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Performance Appraisal in HBL

2011
Mariyam Najeeb

A Case Study on Performance Appraisal in Habib Bank Limited


Mariyam Najeeb

Department of Management Sciences, the Islamia University of Bahawalpur, Pakistan

Email: mariyam.khan120@live.com

Abstract
The aim of this research paper is to determine the factors that affect the performance appraisal
system in Habib Bank Limited. To achieve this, an exploratory research was conducted. Primary
data was collected through filling out the questionnaires from the employees of HBL and also by
face-to-face interviews from the executives. The data hence collected helped in identifying the
factors that are critical and inhibit the performance appraisal system in Habib Bank Limited.
Findings concluded that transparent appraisal system is the need of the organization and the
results of the appraisal affect the performance of any employee heavily. Intangible factors such
as employee motivation, loyalty, and inter-personal relations of employees plus level of
commitment are immensely influenced. It is held that performance appraisal is "an important
measure of devolvement as it helps to evaluate whether things are working according to plans or
not, and what changes will be required in the future." (Budhwar and Sparrow, 2002)
This research paper will be helpful in knowing deeply about the performance appraisal system in
Habib Bank Limited and the pros and cons of this system and also how this system affects the
intrinsic and extrinsic factors related to employees. With respect to this research paper it would
be easy to address the problematic factors prevailing in Habib Bank Limited and to improve
them by taking proper measures.

1. Introduction
Humans are the building blocks of any organization. Out of three general resources of every
organization i.e. physical, financial and human, the third one is the most critical and important.
These are the human who help the organization in achieving its goals or can demolish the hope

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of any organization to progress. As Henry Ford said that, take my business, burn up my building,
but give me my people and I'll build the business again. Hence that’s why humans are considered
as the fundamental part of an organization.
The firm can develop when its employees are performing well accordingly because the success
of any organization depends upon the performance of the employees. Those businesses are likely
to flourish who pay extra attention in improving the performance of the employees. Hence for
this purpose proper evaluation system should be present which identifies how the employees are
working according to the set standards and if any employee lacking that level what measures
should be taken to improve their performance.
The performance of any employee is judged by performance appraisal. The aim of performance
appraisal is to give feedback to the employees about their performance on work and to identify
those employees who need training. With performance appraisal, an employee’s performance
can be improved through counseling, coaching and development.
The current research helps in creating awareness about the basic human resource practice,
performance appraisal. As employees of any organizations are motivated to work efficiently if
they know their management is observing their work transparently and without any biasness. In
this case they are urged to work to achieve the objectives set by organization. Under performance
appraisal the job performance of the employees is evaluated on the basis of their past
performance in terms of quantity, quality, cost and time. Performance appraisal helps the
management to know which employees deserve the rewards, salary increase, job promotion and
bonuses etc. Performance appraisal also creates the communication between employees and
management.
A private bank Habib Bank Limited has been selected for this research in order to have in-depth
investigation of different issues and their effect on performance appraisal. This particular bank
was chosen because Habib Bank Limited is the largest bank in Pakistan and offers the basic
range of banking services to its customers. The bank has a system of above 1450 branches in
Pakistan and 55 branches worldwide. The domestic share of HBL is over 40% and it dominates
the commercial banking sector with loans to small industries, traders and farmers. Muhammad
Ali Jinnah established this bank in 1941 in Mumbai (then Bombay) when he realized the need
and importance of a financial intermediation during the campaign of developing a new homeland
for Muslims in India. In 1947 HBL’s headquarters was moved to Karachi.
The bank was owned and managed by the Habib family until Pakistan’s government nationalized
it on 1 January, 1974. In 2010 HBL was given set of awards named as; Best Bank – Pakistan,
Best Trade Finance Provider – Pakistan and Best Foreign Exchange Provider – Pakistan.
It is the slogan of the bank that they grab the best people from the pool of applicants. Therefore
it is the basic reason why the bank is on the top position in the country. HBL cannot be among
the list of the top banks if its employees are not performing according to the set standards. It is
necessary to evaluate the performance of the employees of HBL. For this reason there also exists

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2011
Mariyam Najeeb

a performance appraisal system in HBL which helps the management to know the difference
between efficient and non-efficient employees.
As Cullen Hightower quoted that, when performances go beyond ambition the overlap is known
as success. Habib Bank Limited is investing in its employees by identifying their training needs
and providing them many learning facilities to improve their performance. For the very purpose,
this research has elaborated various factors that can affect or are affected through the
performance appraisal in Habib Bank Limited. Those factors are influential in performance
evaluation and betterment. This research will provide the information to the lay man about the
performance appraisal system prevailing in Habib Bank Limited.

2. Objectives
Objectives of the current research are as follows:
• To point out various issues of performance appraisal in Habib Bank Limited.
• To explain the problems faced by the employees of the bank under the identified issues.
• To suggest the recommendations with their implications to solve the respective issues
While conducting the research these points were kept in mind to get the reliable and valid results.

3. Literature Review
Performance appraisal is an effective tool for an organization to move forward and progress. It is
an opportunity for a two-sided communication hence employees are inspired and motivated to
improve their performance. (Martin, et al 2002)
Douglass (2011) says that performance appraisal is a method through which you can acquire and
achieve the information which is essential for an employee to improve its performance and
accomplishments. Hence for an organization who wants to improve the performance of their
employees, performance appraisal is an effective tool with the help of which information
regarding their corresponding job will be given.
Newstrom (2011) revealed that performance appraisal is actually a process of evaluating the
performance of employees. In this process information is shared with the employees and the
ways are identified through which they can improve their performance.
Performance appraisal is done on the basis of evaluating the current and past job performance of
an employee. The results thus obtained are not reliant upon the personal characteristics of an
employee but on his/her job performance. There is an open communication during the appraisal
that’s helps in making effective relationships among the employees and the managers.
History of Performance appraisal can be traced in the era of Taylor and motion study in the early
20th century. But proper tracks of performance appraisal can be found out from the 2nd World
War which may not be more than 60 years from now (Anchor North, 2011). The proper
performance appraisal system was recognized in 1950s in United States and it is used in many
organizations since then for the performance evaluation.

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According to Dulewicz (1989), it is the ability of the human being to make verdicts about
workings of other people and also about oneself. Hence there is a need of the general scheme
through which the performance of any person can be evaluated with justified calculations or
judgments. Similarly, Beer (1981) pointed out that through performance appraisal system
employees get to know about themselves, that how they are performing and also what their
management values.
Performance Appraisal can be done to evaluate the individual as well as group performance.
There are certain different methods adopted that assess the performance by the individual or
group. Those methods which are commonly user are:
• Behaviorally Anchored Rating Scales (BARS)
• Forced Choice
• Management by Objectives
• 360-Degree Appraisal
Behaviorally Anchored Rating Scale (BARS) is a method to asses the performance with the help
of scales on which the job performance is rated. BARS is known as the better performance
appraisal method. It combines the words with numbers to give the valid evaluation of the
performance.
In forced choice method, respondents have to choose the best or most preferred from two or
more given options.
While in Management by Objectives method, objectives are set to tell the management and
employees what they have to achieve within the organization. This method is helpful as in it the
performance of the employees is compared with the set goals and objectives of the organization.
As the employees are also involved in assigning the objectives they are more like to perform
well.
360-Degree feedback is done to gain the response about the performance of an employee from
all around the organization. Peers, subordinates and supervisors also give the feedback about the
job performance.
The above given methods were designed to effectively assess the performance of an employee.
Many organizations do performance appraisal taking it as their obligation, while others do not
emphasize on the performance appraisal and take it just as the document in the file. Performance
appraisal comes with certain pros and cons.
Advantages of conducting performance appraisals:
• Source of information about the job performance periodically.
• Managers get a chance to talk about the performance with an employee.
• Provide an opportunity to the employees to obtain feedback about their performance and
ways to improve in case of any imperfections.
• Helpful to motivate employees with rewards and compensation.
• Employees plan about the upcoming year to improve the loopholes in their performance.

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While the disadvantages of the performance appraisal system are as follows:


• Consumes a lot time of the managers to evaluate the performance of many employees.
• If performance is not assessed properly, it results in absolute misuse of time.
• All the methods of performance appraisal are based on the human judgment hence the
error probability is much higher.
• It is done periodically mostly once a year. Hence employees get salary increases or other
benefits after a year irrespective of their performance.
It is said that performance appraisal helps the employees to improve his/her skills as it provides
the knowledge and information to them about their performance. In this case, Nurse (2005, as
cited in Ishaq et al, 2009) reveals that performance assists in the training and development of an
employee after seeking the knowledge of their performance.
Similarly Ishaq et al (2009) stressed that efficiency of performance appraisal system results in
assured outcomes. These outcomes are an employees’ knowledge about himself and his
organizations’ goals that are to be achieved. Likewise Teratanavat et al (2006) also stressed that
the important outcomes of the performance appraisal are less employee anxiety, assessment of
potential performance and improvement to achieve future goals. These outcomes or results play
an important role in the progress of an organization. Organizations are likely to develop when
their employees are more dedicated towards their work and that will be possible only if they are
satisfied and working according to the standards set.
Different factors that are done under the name of performance appraisal put a bad impact on the
employee and should be avoided by the organization, if they want to create the sense of equity
and satisfaction within their employees are (Deluca, 1993):
• Freedom is given to those employees who participate more and are among favorites of
the managers.
• Non-efficient employees are penalized with performance appraisal.
• Rewards and reimbursements are not provided to low performing employees.
• Employees are uncertain about the outcomes of the performance appraisal and what will
happen after the appraisal.
• Politics prevailing in the organization that highly affect the performance of an employee.
• Some organizations use those appraisal methods that are not much helpful in evaluating
the job performance.
• The goal of an appraisal is more for short term rather than long term. Hence the goals set
are not strategic.
• Managers feel unenthusiastic to give response to the employees about their corresponding
performance.
All of these factors discourage the employees individually or even in a group.
So we can say performance appraisal should be done in such a way that it enables the
employees to learn. As it is quoted that employees can expand their expertise but capabilities

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can only be learned. And if an employee is lacking the ability that is required it clearly shows
the deficiency of learning ability or in other case just one individual can have the propensity
to stand out in different areas. In this case rating scale method will be appropriate to assess
the performance of an employee.
Performance appraisal or evaluation is one of the most significant and critical issue that is to
be handled efficiently and effectively by the managers in order to motivate the employees.
For this very purpose result-deducing methods should be used to evaluate the performance
that’s appropriate to the current situation in the organization. Hence like this the objectives or
goals of a company can be achieved.
Similarly Malik et al (2011), describes that performance appraisal affects the performance of
an employee. Other than performance appraisal, employee motivation, job satisfaction and
training and development are some other factors that also likely to influence the performance
of the employee of any organization. But those two factors that are extremely responsible for
shaping the performance are that structure of an organization and employee motivation.
Employee motivation can be increased by satisfying the unmet or unfulfilled needs of the
employee. As said by Kreitner (1995), this process of employee motivation is psychological
and mental and has direct effect on the performance and behavior of any person.
Hence performance appraisal is a backbone of an organization. It can help to motivate the
employees to get the objectives and can even produce negative results if proper method of
valuation is not utilized.

4. Research Methodology
To explore the factors and issues influencing the performance appraisal in Habib bank Limited,
exploratory research was conducted. For this primary data was collected through in-depth
interviews and questionnaires from the managers and employees of the bank respectively.
A comprehensive questionnaire containing 15 questions or statements was distributed to the 25
employees of the bank to know their valuable opinions. The statements were designed in such a
way that they give a detailed insight about the issues of performance appraisal prevailing in the
bank. Then the response of these questionnaires was analyzed in terms of percentage by using
Microsoft Excel. The results after analyzing the questionnaires have been discussed in the later
portion to know which factor or issue is more connected with performance appraisal in Habib
Bank Limited.
To increase the reliability of this current research, in-depth interviews were conducted. Questions
regarding different matters related to performance appraisal were asked from the top managers of
the bank and to know what they think about the factors linked with this Human Resource
practice.

5. Findings and Discussions

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The survey in order to collect the data was conducted in two branches of Habib Bank Limited
that is Farid Gate Branch and Islamia University Branch, Bahawalpur. Questionnaires were
given to the employees while interview was conducted from the managers of the branches.
Personal information of the employees was kept optional and many of them were hesitant in
disclosing their information.
On exploring motivation of employees as an issue related to the performance appraisal in HBL,
results show that employees are motivated if there is transparent and bias-free appraisal. Almost
all the employees were in favor of this as they believed if management is evaluating their
performance according to the job performance and awarding them with bonuses or incentives
respective to that, employees will definitely be motivated to work harder than before.
On the response to the statement that “the performance appraisal increases employee
motivation”, 56% employees agreed strongly while 44% of the employees agreed with this
statement. Hence proved that transparent and proper performance appraisal does motivate the
employees to work to achieve the objectives of the organization.

60%
50% StronglyAgree
40% Agree
30% Neutral

20% Disagree

10% StronglyDisagree

0%

Figure1. Response on Motivation

Another issue that was found during the research is “increase in performance”. An efficient
performance appraisal increases the performance of an employee. As we all know that
performance appraisal is done to evaluate the job performance and if it is done according to the
set rules keeping in mind the hard work done by the worker, the employees will perform their job
tasks happily and efficiently.

On the response to the statement “performance appraisal helps to win co-operation and
teamwork”, results show that 8% of the respondents agreed with this statement strongly, 40%
simply agreed while 8% respondents were neutral, they neither agreed nor disagreed. Remaining
44% disagreed with the above given statement strongly. This response of the employees show
that they do not believe that with performance appraisal teamwork and co-operation between the
employees is appreciated.

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50%

40% StronglyAgree
Agree
30%
Neutral
20%
Disagree
10% StronglyDisagree
0%

Figure2. Response on co-operation and teamwork

Likewise performance of an employee, loyalty is also affected by the performance appraisal. If


an employee is appraised according to the efforts he/she has put up in the job he/she will likely to
stay with the organization and hence will become loyal to the organization. Employees HBL are
completely in favor of this. Habib Bank Limited can also flourish when the turnover of the
employees is low. The credibility of the bank increases as employees prefer them over other
banks in the marketplace.
On response to the statement, “performance appraisal can help in reducing grievances among
employees and organization”, 28% of the employees agreed with the statement, 48% stayed
neutral while 24% of the employees disagreed with the statement strongly. In their opinion in
HBL, performance appraisal does not help to reduce the complaints or any other related problem
among employees and management. This shows that there is lack of communication and proper
feedback between management and employees.
50%

40% StronglyAgree
Agree
30%
Neutral
20% Disagree

10% StronglyDisagree

0%

Figure3. Response on Grievances


While inquiring about the issues affecting the performance appraisal in HBL, it was found out
that it helps the management to locate those employees who need training to enhance their
abilities and capabilities in performing a specific job task. If the appraisal of any employees is
not up to the mark then the management will take measures to improve his/her skills so that that
employee can be beneficial for the bank by producing fruitful results. Those employees are also
given training who have potential to perform some task that need advanced skills or knowledge,
hence such employees are fruitful for HBL in the long run.

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When the employees were asked in a questionnaire the statement, “promotions in HBL are
purely based on performance appraisal” they result which came out is illustrated by the figure
below.
50%

40% StronglyAgree

30% Agree
Neutral
20%
Disagree
10% StronglyDisagree

0%

Figure4. Response on promotions in HBL

The graph above shows that the majority of the employees agreed with the statement given
above. As according to the employees promotions and other benefits are given to the employees
with reference to their performance.
Another factor that influences performance appraisal in Habib Bank Limited is potential for
promotions. Performance appraisal helps the management to distinguish those employees who
deserve to be awarded with extra responsibilities, tasks and better remuneration. Due to
performance appraisal system, the performance of the employees is evaluated and consistent
employees are being awarded.
In a questionnaire there was a statement, “transfer, demotion, suspension and dismissal are
based on performance appraisal”. The response of this statement is as follows:
40%
StronglyAgree
30%
Agree
20% Neutral

10% Disagree
StronglyDisagree
0%

Figure5. Response on transfer, demotion, suspension and dismissal

As it is obvious from the figure that an equal percentage of employees that is 32%, agreed and
also disagreed with the statement given above. In view of the employees of HBL demotion,
transfer, dismissal and suspension is occasionally dependent on the performance appraisal of the
employees.
With the help of performance appraisal, the effectiveness of the selection process can be
evaluated. As for those employees who are working consistently to achieve the organization’s

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goals, it means that they have been selected for the post appropriate for them hence depicts the
effectiveness of the selection process. Results from the performance appraisal also reveal that
whether the employee was selected on the basis of his/her competencies and abilities or whether
there was a bias decision to select the particular employee for the particular post.
On response to the statement, “performance appraisal helps the management to identify strength
and weakness of the employees”, 28% employees agreed with the statement strongly, 40%
simply agreed and 8% of the employees remained neutral. Only 24% employees of HBL were
against this statement. The particular response is depicted in a figure as follows:
40%
35%
30% StronglyAgree
25% Agree
20% Neutral
15% Disagree
10% StronglyDisagree
5%
0%

Figure6. Response on strength and weakness of employees

Employees of HBL believe that with the help of performance appraisal, productivity and quality
of work of employees is affected. If the employees are satisfied with the performance appraisal
system existing in the organization they will work efficiently and consistently to complete the
job task. But if the employees have any ambiguity about the transparency of the system they will
not perform accordingly.
Employees were asked that what they think whether the desired target of HBL is achieved
through the performance appraisal or not. 80% of the employees were in a favor that
performance appraisal helps in achieving the desired targets of the bank while remaining 20%
negate this statement. The response to this statement is illustrated as follows:

60%
50% StronglyAgree
40% Agree
30% Neutral
20% Disagree
10% StronglyDisagree
0%

Figure7. Response on Desired target of HBL

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Performance appraisal in Habib Bank Limited also helps in controlling the absenteeism of the
employees. As employees are motivated to work and they likely to stay at the workplace more
than ever so they avoid to leave any working day.
Employees of HBL on the response to the statement “performance appraisal helps in improving
personal skills” believed that this practice does help in improving the competencies and abilities
of the employees. Hence the response is depicted by the help of graph.
60%
50% StronglyAgree
40% Agree
30% Neutral
20% Disagree

10% StronglyDisagree

0%

Figure8. Response on improving personal skills

All of the above given factors were to be found during the research done in Habib Bank Limited
to know about issues that exist with the performance appraisal.

6. Suggestions and Recommendations


On the basis of the research conducted following suggestions are given to the bank management:
1. During the research it was found out that few of the employees were not satisfied with the
existing performance appraisal system of the bank. This shows that they have a doubt on
the transparency and validity of the evaluation done. To avoid such issues management
should try to conduct transparent and bias-free performance appraisal which evaluates the
employee according to his/her job performance.
2. Sometimes management is unable to assess the performance of the employee according
and enhance the outcome is not as expected by the employee that’s why they get de-
motivated and do not perform their job task efficiently.
3. There is a need for a separate committee in Habib Bank Limited to review the
performance appraisal results. This will help to satisfy the employees by ensuring them
that the results will not be influenced by anyone and will be accurate. This act motivates
the employees and gains their trust on the bank.
4. Management of Habib Bank Limited should be very specific in awarding the promotions,
incentives and bonuses etc on the basis of the job performance of the employee. This
shows the clearness of the system.

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5. As performance appraisal helps in creating communication between management and


employees so managers should be keen to reduce any grievances between them. During
the research it was noticed that there was low contact among the employees and the
managers which creates miscommunications and other related conflicts.
6. In order to increase the performance capabilities of the employees, management of the
bank is advised to give them training to perform the task that require technical and
advanced skills. In this sense there will be increase in the performance of the employees
and other employees will also be motivated to gain the advanced knowledge.

7. Conclusion
The primary goal of this research was to explore the issues and factors that influence the
performance appraisal in Habib bank Limited and how they affect the performance of any
employee after and before the evaluation of his/her job performance.
Results of the study suggest that with clear and transparent performance appraisal system in
Habib Bank Limited, employees can be motivated to perform well. And if they are rewarded
against their performance the employees will likely to stay with the bank and their level of
loyalty will increase as they will take the bank as the best evaluator.
It is the basic obligation of an organization to keep its employees happy and satisfied with the
job and work environment for this purpose performance appraisal is done to create the bridge
between the management and the employees.
Better performance appraisal in Habib Bank Limited can do wonders as their employees will be
satisfied and pleased with the organization and the job.

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