You are on page 1of 88

ACKNOWLEDGEMENT I complete my internship in HONDA successfully and I finished my project report under the guidance of my mentor Mr.

Pankaj Agarwal I think that this would not have been possible without the help of some special people. There are some people whom I heartily want to thank. I am grateful to Mr. Pankaj Agarwal who has given me this precious opportunity to work in HONDA SIEL CAR INDIA LTD. as a summer trainee and for giving me guidance in a most humble manner. I would also like to express my thanks and respect to my college teachers who guided me for the particular project and also motivated me for my job.

RASHIKA WALIA BBA student Graphic Era University, Dehradun.

PREFACE After this summer training, I can say that not only theoretical knowledge is essential for MBA course, but practical knowledge is also very important as well for the BBA course. So the summer training, during the period of management course helps to provide real knowledge, practically, to the management student for making their bright future in the real corporate world. After my summer training in HONDA, I also get the opportunity for getting the experience to apply my theoretical knowledge into practical aspect. This project report is divided into chapter for the sake of continuity. In this way with the help of this project report I tried for the dealer survey of HONDA Dealers in the country. I also tried to give suggestion and feedback to HONDA SIEL CAR INDIA Limited and help it in making future working way and different decision.

CONTENTS TOPIC 1. About the company 2. Hondas CEO 3. Ownership Pattern 4. Manufacturing Facility 5. Sales And Distribution Network 6. Product Range 7. Sales Performance 8. Environment And Safety 9. HONDA Philosophy 10. Company Principles 11. Major Events 12. Department Of Marketing 13. Dealer Development Cell 14. Research Methodology 15. Findings 16. Dealer Development Proposal Form Bibliography


Honda Siel Cars India Ltd., (HSCI) a subsidiary of Japan based Honda Motor Company (World's fifth largest vehicle manufacturing co. by volume) was incorporated in December 1995 as a joint venture between Honda Motor Co. Ltd., Japan and Siel Limited, a Siddharth Shriram Group company, with a commitment to providing Hondas latest passenger car models and technologies, to the Indian customers. The parent company Honda Motor Co., Ltd. has grown to become the world's largest motorcycle manufacturer and one of the leading automakers. With a global network of 437* subsidiaries and equity-method affiliates, Honda develops, manufactures, and markets a wide variety of products ranging from small general-purpose engines and scooters to specialty sports cars, to earn the Company an outstanding reputation from customers world wide.


MASAHIRO TAKEDAGAWA (PRESIDENT & CEO) Masahiro Takedagawa is the current President and CEO of Honda Siel Cars India Ltd. He has taken over as President and CEO of Indian Operations since April 2005.He is associated with Honda Motor Company Japan for more than 25 years. He joined Honda in 1979 as Area Manager in Car retail operations in Japan and has been in sales and marketing division of Honda right since beginning with stints at USA, Italy, Thailand with the last assignment at the product planning and marketing office at Tokyo Headquarters. He also assumes the overall responsibility for Honda's automobile, motorcycle and power product businesses in South West Asia, comprising India, Pakistan, Sri Lanka, Nepal and Bangladesh. Mr. Takedagawa served as an Operating Officer of Honda Motor Co. Ltd. since February 21, 2006. Prior to that, he served as Global Head of Product Planning of Honda Motor Co, Japan. He has been Non-Independent Non-Executive Director of Honda Siel Power Products Ltd. since March 26, 2005. He has been a Director of Hero Honda Motors Ltd. since May 30, 2006. He has been a Director of Atlas Honda Ltd. since April 27, 2006. He serves as a Director of Honda Motor India Private Ltd.

OWNERSHIP PATTERN Honda Siel Cars India Ltd., (HSCI) was incorporated in December 1995 as a joint venture between Honda Motor Co. Ltd., Japan and Siel Limited, a Siddharth Shriram Group company, with a commitment to providing Hondas latest passenger car models and technologies, to the Indian customers. HSCI currently holds 99.9% ownership and rest 0.1% lies with Siddharth Shriram Group company.The Honda City, its first offering introduced in 1997, revolutionized the Indian passenger car market and has ever since been recognized as an engineering marvel in the Indian automobile industry. The success of City as well as all its other models has led HSCI to become the leading premium car manufacturer in India.The total investment made by the company in India till date is Rs. 1620 crores. The company has a capacity of manufacturing 100,000 cars. MANUFACTURING FACILITY HSCIs state-of-the-art manufacturing unit was set up in 1997 at Greater Noida, U.P with an investment of Rs. 450 crore. The green-field project is spread across 150 acres of land (over 6,00,000 sq. m.). The initial installed capacity of the plant was 30,000 cars per annum, which was thereafter increased to 50,000 cars on a two-shift basis. The capacity has further been enhanced to 1,00,000 units annually in February 2008 . The capacity expansion was necessitated by the excellent performance of all the Honda models, particularly the growing demand for City ZX in India. Several modifications were done by the company with the objective of offering higher quality products to its customers, faster and quicker. The expansion process also included expansion of the covered area in the

plant, from 1,07,000 sq. m. to 1,31,794 sq. m. HSCI currently produces the Honda City ZX, Civic and Accord models in India and the premium SUV, CR-V is sold as a fully imported unit from Japan. The company operates under the stringent standards of ISO 9001 for quality management and ISO 14001 for environment management.

PRODUCT RANGE Honda Siel Cars product range in India includes the Honda City ZX in the mid-size segment, Civic & Civic Hybrid in the Lower D segment and Accord in the luxury segment and third generation all-new CR-V (both 2.0L 2 WD and 2.4L 4WD) in the SUV segment. While the City ZX, Civic and Accord are manufactured at the companys plant, the CR-V & Civic Hybrid is imported from Japan as a Completely Built Unit.

HONDA CITY ZX City ZX is today recognized as one of the most successful car brands in the country. Its success is a replica of the success of its predecessor - the original Honda City, launched way back in 1997. In fact, HSCI took a historic step in 2003, when it introduced the NewCity at a time when the original City was still performing brilliantly and it was an immediate success. The City ZX was launched two years later in 2005 as an enhanced version of the New-City and is strongly associated with durability, reliability, quality and fuel-efficiency. The City ZX range includes 4 variants - EXi, GXi, CVT (Automatic Transmission) and VTEC. While EXi, GXi and CVT variants come with the advanced combustion system of the 1. 5 litre Intelligent Dual & Sequential Ignition (i-DSI) engine, City VTEC embodies a 1.5 litre VTEC (Variable Valve Timing and Lift Electronic Control) engine. The City VTEC comes with sporty exteriors and plush interiors, catering to the premium segment customers. On the outside, the car is adorned by 14 alloy wheels, front and rear fog lamps and rear disc brake. The interiors are more lavish with leather steering, centre console and beige and black upholstery. The City is manufactured with 79% indigenisation level and currently enjoys 25% market share in its segment.


HSCI launched the 1.8V Civic in India in July 2006 which became a runaway success. The company has also launched the 1.8V version of the Civic in June 2007. The Civic is Hondas largest selling model globally and is now sold in approximately 160 nations and regions worldwide. The Civic made its debut, with a two-door model in July 1972, followed shortly by a three-door version. The series was a major hit, especially among young people and for three consecutive years, from 1972 to 1974, the Civic won the Car of the Year Japan award. Civics development process contrasted completely with Honda tradition. Rather than pursue development based primarily on the vision of Company founder Soichiro Honda, the Civics development team traveled to various world markets, gained local knowledge and experience first-hand, and then set about creating a car that is needed right now. Overseas production of Civic began in Indonesia in 1975, and Civic vehicles are now made in 11 countries, including North America, Europe, Asia and South America. Total cumulative production of Civic models at the end of calendar 2004 was approximately 16 million unitsmaking it one of the most popular models in Honda history.

The eighth-generation Civic was launched towards the end of 2005 in the US and early 2006 in Japan. It already has the distinction of being voted as the top car in different markets and categories. Some of these include: Car of the Year at the prestigious Detroit Auto Show 2006. Red dot: best of the best award for highest design quality in Europe. 2006 Car of the Year by the Automobile Journalists Association of Canada (AJAC). 2006 "North American Car of the Year" presented by a group of 49 international automotive journalists. "Top Safety Pick - Gold" award by the Insurance Institute for Highway Safety (IIHS) for earning "Good" ratings in frontal, side impact and rear impact tests and measurements. 2007 Indian Car of the Year The Civic has an indigenisation level of 72% and enjoys 45% market share in its segment.



In a pioneering move, Honda Siel Cars India (HSCI), leading manufacturer of premium cars in India, launched India's first hybrid car - the globally acclaimed Civic Hybrid on June 18, 2008 In line with Honda's long-term commitment to the development of advanced and environmentally-friendly technologies that do not compromise on driving pleasure, the Civic Hybrid offers a rare combination of being environmentally friendly, fuel efficient and also having a high fun-to-drive quotient. The launch of the Civic Hybrid is the fulfillment of yet another commitment HSCI made to its customers - of bringing in latest technologies and models from Honda's global line-up. It also seeks to strengthen HSCI's efforts towards the protection of the environment and conservation of energy sources. The Honda Civic Hybrid System features a 3-stage i-VTEC + IMA that employs

Honda,s 1.3L i-VTEC (Variable Valve Timing and Lift Electronic Control) engine to provide three stages of valve timing (low-speed, high-speed, and cylinder idle mode), combined with a compact and efficient electric motor, Honda's IMA (Integrated Motor Assist) system. Together with highly efficient CVT transmission, the system provides nearly 47% enhanced fuel efficiency than a regular 1.8L Civic AT without compromising on driving performance.

The Civic Hybrid can deactivate all four of its cylinders and operate using only the electric motor in certain steady-state cruising situations. In addition, the internal combustion engine is switched off when car comes to a stop while the brake pedal is pressed. These factors contribute greatly to the reduction of fuel consumption and emissions, particularly in city traffic.

Apart from sleek, aerodynamic exteriors and new-age luxurious interiors, Honda Civic Hybrid offers the best in safety technology, including Active Headrest and four SRS Airbags (driver, assistant and side air bags), besides other safety features. The Civic Hybrid will be imported from Japan as a completely built unit and will be available in two colours - Premium White Pearl and Alabaster Silver.

HONDA ACCORD New Accord comes with fresh new exterior styling, enhanced interiors and several new value-added features. The new Accord has a new-look, sporty rear with revamped LED Tail lamps and rear bumper garnish that further enhances its stunning exterior styling. Adding greater value to the 2.4 lt model, the new car now has premium wood & leather steering wheel and turn indicators on side-view mirrors, features which were earlier available only in the V6 model. For easy and convenient parking, the new Accord has front and rear Parking Assistance Sensors, which warn the driver of obstacles in his way while parking. The Accord V6 now has enhanced safety in the form of Vehicle Stability Assist (VSA) technology and also new 10-spoke 16 alloy wheels. The Honda Accord, which has been a popular premium sedan ever since its launch in 2003,


will continue to delight the customers with its class-leading performance and luxury features such as leather upholstery, dual-zone climate control and six-CD changer. The Accord has won recognition all over the world from the automobile press for its commitment to innovation and value. To name a few, it received the Japanese Car of the Year Award 2002-2003 for the third time, Best Selling Car in 2001 in the US, Product of the Year by Fortune Magazine in 1993 and Best Selling Car from 1989-91 in the US. The Accord is manufactured with 34% indigenisation level and currently enjoys 27% market share in its segment.

HONDA CR-V The 3rd generation CR-V was introduced in November 2006. The all-new, third generation Honda CR-V offers its customers a distinctive combination of the comfort of a sedan with the thrills of a SUV. The engine is a 2.4-liter DOHC i-VTEC, which delivers a powerful torque of 162 ps @ 5,800 rpm. Realtime 4WD is a unique feature of the car which is the first in its class. The Realtime 4WD intelligently detects adverse road conditions and switches to 4-wheel drive

instantly. In normal conditions the all-new CR-V operates in front wheel drive mode but in wet, muddy roads or off-road conditions, it automatically switches to 4-wheel drive instantly. An enlarged clutch and stiffened transmission parts help distribute 20% additional torque to the rear wheels which ensures smooth drive in bad road conditions without compromising on safety or fuel consumption. HSCI recently introduced the 2.0L 2WD (2-Wheel Drive) Honda CR-V which is more agile & has a sporty handling. The new lighter engine gives good fuel efficiency, without compromising on performance. The CR-V currently enjoys 37% market share in its segment. HONDA PHYLOSOPHY The Honda Philosophy expressed in this illustration shows the Company Principle, Management Policies and the Honda Way based upon the fundamental beliefs of Respect for the Individual and The Three Joys


RESPECT FOR INDIVIDUAL Each Individual is unique, independent and possesses initiative



Associates are encouraged to take initiatives while understanding that they must take responsibility for the result of these actions.

All associates are treated fairly and equal opportunity is given to all.

The relationship among associates at HSCI to be based on mutual trust.


The driving force behind Hondas growth was the leadership of its founders Mr. Soichiro Honda and Mr. Takeo Fujisawa. The most valuable legacy which our founders gave to our company is Honda philosophy. This Honda Philosophy will continue to serve as the basis of our daily business action and judgment for all companies and associates within the Honda Group. It is critical that Honda Philosophy be fully understood, respected, shared and translated into action by every Honda associate around the world.





PERFORMANCE APPRAISAL An organizations goals can be achieved only when people put in their best efforts. How to ascertain whether an employee has shown his or her best performance on a given job? The answer is performance appraisal. Employee assessment is one of the fundamental jobs of HRM(human resource management). But not an easy one though. This project topic is devoted to a detailed discussion of the nature and process of conducting performance appraisal. Meaning and Definition In simple terms, performance appraisal may be understood as the assessment of an individual's performance in a systematic way, the performance being measured against such factors as job knowledge, quality and quantity of output, initiative, leadership abilities, supervision, dependability, co-operation, judgement, versatility, health, and the like. Assessment should not be confined to past performance alone. Potentials of the employee for future performance must also be assessed. A formal definition of performance appraisal is: It is the systematic evaluation of the individual with respect to his or her performance on the job and his or her potential for development. A more comprehensive definition is: Performance' appraisal is a formal structured system of measuring and evaluating an employees job related behaviors and outcomes to discover how and why the employee is presently performing on the job and how the employee can perform more effectively in the future so that the employee organization and society all benefit. The second definition includes employees behaviour as part of the assessment. Behaviour can be active or passive--do something or do nothing. Either way behavior affects job results. The other terms used for performance appraisal arc: performance rating, employee assessment. Employees performance review, personnel appraisal, performance evaluation employee evaluation and (perhaps the oldest of the terms used) merit rating. In a formal


sense, employee assessment is as old as, the concept of management and in an informal sense; it is probably as old as mankind. Nor performance appraisal is done in isolation. It is linked to job analysis as shown in Fig.

Fig. Relationship of Performance Appraisal and Job Analysis


OBJECTIVES OF PERFORMANCE APPRAISAL Data relating to performance assessment of employees are recorded, stored. And used for seven purposes. The main purposes of employee assessment are: 1. 2. 3. 4. 5. To effect promotions based on competence and performance. To confirm the services of probationary employees upon their completing the probationary period satisfactorily. To assess the training and development needs of employees. To decide upon a pay raise where (as in the unorganized sector) regular pay scales have not been fixed. To let the employees know where they stand insofar as their performance is concerned and to assist them with constructive criticism and guidance for the purpose of their development. 6. To improve communication. Performance appraisal provides a format for dialogue between the superior and the subordinate, and improves understanding of personal goals and concerns. This can also have the effect of increasing the trust between the rater and the ratee. 7. Finally, performance appraisal can be used to determine whether HR programmes such a selection, training, and transfers have been effective or not. Broadly, performance appraisal serves four objectives(i) (ii) (iii) (iv) developmental uses, administrative uses/decisions, organizational maintenance/objectives, and documentation purposes


Table below outlines these and specific uses more clearly:-


PERFORMANCE APPRAISAL AND COMPETITIVE ADVANTAGE The objectives of performance appraisal, listed above, point out the purpose which such an exercise seeks to meet. What needs emphasis is that performance evaluation contributes to firm's competitive strength. Besides encouraging high levels of performance, the evaluation system helps identify employees with potential, reward performance equitably and determine employee's need for training. Specifically, performance appraisal helps an organization gain competitive edge in the following ways (see Fig below) Strategy and

Fig: How Performance Appraisal can contribute to Firm's Competitive Advantage? Improving Performance An effective appraisal system can contribute to competitive advantage by improving employee job performance in two ways-by directing employee behaviour towards organizational goals, as was done by the second beekeeper (see opening case), and by monitoring that behaviour to ensure that the goals are met.


Making Correct Decisions As stated above, appraisal is a critical input in making decisions on such issues as pay raise, promotion, transfer, training, discharges and completion of probationary periods. Right decision on each of these can contribute to competitive strength of an organization. If promotion, for example, is made on performance, the promotee feels motivated to enhance his or her performance. Ensuring Legal Compliance Promotions made on factors other than performance might land up a firm in a legal battle, thus diverting its focus on non-productive areas, as it happened to Williamson Magar. Organizations can minimize costly performance-related litigation by using appraisal systems that give fair and accurate ratings. Minimizing Job Dissatisfaction and Turnover Employees tend to become emotional and frustrated if they perceive that the ratings they get are unfair and inaccurate. Such employees find that the efforts they had put in became futile and obviously get de-motivated. Dissatisfaction in the job sets in and one of the outcomes of job dissatisfaction is increased turnover. Fair and accurate appraisal results in high motivation and increased job satisfaction. An organization having satisfied and motivated employees will have an edge over its competitors. Consistency between Organizational Strategy and Behaviour An organization needs a strategy consistent with the behaviour of its employees if it were to realize its goals. A truism of organizational life is that people engage themselves in behaviours that they perceive will be rewarded. As employees want to be rewarded, they tend to occupy themselves more with those activities on which the organization emphasizes. For example, if the focus is on service, employees will behave in ways that will help them in gaining rewards associated with service delivery. If the focus is on cost control, employees will seek to control cost and thus be recongnised and rewarded. If the focus is on rewarding productivity, employees will strive for productivity. The performance appraisal becomes not only a means of knowing if the employees' behavior is


consistent with the overall strategic focus, but also a way of bringing to the fore any negative consequence of the strategy- behaviour fit For example, a single point productivity focus may include potential negative consequences such as decreased quality and co-operations. Thus, the performance appraisal system is an important organizational mechanism to elicit feedback on the consistency of the strategy-behaviour link. Organizational Strategy and Performance Appraisal The performance appraisal system serves many organizational objectives and goals. Besides encouraging high level of performance, the evaluation system is useful in identifying employees with potential, rewarding performance equitably. And determining employees' needs for development. These are all the activities that should support the organizations strategic orientation. Although these activities are clearly instrumental in achieving corporate plans and long-term growth, typical appraisal systems in most organizations have been focused on short-term goals. From the strategic management point of view, organizations can be grouped into three categories defenders, prospectors and analyzers. Performance appraisal has definite roles in all the three strategies. Typically, defenders have a narrow and relatively stable product-market domain. Because of this narrow focus, these organizations seldom need to make major adjustments in their technology. Structure or methods of operations. They devote primary attention to improving the efficiency of their existing operations. Because of the emphasis 011building skills within the organization, successful defenders use performance appraisal for identifying training needs. Performance appraisal is usually more behaviour oriented. Organizations with a prospector strategy continuously search for different product and market opportunities. In addition, these organizations regularly experiment with potential responses to new and emerging environmental trends. Prospectors are often the harbingers of change. Because of the emphasis on skills identification and acquisition of human resources from external sources, as opposed to skills building with the organization, prospectors often use the performance appraisal as a means of identifying staffing needs. The emphasis is on results. Finally, the focus is on division and corporate performance evaluation as they compare with other companies during the same evaluation period.

Organizations with an analyzer strategy operate in two types of product market domains. One domain is stable while the other is changing. In their more innovative areas, managers watch their competitors closely and rapidly adopt the ideas that appear promising. In general, analyzers use cost effective technologies for stable products and project or matrix technologies for new product. Analyzers tend to emphasize both skill building and skill i1cquisilion and employ extensive training programmes. Thus, these organizations attempt to identify both training as well as staffing needs. The appraisal systems are considered at the individual, group and divisional levels. Finally, successful analyzers have a tendency to examine current performance with past performance within the organization. Cross-sectional comparisons (comparisons among 'companies) may also occur. Whatever the category, a performance appraisal system has strategic importance to a firm in three ways: 1. Feedback mechanism, 2. Consistency between organizational strategy and job behaviour, and 3. Consistency between organizational values and job behaviour. APPRAISAL PROCESS Figure below outlines the performance- appraisal process. Each step in the process is crucial and is arranged logically. The process as shown in Fig. Below is somewhat idea1ised. Many organizations make every effort to approximate the ideal process, resulting in first-rate appraisal systems. Unfortunately, many others fail to consider one or more of the steps and, therefore, have less-effective appraisal system.


1. Objectives of Appraisal Objectives of appraisal as stated above include effecting promotions and transfers, assessing training needs, awarding pay increases, and the like. The emphasis in all these is to correct problems. Theses objectives are appropriate as long as the approach in Objectives of Appraisal Establish job Expectation Design an appraisal performance Performance interview Use appraisal data for appropriate purposes appraisal is individual. Appraisal in future, would assume systems orientations. In the systems approach, the objectives of appraisal stretch beyond the traditional ones. In the systems approach, appraisal aims at improving the performance, instead of merely assessing it. Towards this end, an appraisal system seeks to evaluate opportunity factors. Opportunity factors include the physical environment such as noise, ventilation and lightings, available resources such as human and computer assistance and social processes such as leadership effectiveness. These opportunity variables are more important than individual abilities in determining work performance. In the systems approach the emphasis is not on individual assessment and rewards or punishments. But it is on how work the work system affects an individuals. In the systems approach the emphasis is not on individual assessment and rewards or punishments. But it is on how the work systems affect an individuals performance. In order to use a systems approach, managers must learn to appreciate the impact that systems levels factors have on individual performance and subordinates must adjust to lack of

competition among individuals. Thus, if a systems approach is going to be successful, the employee must believe that by working towards shared goals, everyone will benefit.

Not that the role of the individual is undermined. The individual is responsible for a large percentage of his or her work performance. Employees should not be encouraged to seek organizational reasons for his failures. The identifications of systems obstacles should be used to facilitate development and motivation, not as an excuse to poor performance. The following table displays some of the differences between the traditional approach and the systems-oriented one. Traditional Systems Guiding value Primary roles PERFORMANCE APPRAISAL SYSTEMS 2. Establish Job Expectations The second step in the appraisal process is to establish job expectations. This includes informing the employee what is expected of him or her on the job. Normally, a discussion is held with his or her superior to review the major duties contained in the job place of formal performance evaluation. 3. Design Appraisal Programme Designing an appraisal programme poses several questions which we need to answers. They are: 1. Formals versus informal appraisal 2. Whose performance is to be assessed? 3. Who are the raters? 4. What problems are encountered? 5. How to solve the problems?

6. What should be evaluated? 7. When to evaluate? 8. What methods of appraisal are to be used?


Whose performance should be rated? To the question as to whose performance should be rated, the answer is obviousemployees, is it individual or teams? Specifically the rate may be defined as the individual, work group, division, or organizations. It is also possible to define the rate at multiple levels. For example, under some condition, it may be desirable to appraise performance both at workgroup level for merit-pay increases and at the individual level to assess training needs. Two conditions necessitate a group level appraisalgroup cohesiveness and difficulty in identifying individual performance. Description. Individual should not be expected to begin the job until they understand what is expected out of them.


Formal V/s informal appraisal: - the first step in designing an appraisal programme is to decide whether the appraisal should be formal or informal. Formal appraisal usually occurs at specified time periodsonce or twice year. Formal appraisals are most often required by the organizations for the purposes of employee evaluation. Informal performance appraisal can occur whenever the

superior feels the need for communication. For example, if the employee has been consistently meeting or executing standards, an informal appraisal may be in order to simply recognize this fact. Discussions can take place anywhere in the organizations, ranging from the managers office to the canteen. But care needs to be taken to ensure that the discussion is held in private. Many organizations encourage a mixture of both formal and informal appraisal. The formal appraisal is most often used as primary evaluation. However, the informal appraisal is very helpful for more performance feedback. Informal appraisal should not take the Group cohesiveness refers to shared feeling among work-team members. There is cooperation and clear understanding to accomplish tasks which are interdependent. Any attempt to assess individual performance shall undermine group cohesiveness and tend to promote individualistic or even competitive orientation. The difficulty in identifying individual contribution is also important to consider. In some cases, interdependent of tasks is so complete that it is difficult to identify who has contributed what. There is no other choice but to view that task as a team effort. But the point to be remembered is that the performance of all employees must be rated. All must become raters. 3. Who are Raters? Raters can be immediate supervisors, specialist from the HR department, subordinates. Peers, committees, clients, self appraisal, or a combination of several. a. Immediate supervisor is the fit candidate to appraise the performance of his or her subordinate. There are 3 reasons in support of this choice. No one is familiar with the subordinates performance than his or her superior. Another reason is that the superior has the responsibility of managing a particular unit. When the tasks of evaluating a subordinate is given to another person, the superior authority may be undermined seriously. Finally, training and development of subordinate is am portent element in every mangers job. Since appraisal programme are often clearly linked to training and development, the immediate superior may be the legal choice to conduct the performance evaluation.



Subordinate can assess the performance of their superiors. The use of this choice may be useful in assessing an employee ability to communicate, delegate work, allocate resources, disseminate information, resolve intrapersonal conflict, and deal with employees on a fair basis. But the problem with the subordinate evaluation is that supervisors tend to become popular, not by effective leadership, but by mere gimmicks.


Peers are in better position to evaluate certain facts of job performance which the subordinates or supervisors cannot do. Such facts include contribution skills, reliability and initiative. Closeness of the working relationships and the amount of personal contacts place peers in a better position to make accurate assessments. Unfortunately friendship or animosity may result in distortion of evaluation. Further when reward allocation is based on peer evaluation, series conflicts among co-workers may develop. Finally join together to rate each other high.


Although clients are seldom used for rating employee performance, nothing prevents an organization from using this source. Clients may b members within the organization who have direct contact with the rate and make use of an output (goods or services) this employee provides. Interest, courtesy, dependability and innovativeness are but a few of he qualities for which clients can offer rating information. Clients, external to the organization can also offer similar kinds of information. Where appraisal is made by the superior, peers, subordinates and clients, it is called the 360-degree system of appraisal. First developed at General Electric, US in 1992 the system has become popular in our country too. GE (India). Reliance Industries, Crompton Greaves, Godrej Soaps, Wipro, Infosys, Thermax and Thomas Cook are using the method with greater benefits. The Arthur Anderson Survey 1997 reveals that 20% of the organization use 360 degree method. In the 360 degree method, besides assessing performance. Other attributes of the assess talents, behavioral quirks, values, ethical standards, tempers and loyalty are evaluated by the people who are best placed to do it. Many employees use rating committees to evaluate employees. These committees are often composed of the


employees immediate supervisor and three or four other supervisors who come in contact with the employee. This choice is welcome when an employee in the course of his or her job performs a variety of tasks in different environment. For e.g. 1supervisor may work with the employee when technical aspects of a job are being performed and another supervisor may deal with the same employee in situations where communications skills are crucial. There are several benefits in using multiple raters. First there may be objectivity in rating as more than rater is involved in the assessment. Furthermore where there are differences in the rater ought ratings they usually stem from the fact that raters at different level in the organization often observe different facets of an employee performance-the appraisal to reflect these differences. The disadvantages of committee rating are that it diminishes the role of the immediate supervisor in the area of training and development. e. In self appraisal employee himself or herself evaluates his or her own performance. Indian Telephone Industries has been following the selfappraisal system for executives in grade I to IV. Hewlett-Packard and Texas Instruments too ask their performance to prepare their own appraisal. On the positive side it may be stated that in self-appraisal there is an opportunity to participate in evaluation particularly if it is combine with goal setti9ng and this should be improve the mangers motivation.


Managers are less defensive in self-evaluation than when supervisors tell them what they are. Self-appraisal is best suited where executive development is the main purpose of evaluation as the approach enablers managers to clearly assess their areas of differences. Unfortunately selfappraisal falls short almost by any criterion. They tend to be more lenient compared to other sources of evaluation, even that of peers who are more lenient than their superiors. Self-appraisal is also more likely to be less biased and less in agreement with judgment of others. In practice a combination of methods is followed for employee. For example evaluation by self may be followed by a superior, the personal department or the HR department (following diagram).




PERIODIC REVIEW (during the year) Whoever may be the rater two requisites must be fulfilled. First the rater must be free from bias. Second the rater must have an opportunity to observe the full spectrum of activities and behavior of the rate over an extended time period.]


Problems of Rating: - Performance appraisals are subject to a wide variety of inaccurate and biases referred to as rating errors. These errors occur in the raters observations, judgments and information processing and can seriously affect assessment result. The most common rating errors are leniency or severity, central tendency, halo effect, primary and recency effects, perceptual set, performance dimension behavior, spill over effect and status effect.


Leniency or Severity: - Leniency or severity on the part of the rater makes the assessment subjective. Subjective assessments defeat the very purpose of performance appraisal. Ratings are lenient for the following reasons.

The rater may feel that anyone under his or her jurisdictions who is rated unfavorably will reflect poorly on his or her own worthiness. He or she may feel that anyone who could have been rated unfavorably has already been discharged from the organization He or she may feel that a derogatory rating will be revealed to the rate to the determinant of the relations between the rater and rate. He or she may rate leniently in order to win promotions for the subordinates and therefore indirectly increase his or her hold over them. He or she may be projecting He or she feels it necessary to always approve of others in order to gain approval for him or herself. He or she may be operating on the premise, whoever associates with me is meritorious therefore, and I am meritorious. He or she may rate leniently because there exists, in the culture, a response set approve rather than disapprove. WC according to a WC according to a lenient rater Severe rater True amount WC LOW written communication HIGH Skills (WC)



Central tendency: - this occurs when employees are incorrectly rated near the average or middle of the scale. The attitude of the rate is to play safe. This safeplaying attitude stems from certain doubts and anxieties which the raters have while assessing the ratees. Such doubts and anxieties are :

Do I know the man sufficiently well to be able to give a fair assessment of him? If I rate him the way I think I should what will be its influence on his relations with me and on his performance in the future? If I rate him the way I think I should what will be its effect on my relations with the others subordinates? If I rate him the way I think I should what will be its effect on his relationship within the group or subordinates? Will I able to be objective in view of pressures from peers, subordinates and trade union? If I rate him the way I think I should will be accused to being partial? How will my boss view the appraisal I make and how will that influences the way he appraises the man? What standards will my peers adopt to appreciate their subordinates? And in view of this am I likely to affect adversely the future of my subordinates? Naturally the rates use such expressions as satisfactory and average to describe the performance of the rates. For example the principal of a college while giving character certificates to the outgoing students describe the character of each student as satisfactory. Obviously its become difficult to distinguish between excellent performance and poor performance. In small organization it is common to label all employees as an average. But in large companies errors of this type tend to obviate the value of evaluations. Close to error of central tendency is the problem of range

restriction. Range restriction may involve clustering all employees around any point on a scale, often in combination with leniency errors at very top. What is distinctive in the error of central tendency and the error of range restriction is a failure to note real performance differences, either intentionally or due to insufficient attention. Halo Error - it takes place when one aspect of an individual performance influences the evaluation of the entire performance of the individual just as the assessment of the performance of a student in his or her examination being influence by the opening paragraph of every answer. If the introductory paragraph is poorly written the chances of scoring high marks in that answer are diminished however good the subsequent portion of the essay may be In an organization a halo error occurs when an emplopuee who work late constantly might be rated high on productivity and quality of output as well as on motivation. Similarly an attractive or popular employee might be given a high overall rating. Rating employees separately can each of a number of performance and encouraging raters to guard against the halo effect are two ways to reduce halo effect. Rater effect: this includes favoritism, stereotyping and hostility. Excessively high or low scores are given only to certain individual or groups based on the raters attitude towards the rate, not on actual outcomes or behavior. Sex, age, race and friendship biases are example of this type of error. Primary and recency effects: - the raters ratings are heavily influenced either by behavior exhibited by the rate during the early stage of the review period or by outcomes or behavior exhibited by the rate near the end of the review period (recency). For example if a salesperson captures an important contract/ sales just before the completion of the appraisal the timing of the incident may inflate his or her standing even though the overall performance of the salesperson may not have been encouraging. Likewise a blunder committed just before the appraisal period may diminish chance of securing a favorable rating even if the performance is good. One way of guarding against such an error is to ask rater to consider the composite performance of the ratee and not to be influenced by one incident or own achievement. The rater must also be aware of tendency on the part of the rates to improve odds in their favors or suppress weak points during the rating period.


Perceptual Set: - this occurs when the raters assessment is influenced by previously held beliefs. If the supervisors for example have a belief that employee hailing from 1 particular region is intelligent and hard working his subsequent rating of an employee hailing from that region tends to be favorably high. Performance Dimension order: 2 or more dimensions on a performance instrument follows or closely follow each other and both describe or rotate to a similar quality. The rater rates first dimension accurately and then rates the second dimension similar to the first because of their proximity. If the dimension had been arranged in a significant different order the rating might have been different. Spillover effect: This refers to allowing past performance appraisal ratings to unjustifiably influence current ratings. Past ratings, good or bad result for the period although the demonstrated behavior does not deserve the rating good or bad. Status effect: - it refers to overrating of employee in higher-level jobs held in high esteem, and underrating employees in lower-level-job or jobs held in low esteem. It is not the raters errors alone that are barriers to accurate and valid measurement of employee performance. Barriers lie deep within the genetic and acquired make-up of all people concerned with performance appraisal. A wide variety of emotional, psychological, intellectual and physical factors that at first glance may appear to be separate and irrelevant may combine in any numbers of ways during the appraisal process. Exhibit 10.2 Here is a bizarre case of performance appraisal. A pulp making unit located at Harihae in Karnataka, hired 40 engineers in 1994, as management trainees. The new hires were fresh from, REC, Suratkal, and other prestigious institutions. Obviously they were toppers in their respective branches and institutions. The management of the plant adopted a freakish policy with regard to performance appraisal 10 percent of all the employees were to be rated below average. The management did not want all the employees to be ranked high, notwithstanding their excellent performance. The axe fell on the trainees. The raters rated all the 40 trainees below average. Humiliated, these 40 put in their papers even before their training period expired. Solving Raters Problems


The best way to overcome the problems is to provide training to the raters. At HewlettPackard, a 2 day training course is organized every year to prepare managers to handle appraisals better. Not that training is a cure-all for all the ills of appraisal systems. From a practical point of view, several factors, including the extent which pay is related to performance ratings, union pressure, turnover rates, time constraints and the need to justify ratings may be more important than training, influencing the ratings they actually give. This means that improving rating systems involves not just training the raters but remedying outside factors such ass union pressure. And it means that rater training, to be effective, should also add real life problems such as the fact that union representatives will try to influence supervisors to rate everyone high. But training can help improve the appraisal system to the extent of distortion that occurs due to the raters error such as halo, leniency, central tendency and bias. In a typical training, raters are shown a video-tape of jobs being performed and are asked to rate the workers. Ratings made by each participant are then placed on a flip chart and the various charts are explained. For e.g., a trainee is rated on all criteria (such as quantity and quality) about the same, the trainer might explain that halo error had occurred. If, on the other hand, a trainer rated all video-taped workers very high, this might be explained as a leniency error. Typically, the trainer gives the correct rating and then illustrates the rating errors made. In effect, training of raters must help strengthen the factors that tend to improve accuracy of ratings and weaken those that lower the accuracy of the performance measurement. Factors that help improve accuracy: 1. The rater has observed and is familiar with behaviors to be appraised. 2. The rater has documented the behaviors to improve the recall. 3. The rater has a checklist to obtain and review job-related information. 4. The rater is aware of personal biases and is willing to take action to minimize their effect. 5. Rating scores by raters of one group or organization are summarized and compared with those by other raters. 6. The rater focuses attention on performance-related behaviors over which the rater has better control than in other aspects of evaluation.


7. Higher levels of management are held accountable for reviewing all ratings. 8. The raters own performance ratings are related to the quality of rating given and the performance of units. 9. Performance factors are properly defined. Factors that may lower accuracy: 1. The rater rates ratees only when administrative actions are contemplated. 2. The rater tends to inflate ratings when the ratees receive scores and results of appraisals. 3. The rater tends to recall more behaviours known to be of particular interest to higher level managers, whether or not they are pertinent, when his or her ratings are reviewed by such authorities. 4. The rater is unable to express him or herself honestly and unambiguously. 5. Appraisal systems, processes and instruments fail to support the rater. 6. The rater has to rate employees on factors that are poorly defined. 7. Finally, the supervisor/rater must be trained to conduct the appraisal interview. For many raters, this is a difficult task, especially when the appraisal is unfavorable to the rater. Favorable or unfavorable rating, it is the job of the rater to convince the ratee about the appraisal, and advise him or her about the future course of action the rate should take. What should be rated? One of the steps in designing an appraisal programme is to determine the evaluation criteria. It is obvious that the criteria should be related to the job. The six criteria for assessing performance are: 1. Quality: The degree to which the result or process of carrying out an activity approaches perfection in terms of either conforming to some ideal way of performing the activity, or fulfilling the activitys intended purpose. 2. Quantity: The amount produced, expressed in monetary terms, number of units, or number of completed activity cycles. 3. Timeliness: the degree to which an activity is completed or a result produced, at the earliest time desirable from the standpoints of both co-coordinating with the outputs of others and of maximizing the time available for other activities.


4. Cost Effectiveness: the degree to which the use of the organizations resources (e.g. human, monetary, technological and material) is maximized in the sense of getting the highest gain or reduction in loss from each unit or instance of use of a resource. 5. Need for supervision: the degree to which a job performer can carry out a job function without either having to request supervisory assistance or requiring supervisory intervention to prevent an adverse outcome. 6. Interpersonal impact: the degree to which as performer promotes feeling of selfesteem, goodwill and co-operation among co-workers and sub-ordinates. These criteria relate to past performance and behavior of an employee. There is also the need for assessing, as was pointed out earlier, the potential of an employee for future performance, particularly when the employee is tipped for assuming greater responsibilities. Exhibit 10.3 Appraisal of Potential at Philips More and more number of organizations are trying to assess potential of their employees, particularly at the managerial level. Cadbury India, Sandoz, Pfizer, Mafatlal, Philips, National Organic Chemical Industries, Glaxo and P&G are a few of the companies which seek to top managerial potential. At Philips a 2 by 2 matrix is used to assess performance and potential to perform. The vertical axis measures potential while the horizontal, actual performance. Both are further subdivided into parameters high and low resulting in 4 quadrants of classification. The Philips Model Low Potential-Low Performance: these employees are categorized as question marks. The company asks such employees to improve their performance levels. Failure to improve would result in their planned separation. High Potential-Low Performance: these are the problem children. In order to help them improve their performance, these employees are shifted to new locations to work and are closely monitored. If performance levels do not improve, these employees are reclassified as question marks and the separation process initiated.


Low Potential-Low Performance: these employees are categorized as question marks. The company asks such employees to improve their performance levels. Failure to improve would result in their planned separation. High Potential-High Performance: these are the star performers. They have to be kept engaged with complex assignments all the time and groomed to take up the top positions. Otherwise, they might leave. Low Potential-High Performance: these are called as solid citizens and constitute 70 to 75 % of the total number of employees in any organization. They have skills but lack the potential to grow beyond their current job-profile. The organization has to constantly recognize their limitations and take care of their needs. In order to assess employee potential, Philips has adopted the system that prevails at Philips NV, Holland. The system at Philips NV uses 4 broad attributes conceptual effectiveness, operational effectiveness, interpersonal effectiveness and achievement effectiveness and achievement motivation. Each attribute has a 5-point grading scale excellent, very good, good/adequate, weak and insufficient. Coming to the six criteria, it may be stated that the first 4 quality, quantity, timeliness and cost effectiveness are objective in nature; and the last 2 - need for supervision and interpersonal impact are subjective. Objective measures are quantifiable and are therefore highly useful in measuring the performance of an employee. But

performance of employees should not always be evaluated against the amount of deposits mobilized for his or her bank. The effort put in by him/her, the contacts he/she has established, the image about the bank he/she has created in the eyes of public, and if relationships he/she has maintained with subordinates speak more reliably about the managers performance. Here comes the relevance of the subjective criteria. However, as subjective measures are dependent upon human judgments, they are prone to the kinds of errors we noted earlier leniency or severity, central tendency, halo and the like. To be useful, subjective measures must be based on a careful analysis of the behaviors viewed as necessary and important for job performance. Of late, there has been a shift in focus of appraisals. This shift is from performance of the individual to the systems approach. As stated earlier, in the systems approach the emphasis is on improving ones performance. Work performance of an individual depends on organizational factors in addition to his or her abilities. The focus in the systems approach is, therefore, the entire organization. Timing of Evaluation How often should an employee be assessed? The general trend is to evaluate once in 3 months, or six months, or once in a year. According to a survey conducted in 1997 by Arthur Anderson, 70 percent of the organizations conduct performance appraisal once a year. Newly hired employees are rated more frequently than the older ones. Frequent assessment is better than phased evaluation. Feedback in the latter is delayed and the advantage of timely remedial measures by the employee is lost. Frequent evaluation gives constant feedback to the rate, thus enabling him or her to improve performance if there is any deficiency. The performance of trainees and probationers should be evaluated at the end of respective programmes.


METHODS OF APPRAISAL The last to be addressed in the process of designing an appraisal programme is to determine methods of evaluation. Numerous methods have been devised to measure the quantity and quality of employees job performance. Each of the methods discussed could be effective for some purposes, for some organizations. None should be dismissed or accepted as appropriate except as they relate to the particular needs of the organization or of a particular type of employees. Broadly, all the approaches to appraisal can be identified into (i) past-oriented methods, and (ii) future-oriented methods. Each group has several techniques as shown in the figure below:

Past-Oriented Methods Rating Scales: This is the simplest and most popular technique for appraising employee performance; the typical rating-scale system consists of several numerical scales, each representing a job-related performance criterion such as dependability, initiative, output, attendance, attitude, co-operation, and the like. Each scale ranges from excellent to poor. The rater checks the appropriate performance level on each criterion, then computes the employees total numerical score. The number of points scored may be linked to salary increases, whereby so many points equal a rise of some percentage.


Rating scales offer the advantages of adaptability, relatively easy use and low cost. Nearly every type of job can be evaluated in a short time, and the rater does not need any training to use the scale. The disadvantages of this method are several. The raters biases are likely to influence evaluation, and the biases are particularly pronounced on subjective criteria such as cooperation, attitude and initiative. Furthermore, numerical scoring gives an illusion of precision that is really unfounded. Checklist: Under this method a checklist of statements on the traits of the employee and his or her job is prepared in 2 columns viz., a Yes column and a No column. All that the rater (immediate superior) should is tick the Yes column if the answer to the statement is positive and in column No if the answer is negative. A typical checklist is given in the table below. After ticking off against each item, the rater forwards the list to the HR department. The HR department assigns certain points to each Yes ticked. Depending upon the number of Yes the total score is arrived at. When points are allotted to the checklist, the technique becomes a weighted checklist. The advantages of as checklist are economy, ease of administration, limited training of rater, and standardization. The disadvantages include susceptibility to raters biases (especially the halo effect), use of

personality criteria instead of performance criteria, misinterpretation of checklist items, and the use of improper weights by the HR department. Another disadvantage of this approach is that it does not allow the rater to give up relative ratings. Table: - Checklist for Operators


Forced Choice Method: In this, the rater is given a series of statements about an employee. These statements are arranged in blocks of 2 or more, and the rater indicates which statement is most or least descriptive of the employee. Typical statements are : 1. Learns fast _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ works hard 2. Work is reliable_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ performance is a good example for 3. Absents often_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ others usually tardy. As in the checklist method, the rater is simply expected to select the statements that describe the rate. Actual assessment is done by the HR Department. This approach is known as the forced choice method because the rater is forced to select statements, which are readymade. The advantage of this method is the absence of personal bias in rating. The disadvantage is that the statements may not be properly framed they may not be precisely descriptive of the ratees traits. Forced Distribution Method: One of the errors in rating is leniency clustering a large number of employees around a high point on a rating scale. The forced distribution method seeks to overcome the problem by compelling the rater to distribute the ratees on all points on the rating scale. The method operates under an assumption that the employee performance level conforms to a normal statistical distribution. Generally, it is assumed that employee performance levels conform to a bell shaped curve. For example, the following distribution might be assumed to exist excellent 10 %, good 20 %, average 40 %, below average 20 %, and unsatisfactory 10 %. The major weakness of the forced distribution method lies in the assumption that the employee performance levels always conform to a normal distribution. In organizations that have done a good job of selecting and retaining only the good performers, the use of forced distribution approach would be unrealistic, as well as possibly destructive to the employee morale. The error of central tendency may also occur, as the rater resists from placing an employee in the lowest or in the highest group. Difficulties also arise for the rater to explain to the rate why he or she has been placed in a particular group. One merit of this approach is that it seeks to eliminate the error of leniency. However, the forced choice method is not


acceptable to raters and ratees, especially, in small groups or when group members are of high ability. Critical Incidents Method: The critical incidents method of employee assessment has generated a lot of interest these days. The approach focuses on certain critical behaviors of an employee that make all the difference between effective and non-effective performance of a job. The supervisors as and when they occur record such incidents. Examples of critical incidents of a plant manager are given in the following table:

One of the advantages of the critical incidents methods is that the evaluation is based on actual job behavior. Further, the approach has descriptions in support of particular ratings of an employee. Giving job-related feedback to the ratee is also easy. It also reduces the personal biases, if raters record incidents throughout the rating period. Finally, this approach can increase the chances that the subordinates will improve because they learn more precisely what is expected of them. The method however has significant limitations. These include:

1. Negative incidents are generally more noticeable that positive ones. 2. The recording of incidents is a chore to the supervisor and may be put off an easily forgotten. 3. Overly close supervision may result. 4. Managers may unload a series of complaints about incidents during an annual performance review session. The feedback may be too much at one time and thus Behaviorally Anchored Rating Scales: Behaviorally Anchored Scales, sometimes called behavioral expectation scales, are rating scales whose scale points are determined by statements of effective and ineffective behaviors. They are said to be behaviorally anchored in that the scales represent a range of descriptive statements of behavior varying from the least to the most effective. A rater must indicate which behavior on each scale best describes an employees performance. Behaviorally anchored rating scales (BARS) have the following features: 1. Areas of performance to be evaluated are identified and defined by people who will use the scales. 2. The scales are anchored by descriptions of actual job behavior that, supervisors agree, represent specific levels of performance. The result is a set of rating scales in which both dimensions and anchors are precisely defined. 3. All dimensions of performance to be evaluated are based on observable behaviors and are relevant to the job being evaluated since BARS are tailor-made for the job. 4. Since the raters who will actually use the scales are actively involved in the development process. They are more likely to be committed to the final product. BARS were developed to provide results which subordinates could use to improve performance. Superiors would feel comfortable to give feedback to the rates. Further, BARS help overcome rating errors. Unfortunately, this method too suffers from distortion inherent in most rating techniques. Field Review Method This is an appraisal by someone outside the, assessors own department. Usually someone from the corporate office or the HR department. The outsider reviews Employee records and holds interviews with the ratee and his or her superior.

This method is primarily used for making promotional decision at the managerial level. Field reviews are also useful when comparable information is needed from employees in different units or locations. Two disadvantage of this method are:1. 2. An "outsider" is usually not familiar with conditions in an employees work environment which may affect the employee's ability or motivation to perform. An 'outsider' review dose not have the opportunity to observe employee behavior of performance over a period of time and in a variety of situations. But only in an artificially structured interview situation which extends over a very short period of time.



A BARS Scale for the Knowledge and Judgement Dimension of a Grocery Checker's Job. Raters, making field reviews normally receive training on how to conduct the interview and develop their writing skills. Being independent of the work scene they normally have less bias for or against the ratee than docs the immediate supervisor. Even when a supervisor or others concerned supply biased information the rater may he able to pinpoint areas requiring training and development assistance. A BARS Scale for the Knowledge and Judgement Dimension of a Grocery Checker's Job. Raters, making field reviews normally receive training on how to conduct the interview and develop their writing skills. Being independent of the work scene they normally have less bias for or against the ratee than docs the immediate supervisor. Even when a supervisor or others concerned supply biased information the rater may he able to pinpoint areas requiring training and development assistance. Performance Tests and Observations With limited number of jobs, employee assessment may be based upon a test of knowledge or skills. The test may he of the paper-and-pencil variety or an actual demonstration of skills. The test must he reliable and validated to be useful. Even then, performance tests are apt to measure potential more than actual performance. In order for the test to be job related, observations should he made under circumstances likely to be encountered. Practicality may suffer if costs of test development or administration arc high. Confidential Records Confidential records arc maintained mostly in government Departments. though its application in the industry .not ruled out. ITI. for example. had followed this method for a long time. Called the Annual Confidential Report (ACR). the approach had 14 items-(i) attendance. (ii) self-expression (written or oral). (iii) ability to work with others. (iv) leadership. (v) initiative. (vi) technical ability (job knowledge). (vii) ability to understand new material. (viii) ability to reason, (ix) originality and resourcefulness. (x) areas of work that suits the person best. (xi) judgement. (xii) integrity. (xiii) responsibility and. (xiv) and


defect-indebtedness. Memo served. etc. Twelve of these were filled on a fourpoint grade scale (Excellent. Good. Fair and Poor). For integrity. there were special instructions from the management. Justification was required for outstanding or poor rating. Over:!!! rating on a five-point scale was separately given (Outstanding. Very good. Good. Average, Poor). again with justification for rating as outstanding or poor. Recommendations for promotion were also given. The ACR contained recommendations and signature of the rater. the head of the department and the CMD. The system was highly secretive and confidential Feedback to the assessee was given only in case of an adverse entry. The AC'R was highly subjective. Ratings were easily manipulated because the evaluation was linked to promotion. Even ITI has discontinued ACR system for these reasons. Essay Method In the essay method the rater must describe the employee within a number of broad categories such as (i) the rater's overall impression of the employee's performance. (ii), the promo ability of the employee (iii) the jobs that the employee is now able or qualified to perform (.iv) the strengths and weaknesses of the employee. and (v)the training and the development assistance required by the employee. Although this method may be used independently, it is most frequently found in combination with others. It is extremely useful in filing information gaps about the employees that often occur in the better structured checklist method. The strength of the essay method depends on the writing skills and analytical ability of the rater. However many raters do not have good writing skills. They become confused about what to say. How much they should state and the depth of the narrative The essay method can consume much time because the rater must collect the information necessary to develop the essay and then he or she must write it The essay method also depends on the memory power of the rater. A problem with this method is that the rate may be rated on the quality of the appraisals that they give. The quality standard for the appraisal may be unduly influenced by


appearance rather than content. Thus. a 'high quality' appraisal may provide little useful information about the performance of the rate. Cost Accounting Method This method evaluates performance from the monetary returns the employee yields to his or her organisation. A relationship is established between the cost included in keeping the employee and the benefit the organization derives from him or her. Performance of the employee is then evaluated based on the established relationship between the cost and the benefit. Comparative Evaluation Approaches These are a collection of different methods that compare one worker's performance with that of his/her co-workers. Comparative appraisals are usually conducted by supervisors. As these appraisals can result in a ranking from best to worst, they are useful in deciding merit-pay increases, promotions and organisational rewards. The usual comparative forms used in this kind of evaluation are the ranking method and the paired comparison method.

Ranking Method In this, the superior ranks his or her subordinates in the order of their merit, starting from the best to the worst. All that the HR department knows is that A is better than B. The, 'how' and 'why' are not questioned, nor answered. No attempt, is made to fractionalise what is being appraised into component elements. This method is subject to the halo and recency effects, although rankings by two or more raters can be averaged to help reduce biases. Its advantages include ease of administration and explanation. Paired-comparison Method Under this method the appraiser compares each employee with every other employee one at a time. For example there are five employees named A, B. C. D and E. The performance of A is first compared with the performance of B and a decision is made about whose performance is better. Then A is compared with C. D and E in that order. The same procedure is repeated for other employees. The number of comparisons may be calculated with the help of a formula which reads thus: N(N-1)/ 2 where N stands for the number of


employees to be compared. If there are 10 employees, the number of comparisons will be 10(10-1)/2 = 45. After the completion of comparison, the results can be tabulated and a rank is created from the number of times each person is considered to be superior. Future-oriented Appraisals Is it not enough if only the past performance is assessed . How an employee can perform in the days to come is equally important. This can be assessed by focusing on employee potential or setting future performance goals. The commonly used futureoriented techniques are MBO, psychological appraisals, and assessment centres. MANAGEMENT BY OBJECTIVES It was Peter F. Drucker who first gave the concept of MBO to the world way back in 1954 when his The Practice of Management was first published. The MBO concept, as was conceived by Drucker, reflects a management philosophy which values and utilizes employee contributions. Application of MBO in the field of performance appraisal is a recent thinking. Four Steps in the MBO Process How MBO works can be described in four steps: The first step is to establish the goals each subordinate is to attain. In some organisations, superiors and subordinates work together to establish goals. In others. Superiors establish goals for subordinates. The goals typically refer to the desired outcome to be achieved. These goals can then be used to evaluate employee performance. The second step involves setting the performance standard for the subordinates in a previously arranged time period. As subordinates perform, they know fairly well what there is to do, what has been done, and what remains to be done. In the third step, the actual level of goal attainment is compared with the goals agreed upon. The evaluator explores reasons for the goals that were not met and for the goals that were exceeded. This step helps determine possible training needs. It also alerts the superior to conditions in the organization that may affect a subordinate but over which the subordinate has no control. The final step involves establishing new goals and, possibly new strategies for goals not previously attained. At this point, subordinate and superior involvement in goalsetting may


change. Subordinates who successfully reach the established goals may be allowed to participate more in the goal setting process the next time. The process is repeated. As with other approaches. MBO too has been criticised. One comment made against the approach is that it is not applicable to all jobs in all organisations. Jobs with little or no flexibility. Such as assembly-line work, are not compatible with MBO. An assembly-line worker usually has so little job flexibility that the performance standards and objectives are already determined. The MBO process seems to be most useful with managerial personnel 'and employees who have a fairly wide range of flexibility and self control in their jobs. Besides, when the result of an MBO system are to be used to allocate organisational rewards, employees may be less likely to establish challenging goals-goals they are confident that they can accomplish. Further, the allocation of merit pay on a semi-annual or annual basis may encourage the setting up of goals with short time horizons to the disadvantage of important long-term goals. The performance appraisal presently followed in L&T reflects the principles of MBO. Psychological Appraisals Large organization employs full-time industrial psychologists. When psychologists are used for evaluations. They assess an individuals future potential and past performance. The appraisal normally consists of in-depth interviews, psycho1ogical tests. Discussions with supervisors and a review' of other evaluations. The psychologist then write an evaluation of the employee's intellectual, emotional, motivational and other-related characteristics that suggest individual potential and may predict future performance. The evaluation by the psychologist may be for a specific job opening for which the person is being considered. Or it may be a global assessment of his or her future potential. From these evaluations. Placement and development decisions may be made to shape the person's career. Because this approach is slow and costly, it is usually required for bright young members who, others think. May have considerable potential within the organisation. Since the quality of the appraisal depends largely on the skills of the psychologists, some employees object to this type of evaluation, especially if crosscultural differences exist.





ASSESSMENT CENTRES Mainly used for executive hiring, assessment centre are now "being used for evaluating executive or supervisory potential. An assessment centre is a central location where managers may come together to have their participation in job-related exercise evaluated by trained observers. The principal idea is to evaluate managers over a period of time say one to three days, by observing (and later evaluating) their behaviour across a series of select exercises or work samples. Assesses are requested to participate in in-basket exercises, work groups (without leaders), computer simulations, role paying, and other similar activities which require the same attributes for successful performance, as in the actual job. After recording their observations of ratee behaviors, the raters meet to discuss these observations. The decision regarding the performance of each assessee is based upon this discussion of observations. Self-appraisal and peer evaluation are also thrown In for final rating. The characteristics assessed in a typical assessment centre include assertiveness, persuasive ability, communicating ability, planning and organisational ability, self confidence, resistance to stress, energy level, decision making, sensitivity to the feelings of others, administrative ability, creativity and mental alertness. It is a formidable list which is quite difficult to measure accurately over three days, though there would be sizable number of trained observers and psychologists. First developed in the US and the UK in 1943, the assessment centre is gaining popularity in our country, Crompton greaves, Facher, HLL and Modi Xerox are using the technique with results being highly positive. 360-DEGREE FEEDBACK As stated earlier, where multiple raters are involved in evaluating performance, the technique is called 360 degree appraisal. The 360 degree technique is understood as systematic collection of performance data on an individual or group, derived from a number of stakeholders--the stakeholders being the immediate supervisors. Team members, customers, peers, and self. In fact, anyone who has useful information on how an employee does the job may be one of the appraisers. The 360-degree appraisal provides a broader perspective about an employee's performance. In addition, the technique facilitates greater self-development of the employees. For one's development, multi-source feedback is highly


useful. It enables an employee to compare his or her perceptions about self with perceptions of others. Besides, the 360-dcgree appraisal provides formalized communication links between an employee and his or her customers. It makes the employee feel much more accountable to his or her internal or external customers. The technique is particularly helpful in assessing soft skills possessed by employees. By design, the 360-degree appraisal is effective in identifying and measuring interpersonal skill, customer satisfaction, and team-building skills. However, there are drawbacks associated with the 360-degree feedback. Receiving feedback on performance from multiple sources can be intimidating. It is essential that the organisation create a non - threatening environment by emphasizing the positive impact of the technique on an employee's performance and development. Further, firms that use the technique take a long time on selecting the rater, designing questionnaires, and analyzing the data. In addition; multiple raters are less adept at providing a balanced and objective feedback than the supervisors who are sought to be replaced. Raters can have enormous problems separating honest observations from personal differences and biases. Pitfalls notwithstanding, more and more number of firms are using the 36O-degree appraisal technique to assess the performance of their employees. APPRAISE THE PERFORMANCE The next step in the appraisal process is to measure the performance. We revert to the moral of the story narrated in the beginning of this chapter. The moral taught us that we need to measure the performance and not mere activities. What then is performance? Performance is essentially what an employee does or does not do. Employee performance common to most jobs include the following elements: Quantity of output Quality of output Timeliness of output Presence at work Cooperativeness


In addition to these, other elements that deserve assessment are job knowledge, leadership abilities, judgement, supervision, versatility and health. Assessment should also include one's potential to perform and not just actual performance. Performance measurement needs to be based on the benchmarks listed above. These benchmarks vary from job to job. The job of a professor needs to be assessed against parameters that are different to those used to evaluate the performance of a sales representative. PERFORMANCE INTERVIEW Performance interview is another step in the appraisal process. Once appraisal has been made of employees, the raters should discuss and review the performance with the ratees, so that they will receive feedback about where they stand in the eyes of superior. Feedback is necessary to effect improvement in performance, especially when it is inadequate. Specifically, performance interview has three goals: (i) to change behavior of employees whose performance does not meet organisational requirements or their own personal goals. (ii) To maintain the behaviour of employees who perform in an acceptable manner and (iii) to recognize superior performance behaviours so that they will be continued. Raters offer feedback to the ratees through several methods-tell and sell, tell and listen, problem solving and mixed. In tell and sell, also called directive interview, the interviewer let assesses know how well they are doing and sells them on the merits of setting specific goals for improvement, if needed. The tell and listen interview provides the subordinates with chances to participate and establish a dialogue with their superiors. Its purpose is to communicate the rater's perceptions about the ratee's strength and weaknesses and let the subordinates respond to these perceptions. In the problem solving or participative interview, an active and open dialogue is established between the superior and the subordinate. Not only are perceptions shared, but also solutions to problems are presented, discussed, and sought. Mixed interview is a combination of tell and sell and problem solving interviews. Whatever be the approach followed, the emphasis in the interview should be on counseling and development and not on criticism, witch-hunting and buck passing. Because of the


significance of appraisal interview, every effort must be made to make it effective. Guidelines given in Table below will help make the interview successful. GUIDELINES FOR EFFECTIVE APPRAISAL INTERVIEW Select a good time Minimize interruptions Welcome, set at ease Start with something positive Ask open ended questions to encourage discussion Listen Manage eye contact and body language Be specific Rate behaviour, not personality Layout development plan Encourage subordinate participation Complete form Set mutually agreeable goals for improvement End in a positive, encouraging note Set time for any follow up meetings

USE OF APPRAISAL DATA The final step in the evaluation process is the use of evaluation data. The data and information generated through performance evaluation must be used by the HR department. It may be recollected that the most significant rewards employers offer to employees are: 1. 2. 3. 4. Money to purchase goods and services required not only for current and future survival, but also for the luxuries modern life has to offer. The opportunity to use innate and learned skills and talents in a productive manner that the individual and his or her managers and co-workers recognize as valuable. Opportunities to interact with other people in a favorable working environment. Opportunities to learn, grow, and make full use of their potential.


5. 6.

A sense of performance and stability through the continuing existence of the organisation and the job. The opportunity to perform work assignments within an environment that not only protects. But promotes physiological, emotional and psychological health.

In one way or another, data and information outputs of a performance-appraisal programme can critically influence these coveted employer-employee reward opportunities. Specifically, the data and information will be useful in the following areas of HRM: I. Remuneration administration 2. Validation of selection programmes 3. Employee training and development programmes 4. Promotion, transfer and lay-off decisions 5. Grievance and discipline programmes 6. HR planning EDWARD DEMING ON PERFORMANCE APPRAISAL Towards the end of this section, it is worthwhile to note Edward Deming's views on performance evaluation. Deming is opposed to employee assessment, because it: I. Rewards people for manipulating the system rather than improving it, 2. Is often self-defeating, 3. Is inconsistent with team-work, 4. Acts as a substitute for proper management, and 5. Is inherently unfair. His alternatives to performance appraisal are: 1. 2. 3. 4. 5. Meticulous selection of leaders, Educating workers about their obligations, and improved training and education after selection, Getting leaders to function as colleagues rather than as judges, Subordinate performance to be assessed using statistical data, Three to four hours interview annually, with subordinates aimed at support and encouragement, and


6. Accommodation to lone workers. CHALLENGES OF PERFORMANCE APPRAISAL With the increased significance of performance appraisal, challenges confronting the system are mounting. One serious challenge facing the performance appraisal system relates to assessment of self-managed teams. Popularly called empowered teams, these self-managed teams create special challenges for performance appraisal-empowered teams perform without supervisors. Historically, if one recalls, it is the supervisor who assesses the performance of his or her subordinates. Another challenge is that both, individual and team performance, need to be measured. A suitable device needs to be developed to assess the performance of empowered teams because more and more firms use such teams to enhance productivity. Figure below contains a typical model of team appraisal.

The Following table contains challenges of Performance Appraisal Challenges of Appraisal: Create a culture of excellence that inspires every employee to improve and lend himself or herself to be assessed Align organizational objectives to individual aspirations Clear growth paths for talented individuals

Provide new challenges to rejuvenate careers that have reached the plateau stage Forge a partnership with people for managing their careers Empower employees to make decisions without the fear of failing Embed teamwork in all operational processes Debureaucratise the organization structure for ease of flow of information.


Research Problem


To study the level of satisfaction of the employees of HONDA SEIL with the performance appraisal system.

PROBLEM FORMULATION To study the Performance Appraisal System at HONDA SEIL OBJECTIVES OF THE STUDY: 1. 2. To know about the techniques used and the existing steps Taken for appraising the performance of employees in HONDA SEIL. To know the perception of employees regarding the performance appraisal system.




Descriptive research design has been used. It includes survey and fact finding enquiries of different kinds. The main purpose of descriptive research is to describe the state of affair. SAMPLING DESIGN Sampling Technique: Random Sampling is used. The implication of random sampling is that it gives each element in the population equal probability of being selected and all choices are independent of one another Sampling unit Sampling unit Sampling Area : : : 100 Employees


LIMITATIONS While preparing this project, certain factors have been hampering as it was not possible to control them. They have posed limitations to varying extents .The significant ones have been: The respondents were not ready to answer and did not respond to all queries. Time was one of the major constraint for the study. As no study is 100% authentic, so there might be some problems regarding facts and figures drawn out of study. The company maintains privacy in certain aspects of the system and these are not divulged.





Strongly Agree(5) Agree (4) Neither agree nor disagree (3) Disagree (2) Strongly Disagree (1)

30 38 4 18 10

Strongly Agree Agree Disagree Strongly Disagree Neither agree nor disagree

Mean:- 3.60 Findings: Above mean score of 3.70 states that people agree with the statement that the present appraisal system is clear to them.



THE PRESENT APPRAISAL SYSTEM IS HELPFUL FOR THE INDIVIDUAL DEVELOP MENT. Strongly Agree (5) Agree (4) Neither agree nor disagree (3) Disagree (2) Strongly Disagree (1) 16 40 2 20 22

Strongly Agree Agree Disagree Strongly Disagree Neither agree nor disagree

Mean :-3.08 FINDINGS: Above mean score of 3.08 states that people have no clear views on the statement that the present appraisal system is helpful for individual development, they are neither agree nor disagree with the statement.



No. of Responses: Strongly Agree (5) Agree (4) Neither agree nor disagree (3) Disagree (2) Strongly Disagree (1) 20 22 4 26 28

Strongly Agree Agree Disagree Strongly Disagree Neither agree nor disagree

Mean:-2.80 FINDINGS: Above mean score of 2.80 states that people are neither agree nor disagree with the system that the P.A.S is able to motivate them.




SUFFICIENT FOR APPRAISING THE EMPLOYEE. No. of responses: Strongly Agree (5) Agree (4) Neither Agree nor disagree (3) Disagree (2) Strongly Disagree (1) 20 24 2 24 30

Strongly Agree Agree Disagree Strongly Disagree Neither Agree nor disagree

MEAN:-2.80 FINDINGS: Above the mean score of 2.80 state that people have no clear views on the statement that the parameters of P.A.S are sufficient for appraising employees.


Q5. PERFORMANCE APPRAISAL POLICY SHOULD BE EVALUATED AFTER A FIXED DURATION. No. of responses : Strongly agree (5) Agree (4) Neither agree nor disagree (3) Disagree (2) Strongly disagree (1) 35 48 2 10 5

Strongly agree Agree Disagree Strongly disagree Neither agree nor disagree


Mean:-3.98 FINDINGS: Above mean score of 3.98 states that people agree with the statement that appraisal policy should be evaluated after a fixed duration.

Q6. PERFORMANCE APPRAISAL SYSTEM IS THE BEST WAY TO INCREASE JOB SATISFACTION & JOB PERFORMANCE No. of responses: Strongly agree Agree Neither agree nor disagree Disagree Strongly disagree 20 40 2 20 18


Strongly agree Agree Neither agree nor disagree Disagree Strongly disagree

Mean:-3.24 FINDINGS: Above mean score of 3.24 states that people are neither agree nor disagree that the P.A.S system is the best way to increase job satisfaction and job satisfaction.



Accordingly to you which type of parameter should be preferred by the organization in the appraisal of the employees? 10 40 20 10 20

Proper Work Regularity Skills/ Technique Communication skills Interpersonal relationship

Proper Work Regularity Skills/ Technique Communication

FINDINGS: The maximum people i.e 40% want to take regularity should be preferred.



Performance Appraisal policy should be clear and transparent?

Strongly Agree Agree Disagree Strongly disagree Neither agree nor disagree

30 44 15 10 1

Strongly Agree Agree Disagree Strongly disagree Neither agree nor disagree

Mean:-3.69 FINDINGS: Above mean score of 3.69 states that the people are with the statement that performance appraisal policy should be clear and transparent.


Q9. WHETHER PERFORMANCE APPRAISAL HELP IN DETERMINING THE TRAINING NEEDS. No. of responses: Strongly agree Agree Neither agree nor disagree Disagree Strongly disagree 25 40 5 20 10

Strongly agree Agree Neither agree nor disagree Disagree Strongly disagree



FINDINGS: Above mean score of 3.50 states that people are neither agree nor disagree with the statement that performance appraisal help in overcoming training needs.



WHETHER EMPLOYEES ARE AWARE OF THEIR PERFORMANCE APPRAISAL RECORDS. No. of Responses: Strongly agree Agree Neither agree nor disagree Disagree Strongly disagree 10 20 5 45 20

Strongly agree Agree Neither agree nor disagree Disagree Strongly disagree

Mean:-2.55 FINDINGS: Above mean score 2.55 state that people are disagree with the statement that they are aware of their appraisal records.


Q11. DO YOU THINK THAT PERFORMANCE APPRAISAL SYSTEM IS AFFECTED BY FAVORITISM? Strongly agree Agree Neither agree nor disagree Disagree Strongly disagree 10 30 4 36 20

Strongly agree Agree Neither agree nor disagree Disagree Strongly disagree

Mean:- 2.74 FindingsAbove the mean score 2.74 implies that the people are neither agree nor disagree with the statement that the appraisal system is affected by favoritism.


CONCLUSION After going through the questionnaire we came with the conclusion that the present appraisal system in HONDA SEIL is quite satisfactory. The scheme is clear to the employees and it is helpful for an individual development. But there are certain loopholes also The basic loophole in the scheme observed by us is that the present appraisal system is not at all transparent and is unable to motivate the employees as they are not aware of their appraisal records. Job parameters are not explicitly laid down in the beginning of the year or through mutual consent between the appraiser and the appraisee which has been the central consideration in the existing scheme.


RECOMMENDATION 1. The parameters are to be defined by the superiors at beginning of the year & should define the future course of action. 2. Employees should have the right to know the feedback.


BIBLIOGRAPHY Website consulted: www.HONDA Books consulted:


QUESTIONNAIRE PERFORMANCE APPRAISAL SYSTEM YOUR PERSONAL DETAILS NAME: DESIGNATION: NO. OF WORKING YEAR IN HONDA SEIL: Q1. The objectives of present appraisal system are clear to me. ( employees): a) Strongly Agree c) Disagree Q2. b) Agree d) Strongly disagree

The present performance appraisal system is helpful for individual development. a) Strongly Agree c) Disagree b) Agree d) Strongly disagree


The present appraisal system is able to motivate the employees. a) Strongly Agree c) Disagree b) Agree d) Strongly disagree


The parameters of present appraisal systems are sufficient for appraising the employee. a) Strongly Agree c) Disagree b) Agree d) Strongly disagree

Q5. a) Strongly Agree c) Disagree b) Agree d) Strongly disagree



Performance appraisal procedure allows appraiser to express his developmental needs a) Strongly Agree c) Disagree b) Agree d) Strongly disagree


Performance appraisal policy should be evaluated after a.fixed duration. a) Strongly Agree c) Disagree b) Agree d) Strongly disagree


Accordingly to you which type of technique should be used say the organization in the appraisal of employee? a) Proper Work b) Regularity c) Skills/Technique d) Communication

Q.10 Performance Appraisal policy should be clear and transparent? a) Strongly Agree b) Agree c) Disagree d) Strongly disagree THANKS