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Winter Training Report

On

ROLE OF PERFORMANCE APPRAISAL ON STEEL INDUSTRY

Submitted to
Mr. T. P. Singh
Project Supervisor

By
Vaidehi Singh
Roll No 0708170115
MBA IV Semester

To

U P TECHNICAL UNIVERSITY

DEPARTMENT OF MANAGEMENT STUDIES


INSTITUTE OF FOREIGN TRADE AND MANAGEMENT
LODHIPUR RAJPUT, DELHI ROAD, MORADABAD (UP)
ROLE OF PERFORMANCE APPRAISAL ON STEEL INDUSTRY
BY

Vaidehi Singh
MBA IV SEMESTER

SUBMITTED TO DEPARTMENT OF MANAGEMENT STUDIES IN THE PARTIAL


FULFILLMENT OF THE REQUIREMENT FOR THE DEGREE OF

MASTER OF BUSINESS ADMINISTRATION


AT THE
INSTITUTE OF FOREIGN TRADE AND MANAGEMENT

JANUARY 2009

The author hereby grants I.F.T.M permission to reproduce and to distribute publicly, paper and electronic
copies of the project in whole or part.

Signature of student: __________________________________________________________________


Department of Management Studies
March 2009

Certified by: ___________________________________________________________________________


Mr. T. P. Singh
Project supervisor

Accepted by: __________________________________________________________________________


Dr. (Mrs.) Manjula Jain
Professor and Head
Department of Management Studies

ACKNOWLEDGEMENT
This project has been made possible through the direct and indirect co-operation of

various people for whom I wish to express my appreciation and gratitude. In the

preparation of this project report I have received help and encouragement from different

sources.

I express my sincere gratitude to Dr. Manjula Jain (Professor and Head of the dept. of

Management Studies); I convey my regards to my Project Guide Mr. T. P. Singh for his

untiring support and encouragement.

I am also very thankful to all the faculty members of I.F.T.M. for providing me with their

invaluable suggestions and moral support to complete my report in expected format. A

special thanks to my parents who encourage me a lot during my project session.

I once again thanks to all those who extended their support and co-operation in bringing

out this project work successfully.

VAIDEHI SINGH
PREFACE

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

be traced to Taylor's pioneering Time and Motion studies. But this is not very helpful, for

the same may be said about almost everything in the field of modern human resources

management. As a distinct and formal management procedure used in the evaluation of

work performance, appraisal really dates from the time of the Second World War - not

more than 60 years ago.

In many organizations - but not all - appraisal results are used, either directly or directly,

to help determine reward outcomes. That is, the appraisal results are used to identify the

better performing employees who should get the majority of available merit pay

increases, bonuses and promotions.

The purpose of this study has been to determine whether the performance appraisal was

used for employee development and whether the appraisal was emphasized as an

important part of the performance appraisal process in steel industry. Also whether the

performance appraisal helps in increasing industry’s profitability.

Our study suggested that the performance appraisal has helped in increasing the

profitability of industry. Certain loop holes has been determined and suggestions were

made.
Chapter no. Title Page no.

Acknowledgment III

Preface IV

List of Table VI

List of figures VII

1. Introduction 6

2. Scope and Importance

27

3. Objective

29

4. Research Methodology 31

5. Literature Review 34

6. Findings and Analysis 54

7. Conclusions 64

8. Suggestions and Recommendation 69

9. Limitations 71

Bibliography 74
INTRODUCTION

Almost every organization in one way or another goes through a periodic ritual,

formally or informally, known as performance appraisal. Performance appraisal has been

called many things. The formal performance appraisal has been called a tool of

management, a control process, an activity and a critical element in human resources

allocation. Uses for performance appraisal have included equal employment opportunity

considerations, promotions, transfer and salary increases. Primarily performance

appraisal has been considered an overall system for controlling an organization.

Performance appraisal has also been called an audit function of an organization regarding

the performance of individuals, groups and entire divisions.

Performance appraisal may be defined as a structured formal interaction between

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

or semi-annual), in which the work performance of the subordinate is examined and

discussed, with a view to identifying weaknesses and strengths as well as opportunities

for improvement and skills development.

Almost every organization in one way or another goes through a periodic ritual,

formally or informally, known as performance appraisal. Performance appraisal has been

called many things. The formal performance appraisal has been called a tool of

management, a control process, an activity and a critical element in human resources

allocation.
And since people differ in their abilities and aptitudes. These differences are natural to a

great extent and cannot be eliminated even by giving the same basic education and

training to them. There will be some differences in the quality and quantity of work done

by different employees even on the same job. Thus, there is a great need to have suitable

performance appraisal system to measure the relative merit of each employee.

The basic purpose of performance appraisal is to facilitate orderly

determination of an employee’s worth to the organization of which he is a part. However,

a fair determination of the worth of an employee can take place only by appraising

numerous factors some of which are highly subjective, as for instant, attendance, while

others are highly subjective, as for instant, attitude and personality. The objective factor

can be assessed accurately on the basis of records maintained by the Human resource or

personnel Department, but there is no device to measure the subjective factor precisely.

Notwithstanding this, appraisal of these factors must be done to achieve the full

appreciation of every employee merit.

Therefore, it can be said that, performance appraisal means systematic

evaluation of the personality and performance of each employee by his supervisor or

some other person trained in the techniques of merit rating. It employs various rating

techniques for comparing individual employees in a work group, in term of personal

qualities or deficiencies and the requirements of their respective jobs. To quote dale

Yoder,” performance appraisal includes all formal procedures used to evaluate

personalities and contribution and potential of group members in a working organization.

It is a continuous process to secure information necessary for making correct and

objective decisions on employees.” The comparison of performance with job


requirements helps in finding out the merit of individual employees in a week group.

Supervisor or an independent appraiser may do rating.

Performance appraisal is a formal program in an organization, which is

concerned with not only the contribution of the members who form part of the

organization, but aims at spotting the potential also. The satisfactory performance is only

a part of the system as a whole and the management needs more information than mere

performance ratings of the subordinates. There are no two opinions about the necessity of

performance appraisal, which can meet requirements of the management to achieve the

organizational goals.

Performance appraisal is the systematic evaluation of the individual with

respect to his performance on the job and his potential for development. Performance

appraisal is concerned with determining the differences among the employees working in

the organization. Generally, the individual’s immediate superior in the organization and

whose performance is reviewed in turn by his superior does the evaluation. Thus,

everyone in Performance appraisal employs rating techniques for comparing individual

employees in the work group, in terms of personal qualities or deficiencies and the

requirements of their respective jobs.

More Abruptly it can be said that, Performance management can be defined

as a strategic and integrated approach to delivering sustained success to organizations by

improving the performance of the human capital and by developing the capabilities of

teams and individuals within that organization (Armstrong and Baron, 2000). The process

of performance management therefore focuses not only with ‘WHAT’ is produced but,

also ‘HOW’ it is produced. It seeks to ensure that what has been produced is in line with
the organization’s needs and these products have been produced in line with the

organization’s way of doing things.

Performance management can be achieved through many different ways.

These include performance appraisal system and coaching. Performance appraisal system

can be described as a fairly old system of measuring employees’ performance that has

been in use in many organizations. However, Performance appraisal has not brought in

the amount of positive results that was expected of it. Armstrong and Mulis (1994:86)

quoted one manager describing performance appraisal as “a dishonest annual ritual”. The

question that arises then is: “If Managers (the custodians of the system) do not have

confidence in their own system, what more employees (who happen to be victims of the

system)?”

The meaning of the word “appraisal” is “to fix a price or value for

something”. This is used in finance in terms such as project appraisal or financial

appraisal where a value is attached to a project. Similarly performance appraisal is a

process in which one values the employee contribution and worth to the organization.

Performance appraisal can be defined as a system of measuring employee’s

performance relative to the assigned or agreed objectives. The process starts

with the supervisor and or with the subordinate agreeing on specific

objectives that need to be met on an agreed time period. The objectives that

are used in the Performance appraisal stem from the main organizational

objectives that are reduced to Departmental goals and now to individual

goals.
The performance appraisal system has to be transparent and the employee

should be taken into full confidence. In many cases employees themselves are given a

chance to conduct a self-appraisal. Performance appraisal is a case of joint problem

solving by the organization and the employee. However the organization must also take

care of future potential and not get bogged down by current performance.

Normally the immediate supervisor does the appraisal. Some organizations

also have a peer group performance appraisal where colleagues rate the performance.

The HR person must also ensure that line managers are properly trained for

carrying out the appraisal including interviewing techniques and on how to give

feedback. The managers must also be trained to look at the cases objectively outside of

their personal opinion of the candidate.

Therefore at end it would be right to say that, Performance appraisal is the

process of obtaining, analyzing and recording information about the relative worth of an

employee. The focus of the performance appraisal is measuring and improving the

actual performance of the employee and also the future potential of the employee. Its aim

is to measure what an employee does.

According to Flippo, a prominent personality in the field of Human

resources, "performance appraisal is the systematic, periodic and an impartial rating of an

employee’s excellence in the matters pertaining to his present job and his potential for a
better job." Performance appraisal is a systematic way of reviewing and assessing the

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

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

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

achievements of the overall organizational goals.

Organizations exists to achieve goals. Goals are only met when individual

employees efforts matches with policy of the organization and thus bringing out success

and effectiveness. The assessment of how unsuccessful employees have been at meeting

their individual goals therefore becomes a critical part of HRM and here comes

Performance Appraisal System.

Performance Appraisal is an important component of the information and

control system. In today’s flexible organizations, performance evaluations provide an

effective way for managers to clarify performance goals and standards to enhance future

individual performance. Thus, the purpose of performance appraisal is to improve the

organization’s performance through the enhanced performance of individuals.

The performance appraisal system:

 Is an organizational necessity.

 Is based on well defined objective criteria.

 Is based on careful job analysis.

 Uses only job related criteria.

 Is supported by adequate studies.


 Is applied by trained qualified raters.

 Is applied objectively throughout the organization.

 Can be shown non discriminatory as defined by law.

By focusing the attention on performance, performance appraisal goes to the

heart of personnel management and reflects the management's interest in the progress of

the employees.

OBJECTIVE OF PERFORMANCE APPRAISAL

There are mainly two purposes for which performance appraisal is used by an

organization:

(1) To improve the work performance of employees by helping them realize and use their

full potential in carrying out the firm’s missions; and

(2) To provide information to employees for use in making work related decisions,

More specifically, appraisals serve the following purposes.

1) Appraisals generate information to support administrative decisions. Promotions

transfers and reassignments, demotions and termination’s are action based at least in

part on performance.

2) Appraisals provide feedback to employees and thereby serve as vehicle for personal

or career development because feedback provides:

• Reassurance that they are contributing and doing the right thing
• Awareness of the impact on the desired results

• A measure of the adequacy of performance (quality, quantity, speed etc.)

• Recognition of the importance and value of their performance.

3) Once the development needs of employees are identified appraisals can help establish

objectives for training programmes. Thus evaluations provide a basis for changing

performance plans, including objectives and standards of behaviors as business plans

and conditions change.

4) As a result of proper specifications of performance levels, appraisals can help

diagnose organizational problems. They do so by identifying training needs and the

knowledge, abilities, and other characteristics to consider in hiring, and they also

provide a basis for distinguishing between, effective and ineffective performers.

5) Appraisals are used as criteria in test evaluations.

The rationale for differential treatment of employees needs to be consistent with

company’s values, philosophy and strategy. It also needs to be balanced with the desire

for collaboration, rather than competition and conflict, sought in TQM.


PERFORMANCE APPRAISAL - PROCESS MAP
METHODS OF PERFORMANCE APPRAISAL

Currently most of the companies are using one of the following Performance Appraisal

Methods:
1). 360 Degree Appraisal Method

2). Rating Scale Method

3). Management by Objective Method

Under the 360 Degree appraisal method the employee is rated from all angles i.e., by

the superiors, subordinates, peers, suppliers, distributors, customers and clients. Under

the Management by Objective method the employee goals are set mutually by the

employee's and the management. And the employees are rated based on the

accomplishment of these goals. Under the Rating Scale method each employee trait or

characteristic is rated on a scale that usually has several points ranging from "poor" to

"excellent" (or some similar arrangement).The traits assessed on these scales include

employee attributes such as work quality, cooperation, initiative, punctuality and

technical competence, etc. The selected traits should be in some way relevant to the

appraisee's job.

360º APPRAISAL AND FEEDBACK

The 360 degree appraisal involves rating of an employee or manager by everyone above,

alongside and below him. Corporates are using this tool to find out truths about their

managers. Although deployed mostly as a fact-finding technique, 360 º appraisals are

also used to design promotion and reward system in the organization.

Concept of 360º Appraisal

According to Milliman and others, “360-degree appraisal is the process of systematically

gathering data on a person’s skills, abilities and behaviors from a variety of sources –the
manager, peers, subordinates and even customers and clients”. Thus, appraisal of an

employee is done by his superior, his peers, his subordinates and clients or outsiders with

whom he interacts in the course of his job performance. In 360-degree appraisal, besides

appraising the performance of the assesses, his other attributes such as talents, behavior,

values, and technical capabilities are also appraised.

Besides the employee himself, superior, subordinates and peers play an important role in

the appraisal. Structured questionnaires are used to collect responses about the employee

from his superiors, peers and subordinates. Several parameters relating to performance

and behavior are used in the questionnaires. Each manager is assessed by a minimum of

fifteen colleagues, at least two of them being his bosses, four of them peer, and six of

them subordinates. Even the important customers or clients of the firm may also be

requested to give their assessment of the concerned employee. The responses are

presented collectively to the assesses in the form of charts and graphs. Comments and

interpretations are presented later. Counseling sessions are arranged with the employee to

remove the weaknesses identified in the 360 degree assessment.

Merits of 360º Appraisal

The merits of 360º appraisal are as under:


(i) The 360 degree appraisal leads to greater self-awareness of those appraised. It

reveals strengths and weaknesses in their working styles.

(ii) The gap between self assessment and the views of one’s colleagues of peer group

in reduced.

(iii) It facilitates empowerment of subordinates who get a say in the appraisal of their

bosses.

(iv) Inflexible managers are forced to initiate self-change.

(v) Facts about organizational culture and ambience are brought to light by the

multiple appraisals.

Limitations of 360º Appraisal

The system of 360º appraisal suffers from the following limitations:

(i) The 360 degree appraisal system ignores performance in terms of goals.

(ii) The candidate being appraised may not accept negative feedback from the

subordinates and peers. He might feel humiliated.

(iii) Responses from colleagues often tend to be biased.

(iv) Linking rewards to findings under 360 degree appraisal can prove to be unfair.

(v) The subordinates and peers might not be fully competent in appraisal.

Guidelines for Better Use of 360º Appraisal


The use of multisource appraisal can be effective if the following guidelines are

followed:

(i) Involve people. Ask them who should serve as raters, and give them an

opportunity to review and interpret the results. This will strengthen their

commitment to both the overall process and the specific decisions.

(ii) Ensure that relevant data are being collected. Focus on behaviors and

outcomes that raters are capable of observing and are competent to evaluate.

(iii) Ensure that no single rater can dramatically affect the outcome. Use a

large enough sample or eliminate the highest and lowest scores to ensure that no

one rater can skew the data.

(iv)Train raters in what and how to observe. The better people understand what

they look for and how to record”critical incidents” (specific things the person said

and did that can be used as examples to support their ratings, and better the

quality of the information that will be collected.

(v) Ask raters to support their evaluations. Whenever possible, raters should

discuss their observations and evaluations with other raters. These discussions

should trigger thoughts and combat selective memory. Raters should also be

required to provide a rationale for their rating to other raters. This would prevent

people from using the process to act on personal grudges.

(vi)Move slowly and start small. Any organization considering using 360 º

feedbacks in the appraisal process should begin by using it for development

purpose only and then gradually to make it a part of appraisal system. Even then,

the focus should be on the goal-setting portion of the appraisal. People need to get
comfortable with the idea of multisource feedback as a development tool before

they can accept it as part of the formal performance management process.

A lot of organizations seem to be hurrying to integrate 360º feedback into the human

resource management system. Multisource feedback really does have the potential to

enhance human resource management system. However, 360º feedback won’t fix a

system that does not work.

(vii) Develop a culture that supports open feedback. Not surprisingly, 360º

feedback works best in companies where the environment is participatory rather

than authoritarian, where giving and receiving feedback are the norm and are seen

as valuable sources of information. If the current system (where only the

supervisor does the appraisal) is not working due to lack of straight talk and

hesitancy to give direct feedback, it is essential to introduce openness in the

organization.

(viii) Clear and agreed on performance measures and behaviors. When 360º

feedback is used for development only, the organization may be able to settle the

list of behaviors and skills that have reasonable face validity and general support:

“coaching” or “team building”, for instance. However, when the feedback is being

used to determine performance ratings, the result and behavior for which people

are held accountable must be clear, unambiguous and specific.

(ix)The users must support the system and be willing to invest the time required

to make it work. The introduction of 360º feedback makes an already time-

intensive appraisal process even more demanding. It means more data to collect

and more information to process for the additional feedback.


(x) Sound feedback process. While the way the data are collected and presented

are always important, two aspects of sound 360º feedback procedure are

particularly relevant when the data are used for appraisal purpose: the validity and

reliability of the practices for which people will be measured and the

confidentiality of the raters.

Elements of 360º Appraisal Program

The elements of 360º appraisal program are as follows:

(i) Appraisal by Superior/ Boss. This is the most important element of the 360

degree appraisal. Here the focus is to provide constructive feedback on

employee’s performance and his development needs. It is the responsibility of the

superior to ensure that employee sets goals not only in the area of business

performance but also in the areas that are vital to the organization. These are

called corporate thrust areas and may include relationship management, safety

and quality development. If the working style of the employee is a concern area

and needs improvement for enhancing effectiveness then goal may be set for

“style of functioning” such as, from short-term to long-term orientation.

It is expected of the superior to put career aspirations of the employee in proper

perspective. Firstly, superior must communicate to the employee in a clear way what

the organization plans for the employee. Secondly, if the employee has unrealistic

aspirations, then also it is superior’s responsibility to share with the employee the

realistic picture given his/ her strengths, development areas, experience, qualifications,
and the organization’s ability to provide growth. This is how the superior’s appraisal

has a very significant role to play.

(ii) Appraisal by the Peer Group. The peers play an important role in the life of an

employee in the organization. The can also provide a deep insight into the

personality make up, attitude and style of working of the employee. For better

results, it is essential to select the right peers for the purpose of appraisal. They

must include peers both from within the department as well as from the other

departments, which are directly connected with the working of employee’s

department. The concept of internal customers comes handy here. Three to five

internal customers should normally be chosen for peer appraisal.

In order to achieve the purpose of 360º appraisal, the peer group appraisal must strive to

get the feedback on (a) employee’s working style, (b) sensitivity towards others, (c)

spirit of co-operation and collaboration, and (d) ability to work as a team member.

(iii) Appraisal by the Subordinates. Another distinctive feature of 360º

appraisal is the role of subordinates in appraisal. It signifies two things. Firstly, it

is a clear expression from the organization that it encourages openness and that

feedback is a two-way process. Secondly, it is a systemic recognition of the fact

that an employee’s subordinates do play a vital role in his appraisal. Thus, the

purpose of subordinate’s appraisal is to get first hand assessment of how the

subordinates perceive their superior to be in terms of: (a) delegation of authority,

(b) guiding and training of subordinate, (c) motivation of subordinates, (d) team

building, etc.
Upward appraisal provides an opportunity to the subordinates to give feedback to their

superior on the kind of things they would like him/ her to continue doing (status quo),

things they would like him/ her to stop doing (areas for corrective action), things they

would like him/ her to start doing (areas for new initiatives).

(iv)Self Appraisal. Any program of 360º appraisal would not be complete without

self appraisal by the employee whose performance is being appraised. Self

appraisal facilitates the employee to identify his/ her strengths and weaknesses

and provides an opportunity to assess the performance. In a well established

system, employees use the self appraisal very effectively and organizations also

find that employees often are their own strongest critics and display very high

degree of objectivity. Self appraisal also provides an opportunity to the employee

to express his career moves for the future. However, this is only for gathering

information and that under the given organizational constraints, it may not be

possible to provide the career progression desired by the employee. Nevertheless,

it is in the organization’s interest to at least know on a first hand basis the

aspirations of its employees.


EVOLUTION OF PERFORMANCE APPRAISALS IN INDIA

First Phase of Performance appraisals began in the early sixties were prepared in the

form of Annual Confidential Reports (ACR0, also known as Employee Service Records

(ESR) in some organizations. Negative remarks in the ACT or ESR were considered

damaging for career growth. It was thus important to keep the boss in good humor so that

the ACR or ESR did not get spoiled. The ESR was largely trait based and the traits used

were sincerity, punctuality, dynamism, job-knowledge, loyalty, initiative, leadership etc.

The ACR and it was this strict confidentiality that was supposed to serve as the

motivating force for them. This may be considered as Phase 1 of the performance

appraisal systems in India.

In the Second Phase that spanned late sixties and early seventies, the main change was in

communication of adverse remarks to the employees. It was felt that unless this system of

communicating to the employees in writing any quality or trait on which they got a rating

of 33 per cent or less. Even though the communication was sent to the employer by the

personnel department or the establishment section in a routine manner, the employees

took it very seriously because it required office played a key role in moderating the

assessment, and he normally had all the powers to overrule the ratings of the reporting

officer of the employee.

In the Third Phase of appraisals, the employee was given a scope to state his own

accomplishments in the confidential report form. The term annual confidential report was
replaced during this period by Performance Appraisal. The appraisal process began at the

end of the year with a statement by the appraise about his significant accomplishments

during that year. Some organizations later turned this “opportunity given to the appraisee

to express his significant achievements as self-appraisal”. However, this term was a

misnomer as there was no scope for the appraisee to appraise himself. A few

organizations subsequently developed this part of the appraisal by adding other questions

about difficulties faced, plans for improvement next year etc. Everything else remained

the same. The formats became a little more elaborate and in few cases, the appraisal

included the details of the actual work done, largest achieved etc. The confidentiality,

however, was maintained as before. In most cases, there was no communication to the

appraisee about the performance assessment. In a few of them, a column of training needs

was introduced. The appraisals continued to be control oriented and not developmental.

It was really in the he Fourth Phase that the system of performance appraisals underwent

a quantum leap. This phase began in the mid-seventies and in a way was initiated in India

by Larsen & Turbo Limited, followed by the State Bank of India , Bharat Earth Movers

and few other organizations. This phase witnessed a shift from control to development,

appraisal to analysis, strong links to training, confidentiality to openness and traits to

quantifiable tasks and targets.

The movement towards open and development oriented appraisal systems was initiated

by L&T when it adopted a system making appraisal more performance based,

participative (dialogic and interactive), open and developmental. It required the employee

and his reporting officer to plan the performance (the term key performance areas or

KPAs was introduced) or the appraisee in the beginning of the year, review it after six
months with the boss, analyze the factors affecting performance, discuss developmental

needs, have performance counseling and share the ratings with the appraisee. The system

required active participation of the appraisee and was intended to be a performance

planning, performance reviewing. And performance developing system. In the late

seventies and early eighties, most organizations wee fascinated by this open and

development oriented system. Some of them even started new HRD departments by

appointing HRD managers having the skills to design, monitor and implement the

system. While a few organizations switched over to this system, it took about 10 years of

experience to fully understand its intricacies and dynamics. The change process was slow

largely because the employees were not used to the openness introduced by the new

system, the HRD managers did not have enough skill base to monitor it, and the top

management lacked patience and perspective about its potential advantages. Several

organizations could not get out of the mindset created by earlier confidential report

system. They continued to use it for promotions, which were considered as the most

important indicators of development. It is only by the mid eighties that organizations

started setting down and feeling comfortable with the open appraisal systems.

Phase Fifth has started only in last three years with organizations showing some maturity

and growth in terms of their understanding of appraisals. This phase is characterized by a

movement towards development in spirit and form. This is symbolized by the substitution

of the term performance appraisal by performance review system, performance

development system, performance analysis and development to rewards and from

comparative assessment to assessment in relation to plans. There is a movement from

rewards and controls to culture building and development and the new phase also
indicates a shift towards appraisal by multiple sources rather than by only the reporting

officer.
SCOPE AND IMPORTANCE OF THE STUDY

 To help in understanding more about role of performance appraisal and become

clear about their functions;

 To help in understanding functions of performance appraisal in terms of

employee’s strengths and weakness with respect to their performance in the

organization;

 To understand how it helps in identifying the developmental needs of employees,

given their role and function;

 To analyze it’s impact on industrial relationships;

 To find out what tools it implies for bridging the communication gap between

employees and their supervisors.

 To study it’s role in creating a positive and healthy climate in the industry; and
 To understand it’s decision making power regarding employees.
OBJECTIVE OF THE STUDY

1. To examine why an appraisal system is important.

2. To study the effectiveness of the existing performance appraisal system in a

particular industry.

3. On the basis of what industry increase salary and provide training to its

employees. And what is basis of promotion in industry.

4. To understand more and more about role of employee and become clear about

his functions.

5. To understand employee’s own strengths and weaknesses with respect to his role

and functions.

6. To analyze the role played by performance appraisal system in increasing the

mutuality between employee and his superiors.

7. What opportunities are provided by the performance appraisal system to the

employees for self reflection and individual goal setting.


RESEARCH METHODOLOGY

The formidable problem that follows the task of defining the research problem is the

preparation the design of the research project, popularly known as the “research design”.

Decisions regarding what, where, when, how much, by what means concerning an

inquiry or a research study constitute a research design. “A research design is the

arrangement of conditions for collection and analysis data in a manner that aims to

combine relevance to the research purpose with economy in procedure.” In fact, the

research design is the conceptual structure within which research is conducted; it

constitutes the blueprint for the collection, measurement and analysis of data. As such the

design includes outline of what the researcher will do from writing the hypothesis and its

operational implications the final analysis of data.

Therefore, this study outline following designing decisions:-

(i) What is the study about?

The study comprises critical analysis of various functions, methods and scope of

performance appraisal in different companies prevailing in steel industry.

(ii) Why is the study being made?


The main purpose of study is to help in understanding various functions, role and

importance of performance appraisal system and identify the developmental needs of

employees in steel industry. It also focus on the impact of performance appraisal system

on industrial relations and help in finding out various tools for bridging the

communication gap between employees and supervisors.

(iii) What type of data is required?

Data comprising the impact of performance appraisal system on steel industry is required

for the study. Therefore, journal articles and news article from leading business

magazines and news papers did the needful.

(iv) Where can the required data be found?

Since data is secondary therefore most of the review was done with help of internet,

journals, newspaper articles and various books .

(v) What periods of time will the study include?

This study is the result of 2 – 3 months of research.

(vi) What techniques of data collection will be used?

To accomplish the objectives of the study secondary data is used.

(vii) How will the data be analyzed?

Data is analyzed on the basis of journal, newspaper articles and the core knowledge

gained on performance appraisal system from few books and steel industry. A complete

review has been done on role of performance appraisal system on steel industry and its
impact in gaining competitive advantages. Therefore, for this purpose role of

performance appraisal has been studied in few companies prevailing in the steel industry.

(vii) In what style will the report be prepared?

Report is distributed in Chapters completing all the requirements of the research.


LITERATURE REVIEW

Performance appraisal is a process of assessing, summarizing and developing the work

performance of an employee. In order to be effective and constructive, the performance

manager should make every effort to obtain as much objective information about the

employee's performance as possible. Low performance can push the organization back in

today’s tough competition scenario. The project is aimed at analyzing the performance

appraisal and it’s role in steel industry. Therefore, to start with this critical analysis it is

important to know about steel industry at it’s contribution in economy.

INTRODUCTION OF STEEL INDUSTRY

Steel is crucial to the development of any modern economy and is considered to be the

backbone of human civilisation. The level of per capita consumption of steel is treated as

an important index of the level of socioeconomic development and living standards of the

people in any country. It is a product of a large and technologically complex industry

having strong forward and backward linkages in terms of material flows and income

generation. Steel industry was in the vanguard in the liberalisation of the industrial Sector

and has made rapid strides since then. The new Greenfield plants represent the latest in
technology. Output has increased, the industry has moved up in the value chain and

exports have risen consequent to a greater integration with the global economy. The new

plants have also brought about a greater regional dispersion easing the domestic supply

position notably in the western region. At the same time, the domestic steel industry faces

new challenges. Some of these relate to the trade barriers in developed markets and

certain structural problems of the domestic industry notably due to the high cost of

Commission of new projects. The domestic demand too has not improved to significant

levels. The litmus test of the steel industry will be to surmount these difficulties and

remain globally competitive.

CONTRIBUTION OF COUNTRIES TO GLOBAL STEEL INDUSTRY

The countries like China, Japan, India and South Korea are in the top of the above in steel

production in Asian countries. China accounts for one third of total production i.e. 419m

ton, Japan accounts for 9% i.e. 118 m ton, India accounts for 53m ton and South Korea is

accounted for 49m ton, which all totally becomes more than 50% of global production.

Apart from this USA, BRAZIL, UK accounts for the major chunk of the whole growth.

Country Wise Crude Steel Production

COUNTRY CRUDE STEEL PRODUCTION

(mtpa)
China 272.5
Japan 112.7
United States 98.9
Russia 65.6
South Korea 47.5
Germany 46.4
Brazil 32.9
India 32.6
Italy 28.8

STEEL INDUSTRY IN INDIA

Steel has been the key material with which the world has reached to a developed position.

All the engineering machines, mechanical tools and most importantly building and

construction structures like bars, rods, channels, wires, angles etc are made of steel for its

feature being hard and adaptable. Earlier when the alloy of steel was not discovered, iron

was used for the said purposes but iron is usually prone to rust and is not so strong. Steel

is a highly wanted alloy over the world. All the countries need steel for the infrastructural

development and overall growth. Steel has a variety of grades i.e. above 2000 but is

mainly categorized in divisions – steel flat and steel long, depending on the shape of steel

manufactured. Steel flat includes steel products in flat, plate, sheet or strip shapes. The

plate shaped steel products are usually 10 to 200 mm and thin rolled strip products are of
1 to 10 mm in dimension. Steel flat is mostly used in construction, shipbuilding, pipes

and boiler applications. Steel long Category includes steel products in long, bar or rod

shape like reinforced rods made of sponge iron. The steel long products are required to

produce concrete, blocks, bars, tools, gears and engineering products. After

independence, successive governments placed great emphasis on the development of an

Indian steel industry. In Financial Year 1991, the six major plants, of which five were in

the public sector, produced 10 million tons. The rest of India steel production, 4.7 million

tons, came from 180 small plants, almost all of which were in the private sector. India's

Steel production more than doubled during the 1980s but still did not meet the demand in

the mid-1990s, the government was seeking private-sector investment in new steel plants.

Production was projected to increase substantially as the result of plans to set up a 1

million ton steel plant and three pig-iron plants totalling 600,000 tons capacity in West

Bengal, with Chinese technical assistance and financial investment. The commissioning

of Tata Iron & Steel Company's production unit at Jamshedpur, Bihar in 1911-12

heralded the beginning of modern steel industry in India. At the time of Independence in

1947 India's steel production was only 1.25 Mt of crude steel. Following independence

and the commencement of five year plans, the Government of India decided to set up four

integrated steel plants at Rourkela, Durgapur, Bhilai and Bokaro. The Bokaro plant

was commissioned in 1972. The most recent addition is a 3 Mt integrated steel plant with

modern technology at Visakhapatnam. Steel Authority of India (SAIL) accounts for

over 40% of India's crude steel production. SAIL comprises of nine plants, including five

integrated and four special steel plants. Of these one was nationalized and two were
acquired; several were set up in collaboration with foreign companies. SAIL also owns

mines and subsidiary companies.

MAJOR PLAYERS OF STEEL IN INDIA

PUBLIC SECTOR

1. STEEL AUTHORITY OF INDIA LIMITED (SAIL)

Steel Authority of India Limited (SAIL) is a company registered under the Indian

Companies Act, 1956 and is an enterprise of the Government of India. It has five

integrated steel plants at Bhilai (Chattisgarh), Rourkela (Orissa), Durgapur (West

Bengal), Bokaro (Jharkhand) and Burnpur (West Bengal). SAIL has three special and

alloy steel plants viz. Alloy Steels Plant at Durgapur (West Bengal), Salem Steel Plant at

Salem (Tamilnadu) and Visvesvaraya Iron & Steel Plant at Bhadravati (Karnataka). In

addition, a Ferro Alloy producing plant Maharashtra Elektrosmelt Ltd. At Chandrapur, is

a subsidiary of SAIL. SAIL has Research & Development Centre for Iron & Steel

(RDCIS), Centre for Engineering & Technology (CET), SAIL Safety Organisation (SSO)

and Management Training Institute (MTI) all located at Ranchi; Central Coal Supply

Organisation (CCSO) at Dhanbad; Raw Materials Division (RMD), Environment

Management Division (EMD) and Growth Division (GD) at Kolkata. The Central

Marketing Organisation (CMO), with its head quarters at Kolkata, coordinates the

country-wide marketing and distribution network.

2. RASHTRIYA ISPAT NIGAM LTD. (RINL)

RINL, the corporate entity of Visakhapatnmam Steel Plant (VSP) is the first shore based

integrated steel plant located at Visakhapatnam in Andhra Pradesh. The plant was
commissioned in August 1992 with a capacity to produce 3 million tonne per annum

(mtpa) of liquid steel. The plant has been built to match international standards in design

and engineering with state-of- the- art technology incorporating extensive energy saving

and pollution control measures. Right from the year of its integrated operation, VSP

established its presence both in the domestic and international markets with its superior

quality of products. The company has been awarded all the three International

standards certificates, namely, ISO 9001:2000, ISO 14001: 1996 and OHSAS 18001:

1999. RINL was accorded the prestigious ‘Mini Ratna’ status by the Ministry of Steel,

Govt. of India in the year 2006 and the company is gearing up to complete the ambitious

expansion works to increase the capacity to 6.3 mtpa by 2009. RINL has prepared a road

map to expand the plant’s capacity up to 16 mtpa in phases.

3. HINDUSTAN STEELWORKS CONSTRUCTION LTD.(HSCL)

HSCL was incorporated in June 1964 with the primary objective of creating in the Public

Sector an organization capable of undertaking complete construction of modern

integrated Steel Plants. HSCL had done the construction work of Bokaro Steel Plant,

Vizag Steel Plant and Salem Steel Plant from the inception till commissioning and was

associated with the expansion and modernisation of Bhilai Steel Plant, Durgapur Steel

Plant, IISCO (Burnpur) and also Bhadravati Steel Plant. With the tapering of construction

activities in Steel Plants, the company intensified its activities in other sectors like Power,

Coal, Oil and Gas. Besides this, HSCL diversified in Infrastructure Sectors like

Roads/Highways, Bridges, Dams, Underground Communication and Transport system

and Industrial and Township Complexes involving high degree of planning, coordination
and modern sophisticated techniques. The company has developed its expertise in the

areas of Piling, Soil investigation, Massive foundation work, High rise structures,

Structural fabrication and Erection, Refractory, Technological structures and Pipelines,

Equipment erection, Instrumentation including testing and commissioning. The

company has also specialised in carrying out Capital repairs and Rebuilding work

including hot repairs of Coke Ovens and Blast Furnaces and other allied areas of

Integrated Steel Plants.

4. MECON LTD.

MECON is one of the leading multi-disciplinary design, engineering, consultancy and

contracting organization in the field of iron & steel, chemicals, refineries &

petrochemicals, power, roads & highways, railways, water management, ports &

harbours, gas & oil, pipelines, non ferrous, mining, general engineering, environmental

engineering and other related/ diversified areas with extensive overseas experience.

MECON, an ISO: 9001- 2000 accredited company, registered with World Bank (WB),

Asian Development Bank (ADB), European Bank for Reconstruction and Development

(EBRD), African Development Bank (AFDB), and United Nations Industrial

Development Organisation (UNIDO), has wide exposure and infrastructure for carrying

out engineering, consultancy and project management services for mega projects

encompassing architecture & town planning, civil works, structural works, electric, air

conditioning & refrigeration, instrumentation, utilities, material handling & storage,

computerization etc. MECON has collaboration agreements with leading firms from the

USA, Germany, France, Italy, Russia, etc. in various fields. The authorized share capital
of the company is Rs. 10,400 lakh (previous year Rs. 4,100 lakh) against which the paid

up capital is Rs. 10,313.84 lakh (previous year Rs. 4,013.84 lakh). All the shares are held

by the Government of India.

PRIVATE SECTOR

The private sector of the Steel Industry is currently playing an important and dominant

role in production and growth of steel industry in the country. Private sector steel players

have contributed nearly 67% of total steel production of 38.08 million tonnes to the

country during the period April-December, 2007. The private sector units consist of both

major steel producers on one hand and relatively smaller and medium units such as

Sponge iron plants, Mini Blast Furnace units, Electric Arc Furnaces, Induction Furnaces,

Rerolling Mills, Cold-rolling Mills and Coating units on the other. They not only play an

important role in production of primary and secondary steel, but also contribute

substantial value addition in terms of quality, innovation and cost effective.

1. TATA STEEL LTD.

Tata Steel has an integrated steel plant, with an annual crude steel making capacity of 5

million tonnes located at Jamshedpur, Jharkhand. Tata Steel has completed the first

six months of fiscal 2007-08 with impressive increase in its hot metal production. The hot

metal production at 2.76 million tonnes is 4.6%more compared to the corresponding

period of the previous year. The crude steel production during the period was 2.43

million tonnes which is marginally lower than the production of 2.45 million tonnes

last year. The saleable steel production was at a lower level during the period April

September, 2007 (2.34 million tonnes) compared to the corresponding period of last year
(2.36 million tonnes). Tata Steel is continuing with its programme of expansion of steel

making capacity by 1.8 million tonnes to reach a rated capacity of 6.8 million

tonnes. The Project is reported to be moving ahead of schedule and is likely to be

commissioned by May 2008 against the original schedule of June 2008. The Company

has planned to take the capacity to 10 million tonnes by the fiscal year 2010. Tata Steel’s

Greenfield projects in Orissa and Chattisgarh are progressing on schedule with

placement of equipment order for Kalinganagar Project in Orissa and commencement of

the land acquisition process. Jharkhand Project is awaiting announcement of Relief &

Rehabilitation policy of the State Government.

2. ESSAR STEEL LTD. (ESL)

Essar Steel Holdings Ltd. (ESHL) is a global producer of steel with a footprint covering

India, Canada, USA, the Middle East and Asia. It is a fully integrated flat carbon steel

manufacturer—from iron ore to ready-to-market products. ESHL has a current global

capacity of 8 million tonnes per annum (MTPA). With its aggressive expansion plans in

India and other parts of Asia and North America, its capacity is likely to go up to 25

MTPA by 2012. Its products find wide acceptance in highly discerning consumer sectors,

such as automotive, white goods, construction, engineering and shipbuilding. Essar Steel

Ltd., the Indian Company of Essar Steel Holdings Limited, is the largest steel producer in

western India, with a current capacity of 4.6 MTPA at Hazira, Gujarat, and plans to

increase this to 8.5 MTPA. The Indian operations also include an 8 MTPA beneficiation

plant at Bailadilla, Chattisgarh which has world’s largest slurry pipeline of 267 km to

transport beneficiated Iron Slurry to the pellet plant, and an 8 MTPA pellet complex at
Visakhapatnam. The Essar Steel Complex at Hazira in Gujarat, India, houses the world’s

largest gas-based single location sponge iron plant, with a capacity of 4.6 MTPA. The

complex also houses the steel plant and the 1.4 MTPA cold rolling complex. The steel

complex has a complete infrastructure setup, including a captive port, lime plant and

oxygen plant. Essar Steel produces highly customized valueadded products catering to a

variety of product segments and is India’s largest exporter of flat products, selling close

to half of its production to the highly demanding US and European markets, and to the

growing markets of South East Asia and the Middle East. The company’s products

conform to quality specifications of international quality certification agencies, like ABS,

API, TUV Rhine Land and Lloyd’s Register. Essar Steel is the first Indian steel company

to receive an ISO 9001 and ISO 14001 certification for environment management

practices. Essar Steel utilizes Hot Briquetted Iron-Direct Reduced Iron (HBIDRI)

technology supplied by Midrex Technology, USA along with four 150 tonnes DC electric

arc furnaces imported from Clecim, France. The Hazira unit of Essar Steel is equipped

with 5.5 million tonnes per annum (MTPA) hot briquetted iron plant, 4.6 MTPA electric

are furnace, 4.6 MTPA continuous caster, 3.6 MTPA hot strip mill and 1.4 MTPA Cold

Rolling Mill. During the year 2007-08, Essar was awarded costs ISO/TS

16949 and OHSAS 18000 certification.

3. JINDAL STEEL & POWER LTD. (JSPL)

Jindal Steel & Power Limited is one of the fast growing major steel units in the country.

The Raigarh plant of JSPL has a present capacity of 1.37 million tonne per annum

(MTPA) sponge iron plant, 2.40 MTPA Steel Melting Shop (SMS), 1.0 MTPA plant
Mill, 2.30 sinter plant, 0.8 MTPA coke oven and a 330 Mega Watt captive power plant.

During the year 2006-07, the company produced 1.19 million tonnes of sponge iron, 0.8

million tonnes of various steel products, 0.57 million tones of hot metal and 0.21 million

tonnes of rolled products. The performance of JSPL during April-October 2007-08 was

0.68 million tonnes of sponge iron, 0.72 million tonnes of steel products

(slabs/blooms/billets/rounds), 0.68 million tones of hot metal, 0.27 million tonnes of

rolled products and 0.11 million tonnes of plates.

MARKET SHARE OF LEADING PLAYERS IN IRON AND STEEL INDUSTRY

COMPANY PRODUCTION OF MARKET SHARE


STEEL (IN PERCENTAGE
(IN MILLION TONNES) TERMS)
SAIL 13.5 32 %
TISCO 5.2 11 %
RNIL 3.5 8%
ESSAR, ISPAT, JSWL 8.4 19 %
OTHERS 14.5 30 %
TOTAL 45.1 100 %

Therefore, it can rightly be concluded that the liberalization of industrial policy and other

initiatives taken by the Government have given a definite impetus for entry, participation

and growth of both private and public sector in the steel industry.
TRENDS IN PERFORMANCE APPRAISAL SYSTEM
Performance appraisal in its traditional from known as ACR-Annual Confidential Report

is often misused than used. Performance appraisal has now been recognized as a HRD

function. In the last decade many organizations have reviewed and changed their

managerial appraisal systems.

1) There is a trend away from the composite appraisals with multiple objectives (e.g.

performance planning, development rewards and promotions)to separate systems

for different systems for different clusters of objectives.

2) There is a move away from isolated appraisal system to the business linked one .

3) There is shift away from closed confidential type to open dialogue and discussions

based system.

4) There is a movement quantitative (pseudo objective) to qualitative (interactive,

improvement and process oriented) system.

5) There is a movement away from boss assessed feedback to 360-degrees feedback

involving customers, peers, team members, subordinates etc. in addition to

supervisors.

6) There is also a trend away from elaborate systems to simple ones.

7) There is a shift from standard systems to flexible and group specific ones.

8) There is a movement from result oriented systems to process oriented system.

9) There is a movement from the assessment of individual performance to the

development of team performance.

10) There is also a movement from complacency to experimentation through continuous

research change.
Performance appraisal refers to the assessment of an employee’s actual performance,

behavior on jobs, and his or her potential for future performance. Appraisal has several

objectives but the main purposes are to assess training needs, to effect promotions, and to

give pay increases.

Appraisal of performance proceeds in a set pattern. The steps involved are –defining

appraisal objectives, establishing job expectations, designing the appraisal programme,

conducting performance interview, and using appraisal data for different HR activities.

Two important contemporary techniques of performance appraisal include 360º appraisal

and goal setting approach to appraisal also known as ‘Managing by Objectives’.

However, performance appraisal system also serves to be the backbone of any industry in

the corporate world and since the project report focuses on the role played by

performance appraisal in industrial establishment so review of research is done by also

analyzing following secondary data.

The data source: Secondary Data.

The research approach: Survey Method.

The research instrument: Journals , Books , Newspaper Articles.


JOURNAL ARTICLES

1. Title :- “A New Framework for Selection of the Best Performance Appraisal

Method”

Author :- Mostafa Jafari , Atieh Bourouni , Roozbeh Hesam Amiri.

Abstract :- Performance appraisal is one of the most important processes in human

resource management, because it has a great effect on both the financial and program

components of any organization. There is a variety of methods for the appraisal of

employees' performance. Obviously, no method can claim that it has an integrated

approach in performance appraisal. Therefore, human resource managers should select an

appraisal method which is most efficient in their organizations. In this paper, we propose

a framework for the selection of appraisal methods and compare some performance

appraisal methods in order to facilitate the selection process for organizations. The value

of this framework is that, with use of it, organisations can evaluate their performance

appraisal method with respect to the key features of it before implementing any method

as well as expending extra costs. This framework is theoretical in nature, and is build

based on a review of related literature.

2. Title:-“Function of performance appraisal in career development”

Authors :- Baldwin, Jennifer

Abstract :- The design of a performance appraisal system may be considered an

unusual topic in the field of career development. However, it is considered most relevant

in the current employment climate for graduates given the repeated emphasis on career

development at various stages of the employment process. There has been a growing
emphasis since the mid-1970s on employees' needs rather than just organizational needs,

and a recognition of the strategic value of employees being developed to their best

potential. Organizations have become increasingly aware that the effective development

of their employees' skills and knowledge has benefits for the whole organization. Career

development (or employee or professional development) is a thread that runs through

each stage of this discussion of the design of a performance appraisal system. This issue

of career development may also be observed in promotional brochures and information

sessions given by recruiters of graduates of tertiary institutions. Much is made of training

and development opportunities as organizations seek to attract the brightest and best

graduates to their graduate management trainee programs. Performance appraisal can be a

crucial factor in the setting of career goals and the perception of job satisfaction leading

to increased motivation and productivity.

3 Title:-“ Innovative human resource management and corporate performance

in the context of economic liberalization in India”

Authors :- Ashok Som

Abstract :- The Indian economy was forced to adopt a structural adjustment

programme at the beginning of 1991. The structural adjustment programme or

liberalization initiated the process of the opening up of an otherwise closed economy of

India. Liberalization created a hypercompetitive environment and to respond to this

turbulence, Indian organizations adopted innovative changes in their HRM practices.

Current research shows that HRM practices are important for enhanced corporate

performance but little has been reported on the effect of HRM practices and corporate
performance in the context of economic liberalization of India. This study tries to

understand the role of innovative HRM practices and specifically questions how HRM

practices, such as the role of HR department, recruitment, retraining and redeployment,

performance appraisal and compensation, enhance corporate performance during the

change process. A multiple-respondent survey of 69 Indian organizations was undertaken

to study the impact of innovative HRM practices on firm performance. The survey found

that the innovative recruitment and compensation practices have a positive significant

relationship with firm performance. It was observed that recruitment, the role of the HR

department and compensation practices seem to be significantly changing within the

Indian firms in the context of India’s economic liberalization. The synergy between

innovative HRM practices was not significant in enhancing corporate performance during

the liberalization process.

4 Title:-“ The Effects of Human Resource Management Practices on

Productivity: A Study of Steel Finishing Lines”

Authors :- Casey Ichniowisky , Kathryn Shaw and Giovanna Prenushi

Abstract :- This study investigate the productivity effects of innovative employment

practices using data from a sample of 36 homogeneous steel production lines owned by

17 companies. The productivity regressions demonstrate that lines using a set of

innovative work practices, which include incentive pay, teams, jlexible job

assignments, employment security, and training, achieve substantially higher levels

of productivity than do lines with the more traditional approach, which includes
narrow job de$nitions, strict work rules, and hourly pay with close supervision. Our

results are consistent with recent theoretical models which stress the importance of

complementarities among work practices.

NEWSPAPER ARTICLES

 SAIL steels spot in global league with record profit run

8 Oct 2009, 0224 hrs IST, Subhash Narayan, ET Bureau

NEW DELHI: The global economic slowdown has brought the best from state-owned

steel maker SAIL as the company has become the most profitable steel company globally

beating steel biggies such as Arcelor Mittal, Posco, Bao Steel, Nippon in the half yearly

profits.

The company has reported net profit of $ 71 million in the January-June period of 2009

bucking the trend where most global steel companies have made losses. Only Korean

steel maker has come closer to match SAIL reporting a net profit of $ 565 million in the

first half current calendar year.

“SAIL’s performance during the first half of 2009 has been best in the world steel

industry because of a series of steps that the company took in response to the economic

downturn. Not only did the company improve performance on techno-economic

parameters, it lay thrust on value added products and cost efficiency. The efforts have

been aided, by consistent growth in domestic steel demand,” SAIL chairman S K

Roongta told ET.

Being a zero debt company, SAIL has also been able to reduce its interest cost

substantially. It has also rationalised manpower reducing its workforce by 7,500 people in
2008-09 and another 6000-7000 people would reduce in 2009-10.

The performance of SAIL mirrors the improved showing given by other domestic steel

companies. Steel demand in the country has grown month-month in the current financial

year and is projected to grow by 10% for the full year. Even World Steel Association

(World steel) has forecast that while the global steel consumption this year is set to fall

by around 15% to 1,019 million tones, use of steel in India would grow by about 2%.

In terms of profit during the January-June period, POSCO is the only international

company coming closer to SAIL. ArcelorMittal has reported net loss of $1855 million

during the period while Nippon has reported a loss of $1043 million, Severstal a loss of

$944 million, US Steel loss of $831 million, Bao Steel a profit of $98 million.

Another Indian steel company, Tata Steel has emerged as the third most profitable

company during the period, reporting a profit of $458 million. The profitability is only

for its domestic operations not including the operations of Corus.

The comparison has been make using the average of dollar rates prevailing during the

first half of 2009.

“Europe and America may take another couple of years to recover fully after which we

may see a rise in demand there. Till that time only Indian and Chinese companies are

expected fare well,” said an analyst.

 Steel Import Strengthen 70% in Nov.

(Source-economic times 13th December)

India’s steel imports jumped more than 70% to 1.4 mn tonnes last month against 8 lakh

tonne in the same month a year ago. The sharp rise in imports was due to low-priced

shipments coming from China, Thailand and Ukraine into India at $450-500 per tonne,
25% cheaper than the international price, then ruling at $600-700 per tonne. The steel

ministry’s Joint Planning Committee that collects data on iron and steel on a monthly

basis shows that steel imports dipped 10.7% to 5.25 million tonnes in April-October

against 5.88 million tonnes in the corresponding period a year ago. Availability of low-

priced imports from some countries resulted in huge imports in November. This

happened when domestic steel makers were cutting production due to lower demand.

Last month, the government imposed 5% import duty on steel products to protect

domestic industry against cheap imports. But steel producers feel the move is insufficient

to bring down imports as china as withdrawn export tax on some steel products to get rid

of surplus stock. The government has also initiated investigation into dumping

From China but steel firms feel it’s a lengthy process and will take at least 8-9 months to

compel
FINDINGS AND ANALYSIS

The main objective of this study is to analyse the role of performance appraisal and

system implementation in Steel Industry. Since the research is empirical in nature that’s

why following aspects of various organization structure and design of particular industry

have been covered.

ORGANIZATION STRUCTURE AND DESIGN

Jindal brothers

Jindal Brothers is a young, dynamic organization and is going strong on the stock market.

1- The company is well aware of the dynamic environment of software, it is

operating and in order to keep it with the pace of the environment it believes in

constant up gradation of courses. Organization structure and design of the

company is such that it supports this change.

2- Jindal Brothers has a matrix kind of a structure wherein it takes the form of

combination of structures. Matrix structures are adopted became there is more

than one factor around which the structure can be built.

3- This matrix structure at Jindal Brothers improves the quality of decision-making

where interest conflicts arise and direct contacts replaces bureaucracy

4- . This increases the motivation of the managers and development of wider

involvement in strategies. Although at times the company faces high risk of

dilution of priorities became e people do not know who is responsible for what.
5- An organization is a network of authority, responsibility and relationships.

Different organization structure consists of different type of relationships.

Performance Appraisal at Jindal Brothers

While on the job, performance reviews of every employee are done every quarter. The

reviews are done with a view to helping the individual excel at his/her workplace. In case

there are any training requirements, these are noted and acted upon in the coming quarter.

Also, the goals and objectives for the employee are re-visited for

The performance appraisal mechanism is carried out at Jindal Brothers for promotional

purposes.

These are done so as to motivate the employee and improve his performance level. The

method is as follows:

a) Establishment of performance standards with the employees

b) The goals are set mutually as per measurable standards.

c) The actual performance is hence measured.

d) After measuring of the actual performance, the same is compared with the

standards set

e) The appraisal is then discussed with the employees.

f) And finally, if need arises corrective action is initiated. For this purpose the

corrective action is actually identified through brainstorming exercises initiated

by the departmental heads at all the Jindal Brothers. It is then measured as a tool

to evaluate the past performances of the employees.

Some of the methods used at Jindal Brothers are:


1. Key Performance Index

2. 360 Degree Feedback

3. Paired Comparisons

4. Behaviorally Anchored Rating Scale

1. KPI-Key Performance Index

It is based on the performance level of the employee generally classified on the basis of:

• Targets achieved

• Ratings through students’ feedback forms

• Punctuality and regularity

• Day to day performance

This is given after every module at the centers.

Thus we can observe that the appraisal system is not a biased one but based on

performance and productivity basis. All the respective heads of the employee together

with the senior persons at the center brainstorm and then give the promotion.

2. 360 Degree Feedback

This feedback system involves the participation of:

• Coworkers – 40%

• Subordinates - 20%
• Superior - 40%

Thus the feedback given by these members at Jindal Brothers is considered under a

holistic view and then the employee is given a performance appraisal. This evaluation

method involves 40% feedback from the coworkers which says that the employee should

not only maintain good rapport with the senior or junior but majorly with the coworkers

also.

3. Paired Comparisons

The evaluator compares all possible pairs of subordinates on their overall ability to do the

job. Due to the subjectivity of evaluating overall performance some managers me e a

number of different job related dimensions when comparing.

4. Behaviorally Anchored Rating Scale (BARS)

It is a sophisticated method of evaluating the employee based on the employee behavior.

It is a numerical scale that is anchored by the seniors of the organization at various

centers. This is highly confidential and the information is sent in sealed envelopes and

opened only at the time of the final evaluation. There is no further discussion regarding

this scaling, thus it is not given enough weightage.

Steel Authority of India Ltd

Basically there are two types of performance appraisal done on the basis of post of the

SAIL’s employee. They are:

1. Executive performance appraisal system

2. Non-executive performance appraisal system


Executive Performance Appraisal System :-

This system is for performance appraisal for executives of the level E-0 to E-4 . The

various steps involved are:

A) Self Appraisal Performance Review & Planning :

I. Appraisee write his view over the actual achievement for the Key performance

area / Task and Target assigned to him for the year.

II. Comments on fulfillment of KPA / Task and Target are written by the

Reporting Officer , taking account of time frame also.

III. Special Jobs other than tasks given and normal routine work are written by

appraisee.

B) Performance Review Discussion :

I. Both appraisee and reporting officer sit together.

II. Comment over Strengths and weaknesses and areas for development are written

which is undersigned by both .

III. Appraisee can help the reporting officer by giving examples which shows his

strength or weakness. He also tell what training he want to undergo .

C) Performance Assessment :

I. Rating between 1 to5 are given to the appraisee by the Reporting Officer

and Reviewing Officer individually on the basis of Performance Factors and

Potential Factors.

Performance Factors :Quantity of output


Quality of output

Cost control

Job Knowledge and Skill

Team spirit and Lateral

Coordination

Discipline

Development & Quality of assessing subordinates

Special Relevant factor

Potential Factors : Communication

Initiative

Commitment and sense of Responsibility

Problem Analysis and Decision making

Planning and Organizing

Management of Human resources

II. Different weightage are given to each factor

III. Final scores are calculated by multiplying rating and weightage .By adding

these Total Factor Score is calculated.

IV. Comments on Overall Performance And Potential are written by both

Reporting and Reviewing Officers individually.

D) Suggestions for Job Rotation and Job Enrichment

I. Both reporting and reviewing officers write their suggestions whether the

appraisee should be transferred to other department. Either a good employee is


transferred so that he can acquire knowledge of all the departments, or a worst

performing employee is transferred so as to improve his performance.

II. In some exceptional case Head of department give his comments on overall

performance & potential of the employee.

E) Final Assessment

I. Total Factor Score by both Reporting and Reviewing officers is written and

average is calculated.

II. Final Grading between O / A / B / C is given .

III. If Final Grade is C , indicate whether to promote or not to promote the appraisee.

IV. If not to promote give reasons.

V. Meeting with non-promotable appraisee.

VI.

Non Executive Performance Appraisal System

I. Rating are given by both Reporting and Reviewing officers on the basis of

performance of the appraisee depending upon factors:

Performance on the Job

Job Knowledge & skill

Multi-skill Utilization

Conduct & behavior

Punctuality & availability on job

Innovativeness

Cost & Quality Consciousness


Initiative & Capacity to assume higher

responsibility

Housekeeping & safety consciousness

II. Weightage are given to various factors .

III. Scores out of 100 are calculated by multiplying rating with weightage .

IV. O / A / B / C / C- Grades are given according to scores and attendance of the

appraisee.

V. If grade is C- , then appraisee is interviewed by the Head of Department.

Key Observation (s) at SAIL

In the present performance appraisal system of SAIL we found the following loop

holes: If the appraisee has good terms with the reviewing officer and does not have a

smooth relationship with the reporting officer, in such case the reporting officer is

sometimes forced by the reviewing officer to give better score to the appraisee.

SURVEY FINDINGS

In this section, basic data for the number companies constituting steel in industry is

presented on various attributes of performance appraisal.

Frequency and frequency percent scores were computed for each company and thus it

enlighten the following points :-

 Promotions were and known to most of the top and senior management while

middle and lower management were a bit not clear about it. This could be
attributed to the fact that senior and top management were more involved in

decision making and policy formulation than are the middle and lower

management.

 At the lower levels of the organization, performance can be quantified, and the

managers are made accountable at the higher echelons the tasks are too complex

and therefore cannot be assessed on the basis of quantified performance

 Most of the managers feel that the mechanism for potential appraisal is not

adequate.

 The industry believed that self appraisal is the best for managers and above.

 To improve interpersonal communication and behavior assessment by peers and

subordinates is essential.

 The performance of the employees is not regularly monitor and the required

feedback is provided to the subordinates from time to time. The appraisals are

conducted at fixed intervals. The industry believes in using appraisal for

rewarding and increments.

 It would not be wrong to say that interpersonal relations and personal biases (i.e.

liking and disliking) influence the appraisals in the industry.


CONCLUSIONS

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

and efficient performance appraisal system has not been accomplished to the

fullest.

2. It seems that the industry is genuinely interested in improving the efficiency and

utility of performance appraisal system to succeed in today’s dynamic

environment;

3. Systems of innovative HRM practices have large effects on production workers'

performance, while changes in individual employment practices have little or no

effect.

Outward Orientation Performance Appraisal System

The appraisal system should be more sensitive and responsive to current competitive
environment. This is possible through making the industry :

• Quality conscious in products and services to match international standards.

• Customer oriented (internally as well as externally)

• Cost effective

• Technology oriented

• Focused towards collaboration and teamwork


• People oriented

• Focused towards performance standards

• Focused towards values and culture that would help unbottle hidden talent.

In achieving the above, the PA system have a catalytic role to play.

PERIODIC PERFORMANCE REVIEW AND PLANNING:

There should be some aspect in the PA forms, which deals with the effect of Internal
Influences, organizational influences and external influences on performance of
employee to make the PA system more sensitive to changes.

 Increase awareness of company goals in order to integrate company and individual


expectations.

 Conducting training workshops for appraisers to remove biases and errors in


appraisal.

 Increasing transparency and open communication and minimizing confidentiality in


performance review discussions.

The work done towards modifying and developing performance appraisal systems, time
to time should be continued.

Integrating TQM into Performance Appraisal

• Individual rewards should be declined with the PA system. The focus should shift
to team rewards. To recognize individual excellence, the team rewards. To recognize
individual excellence, the team should recommend rewards to tone up motivation
levels in the entire team.

• Continuous feedback and transparency in every system

• Focus on customer delight, both internal and external

Linkage with Rewards


Good performers should be recognized and rewarded, whereas weak performers need to
be encouraged to become better performers. PA systems when liked with individual
rewards and promotions create more problems than they help in motivating people. They
encourage fewer employees and discourage more. They do not develop the team spirit but
rather enhance interpersonal comparisons and power politics. The focus should be shifted
from rewarding the performance of few to development of performance of many.

However there is also a need for recognition and rewarding good work. Alternative
systems of rewarding with multiple reward/recognition mechanism are needed. But these
systems should be separated from other systems (like career planning).

Role of HRD

• HRD should develop relevant competencies and work through empowering the
line managers.

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

• HRD should facilitate the development of behavioral, managerial and technical


(multi functional) competencies in line managers.

• “Role analysis” should find a place in Steel Industry. “Role directories should be
published with key functions for each role.

IMPLICATION OF THE PROJECT

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

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

effectiveness depends a great deal on how human resources in the industry are viewed

and treated. People are to be treated as resources of the industry. Unlike the other

resources, the human resources have the capability of expanding to unlimited extents

with proper investment in human capabilities.


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

should understand the nature and capabilities required to perform different functions as

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

organizational content.

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

(i) Technical capabilities

(ii) Managerial capabilities

(iii) Behavioral (human) capabilities

(iv) Conceptual capabilities

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

differ from level to level in the organizational hierarchy.


RECOMMENDATIONS

1. The economic indicators are all favorable for Growth, temporally slump is

ephemeral.

2. Indian steel industry exudes optimism , thus, more stress relieving packages

should be offered to the mentally stressed staff.

3. Investment in infrastructure is crucial to step up demand for steel , therefore, in

this respect the HR Dept should attempt to obtain the maximum agreement of

Managers in respect of needs and objectives and purpose of the systems.

4. New technologies to use indigenous natural resources would have to be developed

thorough expert person performing their roles efficiently in personnel

management.

5. The industry should try to avoid employee resistance, which is associated with

change worlds true change follows instance. This for all kinds of systems be it

Performance Appraisal.

6. Overtime should be taken care of at time of performance appraisal, which would

motivate the employees to perform better for longer hours.

7. Performance appraisal should be after at proper span of time .


LIMITATIONS

The project report carries with it few limitations, on which the accuracy of the text

written will depend. This study is cross-sectional and data were collected over

two time periods but are still perceptive. Cross-sectional data might create problems with

respect to causality.

 The first and foremost limitation is regarding the sources of information. The

information contained has been obtained from sources believed to be reliable and

in good faith, but which may not be verified independently.

 Using several statistical tools derives the estimates. Hence the findings obviously

carry all the limitations of the statistical tools used.

 Same sets of data from different sources are different. Since not all the data are

available from a single source, an attempt has been made to standardize the data

wherever required, which is essential to maintain uniformity through out the

project.
 Many of the US studies have used multiple criteria for performance, although it is

not sure how well those would transfer to the Asian context. Not using multiple

performance measures may create further limitation in the study.

 The data set is restricted to observations on one very specific type of

manufacturing production process. This narrow focus eliminates many sources of

heterogeneity that confound productivity comparisons in more aggregate data and

in more heterogeneous samples.

Finally, this study did not find evidence of the configuration argument and did not test the

contingency argument, but could find evidence in the universalistic or the best practice

perspective. One way of explaining this might be that due to the turbulent and hyper-

competitive environment, firms are primarily supportive of innovative, adaptive nature of

high-involvement work systems. In other words, there may be some restriction in range

with regard to organizational environments that somehow undercut this study’s ability to

provide a full test of the contingency perspective.


BOOK

1. Kothari,C.R.,Methods and Techniques,New Delhi,New Age International Pvt,

Ltd., 2005

WEBSITES

1. www.google.com

2. www.scribd.com

3. www.wikipedia.org

4. www.sailindia.co.in

5. www.performance-appraisal.com/intro.html

JOURNALS

1. A New Framework for Selection of the Best Performance Appraisal Method

2. Function of performance appraisal in career development

3. Innovative human resource management and corporate performance in the context of

economic liberalization in India.

4. The Effects of Human Resource Management Practices on Productivity: A Study of

Steel Finishing Lines


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