ONGC

PERFORMANCE APPRAISAL IN ONGC

EXECUTIVE SUMMARY

Oil and Natural Gas Corporation Limited (ONGC) is engaged in the business of exploration and drilling of crude oil and natural gas and is the worlds second biggest exploration and production company ONGC owns and operates more than 11000 kilometers of pipelines in India, including nearly 3200 kilometres of sub-sea pipelines. The company contributes more than 78% of Indias oil and gas production. Today, ONGC is the flagship company of India; and making this possible is a dedicated team of nearly 40,000 professionals who toil round the clock. It is this toil which amply reflects in the performance figures and aspirations of ONGC. The company has adapted progressive policies in scientific planning, acquisition, utilization, training and motivation of the team. At ONGC everybody matters, every soul counts. ONGC has a unique distinction of being a company with in-house service capabilities in all the activity areas of exploration and production of oil & gas and related oil field services. Needless to emphasize, this was made possible by the men & women behind the machine. Over 18,000 experienced and technically competent executives mostly scientists and engineers from distinguished Universities/Institutions of India and abroad form the core of our manpower. They include geologists, geophysicists, geochemists, drilling engineers, reservoir engineers, petroleum engineers, production engineers, engineering & technical service providers, financial and human resource experts, IT professionals and so on. This report concentrates on the study of the performance appraisal system being practiced in ONGC and to check its effectiveness and further to suggest and recommend any possible ways to improve and strengthen its PMS.

INTRODUCTION TO THE INDUSTRY

The India Petroleum Industry is a case in point for exhibiting the giant leaps India has taken after its independence towards its march to attain a self-reliant economy. During the Independence era of 1947, the India Petroleum Industry was controlled by foreign companies and Indias own expertise in this sector was limited. Now, after 60 years, the India Petroleum Industry has become an important public sector undertaking with numerous skilled personnel and updated technology that is comparable to the best in the world. The vim and the achievement during these years is the growth of productivity in petroleum and petroleum-based products. Even the consumption has multiplied itself nearly 30 times in the post-independence era. An important advancement in the petroleum industry came with the Industrial Policy Resolution, 1956 which signified the promotion of growth of industries. The ONGC originally set up as a Directorate in 1955, was transformed into a Commission in 1956. In 1958, the Indian Refineries Ltd., a government undertaking, came into existence. The Indian Oil Company (IOC), also a government undertaking, was set up in 1959 with the purpose of marketing petroleum-related products. Indian Oil Corporation Ltd. was formed in 1964 with the merger of the Indian Refineries Ltd. and the Indian Oil Company Ltd. Presently, 17 refineries operate under the India Petroleum Industry.

OVERVIEW OF ONGC LTD:

Born as a modest corporate entity within serene Himalayan settings on 14 th August 1956 as Commission, Oil and Natural Gas Corporation Limited (ONGC), has grown into a full fledged horizontally integrated upstream petroleum company. Today, ONGC is a flagship public sector enterprise and Indias highest profit making corporate, which has achieved the landmark since inception, ONGC has produced more than 600 million metric tonnes of crude oil and supplied more than 200 billion cubic meters of gas, thus fuelling Indias economy.

GLOBAL RANKING
ONGC ranks as the Numero Uno Oil & Gas Exploration & Production (E&P) Company in Asia, as per Platts 250 Global Energy Companies List for the year 2007. ONGC ranks 23rd Leading Global Energy Major amongst the Top 250 Energy Majors of the World in the Platts List based on outstanding performance in respect of Assets, Revenues, Profits and Return on Invested Capital (RIOC) for the year 2007. ONGC is the only Company from India in the Fortune Magazines list of the Worlds Most Admired Companies 2007. ONGC is 9th position in the Industry of Mining, crude oil production.

AIMS OF THE STUDY:

To study the Performance Appraisal System of ONGC. To find the important factors that is taken into consideration for Performance Appraisal.

VISION, MISSION AND OBJECTIVE ONGC VISION

To be a world class Oil and Gas Company integrated in energy business with dominant Indian leadership and Global presence.

ONGC MISSION

Dedicated to excellence by leveraging competitive advantages in R&D and technology with involved people. Imbibe high standards of business ethics and organizational values. Abiding commitment to safety, health and environment to enrich quality of community life. Foster a culture of Trust, openness and mutual concern to make a stimulating and challenging experience for our people. Strive for customer delight through quality products and services.

OBJECTIVES OF THE COMPANY

To maximize production of hydrocarbon, self reliance in technology, promoting indigenous efforts to achieve self reliance in technology, promoting indigenous efforts to achieve in all related equipment, material and services. Assist in conservation of oil, more efficient use energy and development of alternate source of energy. Environmental protection Observe 100% safety in work.

SWOT ANALYSIS STRENGTHS

A) O.N.G.C LTD is perceived to be the leader in oil production industry. B) O.N.G.C has a very efficient and professional management team.
C) O.N.G.C being an international company has sufficient resources and capital to invest.

D) O.N.G.C has ISO-9001 & ISO 14001 registration.

WEAKNESSES
A) O.N.G.C facing difficulties to produce oil from aging reservoirs.

OPPURTUNITY
A) Energy utilization of buried coal resource (700 -1700M), estimated 63BT Equivalent to 15000 BCM. B) O.N.G.C facing difficulties to produce oil from aging reservoirs.

THREATS
A) Security of personnel & property especially crude oil continues to be a cause of concern in certain area. B) In some exploration Campaign Company involves high technology, high technology, High investment and high risk.

HR VISION, MISSION AND OBJECTIVE

HR VISION
"To attain organizational excellence by developing and inspiring the true potential of companys human capital and providing opportunities for growth, well being and enrichment".

HR MISSION
"To create a value and knowledge based organization by inculcating a culture of learning, innovation & team working and aligning business priorities with aspiration of employees leading to development of an empowered, responsive and competent human capital".

HR OBJECTIVES
To develop and sustain core values To develop business leaders for tomorrow To provide job contentment through empowerment, accountability and responsibility To build and upgrade competencies through virtual learning, opportunities for growth and providing challenges in the job To foster a climate of creativity, innovation and enthusiasm To enhance the quality of life of employees and their family To inculcate high understanding of 'Service' to a greater cause

HR Strategy

To meet challenging demands of the business environment, focus of the HR strategy is on change of the employees mind set. Building quality culture and resources. Re-engineering and redeployment for maximizing utilization of HR potential . To build and upgrade competencies through virtual learning, opportunities for growth and providing challenges in the job. Re-strengthening mutual faith, trust and respect. Inculcating a spirit of learning & enjoying challenges.

Role of HR
Alignment of HR vision with corporate vision. Shift from support group to strategic partner in business operations. HR as a change agent. Enhance productivity and performance by developing employee competency and potential. Developing professional attitude and approach. Developing Global Managers for tomorrow to ensure the role of global players.

Measuring HR Performance
HR Parameters have been incorporated in the MOU by ONGC since 1994-95 to systematically and scientifically evaluate effectiveness of HR Systems, which enables and facilitates time bounds initiatives

Challenges faced by Oil and Gas Industry

The oil and gas industry is totally a global industry. However, its underlying importance in Indias growth cannot be ignored. Current business scenario has raised many challenges for oil and gas industry and policy makers. In order to acquire and sustain competitive advantage, companies need to continuously innovate; un-learn; learn; restructure; and improve their core and support processes. It is not just enough to manage current processes; but go beyond the existing model and framework to question and reassess how value is created and delivered. Functional area challenges must be unique for this unique and growing industry.

STRATEGIC VISION
For focusing on core business of E&P, ONGC has following Objectives: To double Reserves. To improve average recovery from 28% to 40%.

The focus of management will be to monetize the assets as well as to assetise the money.

GLOBALIZATION
ONGC operations are being internationalized with a view to acquiring exploration acreage and access to oil in other basics world over in line with the over strategy followed by international oil companies .ONGC Videsh Limited .a subsidiary of ONGC , is managing the overseas ventures.

PERFORMANCE APPRAISAL
Performance appraisal can be defined as the process of evaluating the performance of an employee & communicating the result of the evaluation to him for the purpose of rewarding & developing the employee. According to Michael Armstrong Performance appraisal is a formal assessment & rating of individual by their managers at usually at annual review meeting.

Performance can be defined as the degree of accomplishment of tasks by an employee in his job. In some organizations it is measure of the result achieved & target accomplished whereas in others, it is a measure of employee efforts & behaviour. However most organizations use a combination of both efforts & results. Performance appraisal is also termed as performance review, annual review & annual appraisal.

THE APPRAISAL PROCESS

1. The first step in the appraisal performance process is the determination of standard of performance based on the organizational objectives & job descriptions. 2. The next step of performance appraisal is the measurement of employees performance against the pre-determined goal & standards. 3. The next step is the actual process of measurement. Performance appraisal has to be a continuous process & feedback should be given to the employee at regular intervals. 4. The next step is the very critical step & involves communicating the result of the appraisal to the employee concerned. 5. Once appraisal is finalized after discussing it with the employees, it have to be put effective use.

MAJOR PLAYERS IN PETROLEUM

Indian Oil corporation ONGC Reliance Industries NTPC Hindustan Petroleum Bharat Petroleum TCS

PERFORMANCE APPRAISAL METHODS

1. Management by objective or goal setting. 2. Graphic rating scale. 3. Work standard approach. 4. Essay appraisal. 5. Critical incidence method. 6. Forced choice rating method. 7. Point allocation method. 8. Ranking method. 9. Check list. 10. Behavioural anchored rating scale.(BARS)
11. 360 degree performance appraisal.

12. Team appraisal. 13. Balanced scorecard method.

MANAGEMENT BY OBJECTIVE (MBO)

The main aspect of MBO is clear & well defined goals, a definite time span to achieve the goals, action plan & finally, timely & constructive feedback. It is also called a goal setting approach; MBO is more commonly used for managers & professionals.

GRAPHIC RATING SCALE

This method of appraisal requires the rater to rate the employee on factors like quantity & quality of work, job knowledge, dependability, punctuality, attendance etc. This method is also used for performance appraisal of employees. They check their employees daily by using this method.

WORK STANDARD APPROACH

This method of appraisal is more suitable in a manufacturing scenario, where the goals are pre determined work standard. These work standards can be set based on the average output of a typical employee in the organization or by bench marking against the work standard of a competitor in a similar business.

ESSAY APPRAISAL
In the essay appraisal method, the appraiser prepares a document describing the performance of the employees. Questions or guidelines are provider to the appraiser based on which analyses & describes the employees performance.

CRITICAL INCIDENT METHOD

In this method of performance appraisal, the appraiser makes a note of all the critical incident that reflect the performance & behaviour of the employee during the appraisal period. These are recoded as & when they occur & can demonstrate either positive or negative traits or performance.

FORCED CHOICE RATING METHOD

In this method the appraiser is required to assign ranks to different attributes are all seemingly positive, but have different weights which are unknown to the appraiser. Once the employees attributes are ranked the human resource department applies the weights & arrives at a score which is the final appraisal score.

POINT ALLOCATION METHOD

In this method of appraisal, the appraiser has to allocate points to different members in his team. He has at disposal, a specific number of points which he has to distribute among his team members, based on their performance during the appraisal period.

RANKINNG METHOD
There are three commonly used methods of ranking namely alternation, paired comparison & forced distribution. The first two methods are used when there are only a

few employees to be ranked, whereas forced distribution method is used in large companies which have thousands of employees.

CHECKLIST
In this method the rater has to respond yes or no to a set of questions which assess the employees performance & behaviour. Normally weights are attached to each of these questions based on which the final appraisal score of the employee is calculated.

BEHAVIOUR ANCHORED RATING SYSTEM (BARS)

BARS concentrates on the behavioural traits demonstrated by the employees instead of his actual performance. Some of the other methods like graphic rating scale & checklist also measure the behaviour based on the assumption that desirable behaviour result in effective performance.

360 DEGREE PERFORMANCE APPRAISALS

A 360 degree appraisal system aims at a comprehensive & objective appraisal of employee performance. In a 360 degree appraisal system the employees performance is evaluated by his
supervisor, his peers, his internal external customers, his internal external suppliers & his subordinates. This system reduces the subjectivity of a traditional supervisor appraisal.

TEAM APPRAISAL
In the new economy era, where team work is essential for any venture to succeed, team appraisal has emerged as one of the best tool for the performance management. In the team appraisal method the individual team member evaluate their colleagues in the team & provide feedback.

BALANCED SCORECARD
The balanced scorecard as a method of measuring performance channelizes the efforts of people to achieve organizational goals. The implementation of balanced scorecard involve formulating a strategy & deciding what each employee needs to do to achieve the objectives based on strategy.

PERFORMANCE APPRAISAL SYSTEM AT ONGC

Performance appraisal report is an index of an employees work performance over a given period of time. It is crucial for his or her career growth as it indicates the strengths, weaknesses, training needs, nature of job being performed and problems faced in work situation.

The objectives of the performance appraisal system at ONGC are: To set norms and targets of work performance, as well as, to monitor the work progress of employees. To facilitate placement of employees in accordance with their suitability for different types of assignments. To provide an objective basis for determination of merit, efficiency and suitability for the purpose of promotion. To identify areas requiring exposure for training and development.

The performance appraisal system seeks to evaluate:

The work performance of an employee on the present job in relation to the expected levels of performance, both qualitative and quantitative.
The extent of development achieved by the employee during the period under review.

Evaluation of behavioural attributes attitudes and abilities. Evaluation of potentials for assuming higher responsibility.

The appraisal covers:

Performance during the period from 1st April to 31st March of every year. All regular employees of the company. a) Non Executives. b) Executives

RESEARCH METHODOLOGY

RESEARCH DESIGN The present investigation is descriptive type of study undertaken to estimate the effectiveness of the performance appraisal system of ONGC Ltd. The present study identifies views of employees of different levels and disciplines. They have divided the whole sample into various groups on various criterions like age, experience, discipline, and management level. To do the better analysis these groups are further incised as

Age
Age less than 40 years Age between 40-50 years Age above 50 years Age not provided

Experience
Experience less than 10 years Experience between10- 20 years Experience between20- 25 years Experience between25- 30 years Experience above 30 years

Discipline
Finance Geo Sciences HR Production Technical and Engineering

Managerial Level
Junior Management(E0 - E2) Middle Management(E3 E4)

Senior Management (E5 and above)

MAJOR FINDINGS

Performance Appraisal System in ONGC is not transparent. Appraisers are usually unbiased. Employees are not able to know their actual position after the appraisal. The management is serious about the appraisal process.
The appraisal process provides them an opportunity for development and growth.

Relations with the superior affect the evaluation. Greater weight age is given to the recent performances. There are fixed standards to evaluate the performance but those are not clear due to the subjectivity of the topic. Raters know how to conduct the appraisal. Raters are not that much concerned about the varied needs of people at levels of experience and background. Superior-subordinate relations are good. Superior helps them set and achieve meaningful goals. This makes the environment amiable and congenial.

Performance appraisal sheet is lucid and easy to understand and fill. The parameters used to appraise the potential are ample. The system being not so transparent, employees are unable to identify the performance gaps in order to prepare for the future. Individual feedback is not provided. The management helps provide an atmosphere where all are encouraged for comradeship and teamwork. Appreciation is provided for the good job done. The appraisers are generally aware about their subordinates and their talents and potential. Most of the raters have the ability to give constructive criticism in a friendly, firm and positive manner. Employees dont have the opportunity to respond to the appraisal result. Employees are being rated on their knowledge and skills.
Majority of people want that there should be some incentives based on performance.

Employees are not provided with the genuine feedback. Appraisal counselling is considered beneficial for future developments. Management doesnt bother much about the training requirements mentioned in the appraisal sheet. Most of the employees want that 360o feedback system should be introduced.

PORTERS 5 FORCE MODEL Threat of new entrants:

Due mostly to the industry that ONGC is in, its hard for there to be many new entrants. The only real threat that might arise would be another government funded Oil and Gas company. The reason for this is that a government would not have as hard a time raising funds and gaining access to resources. This is assuming that the company would be researching and developing on domestic soil. The only other threat may not be from new entrants but from smaller competitors who already have access to resources and distribution channels. There is really not much of a threat because there are two main barriers to entry that would be stopping potential threats. These would be very high capital requirements as well as access to Cost disadvantages independent of scale. Even though this industry if very attractive because of the high profits it would be very hard for a company to have enough capital to get in the market. Every part of Oil and Gas Exploration and Development is costly and not something that would be worth the costs as a new entrant into the industry. Going along with the high cost of capital are the cost disadvantages. The companies already in the industry already have the access to raw materials as well as desirable locations. This is something that would be very difficult for a new entrant to try and gain.

Bargaining Power of Suppliers:

ONGC is a vertically integrated company that really deals in all areas from finding the product to refining the product to selling the product. With this being said there is not much to worry about the bargaining power of the suppliers. Supplier power is high as the net margins are strongly dependent on the price of the crude. Due to crude price volatility and supply risks, a lot of the Indian companies are integrating backwards into E&P activities.

Bargaining Power of Buyers:

Not too critical for most companies as refining operations are a part of the complete supply chain, with the refining operations supplying the product to the marketing company. However in case of standalone companies (which may no longer apply) long term contracts have to be signed with the marketing companies. The margins in such cases are dependent on such long term contracts. The industry that ONGC is a part of is different than many other industries. It is different in the fact that people really cannot go without their product. While over a long period of time it may be possible to find other fuels it is not really feasible in the short term. This has been seen in the US in the last few years. Gas companies can keep the prices high and consumers will still pay the high prices. When looking at the individual buyer they have almost no bargaining power because they are only buying such an extremely small portion of the industries total output. Another reason for this lack of bargaining power is that as of right now there is not a real alternative to Oil. All of these reasons make it very hard for the buyer to have much bargaining power at all.

Threat of Substitutable Products:

Although gas, solar power etc exist as substitutes, none of them are big enough to impact the demand of the petroleum products. As stated above there is not a real alternative to oil at this time. There is research being done to try and find substitutes. With the price of oil as high as it is at this time, it is only giving more reason to try and find other fuel sources. This is where the main players in this market must be careful. The prices are staying fairly high now because people really dont have a choice and must pay. If other fuel sources do come out that are less costly, many people will go towards those alternatives. It does not seem that at this time there is a huge threat of this happening but it is definitely a possibility that any player in the market must be aware of.

Intensity of Rivalry among Competitors:

The rivalry in the industry was low till as the industry was tightly regulated by the government. However, the level competition has increased with Reliance and other MNC becoming more aggressive. The largest competitors in this industry for ONGC are Exxon Mobile and Royal Dutch Shell. ONGC is currently in 14 different companies whereas Exxon Mobile is in 20 different countries. While Exxon may be a larger company now ONGC is growing and is becoming a very important global player.

STRATEGIC DECISIONS
Strategic decisions taken by ONGC o ONGC changed from a Commission to a company. o ONGC appointed MC Kinsey as a consultant for complete revamping and restructuring of the organization. o ONGC expanded its global operation through its subsidiary OVL. ONGC bought 71% stake in the MRPL refinery. o ONGC decided to acquire equity oil abroad through the endeavours of the OVL. Human resource development.

OPERATIONS:

ONGC to sign 17 oil, gas contracts

Oil and Natural Gas Corporation (ONGC) along with its partners will sign contracts for half of the 34 oil and gas blocks awarded in the latest round of auction under the New Exploration Licensing Policy (NELP) on Wednesday. Of the 70 blocks offered in NELPVIII, companies bid for only 36 blocks. ONGC and its partner won 17 areas out of their bidding for a maximum of 25 blocks.

ONGC to finalize Rs800 crore shipbuilding contract in a week

Bangalore: Indias biggest oil exploration company, the state-owned Oil and Natural Gas Corp. Ltd (ONGC), is expected to name within a week the winner of a tender to build 12 ships that will support its oil drilling operations. ONGC has budgeted about Rs800 crore for the purchase. Pipavav Shipyard Ltd, Indias newest private sector shipbuilder, has submitted the lowest price quotation, said a person familiar with the price quotations submitted by the eight firms, whose bids have been opened. He did not want to be named ahead of a formal announcement by ONGC and also because the price quotations are confidential. In the first round of bidding, the lowest price quotation was $16.7 million (Rs81 crore) for building each vessel. Several shipbrokers Mint spoke with said the ships would now cost about $13.5 million each, as prices have declined in the wake of the global economic down turn.

Recruitment and selection procedure of ONGC

Oil and Natural Gas Corporation carries out its recruitment process in the process as shown in the block diagram as shown in the figure above. The methods involved are: 1) Internal Recruitment. 2) Direct Recruitment. 3) Indirect Recruitment. 4) Third Party.

Internal Recruitment
Internal Recruitment involves selecting the deserving candidates to various posts by promotions and transfer job posting. Internal Recruitment is also done on the basis of employee referrals.

Direct Recruitment
Direct Recruitment involves conducting the campus recruitment. HR employees Of ONGC are responsible for conducting the recruitment process at the campuses of many Colleges and undertake the selection procedure that involves various tests that are discussed as follows: a) Aptitude Test; b) Group Discussion; c) Personal or Technical Interview.

Indirect Recruitment
Under the indirect recruitment, company informs about the vacancies through various advertisements on newspaper, internet etc. The aspirants need to fill the online application form which is available on ONGCs website i.e. ongcindia.com. After filling the application form the aspirants are issued admit cards as they have to go through series of tests which were discussed above. After the completion of the all the above mentioned steps the final decision on hiring the candidates is taken. Now let us have a look at the eligibility for various posts in the company.

Third Party Recruitment

Under third party recruitment, ONGC contact the following: Private Employment search firms. Employment Exchange. Gate Hiring and Contractors. Unsolicited Applicants/ Walk-ins.

RECOMMENDATIONS
The performance appraisal system of ONGC is of good quality. With the introduction of new e-PAR system, the PMS system is refined further. On the basis of the analysis of responses and findings I have reached to some conclusions. So taking them into consideration few steps may be considered to strengthen the performance appraisal system.
The system should be made more transparent. This can be achieved by creating awareness among the employees regarding each and every aspect of the appraisal process. They should be made aware about the standards and the criterions for evaluation. Further they should be shown the appraisal result. The appraiser and appraise should sit together and then the appraiser should

rate the appraise for his performance and should state the reason for the same. This will increase the level of transparency and the employee will feel satisfied as he will have an opportunity to respond at that very moment itself. The genuine feedback should be provided to the employees. So that they may be in a position to know where they stand exactly. So that they can identify their performance gaps and prepare accordingly for the future. The general belief among employees is that the relations with the superior affect the evaluation process. This is not good as this creates a sense of favouritism in the organization. No doubt one should be in pleasing terms with the superior but that should not affect the evaluation at all. For this the raters should always consider the performance as the only measure for the evaluation.
The raters should take note of the critical performance incidents of an individual

so that at the end of the year it should not be that only the recent performances are given more weight age.
Raters should consider the specific requirements of the people to do the job. They should help them out by providing necessary skill set to do the job more efficiently. They should set the goals as per the potential and calibre of the individual.

Employees should have the opportunity to respond to the appraisal result. For this individual feedback should be provided. Management should take serious note of the training requirements shown by the individual in the appraisal sheet. Training plays a vital role in the development of an individual and helps improve the performance.
Some incentives should be introduced on the performances basis. This thing

creates a sense of healthy competition among employees which boost up the growth of the individual as well as the organization.

Corporate Governance Recognized

In recognition of excellence in Corporate Governance, the following awards have been conferred on ONGC: 'Golden Peacock Award for Excellence in Corporate Governance - 2002' by the Institute of Directors; 'ICSI National Award for Excellence in Corporate Governance' - 2003 by the Institute of Company Secretaries of India; and 'Golden Peacock Global Award' for Corporate Governance in Emerging Economies -2005 by World Council for Corporate Governance, U.K. 'Golden Peacock Award for Excellence in Corporate Governance - 2005' by the Institute of Directors;

Golden Peacock Award for Excellence in Corporate Social Responsibility in Emerging Economies' 2006 - by World Council for Corporate Governance, UK.

'Golden Peacock Award for Excellence in Corporate Governance - 2006' by Institute of Directors.

References:
http://www.ongcindia.com www.citehr.com