PERFORMANCE APPRAISAL

Concept:

Different synonyms are used: performance evaluation, progress rating, merit rating, merit
evaluation etc.

It is the process of assessing the performance and progress of an employee or a group of

employees on a given job and his potential for future development.

It consists of all formal procedures used in working organizations to evaluate

personalities, contributions, and potentials of employees.

“Performance Appraisal is the systematic, periodic and an impartial rating of an

employee’s excellence in matters pertaining to his present job and his potential for a better job.”

-Flippo

It is the process of obtaining, analyzing and recording information about the relative
worth of an employee.

Characteristics of PA:

1. It is a process consisting of a series of steps.

2. It a systematic examination of an employee’s strengths and weaknesses in terms of the
job.
3. It is a scientific or objective study.
4. It is an ongoing or continuous process.
5. The main purpose is to secure information necessary for making objective and correct
decisions on employees.

Objectives/Significance of PA:

1. Training: PA tries to identify strength and weaknesses of an employee on his present

job. This information can be used for devising training and development programmes.

2. Pay Increase: Salary increase of an employee depends on how he is performing in his

job.

3. Feedback: PA provides feedback to employee about their performance. It tells them

where they stand.

4. Promotion: PA discloses how an employee is working in his present job and what are his
strong and weak points. It can be used for transfer, demotion and discharge of employees.
 5. Pressure on Employees: PA puts psychological pressure on people to improve job
performance.

6. Desire for Improvement: PA promotes a desire for improvement among employees.

The confidence and morale of employees are increased when they are convinced that
management evaluates them impartially and rewards individual performance.

7. Impact on the Organization: PA helps in matters relating to compensation, promotions

recruitment, selection, training etc.

Process of Performance Appraisal:

1. Setting Performance Standards

2. Communicating Standards

3. Measuring Performance

4. Comparing with Standards

5. Discussing Results

6. Taking Corrective Actions

1. Establishing Performance Standards

Criteria is specified with the help of job analysis. It should be clear, objective and in
writing and should be clear, objective and in writing and should be discussed with supervisors. It
performance cannot be measured, then personal characteristics that contribute to employee
performance must be determined. They include-work quality, honesty, reliability, cooperation,
team work, job knowledge, initiative, leadership, attendance, safety conscious, learning ability,
adaptability, sense of responsibility etc.

These are to be indicated on Appraisal forms.

Who is to do the appraisal and how frequently appraisal is to be done should also be
decided.

2. Communicating the Standards: To the employees so that they know what is expected to
them. Standards should also be conveyed to the evaluators. Standards should be revised and
modified in the light of feedback obtained from employees and evaluators.
3. Measuring Performance: This requires choosing the right technique of measurement,
identifying external & internal factors influencing performance and collecting information on
results obtained. Data on performance can be collected through personal observation, written
reports, face to face contacts.

4. Comparing the actual with the Standards: Comparison will reveal the deviation which may
be positive or negative.

Positive deviation Actual Performance > Standard Performance

Negative deviation Actual Performance < Standard Performance

5. Discussing the Appraisal: Results are communicated to and discussed with the employee.
They enable an employee to know his strengths and weaknesses. This discussion may have a +ve
or-ve impact on the subsequent performance depending on how the feedback is presented and
discussed with the employee.

6. Taking Corrective Actions: Steps required to improve performance are identified and
initiated through mutual discussion with employees. The corrective actions can be training,
watching, counseling etc.

Problems/Limitations of Performance Appraisal:

1. Errors in Rating

(a) Halo Effect: It is the tendency to rate an employee consistently high or low on the basis of
overall impression. One trait of an employee influences the rater’s appraisal on all other traits.
This error may be minimised by rating all employees on one trait before taking up another trait.

(b) Stereotyping: This implies forming a mental picture of a person on the basis of his age, sex,
caste or religion. It results in an over simplified view and blurs the assessment of job
performance.

(c) Central Tendency: It means assigning average ratings to all the employees in order to avoid
commitment or involvement. As a result, the ratings are clustered around the midpoint.

(d) Constant Error: Some evaluators tend to be eenient while others are strict. In the first case
performance is overrated (leniency error) while in the second type, it is under-rated (Strictness
error). This may be avoided by holding meetings so that rates understand, what is expected of
them.

(e) Personal Bias: This arises because the rater might like or dislike an employee. It arises on the
basis of regional or religious beliefs and habits or interpersonal conflicts. Bias may also be the
result of time. Recent experience or first impression may affect the evaluation.
(f) Spill Over Effect: This arises when past performance affects assessment of present
performance. For eg: recent behavior or performance of an employee may be used to judge him.

2. Lack of Reliability: It implies stability and consistency in the measurement. Lack of

consistency among different rates, inconsistent use of measuring standards, lack of training in
appraisal techniques, some factors like initiative are highly subjective and cannot be quantified.
All these may reduce the reliability of PA.

3. Incompetence: On the past of raters due to lack of knowledge and experience.

4. Negative Approach: PA loses most of its value when the focus of management is on
punishment rather than development of employees.

5. Mutual Objectives: Raters may get confused due to too many or unclear objectives of P.A.

6. Resistance: Trade unions resist PA on the ground that it involves discrimination among its
members.

Requirement/Essentials of a good Appraisal System:

1. Simple & Easy to understand & administer.
2. Open & Participative
3. Employees should be made aware of performance standards.
4. Valid and Reliable.
5. Raters should be honest, rational & objective.
6. Built on incentive i.e. reward good performance.
7. Contain a follow up mechanism.
8. Periodically reviewed and updated.
9. Raters to be provided training.
10. Established with the support of people who administer it.

Methods/Techniques of Performance Appraisal-

Performance Appraisal

Traditional Methods Modern Methods

1. Confidential Report 1. Assessment Centre

2. Free Form or Essay 2. Human Resource
Accounting
3. Straight Ranking 3.BehaviourallyAnchored
Rating Scale
4. Paired Comparison 4. Appraisal through MBD.
5. Forced Distribution 5. 360o Appraisal
6. Graphic Rating Scale
7. Checklist
8. Critical Incidents
9. Group Appraisal
10. Field Review

Modern Methods:
1. Assessment Centre Method:

It is a group of employees drawn from different work units. They work together on an
assignment similar to the one they would be handling when promoted.

The evaluators observe and rank the performance of all employees both individually and
collectively by using simulation techniques like role playing, business games and in baskets
exercises.

Evaluators prepare a summary report and feedback is administrated on a face-to-face basis to the
employees who ask for it.

Assessment Centre generally measures interpersonal skills, communicating ability, ability to plan
and organise etc. Personal Interviews, projective tests are used to assess work motivation, career
orientation and dependence on others. Paper and pencil tests are used to measure intellectual
capacity.

Assessment Centres also help to determine training and development needs of employees and
provide data for HR planning.

2. Human Resource Accounting Method:

Under this method performance is judged in terms of costs and contributions of employees. Cost
of HR consist of expenditure on HRP, recruitment, selection, induction, training, compensation
etc. contribution of HR is the money value of labour productivity or value added by HR.
difference between cost and contribution will reflect the performance of employees.

3. Behaviourally Anchored Rating Scales: (BARS)

This method combines graphic rating scales with critical incidents methods. BARS are
descriptions of various degrees of behavior relating to specific performance dimensions. Critical
areas of job performance and the most effective behavior for getting results are determined in
advance. The rater records the observable job behavior or an employee and compares these
observations with BARS.

Employee’s actual job behavior is judged against the desired behavior.

4. Appraisal by Results or MBO

Also called as ‘Management by objectives and Self Control’ or ‘Work Planning and Review’ or
‘Goal Setting Approach’ to Appraisal.

MBO is defined as “a process whereby the superior and subordinate managers of an organisation
jointly identify its common goals, define each individual’s major areas of responsibility in terms
of results expected of him and use these measures as guides for operating the unit and assessing
the contributions of each of its members.”

-Steps involved in MBO

(i) Set Organisational goals.

(ii) Defining Performance targets

(iii) Performance Reviews

(iv) Feedback

5. The 360o Appraisal Technique:

It involves evaluation of a manager by everyone above, alongside and below him. Structured
questionnaires are used to collect responses about a manager from his bosses, peers, and
subordinates. Several parameters relating to job performance, and henvaiour are used in the
questionnaires. Each manager is assessed by a minimum of 15 colleagues, atleast two of them
being his bosses, four of them peers, and six of them subordinates.

Used in several corporations like: General Electric, Reliance Industries, Crompton Greaves,
Godrej Soaps, Wipro, Infosys.

The 360o appraisal has four integral components:

1. Self Appraisal
2. Superior’s Appraisal
3. Subordinate’s Appraisal
4. Peer Appraisal

Performance Management:
Performance Management
A Cyclical, continuous process
where employees and managers
work together
Potential Appraisal:
Potential refers to the abilities present but not currently utilized. The main objective of
potential appraisal is to identify the potential of a given employee to occupy higher positions in
the organisational hierarchy and undertake higher responsibilities.

It can serve the following persons:

(i) To advise the employees about their future prospects

(ii) To advise the employees about what they must do to improve their career prospects.

(iii) To help the orgnisation chalk out a suitable succession plan.

(iv) To update training efforts from time to time.

Mechanism of potential appraisal:

(i) Rating by Superior

(ii) Psychological Tests

(iii) Games

(iv) Performance Records

Potential may be judged by: (a) Reviewing present performance (b) Analysing personality traits
(c) Relooking at past experience (d) Considering age & qualification, (e) Explaining unused
knowledge & skills of an employee.

Potential Appraisal at Philips India

Combination of performance & potential appraisal system. The various criteria are:

1. Conceptual Effectiveness
2. Operational Effectiveness
3. Interpersonal Effectiveness
4. Achievement motivation

Each criteria is measured on a fine-point scale. A 2x2 matrix is used to demonstrate the
combination of performance and potential appraisal.

(i) Low Potential – Low Performance

(ii) High Potential – Low Performance

(iii) Low Potential – High Performance

(iv) High Potential - High Performance

Traditional Methods of PA

1. Confidential Report. This is a traditional form of appraisal used in most government

organisation. A confidential report is a report prepared by the employee’s immediate superior. It
covers the strengths and weaknesses, main achievements and failure, personality and behavior of
the employee. It is descriptive appraisal used for promotions and transfers of employees. But in
involves a lot of subjectivity because appraisal is based on impressions rather than on data. No
feedback is provided to the employee being appraised and therefore, its credibility is very low.
The method focuses on evaluation rather than developing the employee. The employee who is
appraised never knows his weaknesses and the opportunities available for overcoming them. In
recent years, a negative confidential report is required to be communicated to the employee. If
the employee disagrees, a noting to that effect has to be made on the report. This has been made
necessary by trade unions and courts.

2. Free Form or Essay Method. Under this method, the evaluator writes a short essay on the
emplopyee’s performance on the basis of overall impression. The description is expected to be as
factual and concrete as possible. An essay can provide a good deal of information about the
employee especially if the evaluator is asked to give examples of each one of his judgments. But
this method suffers from several drawbacks. First it involves bias as evaluation is not based on
specific performance dimensions related to the job. Bias may also arise because rating is in the
evaluater’s own words. The appraisal may be loaded with a flowery language rather than
appraisal of actual performance. One evaluator may be a good easy writer but the other may not
be. Thirdly, it is a very time consuming method of appraisal. This method may be appropriate for
assessing senior executives where the number involved is small. Fourthly. It is not possible to
compare two easy appraisals due to variations in their length and contents.

3. Straight Ranking Method. In this technique, the evaluator assigns relative ranks to all the
employees in the same work unit doing the same job. Employees are ranked from the best to the
poorest on the basis of overall performance. The ‘wholemen is compared with the whole man’
without analysing performance. The relative position of an employee is reflected in his numerical
rank.

For instance, if five persons A,B,C,D and E are to be ranked, the ranking may be as
follows:

Employee Rank

A 2
B 1
C 5
D 4
E 3
Straight ranking is one of the oldest and simplest methods. It is time saving and a comparative
evaluation technique of appraisal. But there are several weaknesses in this method. First, it
involves bias and snap judgment because appraisal is not based on specifically defined measures
of job-related performance. Secondly, ranking of individuals having varying behavior patterns or
traits is difficult especially when a large number of persons are to be rated. Thirdly, the method
only indicates how a person stands in relation to others in the group but does not tell how much
better or worse he is than another.
4. Paired Comparison Method. This is a modified form of man to man ranking. Herein, each
employee is compared with all the others in pairs one at a time. The number of times an
employee is judged better than the other determines his rank. Comparison is made on the basis of
overall performance. The number of comparisons to be made can be decided on the basis of the
following formula: N (N-1)/2 where N is the number of persons to be compared. This method is
illustrated below:

A B C D E Final Rank
A - - - + + 3
B + - - + + 2
C + + - + + 1
D - - - - + 4
E - - - - - 5

Herein, plus (+) sign implies the employee is considered better and minus (-) sign means worse
than the other employee in the pair. C gets the highest number of plus signs, therefore, his rank is
the highest and so on.

Paired comparison method is easier and simpler than the ranking method. But it is subjective
because appraisal is not based on specific job related performance. Secondly, it becomes very
cumbersome when the number of employees to be rated is large.

5. Forced Distribution Method. In this technique, the rater is required to distribute his ratings in
the form of a normal frequency distribution as shown in Fig. 14.3. The purpose is to eliminate
the rate’s bias of central tendency. Here also ranking technique is used. This method is highly
simple to understand and easy to apply. Secondly, it helps to reduce bias involved in straight
ranking and paired comparisons. But in this method employees are placed in a certain category
and not ranked within a category. The method is based on the questionable assumption that all
groups of employees have the same distribution of good and poor performances. The rater does
not explain why an employee is placed in a particular category. Specific job related performance
criteria is not used in ratings. The rater may resent the restriction placed on his freedom of
choice.
 Fig. 14.3. Forced Distribution Curve.

6. Graphic Rating Scales. It is a numerical scale indicating different degree of a particular trait.
The rate is given a printed form for each employee to be rated. The form contains several
characteristics relating to the personality and performance of employees. Intelligence, quality of
work, leadership skills, judgment, etc. are some of these characteristics. The rater records his
judgment on the employee’s trait on the scale. The numerical points given to an employee are
added up to find out his overall performance a standing in the group. Rating scales are of two
types. viz., continuous and discontinuous. In continuous scale, the degrees of a trait are measured
in numbers ranging from 0 to 5 whereas in a discrete or discontinuous scale appropriate boxed or
squares are used. Fig. 14.4 contains rating scales.
Poor Average Good Excellent
Quantity of Work
0 1 2 3 4 5
Quality of Work
Job Knowledge
Dependability
Attitude

Continuous Rating Scale

Attitude

No Interest Indifferent Interested Enthusiastic Very Enthusiastic

Discrete or Discontinuous Rating Scale

Fig. 14.4. Rating Scales

The rating scale method is widely used as it is easy to understand and use. It allows a
statistical tabulation of scores and a ready comparison of scores among the employees is
possible. It is economical to design and administer rating scales. The approach is multi-
dimensional as several significant dimensions of the job can be considered in evaluation. But the
rating is generally arbitrary and subjective because specific job related performance criteria are
not considered. Secondly, it is assumed that each trait is equally important for all jobs. Thirdly,
the descriptive words used in rating scales, i.e. ‘dependable’ may have different meanings to
different raters. There is an implication that high rating on one factor can compensate for low
score on other factor. Fourthly, the method imposes a heavy burden on the rater. He has to
evaluate report performance on several factors each having five degrees. In practice, ratings tend
to cluster on the high side. A supervisor often tends to rate his subordinates high to avoid
criticism from them. To minimise this bias, the rater may be asked to give reasons to justify his
ratings.

7. Checklist Method. A checklist is a list of statements that describe the characteristics and
performance of employees on the job. The rater checks to indicate if the behavior of an employee
is positive or negative to each statement. The performance of an employee is rated on the basis of
number of positive checks. There are three types of checklists that can be used: (a) Simple
checklist (Table 14.3) wherein equal importance is given to each statement, (b) Weighted
checklist (Fig.14.4) in which weights are assigned to different statements to indicate their
relative importance, and (c) Forced choice checklist (Fig.14.3) wherein five statements are given
for each trait, two most descriptive statements, two least descriptive statements and one neutral
statement. The rate of required to check one statement each from the most descriptive and least
descriptive ones. The aim is to minimise the rater’s personal bias.

Table 14.3 Simple Checklist

1 Is the employee regular on job Yes/No

2 Is the employee respected by his subordinates Yes/No
3 Is the employee always willing to help his peers Yes/No
4 Does the employee follow instructions properly Yes/No
5 Does the employee keep the equipment in order Yes/No

Table 14.4 Forced Choice Block

Regularity on the Job Most Least

(a) Always regular √
(b) Informs in advance for absence/delay √
(c) Never Regular √
(d) Remains absent √
(e) Neither regular nor irregular

Table 14.5 Weighted Checklist

Traits Weights Performance Ratings (Scale 1 to 5)

1 Attendance 0.5
2 Knowledge of the job 1.0
3 Quantity of work 1.0
4 Quality of work 1.5
5 Dependability 1.5
6 Interpersonal relations 2.0
7 Organisational loyalty 1.5
8 Leadership potential 1.5

Checklist method is a descriptive technique and it provides concrete examples of evaluation. But
it is a time-consuming and expensive method as a different checklist must be developed for each
job category. Secondly, it is difficult to assemble, analysis and weight several statements that
properly describe job related behavior and performance. The statements may be interpreted
differently by different rates. The rater may not know which statement contributes most to
successful performance. Trained raters are required. But they must resist the restrictions imposed
on them under the forced choice method.

8. Critical Incidents Method. In this method, the supervisor keeps a written record of critical
(either good or bad) events and how different employees behaved during such events. The rating
of an employee depends on his positive/negative behaviours during these events. These critical
incidents are identified after through study of the job and discussion with the staff. For example,
a fire, a sudden breakdown of machinery, a serious accident, etc. may be identified as critical
incidents for the working of a factory. Table 14.6 illustrates the behavior of five workers during
machine breakdown.

Table 14.6 Critical Incident Score

Worker Reaction Score

A Informed the supervisor immediately 5
B Became anxious of loss of output 4
C Tried to repair the machine 3
D Complained of poor maintenance 2
E Was happy to get forced rest 1

Critical incidents method helps to avoid vague impressions and general remarks as the rating is
based on actual records of behavior/performance. The feedback from actual events can be
discussed with the employee to allow improvements. The rater can fully defend his ratings on the
basis of his record. But this method suffers from several problems. First, it is very time
consuming and cumbersome for the superior to maintain a written record for each employee
during every major event. Secondly, quoting incidents after considerable time lapse may evoke
negative emotions from employees. Thirdly, subjective judgment of supervisor is involved in
deciding critical incidents and ‘desirable’ response to an event. Fourthly, the supervisor may
commit errors in recording behaviours of different employees during a short duration event.
Fifthly, critical incidents occur infrequently and therefore, a continuous record of performance
might not be available. Lastly, the employees are likely to become concerned with what the
supervisor records rather than with daily job routine.

9. Group Appraisal Method. Under this method, a group of evaluators assesses employees.
This groups consists of the immediate supervisor of the employee, other supervisors having close
contact with the employee’s work, head of the department and a personnel expert. The group
determines the standards of performance for the job, measures actual performance of an
employee, analyses the causes of poor performance and offer suggestions for improvements in
future. The advantage of this method is that it is simple yet more thorough. Due to multiple
evaluators personal bias is minimised. But it is a very time-consuming process.
10. Field Review Method. In this method, a training officer from the human resource
department interviews line supervisors to evaluate their respective subordinates. The interviewer
prepares in advance the questions to be asked. By answering these questions a supervisor give
his opinions about the level of performance of his subordinate, the subordinate’s work progress,
his strengths and weaknesses, promotion potential, etc. The evaluator takes detailed notes of the
answer which are then approved by the concerned supervisor. These are then placed in the
employee’s personal service file.

This system relieves the supervisor of the need for filling in appraisal forms. The
supervisor’s personal bias is reduced due to the active involvement of the human resource
officer. The ratings are usually classified into three categories, i.e. outstanding, satisfactory and
unsatisfactory. This is, however, a time-consuming method. The success of this method depends
upon the competence and sincerity of the inverviwer.

The traditional methods given above all focus more on the traits of an employee than on
his job performance. In the absence of predecided performance criteria or standards, the personal
bias or subjectivity of the evaluator affects the ratings.

One study of appraisal in General Electric Co., USA revealed that the traditional
approach to performance appraisal caused the following responses:

(a) The very nature of the appraisal system led top criticism.
(b) Criticism exercised a negative impact on goal attainment.
(c) Criticism increased antagonism and defensiveness among employees resulting in
inferior performance.
(d) Praise had little effect one way or the other.

The traditional systems of appraisal are based on judgment role of the supervisor.

In order to overcome these weaknesses, some new techniques of performance appraisal have
been developed. These techniques are described below:

11. Assessment Centre Method. An assessment centre is a group of employees drawn from
different work units. These employees work together on an assignment similar to the one they
would be handling when promoted. Evaluators observe and rank the performance of all the
participants. Experienced managers with proven ability serve as evaluators. This group evaluates
all employees both individually and collectively by using simulation techniques like role playing,
business games and in basket exercises. Employees are evaluated on job-related characteristics
considered important for job success. The evaluators observe and evaluate employees as they
perform jobs. Assessment are done generally to determine employee potential for promotion.
The evaluators prepare a summary report and feedback is administrated on a face-to-face basis to
the employees who ask for it.
 An assessment centre generally measures interpersonal skills, communicating ability,
ability to plan and organise, etc. Personal interviews and projective tests are used to assess work
motivation, career-orientation and dependence on others. Paper and pencil tests are used to
measure intellectual capacity.

Assessment centres are not only a method of appraisal but help to determine training and
development needs of employees and provide data for human resource planning. This method is
also used to select students for entry level positions. All candidates get an equal opportunity to
prove their merit. They are evaluated by a team of trained assessors under similar conditions.
Rater’s personal bias is reduced.

Modern Methods of Performance Appraisal

11. Assessment Centre Method. An assessment centre is a group of employees drawn from
different work units. These employees work together on an assignment similar to the one they
would be handling when promoted. Evaluators observe and rank the performance of all the
participants. Experienced managers with proven ability serve as evaluators. This group evaluates
all employees both individually and collectively by using simulation techniques like role playing,
business games and in basket exercises. Employees are evaluated on job-related characteristics
considered important for job success. The evaluators observe and evaluate employees as they
perform jobs. Assessment are done generally to determine employee potential for promotion.
The evaluators prepare a summary report and feedback is administrated on a face-to-face basis to
the employees who ask for it.

An assessment centre generally measures interpersonal skills, communicating ability,

ability to plan and organise, etc. Personal interviews and projective tests are used to assess work
motivation, career-orientation and dependence on others. Paper and pencil tests are used to
measure intellectual capacity.

Assessment centres are not only a method of appraisal but help to determine training and
development needs of employees and provide data for human resource planning. This method is
also used to select students for entry level positions. All candidates get an equal opportunity to
prove their merit. They are evaluated by a team of trained assessors under similar conditions.
Rater’s personal bias is reduced.

But this is a time consuming and expensive method. Further the candidates who receive a
negative report from the assessment centre may feel demoralised. In order to make this method
effective, it is necessary to state the goals clearly, to obtain top management support, to conduct
join analysis, to train and assessors, and to periodically evaluate and revise the assessment
programme.

12. Human Resource Accounting Method. Human resources are a valuable asset of any
organisation. This asset can be valued in terms of money. When competent, and well-trained
employees leave an oganisation the human asset is decreased and vice versa. Under this method,
performance is judged in terms of costs and contributions of employees. Costs of human
resources consist of expenditure on human resource planning, recruitment, selection, indication,
training, compensation, etc. Contribution of human resources is the money value of labour
productivity or value added by human resources. Difference between cost and contribution will
reflect the performance of employees.

13. Behaviourally Anchored Rating Scales (BARS). This method combines graphic rating
scales with critical incidents methods. BARS are descriptions of various degrees of behavior
relating to specific performance dimensions. Critical areas of job performance and the most
effective behavior for getting results are determined in advance. The rater records the observable
job behavior of an employee and compares these observations with BARS. In this way, an
employee’s actual job behavior is judged against the desired behavior. The steps involved in
constructing BARS are as follows:

(a) Identify Critical Incidents. Persons with knowledge of the job to be appraised (job
holders/supervisors) describe specific examples of both effective and ineffective job behaviours.

(b) Select Performance Dimensions. The persons then cluster the behavioural incidents into a
smaller set (usually five or ten) of performance dimensions.

(c) Retranslate the Incidents. Another group of knowledge persons assign each incident to the
dimension that it best describes. Incidents for which there is less than 75 per cent agreement with
the first group are not retranslated.

(d) Assign Scales to Incidents. The second group rates each incident on a seven or nine point
scale. Ratting is done on the basis of how well the behavior described in the incident represents
performance on the appropriate dimensions. Means (averages) and standard deviations are then
calculated for the scale values assigned to each incident. In incidents that have standard
deviations of 1.5 or less (on a seven point scale) are included in the final anchored scales.

(e) Develop Final Instrument. A subset of the incidents that meets both the retranslation and
standard deviation criteria is used as a behavioural anchor for the final performance dimensions.
A final BARS instrument typically comprises a series of vertical scales (one scale per dimension)
that are endorsed by the included incidents. Each incident is positioned on the scale according to
its mean value.

BARS method has several advantages. First, the ratings are likely to be accurate because
these are done by experts. Secondly, the method is more reliable and valid as it is job specific
and identifies observable and measureable behaviour. The rater’s bias is reduced. Systematic
clustering of critical incidents helps in making the dimensions independent of one another.
Thirdly, ratings are likely to be more acceptable due to employee participation. Fourthly, the
method provides a basis for setting developmental goals for employees as it differentiates
between behavior, performance and results. Lastly, the use of critical incidents is useful in
providing feedback to the employee being rated.

BARS method, however, suffers from weaknesses. First, it is very time consuming and
expensive to develop BARS for every job. Second, behaviours used are more activity-oriented
than results-oriented. Several appraisal forms are required to accommodate different types of
jobs in an organisation. Despite its intuitive appeal this method is not necessarily superior to the
traditional methods of appraisal.

Fig. 14.5. Behaviourally Anchored Rating Scale

Source: Hammer, W.C. & Schmidt, K.F. (Eds) Contemporary Problems in Personnel, Chicago, 1977.

14. Appraisal by Results or MBO. The concept of management by objectives (MBO) was
developed by Peter Drucker in 1954. He called it management by objectives and self control.
Since then MBO has became an effective and operational technique of performance appraisal
and a powerful philosophy of managing. It is also known as Work Planning and Review or Goal
Setting Approach to appraisal.

Management by objectives has been defined as “a process whereby the superior and
subordinate managers of an organisation jointly identify its common goals, define each
individual’s major areas of responsibility in terms of results expected of him and use these
measures a guides for operating the unit and assessing the contributes of each of its members. In
other words, MBO involves appraisal of performance against clear, time bound and mutually
agreed job goals.

14.8 Performance Appraisal through MBO

The main steps involved in performance appraisal through MBO are as follows:

1. Set Organisational Goals. First of all, goals of the organisaton in key areas of performance
are laid down. These goals are defined in clear, précis and measurable terms. They should be
challenging yet attainable. A through analysis of internal environment (strengths and
weaknesses) and external environment (opportunities and threats) of the organisaton is made to
set these goals.

2. Defining Performance Targets. On the basis of organisational goals, performance standards

for each employee are defined. The responsibilities of an employee may be decided on the basis
of organisation charts and job descriptions. Every subordinate writes down his own performance
goals with are work-related and career-oriented. His manager also writes down the goals he
thinks the subordinate should strive for. The two then discuss them, reach an agreement and put
the agreed goals in writing. Thus, employees at all levels are actively involved in goal-setting.
Clear attainable goals help channel energies in the right direction and let the employee know the
basis on which he will be judged. The goals are periodically reviewed and revised to keep them
flexible and up-to-date.

The level of performance considered satisfactory to achieve the goal is defined. Measure
checkpoints are established to measure progress towards the goals. Action plans required to
achieve

Item Management by Objection

1 Nature of Goals
2 Evaluation Process
3 Role of Employer
(a) Clear and measurable
(b) Clear linkage between organizational goals and performance
targets for an employee.
(c) Goals/targets determined before the appraisal period begins.
(d) Checkpoints set up to measure progress.
(e) Focus on results to be achieved rather an on activities
(a) Periodic reviews of performance rather than only yearly
review.
(b)Focus of review on performance or results achieved rather
than on personal traits.
(a) An employee active participant in goal setting and
performance appraisal processes rather than a passive observer.

4 Nature of Control
5 Role of Evaluator
(b) Plays a key role in all job related decisions
(a) Focus on future rather than on past or present.
(b) Appraisal interview has a problem-solving approach.
(c)Frequent feedback for self-control
(a)Serves as a coach and counseller.
(b) Supportive rather than judgmental role
(c) Seeks development of an employee rather than findings faults.

the goals are also decided through mutual consultation among an employee and his superior.
Joint goal-setting and jont action planning are essential elements of appraisal through MBO.

3. Performance Review. Frequent performance review meetings between the manager and the
subordinate are held. Initially, monthly reviews may be used and then extended to quarterly
reviews. In the review meetings, progress is assessed, weaknesses and constraints are identified
and steps to be taken to improve performance are decided. Subordinates actively participate in
this process. This leads to self-control by the employee.

4. Feedback. After every performance review, feedback on performance is communicated to the

employee so that he can regulate and improve upon his own performance. On the basis of
performance review rewards are decided. New goals and performance targets are determined for
the next period.

14.8.1 Advantages of Goal Setting Approach

MBO is superior to other methods of performance appraisal. It offers the following benefits:

1. Ends-means Chain. MBO makes goals more explicit and focuses attention on key results
areas. Targets set at every level are integrated with those at the next higher level. This helps to
ensure that activity of every person is ultimately contributing towards organizational goals.

2. Role Charity. By providing clear targets of performance. MBO helps to avoid role ambiguity
and role conflict. Every individual understands his area of work and the role he is to play in the
organisation. Responsibility for results is clearly defined and there is no misunderstanding as to
performance goals.

3. Objective Appraisal. The targets developed in MBO provide an objective criteria for
evaluating performance. An employee knows in advance the results expected of him and the
basis on which his performance will be judged. Frequent performance review sessions help to
identify problems early and more clearly. After identifying deficiencies in performance,
individual self-improvement programmes can be undertaken. judgemental role of the superior is
avoided and subordinates are provided the opportunity for self-appraisal.
4. Motivation and Commitment. Active participation of subordinates in goal-setting and
performance reviews helps to satisfy ego and self-actualisation needs. Close linkage between
overall goals and individual goals leads to integration of individual with the organisation. Job
satisfaction and morale of employees tend to be higher.

5. Management Development. Continuous feedback and opportunities for self-control help to

develop the leadership potential of lower level executives. Support and counsel of the superiors
also foster career development. MBO is a problem-solving rather than a tell and sell approach.

6. Coordination. Harmony between objectives at different levels provides a sense of common

direction to all. Frequent interactions between the subordinates and superiors help to reduce
internal conflicts which arise when managers compete for scarce resources. It becomes easier to
initate and implement Organisational change.

14.8.2 Limitations of MBO

MBO suffers from the following drawbacks:

(i) Difficulty in Goal Setting. It is often difficult to set truly verifiable goals for all jobs.
Moreover, in the urge to specify goals in measurable terms, managers may ignore important
qualitative goals may over-ride long-term goals. Blue-collar workers are often unable to set their
job goals.

(ii) Problem of Participation. Traditional hierarchical structures and authoritative attitudes do

not allow active participation of subordinates in goal-setting. In practice, leadership style of
many managers may not be compatible with participative, goal-setting. Participation may lead to
a ‘tug of war’ wherein the subordinate tries to set lower targets whereas the superior insists on
higher targets.

(iii) Lack of Understanding. MBO often fails due to lack of knowledge about the philosophy
and process of MBO. Unknowledgeable persons overstress the structure rather than the
philosophy. Lack of top management support and hasty implementation also cause failure.
Failure to carefully monitor the system is also a problem.

(iv) Time-consuming and Expensive. MBO programme involves considerable time, energy and
expenditure. It is difficult to administer because continuous interaction between superior and the
subordinate is required. A manager may become so engrossed in performing assigned activities
that he looses sight of the goal. This is called ‘the active trap.’

(v) Inflexibility. MBO can be self-defeating if it fails to take into consideration the deeper
emotions of people. Rating of every individual on the basis of specific targets may make it
difficult to compare the ratings.
 MBO is no doubt superior to traditional methods of performance evaluation. But its
successful use requires several precautions. First, the support and commitment of top
management is essential. Secondly, training is required in interpersonal relations, participative,
decision-making, and other aspects. Thirdly, good job descriptions must be prepared for different
jobs to permit goal-setting by subordinates. Fourthly. Superiors must have trust in subordinates
to establish reasonable goals. Fifthly, the focus must be on solving-problems rather than on
criticising performance. Sixthly, the organisation structure and leadership style must be
compatible with participative management. Seventhly, regular feedback must be provided to
permit self-improvement.

The above conditions are more likely to be satisfied at higher levels. Therefore, goal
setting approach to appraisal is more useful for managerial, technical and supervisory personnel
than for blue collar workers.

14.9 The 360 Degree Appraisal Technique

Performance appraisal has come to occupy a pivotal place in human resource function.
The traditional merit rating which focused on personality traits was replaced by performance
appraisal with focus on work results. The concept of M30 transformed it into a participative
process. In order to make appraisal more objective, transparent and participative concepts such
as self-appraisal, peer appraisal, subordinate appraisal and appraisal by customers (both internal
and external) were introduced. These led ultimately to the introduction of 360o feedback system
in the United States.

360o system involves evaluation of a manager by everyone above, alongside and below
him. Structured questionnaires are used to collect responses about a manger from his bosses,
peers and subordinates. Several parameters relating to performance and behavior are used in the
questionnaire. Each manager is assessed by a minimum of fifteen colleagues, at least two of
them being his bosses, four of them peers, and six of them subordinates. The responses are
presented collectively to the assesses in the form of charts and graphs. Comments and
interpretations are presented later. Counseling sessions are arranged to solve the weaknesses
identified in the 360 degree assessment. Several corporations like General Electric, Reliance
Industries, Crompton Greaves, Godrej Soaps, Wipro, Infosys, Thermax, etc. are making use of
this technique.

Table 14.8: Evaluation of 360 Degree Appraisal

Advantages Disadvantages
1. Greater self-awareness of the top managers. It 1. The system may be utilised to
reveals strengths and weaknesses in their humiliate people.
managing styles.
2. The gap between self assessment and the views 2. Response from colleagues tends
of one’s colleagues is reduced. to be biased.
3. When peer group assessment is included 3. Linking rewards to findings can
teamwork thrives. prove to be unfair.
4. Facts about organisational culture and 4. Ignores performance in terms of
ambiance are brought to light. reaching goals.
5. Empowerment is facilitated. 5. Assessees may deny the truth of
negative feedback
6. Inflexible managers are forced to initiate self-
change.

The 360 degree assessment programme is effective when used from the top down. The fact that
the manager at the top has also been administrated the test convinces everyone and they are
unwilling to go through it as well.

Fig. 14.6. Four integral Components of 360 Degree Appraisal

As depicted in the Fig. 14.6, the employee is at the core of this system and on the 4 corners are
the different entities that play important role in the employee’s work namely his/her superior
subordinate(s) and the peers both from within the department as well as from other departments
in the orgnisation. Thus, the 360 degree appraisal has four integral components.

1. Self Appraisal
2. Superior’s Appraisal
3. Subordinate’s Appraisal
4. Peer Appraisal

Now let us look at each one of them as shown in Fig. 14.6 in detail.
 Self Appraisal. Self appraisal is a very important part of the 360 degree appraisal
because it gives the employee absolute freedom to objectively look at his/her strengths and areas
of development along with an opportunity to assess the performance. Surprisingly enough, in a
well-established system employees use the self appraisal very effectively and organisations also
find that employees often are their own strongest critiques and display very high degree of
objectivity.

Another important area is the self-renewal and development of the employee. In the
unprecedented competitive environment of the twenties it is imperative for every one to remain
employable for retraining employment and this onus is on the employee and not on the
organisation. Organisations will merely facilitate the effort by providing an environment
conductive for development. So identifying the futuristic areas of development keeping in mind
the fast pace of technological upgradation with induces obsolescence and adversely affects the
employability is an essential requirement.

In an appraisal environment employees can share their development areas with their
superiors based on the self appraisal data and together work out a development plan keeping in
mind the organisational realities like resources availability, time pressure, etc.

Self appraisal also provides the opportunity to the employee to express his/her career
moves for the future. However, this is only for gathering information and it is possible that given
the organisational constraints it may not be possible to provide the same career progression as
desired by the employee. Nevertheless, it is in the organisation’s interest to atleast know on a
first hand basis the aspirations of its employees rather than get caught off guard by sudden
resignation and then say. “But we never knew you wanted a promotion?” By then it is too late
and in any case offering a higher position to an employee who has resigned sets a very poor
example within the organisation and affects the employees morale adversely.

So, self-appraisal is a critical component of the overall appraisal system.

Superior’s Appraisal. This undoubtedly continues to be the heavy-weight component of

the appraisal system. In the 360 degree appraisal system, however, the focus is entirely different
from the traditional power wielding opportunity to “fix” the employee at the appraisal time, to
provide constructive feedback on employee’s performance in the review period, his development
areas (in the light of superior’s position in the oganisation he is in a position to provide valuable
inputs on the trends in the organisation and in the industry) to the goal setting in an inspiring way
that not only takes care of organisational objectives but also stretches the employee effort,
provides challenge and opportunity to be creative (rather then traditional “What about 10%
higher than last year”). Also it is the responsibility of the superior to ensure that employee set
goals not only in the area of business performance but also in the area are vital to the
organisation otherwise called corporate thrust areas and may include relationship management,
safety and quality development. If the working style of the employee is a concern areas and
needs improvement for enhancing effectiveness then goal may be set for “style of functioning”,
e.g., from short-term to long-term orientation, from ad-hoc to system development, etc.

Another very significant element of the superior’s appraisal is to put career aspirations of
the employee in proper perspective. On the one hand, superior must communicate to the
employee in clear way what the organisation plans for the employee. It has been observed in the
recent past that only when a star performer resigned he was told that the organisation had very
attractive career progression or overseas assignment or a new project head responsibility coming
his way but then it is too late. So do not remain confidential and go ahead and share with the
employee the way organisation looks at his/her future which is of-course not a binding
commitment but a reassurance nevertheless for the employee has entirely unrealistic aspirations
then also it is superior’s responsibility to share with the employee the realistic picture given
his/her strengths, development areas, experience, qualifications and the organisation’s ability to
provide growth.

So it is in this above mentioned way that the superior’s appraisal has a very significant
role to play rather than the “fixing” syndrome of the past.

Subordinate Appraisal. A distinctive feature of the 360 degree appraisal, this is not the
subordinate’s opportunity to get even with the boss and should be seen in a very positive way.
First of all, it is very clear expression from the organisation that it encourage openness and that
feedback is a two-way process. Secondly, it is a systemic recognition of the fact than an
employee’s subordinates do play a vital role in his own performance.

So the purpose of subordinate’s appraisal is to get first hand assessment of low the
subordinates perceive their superior to be in terms of style of functioning, etc. It is, however,
very critical to design the subordinate-appraisal or upward-appraisal as it is sometimes called, in
a proper way.

My own suggestion is that it should have scope for providing an opportunity to the
subordinates to give feedback to their superior on the kind of things they would like him/her to
continue doing (status quo), things they would like him/her to stop doing (areas for corrective
action), things they would like him/hr to start dong (areas for new initiatives).

Then it should have a section to assess subordinate’s perception of the superior’s ability
to:

(i) Delegate the work.

(ii) Motivate the people around
(iii) Communicate effectively
(iv) Build team
(v) Act as a role model for them.
 The last one, i.e. the ability to act as a role model for them is very significant because that
in a nutshell captures the overall effectiveness of an employee with his/her subordinates. Thus,
the subordinate appraisal plays a very important role in the 360 degree appraisal system.

Peer Appraisal. Another distinctive feature of the 360 degree appraisal is the peer
appraisal. It is significant because peers plays a critical role in the life of any employee in the
organisation. In any organisation it is rather easy for people to form smell groups and stick
together but then when you need people from other groups for your work you may not get the
requisite support thereby affecting your overall effectiveness.

First things about peer appraisal is to select the right peers for getting the appraisal done.
They must include peers both from within the department as well as from the other departments
which are directly connected with the working of employee’s department. The concept of
internal customers comes handy here. 3-5 internal customers should normally be chosen for peer
appraisal.

Peer appraisal must strive to get the feedback on employee’s working style and may
include ability to appreciate other people’s view an appreciating of:

(i) Other departments functioning sensitivity towards others.

(ii) Cooperation and collaboration
(iii) Ability to work as a team member

The list is of-course only suggestive and not exhaustive.

Thus, these four components complete the 360 degrees, each one representing 90 degrees
of the overall appraisal. Jargaon apart, 360 degree appraisal is a logical and systematic way of
looking at appraisals in the current context. A word of caution, however, is that because it is a
fad at the moment and others are talking about it, should not be the only reason for your
organisation to go for the 360 degree appraisal. The factors to keep in mind before attempting to
introduce 360 degree appraisal

Table 14.9: Performance Dimensions

Performance Subordinates Peers Supervisors Customers

Dimensions
Administrative √
Leadership √
Communication √ √
Inter-Personal √ √ √
Decision-making √ √
Technical √ √ √
Personal √ √ √
Motivation
Customer- √
Orientation
Source: Maximising the value of 360 Degree Feedback by Walter W. Tomow ct. al., Jossey Bass, London.

Maintenance: Employee Health and Safety, Employee

Welfare, Social Security
Employee Health and Safety

Health and safety of the employees is an important aspect of a company’s smooth and successful
functioning. It is a decisive factor in organizational effectiveness. It ensures an accident-free
industrial environment. Companies must attach the same importance towards achieving high
OH&S performance as they do to the other key objectives of their business activities. This is
because, proper attention to the safety and welfare of the employees can yield valuable returns to
a company by improving employee morale, reducing absenteeism and enhancing productivity,
minimizing potential of work-related injuries and illnesses and increasing the quality of
manufactured products and/ or rendered services.

The Constitution of India has also specified provisions for ensuring occupational health and
safety for workers in the form of three Articles i.e. 24, 39(e and f) and 42. The regulation of
labour and safety in mines and oil fields is under the Union list. While the welfare of labour
including conditions of work, provident funds, employers’ invalidity and old age pension and
maternity benefit are in the Concurrent list.

The Ministry of Labour, Government of India and Labour Departments of the States and Union
Territories are responsible for safety and health of workers. Directorate General of Mines
Safety (DGMS) and Directorate General Factory Advice Services & Labour Institutes
(DGFASLI) assist the Ministry in technical aspects of occupational safety and health in mines
and factories & ports sectors, respectively.

DGMS exercises preventive as well as educational influence over the mining industry. Its
mission is the reduction in risks of occupational diseases and casualty to persons employed in
mines, by drafting appropriate legislation and setting standards and through a variety of
promotional initiatives and awareness programmes. It undertakes inspection of mines,
investigation of all fatal accidents, grant of statutory permission, exemptions and relaxations in
respect of various mining operation, approval of mines safety equipment, appliances and
material, conduct examinations for grant of statutory competency certificate, safety promotional
incentives including organization of national awards and national safety conference, etc.

EMPLOYEE WELFARE

Welfare includes anything that is done for the comfort and improvement of employees and is
provided over and above the wages. Welfare helps in keeping the morale and motivation of the
employees high so as to retain the employees for longer duration. The welfare measures need not
to be in monetary terms only but in any kind/forms. Employee welfare includes monitoring of
 working conditions, creation of industrial harmony through infrastructure for health, industrial
relations and insurance against disease, accident and unemployment for the workers and their
families.

Labor welfare entails all those activities of employer which are directed towards providing the
employees with certain facilities and services in addition to wages or salaries.

Labor welfare has the following objectives

• To provide better life and health to the workers

• To make the workers happy and satisfied
• To relieve workers from industrial fatigue and to improve intellectual, cultural and material
conditions of living of the workers.

The basic features of labor welfare measures are as follows

• Labor welfare includes various facilities, services and amenities provided to workers for
improving their health, efficiency, economic betterment and social status.
• Welfare measures are in addition to regular wages and other economic benefits available to
workers due to legal provisions and collective bargaining
• Labor welfare schemes are flexible and ever-changing. New welfare measures are added to the
existing ones from time to time.
• Welfare measures may be introduced by the employers, government, employees or by any social
or charitable agency.
• The purpose of labor welfare is to bring about the development of the whole personality of the
workers to make a better workforce.

SOCIAL SECURITY

Social security is a dynamic concept which is considered in all advanced countries of the world
as an indispensable chapter of the national programme. With the development of the idea of the
welfare state, it has been considered to be most essential for the industrial workers, though it
includes all sections of the society.

Social security is that security which the society furnishes through appropriate organization
against certain risks or contingencies to which its members are exposed. These risks are
essentially contingencies against which the individual cannot afford by his small means and by
his ability or foresight alone.

As the name stands for the general well-being of the people it is the duty of the state to promote
social security which may provide the citizens with benefits designed to prevent or cure disease,
to support him when he is not able to earn and to restore him to gainful activity. To enjoy
security one must be confident that benefits will be available as and when required.
Industrial Relations- an overview
The term industrial relations explain the relationship between employees and management which
stem directly or indirectly from union-employer relationship. Industrial relations are the
relationships between employees and employers within the organizational settings.

The field of industrial relations looks at the relationship between management and workers,
particularly groups of workers represented by a union. Industrial relations are basically the
interactions between employers, employees and the government, and the institutions and
associations through which such interactions are mediated.

The term industrial relations have a broad as well as a narrow outlook. Originally, industrial
relations were broadly defined to include the relationships and interactions between employers
and employees. From this perspective, industrial relations cover all aspects of the employment
relationship, including human resource management, employee relations, and union-management
(or labor) relations.

Now its meaning has become more specific and restricted. Accordingly, industrial relations
pertains to the study and practice of collective bargaining, trade unionism, and labor-
management relations, while human resource management is a separate, largely distinct field that
deals with nonunion employment relationships and the personnel practices and policies of
employers.

History

Industrial relations got its roots in the industrial revolution and the spread of capitalism which
created the modern employment relationship by spawning free labour markets and large-scale
industrial organizations with thousands of wage workers. Kaufman, the Global Evolution of
Industrial Relations.

As both societies wrestled with these massive economic and social changes, labour problems
arose. Low wages, long working hours, monotonous and dangerous work, and abusive
supervisory practices led to high employee turnover, violent strikes, and the threat of social
instability and due to confluence of these event and ideas associated with rise of democratic
governments in the western world of the late nineteenth and twentieth centuries. It emerged from
both negative and positive impulses

The negative aspect, industrial relations was a reaction against deplorable working condition and
with unrepressed profit making and employee clout in the nine teeth century and twentieth
century capitalism and this led to the deplorable situations a conflict between capital and labour
and hardship for employee of that time

So we come to the conclusion that industrial relation was part of the reform wing. Industrial
relations arose from the conviction that cordial relationship between workers and employer could
be improvised through a combination of scientific discovery, education, legal reform.

Current situation
 Therefore, the maintenance of a good human relationship is a must in today business
environment, because in case of its absence the organizational structure may crumble.
Employees constitute the most valuable assets of any organization.

Any neglect of the important factor is likely to result in increased cost of production in term of
wage and salaries, benefits and services; working conditions, increased labour turn-over,
absenteeism, indiscipline and cleavages, strikes and transfer on the ground of discontent and the
like, besides deterioration in the quality of the goods produced and strained relations between
labour and management.

The Germans practice co-determination which gives workers of the organization representation
at the management of the companies these known as the law allows workers to elect
representatives (usually trade union representatives) for the supervisory board of directors.

Employee Grievance: Concept and Cause

Employees are human beings and they have certain expectation, assumptions, norms, values
and represent their culture. If the management or organization doesn’t respect their human
aspects they become dissatisfied and it may turn into grievance of employees. And type of
inhuman or injustice behavior can cause grievance of the employees. Apart from this, , lack of
appropriate motivation, unnecessary or unscientific cannot system and ineffective leadership can
also be the reason for grievance.

Employees may be grievant due to the existing policy, rule, work procedure or dissatisfaction
due to the certain behavior. If the level of dissatisfaction goes on increasing then they put the
written complaint about it to the management which is known as grievance. Grievances are
concerns, problems or complaints that employees raise to their employers. The Employment
Relations Acts gives all employees the rights to pursue a personal grievance if they have genuine
complaints.

Employee grievance has negative effect in the organization. If it is not solved in time, employees
may participate in the unfavorable activities like protesting, strike and lockout. This will reduce
the productivity of organization and the dispute or conflict between the management and
employee may arise. Capable, experienced and genuine employees may leave the organization.
Production cost may be genuine employees may leave the organization. Production cost may be
increased and the quality of products and services may deteriorate.

Causes of Employee Grievance

Employee’s grievance not only reduces the productivity of employees and organization, it may
put the existence of the organization in a danger situation. Therefore, the grievance has to be
solved as quickly as possible. For this, the reason has to be identified. The reason for grievance
may vary according to the situation. Some of the important reasons are as under:-

1. Unfair Management
 Employees want to be treated equally as other employees. But if management treats differently
to the identically performing employees then the grievance arises.

2. Poor Communication

Open and two way communication makes a healthy relationship and motivates the employees.
Policy, directives, information and other notices have to be received by each employee in a
similar way according to their job responsibility. One way and controlled communication makes
them feel inferior and this will create misunderstanding among the employees and the
management. This misunderstanding will slowly turns into the grievance. Thus, poor, controlled
and one way communication is also a reason for employee’s grievance.

3. Different interpretation

Different in the understanding and the interpretation between the employees and the management
also causes for grievance. If employees understand the policy, rules and terms and conditions,
directions and guidelines determined by the management differently then they become negative
towards the management and whole organization. Organization with ineffective communication
has high chance for grievance.

4. Personality traits

Some employees have habit of being grievant even in minor and small cases. They needle or
point out other employees even in their minor mistakes. This will create grievance to the
employee himself/herself and other employees as well. Therefore, a personality trait is one of the
reasons for the grievance.

5. Culture of Organization

In some cases, the wrong culture of organization creates grievance in the employees. Bad culture
adversely affects the organizational environment and it dissatisfies the employees. This
dissatisfaction grows on increasing into the grievance.

6. Weak leadership

Leader must be present as a guardian of all employees. If the leader is weak, then employee’s
enthusiasm may go down and employees do not follow and ignore the leaders. Serious in-
disciplinary activities may be carried out in the organization. This will increase the employee
grievance.

7. Personality clash

Sometimes, some employees may have personality clash with the colleagues, management and
other people’s thought, concept and work style. They may take it as a challenge when their idea
is not accepted and a feeling of revenge may take place. Feeling of ego may create anger,
miserable or dishearten to an employee that will create grievance among the employees.
 Grievance: Handling, and Redressal
Settlement Machinery

A grievance is any dissatisfaction or feeling of injustice having connection with one’s employment situation which is
brought to the attention of management. Speaking broadly, a grievance is any dissatisfaction that adversely affects
organizational relations and productivity. To understand what a grievance is, it is necessary to distinguish between
dissatisfaction, complaint, and grievance.

1. Dissatisfaction is anything that disturbs an employee, whether or not the unrest is expressed in words.
2. Complaint is a spoken or written dissatisfaction brought to the attention of the supervisor or the shop steward.
3. Grievance is a complaint that has been formally presented to a management representative or to a union official.

According to Michael Jucious, ‘grievance is any discontent or dissatisfaction whether expressed or not, whether valid
or not, arising out of anything connected with the company which an employee thinks, believes or even feels to be
unfair, unjust or inequitable’.

In short, grievance is a state of dissatisfaction, expressed or unexpressed, written or unwritten, justified or unjustified,
having connection with employment situation.

FEATURES OF GRIEVANCE

1. A grievance refers to any form of discontent or dissatisfaction with any aspect of the organization.
2. The dissatisfaction must arise out of employment and not due to personal or family problems.
3. The discontent can arise out of real or imaginary reasons. When employees feel that injustice has been done to
them, they have a grievance. The reason for such a feeling may be valid or invalid, legitimate or irrational, justifiable
or ridiculous.
4. The discontent may be voiced or unvoiced, but it must find expression in some form. However, discontent per se is
not a grievance. Initially, the employee may complain orally or in writing. If this is not looked into promptly, the
employee feels a sense of lack of justice. Now, the discontent grows and takes the shape of a grievance.
5. Broadly speaking, thus, a grievance is traceable to be perceived as non-fulfillment of one’s expectations from the
organization.

CAUSES OF GRIEVANCES

1. Economic

Employees may demand for individual wage adjustments. They may feel that they are paid less when compared to
others. For example, late bonus, payments, adjustments to overtime pay, perceived inequalities in treatment, claims
for equal pay, and appeals against performance- related pay awards.

2. Work environment

It may be undesirable or unsatisfactory conditions of work. For example, light, space, heat, or poor physical
conditions of workplace, defective tools and equipment, poor quality of material, unfair rules, and lack of recognition.

3. Supervision

It may be objections to the general methods of supervision related to the attitudes of the supervisor towards the
employee such as perceived notions of bias, favouritism, nepotism, caste affiliations and regional feelings.

4. Organizational change
 Any change in the organizational policies can result in grievances. For example, the implementation of revised
company policies or new working practices.

5. Employee relations

Employees are unable to adjust with their colleagues, suffer from feelings of neglect and victimization and become an
object of ridicule and humiliation, or other inter- employee disputes.

6. Miscellaneous

These may be issues relating to certain violations in respect of promotions, safety methods, transfer, disciplinary
rules, fines, granting leaves, medical facilities, etc.

REDRESSAL SETTLEMENT MACHINERY

The three methods for settlement of industrial disputes are as follows:

1. Conciliation
2. Arbitration
3. Adjudication.

Failure of the employees and the employers to sort out their differences bilaterally leads to the emergence of
industrial disputes. The Industrial Disputes Act, 1947 provides legalistic machinery for settlement of such disputes by
involving the interference of a third party.

1. Conciliation

In simple sense, conciliation means reconciliation of differences between persons. Conciliation refers to the process
by which representatives of workers and employers are brought together before a third party with a view to
persuading them to arrive at an agreement by mutual discussion between them. The alternative name which is used
for conciliation is mediation. The third party may be one individual or a group of people.

Board of Conciliation

In case the conciliation officer fails to resolve the dispute between the disputants, under Section 5 of the Industrial
Disputes Act, 1947, the appropriate government can appoint a Board of Conciliation. Thus, the Board of Conciliation
is not a permanent institution like conciliation officer. It is an adhoc body consisting of a chairman and two or four
other members nominated in equal numbers by the parties to the dispute.

The Board enjoys the powers of civil court. The Board admits disputes only referred to it by the government. It follows
the same conciliation proceedings as is followed by the conciliation officer. The Board is expected to give its
judgment within two months of the date on which the dispute was referred to it.

In India, appointment of the Board of Conciliation is rare for the settlement of disputes. In practice, settling disputes
through a conciliation officer is more common and flexible.

2. Arbitration

Arbitration is a process in which the conflicting parties agree to refer their dispute to a neutral third party known as
‘Arbitrator’. Arbitration differs from conciliation in the sense that in arbitration the arbitrator gives his judgment on a
dispute while in conciliation, the conciliator disputing parties to reach at a decision.

The arbitrator does not enjoy any judicial powers. The arbitrator listens to the view points of the conflicting parties and
then gives his decision which is binding on all the parties. The judgment on the dispute is sent to the government.
The government publishes the judgment within 30 days of its submission and the same becomes enforceable after 30
days of its publication. In India, there are two types of arbitration: Voluntary and Compulsory.
 Voluntary Arbitration

In voluntary arbitration both the conflicting parties appoint a neutral third party as arbitrator. The arbitrator acts only
when the dispute is referred to him/her. With a view to promote voluntary arbitration, the Government of India has
constituted a tripartite National Arbitration Promotion Board in July 1987, consisting of representatives of employees
(trade employers and the Government. However, the voluntary arbitration could not be successful because the
judgments given by it are not binding on the disputants. Yes, moral binding is exception to it.

Compulsory Arbitration

In compulsory arbitration, the government can force the disputing parties to go for compulsory arbitration. In other
form, both the disputing parties can request the government to refer their dispute for arbitration. The judgment given
by the arbitrator is binding on the parties of dispute.

3. Adjudication

The ultimate legal remedy for the settlement of an unresolved dispute is its reference to adjudication by the
government. The government can refer the dispute to adjudication with or without the consent of the disputing parties.
When the dispute is referred to adjudication with the consent of the disputing parties, it is called ‘voluntary
adjudication.’ When the government herself refers the dispute to adjudication without consulting the concerned
parties, it is known as ‘compulsory adjudication.

Adjudication of industrial disputes

1. Labour Court
2. Industrial Tribunal
3. National Tribunal