1 INTRODUCTION

In the business world investment is made in machinery, equipment and

services. Quite naturally time and money is spent ensuring that they provide what their
suppliers claim. In other words the performance is constantly appraised against the
results expected.

When it comes to one of the most expensive resources companies invest in,
namely people, the job appraising performance against results is often carried out with
the same objectivity. Each individual has a role to play and management has to ensure
that the individual’s objectives translate into overall corporate objectives of the
company. Performance Management includes the performance appraisal process which
in turn helps identifying the training needs and provides a direction for career and
succession planning.

1.1 Understanding Performance Management

PERFORMANCE MANAGEMENT

CORPORATE GOALS

DETERMINE INDIVIDUAL
OBJECTIVES LINKED TO
CORPORATE GOALS
ENSURE RESPONSIBILITY AND
ACCOUNTABILITY

PERFORMANCE APPRAISAL

PERFORMANCE LINKED INCREMENTS/

INCENTIVES/ REWARDS
What is Performance?
Performance is synonymous with behaviour; it is what people actually do.
Performance includes those actions that are relevant to the organizational growth and
can be measured in terms of each individual’s proficiency (level of contribution).
Effectiveness Performance refers to the evaluation of results of performance that is
beyond the influence or control of the individual.

How is Performance managed?

Good performance by the employees creates a culture of excellence, which
benefits the organization in the long run. The activity includes evaluation of jobs and
people both, managing gender bias, career planning, and devising methods of
employee satisfaction etc. the efforts are to make to generate the individual’s
aspirations with the objectives of the organization. Organization has to clear the way of
career advancements for talented and hardworking people. Fear of any kind from the
minds of the employees should be removed so that they give best to their organization.
Allow free flow of information. Communication network should be designed in such a
way no one should be allowed to become a hurdle. This enables the managers to take
correct decisions and that too quickly.

Why Performance Appraisal?

Today’s working climate demands a great deal of commitment and effort from
employees, who in turn naturally expect a great deal more from their employers.
Performance appraisal is designed to maximize effectiveness by bringing participation
to more individual level in that it provides a forum for consultation about standards of
work, potential, aspirations and concerns. It is an opportunity for employees to have
significantly greater influence upon the quality of their working lives. In these times
of emphasis on “quality”, there is a natural equation: better quality goods and services
from employees who enjoy better quality “goods and services” from their employers.

Performance appraisal must be seen as an intrinsic part of a manager’s

responsibility and not an unwelcome and time-consuming addition to them. It is about
improving performance and ultimate effectiveness.
 Performance appraisal is a systematic means of ensuring that managers and
their staff meet regularly to discuss post and present performance issues and to agree
what future is appropriate on both sides.
This meeting should be based on clear and mutual understanding of the job in
question and the standards and outcomes, which are a part of it. In normal
circumstances, employees should be appraised by their immediate managers on one to
one basis. Often the distinction between performance and appraising is not made.
Assessment concerns itself only with the past and the present. The staff is being
appraised when they are encouraged to look ahead to improve effectiveness, utilize
strengths, redress weaknesses and examine how potentials and aspirations should
match up.
It should also be understood that pushing a previously prepared report across
and desk cursorily inviting comments, and expecting it to be neatly signed by the
employee is not appraisal - this is merely a form filling exercise which achieves little
in terms of giving staff any positive guidance and motivation.

THE APPRAISAL OF PERFORMANCE SHOULD BE GEARED TO:

 Improving the ability of the jobholder;
 Identifying obstacles which are restricting performance
 Agreeing a plan of action, that will lead to improved performance.

It is widely accepted that the most important factor in organization effectiveness

is the effectiveness of the individuals who make up the organization. If every
individual in the organization becomes more effective, then the organization itself will
become more effective. The task of reviewing situations and improving individual
performance must therefore be a key task for all managers.
For appraisal to be effective, which means producing results for the company, each
manager has to develop and apply the skills of appraisal
These are: -
 Setting standards on the performance required, which will contribute to the
achievement of specific objectives
  Monitoring performance in a cost –effective manner, to ensure that previously
agreed performance standards are actually being achieved on an ongoing basis

 Analyzing any differences between the actual performance and the required
performance to establish the real cause of a shortfall rather than assume the
fault to be in the jot holder.

 Interviewing having a discussion with the jobholder to verify the true cause of a
shortfall, a developing a plan of action, which will provide the performance,
required

Appraisal can then become a way of life, not concerned simply with the
regulation of rewards and the identification of potential, but concerned with improving
the performance of the company. The benefits of appraisal in these terms are
immediate and accrue to the appraising manager, the subordinate manager/employee,
and to the company as a whole.

1.2 MAIN OBJECTIVES OF THE STUDY

 To study the current performance appraisal system of the organization and

identify the gaps between the current state and the desired state.

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

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

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

the productivity of employees and the organizational performance as a
whole.

 To identify the key performance indicators and critical success factors for
achieving organizational excellence.
2 PROFILE OF AUTOMOBILE INDUSTRY & CAR
MANUFACTURERS:

The automobile sector is a key player in the global and Indian economy. The
global motor vehicle industry (four-wheelers) contributes 5 per cent directly to the
total manufacturing employment, 12.9 per cent to the total manufacturing production
value and 8.3 per cent to the total industrial investment. It also contributes US$560
billion to the public revenue of different countries, in terms of taxes on fuel,
circulation, sales and registration. The annual turnover of the global auto industry is
around US$5.09 trillion, which is equivalent to the sixth largest economy in the world
(Organisation Internationale des Constructeurs d'Automobiles, 2006). In addition, the
auto industry is linked with several other sectors in the economy and hence its indirect
contribution is much higher than this. All over the world it has been treated as a
leading economic sector because of its extensive economic linkages.
India’s manufacture of 7.9 million vehicles, including 1.3 million passenger cars,
amounted to 2.4 per cent and 7 per cent, respectively, of global production in number.
The auto-components manufacturing sector is another key player in the Indian
automotive industry. Exports from India in this sector rose from US$1.0 billion in
2003-04 to US$1.8 billion in 2005-06, contributing 1 per cent to the world trade in
auto components in current USD.
In India, the automobile industry provides direct employment to about 5 lakh
persons. It contributes 4.7 per cent to India’s GDP and 19 per cent to India’s indirect
tax revenue. Till early 1980s, there were very few players in the Indian auto sector,
which was suffering from low volumes of production, obsolete and substandard
technologies. With de-licensing in the 1980s and opening up of this sector to FDI in
1993, the sector has grown rapidly due to the entry of global players. A rapidly
growing middle class, rising per capita incomes and relatively easier availability of
finance have been driving the vehicle demand in India, which in turn, has prompted the
government to invest at unprecedented levels in roads infrastructure, including projects
such as Golden Quadrilateral and North-East-South-West Corridor with feeder roads.2
The Reserve Bank of India’s (RBI) Annual Policy Statement documents an annual
growth of 37.9 per cent in credit flow to vehicles industry in 2006. Given that
passenger car penetration rate is just about 8.5 vehicles per thousand, which is among
the lowest in the world, there is a huge potential demand for automobiles in the
country.

There are two distinct sets of players in the Indian auto industry: Automobile
component manufacturers and the vehicle manufacturers, which are also referred to as
Original Equipment Manufacturers (OEMs). While the former set is engaged in
manufacturing parts, components, bodies and chassis involved in automobile
manufacturing, the latter is engaged in assembling of all these components into an
automobile. The Indian automotive component manufacturing sector consists of 500
firms in the organised sector and around 31,000 enterprises in the unorganised sector.
In the domestic market, the firms in this sector supply components to vehicle
manufacturers, other component suppliers, state transport undertakings, defence
establishments, railways and even replacement market. A variety of components are
exported to OEMs abroad and after-markets worldwide.

The automobile manufacturing sector, which involves assembling the

automobile components, comprises two-wheelers, three-wheelers, four-wheelers,
passenger cars, light commercial vehicles (LCVs), heavy trucks and buses/coaches. In
India, mopeds, scooters and motorcycles constitute the two-wheeler industry, in the
increasing order of market share. In 2005-06, the Indian auto sector had produced over
7.6 million two wheelers and 1.3 million passenger cars and utility vehicles. India is a
global major in the two-wheeler industry producing motorcycles, scooters and mopeds
principally of engine capacities below 200 cc. It is the second largest producer of two-
wheelers and 13th largest producer of passenger cars in the world. Tata figures among
the ten largest global manufacturers of LCVs, heavy trucks, buses and coaches, while
it is among the top 25 in passenger car manufacturing. The two-wheeler industry in
India has grown at a compounded annual growth rate of more than 10 per cent (in
number) during the last five years and has also witnessed a shift in the demand mix,
with sales of motorcycles showing an increasing trend. Indian twowheelers comply
with some of the most stringent emission and fuel efficiency standards worldwide. The
passenger car segment has been growing at a rapid pace -- from over 6,50,000 vehicles
sold during 2001 to over a million vehicles sold during 2004-05, showing an annual
growth rate of 17.36 per cent.

2.1 ORGANISED AUTO SECTOR IN INDIA :

While the Original Equipment Manufacturers (OEMs) are at the top of the auto
supply chain, it should be noted that there are a few OEMs in India which supply some
components to other OEMs in India or abroad. Most of the Indian OEMs are members
of the Society of Indian Automobile Manufacturers (SIAM), while most of the Tier-1
auto component manufacturers are members of the Automobile Component
Manufacturers’ Association (ACMA). All of them are in the organised sector and
supply directly to the OEMs in India and abroad or to Tier-1 players abroad. Tier-2
and Tier-3 auto-component manufacturers are relatively smaller players. Though some
of the Tier-2 players are in the organised sector, most of them are in the unorganised
sector. Tier-3 manufacturers include all auto-component suppliers in the unorganised
sector, including some Own Account Manufacturing Enterprises (OAMEs) that
operate with one working owner and his family members, wherein manufacturing
involves use of a single machine such as the lathe. Auto-component manufacturers
cater not only to the OEMs, but also to the after-sales market. In the recent years, there
has been a rapid transformation in the character of the automotive aftermarket, as a fast
maturing organised, skill-intensive and knowledge driven activity. Hence, the auto
industry in India possesses a very diverse and complex structure, in terms of scale,
nature of operation, market structure, etc. While output, emoluments and Gross Value-
Added (GVA) have been growing in both the automobile and auto-component
industries, employment is on the rise in the latter and it is declining in the former Fall
in employment despite growth in total emoluments is a matter of concern in the
automobile sector. This also indicates that the real labour costs are increasing. The
growth rate in gross value-added has been quite impressive in both sub-sectors, more
so in the automobile manufacturing sector.
2.2 UNORGANISED AUTO SECTOR IN INDIA:

The unorganized sector consists of enterprises that are not registered under
certain sections of the Factories Act.20 In this section, data on the unorganized
manufacturing sector from the National Sample Survey Organization (NSSO) is used.
The unorganized auto sector in India has grown in terms of number of enterprises,
employment, output, capital, capital intensity and labor productivity. However, capital
productivity has fallen considerably. Very similar trends are observed in OAME,
NDME and DME21 in rural and urban areas. However, it is evident that the growth of
this sector has been quite low in the rural areas than in the urban areas. Rural-urban
disparities are even more striking. It is clear that the rural unorganized sector is very
small compared to its urban counterpart in the auto industry. However, rural areas still
have a major part of OAME. Thus, it could be inferred that only tiny players, even
among the smaller firms under the unorganized sector, prefer doing business in rural
areas. These observations point towards the importance of making rural areas more
attractive for all industries, including the auto industry, by enhancing infrastructure and
introducing incentives, given the current levels of urban congestion and corresponding
infrastructure bottleneck. While the share of employment of the unorganized auto
sector in the entire auto industry has grown from 16 per cent in 1994-95 to 30 per cent
in 2000-01, the share of the unorganized auto sector in total value of auto output has
grown only from 2 per cent to 3 per cent. The share of the unorganized auto sector in
total capital stock employed in the auto industry has grown from 4 per cent to 8 per
cent, during this period. In 2005-06, the number of enterprises in the unorganized
sector was about 10 times higher than that in the organized sector.

2.3 EVOLUTION OF THE POLICY FRAMEWORK :

The Indian auto policy has generally been in line with the prevailing industrial
policy framework. During the British regime, India had no auto industry to begin with
and all the automobiles were imported from the global auto manufacturers such as
General Motors and Ford Motors. In the 1940s, Hindustan Motors and Premier Motors
were established by Indian entrepreneurs, by importing know-how from General
Motors and Fiat respectively. In the 1950s, a few other companies such as Mahindra
and Mahindra, Ashok Motors (with Technical Collaboration with Leyland Motors) and
Bajaj Auto entered the market for commercial vehicles and two-wheelers. Most of
them either imported auto-components or produced them in-house, till mid-1950s,
when India launched import substitution programme. This development, followed by
the L.K. Jha Committee’s recommendations in 1960 to develop an indigenous
ancillaries sector, resulted in the evolution of a separate auto-component sector. From
being a highly protected segment pre-1980s, the auto-component industry in India has
emerged into a global player, supplying not only to domestic firms but also to
numerous foreign Original Equipment Manufacturers (OEMs). Till 1991, the Phased
Manufacturing Programme (PMP), under which domestic OEMs had to increase the
proportion of domestic inputs over a specific time period, had laid foundation for the
Indian auto-component sector. However, assured demand for their products had
rendered many players in this sector inefficient. This led to abolition of this
programme under the New Industrial Policy of 1991. Passenger car segment was
restricted to licensed production. Commercial vehicles and two-wheelers were also
restricted by licences, but the extent of restrictions was less and hence there were quite
a few new entrants in these segments in the 1980s, especially in the CV segment. The
reforms of 1991, followed by the entry of global OEMs and Tier-1 suppliers in India,
paved the way for expansion of range, technologies and number of auto-component
manufacturers. This led to a major transition in the Indian auto industry, wherein the
vehicle manufacturers started outsourcing most of their components from the auto
component manufacturers. Ever since the delicensing of passenger car segment in
1993, the Indian auto industry has grown bigger, with new international players
entering the market. Since 2000, there have been many significant policy
developments such as removal of Quantitative Restrictions (QRs) on auto imports and
permission for 100 per cent FDI. Financial liberalisation in the early 1990s enhanced
credit availability to consumers and this, in turn, led to a boost of auto loans in India,
which was a key driver of demand for automobiles. This facilitated the transition of
passenger cars from being regarded as luxury goods, accessible only for the elites, to
necessary goods, accessible to a wider section of the society.
Since 2000, India has been observing a Safety Decade. Efforts have been made
for aligning Indian safety standards with global ones. Roadmap has been prepared till
2007 for safety standards, while an outline has been drawn till 2010. The National
Road Safety Board is under active consideration by the government, which will be
responsible for road-related measures, vehicle-related measures and research on road
safety. One of the major measures, which is likely to be implemented in the near
future, is the measurement of road-worthiness of vehicles, based on which a regulatory
body under the government may be engaged in certifying, whether a motor vehicle is
road-worthy or not, in terms of emissions and safety. Auto policy, 2002, stresses on the
need to provide direction to the growth and development of the auto industry in India.
This policy document resulted in reduction of duties in the auto-component sector to a
large extent and the automobile sector to some extent and extension of R&D incentives
to the auto sector. R&D thrust by the government can be inferred from the recent
measures such as 150 per cent weighted deduction on R&D expenditure and increased
R&D budget allocation for this sector. In 2005-06, a few major policy developments
relevant for the auto sector took place in India. Implementation of VAT has taken
place in a few states. Euro III emission norms have been introduced in 11 metro cities
and at the same time, the Euro II norms have been implementation in rest of the cities.
These norms have been delayed for the diesel vehicles due to the unavailability of fuel.
Therefore, the government has decided to implement these norms58 in phased manners
in selected northern states. Finance Bill 2006 reduced excise duty of motor vehicles to
12.5 per cent against 15 per cent before and import duty of raw materials to 5-7.5 per
cent against 10 per cent before and has given a thrust to the development of
infrastructure, which is the key factor influencing auto industry, both as a driver of
demand59 and as a facilitator of enhancing competitiveness in manufacturing of auto
products. The introduction of above mentioned norms, in addition to safety and noise
norms have led to the increase in the workload on the Automotive Research
Association of India (ARAI) testing facilities. Keeping this in mind, the Government
of India has made various efforts to improve the testing facilities. These include the
approval of two proposed additional testing facilities, upgradation of the ARAI &
Vehicles Research and Development Establishment (VRDE), establishment of a world
class test track and building of a few additional centres under the NATRIP in and
around the major auto hubs in India. This is an industry-government joint initiative,
involving an investment of Rs. 1,718 crore. The additional centres would be set up in
Manesar, Pune, Ahmednagar, Chennai and Indore. More on emission norms is covered
in Section 7.2. For example, when there is a better road network, it is more likely that
demand for automobiles increases among the people. With better roads and power
availability and quality, for example, the firms will be able to reduce their costs of
transportation and production, as well as improve their product quality.

Efforts have also been made to promote alternative fuels. For this, the following three
initiatives have been launched:
Agreement with the sugar industry on the off-take of ethanol has been made.
An action plan has been prepared to grow and procure bio-diesel at fixed price.
Hydrogen energy roadmap has been prepared by Ratan Tata. According to this
roadmap, 10 lakh hydrogen-fuelled vehicles has been produced by 2010.

The accession to the UNWP (United Nations Working Party) 1998 is another
important decision taken by the Indian Government in 2005-06. This agreement will
prove a significant step towards the global integration of the Indian auto industry. A
great deal of progress has been made on bilateral and regional trade agreements. The
bilateral agreement with Chile and Singapore and regional agreements with SAFTA
(South Asian Free Trade Agreement) and MERCOSUR (Southern Common Market)
have been concluded, while the bilateral discussion with Thailand and regional
discussions with ASEAN and BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral
Technical and Economic Cooperation) have reached the final stage. In August 2006, a
Draft of Automotive Mission Plan Statement was released by the Ministry of Heavy
Industries, in consultation with industry. This was released as a report in December
2006. This document draws an action plan to take the turnover of the automotive
industry in India to US$145 billion by 2016 with special emphasis on small cars,
MUVs, two-wheelers and auto-components. Measures suggested include setting up of
a National Auto Institute, upgrading infrastructure, cutting the duties of raw materials
and fiscal incentives for R&D. In August 2006, the Working Group on Automotive
Industry in the Ministry of Heavy Industries has brought out a report for the Eleventh
Five Year Plan. This document stresses on the need of speeding up the move towards
VAT in the states and GST at the Centre. Labour regulations, paperwork involved in
government-related transactions, internal trade barriers, infrastructure bottlenecks, raw
materials, human capital, increasing interest rates and threats due to FTAs are, as
mentioned in this document, barriers to competitiveness. This report notes that the
effective levy is lower for a Counter-Vailing Duty (CVD) than excise duties locally,
because of the fact that excise is made after including the post-manufacturing
expenses64 in the price, while imported Completely Built Units (CBUs) have the
advantage of being levied the CVD before post manufacturing expenses. In addition,
the document recommends various other measures such as upgrading human resources,
mandatory inspection and control and retirement of vehicles based on road-worthiness.
In 2004, Early Harvesting Scheme for Indo-Thailand FTA was launched for 84
auto-component products. The countries included in this group are Bangladesh, India,
Myanmar Sri Lanka and Thailand. These are the barriers to inter-state movements,
mainly because of inconsistencies and differences in the fiscal and other policies of
Indian states. This includes selling and distribution costs (advertising, personnel,
incentives, warranty, branding and transportation) and margins. This ‘CVD anomaly’
is explained in the Report of Working Group on Automotive Industry, Ministry of
Heavy Industries and Public Enterprises (2006).
Financial Bill for 2007-08 has very few measures that affect the auto sector.
Cut in import tariffs of commercial vehicles to 10 per cent is expected to induce further
competition in the Indian commercial vehicles sector. Since CVs are required in the
development of infrastructure, duty reduction on CVs may give a boost to
infrastructure. Increase in total tax burden is certain to occur now, because of the
increase in education cess from 2 per cent to 3 per cent of total taxes. Extension of
R&D incentives for five more years, reduction of Central Sales Taxes (CST) and
increased infrastructural expenditure are positive features of the budget, for auto
sector.

2.4 EMISSION AND SAFETY STANDARDS :

In India, safety standards were introduced in the 1960s in auto-components,

while the Central Motor Vehicles Rules came into existence in 1989. In 1991, the first
state emission norms came into force for petrol vehicles and in 1992 for diesel
vehicles. From April 1995, fitting of catalytic converters in new petrol-driven
passenger cars was mandated in the four metros and unleaded petrol was also
introduced. From April 2000, unleaded petrol is available in the entire country. As for
road safety, numerous awareness programmes are arranged all over the country, since
2000-10 is a safety decade. In developed countries, lead was phased out from petrol
over a period of more than 10 years, while in India this was achieved in just six years.
The time gap between the introduction of norms in Europe and India is narrowing
down gradually. Euro I was introduced in the EU in 1983, while the same was
introduced to India in 1996. Euro II was introduced in the EU in 1996-97. Bharat
Stage-II norms, which are the Indian counterparts of Euro II, have been introduced for
smaller passenger vehicles (Gross Vehicle Weight < 3.5 tonnes) in 2000, and for
heavier vehicles (Gross Vehicle Weight > 3.5 tonnes) from 2001 in National Capital
Region of Delhi. For Mumbai, Chennai and Kolkata, these standards were extended to
different months in 2001. Later, these norms were extended to the rest of the country in
phases by 2005. However, for some categories of vehicles such as two-wheelers and
three-wheelers, new generation norms are yet to be announced. Bharat Stage-III norms
have been implemented in many Indian states in phases. There are numerous other
policy initiatives from the government and industry to encourage adoption of
environment-friendly technologies, such as hydrogen energy initiative by Tata and a
few other government policies enumerated in the previous subsection. However, there
were some contradictions and policy changes in North-Eastern states, in terms of
implementation of emission norms. The component-suppliers of an MUV major based
in Mumbai, covered in our field survey, had adapted their technologies to suit Bharat-I
norms, which were introduced in North-Eastern states in 1997. With the
implementation of Bharat-II norms in this region in 2005, they had adapted their
technologies accordingly. However, it was later found that fuel that is consistent with
Bharath-II norms was not available in sufficient quantity and hence Bharat-I was
implemented again, instead of Bharath-II. Consequently, some of the suppliers had to
close down their operations partly or fully. Hence the emission norms-related policies
should be designed in such a way that the manufacturers get sufficient time to adapt
their processes and technologies. At the same time, both domestic and foreign firms at
all levels should be prepared for the latest international norms.

The Benz Vehicle (1886, Germany) : It is accorded the distinction of being the first
gasoline-powered vehicle. This three-wheeler was the first car equipped with a
differential gear and had a horizontal, four-cycle single-cylinder engine. The engine
was mounted horizontally behind the seat, over the rear axle, in a frame-developed
form prevailing tricycles. Its 0.9 horsepower was transmitted to the rear wheels via belt
and chain, enabling a top speed of about 15 km/h. A lever connected to a rack-and-
pinion controlled the lone front wheel, which steered the car.
Baker Electric (1899) : For a long period after gasoline-powered cars gained
popularity, battery-powered cars continued to be made in the United States. The Baker
was produced from 1899 to 1915. The unusual suspension of this car consisted of
attaching the wheel shafts directly to the frame, on top of which was mounted a body
on springs. The body carried the motor, which drove the rear wheels by a chain. A
lever next to the driving seat controlled its speed. The Baker Electric was reputedly
easy to drive, and could cruise a distance of 80 km when fully charged, reaching a top
speed of 40 km/h.
Stanley Streamer: The steam car, Stanley Steamer continued production until 1927. It
was quiet, had little vibration, produced sufficient torque, and was easy to handle.
Under the bonnet of this car was boiler, which provided the pressure to drive a two-
cylinder engine located beneath the floor. Because of its abundant torque,
Stanley Streamer: The Stanley Steamer did not have a transmission-just one gear
engaged the center of its crankshaft, and directly turned the rear wheels. Manipulating
the Steamer's valves, which controlled the flow of fuel, water, and steam, must have
required quite a bit of practice and knowledge. Although it could achieve a higher top
speed than its gasoline-driven rivals, it was hard to start, especially in the cold weather.
Panhard et Levassor (1891 France): Two French toolmakers Rene Panhard and
Emile Levassor were the first to propose and commercialize a car having a layout and
structure similar to today's cars. The Panhard et Levassor was the origin of the classic
front engine, rear-wheel drive layout, the paradigm that transformed the horseless
carriage into the car as we know it today. It positioned its transmission in line with the
engine and clutch, and had a steering wheel instead of a tiller, and an in-line four-
cylinder engine. The front engine gave the car a better balance and made it easier to
steer.
Mercedes (1901): The new Daimler model combined into one machine for the first
time all the vital features of the modern car : a powerful four-cylinder engine, a
pressed steel chassis, a honeycomb radiator, and a recognizably modern gear stick
moving in a gate. The model was named Mercedes, after the daughter of an Austrian,
Emily Jellinek, the Daimler representative in France.
Tin Lizzie or T Model (1907): Henry Ford's model T, popularly called the Tin Lizzy,
was the first everyman's car .It not only brought motoring to the masses but also was
the first mass-produced car . As result, automobile ownership surged and car s became
affordable for the ordinary wage earner as well. The Model T introduced various
features to facilitate driving, and the transmission was integrated with the engine. Its
planetary gears-two forward and one back-could be shifted without the use of a clutch.
In 1906, gasoline-powered cars were produced that had a style of their own. In
these new models, a hood covered the front-mounted engine. Two kerosene or
acetylene lamps mounted to the front served as headlights. Car s had fenders that
covered the wheels and step-up platforms called running boards, which helped
passengers get in and out of the car . The passenger compartment was behind the
engine. Although drivers of horse-drawn vehicles usually sat on the right, automotive
steering wheels were on the left in the United States Improvements in engine-powered
car s during the 1920s contributed to their popularity: synchronized-mesh
transmissions for easier gear shifting; four-wheel hydraulic brake systems; improved
carburetors; shatterproof glass; balloon tires; heaters; and mechanically operated
windshield wipers.
The Morris and the Austin Seven (1922): The bull-nosed Morris launched the family
car in Britain. In the 1920s, this popular line could be bought for as little as $775, at
$115 down and about $9 per week. Also in 1922, the Austin Seven became the family
runabouts. It had all the big car characteristics contained in a small design. The top
speed was 45-50 mph, and averaged 40 miles on a gallon of gasoline. It was a front-
engine, rear-drive model using 750cc four-cylinder side valve, 10.5-horsepower
engine, and floor shift three-speed transmission. The handbrake stopped the front
wheels while a more conventional foot pedal stopped the back ones.
The Volkswagen (1938): The Volkswagen (German for the "people's car ") went on to
rack up worldwide sales of more than 40 million. A horizontally opposed four-cylinder
engine was designed for the power plant, with a total displacement of 996cc. When
mounted in the rear and driving the rear wheels, this engine, with its low height,
permitted the Volkswagen to have a streamlined, fastback shape. It was air cooled too
and came to be loved all over the world as the beetle.
Aerodynamic Models: From 1930 to 1937, car engines and bodies became large and
luxurious.Many 12- and 16-cylinder car s were built. Independent front suspension,
which made the big car s more comfortable, appeared in 1933. Also introduced during
the 1930s were stronger, more reliable braking systems, and higher compression
engines, which developed more horsepower. Mercedes introduced the world's first
diesel car in 1936. Cars on both sides of the Atlantic were styled with gracious
proportions, long hoods, and pontoon-shaped fenders. Creative artistry merged with
industrial design to produce appealing, aerodynamic cars. Some of the first car s to
fully incorporate the fender into the bodywork came along just after World War II, but
the majority of designs still had separate fenders with pontoon shapes holding
headlight assemblies. During the 1940s, sealed-beam headlights, tubeless tires, and the
automatic transmission were introduced.

SMALL CAR S VERSUS BIG CARS: Two schools of styling emerged in the 1950s,
one on each side of the Atlantic. The Europeans continued to produce small, light car s
weighing less than 1300 kg (2800 lb). European sports car s of that era featured hand-
fashioned aluminum bodies over a steel chassis and framework. In America,
automobile designers borrowed features for their car s that were normally found on
aircraft and ships, including tailfins and portholes. Cars were produced that had more
space, more power, and smoother riding capability. Introduction of power steering and
power brakes made bigger car s easier to handle. The Buick Motor Car Company, Olds
Motor Vehicle Company (Oldsmobile), Cadillac Automobile Company, and Ford all
built enormous car s, some weighing as much as 2495 kg (5500 lb).
Austin Mini (1959): The Austin Mini was introduced in Britain. It became hugely
popular. It was small enough to squeeze through city traffic, easy to park, cheap to run,
yet big enough for four adults. Its success paved the way for a succession of small cars.
The Japanese Cars: In the 1950s and more years since the Japanese began producing
cars domestically, Japanese automotive technology has made remarkable progress and
come to be one of the international leaders. In 1980, Japan became the top automobile-
producing country in the world.
Sports Cars: The various car races encouraged the automakers to view car racing as a
sport resulting in the rapid development of automotive technology. As technological
knowledge began to accumulate from car racing, various sports models appeared,
allowing motorists to experience real driving pleasure.
COMPUTERIZED CARS: Today, stepping into the twenty-first century, utilizing
new materials, high-tech electronics, new power sources, and artificial intelligence, the
type of car that automakers are capable of producing cannot even be imagined.

Austin Rover Maestro (1983): The Austin Rover in Britain introduced the Maestro,
with a talking dashboard designed to alert the driver to engine problems, the latest in
the line of electronic systems added to car s since the 1960s.

Ford Probe IV: The Ford Probe IV prototype, perhaps the world's most aerodynamic
four seater, is testing many revolutionary features that may well become the standard
in tomorrow's car s. Among them is the use of computer-controlled pneumatic
suspension.
3 PROFILE OF MARUTI SUZUKI INDIA

This chapter consists of overview of Maruti Suzuki India Limited and

Hyundai Motors India Limited with respect to Manufacturing facilities, Corporate
Milestones, Sales and Service network with their few popular brands.

3.1 History & Milestone of Maruti Suzuki India Limited

Maruti Suzuki is one of the leading automobile manufacturing

companies in India. It is the market leader in the automobile industry both in terms of
production and revenue generation. The history of Maruti Suzuki is very fascinating.
In the year February 1981, Maruti Udyog Limited was incorporated
under the provisions of the Indian companies act, 1956. The major objectives of Maruti
Udyog were to modernize the Indian automobile industry, to produce fuel-efficient
cars and mass number of vehicles.
The company was formed as a government company, with Suzuki as a
minor partner, to make people’s car for middle class India. In October 2, 1982, the
company signed the license and joint venture agreement with Suzuki Motor
Corporation of Japan. In the year 1983, the company started their productions and
launched Maruti 800. In the year 1983, the company launched its most awaited Maruti
Omni and in 1985, the company launched Maruti Gypsy in the Indian Market.
The Gypsy was the first modern four-wheel drive vehicle in the Indian
market. In June 1986, the company launched new model of Maruti 800.
In the year 1987, the company forayed into the foreign market by
exporting first lot of 500 cars to Hungary. In the year 1990, the company launched
India’s first three box car, sedan i.e Maruti 1000. In the year 1992, Suzuki Motor
Corporation, Japan increased their stake in the company to 50 percent. In the year
1993, the company introduced the Maruti Zen and in 1994 the company launched
Maruti Esteem in the market.
In the year 1995, the company commenced their second plant. In the
year 1997, the company started Maruti Service Master as model workshop in India to
look after sale services. In the year 1999, the third plant with new press, paint and
assembly shops became operational. With the growing demand of customers in the
Indian automobile market the company launched Maruti Alto in 2000.
In the same year i.e in 2000, the company launched a call centre. This
was the first time a car company had ever launched a call centre in India. In this year,
Maruti set up a website for its Wagon-R car, introduced a new model of Zen, got the
IRTE National award for its safety initiative, traffic management and environment
protection, launched the Baleno and the Waon-R with electric power steering. Maruti
introduced its first CNG (Compressed Natural Gas) car in 2001. In this same year,
Maruti invested 550 crore rupees in Manufacturing cars. In the year 2002, Maruti
launched Maruti Finance to offer financial services like extended warranty and finance
for car insurance.
In the year 2002, Suzuki Motor Corporation increased their stake in
the company to 54.2 percentages. In the same year the company found new business
segment i.e. Maruti True Value for Sales, Purchase and trade of pre-owned cars in
India. In the year 2005, the company launched the first world strategic model from
Suzuki Motor Corporation ‘Swift’ in India.

During the year 2006-07, the company commenced operations in the new
car plant and the diesel engine facility at Manesar, Haryana. In November 2006, the
company inaugurated a new institute of Driving Training & Research (IDTR), which
was set up as a collaborative project with Delhi government at Sarai Kale Khan in
South Delhi.

During the year 2007-08, the company signed an agreement with the
Adani group for exporting 2,00,000 units annually through the Mundra Port in Gujrat.
The company launched Swift-Diesel and SX4 a luxury sedan with tag line ‘Men Are
Back’ during the year. In July 2007, the company launched the new Grand Vitara, a
stylish, muscular and five seater in the MUV (Multi Utility Vehicle) segment.
The company changed its name from Maruti Udyog Limited to Maruti Suzuki
India Limited with effect from September 17, 2007. During the year 2007, the
company entered into a joint venture agreement with Magneti Marelli Power train SPA
and formed Magneti Marelli Power train India Pvt Ltd for manufacturing Electric
control units. Maruti also entered into another joint venture agreement with Futuba
Industrial Co.Ltd and formed FMI Automotive Components Ltd for manufacturing
exhaust system components.
 During the year, the company made pact with Shriram City
union finance Ltd, a part of Shriram Group, Chennai, to offer easy, transparent and
hassle-free car finance to their customers, particularly in semi urban and rural markets.
During the year 2008-09, the company launched a new A2 segment car, branded the
A-Star in India & in Europe as the new Alto. In June 2008, the company launched
Maruti 800 Duo, a dual fuel (LPG + Petrol) car. In April 2009, the company revealed
new Ritz K 12 M engine at Gurgaon Plant.

Maruti Suzuki launched its EECO and Alto K10 (K Series vehicle) in
the year 2010. In the year 2011, Maruti Suzuki launched its luxury Sedan Kizashi and
SX4 diesel model. In the month of March 2011 the company produced 10 million cars.
Maruti Suzuki India Limited has launched its seven seater spacious & comfortable
MPV Ertiga on 12 April 2012 to cater the needs of larger family size consumers.
Very recently, the company has launched the all new Alto 800. The
main targets of Alto 800 are customers considering the purchase of first cars like
young customers i.e. youths.

Maruti Suzuki offers 16 brands and over 150 variants ranging from
people’s car Maruti 800 to the latest Life Utility Vehicles, Ertiga. Maruti Suzuki’s
portfolio includes Maruti 800, Alto, Alto K10, A-Star, Estilo, Wagon-R, Ritz, Swift,
Swift Dzire, SX4, Omni, Eecon, Kizashi, Grand Vitara, Gypsy and Ertiga.

The company employs over 9000 people (as on 31 st March 2012).

Maruti Suzuki’s sales and service network is the largest among car manufacturers in
India. The company has been rated first in customer satisfaction in the JD Power
survey for 12 consecutive years.

Over two and half decades, Maruti Suzuki has won the hearts of
customers through high quality products and services.
The company is engaged in the business of Manufacturing, Purchase
and sale of motor vehicles and Spare parts. The other activities of the company
includes facilitation of pre-owned car sales, fleet management and car financing.

The company has seven subsidiary companies, namely Maruti

Insurance Business Agency Ltd, Maruti Insurance Distribution Services Ltd, Maruti
Insurance Agency Solutions Ltd, Maruti Insurance Agency network Ltd, Maruti
Insurance Agency Services Ltd, Maruti Insurance Agency Logistics Ltd and True
Value Solutions Ltd.

The first six subsidiaries are engaged in the business of selling motor
insurance policies to owners of Maruti Suzuki vehicles and seventh subsidiary, True
Value Solutions Ltd is engaged in the business of sale of certified pre-owned cars
under the brand ‘Maruti True Value’.
Maruti Suzuki believes in the simple concept of “smaller, fewer,
lighter, shorter and neater.” The work culture is unique where a common uniform and
a common canteen for everyone from the Managing Director to the worker.

Maruti Suzuki strongly believes on following core values-

 Customer Obsession
 Fast, Flexible & First Mover
 Innovation & Creativity
 Networking & Partnership
 Openness & Learning

Note- After year 2000-2001, the nomenclature of category/segment/sub

segment in automobile sector has been changed and as per the report of Society of
Indian Automobile Manufacturers, cars have been treated as Mini (A1), Compact (A2),
Mid Size (A3), Executive (A4), Premium (A5) and Luxury (A6) under passenger
vehicles. After year 2000, Van was treated as multipurpose vehicle. Presently it is
found that few automobile companies are not adhered to above segment & hence there
might be little difference in categorization of vehicles.

3.2 Manufacturing Facilities of Maruti Suzuki

Maruti Suzuki has achieved its goal because of its unbelievable Manufacturing
excellence. With an object to fulfill the demand of market, today Maruti Suzuki’s
plants are comparable with the best in the world in terms of Quality, Productivity and
Operational efficiency.
Maruti Suzuki has two state-of-the art manufacturing facilities in India. Both
manufacturing facilities have a combined production capacity of 12,50,000 vehicles
annually.
3.2.1 Gurgaon Manufacturing Facility

The Gurgaon manufacturing plant is spread over 300 acres. This facility houses
three fully integrated plants. Together the three plants churn out around nine lakh units
annually. The recently launched Alto 800 is manufactured at this same plant.
.
According to the statement of Mr.R.C.Bhargava (Chairman-MSIL), Maruti
Suzuki India Limited finalized Rs.1700 crore investment for doubling the diesel engine
capacity at Gurgaon Manufacturing Facility to 6,00,000 units by 2014. Of this, Rs.950
crore is being invested for the first phase of 1.5 lakhs diesel engines by mid-2013.

3.2.2 K Series Plant

The Gurgaon premises also having the K-Series engine plant. Commissioned in
2008, the K-Series engine plant has an installed capacity of over 7.7 lakh units per
annum. Since inception of this plant, till date over 10 lakh K-Series engines have been
rolled out. In this plant K-Series engines are available in 1 litre, 1.2 litre, and 1.4 litre
capacities. Presently, Alto-K10, A-Star, Estilo, Wagon-R, Swift, Swift Dzire, Ritz and
Ertiga are powered by the K-Series engines.

3.2.3 Manesar Manufacturing Facility

In February 2007, the 600 acre Manesar facility located around 25 Kms south
of Gurgaon facility was inaugurated. This facility houses two fully integrated plants
with a capacity of 5.5 lakh units annually. Both manufacturing facilities are highly
automated with advanced robotics, contemporary paint, weld and machining
infrastructure. This plant produces the SX4 vehicles.

3.2.4 Suzuki Power train

Suzuki Power train India limited is a joint venture of Maruti Suzuki with
Suzuki Motor Corporation, Japan at Manesar. This plant manufactures world class
diesel engines and transmissions for cars.15 Suzuki Power train India Limited (SPIL)
supplies about 3,00,000 diesel engines a year to Maruti, while petrol engines are made
in-house. Currently, Maruti has a 30 percent stake in SPIL, while the rest lies with
Japanese parent Suzuki Motor Corporation (SMC)
 Maruti Suzuki’s Manesar Power train plant can be seen as follows.

Picture 1: Suzuki Power Train plant at Manesar

Source: www.thehindubusinessline.com

3.3 Services offered by Maruti Suzuki India Limited

3.3.1 Sales and Service Network (Stations)

Maruti Suzuki’s Sales and Service network is the largest among car
manufacturers in India. The company had 802 sales outlets in 555 cities and 2740
service workshops in 1335 cities as on 31 March 2010. The service network of the
company includes Dealer Workshops, Maruti Authorized Service Stations (MASSs),
Maruti Service Masters (MSM) and Maruti Service Zones (MSZ). In FY 2011-12,
Maruti Suzuki had opened its 1000th Sales outlet, another landmark achieved. The
company with over 2950 service outlets reaches its customers across 1400 cities.
The following chart clearly depicts the wide network of Maruti Suzuki.
 Chart 3.1: Maruti Suzuki’s Network Details

Source: Report by Maruti Suzuki India Limited (2012)

The above pie chart depicts that Maruti Suzuki’s total sales outlet in year 2011-12 was
1100 whereas 801 cities were covered through its sales network. It was also observed that there
1653 authorized service stations in year 2011-12 whereas the total number of true value outlets
in year 2011-12 was 409.

As far as service network is concerned, Maruti Suzuki has also given assurance to the
families travelling on the highway as there is a service workshop at a distance of every 30
kilometers on most high density highways in India. Besides the helpline number is also provided
by company.

3.3.2 Maruti Insurance

Maruti launched Insurance service in the year 2002. Maruti provides vehicle insurance to
its customers with the help of the National Insurance Company, Bajaj Allianz, New India
Assurance and Royal Sundaram. This service was set up by the company with the inception of
two subsidiaries Maruti Insurance Distributors Services Pvt Ltd and Maruti Insurance Brokers
Pvt Limited.
3.3.3 Maruti Finance
With an intention to promote the bottom line growth, Maruti launched Maruti Finance in
January 2002. Maruti had started two joint ventures Citicorp Maruti and Maruti Countrywide
with City Group and GE countrywide respectively to assist its client in securing loan.

For this, Maruti tied up with ABN Amro bank, HDFC bank, ICICI Bank, Kotak
Mahindra, Standard Chartered bank and Sundaram Finance to start this venture including its
strategic partners in car finance. In March 2003, Maruti entered into a strategic partnership with
State Bank of India.

3.3.4 Maruti True Value

With an intention to not only generate incomes for dealers but to also promote sale of
new Maruti cars by offering to buy old cars at reasonable prices and selling a new car in
exchange, Maruti Suzuki launched a subsidiary, True Value.
Under True Value, the seller has the option to be paid in cash/cheque, or get a True Value
car in exchange or a brand new Maruti Suzuki car in exchange. As a mark of confidence, and to
promote reassurance to customers, every vehicle bought under Maruti True Value is inspected
and certified by Maruti Engineers and the car carries a one year warranty and three free services.

3.3.5 Institute of Driving & Traffic Research (IDTR)

Maruti Suzuki introduced world class driving training facilities to India by launching
Institute of Driving & Traffic Research. These include a specially formulated multilingual theory
curriculum, scientifically laid-out driving tracks and advanced driving simulators that replicate
Indian driving conditions. The first IDTR was set up at Loni (on the outskirts of Delhi), in 2000
in collaboration with the Delhi government. In 2010-11, the IDTR was set up at Gujrat, in
collaboration with the Tribal Development Department of Gujrat. The intention of this initiative
was to develop the driving skills of tribal youth. The IDTR is presently exist at Haryana (two
IDTR, each at Rohtak and Bahadurgarh), two in New Delhi (Loni and Sarai Kale Khan), one in
Gujrat (Vadodara), one in Uttarakhand (Dehradun).
3.3.6 National Road Safety Mission

National Road Safety Mission is the flagship Road Safety initiative introduced by the
company in December 2008. Under this initiatives, the company took a commitment of training
over 5,00,000 people in safe driving practice in a span of 3 years. The main objective of this
initiative was to make them employable in driving profession.

3.3.7 N2N Fleet Management

N2N is the short form of End to End Fleet management which provides lease and fleet
management solution to corporate. The list of clients who have signed up this service includes
Reckitt Benckiser, Sona Steering, Gas Authority of India Ltd (GAIL), Dupont, Doordarshan,
Singer-India, Transword etc. This service includes end to end solutions across the vehicle’s life,
which includes Leasing, Maintenance, Convenience services and Remarketing.

3.4 Awards/Recognition won by Maruti Suzuki

Because of outstanding performance and continuous innovations, Maruti Suzuki got

various awards and achievement as follows:
· Business Standard India’s company of the year 2011 award Ranked amongst the
top 10 most admired companies by Wall Street Journal
· 11th time in a row, the Company ranked highest in JD Power Asia Pacific 2010
India Customer Service Index (CSI) study.
· NASSCOM and CNBC TV 18 IT user award
· Ranked highest in JD Power Sales Satisfaction Index (SSI)
· Ranked one in JD Power initial quality study 2010 for model- Dzire
· CNBC-TV18 award 2011 for Manufacturer of the year.
· Corporate campaign ‘Kitna Deti Hai’ rated amongst the best campaigns of the
year 2010 by CNBC-TV18’s program on advertising & marketing
· NHRDN (National HRD Network) Trailblazer Award 2010 for HRD
Excellence.
· Maruti’s Alto ranked no.1 in TNS four wheeler Total Customer Satisfaction
(TCS) study.
3.5 Recent Popular Brands of Maruti Suzuki India Limited

Today, Maruti Suzuki has rolled out lot of successful models to serve each and every
section of society which includes Maruti 800, Alto, Wagon-R, Swift, Swift Dzire. Recently
Maruti Suzuki has launched few models in Indian Market, which has always been the centre of
attraction.
·
3.5.1 Maruti Alto 800

On 16 October 2012, Maruti Suzuki has launched its most awaited car Maruti Alto 800
Before launching this Alto 800, the company had bagged 6000 pre launch bookings for this
upgraded model. The company has invested around Rs.470 crore, and 200 engineers from Suzuki
Motor Corporation and Maruti Suzuki were jointly involved in the development of the Alto 800
for over four years. The petrol Alto 800 ranges between Rs.2,44,000 – Rs.2,99,000. The CNG
variant of Alto 800 has been priced between Rs.3,19,000 – Rs.3,56,000 with a fuel efficiency of
30.46 km per kilogram. The new Alto 800 has been designed for entry level customers.

The special features of new Alto 800 are-Wave

front Design
Fresh & Spacious Interiors Best in class
Mileage
Easy drive and handling

Safer drive.

3.5.2 Maruti Wagon R

The Maruti Suzuki Wagon R is a made for India version of Suzuki Wagon R. The Wagon
R was launched in December 1999 and has since undergone three upgrades one in 2003, another
in 2006 and in 2010.

Wagon R has been the third largest selling vehicle from the portfolio of Maruti Suzuki
which is a good thing in small package. Recently the company has launched the new Wagon-R
powered by the company’s well known K Series engine. New Wagon R equipped with an
advanced security system called iCATs, which prevents vehicle theft. New Wagon R is available
in CNG and LPG versions with BS-IV norms. The car ranges between Rs.4,26,000- Rs.4,42,000.
Very soon the company is going to launch diesel version of Wagon-R which costs around
Rs.5,50,000.

3.5.3 Maruti Swift

Swift is one of the largest selling vehicle of Maruti Suzuki. Swift was launched in 2005
and has made a massive success in the Indian market. In the last six years Maruti sold 6 lakh
Swift cars and presently there is 3-4 months waiting period for this car. Recently Maruti Suzuki
has launched the new Swift which has same 1.2 litre K-series petrol and 1.3 litre CRDI diesel
engines. The new Swift is much lighter than old one & the company has raised the fuel
efficiency of new Swift by 6 percent in diesel and 4 percent in the petrol. The new Swift is
having 140 new features. This Swift is wider, longer and up to 30 kg lighter than old Swift. The
company along with its suppliers has invested around Rs.550 crore in developing new Swift. The
Swift ranges between Rs.5,50,000 – 5,80,000.

3.5.4 Maruti Suzuki Ertiga

Maruti Suzuki India Limited has launched its most awaited UV (Utility Vehicle) in the
Indian automobile market on Thursday i.e 12 April 2012 at an introductory price range of
Rs.5.89 lakhs to 8.45 lakhs (ex-showroom Delhi). Ertiga is available in Petrol and Diesel
version. The company has introduced Ertiga with K-14 VVT 1.4 litre petrol engine. Due to its
powerful engine, style, performance, and comfortness, Maruti Suzuki termed it as LUV (Life
Utility Vehicles). The company has invested Rs.400 crore to develop the Ertiga. This vehicle is
available in six versions.
According to Mr.Shinzo Nakanishi (Managing Director, Maruti Suzuki),”Ertiga is meant
for a compact car customer wishing to upgrade to a bigger car”.

3.5.5 A-Star

A-Star is the one of the renowned feather in the crown of Maruti Suzuki launched in the
year 2008. The A-Star has powered by the latest state-of-the art, light weight 998 cc K10 B
petrol engine. A-Star is the best in class fuel efficient car with a mileage of 19 kilometer. A-Star
is priced in between Rs 3,90,000 - Rs.4,80,000 & available in 5 different variants i.e LXI, VXI,
AT, ZXI, ZXI (Opt) with various safety features like Dual airbags, ABS with EBD, Immobilizer,
Child proof rear door locks, Head light leveling, High mount stop lamp etc.
 A-Star is the first product of Maruti Suzuki which is loaded with KB series engine in
India which meets new emission norms in India as well as Euro 4 & Euro 5. A-Star is one of the
rare hatchback models in Maruti Suzuki which is a great hit in Europe where it was designed. As
far as target customer is concern, A-Star is marketed keeping in view the youth of India.
4 LITERATURE REVIEW

Organizations’ are set up to achieve certain objectives. Achievement of goals or targets

depends upon the performance of individual employees. The objectives can be fulfilled when the
tasks are assigned to the employees and they perform the tasks. Otherwise these cannot be
fulfilled. Now the question arises how far the work has been done as per the planning. The
responsibility, accountability and performance standards have been met or not. Hence it is quite
necessary to understand as to what extent employees have been successful at their jobs for
achievement of their goals. This information will be available when the performances of
employees have been evaluated at the end of the year. If it is not done then the management will
not come to know the exact position about the targets achieved. They will be in the dark and
there will be chances of planning failure. The planning is done in the beginning of performance
management process. The performance appraisal is an important stage in this process. It shows
as per planning of objectives, performance standards and behaviour the communication,
counseling, coaching, motivation and feedback have been given or not. Finally to see what is the
impact of these planning and action on the performance of the employees. The performance
standards regarding quality, quantity, cost and behaviour have been achieved or not. So it
becomes necessary to carry out the performance appraisal of every one for smooth working of
the organisation. Thus performance appraisal forms an important part of HRM. This necessitates
the study of the topic of performance appraisal.

Performance appraisal is mainly used for three purposes:

(a) As a basis of reward allocation such as salary increments, promotion and other rewards
etc. In performance appraisal systems slow and fast working employees are identified.
Under compensation, rewards and recognition plans the employees are given higher pay
scales, higher incentives for better performance and appreciation for the work. Some time
the cases of good performers are recommended for further promotion. It leads to
development and motivation of employees.
(b) Performance appraisal will point out the weaknesses of employees and will spot the areas
where development efforts are needed. The weaknesses in initiatives, leadership quality, problem
solving approach, behaviour, discipline, difficulties faced during the work and competencies for
performing the tasks. The deficiencies can be pinpointed. Performance appraisal is a tool for
identification of deficiencies. On the basis of identification the remedial action can be taken to
overcome the deficiencies. This way the performance of employees may improve to a good
extent.

(c) It can be used for the selection and development programme. It will differentiate satisfactory
performers from unsatisfactory ones. The performance appraisal will help the management to
perform functions relating to selection, development, salary, promotion, penalties, lay-off and
retrenchment.

4.1 Importance and Uses of Performance Appraisal

Following are uses of performance appraisal:

It can be used for career advancement of an individual. On the basis of an individual's
performance his promotion, training and development and career plans are formulated. It can be
used for transfer as it discloses various abilities of individuals which can form a basis to identify
as to who is eligible for transfer in respect of different categories of jobs. It provides guidelines
for training and development of individuals. The training needs for individuals can be established
on that basis. It encourages employees to work hard since they are aware that their performance
is being appraised and it can result into a reward also.

Performance appraisal facilitates the determination of incentives, perquisites, fringe benefits and
piece rate wages. It is also helpful for the development of organisation, as company's objectives
and development programmes can be matched with employee's competence. By identification
and correction action taken under performance appraisal the productivity of the employees,
systems and of organization as whole can be increased. It gives clear picture into the work being
done and the employees who have contributed in work achievement. Through feedback from the
managers and supervisors the employees get clear ideas about the competencies, difficulties
faced and the performance achieved. On the basis of this the employees take the
responsibility for their improvement. The performance appraisal is a regular opportunity to
find out and deal with the important issues employees facing while performing jobs.

4.2 Definitions of Performance Appraisal

A performance appraisal is known by other terms like employee appraisal, performance

review. It is a method by which the job performance of an employee is measured in terms of
quality, quantity, cost, behaviour and time. It is conducted by self, peers, seniors and junior.
But generally in formal method it is conducted by the immediate manager or supervisor under
whom the person is directly working. . A performance appraisal is a part of measuring,
comparing, finding, guiding, correcting and managing career development of the employees..
It is the process of gathering, recording and critically analysing information about the relative
importance of employees to the organization. Performance appraisal is study of present
achievements, and failures, personal strengths and weaknesses, and suitability for incentives,
rewards and recognition, increased pay scale, promotion or further training. Finally it shows
the suitability of the person at present job to the organisation.Appraisal is the evaluation of
worth, quality or merit. Appraisal should measure both performance in accomplishing goals,
plans and performance as a manager. It is the evaluation of present performance and future
capabilities. Different experts have defined this concept as follows:

"It is the evaluation or appraisal of the relative worth to the company of a man's services on
his job." (Alford and Beatty)

"Performance appraisal is a systematic periodic and impartial rating of employee's excellence

in matters pertaining to his present job and to his potentialities for a better job." (Flippo)

"It is the process of evaluating the performance and qualifications of the employees in terms
of the requirements of the job for which he is employed, for purposes of administration
including placement, selection for promotions, providing financial rewards and other actions
which require differential treatment among the members of a group as distinguished from
actions affecting all members equally." (Heyel)
Douglass
Performance appraisal is a method of acquiring and processing the information needed to
improve an individual employee’s performance and accomplishments.

Newstrom
It is the process of evaluating the performance of employees, sharing that information with
them and searching for ways to improve their performance

Performance Appraisal
A process in where an individual's performance is scored and feedback is given. A large
component in psychology is trying to measure human behavior. Performance appraisals are
often used in the work place to inform employees on their work progress. Promotions,
bonuses and training needs are often based on the information provided by a performance
appraisal.

“Performance appraisal is a meeting between workers and their manager to discuss how well
they are doing in their work.” Macmillan Dictionary

Process by which a manager or consultant (1) examines and evaluates an employee's work
behavior by comparing it with preset standards, (2) documents the results of the comparison,
and uses the results to provide feedback to the employee to show where improvements are
needed and why. Performance appraisals are employed to determine who needs what
training, and who will be promoted, demoted, retained, or fired.

Some people confuse performance appraisal with merit rating. But both are basically
different. In merit rating, employee's internal merits and qualities are studied like his nature,
physical and mental merits and so on; while in performance appraisal, evaluation is made of
quantitative factors based on production quantity, quantity of accepted and unaccepted jobs
and strata of work, etc. Thus, in merit rating the stress is on what he is, while in performance
appraisal the emphasis is on what he does and what potentiality does he possess.
4.3 Approaches to Performance Appraisal

The concept of performance appraisal came to light with the development of management.
After industrialization when competition crept in the market, the need for effectiveness was
felt. In past, the roots can be traced in the time and motion study. For effective working the
need for capable and dedicated worker was felt. In time and motion study the efforts were
there to save time and activities so that the performance output can be improved. This became
more and more popular with the tough competition in the market. As on today the company
get differential competitive advantage over their rivals whose employees are well trained,
motivated, committed and achieving the performance standard. The formal use of
performance appraisal procedure was used in the time of Second World War. The history of it
is not very long. It is hardly a few decades old. The approached to performance appraisal can
be explained as follows:

4.3.1 Old Approach

In broader sense, the practice of appraisal is a very old technique or art. In short it can be
claimed one of the oldest profession. Performance appraisals are widely used in the society.
The history of performance appraisal can be dated back to the 20th century and then to the
second world war when the merit rating was used for the first time. An employer appraising
their employees is a very old concept. Performance appraisals are an important part of
performance measurement process. Dulewicz (1989), said that "performance appraisal is a
basic human tendency to make judgement about those one is working with, as well as about
oneself." Appraisal, it seems, is both inevitable and universal. In the absence of a carefully
structured system of appraisal, people will tend to judge the work performance of others,
including subordinates, naturally, informally and arbitrarily. The human inclination to judge
can create serious motivational, ethical and legal problems in the workplace. Without a
structured appraisal system, there are chances that the mistakes are likely to take place and
these may be unlawful, biased and improper.

Performance appraisal systems was used in the past whether the payments have been made to
the workers are justified or not. It can be said that is was a simple income justification. The
process was firmly linked to material outcomes. The employees were paid as per the output.
If the output was good the good salary was paid otherwise there was a cut in the salary. A pay
increment was given when the performance was more the expected standard. There was no
consideration for the human touch to the performance appraisal system. There was no scope
for the development of employees. The motivational factors were only the wage cut or a rise
to improve or continue to perform well. Sometimes this basic system could succeed in getting
the results that were expected but most of the times it failed.

For example, early motivational researchers were aware that the employees with almost
similar ability to work were paid same salary but with the different levels of motivation while
performing the jobs. These observations were confirmed in empirical studies. There were
many factors to influence to perform well. The factors were good salary, morale, self esteem
and appreciation. But out of these the salary was a major factor to affect the performance of
the workers. As a result, the traditional emphasis on reward outcomes was progressively
rejected. In mid of twentieth century the performance appraisal was recognized as a tool for
motivation and development of employees. The present form of performance appraisal started
from that time onwards.

4.3.2 Modern Appraisal

Performance appraisal may be defined as a structured formal appraisal system in which the
subordinate’ performance is appraised by his supervisor, that usually takes place in mid and
end of the year assessments. In this the performance of employee is measured, compared and
discussed with the objectives to find out the strengths, weaknesses, difficulties faced, and the
deficiencies in competencies so that these things can be developed. The management is
looking forward for improvement in individuals’ performance and increase the effectiveness
of human resource. This may leads to proper utilization of all resources and finally the comp-
any get competitive advantage in the market over the rivals. In many organizations the
appraisal system is used as base for deciding rewards, recognition, compensation, training,
promotion, bonuses and many other opportunities for employees’ development.
On other side the poor performers are also identified who may need counseling, coaching,
guidance or any other help for further problem solution and improvement in performance.
Despite of sincere efforts of the management if the employee is not interested to improve
them remedial action can be taken to correct him. Such action can include wage cut,
dismissal, demotion and loosing seniority subject to provisions of law of the land prevailing.
Now it is difficult to say that it is a good method for deciding the corrective and development
action. Right now it is a matter for comprehensive discussion.
4.3.3 Criticism of Performance Appraisal
Performance appraisal is a good method for improvement of performance of employees and
increase effectiveness of organization in the business. Despite of its advantages it has been
criticized by some management experts, researchers and consultants. They argued that the
reliability and validity of performance appraisal id uncertain. Due to its different types of
errors it is impossible to say it is a perfect method for performance evaluation. Derven
support this criticism in 1990. The appraisal of people is like to be biased due to different
factors. It creates confusion, frustration and employees reject the feedback given by the
appraiser. Some time favour, nepotism, preference and other factors play their role in
appraisal. In most of the cased the appraisal given by the appraiser are not uniform given at
the different times of the same person or same person appraising the different persons. It
leads to dissatisfaction. Further it is a time consuming and traditional method. It is not going
to give any concrete decision for further action.

4.3.4 In Favour of Performance Appraisal

On other side the experts give the extremely opposite view about performance appraisal.
They are strong supporters of performance appraisal. Lawrie said that is the most crucial
aspect of organizational life. The latest statement accepted world wide by different
organizations is– "get paid according to what you contribute" – the focus of the companies is
toward performance management process and particularly to individual performance.
Performance appraisal helps to evaluate the performance and contribution of employee
towards the organizational goals. If the whole process formal and properly structured and
implemented, it helps in giving the clear ideas

to the employees regarding their, roles and responsibilities, targets achieved and difficulties
faced while performing the jobs. It helps to align the individual performances with the
organizational goals and also suggest how the effectiveness of employees and organization
can be achieved further.

Further there are people of different opinions between the two extreme sides of performance
appraisal. They have differences regarding the methods and time of application of
performance appraisal. On group believe that performance appraisal is important to find out
the strengths and weaknesses and development uses. But when it is related to rewards, pay
rise or cut, promotion and demotion then it is taken as negative point. When it is related to
these it eliminated the development part of the appraisal. They very objective of performance
appraisal is hidden in punitive actions and not in development of employees. It is not
providing the opportunity for development, encouragement but it is a deterrent approach of
the management. When employee knows that his next pay rise is due, the employee is not
going to disclose the difficulties faced by him. This may be taken as a weakness of the
employee and wage rise may be denied.

Further, there may be difference of opinion of the appraiser and executioner. Supervisor in
day to day working understand the employees in a better way. He may suggest for employee
to brush up the certain skill for further improvement. But this may be taken by the
executioner as a weakness and he may be denied further promotion. This may be taken in
different way and can damage the morale, develop frustration and dissatisfaction. It may
leads to bitter relationship, creates labour problems and productivity will go done. Ultimately
the performance will be poorer further. These advocates say that the performance appraisal
should not be linked with the reward and promotion. This should be considered separately on
the basis of merit, results and efforts.

4.3.5 The Link to Rewards

Bannister and Balkin said that the employees are more interested in accepting this. They feel
that the appraisal system should be linked with the reward and compensation plans. They feel
more satisfaction when it is related to the rewards in many organizations. On this point, the
others argue that for reward purpose there should be clear communication in appraisal
system. In present practice the reward issues are not discussed in appraisal of employees. It is
the responsibility of the management to discuss with every employee over the issue of
rewards. Consistency is not maintained in different organizations. This is further increased by
conducting separate wage and salary review in which the rises, bonuses and other incentives
are decided arbitrarily and often without disclosing the facts to the employees by manager
and supervisor.

Every person differs in his abilities, attitude and aptitudes. There is always some difference in
inputs, outputs and quality of outputs when two or more persons are working on the same job.
It becomes very difficult to know who is more suitable to the job. Management is putting
efforts for proper utilization of men, machines and materials. Except manpower other
resources are non living resources. Once they are in use then full utilization is possible. But in
case of manpower, when people are employed their full utilization may be possible
sometime. The efforts will be to find out the weak element that contributes to the
accomplishment of objectives. The need for contribution assessment of every person has been
felt. This is only called performance appraisal. Performance appraisals of Employees are
necessary to understand each employee’s abilities, competencies and relative merit and worth
for the organization. Performance appraisal rates the employees in terms of their performance
criteria.

Performance appraisal takes into account the performance of one year, looks critically into
the strength, weaknesses and deficiencies in the performance given. The focus is on
improvement in future performance of the employees. Performance Appraisal shows relative
worth of an employee. The focus of the performance appraisal is measuring, analyzing and
improving the actual performance of the employee and also to find out the potentials of the
employees for future assignments. It is a powerful tool to calibrate, refine and reward the
performance of the employee. It helps to analyze his achievements and evaluate his
contribution towards the achievements of the overall organizational goals

. Performance appraisal is considered as a part of career development. "Get paid according to

what you contribute" – worldwide this principle has been followed. Further this is expected
by the employees also. The focus of the organizations is turning to performance management
and specifically to organizational as well as individual performance. Performance appraisal
helps to assess the competencies of employees, attitude at work, performance standards
achieved to contribute to the objectives of organization, willingness to shoulder
responsibility, initiatives to solve problems and leadership quality. Through performance
appraisal the relative worth of employees to the organization is found out. It leads to the
recognition of the work done by the employees, by rewarding, recognitions and higher
compensation packages. Good performers are identified for promotion to the higher jobs.
When employees take their own responsibility to work and overcome their weaknesses and
improve performance. This opens the gate for further development in career. It plays the role
of the link between the organization and the employees’ personal career development goals.

Through Performance appraisal, the talents and potentials of the employees are identified. It
helps the management to identify the individuals who can be assigned the new or higher
responsibility in future. The performance appraisal process in itself is developmental in
nature because the weaknesses, difficulties faced, deficiencies anywhere are identified and
remedial actions are taken to overcome these. The objective is not to criticize or punish but to
give opportunity to improve over the weak areas. Performance appraisal review opens gate
for many other HR processes. It identifies the good performers and poor performers at work.
For good performers the HR process like rewards, recognitions, incentives, higher packages,
promotion, deputation, job enrichment etc. are initiated. For poor performers wage cuts,
deprivation of welfare facilities, demotion, discharge or dismissal, lower rate of incentives
etc. these HR processes would be applicable During performance appraisal feedback is given
to every employee relating to their performance with objective to explain the clear position of
the performance of individual. It is with the positive approach to motivate the employees. The
employee should take it as an opportunity to shoulder the responsibility to learn more to
overcome the weak points so that he can improve the performance. In turn the improved
performance would open the door for rewards, promotion, higher packages and other
development opportunities. Based on the performance evaluation, employees can develop
their competencies, performance, career goals, achieve and chart their career progression.
Performance appraisal encourages employees to to shoulder the responsibility willingly to
learn more, increase their strengths and overcome their weaknesses. Finally the objective of
performance appraisal is to develop individual performance, organization performance and
career of employees.

The amount of research regarding the topic “Performance Appraisal” is so vast. The
topic is literally not new; it is as old as the formation of the organizations. Before the early
1980’s, majority of theoretical studies emphasized on revamping the rating system within the
organization. The actions were a great thing to reduce the chaotic of employee’s performance
appraisal (Feldman, 1981). With the passage of the time the methods and rating system
among the employees got enhanced and received an immense appreciation and attentions of
the managers. 
Behavioral Observation Scale (BOS) is one of the best techniques utilized by the
managers to arte the employees. The dilemma was on the peak in the 1960s and 1970s. In the
same period couple of new innovated rating scales were introduced, which was Behaviorally
Anchored Rating Scale (BARS) and the Mixed Standard Scale (MSS). The innovations were
dominant one which condensed the errors and improved the observation skills from the
performance appraisal practice. According to the research of Arvey and Murphy (1998), there
were hundreds of thousands of researches had been taken place between the periods of 1950
to 1980, which merely focused on the different types of rating scales. Landy and Farr (1980)
reviewed and researched the methods of performance appraisal in totally a different manner,
in which they understand the rater and process in an organizational context. Other
Performance appraisal reports include the rater characteristics in their report like race, gender
and likeability. 
After the year 1980 the biasness among the performance appraisal system occurred
outrageously and appraisal had been granted on the favoritism or race and gender basis rather
examined the knowledge, skills and style of the work of the employee. The accuracy criteria
among the performance appraisal system clutched its grip in the start of the 1980s, where the
researches were emphasized on common psychometric biases which include the diversified
rating errors like leniency, central tendency and halo, which were termed as rating errors in
the appraisal method. It has been observed that the bias free appraisals were inevitably true or
more precisely we can say more accurate, but the concept was totally refused by the research
of Hulin in 1982. According to them the biasfree appraisals were not necessarily accurate
(Murphy & Balzer, 1989). 
Researches which had been done in the year 1980 were found the most dominating one which
contributed the appraisal system in a great deal. The researches of the1980 also helped out to
clarify some presumed assumptions regarding the performance appraisal, just like the work of
Murphy (1982). Research has included the measure of employee attitudes towards the system
of performance appraisal and its acceptance (Roberts, 1990). Bernardian and Beatty (1984),
suggested in their research that behavioral and attitudinal kinds of measure ultimately prove
to be better anticipator as compared with the traditional psychometric variables, which we
have declared earlier as well, like leniency, halo and discriminability. A Performance
Appraisal system is totally ineffective in practice due to the dearth of approval from the end
users (Roberts, 1990).  
According to a number of researchers, the enhanced and upgraded performance
appraisal procedure and method will enhance the satisfaction level of the employees and
definitely will improve the process of goal setting within the organization. 

Rationale
Performance appraisals are one of the most important requirements for successful
business and human resource policy (Kressler, 2003). Rewarding and promoting effective
performance in organizations, as well as identifying ineffective performers for developmental
programs or other personnel actions, are essential to effective to human resource management
(Pulakos, 2003). The ability to conduct performance appraisals relies on the ability to assess
an employee’s performance in a fair and accurate manner. Evaluating employee performance
is a difficult task.
Once the supervisor understands the nature of the job and the sources of information, the
information needs to be collected in a systematic way, provided as feedback, and integrated
into the organization’s performance management process for use in making compensation,
job placement, and training decisions and assignments (London, 2003).
After a review of literature, a performance appraisal model will be described in detail. The
model discussed is an example of a performance appraisal system that can be implemented in
a large institution of higher education, within the Student Affairs division. The model can be
applied to tope level, middle-level and lower level employees. Evaluation instruments
(forms) are provided to assist you with implementation the appraisal system.

Introduction
Performance evaluations have been conducted since the times of Aristotle
(Landy,Zedeck, Cleveland, 1983). The earliest formal employee performance evaluation
program is thought to have originated in the United States military establishment shortly after
the birth of the republic (Lopez, 1968). The measurement of an employee’s performance
allows for rational administrative decisions at the individual employee level. It also provides
for the raw data for the evaluation of the effectiveness of such personnel- system components
and processes as recruiting policies, training programs, selection rules, promotional
strategies, and reward allocations (Landy,Zedeck, Cleveland, 1983). In addition, it provides
the foundation for behaviorally based employee counseling. In the counseling setting,
performance information provides the vehicle for increasing satisfaction, commitment, and
motivation of the employee. Performance measurement allows the organization to tell the
employee something about their rates of growth, their competencies, and their potentials.
There is little disagreement that if well done, performance measurements and feedback can
play a valuable role in effecting the grand compromise between the needs of the individual
and the needs of the organization (Landy, Zedeck, Cleveland, 1983).

Purpose
Performance appraisals should focus on three objectives: performance, not
personalities; valid, concrete, relevant issues, rather than subjective emotions and feelings;
reaching agreement on what the employee is going to improve in his performance and what
you are going to do (McKirchy, 1998). Both the supervisor and employee should recognize
that a strong relationship exists between training and performance evaluation (Barr, 1993).
Each employee should be allowed to participate in periodic sessions to review performance
and clarify expectations. Both the supervisor and the employee should recognize these
sessions as constructive occasions for two-way communication. Sessions should be scheduled
ahead of time in a comfortable setting and should include opportunities for self-assessment as
well as supervisor feedback. These sessions will be particularly important for new employees
who will benefit from early identification of performance problems. Once these observations
have been shared, the supervisor and employee should develop a mutual understanding about
areas for improvement, problems that need to be corrected, and additional responsibilities that
might be undertaken. When the goals are identified, a plan for their achievement should be
developed. The plan may call for resources or support from other staff members in order to
meet desired outcomes. In some cases, the plan might involve additional training. The
supervisor should keep in contact with the employee to assure the training experiences are
producing desired impact (Barr, 1993). A portion of the process should be devoted to an
examination of potential opportunities to pursue advancement of acceptance of more complex
responsibilities. The employee development goals should be recognized as legitimate, and
plans should be made to reach the goals through developmental experiences or education
(Barr, 1993). Encouraging development is not only a supervisor's professional responsibility,
but it also motivates an employee to pursue additional commitments. In addition, the pursuit
of these objectives will also improve the prospect that current employees will be qualified as
candidates when positions become available. This approach not only motivates current
performance but also assists the recruitment of current employees as qualified candidates for
future positions (Barr, 1993). How to arrive? Reasons why need to be done Benefits of
productive performance appraisals. - Employee learns of his or her own strengths in addition
to weaknesses. - New goals and objectives are agreed upon. - Employee is an active
participant in the evaluation process. - The relationship between supervisor and employees is
taken to an adult-to-adult level. - Work teams may be restructured for maximum efficiency. -
Employee renews his or her interest in being a part of the organization now and in the future.
- Training needs are identified. - Time is devoted to discussing quality of work without regard
to money issues. - Supervisor becomes more comfortable in reviewing the performance of
employees. - Employees feel that they are taken seriously as individuals and that the
supervisor is truly concerned about their needs and goals. (Randi, Toler, Sachs, 1992).
 Any performance appraisal system used to make employment decisions about a
member of a protected class (i.e. Based on age, race, religion, gender, or national origin) must
be a valid system (an accurate measure of performance associated with job requirements).
Otherwise, it can be challenged in the courts based on Title VII of the 1964 Civil Rights Act,
the Civil Rights Act of 1991 and the Age Discrimination in Employment Act of 1975
(London, 2003).

Uniform Guidelines on Employee Selection 1978 is the controlling federal law in the
area of performance appraisals. The Equal Employment Opportunity Commission (EEOC)
requires that any measurement used to differentiate between employees must be valid and
fairly administered. The Americans with Disabilities Act (ADA) suggests that performance
appraisals for people with disabilities for people with disabilities will not be conducted any
differently than those for other employees.
Another important aspect to consider is the employee’s right to privacy. Employees
must have complete access to their personnel files, but others should have controlled access.
The records should be accurate, relevant, and current.

Rewards
Effective reward systems are often hard to establish when creating performance
appraisals. The question of how specific the reward, when the reward should be given, and
how to reward group efforts can be a tricky subject to master.
Our advice on this is to keep it simple. It is important to have an established reward
system. However, rewards can be as simple as more autonomy on the job, praise for progress,
additional professional development funding, and vacation time.
The important aspect to remember when establishing reward systems is to be
consistent. If two employees are being evaluated in the same way, their reward opportunities
should reflect their evaluation outcomes.
5 RESEARCH METHODOLOGY

5.1 RESEARCH DESIGN

The present investigation is descriptive type of study undertaken to estimate the effectiveness
of the performance appraisal system of ONGC Ltd. The present study identifies views of
employees of different levels and disciplines.

I have divided the whole sample into various groups on various criterions like age,
experience, discipline, and management level.

To do the better analysis these groups are further incised as

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

Experience
 Experience less than 10 years
 Experience between 10-20 years
 Experience between 20-25 years
 Experience between 25-30 years
 Experience more than 30 years

Discipline
 Finance
 Geo Sciences
 HR
 Production
  Technical and Engineering

Managerial Level

 Junior Management(E0 - E2)

 Middle Management(E3 – E4)
 Senior Management(E5 and above)

5.1.1 Population of the Study

All those persons who are working in are the population of this study.

5.1.2 Sample Size

The sample size is 100.

5.2 METHOD OF DATA COLLECTION

5.2.1 PRIMARY DATA

The primary data to be selected was based upon the response of the respondents to the
questionnaire designed. The questionnaire consists of closed ended questions.

A part of Questionnaire was targeted to know the personal details of the respondents.
Second part consists of closed ended questions on the scale of 1 to 5. Third part comprised of
questions to be answered in Yes or No.

5.2.2 SECONDARY DATA

The secondary data was collected by referring through manuals, journals and intra net,
web sites, and the final data was analyzed systematically to achieve the desired result.
5.3 Tools of Data Analysis
The collected data has been analyzed keeping in view the objectives of the study. The
statistical tool used is Chi-square test in this study.

5.4 Collected data at a glance

Significant variables YES NO

Individual feedback should be
provided after the appraisal
The management helps provide an
atmosphere where all are
encouraged foe teamwork &
comradeship
My superior appreciates me when I
do a good job
My appraiser knows my
personality ,talents & potentials
Rather has the ability & courage to
give constructive criticism in a
friendly, firm & positive manner
The employees are provided with
the opportunity to respond to the
feedback of the appraisal
Are you rated on your
competencies- Knowledge, skills&
attributes
There should be some incentives
based on the individual & group
performance
Are you provided with the genuine
feedback
Do you find appraisal counseling
beneficial for future developments
Do you think management take a
serious note of training
requirements shown in the
appraisal
Do you want the system of 360
degree appraisal in which you can
appraise your superior
6 DATA ANALYSIS

6.1 Individual feedback should be provided after the appraisal.

Responses
YES - 87%
NO - 13%

90
80
70
60
50
40
30
20
10
0
Yes No

As of now the system of providing the appraisal feedback to every individual is not there .
However 87% of the respondents want that there should be such system. The general opinion
of the employees is that the basic purpose of the appraisal process is not fulfilled until or
unless one gets to know how he has performed. Ultimately the aim of the performance
appraisal is to develop the individual through proper monitoring and feedback system.

13% of the respondents feel that the individual feedback should not be provided. They
are still of the opinion that the performance appraisal should be treated as confidential report
only. They consider that the individual feedback system will give rise to discrepancies.
6.2 The management helps provide an atmosphere where all are encouraged for
teamwork and comradeship.

Responses
YES - 69%
NO - 31%

70

60

50

40

30

20

10

0
Yes No

Majority of the respondents feel that the management helps provide an atmosphere
where all are encouraged for teamwork and comradeship. This thing is necessary because you
can expect the performance only when you provide the suitable atmosphere for it. It has been
proved that the

office atmosphere plays a critical role in the overall performance of the individuals and
in turn of the organisation. Providing congenial environment fuel up the performance.
Through personal interaction I came to know the kind of environment prevailing in the
organisation. Though management is not putting much efforts to do so, it is there in the
system. People help out each other without any expectations.
However still 31% of respondents feel that the management doesn’t help providing an
atmosphere where everybody is encouraged for teamwork. What I feel is that the teamwork is
only possible when everybody in the team or a group is willing to put in effort and this thing
can’t be enforced upon somebody. So I would suggest to these respondents to take the plunge
and rest will automatically follow and comradeship will develop.

6.3 My Superior appreciates me when I do a good job.

Responses
YES - 86%
NO - 14%

90
80
70
60
50
40
30
20
10
0
Yes No

86% of the respondents responded as YES. This thing may appear to be very small
but the fact is that this thing helps an individual to give its best. A small token of appreciation
or just a pat on the back is enough to keep that individual motivated for the next week atleast.
Praise is such a thing that can make the king to work provided that should be genuine one.
There is a difference between praise and flattery. And if this difference is not clearly
understood it can prove fatal.
But exceptions are always there so here also 14% of the respondents don’t feel the
same. They don’t consider that their superiors appreciates them when they do a good job.
Some of the respondents are of the opinion that the superior seldom appreciates their work
and if at all they appreciates, it is not genuine one.
6.4 My appraiser knows my personality, talents and potentials.

Responses
YES - 87%
NO - 13%

90
80
70
60
50
40
30
20
10
0
Yes No

Majority of the respondents agree to the point that the appraiser knows their
personality, talents and potentials. Appraiser should be aware about these things of his
subordinates whom he has to appraise. These things actually help both the parties. Expecting
certain level of performance without knowing the caliber of the individual is not justified at
all. Once you are aware of the personality and talents of an individual, you can take work
accordingly.
Only 13% of the respondents feel that the appraisers are not aware of their talents and
potentials. Their say is that the appraisers hardly put any efforts to know the potential.
6.5 Rater has the ability and courage to give constructive criticism in a friendly, firm
and positive manner.
Responses
YES - 67%
NO - 33%

70

60

50

40

30

20

10

0
Yes No

Majority of the respondents feel that the raters have the ability and courage to give
constructive criticism in a friendly, firm and positive manner. At times it is necessary to scold
and criticize also but that should be done in such a manner that it should not discourage the
individual. Therefore constructive criticism is of paramount importance.
However there is considerably good percentage of respondents who feel that their raters are
unable to do so. Some of the respondents are of the opinion that the raters hardly know how
to give feedback in positive manner.
6.6 The employees are provided with the opportunity to respond to the feedback of
the appraisal.

Responses
YES - 37%
NO - 63%

70

60

50

40

30

20

10

0
Yes No

Majority of the respondents don’t agree with the above statement. According to
them they are not provided with the opportunity to respond to the appraisal feedback.
However 37% respondents says that they can respond to the feedback.
As such there is no procedure to respond to the appraisal result in the current
performance appraisal system. The reason being that the result itself is not shared with the
individual appraised. Why some people then think that they do get the opportunity to respond
to the appraisal result? This is because the system is such that in case an individual gets very
poor rating or very excellent rating then individual counseling is provisioned to confirm the
ratings and the reason behind such ratings.
6.7 Are you rated on your competencies- Knowledge, skills, and attributes?

Responses
YES - 72%
NO - 28%

80

70

60

50

40

30

20

10

0
Yes No

72% respondents believe that they are rated on their competencies- knowledge, skills
and attributes. However 28% deny the same. In the appraisal sheet itself there is one section
called potential appraisal. In this section the appraisee is rated on the various traits keeping
the existing role as well as future positions in perspective. One of the traits is Professional
Competance, which I think covers knowledge as well as skill part of an individual.
6.8 There should be some incentives based on the individual and group performance?

Responses
YES - 88%
NO - 12%

90
80
70
60
50
40
30
20
10
0
Yes No

Majority of the respondents want that there should be some incentives based on the
individual and group performances. They agree to the point that a star performer and a low
performer of same managerial level is getting paid exactly the same. This sometimes acts as a
demotivating factor for the star performer as well. A slight differentiation should be there for
the performer and non performer. Further incentives on group performance increases the
group cohesiveness and boost up the integrity.
6.9 Are you provided with the genuine feedbacks?

Responses
YES - 27%
NO - 73%

80

70

60

50

40

30

20

10

0
Yes No

The chart clearly shows the response of the respondents. Majority feels that they are not
given genuine feedbacks. On the basis of personal interaction I can say that people are not
satisfied with the kind of feedbacks they get. They say that the appraisal result is confidential
but apart from the appraisal feedback, otherwise also they are not provided with the routine
feedback on their performance. They are of the opinion that if they are provided with the
genuine feedback then they can improve their performance manifolds.
But there are 27% people who think they are provided with the genuine feedback. In
that case I would say that they are lucky to have those sort of superiors.
6.10 Do you find appraisal counseling beneficial for future developments?

Responses
YES - 77%
NO - 23%

80

70

60

50

40

30

20

10

0
Yes No

Again the majority is in the favors of the statement. Most of the respondents find
appraisal counseling beneficial for the future developments. But here I disagree. Not that I
don’t consider that the counseling are beneficial. No doubt they are beneficial for the future
development, rather they should be. But the thing is that the system of providing counseling
is very rare phenomenon. I have already mentioned that it is provided only and only if the
appraisal result falls in extreme limits either very low or very high ratings. So my point is
how come majority of the respondents have experience the counseling sessions. I have come
across the people who said that they don’t know about it as they haven’t experience it and
they have left this question unanswered.
6.11 Do you think management take a serious note of training requirements shown in
the appraisal?

Responses
YES - 38%
NO - 62%

70

60

50

40

30

20

10

0
Yes No

38% respondents feel that the management takes a serious note of training
requirements shown in the appraisal. At the same time 62% respondents are of the opinion
that the management doesn’t pay any heed to the training requirements shown in the appraisal
sheet.

In performance appraisal sheet every individual has to mention the training

requirements which is then assessed by the reviewing officer and then by accepting officer.
Once it is over the requirements are sent to the Academy.

In my opinion if this thing is mentioned in the performance sheet then it should be

taken care of properly. But the respondents say that it is mere formality. I met one employee
having 20 years of experience who said that he had been filling the requirements every year
but in the span of more than 20 years he happened to get the training twice only.
6.12 Do you want the system of 360◦ degree appraisal in which you can appraise your
superior?

Responses
YES - 73%
NO - 27%

80

70

60

50

40

30

20

10

0
Yes No

In 360 o feedback system the performance information is collected from multiple

parties including one’s subordinates, peers, supervisors and customers or clients. As of now
only superior appraise the subordinate.
Majority of the respondents want that the 360 degree appraisal system should be
introduced. In their opinion this system will reveal the truth about the managers. However
27% respondents don’t want this system to be adopted. They think that this system will give
rise to disagreements and one may criticize the boss freely without any basis.
6.13 Appraisal System

Appraisal System
5; 2; 13% 3; 4; 27%

1
2
3
4
5

4; 9; 60%

In this question appraiser was asked to rate how helpful the appraisal system is, from
the graph it can be seen that majority of appraisers have rated 5,4 & 3 which implies
that Performance Appraisal system is very helpful in Planning their work. Also most
of the appraisers are satisfied with the appraisal system.
6.14 Support from subordinate

Support from Subordinate

Yes
No

Yes; 15; 100%

This question was asked to find out how helpful appraisal system is in communicating
the support that apprasier needs from appraisee. From results it is seen that the
performance appraisal system is very helpful in communicating the support and help
needed by the appraiser from the appraisee.
6.15 Type of Appraisal System

Type of Appraisal System

MBO; 2; 13% Assessment centre

MBO
BARS; 2; 13%

BARS
360 degree feedback; 11; 73%

360 degree feedback

Balance scorecard

From results its clear that majority of companies prefer to use “360 degree feedback”
system for Performance Appraisal. As 360 degree feedback gives feedback of
appraisee from everyone interacting with him, it is more reliable and hence most
preferred.
6.16 Performance Appraisal criteria

Performance Appraisal criteria

Quantitative process Quantitative outcome
criteria; 3; 20% criteria; 3; 20%

Quantitative outcome criteria

Qualitative process criteria

Qualitative process criteria;
9; 60%
Quantitative process criteria

From results we can see that Qualitative Process is considered as the most important
criteria for which the Performance appraisal programs are carried out, which shows
that companies consider Qualitiy of product & service and Customer satisfaction as
most important factors.
6.17 Timing of Appraisals

Timing of Appraisal
Quaterly; 2; 13%

Annual
Quaterly
Half Yearly
Monthly
Anytime

Annual; 13; 87%

From graphs we can see that most of companies conduct appraisals on annual basis. Some
companies conduct quaterly also.
6.18 Effect of poor Appraisal System

Effect of Poor Appraisal System

Ineffective teamwork; 4; 27%

De-motivation
Retention
Ineffective teamwork

De-motivation; 11; 73%

It can be seen from results that most of the employees get De-motivated because of a
poorly conducted appraisal. To some extent employees dont coordinate with their
team members. Thus resulting in reduction of output.
6.19 Communication between top management and staff

Good Communication between Top Management and Staff

Yes
No

Yes; 15; 100%

All appraisers totally agree that performance appraisal helps in communicating the top
management plans and business goals to staff at lower level.
6.20 Insight to Appraisee’s strength and weakness

Insight into Appraisee's Strength and weakness

Yes; 5; 33%

Yes
No

No; 10; 67%

It is evident from the results that performance appraisal system doesn’t help the
appraiser in understanding strength and weakness of apraisee.
6.21 Appraisee’s comment and suggestion

Appraisee's comment & suggestion

Yes; 2; 13%

Yes
No

No; 13; 87%

From the results it can be seen that appraisee’s comments and suggestion are not
taken into consideration before Performance Appraisal. Performance Appraisal
system is designed by appraiser without consulting appraisee.
6.22 Performance Appraisal

Performance Appraisal

Immediate supervisor; 15; 100%

It is evident from the results that performance appraisal is conducted by the

Immediate Supervisor in all the companies.
6.23 Understanding of Apprasiee’s Job

Understanding of Appraisee's Job

Yes
No

Yes; 15; 100%

From this it is clearly seen that according to appraiser there is a clear and joint
understanding of the appraisee’s job.
6.24 Standards for Performance Appraisal

Standards for Performance Appraisal

No; 2; 13%

Yes
No

Yes; 13; 87%

From results it is evident that Performance appraisal standards are very well
communicated to Appraisee before the Appraisal is carried out.
6.25 Self rating in Performance Appraisal

Self Rating in Performance Appraisal

Yes
No

No; 15; 100%

From results it can be clearly seen that the Appraisee is not given a chance to rate his
own performance.
6.26 Action after Performance Appraisal

Action after Performance Appraisal

Yes
No

Yes; 15; 100%

This shows that most of the companies act upon the results of their Performance Appraisal
program.
7 FINDINGS,SUGGESTIONS AND CONCLUSION

7.1 FINDINGS

 From the survey results its evident that both the appraisee’s and appraisers
expectation from Performance appraisal system are the same i.e. “Determination
of Promotion or Transfer” and “Salary Administration and Benefits”. Hence a
single performance appraisal system can satisfy needs of both the Appraiser and
appraisee. Therefore the Performance appraisal program would be designed in
such a way that the appraiser would be able to analyse the contribution of the
employee to the orgaisation periodically and all the employees who have been
performing well would be rewarded suitably either by an increase in the salary or
a promotion. Through this the appraiser can also motivate the employees who felt
that they had no growth in the organisation and serves the purpose of employee
development.Thus performance appraisals can be used as a significant tool fo
career lanning.

 Analyzing ones own strengths and weaknesses is the best way of identifying the
potentials available, rather than the other person telling. Self-appraisal is a tool to
analyze oneself. One of the most important findings was that almost all the
employees wanted self-rating to be a part of performance appraisal program
carried out by the organisation. From the responses of the appraiser we can also
see that Self rating is not encouraged by the organisations. This could therefore be
an important factor which leads to dissatisfaction among the appraisees. At the
end of the year of the appraisal period the appraisal process should begin with
self-appraisal by every employee. To appraise ones own self on key performing
targets and qualities, the appraisee would go through a process of reflection and
review. It is an established fact that change is faster when it is self initiated. If
any employee has to improve or do better, he must first feel the need to do so.
Reflection and review is a process that enables him to feel the need and improve
more upon his strengths and weaknesses

 Another point to be noticed is that even in the other forms of Performance

Appraisal also the employees expect that they should be given a chance to rate
 their own performance. This can allow the employee to analyze ones own
performance which gives new insights on how one is performing and what are the
critical points where he has to put his best and improve upon

 The existence of a proper complain channel was also of utmost importance to the
appraisees. They should be given a chance to convey their greviences to the top
management.

 The appraisees also expect that their comments and suggestions should be taken in
to account while conducting the appraisals. This expectation is not fulfilled as the
appraisers do not take their comments and suggestions into consideration.
Therefore they should look into this matter before it leads to dissatisfaction among
the employees.

 The results also indicate that the there is no communication of top management
plans and business goal to the appraisee. The appraisers on the other hand feel that
the goals and plans have been clearly communicated to the appraisees.
Communication is very essential for any system to function efficiently. Therefore
the appraisers should look into this matter and see to it that the goals and plans are
communicated effectively.

 The findings suggest that for success of Appraisal system the credibility of
appraiser is of utmost importance.

 As per the Appraiser, a poorly conducted appraisal system would lead to

demotivation and ineffective teamwok which will result in inefficient functioning
and low productivity in the organization. Therefore, if at all they feel there is
dissatisfaction among the appraisee’s they should motivate them. Achievement,
recogntion, invelvement, job satisfaction and development can motivate the
employees to a large extent. Along with this satisfactory working conditions and
appropraite awards also play an important role.

 Also a majority of employees were satisfied with the current appraisal system
although they requested for some changes.
 Most of the employees were also not clear about the criteria on which ratings were
given to each employee while conducting the performance appraisal. Instead of
secrecy there should be openess. Because of lack of communication, employees
may not know how they are rated. The standards by which employees think they
are being judged are sometimes different from those their superiors actually use.
Proper communication of these ratings can help the employers achieve the level of
acceptability and commitment which is required from the employ.

 From the survey we can also derive that the appraisee’s expect a post appraisal
interview to be conducted wherein they are given a proper feedback on their
performance and they can also put forward their complaints if any. The appraisal
should also be followed up with a session of counseling which is often neglected
in many organizations. Counseling involves helping an employee to identify his
strengths and weaknesses to contribute to his growth and development. Purpose is
to help an employee improve his performance level, maintain his morale, guide
him to identify and develop his strong points, overcome his weak points, develop
new capabilities to handle more responsibilities, identify his training needs.

 Performance Appraisal System is not transparent.

 Appraisers are usually unbiased.
 Employees are not able to know their actual position after the appraisal.
 The management is serious about the appraisal process.
 The appraisal process provides them an opportunity for development and growth.
 Relations with the superior affect the evaluation.
 Greater weightage is given to the recent performances.
 There are fixed standards to evaluate the performance but those are not clear due
to the subjectivity of the topic.
 Raters know how to conduct the appraisal.
 Raters are not that much concerned about the varied needs of people at levels of
experience and background.
 Superior-subordinate relations are good. Superior helps them set and achieve
meaningful goals. This makes the environment amiable and congenial.
  Performance appraisal sheet is lucid and easy to understand and fill.
 The parameters used to appraise the potential are ample.
 The system being not so transparent, employees are unable to identify the
performance gaps in order to prepare for the future.
 Individual feedback is not provided.
 The management helps provide an atmosphere where all are encouraged for
comradeship and teamwork.
 Appreciation is provided for the good job done.
 The appraisers are generally aware about their subordinates and their talents and
potential.
 Most of the raters have the ability to give constructive criticism in a friendly, firm
and positive manner.
 Employees don’t have the opportunity to respond to the appraisal result.
 Employees are being rated on their knowledge and skills.
 Majority of people want that there should be some incentives based on
performance.
 Employees are not provided with the genuine feedback.
 Appraisal counseling is considered beneficial for future developments.
 Management doesn’t bother much about the training requirements mentioned in
the appraisal sheet.
 Most of the employees want that 360o feedback system should be introduced.

7.2 SUGGESTIONS

The performance appraisal system is of good quality. With the introduction of new e-
PAR system, the PMS system is refined further. On the basis of the analysis of responses and
findings I have reached to some conclusions. So taking them into consideration few steps
may be considered to strengthen the performance appraisal system.

 The system should be made more transparent. This can be achieved by creating
awareness among the employees regarding each and every aspect of the appraisal
process. They should be made aware about the standards and the criterions for
 evaluation. Further they should be shown the appraisal result.

 The appraiser and appraise should sit together and then the appraiser should rate the
appraise for his performance and should state the reason for the same. This will
increase the level of transparency and the employee will feel satisfied as he will have
an opportunity to respond at that very moment itself.

 The genuine feedback should be provided to the employees. So that they may be in a
position to know where they stand exactly. So that they can identify their performance
gaps and prepare accordingly for the future.

 The general belief among employees is that the relations with the superior affect the
evaluation process. This is not good as this creates a sense of favoritism in the
organization. No doubt one should be in pleasing terms with the superior but that
should not affect the evaluation at all. For this the raters should always consider the
performance as the only measure for the evaluation.

 The raters should take note of the critical performance incidents of an individual so
that at the end of the year it should not be that only the recent performances are given
more weightage.

 Raters should consider the specific requirements of the people to do the job. They
should help them out by providing necessary skill set to do the job more efficiently.
They should set the goals as per the potential and caliber of the individual.

 Employees should have the opportunity to respond to the appraisal result. For this
individual feedback should be provided.

 Management should take serious note of the training requirements shown by the
individual in the appraisal sheet. Training plays a vital role in the development of an
individual and helps improve the performance.
  Some incentives should be introduced on the performances basis. This thing creates a
sense of healthy competition among employees which boost up the growth of the
individual as well as the organization.

7.3 CONCLUSION

With rewards being directly linked to achievement of objectives, goal setting and
Performance Appraisal assumes utmost importance. The Performance Appraisal
System has been professionally designed and it is monitored by HRD. The
implementation is the responsibility of each and every employee along with their
supervisor. There should be adequate training to the evaluator that will go a long way
in answering the quality of Performance Appraisal. In conclusion, a Performance
Appraisal is a very important tool used to influence employees. A formal Performance
review is important as it gives an opportunity to get an overall view of job
performance and staff development. It encourages systematic and regular joint-
stocking and planning for the future. Good performance reviews therefore don’t just
summarize the past they help determine future performance.
Questionnaire

Q1. Individual feedback should be provided after the appraisal.

 Yes No

Q2. The management helps provide an atmosphere where all are encouraged for teamwork
and comradeship.

 Yes No

Q3. My Superior appreciates me when I do a good job.

 Yes No

Q4. My appraiser knows my personality, talents and potentials.

 Yes No

Q5. Rater has the ability and courage to give constructive criticism in a friendly, firm and
positive manner.

 Yes No

Q.5 The employees are provided with the opportunity to respond to the feedback of the
appraisal.

 Yes No

Q6. Are you rated on your competencies- Knowledge, skills, and attributes?

 Yes No

Q7. There should be some incentives based on the individual and group performance?

 Yes No

Q8. Are you provided with the genuine feedbacks?

 Yes No

Q9. Do you find appraisal counseling beneficial for future developments?

 Yes No
Q10. Do you think management take a serious note of training requirements shown in the
appraisal?

 Yes No

Q11. Do you want the system of 360◦ degree appraisal in which you can appraise your
superior?

 Yes No

Q12. Do the variables in appraisal form cover your actual performance, contribution to the
organization and potential for improvement?

Q13. Do you want more open-ended questions in the appraisal form?

Q14. Do you think your appraisal form reflects your true performance?

Q15. Do you think you have sufficient control over your work environment?