Project on Performance Appraisal System

EXECUTIVE SUMMARY

The history of performance appraisal is quite

brief. Its roots in the early 20th century can be
traced to Taylor's pioneering Time and Motion
studies. But this is not very helpful, for the same
may be said about almost everything in the field of
modern human resources management. As a distinct
and formal management procedure used in the
evaluation of work performance, appraisal really
dates from the time of the Second World War - not
more than 60 years ago.
In many organizations - but not all - appraisal
results are used, either directly or directly, to help
determine reward outcomes. That is, the appraisal
results are used to identify the better performing
employees who should get the majority of available
merit pay increases, bonuses and promotions.
By the same token, appraisal results are used to
identify the poorer performers who may require
some form of counseling, or in extreme cases,
demotion, dismissal or decreases in pay.
(Organizations need to be aware of laws in their
country that might restrict their capacity to dismiss
employees or decrease pay.)
The purpose of this study has been to determine
whether the performance appraisal was used for
employee development and whether the appraisal
was emphasized as an important part of the
performance appraisal process. Also whether the
performance appraisal helps in increasing
company’s profitability.

Our study suggested that the performance

appraisal has helped in increasing the profitability
of SAIL which was clearly shown by their
performance on BSE Sensex. Certain loop holes has
been determined and suggestions were made.

INTRODUCTION

Almost every organization in one way or

another goes through a periodic ritual, formally or
informally, known as performance appraisal.
Performance appraisal has been called many things.
The formal performance appraisal has been called a
tool of management, a control process, an activity
and a critical element in human resources allocation.
Uses for performance appraisal have included equal
employment opportunity considerations, promotions,
transfer and salary increases. Primarily performance
appraisal has been considered an overall system for
controlling an organization. Performance appraisal
has also been called an audit function of an
organization regarding the performance of
individuals, groups and entire divisions.
Performance appraisal may be defined as a
structured formal interaction between a subordinate
and supervisor, that usually takes the form of a
periodic interview (annual or semi-annual), in which
the work performance of the subordinate is
examined and discussed, with a view to identifying
weaknesses and strengths as well as opportunities
for improvement and skills development.
Almost every organization in one way or
another goes through a periodic ritual, formally or
informally, known as performance appraisal.
Performance appraisal has been called many things.
The formal performance appraisal has been called a
tool of management, a control process, an activity
and a critical element in human resources allocation.
Uses for performance appraisal have included equal
employment opportunity considerations, promotions,
transfer and salary increases. Primarily performance
appraisal has been considered an overall system for
controlling an organization. Performance appraisal
has also been called an audit function of an
organization regarding the performance of
individuals, groups and entire divisions.

OBJECTIVES OF PERFORMANCE APPRAISAL

Employees would like to know from a performance

appraisal system:
· concrete and tangible particulars about their work;
and
· assessment of their performance.
This would include how they:
· did;
· could do better in future;
 · could obtain a larger share of rewards; and
· could achieve their life goals through their
position.
Therefore an employee would desire that the appraisal
system should aim at:
· their personal development;
· their work satisfaction; and
· their involvement in the organization.
From the point of view of the organization,
performance appraisal serves the purpose of:
· providing information about human resources and
their development;
· measuring the efficiency with which human
resources are being used and improved ;
· providing compensation packages to employees;
and
· maintaining organizational control.
Performance appraisal should also aim at the mutual
goals of the employees and the organization. This is
essential because employees can develop only when the
organization’s interests are fulfilled. The organization’s
main resources are its employees, and their interest cannot
be neglected. Mutual goals simultaneously provide for
growth and development of the organization as well as of
the human resources. They increase harmony and enhance
effectiveness of human resources in the organization.
SCOPE OF PERFORMANCE APPRAISAL

• To help each employee understand more about their

role and become clear about their functions;

• to be instrumental in helping employees to better

understand their strengths and weaknesses with respect
to their role and functions in the organization;

• to help in identifying the developmental needs of

employees, given their role and function;

• to increase mutuality between employees and their

supervisors so that every employee feels happy to work
with their supervisor and thereby contributes their
maximum to the organization;

• to act as a mechanism for increasing communication

between employees and their supervisors. In this way,
each employee gets to know the expectations of their
superior, and each superior also gets to know the
difficulties of their subordinates and can try to solve
them. Together, they can thus better accomplish their
tasks;

• to provide an opportunity to each employee for self-

reflection and individual goal-setting, so that
individually planned and monitored development takes
place;

• to help employees internalize the culture, norms and

values of the organization, thus developing an identity
and commitment throughout the organization;

• to help prepare employees for higher responsibilities

in the future by continuously reinforcing the
development of the behavior and qualities required for
higher-level positions in the organization;

• to be instrumental in creating a positive and healthy

climate in the organization that drives employees to give
their best while enjoying doing so; and

• to assist in a variety of personnel decisions by

periodically generating data regarding each employee.

ERRORS OCCURRED
IN
PERFORMANCE APPRAISAL
One of the biggest problems with performance appraisal is the fact
that most people are not accurate raters of others’ performance .
When an employee’s performance rating does not reflect their true or
actual performance , we say a rater error has occurred . The most
common rater errors are:-

• Halo / Horn Effect

• Central Tendency
• Recency
• Leniency
• Bias

ERROR DEFINITION EXAMPLE

Inappropriate Manoj’s outstanding
generalizations from writing ability caused
one aspect of an his supervisor to rate
Halo/horns
individual’s him highly in
effect
performance to all unrelated areas where
areas of that his performance was
person’s performance actually mediocre.

Central The inclination to rate Because Rahul had a

tendency people in the middle concern that he would
scale even when their not be able to deal
performance clearly with confrontation
warrants a during an appraisal
substantially higher or session, he rated
lower rating all of his employees
as
 “Meets
Expectations.”

Sudha kept no records

of
critical incidents.
The tendency of minor When she
events that have began writing the
happened recently to appraisals for her
Recency
have more influence employees she
effect
on the rating than discovered that she
major events of many could only recall
months ago examples of either
positive or negative
performance for
the last two months.

The tendency to Reema , attributes the

attribute performance successes of her work
failings to factors group to the quality
Attribution under the control of the of her leadership and
bias individual the failings
and performance to their bad attitudes
successes to and inherent laziness.
external causes

METHODOLOGY

Basically there are two types of performance appraisal done

on the basis of post of the SAIL’s employee. They are:
1. Executive performance appraisal system
2. Non-executive performance appraisal system

EXECUTIVE PERFORMANCE APPRAISAL

SYSTEM

This system is for performance appraisal for executives of

the level E-0 to E-4 . The various steps involved are:

A) Self Appraisal Performance Review & Planning

I. Appraisee write his view over the actual achievement

for the Key performance area / Task and Target
assigned to him for the year.
II. Comments on fulfillment of KPA / Task and Target
are written by the Reporting Officer , taking account
of time frame also.
III. Special Jobs other than tasks given and normal
routine work are written by appraisee.

B) Performance Review Discussion

I. Both appraisee and reporting officer sit together.

II. Comment over Strengths and weaknesses and areas for
development are written which is undersigned by
both .
III. Appraisee can help the reporting officer by giving
examples which shows his strength or weakness. He
also tell what training he want to undergo .
C) Performance Assessment

I. Rating between 1 to5 are given to the appraisee by

the Reporting Officer and Reviewing Officer
individually on the basis of Performance Factors
and Potential Factors.

Performance Factors :Quantity of output

Quality of output
Cost control
Job Knowledge and Skill
Team spirit and Lateral
Coordination
Discipline
Development & Quality of
assessing subordinates
Special Relevant factor

Potential Factors : Communication

Initiative
Commitment and sense of
Responsibility
Problem Analysis and Decision
making
Planning and Organizing
Management of Human resources

II. Different weightage are given to each factor

III. Final scores are calculated by multiplying rating
and weightage .By adding these Total Factor Score
is calculated.
 IV. Comments on Overall Performance And Potential
are written by both Reporting and Reviewing
Officers individually.

D) Suggestions for Job Rotation and Job Enrichment

I. Both reporting and reviewing officers write their

suggestions whether the appraisee should be
transferred to other department. Either a good
employee is transferred so that he can acquire
knowledge of all the departments, or a worst
performing employee is transferred so as to improve
his performance.

II. In some exceptional case Head of department give

his comments on overall performance & potential of
the employee.

E) Final Assessment

I. Total Factor Score by both Reporting and Reviewing

officers is written and average is calculated.
II. Final Grading between O / A / B / C is given .
III. If Final Grade is C , indicate whether to promote or
not to promote the appraisee.
IV. If not to promote give reasons.
V. Meeting with non-promotable appraisee.
NON-EXECUTIVE PERFORMANCE APPRAISAL SYSTEM

I. Rating are given by both Reporting and Reviewing

officers on the basis of performance of the appraisee
depending upon factors: Performance on the
Job
Job
Knowledge & skill
Multi-
skill Utilization
Conduct
& behavior
Punctuality &
availability on job
Innovativ
eness
Cost &
Quality Consciousness
Initiative & Capacity to
assume higher
responsibility
Housekeep
ing & safety consciousness

II. Weightage are given to various factors .

III. Scores out of 100 are calculated by multiplying rating
with weightage .

IV. O / A / B / C / C- Grades are given according to

scores and attendance of the appraisee.

V. If grade is C- , then appraisee is interviewed by the

Head of Department.

METHODS OF PEFORMANCE APPRAISAL

Ranking. - The term ranking has been used to describe an
alternative method of performance appraisal where the
supervisor has been asked to order his or her employees in
terms of performance from highest to lowest.

Forced Choice Method. - This appraisal method has been

developed to prevent evaluators from rating employees to
high. Using this method, the evaluator has to select from a
set of descriptive statements, statements that apply to the
employee. The statements have been weighted and summed
to at, effectiveness index.

Forced Distribution. - The term used to describe an

appraisal system similar to grading on a curve. The
evaluator had been asked to rate employees in some fixed
distribution of categories. One way to do this has been to
type the name of each employee on a card and ask the
evaluators to sort the cards into piles corresponding to
rating.

Paired Comparison. - The term used to describe an

appraisal method for ranking employees. First, the names
of the employees to be evaluated have been placed on
separate sheets in a pre-determined order, so that each
person has been compared with all other employees to be
evaluated. The evaluator then checks the person he or she
felt had been the better of the two on the criterion for each
comparison. Typically the criterion has been the employees
over all ability to do the present job. The number of times a
person has been preferred is tallied, and the tally developed
is an index of the number of preferences compared to the
number being evaluated.

Graphic Rating Scale. - The term used to define the oldest

and most widely used performance appraisal method. The
evaluators are given a graph and asked to rate the
employees on each of the characteristics. The number of
characteristics can vary from one to one hundred. The
rating can be a matrix of boxes for the evaluator to check
off or a bar graph where the evaluator checked off a
location relative to the evaluators rating.

Checklists. - The term used to define a set of adjectives or

descriptive statements. If the rater believed the employee
possessed a trait listed, the rater checked the item; if not,
the rater left the item blank. rating score from the checklist
equaled the number of checks.

Behavioral Anchored Rating Scales. - The term used to

describe a performance rating that focused on specific
behaviors or sets as indicators of effective or ineffective
performance, rather than on broadly stated adjectives such
as "average, above average, or below average". Other
variations were:

Behavioral observation scales

Behavioral expectations scales
Numerically anchored rating scales

Critical Incident Technique. - The term used to describe a

method of performance appraisal that made lists of
statements of very effective and very ineffective behavior
for employees. The lists have been combined into
categories, which vary with the job. Once the categories
had been developed and statements of effective and
ineffective behavior had been provided, the evaluator
prepared a log for each employee. During the evaluation
period, the evaluator recorded examples of critical
behaviors in each of the categories, and the log has been
use to evaluate the employee at the end of the evaluation
period.

Management by Objectives. - The management by

objectives performance appraisal method has the supervisor
and employee get together to set objectives in quantifiable
terms. The appraisal method has worked to eliminate
communication problems by the establishment of regular
meetings, emphasizing results, and by being an ongoing
process where new objectives have been established and
old objectives had been modified as necessary in light of
changed conditions.

DATA ANALYSIS
• SAIL wins 'India's Employers of Choice Award-
2007' in the Public Sector
• SAIL's Q4 net profit Rs.1902 crore – up 72%
• President Kalam presents prestigious Corporate
Social Responsibility award to SAIL
• SAIL has been a pioneer in promulgating a firm
policy
• on safety in the workplace.
• SAIL has been an active participant in the National
RCH programme across all since 1995. All SAIL
hospitals have participated in the National RCH
program.
• In all SAIL Plants, Mahila Samities have been
formed since inception. The members of the
Samities are spouses of the employees. Spouses of
MDs, EDs etc are also a member of Mahila Samities
. A lot of work is being done for the society by these
Samities.

All these facts shows that SAIL is constantly

increasing and becoming famous in public sector
.This implies employees are working efficiently
which is possible when employees are happy with
company’s performance appraisal system.
 OBSERVATIONS

In the present performance appraisal system of SAIL

we found the following loop holes:

If the appraisee has good terms with the reviewing

officer and does not have a smooth relationship
with the reporting officer , in such case the
reporting officer is sometimes forced by the
reviewing officer to give better score to the
appraisee.

RECOMMENDATIONS

• The reporting officer should keep the

performance data of each subordinate.

• The reporting officer should give monthly

feedback to the subordinates regarding their
performances and thereby giving suggestions to
improve.

BIBLIOGRAPHY

Websites :- www.sailindia.co.in
www.wikipedia.org
www.performance-
appraisal.com/intro.htm
 www.telecollege.dcccd.edu/contents/eval
uate.htm

Books :-
i. Personnel – Human Resource Mgmt
By David A Decenzo
ii. Human Resource Mgmt
By Gary Dessler