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A Project Report submitted to SRI VENKATESWARA UNIVERSITY, TIRUPATHI In Partial Fulfillment Of The Requirements For The Award Of Degree Of


Department Of Management Studies JAGANS INSTITUTE OF MANAGEMENT STUDIES (Affiliated to S.V University, Approved by AICTE) Nellore-5240042006-2008


This is to certify that the project report entitled PERFORMANCE APPRAISAL SYSTEM that is being submitted by Miss M. Anuradha in partial fulfillment for the award of MBA in Jagans institute of management studies is a record of bonafide work carried out by her under my guidance and supervision. The results embodied in the project report have not been submitted to any other University or Institute for the award of any degree or diploma.


The presentation of this project has given me the opportunity to express my profound gratitude to all those who have made it possible for me to accomplish this project work. At the first instance I would like to thank the NATCO PHARMA LTD., Hyderabad, for giving me the opportunity to do the project work in esteemed organization.

I am especially thankful to Mr. A.LAKSHMI NARAYANA the GENERAL MANAGER NATCO PHARMA LTD . for his valuable guidance.

I am especially thankful to


Principal, Mr.C.SASIDHAR head of the department and

T.V.S .RAVIKANTH Internal Project Guide and other Faculty members of JAGANS INSTITUTE OF MANAGEMENT STUDIES for supporting me in all my deeds during my curriculum.


SL. NO. 1. CHAPTER REASEARCH METHODOLOGY Need of the study objectives of the study scope & limitations of study 2. PROFILES INDUSTRY PROFILE Company Profile PAGE NO.



4. 5. 6. 7.




Human Resource Management refers to set of programmes, functions, and activities designed and carried out in order to maximize both employee as well as organizational effectiveness. Successful Human Resources planning is designed to identify organizations, human resources needs. Once these needs are known, an organization will want to do something about meeting them. The next step, then in the staffing function- assuming, of course, that demand for certain skills, knowledge and abilities is greater than the current supply- is recruiting. This activity makes it possible for

company to acquire the people

Necessary to ensure the continued operation of the organization.


Organizational Development

Training And Development

Union / Labor Relations Organization/

Quality Work life Productivity Readiness for change

Job Design

Human Employee Assistance Resource Plan Personnel Research and Information Systems Compensation / Benefits Benefits Selection and Staffing

NEED OF THE STUDY: With increased competition due to liberalization and with foreign investments and multinationals being welcomed in this country there is immense pressure on the Indian organizations to perform better. This pressure is for survival in some organizations and to others to excel and expand in their own expertise. Some of the organizations have built up very loyal and experienced work force. They are very comfortable with old technology and methods, which yielded good results in past. The past success combined with values, experience and loyalty to the organization prevent them to accept change, in addition to these employees, and there has been an entry of new generation of employees who have already absorbed modern technology. The new generation employees Question everything and are ready to run the race, in some cases they want more pay than an employees does with similar qualifications working for the past decade. How to appraise the two types of employees and yet compete in the race is the more challenging of most of the organizations. This project is intended to studying one of the

highly developed and indigenous performance appraisal systems at NATCO PHARMA.


To study effectiveness of appraisal system. Whether the appraisal system at NATCO is helpful in achieving organizational goals and objectives. To study whether the appraisal system at NATCO is helpful in employee performance through out the employee career. To study the employee perceptions and satisfaction through performance appraisal system in NATCO. To study the general outcome of performance appraisal system at NATCO.

SCOPE OF THE STUDY: The present study OF entitled A STUDY ON




APPRAISAL SYSTEM IN NATCO PHARMA LIMITED could be of great use for the organization and the employees concerned in the following areas:

The study attempts to analyze the effectiveness and employees opinions of appraisal system.

The study attempts to analyze the awareness of performance appraisal.

The study emphasizes to reveal the best method of performance appraisal system in this organization.


. The data given by the employee are based on the individual perception and may not be reliable. The data collected through the questionnaire is limited and is confined to the questions with regard to the questionnaire. Newly recruited employees could not complete the questionnaire in a confident way. The study was based on provided by the managers. the information

The study has converted into survey only in NATCO PHARMA LIMITED, Banjara Hills

Hence the study undertaken may not be uniform every where. It will vary from industry to industry.

The entire study has been divided into FIVE CHAPTERS. 1. FIRST CHAPTER deals the entire picture of profile of the industry and the company. 2. SECOND CHAPTER deals with Statement of the problem, scope, advantages and Limitations of the study It also provides. 3. THIRD CHAPTER deals with conceptual frame work







interpretation of data using stastical tools like percentage method 5. FIFTH CHAPTER shows the Summary and findings, suggestions and conclusions.


PHARMACEUTICAL INDUSTRY The pharmaceutical industry is a knowledge drive industry and is heavily dependent on research and development of new products and growth. However, basic results (discovering new molecules) are time consuming and expensive process and are thus, dominated by large global multi nationals. Indian companies have recently entered the area and initial results have been encouraging. Patents play an important role in encouraging research and development. The new W.T.O rules imply that India will have to switch to a product patent regime post 2005 from its current process patent regime. This would alter the scenario in the Indian market over the next 10-15 years. In the global pharmaceutical market western markets are the largest and fastest growing due to introduction of newer molecules at high prices. A well-established reimbursement and insurance system implies that per capital drug expenditure is abnormally high in western countries as compared to the developing nations.

The Indian pharmaceutical industry highly fragmented, but has grown rapidly due to the friendly patent regime and low cost manufacturing structure. Intense competition high volumes and low prices characterize the Indian domestic market. Exports have been rising around at 30% CAGR over last

5years.there is a shift in export profile towards value added formulations from the low value bulk drugs. The drug pricing control order (DPCO) has been the milestone around the neck of Indian industry as it has severely restricted profitability and hence innovation. However, the government has been relaxing control in a slow but progressive manner. The span of control of DPCO has come down from 90% to 50% and is likely to be further reduced as per latest proposed changes. In the domestic market, old mature categories like Ineffective, vitamins, analgesics, are degrading or stagnating while new life categories like cardio-vascular, CNS ant diabetic are growing at double-digit rays. The growth of a company in the domestic market is thus critically dependent on its therapeutic presence.

INTRODUCTION TO THE PHARMACEUTICAL INDUSTRY Pharmaceuticals are medicinally effective chemicals, which are converted to dosage forms suitable for patients to imbibe. In its basic chemical form, pharmaceuticals are called bulk drugs and the final dosage forms are known as formulations. Bulk drugs are derived from four types of intermediates (raw materials), namely

Plant derivatives (herbal products ) Animal derivatives ex:- insulin extracted from bovine pancreas Synthetic chemicals Bio-genetics (human derivatives) ex:-human insulin INDUSTRY SCENARIO GLOBAL SCENARIO The developed countries like Western Europe, Japan and us are the markets. Higher purchasing power and a welldeveloped health insurances and reimbursement system implies that the value of drugs sold is much higher there.

Growth I these markets is also higher blockbuster drugs drive growth.

INDIAN SCENARIO There are more than 20,000 registered pharmaceutical manufactures exist in the country. The market share of the MNCs has fallen from 75% to around 35% in the Indian pharmaceuticals market, while the share of Indian companies has increased from 20% to nearly 65%. PSUS have almost lost out completely. The sector has undergone several policies as well as attitudinal changes over the past 2 years. In Indian pharmaceuticals sector are highly fragmented with more than 20,000 registered units. It has increased drastically in the last two decades. The leading 250 pharmaceutical companies control 70% of the markets with the market leader having nearly 7% of the market share. It is an extremely fragments market with severe price competition and government price control. EXTERNAL TRADE In India pharmaceutical industry is highly regulated. The government controls prices of a large number of bulk

drugs and formulations. Profit margins of player vary widely in both domestic and exports sales due to many factors. FUTURE PROSPECTS As per W.T.O from the year 2005 India will grant product patent recognition to all new chemical entities (NECs) i.e., bulk drugs developed then onwards. STRATEGIES OF DOMESTIC PLAYERS Most of the domestic companies are expanding the therapeutic reach through a new product launches high margin segments, thus enhancing the product portfolio and increasing the critical mass. The long-term objective will be to enter into higher platform of biotechnology and drug delivery systems. GROWTH OF PHARAMACEUTICAL INDUSTRY IN INDIA As the turn or century the Indian drug industry has set up through the pioneering works of scientists like Acharya .p, Cray, and professor T.K.Gujjar. However after independence the nascent Indian Pharma industry could not evolve to meaningful levels of function. Bulk drugs were imported, glaxo, Pfizer, parka-Davi ruled the roost-drugs like streptomycin and tetramycin which were sold without the cutting edge of competitive antagonism at four times the MRP.

This was followed by acute shortages of drugs following indirect cartelization of the Industry. This lead to the inclination towards cartelization of the industry. This leads to inclination towards indigenous production. Hindustan and biotic was set up with W.H.O and UNCF in 1954. Subsequently Indian drugs and pharmaceuticals (IDPL) were set up with soviet technology in 1961. With the setting up of Indian public sector, antibiotic prices came crashing down in some cases by 60% to 70%. The MNCs in order to survive in the market slashed their prices. Interestingly, it was in this period where the public sector started basic drugs in India. In 1960s the Indian private sector also stated growing. Unlike the foreign sector, they also setup substantial capacities for production of bulk drugs. With the introduction of patent act 1970 this sector began to bloom. This act allowed Indian companies to register product if proved that the process used was marginally different from the original product manufacture of the MNCs simultaneously. FERA ensures that MNCs were restricted in their equity above 40% .The government also insisted that

10% of production in actual line of formulations should be for bulk drugs in case of MNCS. Patent act 1970 had its own demerits, but this act definitely helped Indian Pharma companies to part learning to copy the molecular structure of compounds.


NATCO Pharma limited is established in the year 1981, and began its operations in the year 1984 with an authorized capital of Rs.7.5 millions. It is a public limited company; promoted by Mr.Nannapaneni Chowdary on his return to India from U.S.A during which he worked as a senior scientist in Analytical Research and Technical Services with the pioneers of TRT Arnold Bucket and Robert Goldman. NATCO today is one in of India the with fast a growing growing



pharmaceutical group in a global presence. Since inception, NATCO has seen itself as a part of the crusade for a healthier future. From a single unit of 20 people to over 1600 people, today NATCO is on the global map with offices in North

America, Moscow, Western Europe, Southeast Asia and other regions. It makes its products in countries like Holland, China, HongKong, Tanzaina, Kenya and Nigeria. The companys first project was C ardicap an anti anginal drug. NATCO manufactures a wide range of tabs, caps, liquids, dry syrups, dry powder and inhalers. The company has introduced many dosage forms in to the market in various segments like anti-cold , anti-asthmatic, anti-biotic, neuropsychiatry, cardio-vascular, gastroenterology, NSAID etc NATCO PHARMA LTD is an integrated pharmaceutical company involved in the business of research, manufacturing and marketing of formulation, parental, bulk drug and intermediate for Indian and overseas in the country. The company manufactures products for companies like Ranbaxy, Smith Kline Beecham, John Wyeth, Ici, P&G, Wockhart etc..,


MANUFACTURING LOCATIONS KOTHUR: The company has one manufacturing factory at Kothur, situated in 5280 sq.m site. This factory has attained ISO: 9002,14002 certification and it is engaged in the manufacturing of tablets, capsules, liquids and drug syrups. The biotechnology unit of NATCO is also located at Kothur. This factory is one of the few factories available in India, which manufactures fungal diastase for digestive image. It is equipped with one of the finest equipments and technology. MEKAGUDA: This factory is a chemical division located at Mekaguda spread over 100 acres; this factory incorporates latest technology and immense capacities. It is one of the latest synthetic bulk activities manufacturing unit in India. This factory also possesses an effluent treatment plant, which adds miles in the direction of being environment friendly.

NAGARJUNA SAGAR: This factory is a parental division located at Nagarjuna Sagar, which is around 180kms from Hyderabad. This factory is one of the biggest single unit infrastructures for the manufacturing of small and large volume Parenterals. SANATH NAGAR:

This is a chemical and R&D division located at Sanathnagar, Hyderabad. It is the only manufacturing factory in India. The manufacture worlds best known antidepressant Fuoxetine, HCL it also manufactures other bulk drugs which including Isosorbides etc.. NATURE OF ACTIVITY: NATCO has undertaken the manufacturing and marketing of formulation bulk drugs and intermediates. RESEARCH AND DEVELOPMENT: NATCOS research and development effort is

multidisciplinary. With the help of NATCO research centre, centralized support, networking and integration of group requirements is facilitated. The center has a core team of dedicated scientists backed by advanced facilities and equipments. Currently R&D is involved in the development of new controlled released drug delivery system which includes specialized gels, micro/nano spheres, micro sponges and liposomes technologies. The company conducts research in peptide synthesis of through fermentation process, microbiological and through strain improvement, techniques are also undertaken.

NATCO has been sanctioned assistance of rs.130 Lakhs under the SPONSORED RESEARCH AND DEVELOPMENT PROGRAMME (SPREAD) by industrial credit and Investment Corporation of India for carrying research projects in association with leading national research labs. NATCO conducts research in peptide synthesis along with center for cellular and molecular biology, Hyderabad. NATCO works in close collaboration with central leather research institute, madras for the development of oral vaccines. NATCO has entered in strategic alliances with Hyderabad central university and Brita institute if technology and science, Pilani to conduct research in the field of synthetic chemistry.

EXPANSION, GLOBALISATION AND DIVERSIFICATION: NATCO as a part of globalization plant finalized an investment proposal for setting up the formulation unit in New Jersey, USA at an estimate cost of US $.6 million .The EXIM bank of India is likely to fund team loan finance equivalent to US $4.80 millions and the company will invest

the balance. The proposed US project is expected to, be highly beneficial to the company both financially and technologically, besides earning foreign exchange to our country.

INTERNATIONAL BUSINESS: NATCO Pharma services markets are across the globe. Some of the countries where its presence is felt are U.S.A, U.K, Canada, Columbia, Brazil, Spain, Hong Kong, Denmark, Ireland, Greece, China, Egypt, Belgium, Bangladesh, Russia, Pakistan, Cyprus, Italy, south Africa, Poland, Australia etc.., NATCO Pharma is one of the first Indian companies to set up a unit in USA; NATCO Pharma LLC(NEW JERSEY). The exports have shown a steady increase in the previous years NATCO Pharma production facility has received the world health organization (W.H.O) certificate for maintaining good manufacturing practice (GMP).

NATCO Pharma has a distinction of launching the formulations of sumatriptan the first anti migraine for the first time in Asia. NATCO Pharma is one of the Indian companies to achieved ISO: 9002 Certification for its quality standards.

NATCO Pharma has pioneered and developed the concept of time-release dosage preparation for which it has earned enormous goodwill in India .the Company today is specially recognized with time-release preparation. IMPORTANT PRODUCTS OF THE COMPANY Cipronat Natcoldplus Cetrinat Feonat Aminat Amoxinat Sparnat Cephlenat Omenat Cefuronat Lansonat Randinat

FAMOUS MEDICINES OF NATCO Veenat Cetronat Zoldnat Onenat

MAIN OBJECTIVES OF THE COMPANY To increase market share from 0.6% to 1.1% The goals of the future are clearly in launching high technology, specialized products balanced by high technology and mass products in order to increase sales, market shares and returns.

To carry on the business of and deal in finished drugs of pharmaceuticals, bulk drugs, chemicals, fuel chemicals, ayurvedic and cosmetics. To do all kinds of consultancy services in pharmaceuticals and carry on research to do loan licensing, manufacturing, act as advisors for such of those industrial organizations and research labs who may desire these services in pharmaceutical. The company intend to extract maximum advantage from its R&D wing and from the collaborative research .it is undertaking with leading research organizations such as CCMB (center for cellular and molecular biology) CLRI (Centre leather research institute) etc

NATCO TRUST: NATCO Trust was established with the objective of improving the quality of life of the rural and urban people in the areas of health, education, sanitation and environment and for overall development. It is a non-perfect charitable organization. AWARDS RECEIVED:

Best invention for invention of anti-cancer drug called imatinib mesylate AIIE World Health Organization (WHO) certificate for current good manufacturing practices (CGMP) ISO: 9002 Certification in the year 1994 ISO: 14000 Certification in the year 2003 National Award to Small Scale Entrepreneur, 1998

instituted by government of India, ministry of industries, small Industries development organization. All India industrial exhibitions (AIIE), 1986 award for best imports substitution, best new product. National unity award. Industrial promotion selection award 1988 for perfect

controlled drug delivery system by government of AP Federation of A.P chamber of commerce and industry (FAPCCI) for best scientist.




All employees of the company go through a yearly performance review and counseling. The objective is to give

feedback on performance and counsel him on development needs. The appraisals also provide valuable data to: The process of reward management that is to the process of deciding increments and promotions. The development of training plan for each individual. Training needs are identified for each employee largely based on the strengths and improvement areas are identified in the appraisal areas for improvement. APPRAISAL PROCESS OF NATCO PHARMA LIMITED: Self appraisal Appraiser reads self appraisal Appraiser and reviewer discuss the performance of appraise Appraisal discussion with employee Decision on appraisal rating and signing the appraisal document The appraisal is returned to HR and OD department.

HUMAN RESOURCE POLICY IN NATCO: The NATCO recognize the importance of skilled

manpower and fully believe in development of available manpower in the organization. The company recruits the manpower based on

manpower planning or requirements that arouse with the increased quantum of work vacancies created by exit of employees. The company believes in development training the available manpower to the maximum possible extent. NATCO extends training and development activity to each and every employee of it. The training shall be imparted on the basis of planned schedule after evaluation of training needs at the individuals and group level. The training system assesses knowledge, skills, and behavior-based needs of the human resource.

PERFORMANCE APPRASISAL AT NATCO: The objectives of the performance appraisal system in NATCO Conduct a yearly performance review and counsel staff and executives. To get feedback on performance and counsel them on development needs. It is a process of rewarding management i.e., to the process of deciding increments and promotions. To develop and to improve the employees performance on the job. Linking the reward system directly for the performance evaluation system. To motivate the employees towards development and prepare them to take up higher positions. The training needs of the employee are identified. Performance appraisal will promote superior sub-ordinate relationship by mutual fair and performance rating without any bias.

HUMAN RESOURCE DEVELOPMENT POLICY IN NATCO: The training and development function of HR & OD department starts from the date of joining of the personnel in the organization through induction.

The new entrant will be briefed about: An informal introduction to all departments and key managers on the day of the joining. Brief orientation to the people and department related to the job.

A formal two-day group induction program once in a quarter to all the new entrants who joined during the quarter. The new entrant will be placed under a normal probation period of six months from the date of joining, at the end of which his performance will be assessed for confirmation.

HUMAN RESOURCE POLICY IN NATCO: HR and OD Department Manual: Purpose: 1. To ensure the right people for the right job

2. The purpose of this manual is to outline various activities to be performed By the HR and OD Department. Sequence of Activities: 1. Manpower planning shall be carried out by the department heads to assess the requirements Manpower Planning : a) Of people for positions at various levels. b) The department head assess manpower planning

requirements whenever there is a proposed expansion of activities/capacity or when there is addition of new division.

c) The manager-HR & OD, along with the department head decides on the manpower requirements & the time frame by which the job is to be done. 2. Recruitment and selection and placement: Recruitment: a) Recruitment shall be based on the manpower planning or any adhoc requirements that arise with the increased

quantum of work for a given period of time or to fill up vacancies created by exit of employees. b) Souring of personnel shall be done through various means, depending on the nature of personnel requirement. The HR and OD division normally goes

through the following system sourcing : 1. Data bank 2. Personal/employee contacts 3. In case of fresher, NATCO goes for campus selection from professional colleges and universities.

Selection: a) Selection process is done through : Screening of applications

Preliminary interviews Find interview b) Selection process is undertaken jointly and in consultation with the departmental/divisional head concerned. c) Selection panel consists of department head or intermediate manager and the HR executive/manager. The final panel consists of the department head and the manager-HR & OD Placement: After a person is selected, his placement is decided upon, in consultation with the department head. Placement details, as to incumbents exact role and responsibilities and reporting relationship in the hierarchy are finalized; the same is communicated to the selected candidate. 4. Induction ,probation and confirmation :


a) The induction process in NATCO is as follows : 1. An informal introduction to all departments and key managers on the day of joining 2. Brief orientation personnel in his department. 3. On the job training will be extended to all new entrants as per the job requirements. Probation and Confirmation: a) The normal probation period for all the new entrants is six months from the date of joining at the end of which his performance is assessed for confirmation. b) At the end of the six months period if the probationer is confirmed/she will be given a letter of confirmation which makes him/her eligible for additional benefits such as earned leave, LTA etc.,

ANNUAL PERFORMANCE APPRAISAL IN NATCO: All the employees of NATCO go through a yearly performance appraisal review and counseling. The objective is to give feedback on performance and counsel the employee on technical development. The appraisal also provides valuable data on: 1. The process of reward management i.e., the process of deciding increments and promotions. 2. A training plan is developed that provides a basis for identifying each individual training need. The appraisal process is as under: 1. Self appraisal in NATCO 2. In the second stage, the appraisal is evaluated by his/her appraiser. 3. Appraiser and the reviewer discuss the performance of the apprise 4. Appraisal discussion with the employee 5. Decision on the appraisal rating and signing of the appraisal document. 6. The appraisal is then turned to the HR & OD department.


Performance appraisal is for hiring and placing employees. It is a process of estimating or judging excellence, quality of an individual Employee behavior. A performance appraisal is a process of evaluating individual employees performance. Performance appraisal has been considered as a most significant and important tool for an organization. It also inter related with information gathering and division making process which helps in recruitment, training and compensation. Performance appraisal is the systematic evaluation of the individual with regard to his or her performance on the job and his potential for development. Performance appraisal is the systematic and objective way of judging the relative worth or ability of an employee in performing his job. MEANING Performance appraisal is a systematic review of the performance of the employee on written basis at regular interval and the holding of appraisal interview at which employee have the opportunity to discuss performance issues on one - to one basis, usually with their immediate superiors.

Definition of performance appraisal Performance appraisal is a process of evaluating the performance and qualification of employees in terms of the requirement of the job which is employed for the purpose of administration including placements, selection for promotion, providing financial rewards and other actions which require differential treatment among the remembers of a group as distinguished from actions affecting all members equally. Performance appraisal is the systematic evaluation of individual with regards to his or his or performance on the job his potential for development. Beach Thus performance appraisal is the systematic and objective way of judging the systematic and objective way of judging the relative worth or ability of an employee in performing his job. Performance appraisal is the step where the management find out how effective it has been at hiring and placing the employees. In the business world investment is made in machinery, equipment and services. Quite naturally time and money is spent enduring that they provide what their suppliers claim. One of the most expensive resources in which companies invest is man power. The job of appraising performance against results is not very often carried out with same objectivity, if indeed it is done at all. In other words the performance is constantly appraised against the results expected. Performance appraisal, like others personnel function forms eventually a line responsibility, although involving the staff assistance and advice. The very it may be painted out that performance appraisal is a continuous function and not nearly an issue if forms and reports. Performance appraisal is a systematic periodical and so for as humanly an impartial pertaining to his potential for a better job.

Edwin.d.flippo According to modern terminology: Performance appraisal is Janues headed process. Janue is the name of roman god who had two eYes, one is front and one at tie back, i.e. Performance appraisal should not only evaluate the past performance of the employee but also look ahead for his potential to develop.

Objectives of performance appraisal 1. To facilitate promotion based on competency and performance. 2. To confirm the services of probationary employees upon completing the probationary period and satisfactory. 3. To assess training and development needs of employee. 4. Performance employees. appraisal impact with the salary of

5. To let the employee know where they stand so far as their performance is concerned and to assist them with construct criticism and guidance for their development. 6. To improve communication performance appraisal provides a dialogue between a superior and subordinate, and improves understanding if personal goals and achievements. This will also have the effect of increasing the trust between appraiser & appraisal

Formal performance appraisal plans are designed to meet three needs 1. Provide systematic judgment to backup salaries and transfers etc.., 2. Tell the subordinates where they axially placed. 3. It can be for counseling and coaching. A suggested format of performance appraisal 1. Identification of key performance areas and target getting through periodic discussion between each employee and employer. 2. Managerial and behavioral qualities. 3. Self-appraisal by the appraisal. 4. Performance analysis. 5. Performance ratings. 6. Performance counseling. 7. Identification of training needs and action planning. 8. Final assessment. Identification of key performance areas and target setting through periodic discussion between each employee and employer: Every job has a set of functions to be performance by its holder. In changing the priorities by its complexity of the job, it is necessary to identity, review, recapitulate and respect upon the key functions periodically. The identification of key performance areas, it is useful to set targets for the period of appraisal. These targets should deal with the tasks expected to be accomplished by the appraise under each key performance areas during the period that will be reviewed later. Such targets settings helps the appraise to be clear of the expectations.

Managerial and behavioral qualities The important aspect of the employee performance is the extent to which each employee exhibits the qualities desired for the employees if that organization. Qualities include creativity, initiative, contribution to team spirit, organization, perseverance etc. Every organization should identity a list of such qualities desired to be shown by its employees and include these in the performance appraisal formats. Appraising the employees periodically on these will enable the employees to strive Self appraisal by the appraise:

At the end of the year or the appraisal period the appraisal process should begin with self appraisal by every employee. To appraise ones own self on key performance areas, targets, and qualities, the appraise would go through a process of reflection and review.

Performance analysis: As a result of performance appraisal the communication between the appraise and the appraiser will be increase. The appraiser should know more and more about the circumstances under which his appraise is working, the difficulties the employee is experiencing and contribution that the employee is making. The appraise should also understands how the employee is responsible for some achievements or non achievements.

Objectives: Identification of factors that have helped the appraise to reach the level of performance achieved in relation to various key performance areas, targets and various other functions associated with the employees job. Facilitating factors. Identification of factors that have prevented the appraise from doing better or those that hindered his performance. Hindering factors. Identifying developmental needs for better performance on critical functions, associated with the present role. To gain a better understanding about the appraise his role requirements. Methodology Periodic review of employee work in key performance areas Identifying the causes for success or failure Identifying average, poor) performance rating (excellent, good,

Listing down the various factors Implementing the plans according to the factor Performance review & counseling

Performance ratings It is a very important component of any performance appraisal system is the performance assessment may be made using categories like excellent, good, average and poor. Defining the rater Raters, supervisors, peers, clients, customers or high level managers can provide rating. In the majority of cases, an employees immediate supervisor makes appraisal and the appraise has sole responsibility for the appraisal. Defining the rate Rate can be defined as the employee whose performance is to be rated. The rate may be defined at the individual, work group discussion or organization wide level.

Subjectivity & errors in ratings The following are the commonly observed errors: Appraisers like or dislike may tend to rate the appraised positively or negatively. Appraisers leniency & severity may affect the ratings of the employee. Appraisers over consciousness tends to rate average to the appraised Appraisers first impression to the appraise effect rating Appraiser may rate according to the recent behavior of the appraise by forgetting the past

Appraiser rates appraised on the basis of their expectations and perceptions Rating methods: BARS Assessment by peers. Performance counseling It is a process of correct and controlling the employees behavior by giving him negative feedback in an assertive manner by his boss. Performance counseling focuses on entire performance during a particular period. Performance counseling has acquired a negative image because of equating it with clinical counseling and psychotherapy. Objective of performance counseling Helping the appraise or employee to realize their potential as a manager. Helping the employee to understand themselves their strengths and weakness. Helping the employee to have better understanding of the environment. Encourage the employee to set goals for further development. Process involved in counseling There are three main processes involved in counseling. Communication: It involves both receiving messages, giving messages and giving feedback.

Influencing: Influence is of a special type enabling the other person to exercise more autonomy, providing reinforcement. Helping: It also functions in the similar way. It involves in three different elements. 1. Concern and empathy 2. Mutuality of relationship 3. Identification of developmental needs Process of Counseling









Identification of training needs Targets are not accomplished due to lack of capabilities of the employee. So the capabilities can be developed through training on the job coaching etc. this becomes the action plan. Developmental needs flow directly from the assessment of the performance the appraiser should of the employee and suggests actions. Final assessment In the final assessment stage the appraiser would have a through understanding of the appraise and helps the appraiser to assess the appraise on a rating scale. The final assessment is shown to the employee. Purpose of performance appraisal The aims of performance appraisal are attaining at different purposes. They are 1. To look back on what has been accomplished. 2. To look forward to what needs to be accomplished. 3. To clarify the job holder career prospects aspirations and intensions

4. 5. 6. 7. 8. 9.

To note and recognize achievement To review the past and present performance To improve future performance To identify training and development needs To motivate people through performance related pay To create and maintain a climate of success in the organization

Factors affecting performance appraisal The following factors may affect the performance of the employee executing of any organization: 1. Sound recruitment policy 2. Effective training 3. Companys vision 4. Leadership style 5. Communication 6. Promotion 7. Career path planning 8. Job rotation 9. Awards & rewards 10. Employee stock option plan 11. External bonding of people Benefits of performance appraisal 1. Motivation and satisfaction 2. Training & development 3. Recruitment and induction

4. Employee evaluation Essentials of effective performance system To be effective a performance appraisal system should satisfy the following requirements: 1. 2. 3. 4. 5. 6. 7. 8. 9. Mutual trust Clear objective Standardization Training Job relatedness Documentation Feedback and participation Paot appraisal interview Review and appeal

Problems of performance appraisal The major problems in performance appraisal are 1. Rating biases like hallo effect, personnel prejudice and regency effect. 2. Failure of the superiors in conducting pre performance and post performance appraisal interviews 3. Subjectivity based appraisal system 4. Less reliability and ability of the performance appraisal system 5. Negative ratings effects interpersonal relations & uncontrollable 6. Influence of external environment factors & uncontrollable internal a setback on production 7. Feedback and post appraisal interview may have a setback on production 8. Absence of inter -- reliability

9. Unpleasant solutions in feedback interview Methods of performance appraisal Traditional methods methods 1. Straight ranking method centre 2. Man to man comparison 3. Grading asset accounting 4. Graphic rating scales 5. Forced choice distribution 6. Check lists appraisal 7. Free from essay methods 8. Critical incidents 9. Group appraisal 10. Field review methods Modern 1. Assessment 2. M B O 3. Human method 4. BARS 5. 360

Traditional method Straight Ranking Methods It is the oldest and simplest method (of performance appraisal) by which the man and his performance are considered as an entity by the rater. The whole man is compared with in a working group is done against that of another.

That is persons are listed in order of merit and placed in a simple grouping. Paired comparison technique: By this technique, each employee is compared every trait with all the other persons in pairs one at a time. With this technique, judgment is easier and simpler than with the ordinary ranking method. The number of times each individual is compared with another is telling on a piece of paper. These numbers yield the rank order of the entire group. (Or) Under this method the appraiser compares each employee with every other employee one at a time. Grading The actual performance of an employee is compared with the grades like A outstanding, B very good, C good or average, D fair, E poor and (-B) or (B-) very poor or hopeless. Graphic rating seals: This is the most commonly used method of performance appraisal. It is a printed form, one for each person to be rated (according to juices) considering employee characteristics and employee contribution. Forced distribution: The forced distribution method seeks to overcome the problem by compelling the rater to distribute the rates on all points of the rating seals. The method operates under the

Modern methods

Assessment centre: under this method many evaluators join together to judge employee performance in several situations with the use of important feature of the assessment centre is job related simulations. MBO: peter drunker has evolved this method. M B O can be defined as a process where by the supervisor and subordinates, managers of an organization jointly identified the common goals and objectives. Human asset accounting method The human asset accounting method refers to attracting money estimates to the value of a firms internal human organization and its external good will Behavior Anchored Rating Scale In this scales represent a rang of descriptor statements of behavior varying from least to the most effectors. BARS were developed to provide results which subordinates can use to improve performance. 360 Appraisals Appraisal should be capable of determining what is important (or) what is relatively less important. A person should assess the performance with out bias. Appraisers are superiors, peers, and subordinate employee. Components of appraisal evaluation Performance evaluation can be done for a variety of reasons _ counseling, promotions, research, salary administration. So it is necessary to begin by stating very clearly the objectives this, the personnel evaluation system should adder the questions.

Who of the performance appraisal? The person who has thorough knowledge about job content should conduct the appraisal. The appraisal should be capable of determining what is more important and what is relatively less important for the job. Appraiser should prepare the report and make judgement without personal bias, favoritism. What of appraisal? The of an appraisal consists in appraising non supervisory employees for their current performance and managers for future potential. It includes evaluation of human traits. Appraisers are asked to rate appraise Using future scale on such characteristics as tact, willing, enters enthusiasm and mutuality. Why of appraisal? It is concerned with 1. Creating and maintaining a satisfactory level performance of employees in their personal jobs. of

2. highlighting employee needs and opportunities for personal growth and development 3. Aiding in decision making for promotion, transfers , lay offs and discharge

Why of appraisal? When answers the query about the frequency of appraisal? The ideal thing in that each employee should be rated three months after being assigned to a job and every six months thereafter. The times of rating should not coincide with the time of salary reviews. Where of appraisal? Where indicates the location where an employee may be evaluated. It is usually done at the place of work of office of the superior. Informally appraisal may take place anywhere and everywhere both on job in work situations and off the job. How of appraisal: Under how the company must decide what different methods are available and which of these may be used for performance appraisal. On the basis of the comparative advantages & disadvantages it is decided which method would suit the purpose best. What should be rated? 1. Quality 2. Quantity

3. 4. 5. 6. 7.

Timeliness Cost Effectiveness Need for Supervision Interpersonal Impact Training

Training and Development Focus: Identifying, assessing and through planned learning, helping develop the key competencies which enable individuals to perform current or future jobs. Organization Development Focus: Assuring healthy inters and intra-unit relationships and helping groups initiates and managed change. Organization/Job Design Focus: defining how tasks, authority and system will be organized and integrated across organization units and in individual jobs. Human Resource Planning Focus: determining the organizations major human resource needs, strategies and philosophies. Selection and staffing Focus: matching people and their career needs and capabilities with jobs and career paths. Personnel research and Information systems

Focus: assuring a personnel information base. Compensation / benefits Focus: assuring compensation and benefits, fairness and consistency.

Employee assistance To assist employees to function more effectively in their positions by exposing them to the latest concepts, information and techniques and developing the skills they will need in their particular fields. To build up a second line of competent officers and prepare them to occupy more responsible positions. To broaden the minds of senior managers by providing them with opportunities for an interchange of experiences within and outside of with a that view may to correcting from the over narrowness outlook arise

specialization. To develop the potentialities of people for the next level jobs. To ensure smooth and efficient working of a department. To ensure economical output of required quality.

To promote individual and collective morale, a sense of responsibility, relationships. Focus: providing personal problem solving, counseling to individual employees Union labor relations Focus: assuring healthy union/organization relationships. co-operative attitudes and good

Human resource planning Human resource planning participates not only the required kind number but also determines the action plan of all the functions of personnel management. It checks the corporate plan of the management. It provides scope for advancement and development of employees through training and development It helps to anticipate the cost of salary enhancement, better benefits.

It affects uncertainty and change. But the human resource development effects uncertainties and changes to the maximum extent possible and enables the organizations to have right men at right time and in a right place. It helps to take steps to improve human resource contributions in the form of increase productivity, sales, turnover. It facilitates the control of all the functions, operations, contribution and cost of human resources.

Objectives of human resource planning

Ensure optimum use of human resources currently employed Avoid unbalances in the distribution and allocation of manpower. Assess forecast future skill requirements of the organizations overall objectives. Provide control measures to ensure availability of necessary resources when required. Control the cost aspect of human resources. Formulate transfer and succession policy. Evolution of Performance Appraisal system: Performance appraisal is an important part of the system of developing human sources and developing culture of maturity and collaboration in an organization. It provides inputs for better management of salary and reward system. Effective functioning of performance appraisal system

depends upon a minimal level of trust and commitment to development of employees in an organization.

People differ in their abilities and aptitudes. These are natural to a great extent and cannot be eliminated completely by imparting them training and development. There will always some differences in the quality and quantity of work by different people. Therefore, it is necessary for the management of an organization to know these differences so that they may be developed accept the responsibilities and challenges associated with the higher jobs. The individual employee may also like to know his capabilities terms of his fellow employee so that he may improve upon his own. His peers similarly change for the better, looking at his performance. Formal appraisal of individuals performance began in dynasty in china (221;265 A.D) where an imperial rater appraised the performance of members of the royal family; similar systems was followed in many countries in 1883; the new York civil service also introduced a formal appraisal system . Employee appraisal techniques are set to have been used for the time during the first

world war, when at the insurance of Walter dill Scott, the us army adopted the man to man rating system for evaluating military personnel.

Later during 1920-1930 period merit rating programs which were used to give wage increments on the basis of merits were accepted. The later phase, of performance appraisal, places emphasis on the development of the individuals and is widely used to evaluate technical, professional management personnel. Though formal performance appraisal system started in U.S.A with only few organizations, at present, large number of American companies adopted performance appraisal system to evaluate their employees performance. A formal performance appraisal system has been perceived to be equally important business and industry. The system of performance appraisal varies in different countries. American companies use performance appraisal mainly to determine the wage increase, promotions and transfers. There is a little emphasis on providing feed back to

employees and assessing the need for their further training. Indian companies in contrast use performance appraisal for training and development transfers for etc providing as do feedback the to employees and also use it in determining the wages, promotion, companies. and American



METHODOLOGY: Methodology deals with different methods and tools by which the data are collected. SAMPLING DESIGN: The sampling is done from the total universe of 120. The employees of NATCO PHARMA LIMITED, Corporate Office, Constitutes the universe. The sample is selected using the random sampling method. The sample consists of 30 employees, out of whom 15 respondents are Executives and 15 respondents are Employees. SOURCES OF DATA:

Since the study is explorative and investigation there is a requirement of data from different sources. Enough data is more relevant for any research in order to have a clear idea about the research. PRIMARY DATA: Primary data is the data which is fresh in nature. The required data and information were collected from the sample respondents with the aid of

questionnaire designed for the purpose and through personal interviews.

SECONDARY DATA: The data were also collected through the secondary sources such as: Leaflets Brochures Annual reports of NATCO Other textual information available in the library

DATA ANALYSIS: The Data collected were analyzed using statistical measures like percentages, averages wherever necessary and according to the demand of the study descriptive analysis is made.


Are you participating in Performance Appraisal? A = YES B = NO

Category of A Employees Executives 15 (100%) Staff 14 (93%) Total 29

B 1 (7%) 1 15 15 30


From the above table, it is found that 100% of Executives are participating in Appraisal System Compared with Executives, 93% of the Staff is participating in Appraisal System and 7% are not participating.


A = YES B = NO


0, 0% A B 15, 100%


7% A B 93%

2. Do you think Performance Appraisal is important in all types of jobs? A = YES B = NO Category of A Employees Executives 14 (93%) Staff 13 (87%) Total 27 B 1 (7%) 2 (13%) 3 15 15 30 Total

The above table depicts that 93% of Executives opted for option A and 7% opted for option B Compared with Executives, 87% of the Staff is opted for option A and 13% opted for option B.


A = YES B = NO

7% A B 93%


13% A B 87%

3. Do you think that the company has been maintaining any records self Appraisal of individual employee throughout his career? A = YES B = NO C = SOMETIMES Category of A Employees Executives 11 (730%) Staff 9 (60%) Total 20 B 1 (7%) 1 (7%) 2 C 3 (20%) 5 (33%) 8 15 15 30 Total

From the above table, it is clear that 73% of Executives opted for option A and 7% opted for option B and 20% opted for option C

Compared with Executives, 60% of the Staff opted for option A and 7% opted for option B and 33% opted for option C.




20% 7% 73% A B C


33% 60% 7%


4. Do you co-operate with your superiors at the time of self Appraisal Meeting? A = YES B = NO

C = AS PER REQUIREMENTS Category A of Employees Executives 10 (67%) Staff 11 (73%) Total 21 B C 5 (33%) 4 (27%) 9 15 15 30 Total

The above table conveys that 67% of Executives opted for option A and 33% opted for option C and none of them opted for option B Compared with Executives, 73% of the Staff is opted for option A and 27% opted for option C and none of them opted for option B.









27% 0% 73%


5. In your Organization the Performance evaluation based on?

A = Total Out put: behavioral aspects; Technical and Soft skills B = Total Output and Technical skills C = Total Output

Category of Employees Executives Staff Total

A 12 (80%) 15(100%) 27 -

C 3 (20%) 3

Total 15 15 30

From the above table, it is clear that 80% of Executives opted for option A and none of them opted for option B and 20% opted for option C Compared with Executives, 100% of the Staff are opted for option A and None of the opted for option B and C.


A = Total Output; Behavioral aspects; Technical and Soft skills B = Total Output and Technical skills C = Total Output


20% 0% A B C 80%


0% A B C 100%

6. If you Score poor ratings, then what should be the next step? A = Try to improve performance as per feedback B = Accept the Outcome C = I will complain against the appraisal Category of A Employees Executives 14 (93%) Staff 12 (80%) Total 26 B 1 (7%) 2 (13%) 3 C 1 (7%) 1 15 15 30 Total

From the above table, it is clear that 93% of Executives opted for option A and 7% opted for option B and no one opted for option C Compared with Executives, 80% of the Staff is opted for option A and 13% opted for option B and 7% opted for option C.


A = Try to improve performance as per appraiser feed back B = Accept the outcome C = I will complain against the appraiser


7% 0% A B C 93%



7% A B C 80%

7. What is the time gap usually maintain by the Organization in Appraising? A = QUARTERLY B = HALF YEARLY C = ANNUALLY Category of Employees Executives Staff Total A B 1 (7%) 4 (27%) 5 C 14 (93%) 11 (73%) 25 Total 15 15 30

From the above table depicts that 7% of Executives responded that the time gap maintained by the Organization in appraising is 6 months and 93% replied that time gap is one year.

Compared with Executives, 20% of the Staff responded that the time gap is 6 months and 73% responded that the time gap is one year.


A = Quarterly B = Half Yearly C = Annually


0% 7% A B C 93%






8. Do you have any feedback of your performance and steps to be taken to improve the performance? A = YES B = NO C = SOMETIMES Category of A Employees Executives 8 (53%) Staff 8 (53%) Total 16 B 6 (40%) 3 (20%) 9 C 1 (7%) 4 (27%) 5 Total 15 15 30

From the above Table, it is clear that 53% of Executives opted for option A and 40% opted for option B and 7% opted for option C

Compared with Executives, 53% of the Staff is opted for option A and 20% opted for option B and 27% opted for option C.


A = Yes B = No C = Sometimes


7% A 40% 53% B C


27% 53% 20%


9. Is the present appraisal system helpful for the self development of individual employee? A = YES B = NO

C = UP TO CERTAIN EXTENT Category of A Employees Executives 10 (67%) Staff 8 (53%) Total 18 B 2 (13%) 2 C 3 (20%) 7 (47%) 10 Total 15 15 30

The above table depicts that 67% of Executives opted for option A and 13% opted for option B and 20% opted for option C Compared with Executives, 53% of the Staff opted for option A and 47% opted for option C and no one opted for option B.


A = Yes B = No C = Up to certain extent


20% A 13% 67% B C


47% 53% 0%


10. What is the general outcome of performance appraisal system?

A = FINALIZATION OF INCREMENTS B = IDENTIFICATION OF TRAINING NEEDS C = FEED BACK FROM THE BOSS D = ALL THE ABOVE Category of A B Employees Executives 2 (13%) 1 (7%) Staff Total 2 (13%) 2 (13%) 4 3 C 1 (7%) 1 D 11 (73%) 11 (73%) 22 Total 15 15 30

The above table depicts that 13% of Executives opted for option A and 7% opted for option B, 7% opted for option C and 73% opted for option D. Compared with Executives, 13% of the Staff opted for option A and 13% opted for option B and 73% opted for option D and no one opted for option C.


A = Finalization of increments B = Identifications of Training Needs C = Feed back from the Boss D = All the above



7% 7%




13% 13% 0% 74%


11. Are you satisfied with the existing performance appraisal system? A = YES B = NO Category of A Employees Executives 11 (73%) Staff 13 (87%) Total 24 B 4 (27%) 2 (13%) 6 15 15 30 Total

The above table depicts that 73% of Executives are satisfied with existing appraisal system and 27% are not satisfied Compared with Executives, 87% of the Staff is satisfied with existing system and 13% are not satisfied.


A = Yes B = No

27% A B 73%


13% A B 87%


FINDINGS NATCO recognized the importance of skilled

manpower and strongly believes in the development of available manpower in the organization. NATCO conducts performance appraisal to its employees to give feedback on performance and counsel the employees for their development. Based upon the analysis of data regarding performance appraisal system in NATCO the following findings can be made: The main objective of performance appraisal systems at NATCO is to identify training needs. The general outcome of performance appraisal system at NATCO is to identification of training needs, feedback, and finalization of increments.








development of individual employee. The performance appraisal system at NATCO facilitates the achievement of the organizational goals and objectives. Majority of staff feels that the technical and behavioral aspects are to be considered for evaluation of performance.

Feedback performance is given properly to the employees Appraisal form is too elaborate and not suitable to all departments. Majority of the employees are satisfies with the existing appraisal system. Majority of the employees co-operate with their superiors at the time of appraisal meeting. Most of the employees feel that the appraisal system is important in all types of jobs.

SUGGESTIONS The following suggestions can be made in order to improve the Performance appraisal system in NATCO Pharma Ltd.

The company should follow open system of appraisal and feedback is given to the employees. Since performance appraisal form is too elaborate and lot is filled in. it may be changed to a simple form.

Appraisal process should be continuous and the performance may be evaluated regularly. Appraisal forms can be framed separately for different departments, which is useful to the specified department. In the evaluation of performance both technical and behavioral aspects are to be confirmed.

CONCLUSION Performance appraisal plays a vital role for the success of the organization. Every organization will have a particular performance appraisal, that appraisal must be rightly communicated and taught to the employee, and the appraisal must not hurt anybodys personal feeling.

After the present case study, on performance appraisal at NATCO Pharma Ltd, we can conclude that some of the things can still improve for better employee satisfaction, which results in more productivity of the organization.

According to NATCO Chairman, M.D. Mr. V. C. Nannapaneni, His employees are his Organizations

strengths, is true in reality also.


Dear Sir/Madam, I am an M.B.A student. As part of my course I have taken up A STUDY ON PERFORMANCE APPRAISAL SYSTEM AT NATCO PHARMA LIMITED .I would be grateful if you would kindly spare sometime to fill up this enclosed questionnaire. This information is used purely for academic purpose and will be kept confidential. Thanking you, sincerely, EMPLOYEE PROFILE NAME DESIGNATION


: :


1. Are you participating in performance appraisal? a) Yes b) No

2. Do you think performance appraisal is important in all types of jobs? a) Yes b) No

3. Do you think that the company has been maintaining any records of self appraisal of individual employee throughout his career? a) Yes b) No C) Sometimes

4. Do you co-operate with your superiors at the time of self appraisal meeting? a) Yes requirements b) No c) As per

5. In your organization the performance evaluation based on a) Total output ; behavioral aspects ;technical and soft skills b)Total output and technical skills

c) Total output

6. If you score poor ratings, then what should be the next step? a) Try to improve performance as per appraiser feedback b)Accept the outcome c) I will complain against the appraiser 7. What is the time gap usually maintained by the organization in appraising? a) Quarterly Annually b) Half-yearly c)

8. Do you have any feedback of your performance and steps to be taken to improve the performance? a) Yes Sometimes b) No c)

9. Is the present appraisal system helpful for the self development of individual employee? a) Yes c) Up to certain extent b) No

10. What is the general outcome of performance appraisal system? a) b) c) d) Finalization of increments Identification of training needs Feedback from the boss All the above

11. Are you satisfied with the existing performance appraisal system? a) Yes b) No


BIBILOGRAPHY C.B.Mamoria and S.V. Gankar: Personnel Management, Himalaya Publishing House. P. Subba Rao: Personnel and Human Resource Management Himalaya Publishing House. Annual reports and magazines of Natco Pharma Ltd.

C.R.Kothari: Research and Methodology, Vikas Publishing House T.C. Rao: Performance appraisal system.