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A Study on Effectiveness of Performance Appraisal

in Managerial Employees of Bank


PROF. Ulhas Deshpande

Mr. Amey Jayprakash Vartak
ROLL NO. 340






I, Prof. Ulhas Deshpande hereby certify that Mr. Amey Jayprakash

Vartak of N.L. Dalmia Institute of Management Studies and
Research, MHRDM, 5th Semester, has completed a project on A
Study on Effectiveness of Performance Appraisal in Managerial
Employees of Bank in the academic Year of 2014-2017.This
information submitted is true and original to the best of my

Signature of Director of the Signature

College/Institution Project Guide

Prof. Dr. Gulab Mohite Prof. Ulhas

Director Incharge

This project on A Study on Effectiveness of Performance

Appraisal in Managerial Employees of Bank is the result of co-
operation, hard work and good wishes of many people. I, student
of N.L. Dalmia Institute of Management Studies and Research,
would like to thank my project guide Prof. Ulhas Deshpande for his
involvement in my project work and timely assessment that
provided me inspiration and valued guidance throughout my

I owe my debt to Prof. Dr. Gulab Mohite Director Incharge, N. L.

Dalmia Institute of Management Studies and Research, for giving
me this opportunity to present a creative outcome in the form of a
project work. I would like to thank Prof. Ulhas Deshpande for his
guidance & support with his valuable inputs & knowledge and also
like to take this opportunity to express my gratitude to the faculty
and staff for their friendly guidance and constant encouragement.
I also express my heartfelt gratitude to my institute friends and
family members whose efforts and creativity has helped me in
giving the final shape and structure to this project work.

I am also thankful to those seen and unseen hands and heads,

which has been of direct or indirect help in the completion of this
project work.

I, Mr. Amey Jayprakash Vartak of N. L. Dalmia Institute of

Management Studies and Research of MHRDM (SEM V), hereby
declare that I have completed this project on Study on A Study
on Effectiveness of Performance Appraisal in Managerial
Employees of Bank in the academic year 2014-2017. The
information submitted is true and original to the best of my

Signature of Student


Mr. Amey Jayprakash Vartak

Executive Summary

We strive to find out the implication of Performance Appraisal in

banking sector. Banking sector is one of the emerging sectors of
India; we strive to find out what is the importance of HR in
banking industry in specific with Performance Appraisal. In this
report we discuss the banking industry, HR overview, need of
Performance Appraisal in banks, Indian banking scenario,
techniques and approaches of Performance Appraisal pertaining
to the banking industry.

As we know that in present scenario of cut throat competition in

banking industry only the service is the factor that can make
sense in banking industry, we try to explore the importance of the
Performance Appraisal in banking to uplift the standard of
organization, individual and both as a mutual entity
OBJECTIVE OF THE STUDY......................................................9
SCOPE OF THE STUDY.........................................................10

RESEARCH METHODOLOGY...................................................11
PERFORMANCE APPRAISAL...................................................13
PERFORMANCE APPRAISAL BIASES.........................................22



INTRODUCTION TO BANKING SECTOR......................................51
ICICI BANK COMPANY PROFILE...........................................60
EXTRA MILE FOR ICICI BANK................................................63


ICICI BANK.....................................................................69
SUGGESTION AND RECOMMENDATION......................................77

About the study

The study, Performance Appraisal in Banking Sector,

highlights the importance of Performance Appraisal in special
reference of banking industry. As we know the banking sector is
one of the fastest growing sectors of our country, the study
highlights the perspective of HR in banking sector.

In this study we strive to find out the need of Performance

Appraisal for banks, and try to understand how the Performance
Appraisal is done in banking sector. In this study we take the
case of one of the leading bank, ICICI bank, as our sample and try
to find out their techniques used for Performance Appraisal. This
study refers to the need of Performance Appraisal for banking
industry, importance and emerging trends in the field of
Performance Appraisal. For easy understanding of the study we
have divided the entire study in to several chapters that gives the
specific nature of the subject in question.

We have highlighted several trends of banking industry, growth

and prospect of banking in India, history of Indian banking, Role of
RBI as regulatory bank and the industrial importance bank as an
institute to march the nation in economic growth. Further we
highlighted the role of HR, its need and importance and
Performance Appraisal as its one of the major tools. It signifies
the role of HR in organizational perspective and highlight the
rationale of active HR polices in an organization, this report takes
the HR as managerial function rather than the staff activities. In
this report we try to make the role and concept of HRM
understood for our readers.

The study is manly conducted on the basis of secondary data

rather than the primary data. We managed to collect the
secondary data from ICICI bank and got the information about the
HR policy and process of the bank. In our study we highlighted the
process of ICICI bank Performance Appraisal mechanism and the
manner in which Performance Appraisal takes place in ICICI
bank in special cases like the practical example of ICICI bank, the
study highlights:

A) Techniques,
B) Approach,
C) Forms,
D) Managerial approach,
E) Employees feedback,
F) Process and other real aspect of the Performance Appraisal
that provides the realistic view of the Performance Appraisal
process that is carried out by the bank in actual work
environment. The study is conducted is a simple manner and
most of the data is collected through various sources. This study
refers the Performance Appraisal technique as an effective
managerial tool to enhance the efficiency and effectiveness to
achieve the organizational and individual goals. This study
provides the theoretical knowledge about the Performance
Appraisals on the issue like
A) Need,
B) Importance,
C) Features,
D) Techniques,
E) Approaches,
F) Model,
G) Trends and other issues related to the banking industry.

This study refers to the role of Performance Appraisal in a wide

and in a systematic manner that takes place in a sequential way
and covers almost all the aspect of the appraisal from employees
to organization under the universal approach called Performance

Objective of the Study

To understand the concept of HR in special reference of

Performance Appraisal
To understand the application of Performance Appraisal in
banking sector
To understand the practical aspect of Performance
Appraisal in banking scenario
To understand the modern trends emerging in Performance
To understand the management approach towards
Performance Appraisal
To understand the banking scenario of India
To gain the knowledge of the practical process of the
To view the aspect of Performance Appraisal from
managerial perspective
To highlight the effectiveness of Performance Appraisal in
banking sector
To understand the need of Performance Appraisal for
banking industry

Scope of the study

Following aspects are covered under this study:

A brief overview of the nature of the subject
An introduction to the HR as a managerial function in special
reference with Performance Appraisal
New dimensions, techniques, approaches and thoughts in
Performance Appraisal.
Practical aspect of Performance Appraisal in ICICI bank
Modern techniques emerging in Performance Appraisal.
Need and importance of Performance Appraisal in banking
brief introduction of Indian banking industry
Introduction to ICICI bank
Role of Performance Appraisal as managerial decision in
banking sector in policy making and organizational success
Practical challenges, opportunities in banking sector to
implement the effective performance management system

Research Methodology

The study seems to be the observation and a description of the

project where we try to find out the hidden aspect or bring out the
concept for further explanation, but some scientific method and
techniques classified it as the research, thats why the following
research methods, techniques and components are used to
facilitate the study

Research Design- Descriptive research design

Descriptive research design is a scientific method that is used in

this study which helps in observing and describing the behavior of
a subject without influencing it in any way to obtain a general
overview of the subject. This design allows observation without
affecting normal behavior. It is also useful because it is not
possible to test and measure the large number of samples needed
for more quantitative types of experimentation
These types of experiments are often used by anthropologists,
psychologists and social scientists to observe natural behaviors
without affecting them in any way. It is also used by market
researchers to judge the habits of customers, or by companies
wishing to judge the morale of staff.
Though the results from a descriptive research can in no way be
used as a definitive answer or to disapprove a hypothesis but, if
the limitations are understood, they can still be a useful tool in
many areas of scientific and normal study research such as this

Type of data secondary data

Secondary data was used for this study as the research design is
descriptive in nature so we tried to collect the data available
through other sources on the subject. Sometimes, primary data is
also collected through observation method to facilitate the
research work

Sources of data

The following sources are used for collecting the data for this
News papers
Personal sources

Sampling judgmental sampling

Judgment sampling is a common no probability method. This
sampling is selected on the judgment. This is usually an extension
of convenience sampling. We have decided to draw the entire
sample from one "representative" bank even though the
population includes all banks.
When using this method, we try to ensure that the chosen sample
is truly representative of the entire population.

Performance Appraisal
Performance Appraisal is the systematic evaluation of the
performance of employees and to understand the abilities of a
person for further growth and development. Performance
appraisal is generally done in systematic ways which are as

1. The supervisors measure the pay of employees and compare

it with targets and plans.
2. The supervisor analyses the factors behind work
performances of employees.

3. The employers are in position to guide the employees for a

better performance.

Objectives of Performance Appraisal

Performance Appraisal can be done with following objectives in


1. To maintain records in order to determine compensation

packages, wage structure, salaries raises, etc.

2. To identify the strengths and weaknesses of employees to

place right men on right job.

3. To maintain and assess the potential present in a person for

further growth and development.

4. To provide a feedback to employees regarding their

performance and related status.

5. To provide a feedback to employees regarding their

performance and related status.

6. It serves as a basis for influencing working habits of the


7. To review and retain the promotional and other training


Advantages of Performance Appraisal

It is said that performance appraisal is an investment for the

company which can be justified by following advantages:

1. Promotion: Performance Appraisal helps the supervisors to

chalk out the promotion programmes for efficient
employees. In this regards, inefficient workers can be
dismissed or demoted in case.

2. Compensation: Performance Appraisal helps in chalking out

compensation packages for employees. Merit rating is
possible through performance appraisal. Performance
Appraisal tries to give worth to a performance.
Compensation packages which include bonus, high salary
rates, extra benefits, allowances and pre-requisites are
dependent on performance appraisal. The criteria should be
merit rather than seniority.

3. Employees Development: The systematic procedure of

performance appraisal helps the supervisors to frame
training policies and programmers. It helps to analyze
strengths and weaknesses of employees so that new jobs
can be designed for efficient employees. It also helps in
framing future development programmes.

4. Selection Validation: Performance Appraisal helps the

supervisors to understand the validity and importance of the
selection procedure. The supervisors come to know the
validity and thereby the strengths and weaknesses of
selection procedure. Future changes in selection methods
can be made in this regard.

5. Communication: For an organization, effective

communication between employees and employers is very
important. Through performance appraisal, communication
can be sought for in the following ways:

a. Through performance appraisal, the employers can

understand and accept skills of subordinates.

b. The subordinates can also understand and create a

trust and confidence in superiors.
c. It also helps in maintaining cordial and congenial labor
management relationship.

d. It develops the spirit of work and boosts the morale of


All the above factors ensure effective communication.

6. Motivation: Performance appraisal serves as a motivation

tool. Through evaluating performance of employees, a
persons efficiency can be determined if the targets are
achieved. This very well motivates a person for better job
and helps him to improve his performance in the future.

Performance Appraisal Tools and Techniques

Following are the tools used by the organizations for Performance

Appraisals of their employees.

1. Ranking

2. Paired Comparison

3. Forced Distribution

4. Confidential Report

5. Essay Evaluation

6. Critical Incident

7. Checklists

8. Graphic Rating Scale


10. Forced Choice Method

11. MBO
12. Field Review Technique

13. Performance Test

We will be discussing the important performance appraisal

tools and techniques in detail.

1. Ranking Method

The ranking system requires the rater to rank his subordinates on

overall performance. This consists in simply putting a man in a
rank order. Under this method, the ranking of an employee in a
work group is done against that of another employee. The relative
position of each employee is tested in terms of his numerical
rank. It may also be done by ranking a person on his job
performance against another member of the competitive group.

Advantages of Ranking Method

i. Employees are ranked according to their performance


ii. It is easier to rank the best and the worst employee.

Limitations of Ranking Method

iii. The whole man is compared with another whole

man in this method. In practice, it is very difficult to
compare individuals possessing various individual traits.

iv. This method speaks only of the position where an

employee stands in his group. It does not test anything
about how much better or how much worse an
employee is when compared to another employee.
v. When a large number of employees are working,
ranking of individuals become a difficult issue.

vi. There is no systematic procedure for ranking individuals

in the organization. The ranking system does not
eliminate the possibility of snap judgments.

2. Forced Distribution method

This is a ranking technique where raters are required to allocate a

certain percentage of rates to certain categories (eg: superior,
above average, average) or percentiles (eg: top 10 percent,
bottom 20 percent etc). Both the number of categories and
percentage of employees to be allotted to each category are a
function of performance appraisal design and format. The workers
of outstanding merit may be placed at top 10 percent of the
scale, the rest may be placed as 20% good, 40 % outstanding, 20
% fair and 10 % fair.

Advantages of Forced Distribution

i. This method tends to eliminate raters bias

ii. By forcing the distribution according to pre-determined

percentages, the problem of making use of different
raters with different scales is avoided.

Limitations of Forced Distribution

iii. The limitation of using this method in salary

administration, however, is that it may lead low morale,
low productivity and high absenteeism.

Employees who feel that they are productive, but find

themselves in lower grade (than expected) feel
frustrated and exhibit over a period of time reluctance
to work.

3. Critical Incident techniques

Under this method, the manager prepares lists of statements of

very effective and ineffective behavior of an employee. These
critical incidents or events represent the outstanding or poor
behavior of employees or the job. The manager maintains logs of
each employee, whereby he periodically records critical incidents
of the workers behavior. At the end of the rating period, these
recorded critical incidents are used in the evaluation of the
workers performance. Example of a good critical incident of a
Customer Relations Officer is: March 12 - The Officer patiently
attended to a customers complaint. He was very polite and
prompts in attending the customers problem.

Advantages of Critical Incident techniques

i. This method provides an objective basis for conducting

a thorough discussion of an employees performance.

ii. This method avoids recency bias (most recent incidents

are too much emphasized)

Limitations of Critical Incident techniques

iii. Negative incidents may be more noticeable than

positive incidents.

iv. The supervisors have a tendency to unload a series of

complaints about the incidents during an annual
performance review sessions.

v. It results in very close supervision which may not be

liked by an employee.
vi. The recording of incidents may be a chore for the
manager concerned, who may be too busy or may
forget to do it.

4. Checklists and Weighted Checklists

In this system, a large number of statements that describe a

specific job are given. Each statement has a weight or scale value
attached to it. While rating an employee the supervisor checks all
those statements that most closely describe the behavior of the
individual under assessment. The rating sheet is then scored by
averaging the weights of all the statements checked by the rater.
A checklist is constructed for each job by having persons who are
quite familiar with the jobs. These statements are then
categorized by the judges and weights are assigned to the
statements in accordance with the value attached by the judges.

Advantages of Checklists and Weighted Checklists

i. Most frequently used method in evaluation of the

employees performance.

Limitations of Checklists and Weighted Checklists

ii. This method is very expensive and time consuming

iii. Rater may be biased in distinguishing the positive and

negative questions.

iv. It becomes difficult for the manager to assemble,

analyze and weigh a number of statements about the
employees characteristics, contributions and

There are several techniques of Performance Appraisal, each

with some strong points as well as limitations. Oberg (1972) has
summarized some of the commonly used Performance Appraisal
5. Graphic Rating Scale
A graphic scale 'assesses a person on the quality of his or her
work (average; above average; outstanding; or unsatisfactory).'
Assessment could also be trait centered and cover observable
traits, such as reliability, adaptability, communication skills, etc.
Although graphic scales seem simplistic in construction, they
have application in a wide variety of job responsibilities and are
more consistent and reliable in comparison with essay appraisal.
The utility of this technique can be enhanced by using it in
conjunction with the essay appraisal technique.

6. Management By Objectives
The employees are asked to set or help set their own performance
goals. This avoids the feeling among employees that they are
being judged by unfairly high standards. This method is currently
widely used, but not always in its true spirit. Even though the
employees are consulted, in many cases management ends up by
imposing its standards and objectives. In some cases employees
may not like 'self-direction or authority.' To avoid such problems,
the work standard approach is used.

7. Paired Comparison:
The paired comparison method systematizes ranking and enables
better comparison among individuals to be rated. Every individual
in the group is compared with all others in the group. The
evaluations received by each person in the group are counted and
turned into percentage scores. The scores provide a fair idea as to
how each individual in the group is judged by the assessor.

8. Behaviorally Anchored Rating Scales (BARS):

This is a relatively new technique. It consists of sets of behavioral
statements describing good or bad performance with respect to
important qualities. These qualities may refer to inter-personal
relationships, planning and organizing abilities, adaptability and
reliability. These statements are developed from critical incidents
collected both from the assessor and the subject.

9. Assessment centers:
This technique is used to predict future performance of
employees were they to be promoted. The individual whose
potential is to be assessed has to work on individual as well as
group assignments similar to those they would be required to
handle were they promoted. The judgment of observers is pooled
and paired comparison or alteration ranking is sometimes used to
arrive at a final assessment. The final assessment helps in making
an order-of-merit ranking for each employee. It also involves
subjective judgment by Observers.

A Performance Appraisal system could be designed based on

intuition, self-analysis, personality traits, behavioral methods and
result-based techniques. Different approaches and techniques
could be blended, depending on the goals of Performance
Appraisal in the organization and the type of review. For
example, management by objectives, goal setting and work
standard methods are effective for objective coaching, counseling
and motivational purposes. Critical incident appraisal is best
suited when supervisor's personal assessment and criticism are

A carefully developed and validated forced-choice rating can

provide valuable analysis of the individual when considering
possible promotion to supervisory positions. Combined graphic
and essay form is simple, effective in identifying training and
development needs, and facilitates other management decisions.
Performance Appraisal Biases

Managers commit mistakes while evaluating employees and their

performance. Biases and judgment errors of various kinds may
spoil the performance appraisal process. Bias here refers to
inaccurate distortion of a measurement. These are:

1. First Impression (primacy effect): Raters form an overall

impression about the ratee on the basis of some particular
characteristics of the ratee identified by them. The identified
qualities and features may not provide adequate base for

2. Halo Effect: The individuals performance is completely

appraised on the basis of a perceived positive quality,
feature or trait. In other words this is the tendency to rate a
man uniformly high or low in other traits if he is extra-
ordinarily high or low in one particular trait. If a worker has
few absences, his supervisor might give him a high rating in
all other areas of work.

3. Horn Effect: The individuals performance is completely

appraised on the basis of a negative quality or feature
perceived. This results in an overall lower rating than may be
warranted. He is not formally dressed up in the office. He
may be casual at work too!

4. Excessive Stiffness or Lenience: Depending upon the

raters own standards, values and physical and mental
makeup at the time of appraisal, ratees may be rated very
strictly or leniently. Some of the managers are likely to take
the line of least resistance and rate people high, whereas
others, by nature, believe in the tyranny of exact
assessment, considering more particularly the drawbacks of
the individual and thus making the assessment excessively
severe. The leniency error can render a system ineffective. If
everyone is to be rated high, the system has not done
anything to differentiate among the employees.

5. Central Tendency: Appraisers rate all employees as

average performers. That is, it is an attitude to rate people
as neither high nor low and follow the middle path. For
example, a professor, with a view to play it safe, might give
a class grade near the equal to B, regardless of the
differences in individual performances.

6. Personal Biases: The way a supervisor feels about each of

the individuals working under him - whether he likes or
dislikes them - as a tremendous effect on the rating of their
performances. Personal Bias can stem from various sources
as a result of information obtained from colleagues,
considerations of faith and thinking, social and family
background and so on.

7. Spillover Effect: The present performance is evaluated

much on the basis of past performance. The person who
was a good performer in distant past is assured to be okay at
present also.
8. Recency Effect: Rating is influenced by the most recent
behavior ignoring the commonly demonstrated behaviors
during the entire appraisal period.

Therefore while appraising performances, all the above biases

should be avoid.

Communicating Performance Appraisals

Performance appraisals enable superiors to know what their team

members are upto, evaluate their performances and also give
them correct feedbacks so that they know where they are lacking
and work on their shortcomings.

The term Performance Appraisal generally causes

anxiety among employees, which definitely should not be
the case. You really do not have to worry about your appraisal if
you have worked hard throughout the year.
There is definitely a certain way appraisals need to be
communicated among employees. There are organizations where
management tends to create unnecessary hype about
performance appraisal. In such a scenario, trust me, employees
think only about their appraisals and find it extremely difficult to
concentrate on their routine affairs. The appraisal process
certainly should not disturb your daily schedule.

Let us understand how performance appraisal needs to be

communicated among employees.

The rating procedure, appraisal form or any other related

information ought to be sent to each and every individual
separately. Do not mark a common mail to everyone. If you do not
want to take the pain of sending separate mails to everyone,
create a common login id where each and every individual can
register using their passwords and pull out the appraisal form. The
appraisal form generally has information about employees
designation, grade, level in the hierarchy, responsibilities and
thus must be kept confidential.

Counseling needs to be done on a one on one basis.

Address their queries, confusions in private. Remember, appraisal
is a very sensitive subject and should be handled gracefully. Call
the employees one by one either in your cabin or conference
room and try to find out if they need any help or guidance. Trust
me, if you call them in a group, they would never open up. It is
unethical to discuss ones performance or salary in public.

Once the appraisals are done, communicating the same to the

employees is another big challenge. The increment letters or
appraisal letters should be handed over to the employees either
by the functional head or human resource team personally. Do not
ask your office peon to distribute the letters. Trust me, it is very
insulting. You are not doing any charity. It is their right.
Employee attrition is one of the major problems faced by
organizations after performance appraisal. Employees who
work only for money quit after a salary hike to negotiate further
with any other organization. Individuals who do not get
satisfactory appraisal in any case get demotivated and look for a
change. Any employee who does not agree to his/her appraisal or
feel has not got what he/she deserves needs to be addressed at
the earliest. Sit with the individual concerned and try to make
him/her understand as to why he/she has got a certain rating.
Employees cannot always be wrong. If you feel, an employee
deserves slightly more than what he has got, kindly reconsider
your decision. Remember, it is always better to give a decent
salary hike to talented employees than losing them. After all, if
they leave, you in any case have to spend time and energy
searching for a replacement.

Employees need to be motivated after their appraisals.

Congratulate each and every one irrespective of their salary hike
or promotion. Appreciate everyone for being consistent and most
importantly loyal towards the organization. Make sure no one
feels left out. Sit with them, give them new realistic targets and
guide them as to how can they work together, come out with
more innovative ideas and show better performances in the years
to come.

Performance appraisal should not be the only method to evaluate

or acknowledge employees performance. Do not be rude to
employees who did not perform well. It is absolutely okay to
handhold them and give a second chance.

Understand where the individual went wrong. All

negativities and confusions would disappear if you make the
individual understand where all he/she lacked and why his
counterpart has got a decent appraisal while he/she has not? Yes,
employees at this point of time are really not in a mood to listen
to their superiors but you have to assure them that as a Boss, you
are always there with them and would certainly help in future as
well. Understand if at all the individual is facing any problem or
not and most importantly try to provide a solution. Yes, after a
bad appraisal, employees tend to become negative but as a Boss
it is your responsibility to change their perception.

Let them speak and come out with their frustrations.

Employees should also be careful with their words. Never cross
your limits. Handhold such employees and provide necessary
guidance whenever required. Send them a motivational email.
Such small initiatives go a long way in motivating employees so
that they become a little more serious and come back with a
bang. Make them understand that this is just a temporary phase
and should not act as a demotivating factor for them. Encourage
them to work in unison with their fellow workers, read a lot and
most importantly believe in the organization and its process.

Personnel Records

Personnel Records are records pertaining to employees of an

organization. These records are accumulated, factual and
comprehensive information related to concern records and
detained. All information with effect to human resources in the
organization is kept in a systematic order. Such records are
helpful to a manager in various decisions -making areas.

Personnel records are maintained for formulating and reviewing

personnel policies and procedures. Complete details about all
employees are maintained in personnel records, such as, name,
date of birth, marital status, academic qualifications, professional
qualifications, previous employment details, etc.

Types of Personnel Records

1. Records of employment contain applicants past records, list

sources, employees progress, medical reports, etc.
2. Wages and salaries records contain pay roll records, methods
of wages and salaries, leave records, turnover records and
other benefit records.

3. Training and development contains appraisal reports,

transfer cases, training schedule, training methods.

4. Health and safety records include sickness reports, safety

provisions, medical history, insurance reports, etc.

5. Service Records are the essential records containing bio-

data, residential and family information, academic
qualifications, marital status, past address and employment

Purposes of Personnel Records

According to the critics of personnel records, this system is called

as wastage of time and money. According to personnel records,
followers of this: Dale Yoder, an economist of Michigan University,
USA has justified the significance of personnel records after
making an in-depth study.

1. It helps to supply crucial information to managers regarding

the employees.

2. To keep an update record of leaves, lockouts, transfers,

turnover, etc. of the employees.

3. It helps the managers in framing various training and

development programmes on the basis of present scenario.

4. It helps the government organizations to gather data in

respect to rate of turnover, rate of absenteeism and other
personnel matters.

5. It helps the managers to make salary revisions, allowances

and other benefits related to salaries.
6. It also helps the researchers to carry in- depth study with
respect to industrial relations and goodwill of the firm in the

Therefore, personnel records are really vital for an organization

and are not a wasteful exercise.
Employee Stress - Strategies for managing stress
at workplace

What is Employee Stress?

Employees stress is a growing concern for organizations today.

Stress can be defined as a lively circumstance in which people
face constraints, opportunities, or loss of something they desire
and for which the consequence is both unpredictable as well as
crucial. Stress is the response of people to the
unreasonable/excessive pressure or demands placed on them.

Stress is not always negative. It may also bring out the best in
individuals at times. It may induce an individual to discover
innovative and smarter way of doing things. This positive
dimension of stress is called as enstress. But usually, the term
stress has a negative implication and this negative aspect of
stress is termed as distress. For instance - When a subordinate is
harassed or warned by his superior, unhappiness of unsuitable
job, etc. We can say that Stress causes some people to break,
and other to break records.

Symptoms of Stress

Some of the symptoms of stress at workplace are as follows-

Absenteeism, escaping from work responsibilities, arriving

late, leaving early, etc.
Deterioration in work performance, more of error prone work,
memory loss, etc.

Cribbing, over-reacting, arguing, getting irritated, anxiety,


Deteriorating health, more of accidents, etc.

Improper eating habits (over-eating or under-eating),

excessive smoking and drinking, sleeplessness, etc.

It is thus very essential to have effective stress management

strategies in an organization so that the detrimental
repercussions of stress on the employees as well as their
performance can be reduced and controlled.

Sources/Causes of Stress

The factors leading to stress among individual are called as

stressors. Some of the factors/stressors acting on employees are-

1. Organizational factors- With the growth in organizational

stress and complexity, there is increase in organizational
factors also which cause stress among employees. Some of
such factors are-

a. Discrimination in pay/salary structure

b. Strict rules and regulations

c. Ineffective communication

d. Peer pressure

e. Goals conflicts/goals ambiguity

f. More of centralized and formal organization structure

g. Less promotional opportunities

h. Lack of employees participation in decision-making

i. Excessive control over the employees by the managers

2. Individual factors- There are various expectations which

the family members, peer, superior and subordinates have
from the employee. Failure to understand such expectations
or to convey such expectations lead to role ambiguity/role
conflict which in turn causes employee stress. Other
individual factors causing stress among employees are
inherent personality traits such as being impatient,
aggressive, rigid, feeling time pressure always, etc. Similarly,
the family issues, personal financial problems, sudden career
changes all lead to stress.

3. Job concerning factors- Certain factors related to job

which cause stress among employees are as follows-

a. Monotonous nature of job

b. Unsafe and unhealthy working conditions

c. Lack of confidentiality

d. Crowding

4. Extra-organizational factors- There are certain issues

outside the organization which lead to stress among
employees. In todays modern and technology savvy world,
stress has increased. Inflation, technological change, social
responsibilities and rapid social changes are other extra-
organizational factors causing stress.

Strategies for Managing Stress

Stress experienced by the employees in their job has negative

impact on their health, performance and their behavior in the
organization. Thus, stress needs to be managed effectively so as
to set off these harmful consequences. Strategies for managing
stress are as follows-
Organizational strategies for managing stress

1. Encouraging more of organizational communication with the

employees so that there is no role ambiguity/conflict.
Effective communication can also change employee views.
Managers can use better signs and symbols which are not
misinterpreted by the employees.

2. Encourage employees participation in decision-making. This

will reduce role stress.

3. Grant the employees greater independence, meaningful and

timely feedback, and greater responsibility.

4. The organizational goals should be realistic, stimulating and

particular. The employees must be given feedback on how
well they are heading towards these goals.

5. Encourage decentralization.

6. Have a fair and just distribution of incentives and salary


7. Promote job rotation and job enrichment.

8. Create a just and safe working environment.

9. Have effective hiring and orientation procedure.

10. Appreciate the employees on accomplishing and over-

exceeding their targets.

Individual strategies for managing stress

1. The employees should make a to-do list daily, prioritize the

acts in the list and plan the acts accordingly. Take regular
breaks during work to relax you. By effective time
management, the employees can achieve their targets
timely and can meet work pressures and, thus, avoid stress.
2. Do hard work. Strive to achieve your goals but do not do it to
the harm of family, health, or peer.

3. Indulge in physical exercises. It helps in effective blood

circulation, keeps you fit, diverts mind from work pressures.

4. Encourage a healthy lifestyle. Take a regular sleep, have

plenty of water, have healthy eating habits. Promote
relaxation techniques such as yoga, listening music and

5. The employees should have optimistic approach about their

work. They should avoid connections with negative approach

6. The employees should have emotional intelligence at

workplace. They should have self-awareness, self-confidence
and self-control at workplace.

7. The employees should build social support. They should

have close connections with trustworthy peer who can listen
to their problems and boost their confidence level. This
social network will help the employees to overcome stress.

8. Employee counseling is a very good strategy to overcome

employee stress. Through counseling, employees can
become aware of their strengths and how to develop those
strengths; their weaknesses and how to eliminate them; and
they can develop strategies for changing their behavior.
Employees are also given career counseling which helps in
reducing their ambiguities with regard to career.

9. Find a fun way to release stress, such as, cracking jokes,

playing tennis, golf, etc.

10. Do not remain pre-occupied with yourself. Turn your

focus outwards. Help others. This will release some stress.
Employee Stress and Performance

Employee Stress is negatively correlated to their work

performance. In short, more the level of stress, lower is the
performance. It was conventionally perceived that reasonable
levels of stress would boost the employees and improve their
work performance. But this perception no longer holds true. Today
it is believed that even a little bit of stress will inhibit employees
work performance. This is due to:

Even relatively slight stress distracts an employee. People

facing stress concentrate more on the repulsive feelings
and emotions rather than on the work/job at hand and
consequently their work performance suffers. Stress affects
peoples intellectual, emotional, and interpersonal
Extended or repeated exposure even to minor levels of
stress may have detrimental effects on health and this
might lower employees work performance.
It has been researched that as stimulation increases, work
performance initially increases, but after a point of time
begins declining. The exact location of this variation point
(at which the functions direction or trend reverses) appear
to depend on the complication of the work/task/job being
performed. The more the work complication, the less the
stimulation levels at which a decline in performance occurs.
Employees under stress lose their creativity and
innovativeness. Their thinking ability is narrowed.
But there are certain exceptions to the rule that stress interferes
with work performance. For instance, some people are at their
best in times of calamity / crises. They meet the expectations and
show remarkable performance at times of great stress. This may
stem out from the fact that they have great expertise in the tasks
being performed, making their variation/inflection as very high.
People who have exceptional skills and competencies at a task
may cognitively evaluate a possibly stressful scenario as a
challenge and not as a threat.

Thus, while concluding we can say that whether stress can spoil
or increase performance is dependent on factors such as work
complication, the skills and expertise of the employee in
performing a task, personal traits of individuals/employees
involved, etc. Organizations which encourage an open and honest
communication develop an environment in which employees are
less likely to be stressed out, enabling the employees to best
utilize their abilities and skills and, thus, stimulating the
employees work performance.

Employee Discipline and Features of a Sound

Disciplinary System

Discipline is viewed from two angles/dimensions:

1. Positive Discipline: Positive Discipline implies discipline

without punishment. The main aim is to ensure and
encourage self-discipline among the employees. The
employees in this case identify the group objectives as their
own objectives and strive hard to achieve them. The
employees follow and adhere to the rules and regulations
not due to the fear of punishment but due to the inherent
desire to harmonize in achieving organizational goals.
Employees exercise self-control to meet these goals.

2. Negative Discipline: Employees adhere to rules and

regulations in fear of punishment which may be in form of
fines, penalties, demotions or transfers. In this case, the
employees do not perceive organizational goals as their own
goals. The action taken by the management to ensure
desired standard of behavior/code of conduct from the
employees in an organization is called negative discipline.
The fear of punishment prevents the employees from going

Characteristics of a Sound Disciplinary System (Red Hot

Stove Rule)

Discipline should be imposed without generating resentment. Mc

Gregor propounded the red hot stove rule which says that a
sound and effective disciplinary system in an organization should
have the following characteristics-

1. Immediate- Just as when you touch a red hot stove, the

burn is immediate, similarly the penalty for violation should
be immediate/ immediate disciplinary action must be taken
for violation of rules.

2. Consistent- Just as a red hot stove burns everyone in same

manner; likewise, there should be high consistency in a
sound disciplinary system.

3. Impersonal- Just as a person is burned because he touches

the red hot stove and not because of any personal feelings,
likewise, impersonality should be maintained by refraining
from personal or subjective feelings.

4. Prior warning and notice- Just as an individual has a

warning when he moves closer to the stove that he would be
burned on touching it, likewise, a sound disciplinary system
should give advance warning to the employees as to the
implications of not conforming to the standards of
behavior/code of conduct in an organization.

In short, a sound disciplinary system presupposes-

1. Acquaintance/Knowledge of rules- The employees

should be well aware of the desired code of conduct/
standards of behavior in the organization. This code of
discipline should be published in employee handbook.

2. Timely action- Timely enquiry should be conducted for

breaking the code of conduct in an organization. The more
later the enquiry is made, the more forgetful one becomes
and the more he feels that punishment is not deserved.

3. Fair and just action- There should be same punishment for

same offence/ misconduct. There should be no favoritism.
Discipline should be uniformly enforced always.

4. Positive approach- The disciplinary system should be

preventive and not punitive. Concentrate on preventing
misconduct and not on imposing penalties. The employees
should not only be explained the reason for actions taken
against them but also how such fines and penalties can be
avoided in future.

Types of Penalties for Misconduct/Indiscipline

For not following the standards of behavior/code of conduct in an

organization, there are two kinds of penalties categorized as-

a. Major penalties- This includes demotion, dismissal,

transfer, discharge, withholding increments, etc.

b. Minor penalties- This includes oral warning, written

warning, fines, loss of privileges, etc.
Employee Grievance - Effective Ways of Handling

Employee Training - Benefits and Steps in Employee Training


Training implies enhancing the skills and knowledge of the

employees for performing a specific job. Training tries to improve
employees performance in current job and prepares them for
future job. The crucial consequence of training is learning.

Objectives of Employee Training Programmes

1. To prepare employees to meet the varying and challenging

needs of the job and organization.

2. To provide knowledge and skills to new entrants and to help

them to perform their role and job well.

3. To coach employees for more complex and higher level jobs.

4. To educate employees new and innovative ways and

techniques of performing job.

Benefits of Trained Employees

Training is a significant tool for employee development. Training

has assumed great importance because of exceptional rate of
change in the internal and external organizational environment.
The importance/benefits of trained personnel towards
organizational development are as follows-

a. Trained employees do not require tight control and

supervision as they are well aware of how to perform a job.

b. Trained employees can show higher performance by making

optimum and best utilization of the materials, tools,
equipments and other resources provided to them.
c. Trained employees minimize wastages of resources in the
organization and work both efficiently and effectively.

d. Training makes employees more committed to an

organization as the employees are provided with growth,
advancement and learning opportunities.

e. Training develops a line of proficient and skilled managers as

it prepares employees for complex and higher level tasks.

f. Trained employees adjust to the job better and there are

fewer rates of absenteeism and turnover.

g. Trained employees produce quality and quantity output.

h. Trained employees enable the organization to face

competition from rival firms.

i. Trained employees can respond and adapt to the changing

technology well.

j. Trained employees become more proficient and, thus, their

earning potential increase.

Steps in Employee Training Programme

Training programme involves the following steps:

1. Identifying the training needs- The training needs of

each employee should be identified. Programmes should be
developed that are best suited to their needs.

2. Prepare the trainer- The trainer must do his home work

well. He should know both what to teach and how to teach.
Time management is required by the trainer. Training should
be delivered in such a manner that the trainee should not
lose the interest in the job.

3. Prepare the trainee- The trainee should remain active

during training. He should know that why is he being trained.
He should put across the trainer questions and doubts. The
trainee should be put at ease during the training

4. Explain and demonstrate the operations- The trainer

should explain the logical sequence of the job. The trainee
should perform the job systematically and explain the
complete job he is performing. His mistakes should be
rectified and the complex step should be done for him once.
When the trainee demonstrates that he can do the job in
right manner, he is left to himself. Through repetitive
practices, the trainee acquires more skill.

5. Follow up and feedback- The trainee should be given

feedback on how well he performed the job. He should be
asked to give a feedback on the effectiveness of training

Methods of Training Employees at Workplace

360 Degree Feedback

360 Degree Feedback - Advantages & Pre-requisites

The top level management must be keen to spend their time

and efforts in giving feedback to their subordinates.

Status and ego issues shouldnt overwhelm in the


The subordinates and the peer both should assess and analyze
the top-level managers and the top- level management should
be open to accept their feedback.

Everyone in the organization should take the feedback

considerately and constructively and utilize it for their

Ethics and moral values should be predominant in the


The organization should encourage teamwork.

There should be self- learning in the organization, especially

for the managers.

The personnel department of the organization should be highly


There should be no politics in the organization.

Everyone in the organization should take the feedback

seriously and should make an attempt to benefit from the

It must be ensured that the feedback is confidential.

Following are the essentials of analyzing the candidates

(employees) preparedness for the 360 degree approach-

The employee should have an intention to be better.

The employee should be open to accept the feedback and

should respect the views of others.

The employee should have a competitive feeling.

The employee should be keen in knowing the viewpoints of

others towards him.

The employee should always learn on the job.

What is Employee Performance Management?

Employee Performance Management is a process for establishing

a shared workforce understanding about what is to be achieved at
an organization level. It is about aligning the
organizational objectives with the employees' agreed measures,
skills, competency requirements, development plans and the
delivery of results. The emphasis is on improvement, learning and
development in order to achieve the overall business strategy and
to create a high performance workforce.

History of Performance Management

Performance Management began around 60 years ago as a source

of income justification and was used to determine an employees
wage based on performance. Organizations used Performance
Management to drive behaviors from the employees to get
specific outcomes. In practice this worked well for certain
employees who were solely driven by financial rewards. However,
where employees were driven by learning and development of
their skills, it failed miserably. The gap between justification of
pay and the development of skills and knowledge became a huge
problem in the use of Performance Management. This became
evident in the late 1980s; the realization that a more
comprehensive approach to manage and reward performance was
needed. This approach of managing performance was developed
in the United Kingdom and the United States much earlier than it
was developed in Australia.

In recent decades, however, the process of managing people has

become more formalized and specialized. Many of the
old performance appraisal methods have been absorbed into the
concept of Performance Management, which aims to be a more
extensive and comprehensive process of management. Some of
the developments that have shaped Performance Management in
recent years are the differentiation of employees or talent
management, management by objectives and constant
monitoring and review. Its development was accelerated by the
following factors:

The introduction of human resource management as a

strategic driver and integrated approach to the management
and development of employees; and

The understanding that the process of Performance

Management is something that's completed by line
managers throughout the year - it is not a once off annual
event coordinated by the personnel department.

How Annual Appraisals are Different But Part of

Performance Management

Most organizations have some type of

employee appraisal system, and many are experiencing the
shortcomings of manual staff evaluation systems. When
discussing workforce performance the most commonly asked
question is "How does Performance Management differ from
performance appraisals or staff reviews"? Performance
Management is used to ensure that employees' activities and
outcomes are congruent with the organizations objectives and
entails specifying those activities and outcomes that will result in
the firm successfully implementing the strategy (Noe et al. 2000,
p.55). An effective Performance Management process establishes
the groundwork for excellence by:

Linking individual employee objectives with the

organizations mission and strategic plans. The employee
has a clear concept on how they contribute to the
achievement the overall business objective,

Focusing on setting clear performance objectives and

expectations through the use of results, actions and

Defining clear development plans as part of the process, and

Conducting regular discussions throughout the performance

cycle which include such things as coaching, mentoring,
feedback and assessment.

Performance appraisal properly describes a process of judging

past performance and not measuring that performance against
clear and agreed objectives. Performance Management shifts the
focus away from just an annual event to an on-going process.
Figure 2.1 is a process diagram that provides a graphical view of
the major differences between the two processes.
Figure 2.1 - Graphical view of the difference between Performance
Appraisal and Management

Typical Outcomes from Annual Appraisals

Most recent research suggests that annual staff reviews are

generally perceived as a difficult and painful process by both
managers and employees. As there are typically no objectives
which are set in appraisal systems, there is no link to strategic or
operational outcomes. If the CEO's objective was to increase
margins by 3%, employees may be aware of the CEO's intent but
they are usually not measured on this objective in their individual
appraisal. Therefore, there is no linkage in the appraisal review
and no linkage at a team or department level.

Misdirected Bonuses

This situation has been illustrated many times where employees

and managers have received favorable reviews and bonuses and
yet the organization has not achieved its goals. The
organization may be losing millions of dollars and yet still
paying out bonuses to its managers and employees.
Too Painful, Emotionally Charged

High stress levels for both managers and employees also become
a factor. They both know they will be judged on the outcome of
the appraisal and the fallout is often destructive rather than
constructive. The reasoning behind this is that there are rarely
any pre-defined measures or objectives and the employee review
is not based on any considered evaluation criteria. The
employees' remuneration and future are at stake and the goodwill
of the managers future resources are also at stake. This leads to
high stress in the case of both individuals and this is a poor
emotional state in which to have a thorough discussion about
employee performance.

Poor Understanding of Expectations

Where the appraisal system is poorly communicated, both the

employee and manager enter these discussions with low
confidence levels. This is due to a lack of "rules" as to how to go
about the appraisal process and a lack of understanding of the
expected outcomes. As this process is infrequent, it is viewed by
the employee as an opportunity to discuss remuneration,
promotion prospects and other issues related to the employee.
This means the discussion is dominated by employee content
rather than what the manager needs the employee to do for the
next year. This leads to vague definition of performance goals and
perpetuates the system of poorly defined and executed

As an annual staff review is so infrequent, both managers and

employees find it difficult to remember what actually happened
during the year. Both typically come to the meeting ill prepared
with little meaningful content to discuss. This makes the appraisal
more difficult and frustrates both the employee and manager.
Bad Timing

More often than not, the annual appraisal is executed on the

employees' anniversary which does not coincide with any
particular performance period. If appraisals are conducted
annually on the anniversary date, it is only possible to align at
best only 50% of your staff with future objectives, assuming there
is an even distribution of start dates across the
employee workforce. Given that most appraisal systems are not
automated, there is poor reporting and therefore low visibility as
to who did or did not achieve their objectives.

Subjective Manager Opinion

This means that an employees' future is wholly dependent on

their manager's highly subjective opinion. The CEO or other
executive management does not have clear vision as to who
achieved their objectives and who did not. The outcome for the
CEO is that they do not have the ability to see failure as it
is occurring. Instead, they see failure after the fact and radical
adjustments are then required to repair the situation. By using
standalone appraisal systems, the outcome for the line manager
is that they have additional pressure applied to them, to fix a
problem which has become a major issue and which could have
been otherwise identified and fixed in a very timely fashion.

Performance Not Aligned to Promotions

Given that annual appraisals are only conducted once yearly,

most line managers only seriously think and plan once a year. The
consequences are poor resource management, put-out-the-fire
management and costly and reactive problem fixing on the fly.
Given that most appraisal systems are manual and on paper, the
data arising from an excellent performance typically does not find
its way into the succession planning process. Employees are
therefore often disillusioned to find that they have been passed
over for further development or a promotion when they have
performed strongly for several years.

Poor Development Opportunities

This is a primary cause for employees leaving the organization.

Most appraisal systems do not feature a competency assessment
or an active development plan that both the employee and
manager have mutually agreed to. Staff often gets disillusioned
and leaves the organization if they can see no personal
development prospects or if personal development has not
occurred in practice for the last several years, despite numerous

No Consequence for Non-Participation

Given that most appraisal systems are manual, reporting is weak

and therefore compliance reporting is not visible. This inevitably
means that managers learn that they do not have to perform
reviews and therefore they don't because there is no negative
consequence for them. Equally, employees learn that there is no
consequence to not being reviewed, they lose faith in
management and invariably look for somewhere else to work.
Most manual appraisal systems suffer from sub 30% compliance
and can get to this point after only 18 months of operation i.e.
roughly one to one and a half performance terms.

Typical Outcomes from Performance Management

If Performance Management is implemented correctly with

specific objectives tied to the strategic and operational plan,
organizational performance outcomes will likely increase very
quickly. For example, if the CEO asked for a 3% increase in gross
margin, this objective would be cascaded down to every
department, team and individual who can influence the increase
in gross margin. Those who are successful at achieving this
objective will get a favorable review, those that could not, will get
an unfavorable performance evaluation in the absence of
extenuating circumstances. The process of Performance
Management therefore drives organizational performance
outcomes. Employees that achieve the organizational goals are
rewarded with favorable reviews and bonuses in line with their
performance and contribution to the organization.

Communication Improves The employee and manager

communicate more frequently and agree on changed objectives
to suit continuing changes in conditions and priorities. This is an
inclusive and collaborative process, which ensures that the
employee has input and does not feel they have wasted the year.
The employee works towards specific objectives that are relevant.
If the organization is using a Performance Management product
that has a performance diary, both the manager and employee
attend the review meeting with copies of their performance diary
notes. This contains content from the performance period to be
reviewed. Given that both have content, they feel much better
prepared and stress is lower than if they were attending a
meeting not aware of the subject matter.

Everyone Knows the Rules

Where there is a well structured Performance

Management system that is effectively communicated, both the
employee and manager enter the process with better levels of
confidence as there are "rules" that clearly stipulate what is being
assessed and how. Employees are assessed on achievement of
objectives that have been clearly identified and agreed to.
Managers have a better framework to assess an employees'
performance as they are familiar with the criteria to assess the
employee. The outcome is that both individuals have an informed
discussion and focus on achievement of both personal and
business objectives, not on issues that are irrelevant.

Better Recording Opens Up Communication

If the organization has a system with a performance diary, then
both parties are prepared with relevant content to discuss. They
have diary notes that relate to performance during the entire
performance period. This raises confidence and reduces stress
levels. Both parties feel more comfortable and they can have a
content rich and factual discussion about performance.

Frequent Communication Reduces Stress

Given that these performance reviews happen more frequently,

the discussion centers on performance of objectives rather than
being dominated by the employees' needs. The needs of the
business are discussed more frequently to achieve specific
performance outcomes. This means both the employee and
manager communicate more effectively and achieve better
outcomes. Emotionally charged discussions tend to be displaced
by business focused discussions on achievement of objective

As expectations are modified when a Performance

Management system is introduced, most organizations switch to
defined performance periods. This means that strategic and
operational objectives are set at the beginning of the performance
period. Formal performance reviews are then conducted quarterly
or half yearly and enable management to direct and fine tune
effort in relation to the objectives.

Appraisals Become Relevant for Everyone

By conducting more frequent reviews, objectives can be adjusted

and modified to suit changing business conditions. This
dramatically increases the probability that the objectives are
relevant and are able to be acted upon during the performance

By performing frequent performance reviews, visibility is

increased dramatically. Areas of non performance receive much
more focus and attention and problems can be acted upon much
quicker. Most Performance Management systems provide
reporting as to who has or has not achieved their objectives
(departments and individuals). Adjustments to objectives or
strategy can then be made to ensure expectations can be met.
Alternately, expectations can be modified as appropriate. By
reviewing more frequently, all managers and employees start to
plan and execute to clearly thought out objectives. This results in
better resource management and enables managers to work on
the business, not in the business.

Employee Learning and Development Starts to Happen

Given that most Performance Management systems require

managers and employees to commit to a development plan,
employees experience real personal development and become
more engaged with the organization. They feel part of the
organization and start to understand that they and the
organization are interdependent. The organization is developing
the employee and the employee is working towards developing
the organization by achieving its goals. The majority of
Performance Management systems are able to provide graphical
compliance reports. Therefore, the setting of objectives and
development plans for employees can no longer be ignored.
Employees see real planning, are involved in setting meaningful
objectives and have input into personal development plans which
benefit both themselves and the organization. In all, this results in
an engaged workforce who are extremely committed to achieving
real outcomes for the organization.

Performance Management Research

Several studies have been conducted in Australia that indicates

the predominant method of assessing employees in Australia is
appraisal. During 2004, Associate Professor Alan Nankervis of
Royal Melbourne Institute of Technology conducted a study of 992
Australian organizations. One of the outcomes was that only 2.4%
of organizations reviewed their employees against objectives, the
remaining 97.5% were a combination of some type of appraisal.

Furthermore, The Performance Management Institute of

Australia conducted a survey of Australian employees' attitudes
towards Performance Management in the workplace.
Approximately 450 employees responded from a wide variety of
businesses and enterprises. The research found that, over 59% of
employees received performance reviews once per year or less.
This implies that the majority of Australian managers are failing to
properly engage their employees. Effective management requires
a continual goal setting and review process which gives
employees regular feedback of management expectations and
frequent praise for achievement of desired goals.

Australian Managers Still Doing Standalone Appraisals

What the survey results imply is that Australian managers are

performing appraisals, not performance reviews and objective
setting. The results may also mean that managers are not
targeting their teams to achieving strategic goals which are at all
time-bound. Usually, employees who are not formally reviewed for
a year or more are expending work effort in a manner or direction
which is not readily visible to their manager. This lack
of employee engagement is leading to disaffection from the
employees who can make and want to make a difference to the
organization. In our view, appraisals add very little value to the
performance of an organization and in some circumstances may
actually be detrimental to organizations who wish to move
towards Performance Management. A contributing factor may be
that line managers who have been conducting appraisals have
also seen little, if any, impact on departmental or team
performance as a consequence of conducting these appraisals.
PeopleStreme conducted several research studies in focus
groups over the last four years and during seminars on
Performance Management. To summarise the findings, 87% of
organizations have some type of appraisal system. However, this
is usually referred to as the Performance Management system. Of
the 87% that have these systems, 95% were manual systems
without performance objectives or development plans. It was
clear from the research that many organizations incorrectly view
manual annual appraisal systems as Performance Management
systems. Organizations are increasingly adopting Performance
Management systems. However, organizations in both Australia
and the USA are experiencing 100% to 300% yearly increases in
organizations acquiring Performance Management systems
exceeding the existing forecast rate.

In contrasting Performance Appraisal with Performance

Management, it suggests that performance appraisals are indeed
an evaluation of an employees work. However, Performance
Management reflects the continuous nature of performance
improvement and employee development, recognizing the
importance of effective management, work systems and team
Introduction to Banking Sector

Banking can be defined in various ways as the definition of the

bank varies from country to country and keeps on changing on
the basis of the activities carried out by the banks. In present
dynamic business scenario, banking can be defined as the
activities carried out with the bank on individual or corporate
level. We can understand the concept of the banking by looking
into the activities of the bank.
A bank is a well regularized and licensed financial institute to
assist the individual and corporate customer in their financial
needs. Normally banks provide the following services to its retail
(individual) and corporate clients:
Transactional services,
Services related to monetary transaction through current
saving account,
Investment services,
Fixed deposit ,
Letter of credit ,
Treasury services ,
Bill of exchange ,
Foreign exchange ,
Assisting in trade through Letter of credit,
Letter of guarantee,
Performance bond ,
Project financing ,
Personal loan ,
Credit card ,
Home loan etc.

Banking sector In India

Banking in India originated in the last decades of the 18th
century. The oldest bank in existence in India is the State Bank of
India, a government-owned bank that traces its origins back to
June 1806 and that is the largest commercial bank in the country.
Central banking is the responsibility of the Reserve Bank of India,
which in 1935 formally took over these responsibilities from the
then Imperial Bank of India, relegating it to commercial banking
functions. After India's independence in 1947, the Reserve Bank
was nationalized and given broader powers. In 1969 the
government nationalized the 14 largest commercial banks; the
government nationalized the six next largest in 1980.

Currently, India has 88 scheduled commercial banks (SCBs) - 27

public sector banks (that is with the Government of India holding
a stake), 31 private banks (these do not have government stake;
they may be publicly listed and traded on stock exchanges) and
38 foreign banks. They have a combined network of over 53,000
branches and 17,000 ATMs. According to a report by ICRA Limited,
a rating agency, the public sector banks hold over 75 percent of
total assets of the banking industry, with the private and foreign
banks holding 18.2% and 6.5% respectively. The banking industry
in India seems to be unaffected from the global financial crises
which started from U.S in the last quarter of 2008. Despite the
fallout and nationalization of banks across developed economies,
banks in India seems to be on the strong fundamental base and
seems to be well insulated from the financial turbulence emerging
from the western economies. The Indian banking industry is well
placed as compare to their banking industries western
counterparts which are depending upon government bailout and
stimulus packages.

The strong economic growth in the past, low defaulter ratio,

absence of complex financial products, regular intervention by
central bank, proactive adjustment of monetary policy and so
called close banking culture has favored the banking industry in
India in recent global financial turmoil.

Although there will be no impact on the Indian banking system

similar to that in west but the banks in India will adopt for more of
defensive approach in credit disbursal in coming period. In order
to safe guard their interest; banks will follow stringent norms for
credit disbursal. There will be more focus on analyzing borrowers
financial health rather than capability.

The report Indian Banking Sector Forecast to 2012 contains

comprehensive research and rational analysis on various
segments, like assets size, income level and number of
cardholders, in the Indian banking industry. It also analyzes the
current performance and key market trends, and helps clients to
understand various products available in the market and their
future scope.

The forecast given in this report is not based on a complex

economic model but is intended as a rough guide to the direction
in which the market is likely to move. The future projection is
done on the basis of the current market scenario, past trends, and
rules and regulations laid by the regulator and supervisor of the
financial system, Reserve Bank of India (RBI). The Economic
Liberalization process has increasingly exposed the Banking
Sector to international competition. The role of Banking in the
process of financial intermediation has been undergoing a
profound transformation, owing to changes in the global financial
system. Consequently, the revolution in information technology
has brought about sea changes in the way banking transaction
are carried out Almost 80% of the businesses are still controlled
by Public Sector Banks (PSBs). PSBs are still dominating the
commercial banking system. Shares of the leading PSBs are
already listed on the stock exchanges.

The RBI has given licenses to new private sector banks as part of
the liberalization process. The RBI has also been granting licenses
to industrial houses. Many banks are successfully running in the
retail and consumer segments but are yet to deliver services to
industrial finance, retail trade, small business and agricultural
finance. The PSBs will play an important role in the industry due
to its number of branches and foreign banks facing the constraint
of limited number of branches. Hence, in order to achieve an
efficient banking system, the onus is on the Government to
encourage the PSBs to be run on professional lines.

To promote banking sector in India, Govt. has taken many steps

and formed several committee to review the banking needs and
the prospect the current scenario along with the safeguarding the
interest of the customers

Reserve bank of India

Economists and Planners consider monetary stability in an
economy as the most important function of a Central Bank. The
Prime function of a Central Bank is to ensure and secure
monetary stability i.e. to ensure that the growth rate of money
supply is consistent with the growth rate of output of goods and
services. In an open economy framework however the Central
Banks is additionally entrusted with the responsibility of
managing the exchange rate. Since the inception of the economic
reforms when the Indian Economy embarked on a programme of
liberalization and exchange rate flexibility, the Reserve Bank of
India is managing its twin responsibilities of monetary stability
and exchange rate stability. The economy follows a managed float
system with RBI intervening in the event of violent fluctuations in
exchange rate. In an open economy framework with lesser
restrictions on capital flows, managing the monetary stability and
exchange rate stability pose a challenge for the Central Bank.
Managing the twin functions simultaneously is accompanied by
trade-offs and conflicts. The central bank of the country is the
Reserve Bank of India (RBI). It was established in April 1935 with a
share capital of Rs. 5 crores on the basis of the recommendations
of the Hilton Young Commission. The share capital was divided
into shares of Rs. 100 each fully paid which was entirely owned by
private shareholders in the beginning. The Government held
shares of nominal value of Rs. 2, 20,000.
Reserve Bank of India was nationalized in the year 1949. The
general superintendence and direction of the Bank is entrusted to
Central Board of Directors of 20 members, the Governor and four
Deputy Governors, one Government official from the Ministry of
Finance, ten nominated Directors by the Government to give
representation to important elements in the economic life of the
country, and four nominated Directors by the Central Government
to represent the four local Boards with the headquarters at
Mumbai, Kolkata, Chennai and New Delhi. Local Boards consist of
five members each Central Government appointed for a term of
four years to represent territorial and economic interests and the
interests of co-operative and indigenous banks.
The Reserve Bank of India Act, 1934 was commenced on April 1,
1935. The Act, 1934 (II of 1934) provides the statutory basis of
the function of the bank.
The Bank was constituted for the need of following:
To regulate the issue of banknotes
To maintain reserves with a view to securing monetary
stability and
To operate the credit and currency system of the country to
its advantage.


(a) Performance Appraisal System: The Process

Performance Appraisal involves an evaluation of actual against
desired performance. It also helps in reviewing various factors
which influence performance. Managers should plan performance
development strategies in a structured manner for each
employee. In doing so, they should keep the goals of the
organization in mind and aim at optimal utilization of all available
resources, including financial. Performance Appraisal is a
multistage process in which communication plays an important
role. Craig, Beatty and Baird (1986) suggested an eight-stage
Performance Appraisal process:

(i) Establishing Standards and Measures

The first step is to identify and establish measures which would
differentiate between successful and unsuccessful performances.
These measures should be under the control of the employees
being appraised. The methods for assessing performance should
be decided next. Basically, management wants to:
know the behavior and personal characteristics of each
employee; and
Assess their performance and achievement in the job.
There are various methods available for assessing results,
behavior and personal characteristics of an employee. These
methods can be used according to the particular circumstances
and requirements.
(ii) Communicating Job Expectations
The second step in the appraisal process is communicating to
employee the measures and standards which will be used in the
appraisal process. Such communication should clarify
expectations and create a feeling of involvement.

(iii) Planning
In this stage, the manager plans for the realization of
performance expectations, arranging for the resources to be
available which are required for attaining the goals set. This is an
enabling role.

(iv) Monitoring Performance

Performance Appraisal is a continuous process, involving
ongoing feedback. Even though performance is appraised
annually, it has to be managed 'each day, all year long.'
Monitoring is a key part of the Performance Appraisal process. It
should involve providing assistance as necessary and removing
obstacles rather than interfering. The best way to effectively
monitor is to walk around, thus creating continuous contacts,
providing first-hand information, and identifying problems, which
can then be solved promptly.

(v) Appraising
This stage involves documenting performance through observing,
recalling, evaluating, written communication, judgment and
analysis of data. This is like putting together an appraisal record.

(vi) Feedback
After the formal appraisal stage, a feedback session is desirable.
This session should involve verbal communication, listening,
problem solving, negotiating, compromising, conflict resolution
and reaching consensus.

(vii) Decision Making

On the basis of appraisal and feedback results, various decisions
can be made about giving rewards (e.g., promotion, incentives,
etc.) and punishments (e.g., demotion). The outcome of an
appraisal system should also be used for career development.

(viii) Development of performance

The last stage of Performance Appraisal is 'development of
performance,' or professional development, by providing
opportunities for upgrading skills and professional interactions.
This can be done by supporting participation in professional
conferences or by providing opportunities for further study. Such
opportunities can also act as incentives or rewards to employees.

The ESSENTIALS of an effective performance system are as

Documentation means continuous noting and documenting
the performance. It also helps the evaluators to give a proof and
the basis of their ratings.
Standards / Goals the standards set should be clear, easy to
understand, achievable, motivating, time bound and measurable.
Practical and simple format - The appraisal format should be
simple, clear, fair and objective. Long and complicated formats
are time consuming, difficult to understand, and do not elicit
much useful information.
Correlated with the organization's philosophies and mission
Cover assessment of performance as well as potential for
Look after the needs of both the individual and the
Help create a clean environment
Rewards linked to achievements
Generate information for personnel development and career
suggesting appropriate person-task matching


Promote better understanding of an employee's role and
clarity about his or her functions
Give a better understanding of personal strengths and
weaknesses in relation to expected roles and functions
Identify development needs of an employee
Establish common ground between the employee and the
Increase communication
Provide an employee with the opportunity for self-reflection
and individual goal setting
Help an employee internalize the culture, norms and values
of the organization. This helps develop an identity with and
commitment to the organization and prepares an employee
for higher-level positions in the hierarchy
Assist in a variety of personnel decisions


Achievement of results


Easy appraisal method
Graphic rating scales
Field review method
Forced choice rating method
Critical incident appraisal method
Management by objectives
Work standard approach
Ranking methods
Alteration ranking
Paired comparison
Person-to-person rating
Behaviorally anchored rating scales
Assessment centers
ICICI Bank Company Profile


ICICI Bank (Industrial Credit and Investment Corporation of India)

is an Indian multinational banking and financial services company
headquartered in Mumbai, Maharashtra, India, with its registered
office in Vadodara. ICICI Bank is India's largest private sector bank
with total assets of Rs. 7,206.95 billion (US$ 109 billion) at March
31, 2016 and profit after tax Rs. 97.26 billion (US$ 1,468 million)
for the year ended March 31, 2016. ICICI Bank currently has a
network of 4,450 Branches and 14,354 ATM's across India. It
offers a wide range of banking products and financial services for
corporate and retail customers through a variety of delivery
channels and specialized subsidiaries in the areas of investment
banking, life, non-life insurance, venture capital and asset
management. ICICI Bank is one of the Big Four banks of India,
along with State Bank of India, Bank of Baroda and Punjab
National Bank. The bank has subsidiaries in the United Kingdom
and Canada; branches in United States, Singapore, Bahrain, Hong
Kong, Sri Lanka, Qatar, Oman, Dubai International Finance Centre,
China and South Africa; and representative offices in United Arab
Emirates, Bangladesh, Malaysia and Indonesia. The company's UK
subsidiary has also established branches in Belgium and

ICICI Bank is India's second-largest bank with total assets of Rs.

3,744.10 billion (US$ 77 billion) at December 31, 2008 and profit
after tax Rs. 30.14 billion for the nine months ended December
31, 2008. The Bank has a network of 1,438 branches and about
4,644 ATMs in India and presence in 18 countries. ICICI Bank
offers a wide range of banking products and financial services to
corporate and retail customers through a variety of delivery
channels and through its specialized subsidiaries and affiliates in
the areas of investment banking, life and non-life insurance,
venture capital and asset management. The Bank currently has
subsidiaries in the United Kingdom, Russia and Canada, branches
in United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar
and Dubai International Finance Centre and representative offices
in United Arab Emirates, China, South Africa, Bangladesh,
Thailand, Malaysia and Indonesia. Our UK subsidiary has
established branches in Belgium and Germany. ICICI Bank's equity
shares are listed in India on Bombay Stock Exchange and the
National Stock Exchange of India Limited and its American
Depositary Receipts (ADRs) are listed on the New York Stock
Exchange (NYSE).

ICICI Bank was originally promoted in 1994 by ICICI Limited, an
Indian financial institution, and was its wholly-owned subsidiary.
ICICI's shareholding in ICICI Bank was reduced to 46% through a
public offering of shares in India in fiscal 1998, an equity offering
in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Bank's
acquisition of Bank of Madura Limited in an all-stock
amalgamation in fiscal 2001, and secondary market sales by ICICI
to institutional investors in fiscal 2001 and fiscal 2002. ICICI was
formed in 1955 at the initiative of the World Bank, the
Government of India and representatives of Indian industry. The
principal objective was to create a development financial
institution for providing medium-term and long-term project
financing to Indian businesses. In the 1990s, ICICI transformed its
business from a development financial institution offering only
project finance to a diversified financial services group offering a
wide variety of products and services, both directly and through a
number of subsidiaries and affiliates like ICICI Bank. In 1999, ICICI
become the first Indian company and the first bank or financial
institution from non-Japan Asia to be listed on the NYSE.
After consideration of various corporate structuring alternatives in
the context of the emerging competitive scenario in the Indian
banking industry, and the move towards universal banking, the
managements of ICICI and ICICI Bank formed the view that the
merger of ICICI with ICICI Bank would be the optimal strategic
alternative for both entities, and would create the optimal legal
structure for the ICICI group's universal banking strategy. The
merger would enhance value for ICICI shareholders through the
merged entity's access to low-cost deposits, greater opportunities
for earning fee-based income and the ability to participate in the
payments system and provide transaction banking services. The
merger would enhance value for ICICI Bank shareholders through
a large capital base and scale of operations, seamless access to
ICICI's strong corporate relationships built up over five decades,
entry into new business segments, higher market share in various
business segments, particularly fee-based services, and access to
the vast talent pool of ICICI and its subsidiaries. In October 2001,
the Boards of Directors of ICICI and ICICI Bank approved the
merger of ICICI and two of its wholly-owned retail finance
subsidiaries, ICICI Personal Financial Services Limited and ICICI
Capital Services Limited, with ICICI Bank. The merger was
approved by shareholders of ICICI and ICICI Bank in January 2002,
by the High Court of Gujarat at Ahmadabad in March 2002, and by
the High Court of Judicature at Mumbai and the Reserve Bank of
India in April 2002. Consequent to the merger, the ICICI group's
financing and banking operations, both wholesale and retail, have
Integrated in a single entity.
Extra Mile for ICICI bank ICICI Bank NRI services win
the Excellence in Business
ICICI Bank bags the Best Model Innovation Award in
bank in SME financing the eighth Asian Banker
(Private Sector) at the Dun Excellence in Retail Financial
& Bradstreet Banking awards Services Awards Programme.
ICICI Bank's Rural Micro recently awarded ISO
Banking and Agri-Business 9001:2008 certification by
Group win WOW Event & TUV Nord. The scope of
Experiential Marketing certification comprised
Award in two categories - processes around consulting
Rural Marketing programme and capability building on
of the year and Small methods of quality &
Budget on Ground Promotion improvements.
of the Year. These awards
were given for Cattle Loan ICICI Bank has been awarded
'Kamdhenu Campaign' and the following titles under
'Talkies on the move The Asset Triple A Country
campaign' respectively. Awards for 2009:
Best Transaction Bank in
ICICI Bank's Germany India
Branch has been certified by Best Trade Finance Bank in
Stiftung Warrentest. ICICI India
Bank is ranked 2nd amongst Best Cash Management Bank
57 savings products across in India
19 banks ICICI Bank Best Domestic Custodian in
Germany won the yearly India
banking test of the investor
magazine uro in the call ICICI Bank has bagged the
money category. Best Cash Management
Bank in India award for the
The ICICI Bank was awarded second year in a row. The
the runner's up position in other awards have been
Gartner Business bagged for the third year in
Intelligence and Excellence a row.
Award for Asia Pacific for its
Business Intelligence ICICI Bank Canada received
functions. the prestigious Canadian
Helen Keller Award at the
ICICI Bank's Organizational Canadian Helen Keller
Excellence Group was Centre's Fifth Annual
Luncheon in Toronto. The support to this unique
award was given to ICICI training centre for people
Bank its long-standing who are deaf-blind.
Needs and Importance For Performance
Appraisal in Banking

The butt of many a corporate joke, these hard working

professionals are often relegated to small back offices where their
activities, viewed as little more than administrative functions, are
carried out without much recognition. But in an increasingly
aggressive corporate world, where every competitive edge
counts, leading organizations would do well to recognize the
human potential that can be unleashed by adopting effective
human resource management strategies that realize the potential
of employees and earn their respect and loyalty. Dealing with the
mundane personal matters of corporate life has traditionally been
seen as the sole purpose of the HR department. From hiring
workers and providing transportation and meals services, to
processing housing, medical and insurance benefits, the functions
of HR professionals have been recognized as essential, but have
not always inspired respect for those involved in executing them.

Essentially, people remain the strongest and most

competitive assets of a business.
This should, and is, changing. In a region where business growth
is rapid, and organizations are competing to secure talent from
the same pool, investing in and revering effective HR
departments to find, train and help retain this talent is
increasingly important. Testament to the fact many banks in the
region are now recognizing the value of developing their human
resources, Abu Dhabi recently hosted the Middle East Human
Resource Summit - the annual conference and exhibition for
industry professionals. But can everyone be persuaded to take
real action in developing their HR departments Banking industry
is facing a cut throat completion in present banking scenario
where the motivation of the employee can be a competitive
advantage to retain its customer.

Performance Appraisal In Banking Sector

Performance Appraisal is a vehicle to (1) validate and refine
organizational actions (e.g. selection, training); and (2) provide
feedback to employees with an eye on improving future

Validating and refining organizational action or banks


Employee selection, training and just about any cultural or

management practicesuch as the introduction of a new pruning
method or an incentive pay programmay be evaluated in part
by obtaining worker performance data.
The evaluation may provide ideas for refining established
practices or instituting new ones. For instance, appraisal data
may show that a farm supervisor has had a number of
interpersonal conflicts with other managers and employees. Some
options include

(1) Paying more attention to interpersonal skills when

selecting new supervisors,
(2) Encouraging present supervisors to attend
communication or conflict management Classes at the
local community college, or
(3) Providing the supervisor one-on-one counseling.

Data from Performance Appraisals can also help farmers

(1) Plan for long-term staffing and worker development,
(2) give pay raises or other rewards,
(3) Set up an employee counseling session, or
(4) Institute discipline or discharge procedures.
For validation purposes, it is easier to evaluate performance data
when large numbers of workers are involved such as in banks.
Useful performance data may still be collected when employees
are evaluated singly, but it may take years to obtain significant
data trends.

Employee need for feedback

Although employees vary in their desire for improvement,
generally workers want to know how well they are performing. A
successful farmer recalled with sadness how as a youth he had
worked very hard, along with his immigrant family, for a farmer
who never seemed to notice the effort. Years later he met the
former employer and asked why he had never made any positive
comments about their work. The response from the former boss
was, "I feared you would stop working as hard."

People need positive feedback and validation on a regular basis.

Once an employee has been selected, few management actions
can have as positive an effect on worker performance as
encouraging affirmation. These are, in effect, good-will deposits,
without which withdrawals cannot be made. This does not mean
you should gloss over areas needing improvement. When
presented in a constructive fashion, workers will often be grateful
for information on how to improve shortcomings. Such
constructive feedback, however, "can happen only within the
context of listening to and caring about the person." In general,
supervisors who tend to look for workers positive behaviorsand
do so in a sincere, nonmanipulative waywill have less difficulty
giving constructive feedback or suggestions. Furthermore, in the
negotiated approach, the burden for performance analysis does
not fall on the supervisor alone, but requires introspection on the
part of the individual being evaluated. Feedback may be
qualitative or quantitative. Qualitative comments are descriptive,
such as telling the shop mechanic you appreciate the timeliness
and quality of her repairs. In contrast, quantitative feedback is
based on numerical figures, such as the percentage of plant grafts
that have taken. Some researchers feel feedback is particularly
useful when workers have an achievement objective
By focusing the attention on performance, performance appraisal
goes to the heart of personnel management and reflects the
management's interest in the progress of the employees.

Objectives of Performance appraisal:

To review the performance of the employees over a given
period of time.
To judge the gap between the actual and the desired
To help the management in exercising organizational control.
Helps to strengthen the relationship and communication
between superior subordinates and management
To diagnose the strengths and weaknesses of the individuals
so as to identify the training and development needs of the
To provide feedback to the employees regarding their past
Provide information to assist in the other personal decisions
in the organization.
Provide clarity of the expectations and responsibilities of the
functions to be performed by the employees.
To judge the effectiveness of the other human resource
functions of the organization such as recruitment, selection,
training and development.
To reduce the grievances of the employees.
Followings should kept in the mind for effective
Performance Appraisal in a bank
Select what performance data to collect
Determine who conducts the appraisal
Decide on a rating philosophy
Overcome rating deficiencies
Create a rating instrument
Deliver useful information to employees
The Performance Appraisal or review is essentially an
opportunity for the individual and those concerned with their
performance in the bank , most usually their line manager - to get
together to engage in a dialogue about the individuals
performance, development and the support required from the
manager. It should not be a top down process or an opportunity
for one person to ask questions and the other to reply. It should
be a free flowing conversation in which a range of views are

Performance Appraisals usually review past behavior and so

provide an opportunity to reflect on past performance of the bank
employees. But to be successful they should also be used as a
basis for making development and improvement plans and
reaching agreement about what should be done in the future to
enhance the banks effect and effectiveness. The Performance
Appraisal is often the central pillar of performance management
in the bank to keep the motivation of the employees high.
Performance Appraisal And Performance
Management In ICICI Bank

The facilitation of high achievement by employees. Performance

management involves enabling people to perform their work to
the best of their ability, meeting and perhaps exceeding targets
and standards. Performance management can be coordinated by
an interrelated framework between manager and employee. Key
areas of the framework to be agreed are objectives, human
resource management, standards and performance indicators,
and means of reward. For successful performance management in
ICICI , a culture of collective and individual responsibility for the
continuing improvement of business processes needs to be
established, and individual skills and contributions need to be
encouraged and nurtured as the bank deals in service sector
where the employees are the main factor of making the difference
. One tool for monitoring performance management is
Performance Appraisal that the banks use for rewarding its
employees. For the bank, performance management is usually
known as company performance and is monitored through
business appraisal.

Reasons for Performance Appraisal in ICICI

Increase motivation to perform effectively
Increase staff self-esteem
Gain new insight into staff and supervisors
Better clarify and define job functions and responsibilities
Develop valuable communication among appraisal
Encourage increased self-understanding among staff as well
as insight into the kind of development activities that are of
Distribute rewards on a fair and credible basis
Clarify organizational goals so they can be more readily
Improve institutional/departmental manpower planning, test
validation, and development of training programs

Modern Trends in Banks for P.A

A growing number of front running banks like ICICI, and others
have adopted a Performance Appraisal model in which best-to-
worst ranking methods are used to identify poor performers. The
identified poor performers are then given a time period during
which they have to show an improvement in their performance. In
cases where the employee fails to improve his performance he is
asked to leave the organization gracefully and a severance
package is offered to him. If the employee refuses to leave then
his service is terminated and no compensation is offered. This
system is called rank and yank strategy. Advocates of this
system feel that it continually motivates employees to better their
performance since nobody would like to be included in the poor
performance band. But the flip side of this strategy is that
employees become too competitive and team spirit is not
nurtured. Effective banks are not build merely on investment and
returns but more on the quality of the workforce, its commitment
to the organizational goals and investments made to attract train
and retain superior human capital. An integrated Performance
Management system is essential to get the best out of its people.
Employee performance is linked to the banks performance. This
helps in achieving the organizational goal and creates a
performance culture in the bank. Invention, creativity, diversity of
perspectives is fostered. Employees act as one bank one brand.
ICICI Bank Performance Appraisal Environment
The bank is using the Management by Objectives (MBO) method.
In this method the subordinate in consultation with the supervisor
chalks out short term objectives followed by specific actions that
he has to carry out. The goals are finally set and are action
oriented. The goals set are specific, measurable, achievable,
review able and time bound and most importantly they use to be
aligned with the goal of the organization. At the end of a specified
time period, the activities are jointly reviewed by both the
subordinate and his supervisor. Depending on the performance of
the subordinate, the goals are modified or redesigned for the next
period of time.
The MBO is thus a performance oriented system. A well thought
out MBO system provides multiple benefits. It establishes a link
between the performance of the individual and the bank it is easy
to implement because those who carry out the plan also
participate in setting it up. Each employee becomes aware of the
task he has to perform in the bank. This leads to better utilization
of capacity and talent. It promotes better communication and
information sharing. It provides guidelines for self evaluation as
well as evaluation by the superior against set tasks and goals. It
facilitates guidance and counseling.

The Effective Components of ICICI P .A System

Performance Planning (includes employee goal setting /
objective setting)
Ongoing Performance Communication
Data Gathering, Observation and Documentation
Performance Appraisal Meetings
Performance Diagnosis and Coaching
An effective Performance Appraisal system in ICICI bank
emphasizes individual objectives, Bank objectives and also
mutual objectives. From the viewpoint of individual objective the
Performance Appraisal talks about
a) What task the individual is expected to do?
b) How well the individual has done the task?
c) How can his performance be further improved?
d) His reward for doing well.
From the bank view point a Performance Appraisal should
generate manpower information, improve efficiency and
effectiveness serve as a mechanism of control and provide a
rational compensation structure. In short the appraisal system
establishes and upholds the principle of accountability in the
absence of which bank failure is the only possible outcome.
Finally, talking about mutual goals, the emphasis is on growth and
development, harmony, effectiveness and profitability of the bank

ICICI HR Philosophy on P.A

Performance Appraisal is one such method that allows for the
optimization of employees. In a broad sense , it is a formal
structure that allows for the continued measuring and evaluation
of individual behavior and performance, whilst influencing an
employees job related attributes through such factors as
increased job satisfaction and recognition (with the use of
promotional aids such as better equipment, duties, and salaries).
The purpose of any such system, is not only to measure the
performance of human resources but also to find areas of skill
deficit for further development (through employee feedback),
identify excess potential that could be better utilized, and
communicate objectives more accurately to workers . By doing so,
businesses move one step closer to the achievement of their set
goals and objectives. Included here is also one other factor that is
not a direct objective of appraisals, but becomes a valuable asset
within itself. This simply is the provision for maintaining records of
workers that are legally viable, that can protect the business
when dealing in cases of dismissals and demotions. This is
especially important in todays society because of the "increasing
legislation and regulation dealing with victimization and
discrimination" making bank liable for all their actions. The annual
Performance Appraisal is usually done in two steps. First, the
employees and their manager complete the Performance
Appraisal form - doing a self assessment. Often the bank also
uses a 60 degree feedback process, asking for input from peers.
Secondly, the bank employees and manager participate in a
formal Performance Appraisal interview. The appraisal form,
used in the first step, consists of performance standards and
criteria that are used to judge evaluate your performance. The
items comprising your job description are usually the performance
standards that are used in employees annual appraisal .The
performance standards are derived from a job analysis, which is a
detailed list of all of the skills involved in performing a task. For
example, what are the skills necessary to perform a complete
blood count? The criteria are used to determine the level of
performance, which can be excellent, average, or poor (or
alternatively meets, exceeds or does not meet standards). Once
appraisal is complete, score is averaged and merit raise (if

Forms Used By the Bank for P.A

1. General Performance Appraisal Form I

Six-page form includes evaluation sections for three categories:
a) Objectives from last review period;
b) Current job duties (which are customizable), and
c) Organization core values (e.g., maturity, vision).

2. General Performance Appraisal Form II

Four-page form has three sections:
a) Overall performance,
b) Communication skills, and
c) people/self development skills.

3. General Performance Appraisal Form III

Two-page "short form" has numerical rankings for two sections:
a) General work attributes and
b) Managerial attributes. Includes a weighted average calculation.

4. 360-Degree Performance Appraisal Form I

Two-page form for peers, outside suppliers and customers to fill
out. Also can be used for "upwards" feedback about managers.

5. 360-Degree Performance Appraisal Form II

Two-page form for peers and outsiders - all open-ended questions,
without numerical rankings.

6. Manager Performance Appraisal Form

Six-page form with all sections related to managerial skills. Also
includes a section for listing future objectives.

7. Administrative/Technical Performance Appraisal Form

Four-page form perfect for administrative, technical and customer
service workers.

8. Sales Performance Appraisal Form

Five-page form focused on sales personnel. Includes four sections:
A) Actual vs. plan performance,
b) Lead generation,
c) Selling skills and
d) Account maintenance.

9. Project Evaluation Review Form

Four-page form geared towards specific projects, and an
individuals' role on a given project.
10. Employee Self-Assessment Form
Two-page open-ended form for an employee to fill-out before his
or her own review. Sections include: a) success in meeting goals
from last review, b) accomplishments and c) areas for

Approaches and Techniques in Performance Appraisal

Used By the Bank
Performance Appraisal is a multistage process involving several
activities, which can be administered using a variety of
approaches. Some of these approaches are being used by the
banks for Performance Appraisal
Intuitive Approach: In this approach, a supervisor or
manager judges the employee based on their perception of
the employee's behavior.
Self-Appraisal Approach: Employees evaluate their own
performance using a common format.
Group Approach: The employee is evaluated by a group of
Trait Approach: This is the conventional approach. The
manager or supervisor evaluates the employee on the basis
of observable dimensions of personality, such as integrity,
honesty, dependability, punctuality, etc.
Appraisal Based on Achieved Results: In this type of
approach, appraisal is based on concrete, measurable, work
achievements judged against fixed targets or goals set
mutually by the subject and the assessor.
Behavioral Method: This method focuses on observed
behavior and observable critical incidents.

To summarize our discussion we can say that the Performance

Appraisal is an integral part of performance management and
has become the important component of the HRM. Performance
management includes activities to ensure that goals are
consistently being met in an effective and efficient manner.
Performance management can focus on performance of the
organization, banks, a department, processes to build a product
or service, employees, etc

Performance management reminds us that being busy is not the

same as producing results. It reminds us that training, strong
commitment and lots of hard works alone are not results. The
major contribution of performance management is its focus on
achieving results useful products and services for customers
inside and outside the bank and organization. Performance
management redirects our efforts away from busyness toward
effectiveness. Recently, organizations have been faced with
challenges like never before. Increasing competition from
businesses across the world has meant that all businesses must
be much more careful about the choice of strategies to remain
competitive. Everyone (and everything) in the organization must
be doing what they're supposed to be doing to ensure strategies
are implemented effectively. This situation has put more focus on
effectiveness, that systems and processes in the organization be
applied in the right way to the right things: to achieve results. All
of the results across the organization must continue to be aligned
to achieve the overall results desired by the organization for it to
survive and thrive. Only then it be said that the organization and
its various parts are really performing.

We can say that Performance management should be:

Strategic - it is about broader issues and longer-term goals
Integrated - it should link various aspects of the business,
people management, and individuals and teams. A well
designed Performance Appraisal system helps an
organization, bank Know and understand what is expected of
them Have the skills and ability to deliver on these
expectations Are supported by the organization to develop
the capacity to meet these expectations are given feedback
on their performance have the opportunity to discuss and
contribute to individual and team aims and objectives.
Ongoing banking scenario has changed the scope of the
performance management system as the competition is
extensive and to retain the employees has become the
challenging task for the management. With the help of
Performance Appraisal the bank can recognize its true
personnel inventory and formulate the strategy for man
power planning and career development. Performance
Appraisal directly affects the other sub system of HRM such
as manpower planning, selection, career development,
potential development, recruitment, compensation etc.

To wind up our discussion we can say that Performance

Appraisal is an integrated and widen approach to guide the
employees in the right direction to achieve organizational as well
as individual objectives mainly in banking sector because of the
dominancy of personal skill and service level to interact with the

Suggestion and recommendation

Though it is the basic rule of the report writing that suggestion

and recommendation should not be given until its asked for but
to keeping in the mind the academic nature of the report we
would like to recommend the followings.

Management and employees should see Performance

Appraisal as a positive tools to determine the organizational
efficiency and effectiveness
Banks should use a well communicative method of
Performance Appraisal to avoid any resistance from the
3.The outcome of the Performance Appraisal should be
shared with the concerned employees and corrective action
should be taken in the light of the outcome
Performance Appraisal should be treated as an integral
part of the organizational development not just the formality
If the external agency is hired for Performance Appraisal ,
it will be appreciated to remove the possibility of biasness
Performance Appraisal should be done on both basis
qualitative and quantitative
There should be a cost and benefit study of Performance
Appraisal process

Human Resource Management (V S P Rao)
Performance Management (Herman Aguinis)
Internal report of banks
Internet (Wikipedia, Scribd) and banks website
Personal sources