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Indian Farmers Fertilizer Cooperative Limited,
New Delhi




ROLL NO: 633222489

SESSION: 2006-2008


This is to be certified that Mr. Prasant Priyadarshi of MBA 4 th Semester has

worked on a research project “IFFICO” under my guidance of the Project
Guide Dr.M.S. Pabla. To the best of my knowledge this is his own research
work which has not been submitted for any other degree/diploma of his
university or any other university.

Dr.M.sS. Pabla.
SAS Institute of Information Technology & Research
Punjab Technical University
Mohali Date: ____________


It is a matter of great pleasure to thank all esteemed

persons who helped me to complete my final research project
successfully otherwise it would not been possible.
Acknowledgement is not only a ritual, but also an
expression of indebtedness to all those who have helped in
the completion process of the project. One of the most
pleasant aspects in collecting the necessary and vital
information and compiling it is the opportunity to thank all
those who actively contributed to it.
I like to express my deepest gratitude and thanks to my
Project Guide
Dr.M.S. Pabla for the valuable guidance and constant
encouragement which he extended to me throughout my
research project.






















Sr. No. TABLE Page No.










THE IFFCO: An Executive Summary

IFFCO is one of the largest chemical fertilizer producers in the country/Asian

region over a period of 25 years. IFFCO has been concentrating in the production
and marketing of nitrogen phosphorus and potassium (NPK) complex and urea
and introduced Di-ammonium Phosphate (DAP) in 1981.

The study is divided into 2 parts .the first part mainly involves studying and
analyzing the current performance appraisal system and identifying the gaps
between the current state and the desired-in-state. The general methodology
adopted for study was primarily collection of primary dative; Survey based. Some
secondary sources like company records, manuals, books, accounting and
internet were also tapped.

The second part involves designing a moor effective performance appraisal

system. The effort involved designing a guide book on performance appraisal,
which throws light on the critical area of managing human performance.

The scope of the project involved defining and designing performance appraisal
system, devising feedback system, motivating and rewarding performance,
employee career growth and development and studying the implications of an
effective performance appraisal system on organization’s performance.

Effectively managing performance appraisal has never been more critical then in
today’s dynamic business environment. In order to drive increased productivity
managers must consistently monitor team performance and provide meaningful
feedback to their subordinates. Employees must be constantly aware of their
progress as the expectations for their contributions evolve. Finally, visibility to
employee accomplishments and areas of weaknesses should be used by

managers to provide coaching and guidance to their subordinates. The reality is
that without adequate performance appraisal tools, any and all of these
requirements are difficult to fulfill.

The performance appraisal application allows for an ongoing meaningful feedback

mechanism between managers and their subordinates. It helps transform the often
rushed and tedious once-a-year performance review into an ongoing performance
appraisal process that ties employee performance to bottom line business results.
Most importantly, the improved effectiveness of the overall process has been
proven to increase employee morale and overall productivity.


 Ensures employees understand the merits and standard upon which they are
evaluated promoting a sense of fairness and equality.

 Supports meaningful formal and informal performance appraisal base on goal

accomplishments and competency attainments.

 Provides a framework for ongoing coaching and development to improve future

performance and productivity requirements.

 Is fully integrated with goal setting and compensation planning.

 Provides completely secure authorization and flexible approval workflow.

The proposed study and the outcomes will give insights to the HR managers
about how to plan, motivate, manage, control and reward employee performance
in the best possible manner so as to improve the overall productivity in the


1) During mid-sixties cooperative sector was responsible for distribution of 70 percent

of fertilizers consumed in India and had adequate infrastructure.
2) It had no production facilities of its own and hence dependent on public or private
sectors for suppliers.
3) To overcome this lacuna and to bridge the demand supply gap the farmers of the
country through their own cooperative societies created this new institution to
safeguard their interest.
4) IFFCO was registered of November 3, 1967 as a multi unit cooperative society.
The society is primarily engaged in production and distribution of fertilizers.
5) A cooperative society associated with iffco has risen from 57 in 1967 to more than
36,000 now.


IFFCO has built its present structure based on three broad objectives defined by
its founders. These are (A) production of quality chemical fertilizers-UREA, NPK
and DAP (B) Service to the farming community (C) making fertilizers available
close to them withstand competition.

IFFCO has assumed the status of the largest chemical fertilizer producer in the
country /Asian region over a period of 25 years. IFFCO has been concentrating
on the production and marketing of NPK complex and urea and introduced DAP in
1981.The volume of production has increased from 20,000t NPK in 1970-
1971(Imported material from USA under seeding programme) to 40.5lakh ton
NPK, DAP and Urea (1997-98). The target for the current year (1998-99) is 49.5
lakh ton. These volume are expected to increase further in the years to come
and will reach about 53Lakh tones by 2000-01.

Service to the farmer by way of transferring to them the knowledge of modern

agriculture has been one of the core activities since the inception of IFFCO’s
marketing activities in the seeding programme launched in Rabi 1970-
71.Cooperative societies have been the focal point for IFFCO’s activities in the
rural areas.

The market scenario is changing fast. While there is shortage of phosphoric and
potassic fertilizers currently in the market, there is a glut situation with respect to
urea .As a matter of philosophy ,principle and provision in the by laws , .IFFCO
has to continue to market its products through the cooperative system. The
cooperative system has not grown to the extent of absorbing all the additional
volumes offered by IFFCO and KRIBHCO . The private trade is growing faster

and trying to make inroads in the cooperative system. Under these circumstances,
IFFCO has to a relook at its marketing strategy and modify/strengthen the
cooperative system in the particular to face the competition from the private trade.

Service to the farming community by way of various educational programmes for

the transfer of modern agricultural technology and subjects like Fertilizer Use
Efficiency, Balanced Fertilization and IPNS approach have to be more effective
and to be spread in the interior of rural India.

Fertilizer promotion is one of the important components in fertilizer marketing. The
objective is to create awareness about fertilizers and improve technical information
on improved agricultural practice and fertilizers use so as to increase productive
and use efficiency. Mass media approach is followed in fertilizers promotion.


These are powerful and effective medium of communication and the message is
conveyed even in remote and in accessible areas in a short time. IFFCO has been
taking the advantage of this media for promotion of fertilizers use. IFFCO’s staff
field staff often deliver talks over AIR and production are also published in local
and national level newspapers. Fairs and exhibitions, fairs, and exhibitions are
organized at the local and national level to appraise the farmers about
achievements in agricultural development through audio / visuals aids. This
medium has a mass appeal.

Publication and updating of technical literature from time to time-n regional

language on crop production practices and fertilizer use is very important. This
includes crop folder, leaflets and pamphlets etc., which give brief accounts on crop
production technology.
IFFCO is effectively making use of state an national highway and market places
for promoting the concept of balanced fertilizes use by erecting hoardings and
roadside sign boards, wall paintings etc.

Appreciating the importance of the electronic media and popularization of video
presentations, IFFCO has developed 8 crop films depicting the practices for the

benefit of farmers. This film are of 15 minutes duration each and covers important
crops like rice, wheat, maize, cotton, sugarcane, soybeans, and mustard seed.


As a matter of philosophy and policy, IFFCO has provided in its byelaws

channelising its entire production through the cooperative system. However, in
exceptional circumstances other intuitional agencies could also be involved.
IFFCO is, however, not proposing its production through private trade.



Since organizations exist to achieve goals, the degree of success that individual
employees have in reaching their individual goals is important in determining
organizational effectiveness. The assessment of how successful employees have
been at meeting their individual goals, therefore, becomes a critical part of HRM.
This leads us to the topic of performance appraisal.

People differ in their abilities and aptitudes. These differences are natural to
a great extent and cannot be eliminated even by giving the same basic education
and training to them. There will be some differences in the quality and quantity of
work done by different employees even on the same job. Therefore, it is necessary
for management to know these differences so that the employees having better
abilities may be rewarded and the wrong placements of employees may be
rectified through transfers. The individual employee may also like to know the level
of his performance in comparison to his fellow employees so that he may improve
on it.
Thus, there is a great need to have suitable performance appraisal system to
measure the relative merit of each employee.
The basic purpose of performance appraisal is to facilitate orderly
determination of an employee’s worth to the organization of which he is a part.
However, a fair determination of the worth of an employee can take place only by
appraising numerous factors some of which are highly subjective, as for instant,
attendance, while others are highly subjective, as for instant, attitude and
personality. The objective factor can be assessed accurately on the basis of
records maintained by the Human resource or personnel Department, but there is
no device to measure the subjective factor precisely. Notwithstanding this,
appraisal of these factors must be done to achieve the full appreciation of every
employee merit.


Performance appraisal goes by various names such as performance

evaluation, progress rating, merit rating, merit evaluation, etc. But in this chapter,
we shall use the terms performance appraisal and merit rating to denote the
appraisal of the performance of the employees of an organization.

Performance appraisal means systematic evaluation of the personality

and performance of each employee by his supervisor or some other person
trained in the techniques of merit rating. It employs various rating techniques for
comparing individual employees in a work group, in term of personal qualities or
deficiencies and the requirements of their respective jobs. To quote dale Yoder,”
performance appraisal includes all formal procedures used to evaluate
personalities and contribution and potential of group members in a working
organization. It is a continuous process to secure information necessary for
making correct and objective decisions on employees.” The comparison of
performance with job requirements helps in finding out the merit of individual
employees in a week group. Supervisor or an independent appraiser may do

Performance appraisal is a formal programme in an organization, which is

concerned with not only the contribution of the members who form part of the
organization, but aims at spotting the potential also. The satisfactory performance
is only a part of the system as a whole and the management needs more
information than mere performance ratings of the subordinates. There are no two
opinions about the necessity of performance appraisal, which can meet
requirements of the management to achieve the organizational goals.

Performance appraisal is the systematic evaluation of the individual with
respect to his performance on the job and his potential for development.
Performance appraisal is concerned with determining the differences among the
employees working in the organization. Generally, the individual’s immediate
superior in the organization and whose performance is reviewed in turn by his
superior does the evaluation. Thus, everyone in Performance appraisal employs
rating techniques for comparing individual employees in the work group, in terms
of personal qualities or deficiencies and the requirements of their respective jobs.

Purpose of Performance Appraisal

The objective of performance appraisal fall in two categories:

1) Administrative; and
2) Self-improvement

a) Promotions
This is the most important administrative use of performance
appraisal. It is to the common interest of both the management and employees to
promote employees onto position where they can most effectively utilize their
abilities. It is mismanagement to promote employees into position where they
cannot perform effectively at the time in question. A properly developed and
administered performance appraisal system can aid in determining whether
individuals should be considered for promotions. The system must rate the ratee
for the present job and his potentialities for the higher job. A person performing the
job well does not necessarily mean that he is fit for promotion.

b) Transfers
In an organization, it may be necessary to consider various types of personnel
actions such as transfer, layoffs, demotions and discharges. In some cases, such
actions are called for because of unsatisfactory performance while in other cases it
may be called for due to economic conditions over which the organization has no
control because of changes in production process. Such actions can be justified if
they are based on performance appraisal.

c) Wage and Salary Administration

In some cases, the wage increases are based on the performance appraisal
reports. In some cases, appraisals and seniority are used in combination.

d) Training and Development
An appropriate system of performance appraisal can be helpful in identifying the
areas of skills or knowledge in which certain employees are not up to par, thus
pointing out general training deficiencies which presumably should be corrected by
additional training, discussions, or counseling. Performance appraisal can also
help in spotting the talented employees so as to train and develop them to create
an inventory of executive skills. It can also provide the areas where the
employees/executives could be further trained and positioned to meet retirement
and expansion situations.

e) Personnel Research

Performance appraisal helps in research in the field of personnel management.

Various theories in human relationship are outcome of efforts to find out the cause
and effect relationship between the personnel and their performance.


The performance appraisals bring out the deficiencies and shortcomings of
the employees. Performance appraisal helps human resource development in a
way. A promotion minded individual could ask for the target programmes of a
position he seeks and use the information given by performance appraisal to
prepare him for the job and enhance his candidacy.
Performance appraisal also helps to spot out a person’s ability to see an
organization problem, devise ways of attracting it, translate his ideas into action,
incorporate new information as it arises and carry his plans through the results. It
highlights a sort of total managerial action in contrast to things they customarily
factor out as conceptual entities-things such as planning function, leadership
ability, or financial knowledge. The manager’s selection will often be improved by
this emphasis on the whole managerial job.

Why Performance Appraisal?

The important reasons or benefits, which justify the existence of a system of

performance appraisal in an enterprise, are as under:

1) A good system of performance appraisal helps the supervisor to evaluate the

performance of his employees systematically and periodically. It also helps to
assign that work to individual for which they are best suited.

2) Performance rating helps in guiding and correction of employees. The

supervisor may use the results of rating for the purpose of constructively
guiding employees in the efficient performance of work.

3) The ability of the staff is recognized and can be adequately rewarded by giving
them special increments.

4) Performance appraisal can be used as a basis of sound personnel policy in

relation to transfers and promotions. If the performance of an employee is
better than others, he can be recommended for promotion, but if a person is
not doing well in a job, he may be transferred to some other job.

5) Ratings can be used to evaluate the effectiveness of training programmes.

Merit rating reveals weaknesses of employees and the training programmes
can be modified accordingly.

6) Performance appraisal provides an incentive to the employees to better their

performance in a bid to improve their rating over others.

7) Systematic appraisals will prevent grievances and develop confidence amongst

the employees if they are convinced of the impartial basis of evaluation. The

record of merit rating is available in permanent form to protect the management
against subsequent charges of discrimination, which might be leveled by the
trade union leaders.

Performance Appraisal has a beneficial effect on both the persons doing

the appraisal and being appraised. The appraisal brings prominently to the
attention of supervisors or executives the importance of knowing their
subordinates as human being. The necessity of performance appraisal leads the
appraiser to a thoughtful analysis of people rated and tends to make him more
alive to opportunities and responsibilities in developing the subordinates.
The objective of appraisal is to derive the point to the appraisee without inviting his
resentment or drawing back into the shell or taking defensive attitude.


Performance appraisal may not yield the desired results because

of the following deficiencies:

1) If the factor included in the assessment is irrelevant, the result of merit rating
will not be accurate.

2) Different qualities to be rated may not be given proper weightage certain in


3) Some of the factors are highly subjective like initiative and personality of the
employees; so the actual rating may not be on scientific lines.

4) Supervisors often do not have critical ability in assessing the staff. Sometimes,
they are guided by their personal emotions and likes. So the ratings are likely
to be biased.

Difference between Performance Appraisal and Job

Performance Appraisal Job Evaluation

1. Performance appraisal is concerned with the Job evaluation is the analysis of
differences among the employees in terms of various jobs to know the demands,
their performance. It is also termed as merit which the normal performance of
as it is concerned with the comparative merit particular jobs make on average
of individuals. employees. It does not take into
account the individual abilities of the
2. It considers the abilities and performance of It considers the requirement of various
individuals. jobs in terms of jobs description and
job specifications.

3. The purpose of merit rating is to appraise the The purpose of job evaluation is
performance of individuals to take decisions limited, i.e. to determine the worth of
like increase in pay, transfer, promotion, etc. the job on the basis of demands made
It also serves as guidelines for the by a particular job on the average
management to consider the type of training, worker. This facilitates fixation of
which should be imparted to the employees. wages for various jobs.
4. Performance appraisal rates the man and Job evaluation analyses the job to
not the job as it is concerned with assessing determine their relative worth and fix
of the abilities of the individuals. As a matter their wage levels that are fair and
of fact, it measures the worth of different equitable.
employees to the organization.

5. Performance appraisal is used as a basis of Job evaluation is used to shape the

personnel policies as regards transfer and wage policy of the organization.


 To enable an organization to maintain an inventory of the number and

quality of all managers and to identify and meet their training needs and

 To determine increments rewards, and provide a reliable index for

promotions and transfers to positions of greater responsibility.

 To maintain individual and group development by informing the employee

of his performance standards.

 To suggest ways of improving the employee’s performance when he is not

found to be up to the mark during the review period.

 To identify training and development needs and to evaluate effectiveness of

training and development programmes,

 To plan career development, human resources planning based on



There are various methods of merit rating may classified into:

1) Traditional Methods and
2) Modern Methods.

1) Traditional Methods

Traditional methods are very old technique of performance appraisal. They are
based on trait-oriented appraisal. Evaluation of employees is done on the basis of
standards of personal traits or qualities such as attitudes, judgment, versatility,
initiative, dependability, leadership, loyalty, punctuality, knowledge of job, etc.

There are seven traditional methods of appraisal. They are:

 Unstructured appraisal.
 Employee ranking.
 Forced distribution.
 Graphic – rating scales.
 Check – lists.
 Critical incidents.
 Field review.

Unstructured Appraisal

Under this, the appraiser is required to write down his impression about the person
being appraised in an unstructured way. However, in some organizations,
comments are required to be grouped under specific headings such as quality of
job performance, reasons for specific job behaviors, personality traits, and
development needs. This system is highly subjective and has its merit in its
simplicity and is still in use especially in the small firms.

Ranking Method

Ranking is a simple process of placing in a rank according to their job

performance. It permits comparison of all employees in any single rating group
regardless of type of work. All workers are judged on the same factors and they
are rated on the overall basis with reference to their job performance instead of
individual assessment of traits. In this way, the best in placed first in the rank and
the poorest occupies the last rank. The difficulty of this system is that the rater is
ranked to consider a whole person. Subjectively of the appraiser may enter into his
judgments. Asking the appraiser to rank employees on certain desirable traits can
reduce the subjective ness in this method. The other difficulty with this method is
that it does not indicate the degree of difference between the first man and the
second man, and so on.

Forced Distribution Method

Some appraisers suffer from a constant error, i.e., they either rate all workers as
excellent, average or poor. They fail to evaluate the poor, average or excellent
employees clearly. The forced distribution system is devised to force the appraiser
to fit the employees being appraised into predetermined ranges of scales. It has
an advantage over the paired comparison system in that two or more employees
can be given equal ratings. This system is based on the presumption that
employees can be divided into five point’s scale of - outstanding, above average,
average, below average and poor. In this system, the appraiser is asked to
distribute the employees into these categories in such a way that about 10% of the
men are in group ‘outstanding’, 20% ‘above average’, 40% ‘average’, 20% ‘below
average’, and 10% ‘poor’.
This method obviously eliminates the room for subjective judgment
on the part of supervisors. This system is easy to understand and administer. The
objective of this technique is to spread out ratings in the form of a normal
distribution, which is open to criticism.

Graphic Rating Scales

Under this method, scales are established for a number of specific factors and
qualities. Five degrees are established for each factor and general definitions
appear at points along the scale. Generally, the rater is supplied with a printed
form, one for each person to be rated. The selection of factors to be measured on
the graphic rating scale is an important point under this system.
There are two types:
1) Characteristics, such as initiative and dependability, and
2) Contributions, such as quantity and quality of work.

Since certain area of job performance cannot be objective measured, it is likely

that graphic scales will continue to use a mixture of both characteristics and
Graphic scales impose a heavy burden upon the supervisor. He must report and
evaluate the performance of his subordinate on scales involving as many as five
degrees on perhaps ten different factors. The main drawback of this system is that
the rater may be biased. However, one means of ensuring that the rater has based
his scoring upon substantial evidence is to leave space on the form after each
factor and require him to explain the reason for his rating. In effect, he is asked to
give example of the ratee’s behavior that justifies the assigned rating. A supervisor
may tend to rate him men high to avoid criticism from them.

The graphic rating method is easy to understand and easy to use. It permits the
statistical tabulation of scores in terms of measures of central tendency, skew ness
and dispersion. It permits a ready comparison of scores among employees. The
scores presumably reveal the merit or value of every individual. However, this
method has certain serious drawbacks. There is an implication that a high score of
one factor can compensate for a low score on another. If a man scores for
attendance, attitude, cooperativeness, etc. Frequently, the rating tends to cluster

on the high side under this system. A supervisor may tend to rate his men high so
that they may receive high share of pay raises in some cases.

Check Lists

It also consists of two techniques:

a) Weighted check list, and
b) Forced choice.

a) Weighted Check List:

Under this method, various statements are prepared in such a manner that they
describe various types and levels of behavior for a particular job. Each statement
is attached with a scale value. At the time of rating the employees, the supervisor
just collects and checks all the statements. After the weights and values are
attached to the individual traits, the rating up to this level is gathered on the rating
sheet. Then the weights are averaged and employee is evaluated. The weighted
check – the persons thoroughly acquainted with job and perfect at preparing and
weighing statements should prepare list. When this process is over, rating is
placed on separate cards. Then raters who actually observed the accomplishment
of the work sort these cards. They rank the employee from poor to excellent.
Weights are then assigned to the statements in accordance with the way they are
ranked by the raters.

b) Forced Choice

This method is used particularly with the objective of avoiding scope for personal
prejudices. Under this method, the rater is forced to choose between descriptive
statements of seemingly equal worth describing the person in question.
Statements are chosen of both the sides (favorable as well as unfavorable). For

example, the following two pairs of statement from each pair that is represented by

a) Gives clear instructions to his subordinate.

b) Can be dependent upon to complete any job assigned.
c) Makes promises that he knows he cannot keep.
d) Shows favoritism to some employees.

The rater may feel that neither of the two statements in a pair is applicable, but he
must select the one that is more descriptive. Only one of the statements in each
pair is correct in identifying the better performances and this scoring key must be
kept secret from raters. In this way, bias removed from the appraisal process. The
main advantage of establishing this system of performance appraisal is that it has
greater objectivity than most other methods.

Critical Incident Method

A critical incident means a significant act by an employee exceeding or failing any

of the requirements of his job. It represents an exceptional behavior of an
employee at work, as for instance, Resisted the implementation of change;
Became upset over work; Refused to help a fellow worker; Suggested an
improvement in the work method’ Tried to get a fellow worker to accept the
management decision; Welcome new ideas.
This method requires every supervisor to record all such significant
incidents in each employee’s behavior, which indicate effective or successful
action and those, which indicate ineffective or poor behavior. These are recorded
in a specially designed notebook, which contains categories or characteristics
under which various behaviors can be recorded. Examples of such type of job
requirements of worker a are judgment, learning ability, productivity, dependability,
accuracy of work, responsibility and initiative. Daily recording of these items

seems to be essential because, otherwise, the supervisor may forget the incidents
with his subordinates.
This method suffers from the defect that outstanding incident happens so
frequently that individual’s appraisal may not vary markedly between any two time
periods. It has been observed that most of the time the employees have neither
positive nor negative incidents. If the critical event does not happens’ it will be
difficult to rate an employee. Moreover, it may be difficult for a supervisor to decide
what the critical or exceptional incident is. To rectify this defect, Gerald Whitlock
designed a specimen checklist, which consists of a number of behavior incidents,
which are considered to be an example of - uncommonly, ineffective, or effective
job behavior. The usual procedure in constructing the specimen checklist is to
collect behavior incidents from certain experts in this area. The number of such
performance behaviors ranges from 80 to 150 incidents, equally divided between
effective and ineffective specimens.

Field Review Method

Under this method, an expert from the personnel department interviews the
supervisors. The expert questions the supervisor to obtain all the pertinent
information on each employee and takes notes his notebook. Thus, there is no
rating form with factors or degrees, but overall ratings are obtained. The workers
are usually classified into three categories - outstanding, satisfactory and
unsatisfactory. The interviewer questions the supervisor about the requirements of
each job in his unit and about the performance of each man in his job. He probes
to find out only how a man is doing but also why he does that way and what can
be done to improve or develop him. The supervisor is required to give his opinion
about the progress of his subordinates, the level of performance of each
subordinate, his weaknesses, good points, outstanding ability, promotion ability,
and the possible plans of action in cases requiring further consideration. The
questions are asked and answered verbally.

The success of field review method depends upon the competence of the
interviewer. If he knows his job, he can contribute significantly to accurate

Criticism of Traditional Methods:

The general criticism of traditional performance appraisal systems is that they are
two subjective in nature because all of them are on personal judgment of the rater.
The personal judgment is always subjected to personal bias or prejudice as well
as pressure from certain other areas. The appraiser may not be able to judge the
competence of the employees because of lack of training.

Because of the judgment role of the supervisors under the traditional system,
performance ratings are frequently subject to a number of errors and weaknesses,
which are discussed below:

Halo Error: This type of error occurs when the rater allows one aspect of a
man’s character or performance to influence his entire evaluation. It is the
tendencies of many raters to let the rating they rating to one characteristic
excessively influence their rating on all subsequent characteristics. Many
supervisors tend to give an employee approximately the same rating on all
factors. The error can be recognized quite easily on factors scales. The rating
scale technique of performance appraisal is particularly susceptible to the halo
supervisor judge all of his subordinates on a single factor or trait before going
to the next. In this manner, he can consider all of the men relative to a standard
or to each other on each trait.

Central Tendency: This error occurs when the rater is in doubt about the
subordinates or has inadequate information about them or is giving less

attention and effort to the rating process. Because of these reasons, generally
the raters are reluctant to rate people at the outer ends of the scale. The rater
knows that he has to appraise his subordinates at periodic intervals but if he is
unfamiliar with some of the subordinates or does not have sufficient time to
devote to the rating process, he may play it safe by neither condemning nor
praising. So he may rate them ‘average’. It is possible for this type of rating i.e.,
all average to be a true rating, but its probability is less than its frequency.

Leniency or Strictness: Some supervisors have a tendency to be easy raters

and others have a tendency to be harsh in their ratings. Lenient or easy raters
assign consistently high values or scores to their subordinates and strict or
harsh raters give consistently low ratings. Both the trends can arise from
varying standards of performance among supervisors and form different
interpretations of what they observe in employee performance.

Recent Behavior Bias: Often some raters evaluate persons on the basis pf
their performance in recent few weeks; average behavior is not checked. Some
employees being aware of this tendency show better results when they feel
that they are being observed and the report of their performance is to be
compiled soon.

 Miscellaneous Biases: In many cases, the rater may give higher ratings
because he thinks that it would look bad for him if employees in the other
department received higher pay increases than his pay. Supervisors will tend to
rate their subordinates near the middle of the spectrum if their bosses put
pressure on them to correct the worker’s average rates or to get rid of the
subordinates. Some supervisors show bias against members of the opposite
sex or of another caste, religion or nationality. They also give higher ratings to
senior employees because they are too ready to admit that they have not

improved under their leadership. Many a times, a rater is influenced by
organizational positions and may give higher ratings to those holdings the
higher positions.
2) Modern methods
There are two important methods of performance appraisal,
which are used by the modern concerns. The first is management by objectives,
which represents result-oriented appraisal. The second is behaviorally anchored
rating scale, which is based on the behaviour of the subordinates.

Management by objectives

It was peter drucker who proposed goal setting approach to

performance appraisal, which he called “management by objectives and self-
control”. Douglas McGregor further strengthened this approach. He was
concerned with the fact that most traditional appraisal systems involved rating of
traits and personal qualities that he felt were highly unreliable. Besides, the use of
such trait ratings produced two main difficulties: -
a) The manager was uncomfortable about using them and resisted making
b) It had a damaging effect on the motivation and development of the
Goal setting approach or “management by objectives” (MBO) is the same
as behavioral approach to subordinate appraisal, actually called “Work planning
and review” in case of General Electric Co., USA. Under this approach, an
employee is not appraised by his recognizable traits, but by his performance with
respect to agrees goals or objectives.
The application of goal setting approach to performance appraisal
involves the following steps:
1) The subordinate discusses his job descriptions with his superior and they
agree on the contents of his job and the key results areas.

2) The subordinate prepares a list of reasonable objectives for the coming period
of six to twelve months.
3) He sits with his superior to discuss these targets and plans, and a final set is
worked out.
4) Check – points are established for the evaluation of progress, and the ways of
measuring progress are selected.
5) The superior and the subordinate meet at the end of the period to discuss the
result of the subordinate’s efforts to meet the targets mutually established.
The goal setting approach has done away with the
judgmental role of the superiors in the appraisal of their subordinates. It has led to
greater satisfaction, greater agreement, greater comfort and less tension and
hostility between the workers and the management. This approach is considerably
superior to the traditional approach of performance appraisal. It emphasizes
training and development of individuals. It is problem-solving approach rather than
tell and sell approach. This approach has also got a built – in device of self –
appraisal by the subordinates because they know their goals and the standards by
which their performance will be measured.

The Goal setting approach suffers from the following limitations:

The subordinates can apply this approach only when the goal setting is
possible. It is doubtful if such a procedure can be applied for the blue color
This approach is not easy to administer. It involves considerable time, thought
and the superior and the subordinate. If the span of supervision is quite large, it
will not be possible for the superior to have discussion with each and every
subordinate for setting up mutually agreed goals.

This approach mainly emphasizes counseling, training and development. It is

argued that critical evaluation and modification to improve are incompatible.

But, in practice, it is not possible to forge the critical aspect of performance

This approach is appropriate for the appraisal of executives and supervisory

personnel who can understand it in a better way. Operative workers cannot
understand this approach and moreover, a vast majority of them do not want to
take initiative in setting their own goals.

Behaviorally Anchored Rating Scales

Behaviorally Anchored Rating Scales (BARS) are designed to

identify the critical areas of performance for a job, and to describe the more
effective and less effective job behavior for getting results. Performance is
evaluated by asking the rater to record specific observable job behaviors of an
employee and then to compare these observations with a “behaviorally anchored
rating scale”. As a result, the supervisor is in a position to compare the employee’s
actual behavior with the behavior that has been previously determined to be more
or less effective.
Proponents of BARS claim many advantages of this approach. They
argue that such a system differentiates among behavior, performance, and results,
and consequently is able to provide a basis for setting developmental goals for the
employee. Because it is job- -specific and identifies observable measurable
behavior, it is a more reliable and valid method for performance appraisal.
Empirical studies of Behaviorally Anchored Rating Scales
(BARS) have provided a fertile ground for study by both theorists and practitioners.
By anchoring the scales behaviorally, the BARS approach was expected to
produce more valid and reliable results by reducing measurement errors (leniency,
halo effect, central tendency, etc.).

Designing an Appraisal Programme

 Determining the Objective of ‘performance Appraisal’.

Before any performance appraisal programme is initiated, it

is essential to determine its objectives. The objective of the appraisal programme
may be either to appraise the actual performance of individuals to higher jobs or
both. Sometimes, performance appraisal programmes are associated with specific
objectives like training and development, transfer and promotion, increase in pay,

 Establishing Standards of Performance.

For effective rating of employees, it is necessary to

establish standard on performance against which their performance should be
compared. However, an approach that is more preferable is to establish, in writing,
definite standards of accomplishment, which the employee can reasonably be
expected to meet. Such a method will take it possible for both supervisor and his
subordinate to reach agreement on just what is expected in terms of performance.
It should be noted that performance standards are relative to the group and the
organization. Not only are the needs of each organization different, but the talents
of manpower also varying from organization to organization. The expectation of
management is also higher in some organizations than in others.

 Who is to do the Appraisal?

Generally, the appraiser is the immediate superior of the man to be

appraised. He is most familiar with the employee’s work and is in contact with him
and so he is considered to be able to appraise him well. But there are certain
limitations of appraisal by one person. That is why some organizations try to obtain
two or more ratings on each employee. But again the difficulty may arise because

the second rater may not have the necessary contact with the individual who is to
be rated. The possibility is the constitution of a rating committee, which may
consist of a number of supervisors and specialists from personnel department and
a representative of the worker. The committee will rate each individual collectively.
Some people feel that employee should be allowed to rate themselves. When this
is done, their immediate superiors may offer their rating in conjunction with ratings.

Whosoever the appraiser may be, the subjectivity invariably steps

in. A well-adjusted person is less subject to projecting himself into other than a
poorly adjusted person and, therefore he is able to judge them better. It is often
assumed that qualified psychologists are more capable than laymen of making
unbiased judgments since they receive training in the dynamics of the personality
and also in the correct manner of making the judgment.

 Frequency of Appraisal

The frequency of appraisal differs from organization and with

the nature of duties performed. There are not spot appraisals, monthly, quarterly,
and six monthly or yearly appraisals. But most of the organizations conduct yearly
or half – yearly appraisals because more frequent appraisals besides taking away
time of the appraiser or raters, may create a sense of fear amongst the ratee’s.
Idea frequency is one, which fits into the objectives of the older ones.

 Designing of Forms

This is an important step in performance appraisal to design the

rating forms to be utilized in the programme. The forms should be related to job
families such as clerical, mechanical, sales, technical and supervisory. All require
a different evaluation form. Performance forms may be classified as those
involving comparative ranking and others involving the comparison of each
employee’s actual performance with predetermined standards. The first category
of forms is designed to evaluate employee performance for the purpose of making

wage adjustments, lay offs, promotions, etc. and second category of forms is used
to improve the performance of workers on their present jobs.

 Requirements of a Sound Performance Appraisal


A sound system of performance appraisal must fulfill the following essentials:

1) The appraisal plan should be simple to operate and easy to understand. When
the appraisal system is complicated, employees may not understand it fully and
may look at the plan with suspicion. The plan should not be very time-

2) The performance appraisal system should be performance based, uniform and

non – variable, fair, just and equitable. It should be ensured that the appraisers
are honest, rational and objective in their approach, judgment and behavioral

3) The employees should be made aware of the performance in terms of goals,

targets, behavior, etc. expected of them. A personal between the appraiser and
the employee has to be developed to achieve mutual understanding of the
criteria of evaluation.

4) The appraisal plan should be devised in consultation with the subordinates.

This will increase their commitment to the plan and their understanding of
expected performance.

5) The appraisal plan should take into account the appraisal practices prevailing
in other units in the industry as well as the latest thinking on performance
appraisal. It should fit in the structure and operations of the organization.

6) The top management must create a climate of reliable appraisal throughout the
organization. Goal – orientation, open communications, mutual trust informal
relationships, etc. are the basic elements of such a climate.

7) The appraisal plan should be designed to achieve specific objectives. The

objectives of the appraisal programme may be to evaluate current performance
on the job and to determine the potential for higher jobs. In some cases,
performance appraisal is linked with specific objectives like pay raise, training,
promotion, transfer, etc. The number of factors to be considered and the data
to be collected should be tailor-made to achieve the objective of the appraisal.

8) The appraisers should be selected and trained properly so that they have no
personal bias and possess the necessary capabilities for objective evaluation
of employees. In order to ensure objectivity in appraisal, more persons may
rate an individual independently.

9) There should be provision of appeals against appraisals to ensure confidence

of the employees and their associations or unions. The results of appraisal
must be discussed with the rates so that they may get an opportunity to
express their feelings on their progress reports.




Any survey report begins with stating the objectives of the study; therefore, the first
step in the survey analysis deals with the objectives. Next, the methodology
adopted to collect the information required will be dealt with, that is, the survey
design will be described.
General, data sources include secondary and primary sources.
Secondary can provide a range of information and should be consulted first. If they
do not provide necessary information to the research problem then primary data is
to be collected.


 To study the current performance appraisal system of the organization and identify
the gaps between the current state and the desired-in-state.

 To find out the performance dimensions relevant to the strategic plan of the

 To identify the potential areas for the scope of improvement in the current system
and thereby in the organizational performance.

 To study the implications of an effective performance appraisal system on the

productivity of employees and the organizational performance as a whole.

 To identify the key performance indicators and critical success factors for
achieving organizational excellence.




Research methodology is simple framework or plan for the study that is

as guide in collection and analyzing the data. It is the blue print that is followed in
completes the study. Thus, good research methodology ensures the completion of
project efficiency and affectivity. Since there are many aspect of research

methodology, the line of action has to be chosen from the variety of alternatives, to
choose the suitable method through the assessment from various alternatives.

Research methodology gives the researcher an opportunity to put forward

his argument for having opted for certain alternatives and also at the same time he
can justify his ruling out some other possibility likes. Why research study has been
undertaken, how the research problem has been formulated what data has been
collected, what particular technique if analyzing the data has been used and lot of
similar type question are usually answered when we talk of research problem in
Keeping in view the above stated objectives the following methodology
was adopted:

The Marketing Research Process:-

 Define the problem and Research Objectives: -

The first and main step of any research is to define the relevant
problems or objective for which the researcher wants to do research.

 Develop the research plan: -

To makes the plan for overall research as how, when, where and
from whom researcher will collect the data.
Sources of Data Collection

In order to carry out the resent study, the data used is secondary in
nature and is collected from published sources i.e. websites, newspapers,
business magazines, journals, etc.

Analyze the information: -

After collecting the data the next step is to analyze the information.

Present the findings: -

To make a summary on the basis of analyzing the collect data and find
out the situation.

Make the decision: -

The last step is to take a decision on the basis of finding that what action
should be regarding the findings



The scope of the study has been concised to the exposure of derivatives.


• Primary data: -
Primary data is the data collected specially for a specific
purpose. The methods used for its collection are personal discussion &
questionnaire etc.

The method used in collecting primary data in my research was
questionnaire. In this I asked a set of predetermined questions in a predefined
order, the answers given by the respondents were used to fill up the questionnaire.


Secondary data consists of information that already

exists somewhere and was collected for another purpose, which may not be the
same as the purpose of research. Secondary data used here was the Performa of
performance appraisal used in IFFCO .

The secondary data provide a starting point for research and

offer advantage of low cost and ready availability.

Questionnaire: -
A questionnaire was prepared which consisted of open-ended
questions with multiple choices. The questionnaire used was structured type of
questionnaire. It was prepared taking into account the factors, which were to be
analyzed to know the process of Performance Appraisal.

This method was preferred as it is economical, given more

information and the response is very good.




By filling of the questionnaire, the data was collected which is analyzed as follows:

1. Type of performance appraisal preferred

Table No. 1
Quarterly 85%
Half-yearly 15%
Monthly 0
Annually 0

Graph No. 1

90% 85%
20% 15%
0 0
Quarterly Half-yearly Monthly Annually

After analyzing the data, the results shows that 85% of the senior
production officers prefer quarterly performance appraisal and 15% prefer half-
yearly performance appraisal.

2. Senior’s satisfied by subordinate’s performance

Table No. 2
Yes 75%
Can’t say 25%

Graph No. 2

Can’t say


After analyzing the data, the results shows that 75% of the senior
production officers feel that their seniors are satisfied with their performance and
25% can’t say.

This analysis shows there is lack of appraisal by the immediate seniors.

3. Satisfied with their own Performance

Table No. 3

Yes 85%
No 15%

Graph No. 3




After analyzing the data, the results shows that 85% of the senior production
officers are satisfied with their own performance and 15% are not satisfied with
their own performance.
This implies that satisfaction level has to be increased among senior
production Officers.

4. Performance appraisal improves performance

Table No. 4

Yes 100%
No 0%

Graph No. 4




After analyzing the data, the results shows that 100% of the senior production
officers feel that performance appraisal do helps in performing better.

Through this we come to know that process of performance appraisal is

coming out to be positive and it should be continued.

5. Information is submitted timely by the senior production officers to their

Table No. 5

Yes 100%
No 0%

Graph No. 5




After analyzing the data, the result shows that 100% of the senior
production officers submit all the information timely to their seniors.

This shows that all the senior production officers submit all the information
timely to the seniors.

6. Adequate and fair chance provided to defend against adverse entries in
your appraisal

Table No. 6

Yes 57%
No 43%

Graph No. 6


After analyzing the data, the result shows that 57% of the senior production
officers feel that they are provided with a chance to defend them against adverse
entries in their appraisal whereas 43% denies it.
This shows that there is lack of chances provided to defend against adverse
entries in appraisal.

7. Reason for bad performance

Table No. 7

Personal 16%
Official 16%
Others 16%
No Bad Performance 52%

Graphs No. 7




20% 16% 16% 16%


Personal Official Others No Bad

After analyzing the data, the results shows that 16% of senior production officers
performed bad due to personal reasons, 16% of senior production officers due to
official reasons, 16% of senior production officer’s due to other reasons and no
bad performance from the rest of the 52% of senior production officers.
This shows that there are some reasons, which are required to be rectified
to improve performance.

8. Awareness of appraisal system.

Table No. 8

Yes 60%
No 40%

Graph No. 8


After analyzing the data, the results shows that 60% of the senior production
officers are fully aware of the appraisal system and rest 40% are unaware of this

This shows that awareness about the performance appraisal system is to be





1.) Performance appraisal in IFFCO, DELHI, is done annually.

2.) For appraisal in IFFCO, Delhi, a SELF-APPRAISAL form is given to the staff
members and they fill it up. And then after according to their self-observation
and through the appraisal form filled by the staff members rating is given to
the members. Accordingly then incentives and promotions are granted.

3.) In IFFCO, DELHI, at the majority senior staff members submit all the
information timely to their superiors.

4.) All senior production officers agree that performance appraisal system helps
them to perform better.


 In IFFCO, DELHI, there is lack of proper knowledge among senior production

officers about the procedure followed in Performance Appraisal.

 There is lack of fair chances provided to defend yourself against adverse

entries in your appraisal.

 There is lack of satisfaction level among the senior production level officers
regarding to their own work as they have monotony at their work.




• The company should appraise the performance of the workers by giving

them some incentives, which motivate them to work to their fullest capacity
and to motivate them to work more and show good and better results.
• For the top management of the company it should offer them holiday
package, appraise performance by recognizing there work in meetings etc.
this will help to raise their moral and they can work better. They don’t want
financial help as they earn enough to maintain their status. They want their
work recognition.
• For the lower group the company can increase their wages, give them
pension schemes, and provide them the medical facilities etc because they
want financial help from the company to insure their proper living.
• They should keep changing the raters for the performance appraisal system
from time to time so that they don’t become bias at anytime for any
• The method of the company should be changed periodically so that the
employees have no chance to complain for the method.
• The criteria decided upon which the performance has to be rated should not
be fixed it should be changed from time to time.
• The standards of the rating should be very specific, clear and concise.
• There should be the feeling of teamwork in the organization.
• The system should be cost effective and it should suit the budget of the


In IFFCO performance appraisal is conducted annually. The immediate boss who

has been observing the immediate subordinate throughout the year rates him
according to the self appraisal form filled and personal observation under following

a) Quality of work.
b) Quantity of work.
c) Job knowledge.
d) Dependability.
e) Innovation and creativity.
f) Ability to learn.
g) Attendance.
h) Reactions to criticism.
i) Discipline.
j) Customer relations.
k) Subordinate development.

 The rating given is confidential and out of the knowledge of their

subordinates. Accordingly, promotions and incentives are granted to the
deserving ones.

 Rating given to the senior production officers is done confidentially and

whatever information is been filled in the self-appraisal form is not cross-

 The sole objective for taking part in performance appraisal of senior

production officers in IFFCO is to be awarded with promotions and incentives

but the basic reason why performance appraisal is conducted is to develop
the performance and attitude.

 Senior production officers of IFFCO follow the procedure of performance

appraisal given by the senior managers because they have monotony in their
work and they have no time for any innovation or creativity.



1. What type of performance appraisal you prefer?

Annually Quarterly
Monthly Half yearly

2. Are your seniors satisfied with your performance?

Yes No

3. Are you satisfied with your performance?

Yes No

4. Does performance Appraisal help you in performing better?

Yes No

5. Do you submit information timely to your superiors?

Yes No

6. Do you get adequate and fair to defend your self against adverse entries in
your appraisal?

Yes No

7. What actually comes as the reason for your bad performance? (If any)

Personal Official Other

8. Are you fully aware of the appraisal system followed in your company?

Yes No

9. Any suggestion to alter existing Performance Appraisal system of your




1. Human resources development - T.N. CHABBRA

2. Human resources development - V.S.P. RAO