su ffers from distortion inherent in most rating techniques. - 39 -

Specially Uploaded for ProjectsParadise.com Field Review Method This is an appraisal by someone outside the, assessors own department. Usually so meone from the corporate office or the HR department. The outsider reviews Emplo yee records and holds interviews with the ratee and his or her superior. This method is primarily used for making promotional decision at the managerial level. Field reviews are also useful when comparable information is needed from employees in different units or locations. Two disadvantage of this method are:1 . An "outsider" is usually not familiar with conditions in an employees work envi ronment which may affect the employee s ability or motivation to perform. 2. An outsider review dose not have the opportunity to observe employee behavi or of performance over a period of time and in a variety of situations. But only in an artificially structured interview situation which extends over a very sho rt period of time. - 40 -

Specially Uploaded for ProjectsParadise.com Extremely good 7 performance Good performance Slightly good performance By knowing the price of items. This checker would be expected to look for mismar ked and unmarked items. You can expect this checker to be aware of items that co nstantly fluctuate in price. When in doubt. This checker would ask the other cle rk if the item is taxable. This checker can be expected to verify with another c hecker a discrepancy between the shelf and the marked price before ringing up th at Item. When operating the quick check. If the lights are flashing this checker can be expected to check out a customer with 15 items. You could expect this ch ecker to ask the customer the price of an Item that he or she does not know. In the daily course of personal relationships, he or she may be expected to linger in long conversations with a customer or with another checker. 6 5 Neither poor nor good performance 4 Slightly poor performance Poor performance 3 2 In order to take a break. this checker can be expected to block off the check stand while people wait in line. Extremely poor 1 performance A BARS Scale for the Knowledge and Judgement Dimension of a Grocery Checker s Jo b. Raters, making field reviews normally receive training on how to conduct the int erview and develop their writing skills. Being independent of the work scene the y normally have less bias for or against the ratee than docs the immediate super visor. Even when a supervisor or others concerned supply biased information the rater may he able to pinpoint areas requiring training and development assistanc e. - 41 -

Specially Uploaded for ProjectsParadise.com Performance Tests and Observations With limited number of jobs, employee assessment may be based upon a test of kno wledge or skills. The test may he of the paper-and-pencil variety or an actual d emonstration of skills. The test must he reliable and validated to be useful. Ev en then, performance tests are apt to measure potential more than actual perform ance. In order for the test to be job related, observations should he made under circumstances likely to be encountered. Practicality may suffer if costs of tes t development or administration arc high. Confidential Records Confidential records arc maintained mostly in government Departments. though its application in the industry .not ruled out. ITI. for example. had followed this method for a long time. Called the Annual Confidential Report (ACR). the approa ch had 14 items-(i) attendance. (ii) self-expression (written or oral). (iii) ab ility to work with others. (iv) leadership. (v) initiative. (vi) technical abili ty (job knowledge). (vii) ability to understand new material. (viii) ability to reason, (ix) originality and resourcefulness. (x) areas of work that suits the p erson best. (xi) judgement. (xii) integrity. (xiii) responsibility and. (xiv) an d defect-indebtedness. Memo served. etc. Twelve of these were filled on a fourpo int grade scale (Excellent. Good. Fair and Poor). For integrity. there were spec ial instructions from the management. Justification was required for outstanding or poor rating. Over:!!! rating on a five-point scale was separately given (Out standing. Very good. Good. Average, Poor). again with justification for rating a s outstanding or poor. Recommendations for promotion were also given. The ACR co ntained recommendations and signature of the rater. the head of the department a nd the CMD. The system was highly secretive and confidential Feedback to the ass essee was given only in case of an adverse entry. The AC R was highly subjective . Ratings were easily manipulated because the evaluation was linked to promotion . Even ITI has discontinued ACR system for these reasons. - 42 -

Specially Uploaded for ProjectsParadise.com Essay Method In the essay method the rater must describe the employee within a number of broa d categories such as (i) the rater s overall impression of the employee s perfor mance. (ii), the promo ability of the employee (iii) the jobs that the employee is now able or qualified to perform (.iv) the strengths and weaknesses of the em ployee. and (v)the training and the development assistance required by the emplo yee. Although this method may be used independently, it is most frequently found in combination with others. It is extremely useful in filing information gaps a bout the employees that often occur in the better structured checklist method. T he strength of the essay method depends on the writing skills and analytical abi lity of the rater. However many raters do not have good writing skills. They bec ome confused about what to say. How much they should state and the depth of the narrative The essay method can consume much time because the rater must collect the information necessary to develop the essay and then he or she must write it The essay method also depends on the memory power of the rater. A problem with t his method is that the rate may be rated on the quality of the appraisals that t hey give. The quality standard for the appraisal may be unduly influenced by app earance rather than content. Thus. a high quality appraisal may provide little useful information about the performance of the rate. Cost Accounting Method This method evaluates performance from the monetary returns the employee yields to his or her organisation. A relationship is established between the cost inclu ded in keeping the employee and the benefit the organization derives from him or her. Performance of the employee is then evaluated based on the established rel ationship between the cost and the benefit. Comparative Evaluation Approaches - 43 -

Specially Uploaded for ProjectsParadise.com These are a collection of different methods that compare one worker s performance with that of his/her co-workers. C omparative appraisals are usually conducted by supervisors. As these appraisals can result in a ranking from best to worst, they are useful in deciding merit-pa y increases, promotions and organisational rewards. The usual comparative forms used in this kind of evaluation are the ranking method and the paired comparison method. Ranking Method In this, the superior ranks his or her subordinates in the order of their merit, starting from the best to the worst. All that the HR department knows is that A is better than B. The, how and why are not questioned, nor answered. No att empt, is made to fractionalise what is being appraised into component elements. This method is subject to the halo and recency effects, although rankings by two or more raters can be averaged to help reduce biases. Its advantages include ea se of administration and explanation. Paired-comparison Method Under this method the appraiser compares each employee with every other employee one at a time. For example there are five employees named A, B. C. D and E. The performance of A is first compared with the performance of B and a decision is made about whose performance is better. Then A is compared with C. D and E in th at order. The same procedure is repeated for other employees. The number of comp arisons may be calculated with the help of a formula which reads thus: N(N-1)/ 2 where N stands for the number of employees to be compared. If there are 10 employees, the number of comparisons will be 10(10-1)/2 = 45. After the completion of comparison, the re sults can be tabulated and a rank is created from the number of times each perso n is considered to be superior. Future-oriented Appraisals Is it not enough if only the past performance is assessed . How an employee can perform in the days to come is equally important. This can be assessed by focusi ng on - 44 -

Specially Uploaded for ProjectsParadise.com employee potential or setting future performance goals. The commonly used futureoriented techniques are MBO, psychol ogical appraisals, and assessment centres. MANAGEMENT BY OBJECTIVES It was Peter F. Drucker who first gave the concept of MBO to the world way back in 1954 when his The Practice of Management was first published. The MBO concept , as was conceived by Drucker, reflects a management philosophy which values and utilizes employee contributions. Application of MBO in the field of performance appraisal is a recent thinking. Four Steps in the MBO Process How MBO works can be described in four steps: The first step is to establish the goals each subordinate is to attain. In some organisations, superiors and subordinates work together to establish goals. In o thers. Superiors establish goals for subordinates. The goals typically refer to the desired outcome to be achieved. These goals can then be used to evaluate emp loyee performance. The second step involves setting the performance standard for the subordinates i n a previously arranged time period. As subordinates perform, they know fairly w ell what there is to do, what has been done, and what remains to be done. In the third step, the actual level of goal attainment is compared with the goal s agreed upon. The evaluator explores reasons for the goals that were not met an d for the goals that were exceeded. This step helps determine possible training needs. It also alerts the superior to conditions in the organization that may af fect a subordinate but over which the subordinate has no control. The final step involves establishing new goals and, possibly new strategies for goals not previously attained. At this point, subordinate and superior involveme nt in goalsetting may change. Subordinates who successfully reach the establishe d goals may be allowed to participate more in the goal setting process the next time. The process is - 45 -

Specially Uploaded for ProjectsParadise.com repeated. As with other approaches. MBO too has been criticised. One comment made against the approach is that it is not applicable to all jobs in all organisations. Jobs with little or no flexibi lity. Such as assembly-line work, are not compatible with MBO. An assembly-line worker usually has so little job flexibility that the performance standards and objectives are already determined. The MBO process seems to be most useful with managerial personnel and employees who have a fairly wide range of flexibility and selfcontrol in their jobs. Besides, when the result of an MBO system are to be used to allocate organisational rewards, employees may be less likely to esta blish challenging goals-goals they are confident that they can accomplish. Furth er, the allocation of merit pay on a semi-annual or annual basis may encourage t he setting up of goals with short time horizons to the disadvantage of important long-term goals. The performance appraisal presently followed in L&T reflects t he principles of MBO. Psychological Appraisals Large organization employs full-time industrial psychologists. When psychologist s are used for evaluations. They assess an individuals future potential and past performance. The appraisal normally consists of in-depth interviews, psycho1ogic al tests. Discussions with supervisors and a review of other evaluations. The p sychologist then write an evaluation of the employee s intellectual, emotional, motivational and other-related characteristics that suggest individual potential and may predict future performance. The evaluation by the psychologist may be f or a specific job opening for which the person is being considered. Or it may be a global assessment of his or her future potential. From these evaluations. Pla cement and development decisions may be made to shape the person s career. Becau se this approach is slow and costly, it is usually required for bright young mem bers who, others think. May have considerable potential within the organisation. Since the quality of the appraisal depends largely on the skills of the psychol ogists, some employees object to this type of evaluation, especially if crosscul tural differences exist. - 46 -

Specially Uploaded for ProjectsParadise.com LARSEN AND TOUBRO, HUMAN RESOURCE DEVELOPMENT PERFORMANCE APPRAISAL SYSTEM - 47 -

Specially Uploaded for ProjectsParadise.com CONFIDENTIAL NAME EMS. PS. NO PA FOR M:28 CADRE GROUP DEPT. EXECUTIVES & SUPERVISORS LARSEN &TOUBRO LIMITED HUMAN RESOURCE DEVELOPMENT-PERFO RMANCE APPRAISAL SYSTEM PERFORMANCE ANALYSIS AND REVIEW APRIL 1993 TO MARCH 1994 NAME DATE SIGNATURE EMPLOYEE IMMEDIATE SUPERVISOR NEXT SUPERIOR PERSONNEL/ HRD DEPT. A]PERFORMANCE R EVIEW AGAINST B1] BY OBJECTIVES SUPERIOR A1] AGREED OBJECTIVES TARGETS 1. 2. IMMEDIATE BY EMPLOYEE ADEQUATE V. GOOD RESULTS AND ACHIEVED 1. 2. 3. 4. 5. - 48 INADEQUATE OUTSTANDING GOOD

Specially Uploaded for ProjectsParadise.com A2] SELF REVIEW (by employee) SIGNIFICANT CONTRIBUTORS (JOBS OR PROFESSION RELATED NOT COVERED ABOVE) IMPORTANT FACTORS FACILITATING PERFORMANCE IMPORTANT FACTORS HINDERING PERFORMANCE B2] PERFORMANCE AGAINST OBJECTIVES(BY IMMEDIATE SUPERIOR) OUTSTANDING V. GOOD GO OD ADEQUATE C1] Appraisal of Critical Attributes(by immediate superior) C2] CRIT ICAL ATTRIBUTES OUTSTANDING V. GOOD INADEQUATE INADEQUATE ADEQUATE 1. INNOVATIVENESS Ability to think new and better ways of doing things that results in introductio n of new ideas or improvements of the systems and operations. Ability to determi ne and initiate actions that result in improve handling of jobs, without waiting to be told. Ability to interact effectively with people at all levels to gain t heir confidence and respect and work in a collaborative and participative manner . Ability to muster resources to achieve desired results and device ways and mea ns of solving problems in difficult situations. Ability to convey thoughts and f eelings clearly both through oral as well as written expressions for better unde rstanding. 2. INITIATIVE 3. INTERPERSONAL & TEAM RELATIONSHIP 4. RESOURCEFULNESS 5. COMMUNICATION SKILLS C2] AREAS OF STRENGTH AND IMPROVEMENTS (by immediate superior) - 49 GOOD

Specially Uploaded for ProjectsParadise.com C3] Potential Areas Of Growth (By Immediate Superior) D] Recommendations For Training And Development( By Immediate Superior) D1] IN-C OMANT TRAINING PROGRAMMES Description 1. Code 2. Description Code D2] OTHER TRAINING PROGRAMMES 1. 2. D3] SPECIFIC DEVELOPMENT PLANS Proposed action (tick as applicable) Job rotaion Job enlargement Special assignment Deputatiomn of other dept Others(please speci fy) E] COMMENTS BY NEXT SUPERIOR(S) Details of Actions Required E1] ON SPECIFIC DEVELOPMENT PLANS STATED ABOVE IN D3 E2] OVERALL OBSERVATIONS: F ] FOR USE BY PERSONNEL/ HRD CO -ORDINATOR - 50 -

Specially Uploaded for ProjectsParadise.com ASSESSMENT CENTRES Mainly used for executive hiring, assessment centre are now "being used for eval uating executive or supervisory potential. An assessment centre is a central loc ation where managers may come together to have their participation in job-relate d exercise evaluated by trained observers. The principal idea is to evaluate man agers over a period of time say one to three days, by observing (and later evalu ating) their behaviour across a series of select exercises or work samples. Asse sses are requested to participate in in-basket exercises, work groups (without l eaders), computer simulations, role paying, and other similar activities which r equire the same attributes for successful performance, as in the actual job. Aft er recording their observations of ratee behaviors, the raters meet to discuss t hese observations. The decision regarding the performance of each assessee is ba sed upon this discussion of observations. Self-appraisal and peer evaluation are also thrown In for final rating. The characteristics assessed in a typical asse ssment centre include assertiveness, persuasive ability, communicating ability, planning and organisational ability, self confidence, resistance to stress, ener gy level, decision making, sensitivity to the feelings of others, administrative ability, creativity and mental alertness. It is a formidable list which is quit e difficult to measure accurately over three days, though there would be sizable number of trained observers and psychologists. First developed in the US and th e UK in 1943, the assessment centre is gaining popularity in our country, Crompt on greaves, Facher, HLL and Modi Xerox are using the technique with results bein g highly positive. Assessment Centre - Many Takers Ranbaxy retained the services of a team of psychologists from the UK-based Kelly& King to take the executives (of Ranbaxy) through an assessment center. 20 star manager went through the exercise. Santrupt Misra, Director- Birla Management Corporation had plans for a similar exercise to be held at Gyanodaya, the Aditya Birla learning centre. Misra first - 51 -

Specially Uploaded for ProjectsParadise.com used the assessment centre concept f our years ago on 150 middle and senior level managers. Old timers like Tata have created their own assessment centers, and so have the talent centric companies like Wipro and Cognizant. SHL, a HR consulting firm has worked with over 100 companies conducting dose to 1,000 assessment centers. Consulting firm ECS (formerly known as Eicher Consulting Services) does a number of assessments in a month for a variety of clients like Tata Steel, ING V ysya and the host of BPO outfits. ICICI Bank uses assessment centre as a recruitment and selection tool to find th e best talent, while GE India subsidiary GECIS has used it on 20% of it5 middle ma nagers. The problem with the assessment centres is their cost Not only are the asses see s away from their jobs while the company pays for their travel and lodging, but the evaluators are often company managers who are assigned to the assessment cen tre for short durations. These managers are often supplemented by psychologists and HR specialists who run the centre and also make evaluations. Hence this appr oach is cost - effective only in large organisations. Assessment-centre staff is often influenced by subjective element; such as personality of the candidates: Raters tend to evaluate the quality of the individual s social skills rather tha n the quality of the decisions he/she makes. Assessment -centre ratings seem to be strongly influenced by the participant s interpersonal skills. The approach a lso involves real hazards. One of the most obvious is the examinationtaking synd rome. Solid performers in day-to-day operations feel suffocated in the simulated environment. Another drawback is its potential adverse effect on those not sele cted to participate in the exercise. - 52 -

Specially Uploaded for ProjectsParadise.com Employees who receive a poor report from the centre may react in negative ways. Ideally, a rejected employee would r eturn to his or her former job, satisfied that he or she would not be promoted t o a job he or she could not handle. However, a good performer at one level may l eave the organisation in order to remove the bad assessment report from his or h er work record. Thus, a poor report can demoralize an employee who was once an a sset. Other problems include-strong and unhealthy sense of competition among ass esses; Difficulty of conducting the test frequently; and the possibility of over emphasizing the test performance. But a well-conducted assessment centre can and does achieve better forecasts of future performance and progress than other met hods of appraisal. Also, reliability, content validity, and predictive validity are said to be high in the assessment centres. The test also makes sure that the wrong people are not hired or promoted. Finally, the Assessment centre test cle arly defines the criteria for selection and promotion. - 53 -

Specially Uploaded for ProjectsParadise.com 360-DEGREE FEEDBACK As stated earlier, where multiple raters are involved in evaluating performance, the technique is called 360 degree appraisal. The 360 degree technique is under stood as systematic collection of performance data on an individual or group, de rived from a number of stakeholders--the stakeholders being the immediate superv isors. team members, customers, peers, and self. In fact, anyone who has useful information on how an employee does the job may be one of the appraisers. The 360-degree appraisal provides a broader perspective about an employee s perf ormance. In addition, the technique facilitates greater self-development of the employees. For one s development, multi-source feedback is highly useful. It ena bles an employee to compare his or her perceptions about self with perceptions o f others. Besides, the 360-dcgree appraisal provides formalized communication li nks between an employee and his or her customers. It makes the employee feel muc h more accountable to his or her internal or external customers. The technique i s particularly helpful in assessing soft skills possessed by employees. By desig n, the 360-degree appraisal is effective in identifying and measuring interperso nal skill, customer satisfaction, and team-building skills. However, there are d rawbacks associated with the 360-degree feedback. Receiving feedback on performa nce from multiple sources can be intimidating. It is essential that the organisa tion create a non - threatening environment by emphasizing the positive impact o f the technique on an employee s performance and development. Further, firms tha t use the technique take a long time on selecting the rater, designing questionn aires, and analyzing the data. In addition; multiple raters are less adept at pr oviding a balanced and objective feedback than the supervisors who are sought to be replaced. Raters can have enormous problems separating honest observations f rom personal differences and biases. Pitfalls notwithstanding, more and more num ber of firms are using the 36O-degree appraisal technique to assess the performa nce of their employees. - 54 -

Specially Uploaded for ProjectsParadise.com APPRAISE THE PERFORMANCE The next step in the appraisal process is to measure the performance. We revert to the moral of the story narrated in the beginning of this chapter. The moral t aught us that we need to measure the performance and not mere activities. What then is performance? Performance is essentially what an employee does or do es not do. Employee performance common to most jobs include the following elemen ts: Quantity of output Quality of output Timeliness of output Presence at work Coope rativeness In addition to these, other elements that deserve assessment are job knowledge, leadership abilities, judgement, supervision, versatility and health. Assessment should also include one s potential to perform and not just actual performance. Performance measurement needs to be based on the benchmarks listed above. These benchmarks vary from job to job. The job of a professor needs to be assessed ag ainst parameters that are different to those used to evaluate the performance of a sales representative. - 55 -

Specially Uploaded for ProjectsParadise.com PERFORMANCE INTERVIEW Performance interview is another step in the appraisal process. Once appraisal h as been made of employees, the raters should discuss and review the performance with the ratees, so that they will receive feedback about where they stand in th e eyes of superior. Feedback is necessary to effect improvement in performance, especially when it is inadequate. Specifically, performance interview has three goals: (i) to change behaviour of employees whose performance does not meet orga nisational requirements or their own personal goals. (ii) To maintain the behavi our of employees who perform in an acceptable manner and (iii) to recognize supe rior performance behaviours so that they will be continued. Raters offer feedback to the ratees through several methods-tell and sell, tell and listen, problem solving and mixed. In tell and sell, also called directive i nterview, the interviewer let assesses know how well they are doing and sells th em on the merits of setting specific goals for improvement, if needed. The tell and listen interview provides the subordinates with chances to participate and e stablish a dialogue with their superiors. Its purpose is to communicate the rate r s perceptions about the ratee s strength and weaknesses and let the subordinat es respond to these perceptions. In the problem -solving or participative interv iew, an active and open dialogue is established between the superior and the sub ordinate. Not only are perceptions shared, but also solutions to problems are pr esented, discussed, and sought. Mixed interview is a combination of tell and sel l and problem solving interviews. Whatever be the approach followed, the emphasi s in the interview should be on counseling and development and not on criticism, witch-hunting and buck passing. Because of the significance of appraisal interv iew, every effort must be made to make it effective. Guidelines given in Table b elow will help make the interview successful. - 56 -

Specially Uploaded for ProjectsParadise.com GUIDELINES FOR EFFECTIVE APPRAISAL INTERVIEW Select a good time Minimize interruptions Welcome, set at ease Start with someth ing positive Ask open ended questions to encourage discussion Listen Manage eye contact and body language Be specific Rate behaviour, not personality Layout dev elopment plan Encourage subordinate participation Complete form Set mutually agr eeable goals for improvement End in a positive, encouraging note Set time for an y follow up meetings - 57 -

Specially Uploaded for ProjectsParadise.com USE OF APPRAISAL DATA The final step in the evaluation process is the use of evaluation data. The data and information generated through performance evaluation must be used by the HR department. It may be recollected that the most significant rewards employers offer to emplo yees are: 1. Money to purchase goods and services required not only for current and future survival, but also for the luxuries modern life has to offer. 2. The opportunity to use innate and learned skills and talents in a productive manner that the individual and his or her managers and co-workers recognize as valuable . 3. Opportunities to interact with other people in a favorable working environm ent. 4. Opportunities to learn, grow, and make full use of their potential. 5. A sense of performance and stability through the continuing existence of the orga nisation and the job. 6. The opportunity to perform work assignments within an e nvironment that not only protects. But promotes physiological, emotional and psy chological health. In one way or another, data and information outputs of a performance-appraisal p rogramme can critically influence these coveted employer-employee reward opportu nities. Specifically, the data and information will be useful in the following a reas of HRM: I. Remuneration administration 2. Validation of selection programme s 3. Employee training and development programmes 4. Promotion, transfer and lay -off decisions 5. Grievance and discipline programmes 6. HR planning - 58 -

Specially Uploaded for ProjectsParadise.com EDWARD DEMING ON PERFORMANCE APPRAISAL Towards the end of this section, it is worthwhile to note Edward Deming s views on performance evaluation. Deming is opposed to employee assessment, because it: I. Rewards people for manipulating the system rather than improving it, 2. Is o ften self-defeating, 3. Is inconsistent with team-work, 4. Acts as a substitute for proper management, and 5. Is inherently unfair. His alternatives to performa nce appraisal are: 1. Meticulous selection of leaders, 2. Educating workers abou t their obligations, and improved training and education after selection, 3. Get ting leaders to function as colleagues rather than as judges, 4. Subordinate per formance to be assessed using statistical data, 5. Three to four hours interview annually, with subordinates aimed at support and encouragement, and 6. Accommod ation to lone workers. - 59 -

Specially Uploaded for ProjectsParadise.com CHALLENGES OF PERFORMANCE APPRAISAL With the increased significance of performance appraisal, challenges confronting the system are mounting. One serious challenge facing the performance appraisal system relates to assessment of self-managed teams. Popularly called empowered teams, these self-managed teams create special challenges for performance apprai sal-empowered teams perform without supervisors. Historically, if one recalls, i t is the supervisor who assesses the performance of his or her subordinates. Ano ther challenge is that both, individual and team performance, need to be measure d. A suitable device needs to be developed to assess the performance of empowere d teams because more and more firms use such teams to enhance productivity. Figu re below contains a typical model of team appraisal. Identify KRAs critical to business during the year Set tangible targets for each KRA. Incorporate stretch elements for each target. Fix the minimum acceptable target Determine intangible parameters (like initiative), which indicate pockets of ind ividual excellence with the team Evaluate performance of the team against predetermined targets Communicate the results to ensure transparency Measure the performance of the team (actual versus targets) every month Identify individuals who have excelled. Discount subjective factors by including assessors from outside the team to identify outstanding individuals. Figure: Appraising Teams - 60 -

Specially Uploaded for ProjectsParadise.com The Following table contains challenges of Performance Appraisal Challenges of Appraisal: Create a culture of excellence that inspires every employee to improve and lend himself or herself to be assessed Align organizational objectives to individual aspirations Clear growth paths for talented individuals Provide new challenges to rejuvenate careers that have rea ched the plateau stage Forge a partnership with people for managing their career s Empower employees to make decisions without the fear of failing Embed teamwork in all operational processes Debureaucratise the organization structure for eas e of flow of information. - 61 -

Specially Uploaded for ProjectsParadise.com LEGAL ISSUES ASSOCIATED WITH PERFORMANCE APPRAISAL Performance appraisal data as stated earlier, are used to make many important HR decisions (e.g. Pay, promotion, training, transfer and termination). The apprai sal system is a common target of legal disputes by employees involving charges o f unfairness and bias. An employee may seek the legal recourse to obtain relief from a discriminatory performance appraisal. One such case goes back to 1980s. I n 1981, three junior employees of Williamsons Magor were promoted superseding 15 of their senior workmen. The basis for promotion was recommendations of the dep artmental heads and other authorities. The 15 workmen challenged the promotion t o the three workmen in the Supreme Court and the court upheld the contention of the petitioners on the ground that he said recommendations of departmental heads and authorities were arbitrary and could not be the main basis for effecting pr omotions. There are several recommendations 10 assist employees in conducting fa ir performance appraisal and avoiding legal suits. Gleaned from case laws, these recommendations are intended to be prescriptive measures that employers should take to develop fair and legally defensible performance appraisal systems. 1. Legally Defensible Appraisal Procedures All personnel decisions should be based on a formal standardized performance app raisal system. Any performance appraisal process should be uniform for all emplo yees within a job group, and decisions based on those performance appraisals sho uld he monitored for differences according o race, sex. national origin. Religio n or age of the employees. While obtained differences as a function of these var iables are not necessarily illegal. an organization will have more difficulty de fending an appraisal system with ratings related to these variables. All specifi c performance standards should be formally communicated to employees. All employ ees should be able to review their appraisal results. - 62 -

Specially Uploaded for ProjectsParadise.com There should be a formal appeal proc ess for the rate to rebut rater judgments. All raters should be provided with wr itten instructions and training on how to conduct appraisals properly to facilit ate systematic, unbiased appraisals. All personnel decision-makers should be wel l informed of anti-discrimination laws.They should be made aware of the fine dis tinctions between legal and illegal activities regarding decisions based on appr aisals. 2. Legally Defensible Appraisal Content Any performance appraisal content should be based on a job analysis. Appraisals based on traits should be avoided. Objectively verifiable performance data (e.g. sales, productivity, not ratings) should be used whenever possible. Constraints on an employee s performance that are beyond the employee s control should be p revented from influencing the appraisal to ensure that the employee has an equal opportunity to achieve any given performance level. Specific job-related perfor mance dimensions should be used rather than global measures or single overall me asures. The performance dimensions should be assigned weights to reflect their r elative importance in calculating the composite performance score. 3. Legally Defensible Documentation of Appraisal Results A thoroughly written record of evidence leading to termination decisions should be maintained(e.g. performance appraisal and performance counseling to advise em ployees of performance deficit, needed improvements) and to assist poor performe rs in making Written documentation (e.g. specific behavioural examples) for extreme ratings should he required and they must be consistent with the numerical ratings. Documentation requirements should he consistent among the raters. - 63 -

Specially Uploaded for ProjectsParadise.com 4. Legally Defensive Raters The raters should be trained in how to use an appraisal system The raters must h ave the opportunity to observe the ratee first hand or to review important ratee performance products Use of more than rater is desirable in order to lessen the amount of influence o f any one rater and to reduce the effects of biases. Peers, subordinates, customer s, and clients are possible sources. - 64 -

Specially Uploaded for ProjectsParadise.com PIRAMYD MEGASTORE - STORY OUTLINE Crossroads at Mumbai created a revolution pioneering the concept of shoppertainm ent in the country. It was an attempt to give the citizens of Mumbai a truly int ernational shopping experience, a destination where the entire family can enjoy a day together shopping or browsing, eating and playing games in an unmatched am bience. Of the three ingredients, i.e. shopping, dining and entertainment, Shopp ing was the main ingredient. It had to be world class and had to incorporate glo bal standards in terms of retail management, technology and design. Mrs Urvi Pir amal, Vice Chair person of Piramal Group, had a strong viewpoint on shopping- Tru e shopping is browsing, enjoying, indulging and making choices. It is an express ion of lifestyle and makes an affirmative statement. This was the thought, which translated into Piramyd, India s first Megastore for lifestyle products. Piramyd spreads across 3 levels in the mall and has over 30000 sqft of space in Crossro ads. To a typical Mumbai Women, shopping normally meant endless rounds of bargai ning, endless trips back and forth from store to store, pushy sales people and s carcely enough space to push their elbow. Piramyd Megastore broke all these conv entional hassles of shopping for women. In terms of product offering, Piramyd ha s everything that a woman would want to buy and more less than one roof. It has the widest range ethnic wear, western wear, lingerie, nightwear, leather accesso ries, sunglasses, fine jewelry, and saris. The idea is to provide - 65 -

Specially Uploaded for ProjectsParadise.com her with a complete basket of shoppi ng. In a single visit she can choose to pick up apparels, go over to the footwea r section to pick up complimenting footwear, browse for that matching leather ba g, and end up her buying with some matching jewelry. No longer has she had to vi sit different shops at times in different location. To extend her shopping she c an also look out for groceries and foodstuff from the Supermarket which is just a bridge away. Today s working women wants products, which are fashionable and y et affordable. All the products in Piramyd are showcased keeping in mind the pri ce-conscious Indian buyer. Projecting a dynamic image for the youth, Piramyd ref lects the latest trend in style and includes new range of clothing on an ongoing basis. The store targets the upwardly mobile women of today who lays emphasis o n quality. She is particular about grooming standards and spends on keeping hers elf and her family well groomed. Dressing right is no longer a fashion statement . It is a revelation of her personality and that is lodged deep within her. A wo man can express herself with a choice of apparels and accessories from Piramyd t hat essentially speaks for her. This does not come at a very high price. For a m ere Rs 1200 she can choose to pick up a decent Salwar Kurta set, a footwear star ting from Rs. 400, a leather bag at Rs 400 etc. However depending on the spendin g mood, she can indulge in luxury and choose a Linarika designer wear label at e ven Rs. 4500. To keep her family well groomed too, the Indian woman need not go looking beyond . For the man or the big kid in her life, she can just climb up one floor and bu y the exclusive shirt, the gorgeous ethnic suit, the top of the line blazer or j ust a beautiful tie to match. Not only does Piramyd offer the finest brands avai lable in India, but it also offers a world-class ambience and service, with the widest choice. A woman can browse through the offerings to her hearts content wi thout any pressure of buying through serene ambience in the classy glass and mar ble interiors designed by International architects. There is enough space for he r to rest, take a break while shopping and then continue again. The staff at Pir amyd is trained to be unobtrusive. They are there to help one make a choice or s imply serve quietly and efficiently. With constant in-depth product raining, the Piramyd Staff offers service to all customers with a positive attitude, pleasan t disposition and good communication skills translated into a motto, which reads we believe in service, we do it with pride. - 66 -

Specially Uploaded for ProjectsParadise.com HR VISION Employee Value Proposition Since inception in 1999 we as an organization have be en through various phases of business. We created a mark for ourselves in a the Organized retail sector and now are known as a retailing brand .The single most factor that will act as a catalyst to our growth are the Human Resources To attrac t and retain the best people, we add value to the life of our employee at every instant. We are constantly designing, refining and implementing HR processes and activities which touch our employees. Our HR Proposition: WONDERFUL PLACE TO BE, AN EXCITING PLACE TO WORK As far as the Human Resource Department of Piramyd Retail Limited is concerned, it consists of highly qualified people who have achieved their specialization in this very field. The organization Structure for Human Resource development and Personnel Department is as follows: Manager - Human Resources Assistant ManagerHuman Resources Executive Human Resource Executive Human Resour ce Executive Human Resource Executive Human Resource - 67 -

Specially Uploaded for ProjectsParadise.com Executive Human Resource We, as a group met Mr. Paresh Patel who is one of the executives from the H.R. D epartment. When asked about the need for the H.R. Department in a firm, he expla ined that as Piramyd Retail Limited is a company dealing with its customers dire ctly and there is a direct interaction with the customer in the service industry , it needed its employees to speak and interact with the customer in an efficien t manner in order to know the requirements and then suggest the merchandises acc ordingly. In order to that it was necessary for the sales staff to be more effec tive and hence to achieve this very target they need good people with good inter personal communication skills, good knowledge and a sound sense of humor. And t his can be done only when an effective H.R. Department is in place. Coming back to the topic, according to him, out of the 6 factors involved in the 360 degree appraisal system, they considered only 3 which are the colleagues, the superviso rs and the sub-ordinates. Out of the pre-decided and the pre-defined methods & t echniques for performance appraisal; it was identified by our project group that they used a combination of 2 different methods. The 2 methods are The Grading Me thod & The Graphic Rating Scale Method. Before going ahead lets understand the above 2 methods in brief as to what they are all about:1. The Grading Method: In the grading method, a number of grades or classes are first established and carefull y defined. The rater evaluates the performance of an individual employee against these standards and places him in one of these grades. The grades are related t o qualities of employees and grades are given to such qualities. The qualities m ay be like job knowledge, judgement, leadership, co-operative attitude and so on . The grades may be like A (for outstanding), B (for very good), C (for Good), D (for fair) and E (for poor). The rater judges the performance of an employee an d puts him under a suitable category. This method is simple and quick but the ra ting of employees may not be accurate - 68 -

Specially Uploaded for ProjectsParadise.com particularly when the rater has to c omplete the rating of large number of employees within a short period. 2. Graphic rating Scale Method: This is one of the oldest and the most widely us ed methods of performance appraisal. Here, four to twelve factors are selected, depending upon the category to which the employee belongs. Some of these factors are quantity of output, quality of output, initiative, integrity, dependability , etc. these factors and their degrees are marked on a graph paper provided in t he appraisal form. The rater has merely to check on the scale where he thinks th e employee belongs. The following table gives us an idea about the Graphic Rating Scale Method Quantity of Quality Factors/Considerations Output Output of Integrity Initiative Excellent Very Good Good Average Below Average Advantages of Graphic rating Scale Method: (a) It is simple to understand and ea sy to operate, (b) It is also not a time-consuming method, (c) It is economical and ensures uniformity in the assessment of employees. Comparison among the employees is easy as the details are clearly noted on the p aper by the rater. Disadvantages of Graphic rating Scale Method: - 69 -

Specially Uploaded for ProjectsParadise.com (a) It puts heavy pressure on the ra ter as he has to consider four to twelve different factors with five degrees for each factor. It is therefore, not possible to guarantee the accuracy of the rat ers decision. (b) The rater may be biased, (c) The rater has to do a lot of paper work in the graphic rating scale method. He may do marking mechanically, if he has to make appraisal of large number of ratees. (d) Accurate rating may not be done as there is a very thin gap between two considerations (e.g., very good and good). After discussing about what the two different methods mean we now see how Piramy d Retail Limited (PRL) actually implements these 2 methods in their organization . According to Mr. Paresh Patel, it takes nearly 2 months for the H.R. Department complete the whole process of performance and potential appraisal of all the emp loyees right from the Store Manger to the Trainee Sales Associate of the firm. T he foremost condition of the performance appraisal of an employee in PRL is that he / she should have completed at least a year in the organization. And also th ere are no performance appraisals for Part-timers in PRL. The appraisals take pl ace in the months of April - May and the results are announced through a meeting which sees the attendance of the Manager Human Resources as well as the Store M anager of that particular branch store. There are 3 grades designed for the employees of PRL which are A OUTSTANDING B A VERAGE / GOOD C ADEQUATE. On the basis of the above 3 grades, all the employees are divided and placed among the above slots. Any positive or negative feedback from an individuals colleague, supervisor or sub-ordinate sees him / her in the r espective column. The Organization Structure for Piramyds Operations Department - 70 -

Specially Uploaded for ProjectsParadise.com 1 Store Manager 2 Assistant Store Managers 4 Floor Managers Senior Sales Associates Junior Sales Associates Trainee Sales Associates From the above given grades, only the individuals obtaining the topmost grade i. e. the A grade gets a rise in the post or only those individuals can climb the l adder of this organization structure. Although, most number of employees settle in the second grade i.e. the Average grade. However, these employees are only gi ven a nominal increment of Rs. 450/- in their monthly salaries. On the other han d, for the apex achievers apart from the rise in the post in the organization, t hey are awarded with an increment of Rs.750/- in their monthly salaries. Whereas there is bad news for the employees at the bottom level, by terming them as the Adequate people in the firm. They are not given any sort of incentives or increme nts for that particular year and also are allowed to leave PRL at their request without any further hesitation. The process of appraisal is as follows: - 71 -

Specially Uploaded for ProjectsParadise.com First of all, before the appraisal p eriod, there is a meeting held, which all the employees on the lower or the high er post have to attend and it is mandatory for all. This meeting takes place at least a week before the original appraisal period starts. In this very week all the employees are informed individually about the date of his / her performance appraisal and hence his / her attendance on that very appraisal day becomes comp ulsory. On a day nearly 4-5 employees are appraised. The employees are asked to be prepared for any sort of situations during the appraisals. As an important st ep of their career, employees also take it very seriously and do their work seri ously before and after appraisals. The appraisals in Piramyd Megastore are condu cted by 2 Executives Human Resources, alternatively. These 2 executives are a pa rt of the 3 man committee formed for the purpose of appraisals. The 3 man Commit tee for the current years appraisal process consisted of : 1. Mr. Bosco Menezes S tore Manager, 2. Ms. Amrapali Shahdeo Executive (Human Resources), 3. Mr. Paresh Patel Executive (Human Resources). The employees are called for the appraisals along with their managers for his / her appraisal. 1. Self Evaluation: This is the first step in the appraisal proce ss at PRL, where an employee has to rate himself from 1 6, where 1 is the lowest point, whereas 6 is the highest grade. The employee is actually given a questio nnaire which contains approx. 30 questions. On these questions the employee has to award the points to himself. The questions in the questionnaire are based on the following important aspects of his Job Responsibility in Piramyd Retail Limi ted. Each aspect under this job responsibility is given a different weightage. T he chart showing the different aspects of the Job Responsibility in PRL and thei r weightage is given below: Sr. No. 1. 2. 3. Aspects of Job Responsibility Target Cover Customer Focus Visual Merchandising & House Keeping Weightage Given 35 % 15 % 15 % - 72 -

Specially Uploaded for ProjectsParadise.com 4. 5. 6. Discipline & Attendance Hon esty & Integrity Other Factors 10 % 10 % 15 % 2. Argument Starts: After the employee rates himself in the questionnaire on the above mentioned aspects from 1 6, the same report is given to his superior in t his case the Floor Manager. There is an argument between the floor manager and t he employee, if the floor manager feels that the employee has overrated himself in any of the questions. for instance, if a question is, How Clean Do I Keep My Section?, and if the employee awards himself full points i.e. 6 which means that his section is always clean and there is no dust in his section, his floor manag er may argue in the point and interfere that his section is not always clean and he has found bits of paper on the floor of his section several number of times, then the employee mat argue on that point or even go ahead without having any s ort of arguments by saying the words, I Agree. At this stage the employee has full liberty to argue and repeatedly try and prove his point without affecting or lo sing any points on it. And it is observed that the employees take full advantage of this liberty at PRL. 3. Job Related Questions: The employees are then asked the questions relating to their jobs, for instance, about the fabric knowledge, any extra knowledge that the employee shares while selling the merchandises to t he customers, any further developments he would suggest towards the betterment o f his own section, brand, or the store. The best suggestions are also given bonu s points. The employee is also enquired about his mbility to move to any other b ranch of Piramyd Megastore at any point of time. The positive response is given good points. he is also asked about the ultimate post that he would strive for i n this particular organization and the ways of achieving it. if he is found capa ble and his means and ways to reach that position effective enough then he is gi ven good ratings which fall under the Other Factors category in the above table. 4. The Results: The employees are rated accordingly from the questionnaires, th e out comes of the arguments are also given significance and lastly the abilitie s of the employee judged on the basis of the Job Related Questions. the employee s are judged on the following basis or distribution and cut-off percentages whic h are stated below: - 73 -

Specially Uploaded for ProjectsParadise.com Percentage cut-off 90 % and Above 80 % - 90 % 80 % and Below Rating Outstanding Good Adequate And accordingly the increments are given in the salaries of the employees at PRL . personally as a group we feel that the performance appraisal standards at PRL are quite dicey and difficult as well, as a person in order to come true to thes e standards of the appraisal committee is very difficult as we inquired with a f ew of the sales staff deployed on the different levels of Piramyd Megastore. The response to the appraisal techniques had many people saying that they found in difficult to make it to the top 2 levels of repute and most of them landed up in the 3rd category which is of a bit embarrassing position. THE END - 74 -