Performance Appraisal With Casestudy Project Report

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INDEX SR.NO

TOPIC

PAGE NO

1.

MEASURING PERFORMANCE V/S ACTION

2-3

2.

PERFORMANCE APPRAISAL

4-5

3.

OBJECTIVES OF PERFORMANCE APPRAISAL

6-7

4.

PERFORMANCE APPRAISAL AND COMPETITIVE ADVANTAGE

8-11

5.

APPRAISAL PROCESS

12-29

6.

METHODS OF APPRAISAL

30-41

7.

MANAGEMENT BY BJECTIVES(MBO)

42-43

8.

LARSEN AND TOUBRO, HUMAN RESOURCE DEVELOPMENT— PERFORMANCE APPRAISAL SYSTEM

44--46

9.

ASSESSMENT CENTRES

47-49

10. 11. 12.

360-DEGREE FEEDBACK APPRAISE THE PERFORMANCE PERFORMANCE INTERVIEW

50 51 52

13.

GUIDELINES FOR EFFECTIVE APPRAISAL INTERVIEW

53

14.

USE OF APPRAISAL DATA

54

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EDWARD DEMING ON PERFORMANCE APPRAISAL

55

15. 16.

CHALLENGES OF PERFORMANCE APPRAISAL

56-60

17.

PIRAMYD MEGASTORE - STORY

61-62

OUTLINE 18. 19.

HR VISION OF PIRAMYD MEGASTORE PERFORMANCE APPRAISAL METHODS USED AT PIRAMYD

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63-64 65-70

MEASURING PERFORMANCE V/S ACTION Come appraisal time and one of the most debated aspects of completing the fair-andsquare appraisal revolves around what is 'measured' and what is 'achieved'. And the fable of the Bees and the Bee Keepers is a very popular paradigm that often gets quoted at such times. It goes thus:

The Story: Once upon a time there were two beekeepers that each had a beehive. The beekeepers worked for a company called Bees, Inc. The company's customers loved its honey and demand for the product was increasing. So Bees, Inc. assigned each beekeeper a goal for increased honey production. The beekeepers had different ideas about how to meet their goal and designed different approaches to improve the performance of their hives. The first beekeeper established a bee performance management approach that measured the number of flowers each bee visited. At considerable cost to the beekeeper, an extensive measurement system was created to count the flowers each bee visited. He also provided feedback to each bee at mid-season on his individual performance. He also created special awards for the bees who visited the most number of flowers. However, the bees were never told about the hive's goal to produce more honey so that the company could increase honey sales. The second beekeeper also established a bee performance management approach but this approach communicated to each bee the goal of the hive for increased honey production. The beekeeper and his bees measured two aspects of their performance the amount of nectar each bee brought back to the hive and the amount of honey the hive produced. The performance of each bee and the hive's overall performance were charted and posted on the hive's bulletin board for all the bees to see. The beekeeper created a few awards for the bees that gathered the most nectar. But he also established a hive incentive program that rewarded each bee in the hive based on the hive's overall honey production the more honey produced, the more recognition each bee would receive. At the end of the season, the beekeepers evaluated their approaches. The first beekeeper found that his hive had indeed increased the number of flowers visited ,but the amount of honey produced by the hive had dropped. The Queen Bee reported that because the bees were so busy trying to visit as many flowers as possible, they limited the -4-

amount of nectar they would carry so they could fly faster. Also, since only the top performers would be recognized, the bees felt they were competing against each other for awards. As a result, they would not share valuable information with each other that could have helped improve the performance of all the bees (like the location of the flower filled fields they'd spotted on the way back to the hive). As the beekeeper handed out the awards to individual bees, unhappy buzzing was heard in the background. After all was said and done, one of the high performing bees told the beekeeper that if he had known that the real goal was to make more honey, he would have worked totally differently. The second beekeeper, however, had very different results. Because each bee in his hive was focused on the hive's goal of producing more honey. This Bess had concentrated their efforts on gathering more nectar in order to produce more honey than ever before. The bees worked together to determine the highest nectar yielding flowers and to create quicker processes for depositing the nectar they had gathered. They also worked together to help increase the amount of nectar gathered by the poorer performers. Tile Queen Bee of this hive reported that the poor performers either improved their performance or transferred to hive No.1, because the hive had reached its goal. The beekeeper rewarded each bee his portion of the hive incentive. The keeper was also surprised to hear a loud, happy buzz and a jubilant flapping of wings as he rewarded the individual highperforming bees with special recognition. Should you measure performance or mere activities of employees? is the one who does silent work but does not show of himself/herself or the one who puts up a show but hardly performs to be recognized and rewarded? This and other related questions are answered in this chapter.

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PERFORMANCE APPRAISAL An organization’s goals can be achieved only when people put in their best efforts. How to ascertain whether an employee has shown his or her best performance on a given job? The answer is performance appraisal. Employee assessment is one of the fundamental jobs of HRM. But not an easy one though. This chapter is devoted to a detailed discussion of the nature and process of conducting performance appraisal.

Meaning and Definition In simple terms, performance appraisal may be understood as the assessment of an individual's performance in a systematic way, the performance being measured against such factors as job knowledge, quality and quantity of output, initiative, leadership abilities, supervision, dependability, co-operation, judgement, versatility, health, and the like. Assessment should not be confined to past performance alone. Potentials of the employee for future performance must also be assessed. A formal definition of performance appraisal is: It is the systematic evaluation of the individual with respect to his or her performance on the job and his or her potential for development. A more comprehensive definition is: Performance' appraisal is a formal structured system of measuring and evaluating an employee’s job related behaviors and outcomes to discover how and why the employee is presently performing on the job and how the employee can perform more effectively in the future so that the employee organization and society all benefit. The second definition includes employees’ behaviour as part of the assessment. Behaviour can be active or passive--do something or do nothing. Either way behaviour affects job results. The other terms used for performance appraisal arc: performance rating, employee assessment. Employees performance review, personnel appraisal, performance evaluation employee evaluation and (perhaps the oldest of the terms used) merit rating. In a formal sense, employee assessment is as old as, the concept of management and in an informal sense; it is probably as old as mankind. Nor performance appraisal is done in isolation. It is linked to job analysis as shown in Fig.

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Performance Standards

Job Analysis

Describes work personnel requirement of a particular job

and

Performance Appraisal

Translate job requirements I into levels of acceptable or I' unacceptable performance

Fig. Relationship of Performance Appraisal and Job Analysis

Describes the job-relevant strengths and weaknesses of each individual

Job analysis sets out requirements, which are translated into performance standards, which in turn from the basis for performance appraisal.

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OBJECTIVES OF PERFORMANCE APPRAISAL Data relating to performance assessment of employees arc recorded, stored. and used for seven purposes. The main purposes of employee assessment are: 1. To effect promotions based on competence and performance. 2. To confirm the services of probationary employees upon their completing the probationary period

satisfactorily.

3. To assess the training and development needs of employees. 4. To decide upon a pay raise where (as in the unorganized sector) regular pay scales have not been fixed. 5. To let the employees know where they stand insofar as their performance is concerned and to assist them with constructive criticism and guidance for the purpose of their development. 6. To improve communication. Performance appraisal provides a format for dialogue between the superior and the subordinate, and improves understanding of personal goals and concerns. This can also have the effect of increasing the trust between the rater and the ratee. 7. Finally, performance appraisal can be used to determine whether HR programmes such a selection, training, and transfers have been effective or not. Broadly, performance appraisal serves four objectives(i)

developmental uses,

(ii)

administrative uses/decisions,

(iii)

organizational maintenance/objectives, and

(iv)

documentation purposes

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Table below outlines these and specific uses more clearly:-

Multiple Purposes of Performance Assessment General Applications

Specific Purpose

Developmental Uses

Identification of individual needs Performance feedback Determining transfers and job assignments Identification of individual strengths ad development needs Salary Promotion

Administrative Uses/Decisions

Retention or termination Recognition of individual performance Lay-offs

Organizational Maintenance/ Objectives

Documentation

Identification of poor performers HR planning Determining organization training needs Evaluation of organizational goal achievement Information for goal identification Evaluation of HR systems Reinforcement of organizational development needs Criteria for validation research Documentation for HR decisions Helping to meet legal requirements

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PERFORMANCE APPRAISAL AND COMPETITIVE ADVANTAGE The objectives of performance appraisal, listed above, point out the purpose which such an exercise seeks to meet. What needs emphasis is that performance evaluation contributes to firm's competitive strength. Besides encouraging high levels of performance, the evaluation system helps identify employees with potential, reward performance equitably and determine employee's need for training. Specifically, performance appraisal helps an organization gain competitive edge in the following ways (see Fig below)

Strategy and Behavior

Improving Performance

Making correct decisions

Competitive Advantage

Values and Behaviour

Minimizing dissatisfaction and turnover

Ensuring Legal Compliance

Fig: How Performance Appraisal can contribute to Firm's Competitive Advantage?

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Improving Performance An effective appraisal system can contribute to competitive advantage by improving employee job performance in two ways-by directing employee behaviour towards organizational goals, as was done by the second beekeeper (see opening case), and by monitoring that behaviour to ensure that the goals are met.

Making Correct Decisions As stated above, appraisal is a critical input in making decisions on such issues as pay raise, promotion, transfer, training, discharges and completion of probationary periods. Right decision on each of these can contribute to competitive strength of an organization. If promotion, for example, is made on performance, the promotee feels motivated to enhance his or her performance.

Ensuring Legal Compliance Promotions made on factors other than performance might land up a firm in a legal battle, thus diverting its focus on non-productive areas, as it happened to Williamson Magar. Organizations can minimize costly performance-related litigation by using appraisal systems that give fair and accurate ratings.

Minimizing Job Dissatisfaction and Turnover Employees tend to become emotional and frustrated if they perceive that the ratings they get are unfair and inaccurate. Such employees find that the efforts they had put in became futile and obviously get de-motivated. Dissatisfaction in the job sets in and one of the outcomes of job dissatisfaction is increased turnover. Fair and accurate appraisal results in high motivation and increased job satisfaction. An organization having satisfied and motivated employees will have an edge over its competitors.

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Consistency between Organizational Strategy and Behaviour An organization needs a strategy consistent with the behaviour of its employees if it were to realize its goals. A truism of organizational life is that people engage themselves in behaviours that they perceive will be rewarded. As employees want to be rewarded, they tend to occupy themselves more with those activities on which the organization emphasizes. For example, if the focus is on service, employees will behave in ways that will help them in gaining rewards associated with service delivery. If the focus is on cost control, employees will seek to control cost and thus be recongnised and rewarded. If the focus is on rewarding productivity, employees will strive for productivity. The performance appraisal becomes not only a means of knowing if the employees' behaviour is consistent with the overall strategic focus, but also a way of bringing to the fore any negative consequence of the strategy- behaviour fit For example, a single point productivity focus may include potential negative consequences such as decreased quality and co-operations. Thus, the performance appraisal system is an important organizational mechanism to elicit feedback on the consistency of the strategy-behaviour link.

Organizational Strategy and Performance Appraisal The performance appraisal system serves many organizational objectives and goals. Besides encouraging high level of performance, the evaluation system is useful in identifying employees with potential, rewarding performance equitably. And determining employees' needs for development. These are all the activities that should support the organization’s strategic orientation. Although these activities are clearly instrumental in achieving corporate plans and long-term growth, typical appraisal systems in most organizations have been focused on short-term goals. From the strategic management point of view, organizations can be grouped into three categories defenders, prospectors and analyzers. Performance appraisal has definite roles in all the three strategies. Typically, defenders have a narrow and relatively stable product-market domain. Because of this narrow focus, these organizations seldom need to make major adjustments in their technology. Structure or methods of operations. They devote primary

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attention to improving the efficiency of their existing operations. Because of the emphasis 011building skills within the organization, successful defenders use performance appraisal for identifying training needs. Performance appraisal is usually more behaviour oriented. Organizations with a prospector strategy continuously search for different product and market opportunities. In addition, these organizations regularly experiment with potential responses to new and emerging environmental trends. Prospectors are often the harbingers of change. Because of the emphasis on skills identification and acquisition of human resources from external sources, as opposed to skills building with the organization, prospectors often use the performance appraisal as a means of identifying staffing needs. The emphasis is on results. Finally, the focus is on division and corporate performance evaluation as they compare with other companies during the same evaluation period. Organizations with an analyzer strategy operate in two types of product-.market domains. One domain is stable while the other is changing. In their more innovative areas, managers watch their competitors closely and rapidly adopt the ideas that appear promising. In general, analyzers use cost effective technologies for stable products and project or matrix technologies for new product. Analyzers tend to emphasize both skill building and skill i1cquisilion and employ extensive training programmes. Thus, these organizations attempt to identify both training as well as staffing needs. The appraisal systems are considered at the individual, group and divisional levels. Finally, successful analyzers have a tendency to examine current performance with past performance within the organization. Cross-sectional comparisons (comparisons among 'companies) may also occur. Whatever the category, a performance appraisal system has strategic importance to a firm in three ways: 1. Feedback mechanism, 2. Consistency between organizational strategy and job behaviour, and 3. Consistency between organizational values and job behaviour.

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APPRAISAL PROCESS Figure below outlines the performance- appraisal process. Each step in the process is crucial and is arranged logically. The process as shown in Fig. Below is somewhat idea1ised. Many organizations make every effort to approximate the ideal process, resulting in first-rate appraisal systems. Unfortunately, many others fail to consider one or more of the steps and, therefore, have less-effective appraisal system. Objectives of Appraisal Establish job Expectation Design an appraisal performance Performance interview Use appraisal data for appropriate purposes 1. Objectives of Appraisal Objectives of appraisal as stated above include effecting promotions and transfers, assessing training needs, awarding pay increases, and the like. The emphasis in all these is to correct problems. Theses objectives are appropriate as long as the approach in appraisal is individual. Appraisal in future, would assume systems orientations. In the systems approach, the objectives of appraisal stretch beyond the traditional ones. In the systems approach, appraisal aims at improving the performance, instead of merely assessing it. Towards this end, an appraisal system seeks to evaluate opportunity factors. Opportunity factors include the physical environment such as noise, ventilation and lightings, available resources such as human and computer assistance and social

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processes such as leadership effectiveness. These opportunity variables are more important than individual abilities in determining work performance. In the systems approach the emphasis is not on individual assessment and rewards or punishments. But it is on how work the work system affects an individual’s. In the systems approach the emphasis is not on individual assessment and rewards or punishments. But it is on how the work systems affect an individual’s performance. In order to use a systems approach, managers must learn to appreciate the impact that systems levels factors have on individual performance and subordinates must adjust to lack of competition among individuals. Thus, if a systems approach is going to be successful, the employee must believe that by working towards shared goals, everyone will benefit. Not that the role of the individual is undermined. The individual is responsible for a large percentage of his or her work performance. Employees should not be encouraged to seek organizational reasons for his failures. The identifications of systems obstacles should be used to facilitate development and motivation, not as an excuse to poor performance. The following table displays some of the differences between the traditional approach and the systems-oriented one. PERFORMANCE APPRAISAL SYSTEMS

Guiding value Primary roles

Traditional Attribution to individual Control, documentation

Leadership practices Appraisal frequency Degree of formality Reward practices

Directional, evaluative Occasional High Individual orientation

Systems Attribution to systems Development, problem solving Facilitative, coaching Frequent Low Group orientation

2. Establish Job Expectations The second step in the appraisal process is to establish job expectations. This includes informing the employee what is expected of him or her on the job. Normally, a discussion is held with his or her superior to review the major duties contained in the job place of formal performance evaluation.

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3. Design Appraisal Programme Designing an appraisal programme poses several questions which we need to answers. They are: 1. Formals versus informal appraisal 2. Whose performance is to be assessed? 3. Who are the raters? 4. What problems are encountered? 5. How to solve the problems? 6. What should be evaluated? 7. When to evaluate? 8. What methods of appraisal are to be used?

What methods? Formal V/s Informal

When to evaluate?

Whose performan ce

Appraisal design

What to evaluate?

What are the raters?

What problems How to solve?

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1. Whose performance should be rated?

To the question as to whose

performance should be rated, the answer is obvious—employees, is it individual or teams? Specifically the rate may be defined as the individual, work group, division, or organizations. It is also possible to define the rate at multiple levels. For example, under some condition, it may be desirable to appraise performance both at work-group level for merit-pay increases and at the individual level to assess training needs. Two conditions necessitate a group level appraisal—group cohesiveness and difficulty in identifying individual performance. Description. Individual should not be expected to begin the job until they understand what is expected out of them. 2. Formal V/s informal appraisal: - the first step in designing an appraisal programme is to decide whether the appraisal should be formal or informal. Formal appraisal usually occurs at specified time periods—once or twice year. Formal appraisals are most often required by the organizations for the purposes of employee evaluation. Informal performance appraisal can occur whenever the superior feels the need for communication. For example, if the employee has been consistently meeting or executing standards, an informal appraisal may be in order to simply recognize this fact. Discussions can take place anywhere in the organizations, ranging from the managers office to the canteen. But care needs to be taken to ensure that the discussion is held in private. Many organizations encourage a mixture of both formal and informal appraisal. The formal appraisal is most often used as primary evaluation. However, the informal appraisal is very helpful for more performance feedback. Informal appraisal should not take the Group cohesiveness refers to shared feeling among work-team members. There is cooperation

and

clear

understanding

to

accomplish

tasks which

are

interdependent. Any attempt to assess individual performance shall undermine group cohesiveness and tend to promote individualistic or even competitive orientation. The difficulty in identifying individual contribution is also important to consider. In some cases, interdependent of tasks is so complete that it is difficult to identify who has contributed what. There is no other choice but to

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view that task as a team effort. But the point to be remembered is that the performance of all employees must be rated. All must become raters.

3. Who are Raters? Raters can be immediate supervisors, specialist from the HR department, subordinates. Peers, committees, clients, self appraisal, or a combination of several. a. Immediate supervisor is the fit candidate to appraise the performance of his or her subordinate. There are 3 reasons in support of this choice. No one is familiar with the subordinate’s performance than his or her superior. Another reason is that the superior has the responsibility of managing a particular unit. When the tasks of evaluating a subordinate is given to another person, the superior authority may be undermined seriously. Finally, training and development of subordinate is am portent element in every mangers job. Since appraisal programme are often clearly linked to training and development, the immediate superior may be the legal choice to conduct the performance evaluation. b. Subordinate can assess the performance of their superiors. The use of this choice may be useful in assessing an employee ability to communicate, delegate work, allocate resources, disseminate information, resolve intrapersonal conflict, and deal with employees on a fair basis. But the problem with the subordinate evaluation is that supervisors tend to become popular, not by effective leadership, but by mere gimmicks. c. Peers are in better position to evaluate certain facts of job performance which the subordinates or supervisors cannot do. Such facts include contribution skills, reliability and initiative. Closeness of the working relationships and the amount of personal contacts place peers in a better position to make accurate assessments. Unfortunately friendship or animosity may result in distortion of evaluation. Further when reward

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allocation is based on peer evaluation, series conflicts among co-workers may develop. Finally join together to rate each other high. d. Although clients are seldom used for rating employee performance, nothing prevents an organization from using this source. Clients may be members within the organization who have direct contact with the rate and make use of an output (goods or services) this employee provides. Interest, courtesy, dependability and innovativeness are but a few of the qualities for which clients can offer rating information. Clients, external to the organization can also offer similar kinds of information. Where appraisal is made by the superior, peers, subordinates and clients, it is called the 360-degree system of appraisal. First developed at General Electric, US in 1992 the system has become popular in our country too. GE (India). Reliance Industries, Crompton Greaves, Godrej Soaps, Wipro, Infosys, Thermax and Thomas Cook are using the method with greater benefits. The Arthur Anderson Survey 1997 reveals that 20% of the organization use 360 degree method. In the 360 degree method, besides assessing performance. Other attributes of the assess—talents, behavioral quirks, values, ethical standards, tempers and loyalty are evaluated by the people who are best placed to do it. Many employees use rating committees to evaluate employees. These committees are often composed of the employee’s immediate supervisor and three or four other supervisors who come in contact with the employee. This choice is welcome when an employee in the course of his or her job performs a variety of tasks in different environment. For e.g. 1supervisor may work with the employee when technical aspects of a job are being performed and another supervisor may deal with the same employee in situations where communications skills are crucial. There are several benefits in using multiple raters. First there may be objectivity in rating as more than rater is involved in the assessment. Furthermore where there are differences in the rater ought ratings they usually stem from the fact that raters at different level in the organization often observe different facets - 19 -

of an employee performance-the appraisal to reflect these differences. The disadvantages of committee rating are that it diminishes the role of the immediate supervisor in the area of training and development. e. In self –appraisal employee himself or herself evaluates his or her own performance. Indian Telephone Industries has been following the selfappraisal system for executives in grade I to IV. Hewlett-Packard and Texas Instruments too ask their performance to prepare their own appraisal. On the positive side it may be stated that in self-appraisal there is an opportunity to participate in evaluation particularly if it is combine with goal setti9ng and this should be improve the mangers motivation. Managers are less defensive in self-evaluation than when supervisors tell them what they are. Self-appraisal is best suited where executive development is the main purpose of evaluation as the approach enablers’ managers to clearly assess their areas of differences. Unfortunately selfappraisal falls short almost by any criterion. They tend to be more lenient compared to other sources of evaluation, even that of peers who are more lenient than their superiors. Self-appraisal is also more likely to be less biased and less in agreement with judgment of others. In practice a combination of methods is followed for employee. For example evaluation by self may be followed by a superior, the personal department or the HR department (following diagram).

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Different Raters of Performance- L&T, Bangalore works PROCEDURE AND SCHEDULE FOR PERFORMANCE APPRAISL PROCESS Action by/Date

Form/Section

Brief description of Activities

Annual Performance Review Form 2 Sec:

•

Describes actual results against objectives set earlier. Not more than five Carries out self-review highlighting significant contributions and factors influencing performance Keeps himself or herself ready for appraisal interview by analyzing his performance, strengths and weakness and development needs.

•

Employee by 15.4.1999

•

Form 2 Sec: B, C

•

• •

From 3

•

From 1 From 2

•

Sec C Sec D

•

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Prepares for the appraisal interview by analyzing results against objectives, strengths and weakness and recalling significant incidents. Related to critical attributes. Discusses with the employees and provides feedback on critical attributes and rate on performance and attributes. Carries out development planning with the employee Carries out performance planning for 1994-1995 with employee, selects and describes role related attributes. Describes strengths and weakness and comments on potential areas for growth Records training needs and apecific developments plans.

• From 2 Sec E

• •

Next superior(s) By 15.6.1994

Comments on specific developments plans Makes overall observations on the employee’s performance Forwards the forms if necessary to his superior to ensure:

1. Covenants are reviewed by a superiors at least at DGM level 2. Superiors/ executives are reviewed by covenanted officers.

Immediate superior(s) By 15.6.1994

From 22 From

• •

•

From 2 Personnel/ HRD dept. By 15.7.1994

HRD dept. By 30.7.1994

Immediate Superior

•

•

From 2

• •

Notes the comments by the next superiors and conveys significant observations to employee Forwards for convents to HRD depts. and for superiors/executives to concerned Personnel Dept. Analyses rating and comments and furnishes data to all concerned for necessary actions Co-ordinates Development Action Proposals at Respective Group/ unit level Plans training programme and other actions Complies Pa data for aggregate analysis Comments on Pa exercise and send report to GMs and corporate management

From 1 • • From 3

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Reviews performance and objectives and writes comments as necessary Reviews development action taken and records status.

2. PERIODIC REVIEW (during the year) Whoever may be the rater two requisites must be fulfilled. First the rater must be free from bias. Second the rater must have an opportunity to observe the full spectrum of activities and behavior of the rate over an extended time period.] 4. Problems of Rating: - Performance appraisals are subject to a wide variety of inaccurate and biases referred to as rating errors. These errors occur in the rater’s observations, judgments and information processing and can seriously affect assessment result. The most common rating errors are leniency or severity, central tendency, halo effect, primary and recency effects, perceptual set, performance dimension behavior, spill over effect and status effect. 5. Leniency or Severity: - Leniency or severity on the part of the rater makes the assessment subjective. Subjective assessments defeat the very purpose of performance appraisal. Ratings are lenient for the following reasons. •

The rater may feel that anyone under his or her jurisdictions who is rated unfavorably will reflect poorly on his or her own worthiness.

•

He or she may feel that anyone who could have been rated unfavorably has already been discharged from the organization

•

He or she may feel that a derogatory rating will be revealed to the rate to the determinant of the relations between the rater and rate.

•

He or she may rate leniently in order to win promotions for the subordinates and therefore indirectly increase his or her hold over them.

•

He or she may be projecting

•

He or she feels it necessary to always approve of others in order to gain approval for him or herself.

•

He or she may be operating on the premise, “whoever associates with me is meritorious therefore, and I am meritorious”.

•

He or she may rate leniently because there exists, in the culture, a response set approve rather than disapprove.

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WC according to a Severe rater

LOW

WC according to a lenient rater True amount WC

written communication Skills (WC)

HIGH

4. Central tendency: - this occurs when employees are incorrectly rated near the average or middle of the scale. The attitude of the rate is to play safe. This safeplaying attitude stems from certain doubts and anxieties which the raters have while assessing the ratees. Such doubts and anxieties are : •

“Do I know the man sufficiently well to be able to give a fair assessment of him?

•

“If I rate him the way I think I should what will be its influence on his relations with me and on his performance in the future?

•

“If I rate him the way I think I should what will be its effect on my relations with the others subordinates?”

•

“If I rate him the way I think I should what will be its effect on his relationship within the group or subordinates?”

•

“Will I able to be objective in view of pressures from peers, subordinates and trade union?”

•

“If I rate him the way I think I should will be accused to being partial?”

•

“How will my boss view the appraisal I make and how will that influences the way he appraises the man?”

•

“What standards will my peers adopt to appreciate their subordinates? And in view of this am I likely to affect adversely the future of my subordinates?”

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Naturally the rates use such expressions as satisfactory and average to describe the performance of the rates. For example the principal of a college while giving character certificates to the outgoing students describe the character of each student as satisfactory. Obviously it’s become difficult to distinguish between excellent performance and poor performance. In small organization it is common to label all employees as an average. But in large companies errors of this type tend to obviate the value of evaluations. Close to error of central tendency is the problem of range restriction. Range restriction may involve clustering all employees around any point on a scale, often in combination with leniency errors at very top. What is distinctive in the error of central tendency and the error of range restriction is a failure to note real performance differences, either intentionally or due to insufficient attention. Halo Error - it takes place when one aspect of an individual performance influences the evaluation of the entire performance of the individual just as the assessment of the performance of a student in his or her examination being influence by the opening paragraph of every answer. If the introductory paragraph is poorly written the chances of scoring high marks in that answer are diminished however good the subsequent portion of the essay may be In an organization a halo error occurs when an emplopuee who work late constantly might be rated high on productivity and quality of output as well as on motivation. Similarly an attractive or popular employee might be given a high overall rating. Rating employees separately can each of a number of performance and encouraging raters to guard against the halo effect are two ways to reduce halo effect. Rater effect: this includes favoritism, stereotyping and hostility. Excessively high or low scores are given only to certain individual or groups based on the rater’s attitude towards the rate, not on actual outcomes or behavior. Sex, age, race and friendship biases are example of this type of error. Primary and recency effects: - the rater’s ratings are heavily influenced either by behavior exhibited by the rate during the early stage of the review period or by outcomes or behavior exhibited by the rate near the end of the review period (recency). For - 25 -

example if a salesperson captures an important contract/ sales just before the completion of the appraisal the timing of the incident may inflate his or her standing even though the overall performance of the salesperson may not have been encouraging. Likewise a blunder committed just before the appraisal period may diminish chance of securing a favorable rating even if the performance is good. One way of guarding against such an error is to ask rater to consider the composite performance of the ratee and not to be influenced by one incident or own achievement. The rater must also be aware of tendency on the part of the rates to improve odds in their favors or suppress weak points during the rating period. Perceptual Set: - this occurs when the rater’s assessment is influenced by previously held beliefs. If the supervisors for example have a belief that employee hailing from 1 particular region is intelligent and hard working his subsequent rating of an employee hailing from that region tends to be favorably high. Performance Dimension order: 2 or more dimensions on a performance instrument follows or closely follow each other and both describe or rotate to a similar quality. The rater rates first dimension accurately and then rates the second dimension similar to the first because of their proximity. If the dimension had been arranged in a significant different order the rating might have been different. Spillover effect: This refers to allowing past performance appraisal ratings to unjustifiably influence current ratings. Past ratings, good or bad result for the period although the demonstrated behavior does not deserve the rating good or bad. Status effect: - it refers to overrating of employee in higher-level jobs held in high esteem, and underrating employees in lower-level-job or jobs held in low esteem. It is not the rater’s errors alone that are barriers to accurate and valid measurement of employee performance. Barriers lie deep within the genetic and acquired make-up of all people concerned with performance appraisal. A wide variety of emotional, psychological, intellectual and physical factors that at first glance may appear to be

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separate and irrelevant may combine in any numbers of ways during the appraisal process. Exhibit 10.2 Here is a bizarre case of performance appraisal. A pulp making unit located at Harihae in Karnataka, hired 40 engineers in 1994, as management trainees. The new hires were fresh from, REC, Suratkal, and other prestigious institutions. Obviously they were toppers in their respective branches and institutions. The management of the plant adopted a freakish policy with regard to performance appraisal – 10 percent of all the employees were to be rated below average. The management did not want all the employees to be ranked high, notwithstanding their excellent performance. The axe fell on the trainees. The raters rated all the 40 trainees below average. Humiliated, these 40 put in their papers even before their training period expired. Solving Rater’s Problems the best way to overcome the problems is to provide training to the raters. At HewlettPackard, a 2 day training course is organized every year to prepare managers to handle appraisals better. Not that training is a ‘cure-all’ for all the ills of appraisal systems. From a practical point of view, several factors, including the extent which pay is related to performance ratings, union pressure, turnover rates, time constraints and the need to justify ratings may be more important than training, influencing the ratings they actually give. This means that improving rating systems involves not just training the raters but remedying outside factors such ass union pressure. And it means that rater training, to be effective, should also add real life problems such as the fact that union representatives will try to influence supervisors to rate everyone high. But training can help improve the appraisal system to the extent of distortion that occurs due to the rater’s error such as halo, leniency, central tendency and bias. In a typical training, raters are shown a video-tape of jobs being performed and are asked to rate the workers. Ratings made by each participant are then placed on a flip chart and the various charts are explained. For e.g., a trainee is rated on all criteria (such as quantity and quality) about the same, the trainer might explain that halo error had occurred. If, on the other hand, a trainer rated all video-taped workers very high, this might be explained as a - 27 -

leniency error. Typically, the trainer gives the correct rating and then illustrates the rating errors made. In effect, training of raters must help strengthen the factors that tend to improve accuracy of ratings and weaken those that lower the accuracy of the performance measurement. Factors that help improve accuracy: 1. The rater has observed and is familiar with behaviors to be appraised. 2. The rater has documented the behaviors to improve the recall. 3. The rater has a checklist to obtain and review job-related information. 4. The rater is aware of personal biases and is willing to take action to minimize their effect. 5. Rating scores by raters of one group or organization are summarized and compared with those by other raters. 6. The rater focuses attention on performance-related behaviors over which the rater has better control than in other aspects of evaluation. 7. Higher levels of management are held accountable for reviewing all ratings. 8. The rater’s own performance ratings are related to the quality of rating given and the performance of units. 9. Performance factors are properly defined. Factors that may lower accuracy: 1. The rater rates ratees only when administrative actions are contemplated. 2. The rater tends to inflate ratings when the ratees receive scores and results of appraisals. 3. The rater tends to recall more behaviours known to be of particular interest to higher level managers, whether or not they are pertinent, when his or her ratings are reviewed by such authorities. 4. The rater is unable to express him or herself honestly and unambiguously. 5. Appraisal systems, processes and instruments fail to support the rater. 6. The rater has to rate employees on factors that are poorly defined. 7. Finally, the supervisor/rater must be trained to conduct the appraisal interview. For many raters, this is a difficult task, especially when the appraisal is - 28 -

unfavorable to the rater. Favorable or unfavorable rating, it is the job of the rater to convince the ratee about the appraisal, and advise him or her about the future course of action the rate should take. What should be rated? One of the steps in designing an appraisal programme is to determine the evaluation criteria. It is obvious that the criteria should be related to the job. The six criteria for assessing performance are: 1. Quality: The degree to which the result or process of carrying out an activity approaches perfection in terms of either conforming to some ideal way of performing the activity, or fulfilling the activity’s intended purpose. 2. Quantity: The amount produced, expressed in monetary terms, number of units, or number of completed activity cycles. 3. Timeliness: the degree to which an activity is completed or a result produced, at the earliest time desirable from the standpoints of both co-coordinating with the outputs of others and of maximizing the time available for other activities. 4. Cost Effectiveness: the degree to which the use of the organization’s resources (e.g. human, monetary, technological and material) is maximized in the sense of getting the highest gain or reduction in loss from each unit or instance of use of a resource. 5. Need for supervision: the degree to which a job performer can carry out a job function without either having to request supervisory assistance or requiring supervisory intervention to prevent an adverse outcome. 6. Interpersonal impact: the degree to which as performer promotes feeling of selfesteem, goodwill and co-operation among co-workers and sub-ordinates. These criteria relate to past performance and behavior of an employee. There is also the need for assessing, as was pointed out earlier, the potential of an employee for future performance, particularly when the employee is tipped for assuming greater responsibilities. Exhibit 10.3 Appraisal of Potential at Philips

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More and more number of organizations are trying to assess potential of their employees, particularly at the managerial level. Cadbury India, Sandoz, Pfizer, Mafatlal, Philips, National Organic Chemical Industries, Glaxo and P&G are a few of the companies which seek to top managerial potential. At Philips a 2 by 2 matrix is used to assess performance and potential to perform. The vertical axis measures potential while the horizontal, actual performance. Both are further subdivided into parameters – high and low – resulting in 4 quadrants of classification.

Problem Children

Stars

Problem Separation

Solid Citizens

Low

High

High Potential Low

Performance

The Philips Model Low Potential-Low Performance: these employees are categorized as question marks. The company asks such employees to improve their performance levels. Failure to improve would result in their planned separation. High Potential-Low Performance: these are the problem children. In order to help them improve their performance, these employees are shifted to new locations to work and are closely monitored. If performance levels do not improve, these employees are reclassified as question marks and the separation process initiated. High Potential-High Performance: these are the star performers. They have to be kept engaged with complex assignments all the time and groomed to take up the top positions. Otherwise, they might leave. Low Potential-High Performance: these are called as solid citizens and constitute 70 to 75 % of the total number of employees in any organization. They have skills but lack the potential to grow beyond their current job-profile. The organization has to constantly recognize their limitations and take care of their needs.

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In order to assess employee potential, Philips has adopted the system that prevails at Philips NV, Holland. The system at Philips NV uses 4 broad attributes – conceptual effectiveness, operational effectiveness, interpersonal effectiveness and achievement effectiveness and achievement motivation. Each attribute has a 5-point grading scale – excellent, very good, good/adequate, weak and insufficient. Coming to the six criteria, it may be stated that the first 4 – quality, quantity, timeliness and cost effectiveness – are objective in nature; and the last 2 - need for supervision and interpersonal impact – are subjective. Objective measures are quantifiable and are therefore highly useful in measuring the performance of an employee. But performance of employees should not always be evaluated against the amount of deposits mobilized for his or her bank. The effort put in by him/her, the contacts he/she has established, the image about the bank he/she has created in the eyes of public, and if relationships he/she has maintained with subordinates speak more reliably about the manager’s performance. Here comes the relevance of the subjective criteria. However, as subjective measures are dependent upon human judgments, they are prone to the kinds of errors we noted earlier – leniency or severity, central tendency, halo and the like. To be useful, subjective measures must be based on a careful analysis of the behaviors viewed as necessary and important for job performance. Of late, there has been a shift in focus of appraisals. This shift is from performance of the individual to the systems approach. As stated earlier, in the systems approach the emphasis is on improving one’s performance. Work performance of an individual depends on organizational factors in addition to his or her abilities. The focus in the systems approach is, therefore, the entire organization. Timing of Evaluation How often should an employee be assessed? The general trend is to evaluate once in 3 months, or six months, or once in a year. According to a survey conducted in 1997 by Arthur Anderson, 70 percent of the organizations conduct performance appraisal once a year. Newly hired employees are rated more frequently than the older ones. Frequent assessment is better than phased evaluation. Feedback in the latter is delayed and the advantage of timely remedial measures by the employee is lost. Frequent evaluation gives - 31 -

constant feedback to the rate, thus enabling him or her to improve performance if there is any deficiency. The performance of trainees and probationers should be evaluated at the end of respective programmes.

METHODS OF APPRAISAL The last to be addressed in the process of designing an appraisal programme is to determine methods of evaluation. Numerous methods have been devised to measure the quantity and quality of employee’s job performance. Each of the methods discussed could be effective for some purposes, for some organizations. None should be dismissed or accepted as appropriate except as they relate to the particular needs of the organization or of a particular type of employees. Broadly, all the approaches to appraisal can be identified into (i) past-oriented methods, and (ii) future-oriented methods. Each group has several techniques as shown in the figure below:

Appr aisal Meth ods

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Past-Oriented Methods Rating Scales: This is the simplest and most popular technique for appraising employee performance; the typical rating-scale system consists of several numerical scales, each representing a job-related performance criterion such as dependability, initiative, output, attendance, attitude, co-operation, and the like. Each scale ranges from excellent to poor. The rater checks the appropriate performance level on each criterion, then computes the employee’s total numerical score. The number of points scored may be linked to salary increases, whereby so many points equal a rise of some percentage.

RATING SCALE Instructions: For the following performances factors, please indicate on the rating Scale your evaluation of the employee named below: Employee’s Name: Rater’s Name

Department Date. Excellent 5

Good 4

Acceptable 3

Fair 2

Poor 1

1.

Dependability

------

------

------

-----

-----

2.

Initiative

------

------

------

-----

-----

3.

Overall Output

------

------

------

-----

-----

4.

Attendance

------

------

------

-----

-----

5.

Attitude

------

------

------

-----

-----

6.

Co-Operation

------

------

------

-----

-----

20. Quality of Work

------

------

------

-----

-----

------

------

------

-----

-----

------

------

------

-----

-----

------

------

------

-----

-----

- 33 -

TOTAL

+

+

+

+

TOTAL SCORE

Rating scales offer the advantages of adaptability, relatively easy use and low cost. Nearly every type of job can be evaluated in a short time, and the rater does not need any training to use the scale. The disadvantages of this method are several. The rater’s biases are likely to influence evaluation, and the biases are particularly pronounced on subjective criteria such as cooperation, attitude and initiative. Furthermore, numerical scoring gives an illusion of precision that is really unfounded. Checklist: Under this method a checklist of statements on the traits of the employee and his or her job is prepared in 2 columns – viz., a ‘Yes’ column and a ‘No’ column. All that the rater (immediate superior) should is tick the ‘Yes’ column if the answer to the statement is positive and in column ‘No’ if the answer is negative. A typical checklist is given in the table below. After ticking off against each item, the rater forwards the list to the HR department. The HR department assigns certain points to each ‘Yes’ ticked. Depending upon the number of ‘Yes’ the total score is arrived at. When points are allotted to the checklist, the technique becomes a weighted checklist. The advantages of as checklist are economy, ease of administration, limited training of rater, and standardization. The disadvantages include susceptibility to rater’s biases (especially the halo effect), use of personality criteria instead of performance criteria, misinterpretation of checklist items, and the use of improper weights by the HR department. Another disadvantage of this approach is that it does not allow the rater to give up relative ratings.

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Table: - Checklist for Operators SR.

QUESTIONS

YES

NO

NO. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Is the employee really interested in the job? Does he or she possess adequate knowledge about the job Is his or her attendance satisfactory? Does he/she maintain his/her equipment in good condition? Does he/she co-operate with co-workers? Does he/she keep his/her temper? Does he/she obey orders? Does he/she observe safety precautions? Does he/she complete what he/she commences? Does he/she evade responsibility?

-

-

Forced Choice Method: In this, the rater is given a series of statements about an employee. These statements are arranged in blocks of 2 or more, and the rater indicates which statement is most or least descriptive of the employee. Typical statements are : 1. Learns fast _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ works hard 2. Work is reliable_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ performance is a good example for 3. Absents often_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ others usually tardy. As in the checklist method, the rater is simply expected to select the statements that describe the rate. Actual assessment is done by the HR Department. This approach is known as the forced choice method because the rater is forced to select statements, which are readymade. The advantage of this method is the absence of personal bias in rating. The disadvantage is that the statements may not be properly framed – they may not be precisely descriptive of the ratee’s traits. Forced Distribution Method: One of the errors in rating is leniency – clustering a large number of employees around a high point on a rating scale. The forced distribution - 35 -

method seeks to overcome the problem by compelling the rater to distribute the ratees on all points on the rating scale. The method operates under an assumption that the employee performance level conforms to a normal statistical distribution. Generally, it is assumed that employee performance levels conform to a bell shaped curve. For example, the following distribution might be assumed to exist – excellent 10 %, good 20 %, average 40 %, below average 20 %, and unsatisfactory 10 %. The major weakness of the forced distribution method lies in the assumption that the employee performance levels always conform to a normal distribution. In organizations that have done a good job of selecting and retaining only the good performers, the use of forced distribution approach would be unrealistic, as well as possibly destructive to the employee morale. The error of central tendency may also occur, as the rater resists from placing an employee in the lowest or in the highest group. Difficulties also arise for the rater to explain to the rate why he or she has been placed in a particular group. One merit of this approach is that it seeks to eliminate the error of leniency. However, the forced choice method is not acceptable to raters and ratees, especially, in small groups or when group members are of high ability. Critical Incidents Method: The critical incidents method of employee assessment has generated a lot of interest these days. The approach focuses on certain critical behaviors of an employee that make all the difference between effective and non-effective performance of a job. The supervisors as and when they occur record such incidents. Examples of critical incidents of a plant manager are given in the following table:

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CONTINUING TARGETS CRITICAL DUTIES INCIDENTS Schedule Production for Plant

Full Utilization of personnel and machinery in the plant, order delivered on time

Supervise procurement of raw materials and inventory control

Minimize inventory costs while keeping adequate supplies on hand

Supervise machinery maintenance

No shutdowns due to faulty machinery

Instituted new production scheduling system; decreased late orders by 10% last month; increased machine utilization in plant by20% last month Let inventory storage costs rise 15% last month; Over – Ordered parts “A” and “B” by 20%; Under – Ordered part “C” by30% Instituted new preventive maintenance system for plant; Prevented a machine breakdown by discovering faulty part.

Examples of Critical Incidents for an Assistant Plant Manager One of the advantages of the critical incidents methods is that the evaluation is based on actual job behavior. Further, the approach has descriptions in support of particular ratings of an employee. Giving job-related feedback to the ratee is also easy. It also reduces the personal biases, if raters record incidents throughout the rating period. Finally, this approach can increase the chances that the subordinates will improve because they learn more precisely what is expected of them. The method however has significant limitations. These include: 1. Negative incidents are generally more noticeable that positive ones. 2. The recording of incidents is a chore to the supervisor and may be put off an easily forgotten. 3. Overly close supervision may result. - 37 -

4. Managers may unload a series of complaints about incidents during an annual performance review session. The feedback may be too much at one time and thus appearing as a punishment to the rate. More appropriately, the management should use incidents of poor performance as opportunities for immediate training and counseling. Behaviorally Anchored Rating Scales: Behaviorally Anchored Scales, sometimes called behavioral expectation scales, are rating scales whose scale points are determined by statements of effective and ineffective behaviors. They are said to be behaviorally anchored in that the scales represent a range of descriptive statements of behavior varying from the least to the most effective. A rater must indicate which behavior on each scale best describes an employee’s performance. Behaviorally anchored rating scales (BARS) have the following features: 1. Areas of performance to be evaluated are identified and defined by people who will use the scales. 2. The scales are anchored by descriptions of actual job behavior that, supervisors agree, represent specific levels of performance. The result is a set of rating scales in which both dimensions and anchors are precisely defined. 3. All dimensions of performance to be evaluated are based on observable behaviors and are relevant to the job being evaluated since BARS are tailor-made for the job. 4. Since the raters who will actually use the scales are actively involved in the development process. They are more likely to be committed to the final product. BARS were developed to provide results which subordinates could use to improve performance. Superiors would feel comfortable to give feedback to the rates. Further, BARS help overcome rating errors. Unfortunately, this method too suffers from distortion inherent in most rating techniques.

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Field Review Method This is an appraisal by someone outside the, assessor’s own department. Usually someone from the corporate office or the HR department. The outsider reviews Employee records and holds interviews with the ratee and his or her superior. This method is primarily used for making promotional decision at the managerial level. Field reviews are also useful when comparable information is needed from employees in different units or locations. Two disadvantage of this method are:1. An "outsider" is usually not familiar with conditions in an employees’ work environment which may affect the employee's ability or motivation to perform. 2. An 'outsider' review dose not have the opportunity to observe employee behavior of performance over a period of time and in a variety of situations. But only in an artificially structured interview situation which extends over a very short period of time.

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- 40 -

Extremely good 7 performance Good performance Slightly good performance

6 5

By knowing the price of items. This checker would be expected to look for mismarked and unmarked items. You can expect this checker to be aware of items that constantly fluctuate in price. When in doubt. This checker would ask the other clerk if the item is taxable. This checker can be expected to verify with another checker a discrepancy between the shelf and the marked price before ringing up that Item.

4

When operating the quick check. If the lights are flashing this checker can be expected to check out a customer with 15 items.

Slightly poor performance

3

You could expect this checker to ask the customer the price of an Item that he or she does not know. In the daily course of personal relationships, he or she may be expected to linger in long conversations with a customer or with another checker.

Poor performance

2

Neither poor nor good performance

Extremely poor performance

In order to take a break. this checker can be expected to block off the check stand while people wait in line. 1

A BARS Scale for the Knowledge and Judgement Dimension of a Grocery Checker's Job. Raters, making field reviews normally receive training on how to conduct the interview and develop their writing skills. Being independent of the work scene they normally have less bias for or against the ratee than docs the immediate supervisor. Even when a supervisor or others concerned supply biased information the rater may he able to pinpoint areas requiring training and development assistance.

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Performance Tests and Observations With limited number of jobs, employee assessment may be based upon a test of knowledge or skills. The test may he of the paper-and-pencil variety or an actual demonstration of skills. The test must he reliable and validated to be useful. Even then, performance tests are apt to measure potential more than actual performance. In order for the test to be job related, observations should he made under circumstances likely to be encountered. Practicality may suffer if costs of test development or administration arc high.

Confidential Records Confidential records arc maintained mostly in government Departments. though its application in the industry .not ruled out. ITI. for example. had followed this method for a long time. Called the Annual Confidential Report (ACR). the approach had 14 items-(i) attendance. (ii) self-expression (written or oral). (iii) ability to work with others. (iv) leadership. (v) initiative. (vi) technical ability (job knowledge). (vii) ability to understand new material. (viii) ability to reason, (ix) originality and resourcefulness. (x) areas of work that suits the person best. (xi) judgement. (xii) integrity. (xiii) responsibility and. (xiv) and defect-indebtedness. Memo served. etc. Twelve of these were filled on a fourpoint grade scale (Excellent. Good. Fair and Poor). For integrity. there were special instructions from the management. Justification was required for outstanding or poor rating. Over:!!! rating on a five-point scale was separately given (Outstanding. Very good. Good. Average, Poor). again with justification for rating as outstanding or poor. Recommendations for promotion were also given. The ACR contained recommendations and signature of the rater. the head of the department and the CMD. The system was highly secretive and confidential Feedback to the assessee was given only in case of an adverse entry. The AC'R was highly subjective. Ratings were easily manipulated because the evaluation was linked to promotion. Even ITI has discontinued ACR system for these reasons.

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Essay Method In the essay method the rater must describe the employee within a number of broad categories such as (i) the rater's overall impression of the employee's performance. (ii), the promo ability of the employee (iii) the jobs that the employee is now able or qualified to perform (.iv) the strengths and weaknesses of the employee. and (v)the training and the development assistance required by the employee. Although this method may be used independently, it is most frequently found in combination with others. It is extremely useful in filing information gaps about the employees that often occur in the better structured checklist method. The strength of the essay method depends on the writing skills and analytical ability of the rater. However many raters do not have good writing skills. They become confused about what to say. How much they should state and the depth of the narrative The essay method can consume much time because the rater must collect the information necessary to develop the essay and then he or she must write it The essay method also depends on the memory power of the rater. A problem with this method is that the rate may be rated on the quality of the appraisals that they give. The quality standard for the appraisal may be unduly influenced by appearance rather than content. Thus. a 'high quality' appraisal may provide little useful information about the performance of the rate.

Cost Accounting Method This method evaluates performance from the monetary returns the employee yields to his or her organisation. A relationship is established between the cost included in keeping the employee and the benefit the organization derives from him or her. Performance of the employee is then evaluated based on the established relationship between the cost and the benefit.

Comparative Evaluation Approaches These are a collection of different methods that compare one worker's performance with that of his/her co-workers. Comparative appraisals are usually conducted by - 43 -

supervisors. As these appraisals can result in a ranking from best to worst, they are useful in deciding merit-pay increases, promotions and organisational rewards. The usual comparative forms used in this kind of evaluation are the ranking method and the paired comparison method.

Ranking Method In this, the superior ranks his or her subordinates in the order of their merit, starting from the best to the worst. All that the HR department knows is that A is better than B. The, 'how' and 'why' are not questioned, nor answered. No attempt, is made to fractionalise what is being appraised into component elements. This method is subject to the halo and recency effects, although rankings by two or more raters can be averaged to help reduce biases. Its advantages include ease of administration and explanation.

Paired-comparison Method Under this method the appraiser compares each employee with every other employee one at a time. For example there are five employees named A, B. C. D and E. The performance of A is first compared with the performance of B and a decision is made about whose performance is better. Then A is compared with C. D and E in that order. The same procedure is repeated for other employees. The number of comparisons may be calculated with the help of a formula which reads thus:

N(N-1)/ 2 where N stands for

the number of employees to be compared. If there are 10 employees, the number of comparisons will be 10(10-1)/2 = 45. After the completion of comparison, the results can be tabulated and a rank is created from the number of times each person is considered to be superior.

Future-oriented Appraisals Is it not enough if only the past performance is assessed . How an employee can perform in the days to come is equally important. This can be assessed by focusing on employee potential or setting future performance goals. The commonly used futureoriented techniques are MBO, psychological appraisals, and assessment centres.

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MANAGEMENT BY OBJECTIVES It was Peter F. Drucker who first gave the concept of MBO to the world way back in 1954 when his The Practice of Management was first published. The MBO concept, as was conceived by Drucker, reflects a management philosophy which values and utilizes employee contributions. Application of MBO in the field of performance appraisal is a recent thinking.

Four Steps in the MBO Process How MBO works can be described in four steps: The first step is to establish the goals each subordinate is to attain. In some organisations, superiors and subordinates work together to establish goals. In others. Superiors establish goals for subordinates. The goals typically refer to the desired outcome to be achieved. These goals can then be used to evaluate employee performance. The second step involves setting the performance standard for the subordinates in a previously arranged time period. As subordinates perform, they know fairly well what there is to do, what has been done, and what remains to be done. In the third step, the actual level of goal attainment is compared with the goals agreed upon. The evaluator explores reasons for the goals that were not met and for the goals that were exceeded. This step helps determine possible training needs. It also alerts the superior to conditions in the organization that may affect a subordinate but over which the subordinate has no control. The final step involves establishing new goals and, possibly new strategies for goals not previously attained. At this point, subordinate and superior involvement in goalsetting may change. Subordinates who successfully reach the established goals may be allowed to participate more in the goal setting process the next time. The process is repeated. As with other approaches. MBO too has been criticised. One comment made against the approach is that it is not applicable to all jobs in all organisations. Jobs with little or no flexibility. Such as assembly-line work, are not compatible with MBO. An - 45 -

assembly-line worker usually has so little job flexibility that the performance standards and objectives are already determined. The MBO process seems to be most useful with managerial personnel 'and employees who have a fairly wide range of flexibility and selfcontrol in their jobs. Besides, when the result of an MBO system are to be used to allocate organisational rewards, employees may be less likely to establish challenging goals-goals they are confident that they can accomplish. Further, the allocation of merit pay on a semi-annual or annual basis may encourage the setting up of goals with short time horizons to the disadvantage of important long-term goals. The performance appraisal presently followed in L&T reflects the principles of MBO.

Psychological Appraisals Large organization employs full-time industrial psychologists. When psychologists are used for evaluations. They assess an individual’s future potential and past performance. The appraisal normally consists of in-depth interviews, psycho1ogical tests. Discussions with supervisors and a review' of other evaluations. The psychologist then write an evaluation of the employee's intellectual, emotional, motivational and other-related characteristics that suggest individual potential and may predict future performance. The evaluation by the psychologist may be for a specific job opening for which the person is being considered. Or it may be a global assessment of his or her future potential. From these evaluations. Placement and development decisions may be made to shape the person's career. Because this approach is slow and costly, it is usually required for bright young members who, others think. May have considerable potential within the organisation. Since the quality of the appraisal depends largely on the skills of the psychologists, some employees object to this type of evaluation, especially if crosscultural differences exist.

LARSEN AND TOUBRO, HUMAN RESOURCE DEVELOPMENT—

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PERFORMANCE APPRAISAL SYSTEM CONFIDENTIA L PA FORM:28

NAME EMS. PS. NO

CADRE GROUP DEPT.

EXECUTIVES & SUPERVISORS LARSEN &TOUBRO LIMITED HUMAN RESOURCE DEVELOPMENT-PERFORMANCE APPRAISAL SYSTEM PERFORMANCE ANALYSIS AND REVIEW APRIL 1993 TO MARCH 1994 NAME

DATE SIGNATURE

EMPLOYEE IMMEDIATE SUPERVISOR NEXT SUPERIOR

1. 2.

PERSONNEL/ HRD DEPT.

1. 2. 3. 4. 5.

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GOOD

INADEQUATE

RESULTS AND ACHIEVED

IMMEDIATE

ADEQUATE

AGREED OBJECTIVES TARGETS

BY EMPLOYEE

V. GOOD

A1]

OUTSTANDING

A]PERFORMANCE REVIEW AGAINST B1] BY OBJECTIVES SUPERIOR

A2]

SELF REVIEW (by employee)

SIGNIFICANT CONTRIBUTORS (JOBS OR PROFESSION RELATED –NOT COVERED ABOVE) • •

IMPORTANT FACTORS FACILITATING PERFORMANCE IMPORTANT FACTORS HINDERING PERFORMANCE

B2] PERFORMANCE AGAINST OBJECTIVES(BY IMMEDIATE SUPERIOR)

2.

3.

4.

5.

INNOVATIVENESS

Ability to think new and better ways of doing things that results in introduction of new ideas or improvements of the systems and operations.

INITIATIVE

Ability to determine and initiate actions that result in improve handling of jobs, without waiting to be told.

INTERPERSONAL & TEAM RELATIONSHIP

Ability to interact effectively with people at all levels to gain their confidence and respect and work in a collaborative and participative manner.

RESOURCEFULNESS

Ability to muster resources to achieve desired results and device ways and means of solving problems in difficult situations. Ability to convey thoughts and feelings clearly both through oral as well as written expressions for better understanding.

COMMUNICATION SKILLS

ADEQUATE

GOOD

V. GOOD

INADEQUATE

C2] AREAS OF STRENGTH AND IMPROVEMENTS (by immediate superior)

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INADEQUATE

1.

OUTSTANDING

OUTSTANDING V. GOOD GOOD ADEQUATE C1] Appraisal of Critical Attributes(by immediate superior) C2] CRITICAL ATTRIBUTES

C3] Potential Areas Of Growth (By Immediate Superior)

D] Recommendations For Training And Development( By Immediate Superior) D1] IN-COMANT TRAINING PROGRAMMES Description

Code

1.

Description 2.

D2] OTHER TRAINING PROGRAMMES 1.

2.

D3] SPECIFIC DEVELOPMENT PLANS Proposed action (tick as applicable) • • • • • E]

Details of Actions Required

Job rotaion Job enlargement Special assignment Deputatiomn of other dept Others(please specify)

COMMENTS BY NEXT SUPERIOR(S)

E1] ON SPECIFIC DEVELOPMENT PLANS STATED ABOVE IN D3 E2] OVERALL OBSERVATIONS: F] FOR USE BY PERSONNEL/ HRD CO -ORDINATOR

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Code

ASSESSMENT CENTRES Mainly used for executive hiring, assessment centre are now "being used for evaluating executive or supervisory potential. An assessment centre is a central location where managers may come together to have their participation in job-related exercise evaluated by trained observers. The principal idea is to evaluate managers over a period of time say one to three days, by observing (and later evaluating) their behaviour across a series of select exercises or work samples. Assesses are requested to participate in in-basket exercises, work groups (without leaders), computer simulations, role paying, and other similar activities which require the same attributes for successful performance, as in the actual job. After recording their observations of ratee behaviors, the raters meet to discuss these observations. The decision regarding the performance of each assessee is based upon this discussion of observations. Self-appraisal and peer evaluation are also thrown In for final rating. The characteristics assessed in a typical assessment centre include assertiveness, persuasive ability, communicating ability, planning and organisational ability, self – confidence, resistance to stress, energy level, decision – making, sensitivity to the feelings of others, administrative ability, creativity and mental alertness. It is a formidable list which is quite difficult to measure accurately over three days, though there would be sizable number of trained observers and psychologists. First developed in the US and the UK in 1943, the assessment centre is gaining popularity in our country, Crompton greaves, Facher, HLL and Modi Xerox are using the technique with results being highly positive.

Assessment Centre - Many Takers •

Ranbaxy retained the services of a team of psychologists from the UK-

based Kelly& King to take the executives (of Ranbaxy) through an assessment center. 20 star manager went through the exercise.

•

Santrupt Misra, Director- Birla Management Corporation had plans for

a similar exercise to be held at Gyanodaya, the Aditya Birla learning centre. Misra

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first used the assessment centre concept four years ago on 150 middle and senior level managers.

•

Old timers like Tata have created their own assessment centers, and so

have the talent centric companies' like Wipro and Cognizant.

•

SHL, a HR consulting firm has worked with over 100 companies

conducting dose to 1,000 assessment centers.

•

Consulting firm ECS (formerly known as Eicher Consulting Services)

does a number of assessments in a month for a variety of clients like Tata Steel, ING Vysya and the host of BPO outfits.

•

ICICI Bank uses assessment centre as a recruitment and selection tool

to find the best talent, while GE India subsidiary GECIS has used it on 20% of it5 middle managers. The problem with the assessment centres is their cost Not only are the asses sees away from their jobs while the company pays for their travel and lodging, but the evaluators are often company managers who are assigned to the assessment centre for short durations. These managers are often supplemented by psychologists and HR specialists who run the centre and also make evaluations. Hence this approach is cost - effective only in large organisations. Assessment-centre staff is often influenced by subjective element; such as personality of the candidates: Raters tend to evaluate the quality of the individual's social skills rather than the quality of the decisions he/she makes. Assessment -centre ratings seem to be strongly influenced by the participant's interpersonal skills. The approach also involves real hazards. One of the most obvious is the examinationtaking syndrome. Solid performers in day-to-day operations feel suffocated in the simulated environment. Another drawback is its potential adverse effect on those not selected to participate in the exercise.

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Employees who receive a poor report from the centre may react in negative ways. Ideally, a rejected employee would return to his or her former job, satisfied that he or she would not be promoted to a job he or she could not handle. However, a good performer at one level may leave the organisation in order to remove the bad assessment report from his or her work record. Thus, a poor report can demoralize an employee who was once an asset. Other problems include-strong and unhealthy sense of competition among assesses; Difficulty of conducting the test frequently; and the possibility of overemphasizing the test performance. But a well-conducted assessment centre can and does achieve better forecasts of future performance and progress than other methods of appraisal. Also, reliability, content validity, and predictive validity are said to be high in the assessment centres. The test also makes sure that the wrong people are not hired or promoted. Finally, the Assessment centre test clearly defines the criteria for selection and promotion.

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360-DEGREE FEEDBACK As stated earlier, where multiple raters are involved in evaluating performance, the technique is called 360 degree appraisal. The 360 degree technique is understood as systematic collection of performance data on an individual or group, derived from a number of stakeholders--the stakeholders being the immediate supervisors. team members, customers, peers, and self. In fact, anyone who has useful information on how an employee does the job may be one of the appraisers. The 360-degree appraisal provides a broader perspective about an employee's performance. In addition, the technique facilitates greater self-development of the employees. For one's development, multi-source feedback is highly useful. It enables an employee to compare his or her perceptions about self with perceptions of others. Besides, the 360-dcgree appraisal provides formalized communication links between an employee and his or her customers. It makes the employee feel much more accountable to his or her internal or external customers. The technique is particularly helpful in assessing soft skills possessed by employees. By design, the 360-degree appraisal is effective in identifying and measuring interpersonal skill, customer satisfaction, and team-building skills. However, there are drawbacks associated with the 360-degree feedback. Receiving feedback on performance from multiple sources can be intimidating. It is essential that the organisation create a non - threatening environment by emphasizing the positive impact of the technique on an employee's performance and development. Further, firms that use the technique take a long time on selecting the rater, designing questionnaires, and analyzing the data. In addition; multiple raters are less adept at providing a balanced and objective feedback than the supervisors who are sought to be replaced. Raters can have enormous problems separating honest observations from personal differences and biases. Pitfalls notwithstanding, more and more number of firms are using the 36O-degree appraisal technique to assess the performance of their employees.

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APPRAISE THE PERFORMANCE The next step in the appraisal process is to measure the performance. We revert to the moral of the story narrated in the beginning of this chapter. The moral taught us that we need to measure the performance and not mere activities. What then is performance? Performance is essentially what an employee does or does not do. Employee performance common to most jobs include the following elements:

•

Quantity of output

•

Quality of output

•

Timeliness of output

•

Presence at work

•

Cooperativeness

In addition to these, other elements that deserve assessment are job knowledge, leadership abilities, judgement, supervision, versatility and health. Assessment should also include one's potential to perform and not just actual performance. Performance measurement needs to be based on the benchmarks listed above. These benchmarks vary from job to job. The job of a professor needs to be assessed against parameters that are different to those used to evaluate the performance of a sales representative.

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PERFORMANCE INTERVIEW Performance interview is another step in the appraisal process. Once appraisal has been made of employees, the raters should discuss and review the performance with the ratees, so that they will receive feedback about where they stand in the eyes of superior. Feedback is necessary to effect improvement in performance, especially when it is inadequate. Specifically, performance interview has three goals: (i) to change behaviour of employees whose performance does not meet organisational requirements or their own personal goals. (ii) To maintain the behaviour of employees who perform in an acceptable manner and (iii) to recognize superior performance behaviours so that they will be continued. Raters offer feedback to the ratees through several methods-tell and sell, tell and listen, problem solving and mixed. In tell and sell, also called directive interview, the interviewer let assesses know how well they are doing and sells them on the merits of setting specific goals for improvement, if needed. The tell and listen interview provides the subordinates with chances to participate and establish a dialogue with their superiors. Its purpose is to communicate the rater's perceptions about the ratee's strength and weaknesses and let the subordinates respond to these perceptions. In the problem -solving or participative interview, an active and open dialogue is established between the superior and the subordinate. Not only are perceptions shared, but also solutions to problems are presented, discussed, and sought. Mixed interview is a combination of tell and sell and problem solving interviews. Whatever be the approach followed, the emphasis in the interview should be on counseling and development and not on criticism, witch-hunting and buck passing. Because of the significance of appraisal interview, every effort must be made to make it effective. Guidelines given in Table below will help make the interview successful.

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GUIDELINES FOR EFFECTIVE APPRAISAL INTERVIEW •

Select a good time

•

Minimize interruptions

•

Welcome, set at ease

•

Start with something positive

•

Ask open – ended questions to encourage discussion

•

Listen

•

Manage eye contact and body language

•

Be specific

•

Rate behaviour, not personality

•

Layout development plan

•

Encourage subordinate participation

•

Complete form

•

Set mutually agreeable goals for improvement

•

End in a positive, encouraging note

•

Set time for any follow – up meetings

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USE OF APPRAISAL DATA The final step in the evaluation process is the use of evaluation data. The data and information generated through performance evaluation must be used by the HR department. It may be recollected that the most significant rewards employers offer to employees are: 1. Money to purchase goods and services required not only for current and future survival, but also for the luxuries modern life has to offer. 2. The opportunity to use innate and learned skills and talents in a productive manner that the individual and his or her managers and co-workers recognize as valuable. 3. Opportunities to interact with other people in a favorable working environment. 4. Opportunities to learn, grow, and make full use of their potential. 5. A sense of performance and stability through the continuing existence of the organisation and the job. 6. The opportunity to perform work assignments within an environment that not only protects. But promotes physiological, emotional and psychological health. In one way or another, data and information outputs of a performance-appraisal programme can critically influence these coveted employer-employee reward opportunities. Specifically, the data and information will be useful in the following areas of HRM: I. Remuneration administration 2. Validation of selection programmes 3. Employee training and development programmes 4. Promotion, transfer and lay-off decisions 5. Grievance and discipline programmes

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6. HR planning

EDWARD DEMING ON PERFORMANCE APPRAISAL Towards the end of this section, it is worthwhile to note Edward Deming's views on performance evaluation. Deming is opposed to employee assessment, because it: I. Rewards people for manipulating the system rather than improving it, 2. Is often self-defeating, 3. Is inconsistent with team-work, 4. Acts as a substitute for proper management, and 5. Is inherently unfair. His alternatives to performance appraisal are: 1. Meticulous selection of leaders, 2. Educating workers about their obligations, and improved training and education after selection, 3. Getting leaders to function as colleagues rather than as judges, 4. Subordinate performance to be assessed using statistical data, 5. Three to four hours interview annually, with subordinates aimed at support and encouragement, and 6. Accommodation to lone workers.

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CHALLENGES OF PERFORMANCE APPRAISAL With the increased significance of performance appraisal, challenges confronting the system are mounting. One serious challenge facing the performance appraisal system relates to assessment of self-managed teams. Popularly called empowered teams, these self-managed teams create special challenges for performance appraisal-empowered teams perform without supervisors. Historically, if one recalls, it is the supervisor who assesses the performance of his or her subordinates. Another challenge is that both, individual and team performance, need to be measured. A suitable device needs to be developed to assess the performance of empowered teams because more and more firms use such teams to enhance productivity. Figure below contains a typical model of team appraisal.

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Identify KRAs critical to business during the year

Set tangible targets for each KRA. Incorporate stretch elements for each target. Fix the minimum acceptable target

Evaluate performance of the team against predetermined targets

Communicate the results to ensure transparency

Determine intangible parameters (like initiative), which indicate pockets of individual excellence with the team

Measure the performance of the team (actual versus targets) every month

Identify individuals who have excelled. Discount subjective factors by including assessors from outside the team to identify outstanding individuals.

Figure: Appraising Teams The Following table contains challenges of Performance Appraisal -

Challenges of Appraisal: •

Create a culture of excellence that inspires every employee to improve

and lend himself or herself to be assessed

•

Align organizational objectives to individual aspirations

•

Clear growth paths for talented individuals

•

Provide new challenges to rejuvenate careers that have reached the

plateau stage

•

Forge a partnership with people for managing their careers

•

Empower employees to make decisions without the fear of failing

•

Embed teamwork in all operational processes

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•

Debureaucratise the organization structure for ease of flow of

information.

LEGAL ISSUES ASSOCIATED WITH PERFORMANCE APPRAISAL Performance appraisal data as stated earlier, are used to make many important HR decisions (e.g. Pay, promotion, training, transfer and termination). The appraisal system is a common target of legal disputes by employees involving charges of unfairness and bias. An employee may seek the legal recourse to obtain relief from a discriminatory performance appraisal. One such case goes back to 1980s. In 1981, three junior employees of Williamsons Magor were promoted superseding 15 of their senior workmen. The basis for promotion was recommendations of the departmental heads and other authorities. The 15 workmen challenged the promotion to the three workmen in the Supreme Court and the court upheld the contention of the petitioners on the ground that

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he said recommendations of departmental heads and authorities were arbitrary and could not be the main basis for effecting promotions. There are several recommendations 10 assist employees in conducting fair performance appraisal and avoiding legal suits. Gleaned from case laws, these recommendations are intended to be prescriptive measures that employers should take to develop fair and legally defensible performance appraisal systems.

1.

Legally Defensible Appraisal Procedures •

All personnel decisions should be based on a formal standardized

performance appraisal system. •

Any performance appraisal process should be uniform for all employees

within a job group, and decisions based on those performance appraisals should he monitored for differences according o race, sex. national origin. Religion or age of the employees. While obtained differences as a function of these variables are not necessarily illegal. an organization will have more difficulty defending an appraisal system with ratings related to these variables. •

All specific performance standards should be formally communicated to

employees. •

All employees should be able to review their appraisal results.

•

There should be a formal appeal process for the rate to rebut rater

judgments. •

All raters should be provided with written instructions and training on how

to conduct appraisals properly to facilitate systematic, unbiased appraisals. •

All personnel decision-makers should be well informed of anti-

discrimination laws.They should be made aware of the fine distinctions between legal and illegal activities regarding decisions based on appraisals.

2. Legally Defensible Appraisal Content •

Any performance appraisal content should be based on a job analysis. - 62 -

•

Appraisals based on traits should be avoided.

•

Objectively verifiable performance data (e.g. sales, productivity, not

ratings) should be used whenever possible. •

Constraints on an employee's performance that are beyond the employee's

control should be prevented from influencing the appraisal to ensure that the employee has an equal opportunity to achieve any given performance level. •

Specific job-related performance dimensions should be used rather than

global measures or single overall measures. •

The performance dimensions should be assigned weights to reflect their

relative importance in calculating the composite performance score.

3. Legally Defensible Documentation of Appraisal Results •

A thoroughly written record of evidence leading to termination

decisions should be maintained(e.g. performance appraisal and performance counseling to advise employees of performance deficit,

and to assist poor

performers in making needed improvements)

•

Written documentation (e.g. specific behavioural examples) for

extreme ratings should he required and they must be consistent with the numerical ratings.

•

Documentation requirements should he consistent among the raters.

4. Legally Defensive Raters •

The raters should be trained in how to use an appraisal system

•

The raters must have the opportunity to observe the ratee first hand or

to review important ratee performance products

•

Use of more than rater is desirable in order to lessen the amount of

influence of any one rater and to reduce the effects of biases. Peers, subordinates, customers, and clients are possible sources.

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PIRAMYD MEGASTORE - STORY OUTLINE Crossroads at Mumbai created a revolution pioneering the concept of shoppertainment in the country. It was an attempt to give the citizens of Mumbai a truly international shopping experience, a destination where the entire family can enjoy a day together shopping or browsing, eating and playing games in an unmatched ambience. Of the three ingredients, i.e. shopping, dining and entertainment, Shopping was the main ingredient. It had to be world class and had to incorporate global standards in terms of retail management, technology and design. Mrs Urvi Piramal, Vice Chair person of Piramal Group, had a strong viewpoint on shopping- “True shopping is browsing, enjoying, indulging and making choices. It is an expression of lifestyle and makes an affirmative statement”. This was the thought, which translated into Piramyd, India's first Megastore for lifestyle products. Piramyd spreads across 3 levels in the mall and has over 30000 sqft of space in Crossroads. To a typical Mumbai Women, shopping normally meant endless rounds of bargaining, endless trips back and forth from store to store, pushy sales people and scarcely enough space to push their elbow. Piramyd Megastore broke all these conventional hassles of shopping for women. In terms of product offering, Piramyd has everything that a woman would want to buy and more less than one roof. It has the widest range ethnic wear, western wear, lingerie, nightwear, leather accessories, sunglasses, fine jewelry, and saris. The idea is to provide

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her with a complete basket of shopping. In a single visit she can choose to pick up apparels, go over to the footwear section to pick up complimenting footwear, browse for that matching leather bag, and end up her buying with some matching jewelry. No longer has she had to visit different shops at times in different location. To extend her shopping she can also look out for groceries and foodstuff from the Supermarket which is just a bridge away. Today's working women wants products, which are fashionable and yet affordable. All the products in Piramyd are showcased keeping in mind the price-conscious Indian buyer. Projecting a dynamic image for the youth, Piramyd reflects the latest trend in style and includes new range of clothing on an ongoing basis. The store targets the upwardly mobile women of today who lays emphasis on quality. She is particular about grooming standards and spends on keeping herself and her family well groomed. Dressing right is no longer a fashion statement. It is a revelation of her personality and that is lodged deep within her. A woman can express herself with a choice of apparels and accessories from Piramyd that essentially speaks for her. This does not come at a very high price. For a mere Rs 1200 she can choose to pick up a decent Salwar Kurta set, a footwear starting from Rs. 400, a leather bag at Rs 400 etc. However depending on the spending mood, she can indulge in luxury and choose a Linarika

designer

wear

label

at

even

Rs.

4500.

To keep her family well groomed too, the Indian woman need not go looking beyond. For the man or the big kid in her life, she can just climb up one floor and buy the exclusive shirt, the gorgeous ethnic suit, the top of the line blazer or just a beautiful tie to match. Not only does Piramyd offer the finest brands available in India, but it also offers a world-class ambience and service, with the widest choice. A woman can browse through the offerings to her hearts content without any pressure of buying through serene ambience in the classy glass and marble interiors designed by International architects. There is enough space for her to rest, take a break while shopping and then continue again. The staff at Piramyd is trained to be unobtrusive. They are there to help one make a choice or simply serve quietly and efficiently. With constant in-depth product raining, the Piramyd Staff offers service to all customers with a positive attitude, pleasant disposition and good communication skills translated into a motto, which reads “we believe in service, we do it with pride”. - 66 -

HR VISION Employee Value Proposition Since inception in 1999 we as an organization have been through various phases of business. We created a mark for ourselves in a the Organized retail sector and now are known as a retailing brand .The single most factor that will act as a catalyst to our growth are the “Human Resources” To attract and retain the best people, we add value to the life of our employee at every instant. We are constantly designing, refining and implementing HR processes and activities which touch our employees. Our HR Proposition: “WONDERFUL PLACE TO BE, AN EXCITING PLACE TO WORK” As far as the Human Resource Department of Piramyd Retail Limited is concerned, it consists of highly qualified people who have achieved their specialization in this very field. The organization Structure for Human Resource development and Personnel Department is as follows:

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Manager - Human Resources

Assistant ManagerHuman Resources Executive - Human Resource

Executive - Human Resource

Executive - Human Resource

Executive - Human Resource

Executive - Human Resource

We, as a group met Mr. Paresh Patel who is one of the executives from the H.R. Department. When asked about the need for the H.R. Department in a firm, he explained that as Piramyd Retail Limited is a company dealing with its customers directly and there is a direct interaction with the customer in the service industry, it needed its employees to speak and interact with the customer in an efficient manner in order to know the requirements and then suggest the merchandises accordingly. In order to that it was necessary for the sales staff to be more effective and hence to achieve this very target they need good people with good inter personal communication skills, good knowledge and a sound sense of humor. And this can be done only when an effective H.R. Department is in place. Coming back to the topic, according to him, out of the 6 factors involved in the 360 degree appraisal system, they considered only 3 which are the colleagues, the supervisors and the sub-ordinates. Out of the pre-decided and the pre-defined methods & techniques for performance appraisal; it was identified by our project group that they used a combination of 2

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different methods. The 2 methods are ‘The Grading Method’ & ‘The Graphic Rating Scale Method’. Before going ahead let’s understand the above 2 methods in brief as to what they are all about:1. The Grading Method: In the grading method, a number of grades or classes are first established and carefully defined. The rater evaluates the performance of an individual employee against these standards and places him in one of these grades. The grades are related to qualities of employees and grades are given to such qualities. The qualities may be like job knowledge, judgement, leadership, co-operative attitude and so on. The grades may be like A (for outstanding), B (for very good), C (for Good), D (for fair) and E (for poor). The rater judges the performance of an employee and puts him under a suitable category. This method is simple and quick but the rating of employees may not be accurate particularly when the rater has to complete the rating of large number of employees within a short period. 2. Graphic rating Scale Method: This is one of the oldest and the most widely used methods of performance appraisal. Here, four to twelve factors are selected, depending upon the category to which the employee belongs. Some of these factors are quantity of output, quality of output, initiative, integrity, dependability, etc. these factors and their degrees are marked on a graph paper provided in the appraisal form. The rater has merely to check on the scale where he thinks the employee belongs. The following table gives us an idea about the Graphic Rating Scale Method… Quantity of Quality Factors/Considerations  Excellent Very Good Good

Output

of Integrity

Initiative

Output

  

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Average Below Average



Advantages of Graphic rating Scale Method: (a) It is simple to understand and easy to operate, (b) It is also not a time-consuming method, (c) It is economical and ensures uniformity in the assessment of employees. Comparison among the employees is easy as the details are clearly noted on the paper by the rater. Disadvantages of Graphic rating Scale Method: (a) It puts heavy pressure on the rater as he has to consider four to twelve different factors with five degrees for each factor. It is therefore, not possible to guarantee the accuracy of the rater’s decision. (b) The rater may be biased, (c) The rater has to do a lot of paper work in the graphic rating scale method. He may do marking mechanically, if he has to make appraisal of large number of ratees. (d) Accurate rating may not be done as there is a very thin gap between two considerations (e.g., very good and good). After discussing about what the two different methods mean we now see how Piramyd Retail Limited (PRL) actually implements these 2 methods in their organization. According to Mr. Paresh Patel, it takes nearly 2 months for the H.R. Department complete the whole process of performance and potential appraisal of all the employees right from the Store Manger to the Trainee Sales Associate of the firm. The foremost condition of the performance appraisal of an employee in PRL is that he / she should have completed at least a year in the organization. And also there are no performance appraisals for Part-timers in PRL. The appraisals take place in the months of April - May and the results are announced through a meeting which sees the attendance of the Manager – Human Resources as well as the Store Manager of that particular branch store.

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There are 3 grades designed for the employees of PRL which are A – OUTSTANDING B – AVERAGE / GOOD C – ADEQUATE. On the basis of the above 3 grades, all the employees are divided and placed among the above slots. Any positive or negative feedback from an individual’s colleague, supervisor or sub-ordinate sees him / her in the respective column. The Organization Structure for Piramyd’s Operations Department

1 Store Manager

2 Assistant Store Managers

4 Floor Managers

Senior Sales Associates

Junior Sales Associates

Trainee Sales Associates

From the above given grades, only the individuals obtaining the topmost grade i.e. the A grade gets a rise in the post or only those individuals can climb the ladder of this organization structure. Although, most number of employees settle in the second grade i.e. the Average grade. However, these employees are only given a nominal increment of

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Rs. 450/- in their monthly salaries. On the other hand, for the apex achievers apart from the rise in the post in the organization, they are awarded with an increment of Rs.750/- in their monthly salaries. Whereas there is bad news for the employees at the bottom level, by terming them as the ‘Adequate’ people in the firm. They are not given any sort of incentives or increments for that particular year and also are allowed to leave PRL at their request without any further hesitation. The process of appraisal is as follows: First of all, before the appraisal period, there is a meeting held, which all the employees on the lower or the higher post have to attend and it is mandatory for all. This meeting takes place at least a week before the original appraisal period starts. In this very week all the employees are informed individually about the date of his / her performance appraisal and hence his / her attendance on that very appraisal day becomes compulsory. On a day nearly 4-5 employees are appraised. The employees are asked to be prepared for any sort of situations during the appraisals. As an important step of their career, employees also take it very seriously and do their work seriously before and after appraisals. The appraisals in Piramyd Megastore are conducted by 2 Executives – Human Resources, alternatively. These 2 executives are a part of the 3 – man committee formed for the purpose of appraisals. The 3 – man Committee for the current year’s appraisal process consisted of : 1. Mr. Bosco Menezes – Store Manager, 2. Ms. Amrapali Shahdeo – Executive (Human Resources), 3. Mr. Paresh Patel – Executive (Human Resources). The employees are called for the appraisals along with their managers for his / her appraisal. 1. Self – Evaluation: This is the first step in the appraisal process at PRL, where an employee has to rate himself from 1 – 6, where 1 is the lowest point, whereas 6 is the highest grade. The employee is actually given a questionnaire which contains approx. 30 questions. On these questions the employee has to award the points to himself. The questions in the questionnaire are based on the following important aspects of his Job Responsibility in Piramyd Retail Limited. Each aspect under this job responsibility is - 72 -

given a different weightage. The chart showing the different aspects of the Job Responsibility in PRL and their weightage is given below: Sr. No. 1. 2. 3. 4. 5. 6.

Aspects of Job Responsibility Target Cover Customer Focus Visual Merchandising & House Keeping Discipline & Attendance Honesty & Integrity Other Factors

Weightage Given 35 % 15 % 15 % 10 % 10 % 15 %

2. Argument Starts: After the employee rates himself in the questionnaire on the above mentioned aspects from 1 – 6, the same report is given to his superior in this case the Floor Manager. There is an argument between the floor manager and the employee, if the floor manager feels that the employee has overrated himself in any of the questions. for instance, if a question is, “ How Clean Do I Keep My Section?”, and if the employee awards himself full points i.e. 6 which means that his section is always clean and there is no dust in his section, his floor manager may argue in the point and interfere that his section is not always clean and he has found bits of paper on the floor of his section several number of times, then the employee mat argue on that point or even go ahead without having any sort of arguments by saying the words, “I Agree”. At this stage the employee has full liberty to argue and repeatedly try and prove his point without affecting or losing any points on it. And it is observed that the employees take full advantage of this liberty at PRL. 3. Job Related Questions: The employees are then asked the questions relating to their jobs, for instance, about the fabric knowledge, any extra knowledge that the employee shares while selling the merchandises to the customers, any further developments he would suggest towards the betterment of his own section, brand, or the store. The best suggestions are also given bonus points. The employee is also enquired about his mbility to move to any other branch of Piramyd Megastore at any point of time. The positive response is given good points. he is also asked about the ultimate post that he would strive for in this particular organization and the ways of achieving it. if he is found capable and his means and ways to reach that position effective enough then he is given good ratings which fall under the Other Factors category in the above table. - 73 -

4. The Results: The employees

are rated

accordingly

from the

questionnaires, the out comes of the arguments are also given significance and lastly the abilities of the employee judged on the basis of the Job Related Questions. the employees are judged on the following basis or distribution and cut-off percentages which are stated below: Percentage cut-off 90 % and Above 80 % - 90 % 80 % and Below

Rating Outstanding Good Adequate

And accordingly the increments are given in the salaries of the employees at PRL. personally as a group we feel that the performance appraisal standards at PRL are quite dicey and difficult as well, as a person in order to come true to these standards of the appraisal committee is very difficult as we inquired with a few of the sales staff deployed on the different levels of Piramyd Megastore. The response to the appraisal techniques had many people saying that they found in difficult to make it to the top 2 levels of repute and most of them landed up in the 3rd category which is of a bit embarrassing position.

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THE END

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