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Effectiveness of Performance Appraisal System

ACKNOWLEDGEMENT
This project on Effectiveness of Performance Appraisal System has given me an organisational exposure. It has been an enlightening experience to me. I could learn the depth of Performance Appraisal practically. I would like to thank our Professor D. I. Cabral for his encouragement, guidance, and constant motivation which served as a driving force in the successful completion of the project. In Particular, I am thankful to Mr. Hemant Sahasrabuddhe (Senior Executive HR & IR), Mr. Mandar Mohan Mane (Deputy Manager HR & IR) and the employees of Godrej & Boyce Mfg. Co. Ltd., (respondents) who openly discussed their views and concerns, which helped me in shaping up the project to the best of my abilities.

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Effectiveness of Performance Appraisal System

SYNOPSIS
Performance appraisal is the process of obtaining, analyzing and recording information about the relative worth of an employee. A performance appraisal is a part of guiding and managing career development. Performance appraisal is an analysis of an employee's recent successes and failures, personal strengths and weaknesses, and suitability for promotion or further training. It is also the judgement of an employee's performance in a job based on considerations other than productivity alone. A well laid out performance appraisal system will increase the motivation of the employees in the organisation. I had designed a questionnaire that contained the questions that were asked to the Senior HR Executive of Godrej & Boyce. Also, the Questionnaire for ten employees was formed so as to assess their perception, behavior in the Companys established performance appraisal system and its effectiveness. This helped me to analyse the factors that affect the working of the employees. Godrej & Boyce is following mainly Graphic Rating Scale and Management by objectives as a performance evaluation method to assess the performance of employees. The performance evaluation is done on quarterly basis. The employees feel that their performance is dependent on the performance incentives they get. Organisations appraisal system is found by the employees as fair and unbiased. Employees have faith in Godrejs appraisal system.

Godrej & Boyce can adopt 360 degree of appraisal system so as to obtain unbiased ratings from different parties with which an employee deals while doing the job work. Company can announce bonuses for performers in the organisation. Non monetary benefits can help in a big way to increase the motivation of the employees.

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COMPANY PROFILE
Established in 1897, the Godrej group has grown in India from the days of the charkha to nights at the call centers. Godrej founder, Ardeshir Godrej, lawyer-turned-locksmith, was a persistent inventor and a strong visionary who could see the spark in the future. His inventions, manufactured by his brother Pirojsha Godrej, were the foundation of todays Godrej empire. One of Indias most trusted brand, Godrej enjoys the patronage and trust of over 470 million Indians every single day. With 7 major companies with interests in real estate, FMCG, industrial engineering, appliances, furniture, security and agri care to name a few our turnover crosses 2.6 billion dollars. You may think of Godrej as such an integral part of India like the bhangara or the kurta that it may be surprising to know that 20% of our business is done overseas. Godrejs presence in more than 60 countries ensures that our customers are at home with Godrej no matter where they go. With brands one can believe in, service excellence one can count on and the promise of brighter living for every customer, Godrej knows what makes India tick today. Godrej & Boyce Mfg. Co. Ltd., the holding company of the Godrej Group, started its journey with the manufacture of high quality locks in 1897. Today, they have 15 diverse business divisions offering consumer, office, and industrial products and services of the highest quality to every corner of India and across the globe. Divisions: Appliances AV Solutions (Prima) Construction Electricals & Electronics Furniture (Interio) Lawkim Motors Locks Material Handling Precision Engineering Precision Systems
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Process Equipment Security Solutions Storage Solutions Tooling Vending (Prima)

Godrej values integrity, trust, service and respect for individuals and for the environment. They pride themselves for being one of Indias most respected corporate houses known for their philanthropy and initiation of labour reforms besides being recognized for their fair, transparent and ethical dealings. Their people are their assets who are groomed to deliver their best. The Godrej Group touches the lives of 400 million Indians who use at least one of our products every single day. Their commitment to quality, attention to detail and customer centricity has helped them earn the trust of generations of Indians.

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Effectiveness of Performance Appraisal System

OBJECTIVE OF THE PROJECT


The objective of the project is to understand the concept of Performance Appraisal and its effectiveness with respect to the employees. I could evaluate the factors that affect the Performance appraisal and its implications on the employees with the help of the questionnaire designed. This is an interesting topic as the performance appraisal process followed in the Company and their rewarding policies will affect employees attitude towards working in the organization. I wanted to study the effectiveness of performance appraisal system followed in Godrej and Boyce Mfg. Co. Ltd. Study was done to understand as to what type of performance appraisal system is used by Godrej to evaluate the performance of employees. The study tests the effectiveness of a performance appraisal system in an organisation i.e. how effective the performance appraisal system is towards giving the feedback to the employees about their performance in the organisation and rewards for their performance.

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METHODOLOGY
I have selected Questionnaire method in order to evaluate and understand the effectiveness of performance appraisal. For filling up the questionnaire, Godrej & Boyce Mfg. Company was selected. I had prepared two questionnaires. First Questionnaire was prepared to ask senior executive HR of Godrej & Boyce to gain insights into the basic performance appraisal process followed in Godrej & Boyce. This Questionnaire consisted of 8 questions - open ended and closed ended questions. Second Questionnaire was prepared for the employees of Godrej & Boyce to know their perceptions, understanding and behaviour relating to the effectiveness of Performance Appraisal. It consists of 12 questions which are designed in such a way that it would touch only the important nook and corners of the concept of Performance Appraisal. They are basically multiple choice questions that have objective answers or answers that allow one to select from a range of options i.e. Strongly disagree, disagree, neither agree nor disagree, agree and strongly agree. This questionnaire was filled by the top, middle and the lower level managers. Only these employees were selected so as to evaluate the factors depending upon the hierarchy of the organization. The questions prepared are in association with the current job. It includes questions that are related to the current performance appraisal system followed in the organization, the rewards they get, the objectivity with which the appraisal is done, their feelings and behaviour about the same etc. Participants who were given questionnaires responded back to me very quickly, except few who were a bit busy in the meeting. No personal identifiers were used on the questionnaire so as to keep the identity of the participant a secret and allow them to answer the questions honestly.

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Effectiveness of Performance Appraisal System

STUDY MADE
Questionnaire method is selected for the project entitled Effectiveness of Performance Appraisal. Two questionnaires were prepared for studying the topic. First questionnaire enlisted the details on the basic performance appraisal followed in Godrej & Boyce. Second questionnaire had simple 12 objective questions that were included to understand the various factors of performance appraisal having important effect on the feelings, behavior and motivation of the employees. These questions were asked to fill by the top, middle and lower level managers. The data has been tabulated in tabular form from the response received from the employees on the questionnaires. According to the findings analysis is made. This is supported by pie charts to understand it in a better way. Also recommendations have been given to the Company on the topic.

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DATA TABULATION
Sr. No. 01 Questions I understand how my performance is evaluated. The performance incentives satisfy my personal goals and needs. I feel good about my performance appraisal. I have faith in Organizations performance appraisal system. I feel very bad when I dont receive the expected Performance Incentive. Expectations are communicated to me. clearly 1 7 2 Strongly Disagree Neither Agree nor Disagree 1 Strongly Agree 1

Disagree

Agree

02

03

04

05

06

07

In my organization, performance appraisals are unfair and biased. I actually enjoy performing the daily activities that make up my job. Performance incentive affects my performance in future. The Performance Appraisal system is effective in promoting quality work. My Supervisor is honest and fair in my performance review. The evaluation process should be more often than once a year. 1

08

09

10

11

1 3

7 6

12

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Effectiveness of Performance Appraisal System

FINDINGS AND ANALYSIS


Method of Performance Appraisal The performance appraisal method followed till now in Godrej & Boyce to assess the performance of the employees is Graphic Rating Scale and Management by Objectives. This means the performance appraisal form consists of few questions which have options like Excellent, Good, average, below average and unsatisfactory. This form has many statements formed to assess the employee on parameters like: quantity of work, quality of work done, job knowledge, dependability, co-operation, capability, etc. Company is also in the process to implement 360 degrees as performance evaluation method from the next year across the Company.

Procedure of Performance Appraisal system


Key Result Areas Objectives Key Performance Areas
Action plan Resource Planning Identifying constraints

Plan

Results

Departmental performance Individual performance

Individual performance appraisal Appraisal

As Management by objectives is followed to an extent in the organization which means that objectives set by the top management of the organization annually are communicated to the department managers and they are in turn communicated to each group and the individuals in the
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group about the Key Result Areas (KRAs) and Key performance Areas (KPAs) that are set. The plan is formulated by the divisional heads on the lines of overall objectives set by the top management of the organisation. It is done in terms of formulation of the action plan, identifying the resources required to achieve the desired objectives, the constraints and hindrances that may be faced by the divisions to achieve the objectives. Then the results of the Department and individual are assessed. The results are assessed on the basis of performance of each and every employee of Godrej & Boyce against the set Key Result Areas. Performance is assessed on the basis of online form which is filled by the employees of the organization. They quote the facts and figures achieved by them during the year and rate themselves on various statements using graphic rating scale method. Then the superiors of the organization review the performance of the employees against their own rating and have a discussion with them on where their strengths lie and where they can improve or focus to increase the efficiency. Then superiors rate the individuals performance based on it. After this, divisional heads in consultation with Corporate Human Resource team allocate the incentives to the employees based on the performance of the employees and the Key Result areas set for each individual. One of the following performance ratings is given to each employee:
Below expectation Could have done better Meets expectation Surpasses expectation

If employee gets surpasses expectation then it is reviewed by third party as in Corporate Human Resource Head also.

Involvement of human Resource department in performance rating Divisional HR Department Heads sit with Divisional Heads, top management and allocate the incentives to each and every employee. Normally rerating is not done by the Corporate Human Resource on the performance ratings received by each and every individual.

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When is it done? Performance Appraisal is done on quarterly basis for each and every employee. They are assessed on the basis of the performance and suggested ways to improve after every quarter ends. Incentives are the only monetary benefit given to the performers in Godrej & Boyce. No bonus is given to them. These incentives are given annually after the annual performance review. Communication of KRAs to the employees The Key Result Areas (KRAs) and Key Performance Areas (KPAs) are communicated to each and every individual to help him or her understand the result areas and where one needs to focus as per the set objectives.

Rewards to the performers The performers are those who get rating from superior as meets expectation or surpass expectation. These performers are rewarded in monetary terms through the allocation of incentives. The rewards are given to the employees who have performed keeping in mind what will satisfy or motivate them to work even harder.

Feedback about the appraisal to the employees The employees do get feedback from the superior on the rating they have given to their subordinates. This shows there is transparency in the performance appraisal system adopted by Godrej & Boyce. If an employee has the problem with the superiors rating then he may approach superiors superior in Godrej & Boyce. Also feedback on the areas to improve is given to all the employees who are required to perform the work as per expected. The training needs are also identified for specific employees and they are trained in the areas where they can increase the productivity.

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Self understanding of Performance Appraisal (PA) system

Understanding of PA system
10% 0% Agree Neither agree nor disagree 90% Disagree

90% of the employees agree from the survey conducted that they understand the way they are rated and the performance appraisal system followed by Godrej & Boyce. This shows that it is easier to understand the performance appraisal process of the Company and the employees are aware about it.

Performance Incentives as a motivator

Motivation
10% 10% Agree Neither agree nor disagree 80% Disagree

80% of the employees agree that performance incentives act as a motivator to satisfy their personal goals and needs. Also 80% of the respondents feel good about the performance appraisal system followed in the Company. 80% of the respondents also have faith in Organisations performance appraisal system. Above findings show that Company takes care of employees needs by giving them proper incentives. Company also has a reliable and structured performance appraisal system which employees can rely on.

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Behaviour of employees based on performance incentives

Behaviour
10% 10% Agree 80% Neither agree nor disagree Disagree

80% of the employees agreed that they felt bad when they didnt receive the expected performance incentive. Also, 80% agree that performance incentive affects their performance in future. This shows that employees behavior is decided by the amount of incentives they receive. They get motivated to work based on the incentives they get.

Communication of Key Result Areas (KRAs)

Communication of KRA's
10% 0% Agree Neither agree nor disagree 90% Disagree

90% agree that Key Result Areas are communicated to them well in advance. This shows that they are told what is expected out of their work and where they need to focus in work to meet the expectations. As Godrej & Boyce is following Management by Objectives appraisal method, it proves the point.

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Objectivity followed in Performance Appraisal

Unfairness and biased ratings


20% 10% 70% Agree Neither agree nor disagree Disagree

70% of the employees agree that the performance appraisals are unfair and unbiased. This clearly shows that Company has a transparent and fair system in place which leads to unbiased ratings from superiors. Also 90% agree that their superiors are honest and fair in their performance review. This again confirms that they have clear laid down system as to how to rate the employees based on their performance.

Employees interest towards the work they do

Interest in work
10% 10% Agree 80% Neither agree nor disagree Disagree

80% of the employees surveyed agree that they enjoy performing the daily activities that make up their job. This shows that Godrej & Boyce identifies rightly where each employee would perform well based on the job available and the employees interests. This can be known from previous performance appraisals done by the Company and based on the performance of an individual in a particular job.

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Effectiveness of Performance Appraisal (PA) system

Effectiveness of PA system
10% 20% 70% Agree Neither agree nor disagree Disagree

70% agree that the performance appraisal system is effective in promoting quality work. This clearly indicates that they have well defined KRAs against which the employees are judged and the performance appraisal system motivates them to do quality work.

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CONCLUSION
Godrej and Boyce have a well established performance appraisal system in the division for its employees. It identifies what are the Key Result Areas of each and every individual as per the objectives set by them. These are communicated to them through the link of managers and they are produce results on the same line. Most of the employees understand the performance appraisal system set by the organization and know how it is conducted. Most of the employees surveyed also feel that the performance incentives they get act as a motivator for them to perform during the work. They also have a strong faith in the performance evaluation system on how they are evaluated. Also most of the employees feel that performance incentives they get decide their future course of behavior on work. Employees of Godrej & Boyce dont like when they dont get the performance incentive. Almost all the employees agree that they know what are the Key Result Areas and Key Performance Areas where they will be evaluated in performance evaluation system. Most of the employees feel that their performance appraisals are fair and unbiased. They are carried out in a transparent manner. Employees also think that their superiors are honest and fair in reviewing their performance because they are given the feedback on their performance through the superiors rating. Almost all the employees agree that they enjoy daily activities that make up their job. Employees do think that performance appraisal system promotes performing and doing quality work at job.

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RECOMMENDATIONS
The suggestions and recommendations to Godrej & Boyce with regards to Performance Appraisal system to increase its effectiveness are as follows: They can introduce a system whereby the employees as well as their superiors jointly decide the goals to an extent so that employees will be motivated to achieve the goals set.

To make the performance appraisal system more fair and unbiased in rating the employees, they can introduce a 360 degree system of appraisal or at least rating to the employees should be introduced from two different groups like superior as well as subordinates.

Company can introduce giving bonuses to the employees based on their performance which is not presently done

To award challenging job work and responsibilities to the capable employees will further motivate them to increase the productivity in the areas desired.

To also give non monetary benefits like perquisites to the suitable employees based on their performances.

Make the employees involved in the decision making where they are affected by the decisions relating to the work.

Award training to the suitable employees where they lack some of the qualities required for performing a task in a job.

To do performance appraisal system as objectively as possible.

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BIBLIOGRAPHY
Book Reference Human Resource Management by Ashwathappa

Website www.godrej.com

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ANNEXURE
Sample Questionnaire Filled Questionnaire

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QUESTIONNAIRE
1) What is the Performance Appraisal method followed in the organisation?

2) What is the procedure of conducting the Performance Appraisal in your organisation?

3) Is Human Resource department involved in rating all the employees?

4) How many times do you appraise the performance of employees in your organisation? 5) Are the KRAs and KPAs communicated to each and every individual?

6) Do the performers get rewarded in your organisation? If yes, then how?

7) Do the performance incentives given to the employees satisfy the employees of the organisation?

8) Is the feedback given to the employees about the rating they receive and where they can improve?

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QUESTIONNAIRE FOR EMPLOYEES


Tick whatever you think is the suitable option to the question.
Sr. No. Questions Strongly Disagree Neither Agree nor Disagree Strongly Agree

Disagree

Agree

01

I understand how my performance is evaluated. The performance incentives satisfy my personal goals and needs. I feel good about my performance appraisal. I have faith in Organizations performance appraisal system. I feel very bad when I dont receive the expected Performance Incentive. Expectations are clearly communicated to me. In my organization, performance appraisals are unfair and biased. I actually enjoy performing the daily activities that make up my job. Performance incentive performance in future. affects my

02

03

04

05

06

07

08

09

10

The Performance Appraisal system is effective in promoting quality work. My Supervisor is honest and fair in my performance review. The evaluation process should be more often than once a year. 21 | P a g e

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