PROJECT REPORT

ON

“STUDY ON EFFECTIVENESS OF PERFORMANCE APPRAISAL

SYSTEM”

IN

NEULAND LABORATORIES LIMITED

HYDERABAD.

SUBMITTED BY

K. BINDU NISCHALA
(H.T.NO: 08-02-144)

SUBMITTED
IN PARTIAL FULLFILMENT OF THE
REQUIREMENT FOR THE AWARD OF

MASTER OF BUSINESS ADMINISTRATION

BADRUKA COLLEGE P.G. CENTRE

KACHIGUDA, HYDERABAD
(2002-2004)
 DECLARATION

I hereby declare that the project report titled ‘’ STUDY ON EFFECTIVENESS OF

PERFORMANCE APPRAISAL SYSTEM’’ in NEULAND LABORATORIES

LIMITED , HYDERABAD is an original work and is submitted towards partial

fulfillment of the requirements for the award of the “ MASTER’S DEGREE IN

BUSINESS ADMINISTRATION” from OSMANIA UNIVERISTY, HYDERABAD.

 ACKNOWLEDGEMENTS

I extend my thanks to NEULAND LABORATORIES LTD for making it possible for

the students to work on projects in their organization .The interest the organization has
showed in ensuring effective interaction between the student community and the industry
is indeed praise worthy.

I thank my project guide Mr.M.G.S.Krishna, Vice-president HRD who has given me

this opportunity for doing my project work.

I thank Mr.Raghavendra Rao, for his valuable help and suggestions in completion of
my project work.

I also extend my special gratitude to my lecturer Mrs. Jayashree, for her constant
support that she has gave me through out the period.
 CONTENTS

S.NO TITLE Pg.No

LITERATURE REVIEW 1

ORGANIZATION PROFILE 19

3. DESIGN OF THE STUDY 36

OBJECTIVES OF THE STUDY

METHODOLOGY OF STUDY

SCOPE OF THE STUDY

LIMITATIONS OF THE STUDY

5. ANALYSIS AND INTERPRETATION OF DATA 38

6. FINDINGS 41

7. CONCLUSIONS 42

8. SUGGESTIONS 43

9. ANNEXURES 46

10. BIBLIOGRAPHY 58
 INTRODUCTION TO PERFORMANCE APPRAISAL

Although employees may learn about how well they are

performing through informal means such as favourable comments from co-workers or superiors,
Performance Appraisal is defined here as a formal, structured system of measuring, evaluating
and influencing an employees job related attributes, behaviours and outcomes as well as level of
absenteeism, to discover how productive the employee is and whether he or she can perform as
or more effectively in the future so that the employee, the organization and society gets benefited
altogether. To account for all the factors that affect this formal structured system of measuring
and evaluating performance, the term Performance Appraisal System is used. In essence, the
PAS involves:

1. Conducting a job analysis to identify job duties and responsibilities for which criteria
need to be developed.

2. Choosing an appropriate and valid performance appraisal method to assess job behaviors
or outcomes.

3. Developing a process for conveying job expectations to incumbents prior to the appraisal
period.

4. Establishing a feedback system relating to job performance.

5. Evaluating how well the PAS is doing in relation to its stated objectives.

How well the PAS works depends on the organizational

culture and the characteristics of the rater and the incumbent.
 PURPOSES AND IMPORTANCE OF PERFORMANCE APPRAISAL

Productivity improvement is of concern to almost all

organizations. Although the productivity of most important organizations is a function of
technological, capital and human resources, many organizations have now started to increase
productivity through improving the performance of their human resources. Because, employees
generally work only at 40-60 percent of their capabilities, with the difference in productivity
ratio as high as 3:1 for high versus low performance.

Employee performance includes an employee’s outcomes

(e.g. quality and quantity of output), behaviour (e.g. making a loan, showing up for work on
time) and job-related attributes (e.g. cooperativeness, initiative and team playing). All these can
be measured and evaluated in a variety of ways. However, the choice of appraisal process has a
profound effect on how effective the evaluation is. For example, Management by Objectives
(MBO) systems lead to average productivity gains of more than 45%, increases employee
satisfaction and fewer employee grievances.

In addition to having an impact on productivity, an

effectively designed performance appraisal form serves as a contract between the organization
and the employee. This contract acts as a control and evaluation system, better enabling
performance appraisal to serve the following purposes:

1. Management development:

Focuses on the future by identifying and preparing

individuals for increased responsibility or by establishing remedial training programs.

2. Performance measurement:
 Emphasizes the past, trying to determine the relative value
of employee performance, is useful for promotion, transfer, compensation, training, termination
and layoff decisions.

3. Feedback:

Outlines what performance is expected from employee.

4. Human resources planning:

Audits management talent to evaluate the present supply of

human resources for replacement planning.

5. Research on legal compliance:

Helps to establish the validity of employment decisions

made on the basis of performance based information.

6. Communication:

Provides a format for the dialogue between superior and

subordinate and improves understanding of personal goals and concerns can also increase the
trust between the rater and rate.
 NEED FOR PERFORMANCE APPRAISAL:

1. Provide information about the performance ranks basing on which decision

regarding salary fixation, confirmation, promotion, transfer and demotion are
taken.

2. Provide feedback information about the level of achievement and

behaviour of subordinate.

3. Provide information that helps to counsel the subordinate.

4. To prevent grievances and in disciplinary activities.

5. Provides information to diagnose the training needs of the employees.

 RELATIONSHIPS INFLUENCING PERFORMANCE APPRAISAL

Performance appraisal associated is associated with several

aspects of other personnel and human resource management (PHRM) activities, the internal and
external environments.

Relationship with other PHRM activities

Some of performance appraisals most critical relationships

are with job analysis, selection, compensation and training & development.

Job analysis:

The foundation of performance appraisal is job analysis.

What is or is not important can be assessed only through job analysis. If a formal job analysis has
not been conducted, courts may deny the validity of the appraisal system.

Selection:

To help increase the likelihood that those selected from the

job applicant pool will perform well on the job, organizations use validated selection tests. The
empirical validation of a selection test is the correlation between test scores and performance
scores. Therefore, having performance results is necessary because performance scores cannot be
established without them. When the performance appraisal is used in this way, it is particularly
important that the appraisal forms be based on job analysis.
Compensation:

One purpose of performance appraisal is to motivate

employees. One way is which performance appraisal can do this by serving as a basis on which
to distribute compensation. A valid appraisal of employee performance is necessary for an
organisation to provide contingent rewards (based on performance).

Training and development:

To provide the appropriate training, the organisation must

know the employees current level of performance and on what aspects of performance the
employee is performing at an undesirable level. It is also necessary to know whether the
undesirable performance is caused by ability, motivation or the situation. To gain this
knowledge, performance appraisal is necessary.

Relationship with internal environment.

Aspects of top management, organizational strategy and

corporate strategy and corporate culture have important relationships with performance
appraisal. In addition to influencing how much time and attention is devoted to performance
appraisal and keeping employees informed as to where they stand, the internal environment
influences how much time and attention is devoted to performance appraisal and keeping
employees informed as to where they stand, the internal environment influences how
performance appraisal is done. For example, if top management and the corporate culture
emphasises employee participation, employees will probably involve in performance appraisal
through self appraisal and appraisal of others. Additionally, if top management decided to use
product quality and employee performance s ways in which to gain competitive advantage for
the organisation, performance appraisal may be used to help shape organizational strategy. The
organizations strategy however may also influence the way in which performance appraisal is
done. Short-term criteria may be used in performance appraisal when an organisation is pursuing
a stable, extract profit strategy. Long term criteria may be used when an organisation is pursuing
a growth strategy.

Relationship with external environment

The intensity of domestic and international competition is

making it more difficult, and yet more necessary for organisation to survive, grow and be
profitable, organizations are seeking many ways to improve. Improving employee performance
is among the most critical of these methods. Measuring employee performance and seeking
reasons for any performance deficiencies can facilitate the process. Because, this is the essence
of gathering and using performance appraisal data, the entire performance appraisal system takes
on greater importance in organizations. This will continue to happen in organizations as long as
competition remains such a significant part of the external environment.
 PERFORMANCE APPRAISAL AS A SYSTEM OF PROCESSES AND
PROCEDURES

In establishing a performance appraisal system, decisions

regarding what to measure should be made very early. Other important decisions center around
the time period for the appraisal and the choice of raters.

Identifying criteria:

A valid PAS grows out of comprehensive job analysis that

identifies important job duties and tasks. Once duties and tasks are identified, performance
criteria can be developed. Criteria are to evaluate dimensions against which the incumbent’s
behaviours measured. There are some performance expectations that the incumbent strives to
attain.

Closeness to Organisational Goals:

Depending on the organizations strategy and its ability to measure

performance, criteria can be developed that relate either to individual or group job behaviour or
outcomes or to overall organizational effectiveness. Organizational effectiveness involves an
inferential leap; it entails aggregating individual and group outcomes in order to determine how
well the organization is functioning.

Single or Multiple Criteria:

 If coordinating market activities is the only job duty, then only
criteria that relate to this single duty are needed. More often, however jobs, are multi-
dimensional, composed of numerous different duties and related tasks. If job analysis identifies
all these duties as important, all should be measured by the performance appraisal instrument.

Weighting of Criteria:

For jobs involving more than one duty, there is another decision to
be made. How should these separate aspects of performance be combined into a composite score
that will facilitate comparisons of incumbents? One way is to weight each criterion equally. The
simplest, but most accurate approach is to use weights generated through job analysis. Individual
weights can also be determined for each criterion, relative to its ability to predict overall
performance. Multiple regressions can also be utilized to determine appropriate weights for each
job dimension.

Matching the Purpose :

In addition to identifying appropriate criteria, consideration should

be given to the time period for which performance is to be assessed. On average, most
organizations require formal performance review sessions at six-month to one-year intervals. For
some jobs, this may be an appropriate interval. For other jobs, performance should be evaluated
at the end of each one or two day job, rather than annually.

The evaluation period may also depend on the purpose of the

appraisal. To meet communication and evaluation purposes, the focus should be on current
employee performance during a single performance period. For promotion and training
decisions, an examination of performance across multiple appraisal periods may be of use. If
performance is steadily increasing or is consistently high, a promotion may be justified. If
performance remains consistently low, then training may be necessary.
 Choice of Raters

Sources of performance data include supervisors, peers,

subordinates, self-appraisals, customers and computer monitoring. While many of these can be
used to gather data, the relevance of each source needs to be considered prior to choosing the
rating method.

1. Appraisal by Superiors:

The superior is the immediate boss of the subordinate being

evaluated. The assumption is that superior knows the subordinates job and performance better
than anyone else.

2. Self-Appraisal:

The use of self-appraisal, particularly through subordinate

participation in setting goals, was made popular as an important competent of MBO.
Subordinates who participate in the evaluation process may become more involved and
committed to the goals. Subordinate participation may apparently also help clarify employer’s
roles and reduce role conflict. At this time, self appraisals are effective tools for programs
focusing on self-development, personal growth and goal commitment.

3. Peer Appraisal:

Peer appraisals appear to be useful predictors of

 subordinate performance. They are particularly useful when superiors lack access to some
aspects of subordinate’s performance. However, the validity of peer appraisals is reduced
somewhat if the organisational reward system is based on performance and is highly competitive,
and if the level of trust among subordinates is low. They are useful though when team work and
participation are part of the organisational culture.

4. Appraisal by Subordinates:

Sometimes, the subordinates may evaluate their superiors

solely on the basis of personality or whether they serve subordinates needs rather than those of
the organistaion. Subordinates appraisals can make superiors more aware of their impact on their
subordinates.

5. Appraisal by Customers:

In some situations, the “Customers” of an organization ca

provide a unique perspective on job performance. Examples abound: subscribers to a cable
television service, bank customers, and clients of a hospital and citizens of a local police or fire-
protection district. Although the customers objectives cannot be expected to correspond
completely with the organizations objectives, the information that customers provide can serve
as useful input for employment decisions such as those regarding promotion, transfer and need
for training. It can also be used to assess the impact of raining or as a basis for self-development.

6. Computer Monitoring:

A more recent trend in performance appraisal is the

gathering of performance data by computers. Advance in computer technology make it possible
for employers to continuously collect and analyse information about work performance and
equipment use. More and more managers are using this type of data to help plan workloads,
reduce costs and find new ways to organize work.
7. Rating Committees:

Many organizations, now a days use Rating Committees to

evaluate employees performance. These committees are usually compared of the employee’s
immediate supervisor and three or four other supervisors. The advantageous factor of these
committees is that since more number of raters are there, they can observe different facets of an
employee, at different levels. Further, several raters can help cancel out problems like bias and
the halo effect on the part of individual raters.

8. 360-Degree Feedback:

Many organizations have expanded the idea of upward

feedback into what they call 360 degree feedback. Here, performance information is collected
“all round” - an employee, supervisors, subordinates, peers, internal or external customers and
Questionnaire forms (mostly include supervisory skill items). The feedback is generally used for
training and development rather than for pay increases. In this method, the collected feedback
will be compiled by computer systems into individualized reports that are prepared and presented
to the person being rated. The ratees are often the only ones who get these completed reports.
Then, they meet their own supervisors and sometimes with their subordinates and share the
information they feel is pertinent for the purpose of developing a self-improvement plan.
 APPROACHES TO PERFORMANCE APPRAISAL

It should be emphasized that rating forms should not be equated with rating systems. The
development of a rating form comes only after systematic job analysis, the identification of
criteria and appropriate raters and decisions about timing of appraisals. While direct output
measures of performance are available for some jobs, the most widely used performance
measurements systems are judgmental. The simplest classifications are traditional and modern
methods

I. TRADITIONAL METHODS

1. Graphic Rating Scales:

The graphic rating scale is the most widely used form of

performance evaluation, which had been introduced in the 1920s. The scales as originally
developed and as used today consist of trait labels and unbroken lines with various numbers
positioned along the line and sometimes with descriptive adjectives below. Graphic rating scales
vary considerably in terms of the clarity with which the trait or performance dimension is
delineated, the number of rating categories, and the specialty of the anchors associated with
rating categories. Some graphic scales include only numbers and transmit only information about
directionality. Others include adjectives or verbal descriptors as scale anchors. The raters must
also consider more than one aspect of performance quality. If one rater focuses on the amount of
work produced and another focuses on work flow, an incumbent may receive vastly different
ratings from each rater. The major drawback to these scales is their subjectivity and low
reliability and the descriptive words often used may have different meanings to different raters.
2. Ranking Method:

In ranking method the employees are ranked from best to

worst on some characteristics. The rater first finds the employee with the highest performance
and the employee with the lowest performance and rates the former as best and the later as the
poorest then the rater selects the next highest and next lowest and so on. Ranking can be
relatively easy and inexpensive but its reliability and validity may be open to doubt. One
important limitation of the ranking method is that the size of the difference between individuals
is not well defined.

3. Paired Comparison Method:

The paired comparison method involves comparing each

incumbent to every other incumbent, two at a time, on a single standard to determine who is
“better”. A rank order of the individuals can be obtained by counting the number of times each
individual is selected as the better of a pair. This method does not force distribution of
employees in each department. The limitations with this method are it is time consuming and the
employees are simply compared to each other on total performance rather than specific job
criteria.

4. Forced Distribution Method:

The forced distribution method was designed to incorporate

several factors or dimensions into ranking of subordinates. The term “forced distribution” is used
because the superior must assign only a certain proportion of subordinates to each of several
categories on each factor. A common forced distribution scale may be divided into five
 categories, with a fixed percentage of all subordinates in the group falling within each of these
categories.

5. Checklist Methods:

The checklist method is a simple rating technique in which a

supervisor is given a list of statements or words and asked to check statement representing the
characteristics and performance of each employee.

6. Critical Incident Method:

Under critical incident method the supervisors continuously record

the critical incidents of the employee’s performance or behavior relating to all characteristics in a
specially designed notebook. The supervisors rate the subordinate on the basis of the notes taken
by him. This method has the advantage of being objective because the rater considers the records
of performance rather than the subjective points of opinion.

7. Essay or Free Form Appraisal:

This essay or free from appraisal method requires the

manager to write a short essay describing each employee’s performance during the rating period.
This format emphasis evaluation of overall performance based on strengths/weakness of
employee performance rather than specific job dimensions.

8. Group Appraisal :

Under group appraisal method, an employee is appraised by a

group of appraisers. This group consists of the immediate supervisor of the employee, to other
 supervisors who have close contacts, manager or department head. This method is widely used
for the purpose of promotion, demotion and retrenchment.
8. Confidential Reports:

Assessing the employee’s performance confidentially is a

traditional method of appraisal. Under this method, superior appraises the performance of his
subordinates based on his observations, judgments and intuitions. The superior keeps his
judgments and report confidentially.

II. MODERN METHODS

1. Behaviorally Anchored Scales:

The development of BARS generally corresponds to

collecting incidents describing competent, average and incompetent behaviour for each category.
These incidents are then grouped into broad overall categories or dimensions of performance (eg.
Administrative ability, interpersonal skill). Each dimension serves as one criterion in evaluating
subordinates. Using these categories, another group of individuals lists the critical incidents
pertinent to each category. Armed with a set of criteria with behaviourally anchored and
weighted choices, the superiors rate their subordinates with a form that is relatively unambiguous
in meaning, understandable, justifiable and relatively easy to use.

2. Assessment Centre:

In this approach individuals from various departments are brought

together to spend two or three working days working on an individual or group assignment
similar to the ones they would be handling when promoted. All assesses get an equal opportunity
to show their talents and capabilities and secure promotions based on merit.
 3. Human Resource Accounting:

It deals with cost of and contribution of human resources to the

organization. Cost of the employee includes cost of man power planning, recruitment, selection
etc. employee contribution is the money value of employee service which can be measured by
labour productivity.

4. Management by Objectives:

Management by objectives (MBO) systems are premised

on the assumption that an organizations objectives for a specific time period should cascade
down through the organization. Once goals are established for the organization, they are
distributed to divisions or responsibility centers and eventually individual employees. At the
conclusion of the performance period, the next step is to compare actual performance to the
distributed or agreed-on objectives. After the comparison, the supervisor and the manager jointly
explore the reasons why goals were not attained or were exceeded. The final step is to decide on
new goals and possible new strategies for goals not previously attained. Central to this approach
is the issue of goal congruence. An individual’s goal must be in harmony with those of the
department and organization.

5. Psychological Appraisal:

Psychological appraisals are conducted to assess the

employee potential. Psychological appraisals consist of a) in-depth interviews, (b) psychological
tests, (c) consultations and discussions with the employee, (d) discussions with the superior’s
sub-ordinates and peers, and (e) reviews of other evaluations.

Evaluation is conducted in the areas of (a) employee’s

intellectual abilities, (b) emotional stability, (c) motivational responses, (d) reasoning and
analytical abilities, (e) interpretation and judgmental skills, (f) sociability, (g) employees ability
to comprehend the vents, and (h) ability to foresee the future.

The psychological appraisal results are useful for decision-making

about (i) employee placement, (ii) carrier-planning and development, and (iii) training and
development.
 ORGANISATIONAL PROFILE

BRIEF ABOUT ORGANISATION

Neuland laboratories Limited is engaged in the

manufacturing of bulk drugs/actives and intermediates. They are manufacturing nearly 21 drugs
under 7 varieties viz. Anti-Asthmatics, Cardiovascular, Fluoroquinolones, Anti-Ulcerant, Anti-
Fungal, Anti-Depressant, Anti-Psychotic, and there are 4 products under development viz.
Beclamethasone Dipropionate, Fluticasone Propionate, Salmeterol, Lisinopril. The company’s
turnover stood at Rs.14706 Lacks for the year 2003-2004 recording a growth of 49% over the
previous years turn over of Rs.9825 lakhs. The company’s profit before depreciation, tax and
exceptional items has increased to Rs.1653.01 lakhs up from Rs.385.85 lakhs in the previous
year.

The company is enjoying the financial assistance from Industrial

Credits and Investment Corporation of India (ICICI), Industrial Development Bank of India
(IDBI), State Bank of India (SBI), Export Import bank of India (EXIM), Unit Trust of India
(UTI), Andhra Pradesh Industrial Investment Corporation (APIIC) and Andhra Pradesh
Industrial Development Corporation (APIDC).

The company is regularly exporting its products to end users in Europe,

Canada, Latin America, and South East Asia.

Facilities:
 Neuland has two world class manufacturing facilities close to
Hyderabad (India) with full WHO-CGMP compliance. The facilities are equipped to handle a
comprehensive range of chemical reactions. The company has been accredited with ISO 9002
and USFDA approval for Albuterol Sulfate for its Bonthapally unit and USFDA approval as well
as Certificate of suitability by Council of Europe for Ranitidine HCI Form I for Pashamylaram
unit.

Quality Assurance:

From sourcing of raw materials through every stage of manufacturing,

storing and dispatching Neulands Quality assurance teams adhere to industry-best practices and
are fully conversant in documentation meeting the requirements of agencies such as ISO,
USFDA, Council of Europe, TGA etc.

Regulatory Compliances:

Neulands quality assurance department is adept to only at meeting

the highest quality standards, but also fully conversant and proficient in various drug regulatory
requirements world-wide. The capability in preparing Drug Master Files for various countries is
evident in the two USFDA certifications and European Suitability Certificate. IMF’s for more
products have been submitted to USFDA, HPB Canada and TGA Australia.

Research & Development:

Neuland’s R&D Centre, which has been recognized by Govt. of India, was
established in 1992. The production technologies of all existing products were developed in-
house and the R&D efforts are focused on innovating cost-effective technologies of higher
efficiencies. The ICICI under its sponsored R&D Program sanctioned Rs 65.50 lacks. The R&D
strengths of Neuland complemented by its international business outlook open out opportunities
in the post –GATT era. At Neuland, there is concern for the future both for the future of mankind
as well as for the health of the company itself. This is being addressed by a continuous focus on
Research & Development.
Environment Friendliness:

Pharmaceutical companies are at the core of the mission for a healthier

world. Neuland ranks among the few Indian Companies to have made very high investments
such as secondary treatment plants and incinerators for cleaner operations. Constant environment
audits and continuous investments are aimed at achieving a performance much superior to
regulatory norms.

Conclusion:

Neuland has prided itself always on its commitment to the best in

technology and equipments, high productivity and superior quality. Care is also being taken to
tailor its products to each individual customer’s requirements. The practices of Total Quality
Management, Business Process Re-Engineering etc. are also instrumental to put the organization
on head in the present-day competitive world.
 COMPOSITION OF WORK-FORCE

The organization is headed by managing director (MD). The organization

is broadly divided into 9 Departments/Divisions i.e. Research & Development, Finance, Human
Resource Development, Production, Commercial, Marketing, Quality Control & Quality
Assurance, Materials & Inventories, Projects and. All these Heads shall be assisted by assisted
by Managers, Deputy Managers, Executives/Officers and Assistants (copy of Organogram
enclosed in Annexure-I).

The organizations total work-force stands at 520. It

includes Managerial, Non-Managerial and Workers. The composition of work-force is as
follows:

Managerial Non_Managerial Workers

Managing Director 1 Executives 24 Workers 140
General manager 4 Officers 62
Managers 10 Chemists 77
Deputy managers 13 Accountants 1
Senior Assistants 61
Office Assistants /Technical Assistants 127
Total 28 352 140

Performance Appraisal System is being applied to

Managerial and Non-Managerial Cadres whereas the Workers are covered under negotiation.
 COMPOSTION OF WORK-FORCE

Managerial Non-Managerial Workers

 THE DETAILS OF PERFORMANCE APPRAISAL SYSTEM IN THE
ORGANIZATION

Let us first have an overview of the appraisal process in the

organization. The process is known as PADS, acronym for PERFORMNACE APPRAISAL
AND DEVELOPMENT SYSTEM (copy of PADS enclosed in Annexure- II).

1. THE NEED FOR PERFORMANCE APPRAISAL

Performance appraisal plays a significant part as a tool and

technique of management development and growth. Besides meeting several other objectives in
a company, it also satisfies the psychological need of each individual to know how he is
performing in his job. Secondly, it increases the employee’s job satisfaction and morale by
letting him know that his superiors are interested in his progress and development. It helps to
plan placements, transfers besides career growth and development.

2. OBJECTIVE OF PADS

• Gaining commitment from employees about what is expected of them.

• Providing constructive feedback, coaching and counseling on individual performance.
Measure and improve individual performance.
Identify development/training needs and actions.

3. COVERAGE

The PAD system aims at covering initially all the positions

reporting to the Managing Director and the positions in the next line, till the level of Deputy
Managers.

4. PERIOD OF APPRAISAL

The appraisal period corresponds to the financial year i.e.

April of this year to March of the next year. However, the PAD System envisages review of
performance twice in a year viz. mid-year review during October of the year and final
assessment during April of next year.

5. THE PADS GUIDELINES

The PADS format consists of 3 parts each one pertaining to

different aspects of an individual employee.

5.1 Part I consists of basic details such as Personal Data, Leave availed, Past Increments,
Promotions, Training Programs attended etc. These details are filled in by HR
Department before the forms are dispatched for assessment.
5.2 Part II of the format deals with the actual assessment of the employees in relation to the
mutually agreed objectives. The details of part II on section-wise are as follows:

5.2.1 Section A deals with self-assessment where the individual himself/herself

introspects achievement against the targets already set. The employee also gives
his/her views descriptively such as areas of improvement, any constraints in not
achieving targets, training and development required to enhance their
productivity.
5.2.2 Section B & C relate to any significant achievements (include contribution
and innovation) major setbacks faced by the individual employees during the
period of assessment. These sections are to be filled in by the Appraisers and
 Reviewer. For this purpose, the appraisers and reviewers are advised to maintain a
record to maintain a record book of such incidents for each of their appraisees.

5.2.3 Section D – strengths and areas of improvement. This section is to be

filled by the appraiser and the reviewer.

5.2.4 Section E An employee, with a view to carrying out his job functions
effectively has to have certain competencies. These competencies have been
enumerated in this section.

5.2.5 In Section F- The appraisee is required to set his/her goals for the ensuing
year, April to March.

By this time, Divisional Heads would have their targets finalized

with the MD. The SMART way here is to establish Key Result Area (KRA) Assessment (copy
enclosed in Annexure-)

Specific ---KRA’s should be directly related to specific plans,

Projects.

Measurable ---Measurements should be reliance between

quantitative (objective) and qualitative (subjective).

Achievable ---Objectives should be achievable but at the same

time challenging. The individual should also be able to
control the objective.
 Related to the job ---Objectives must be relevant to the individual’s job role
and a subset of HOD’s objectives.

Time Bound ---The objectives must include a time frame – a target date.

The appraisee specifies the activities in column 2, success

criteria is in column 3, target date in column 4 and weightage in column 5. This will then be
discussed and signed in token of agreement, by the appraisee and his appraiser.

5.2.6 Section G –notes of discussion with appraisee. Feedback on achievement

of objectives and competencies required by the appraisee will be given to him by
the appraiser. This will also incorporate the views of the reviewer. This is
intended so as to bring about transparency in the process of appraisal between the
appraisee and the appraiser. It is suggested without any disturbances i.e. meetings,
phone calls. At this point:

FROM THE APPRAISER THE FOLLOWING MATTERS COULD BE FOCUSSED

• On past performance(achievements, contribution, non- achievements).

• Areas requiring improvement.
• Training & Development needs.
• KRA’s for ensuring year.
• Opportunities for future growth.
FOR THE ASSESSEE IT WOULD MEAN THE FOLLOWING

• To bring out points which would require specific action from his immediate boss.
• To utilize this opportunity to suggest any change in his job concept.
• To suggest training programs so that they can jointly plan for his/her development.
 The notes on discussion with the appraisee have to be recorded
including any differences of opinions between the appraisee and appraiser and duly signed by
both.

5.3 Part III deals with Potential Appraisal.

5.3.1 This is confidential section of the Appraisal Format (copy enclosed in

Annexure- ) and is to be filled by the Appraiser in consultation with the Reviewer
where due reviewer is not the Head of Department. The contents of this section
need not be discussed with the individual employee at the time of feedback
session. The recommendation for promotions will be scrutinized by the
Performance Review Committee.

6 OPERATIONAL DETAILS OF PADS

6.1 The KRA’s/Targets for the year in respect of each and every employee will be fixed
jointly by the Appraiser and the Appraisee and reviewed by the Reviewer. This exercise
must be completed in April each year and a copy of the agreed KRA’s/Targets is given to
the Assessee and the original to be retained by Appraiser.
6.2 The appraisal interview for the proceeding year’s performance year’s performance must
be completed between 1st and 15th of April and the purpose is three fold.

• To objectively assess past performance.

• To identify areas of improvement and chalk out a training and development plan.
• To finalize next year Objectives/Targets.
 6.3 A half-yearly review of KRA’s/Targets will take place between 1st and 15th October each
year between the Appraisee and the Appraiser. The review is carried out in the following
areas.

• Review of progress on KRA’s/Targets.

• Review of training and development needs identified earlier for implementation.
• Constraints faced in not achieving the targets, changes in priorities of
KRA’s/Targets due to environmental reasons etc, are recorded.

The PADS form duly filled in by Appraiser is forwarded to

reviewer for these comments.

6.4 At the end of the Appraisal period i.e. in April of the following year the Appraiser will
complete the Appraisal and forwarded it to the Reviewer for his review.

6.5 Once the review process is completed, the Appraiser will fix the date for the Appraisal
Interview and gives at least 2 days notice to the subordinate.

6.6 The Appraisal Interview is then conducted by the Appraiser and gives feedback on the
following areas:
• On past performance-achievements and non-achievements.
• Areas requiring improvement.
• Training & Development requirements.
• Next year KRA’s/Targets are also discussed and agreed upon.
• Opportunities for growth and development.

The Appraisal is duly completed after discussion with Reviewer.

The overall rating is shared with the employee and his signature is obtained on the form.
6.7 The appraiser completes the record of interview on the PADS form and forwards all the
appraisals in respect of his subordinates to his Reviewer/Functional Head.

6.8 The Reviewer/Functional Head then scrutinizes the appraisals and recommendations for
promotions, approves them as required and then forwards to Corporate HRD through the
respective Division/Unit Heads.

6.9 The Corporate HR Department then prepares a summary by hierarchical levels for the
entire management population in each Division/Unit and computes the percentages of
each rating in each level.

Inter-division comparisons are also made and percentages

computed as above. Similarly, a summary is prepared on all recommendations for
promotions across all departments of the Company/Division and percentage of promotion
level wise is prepared.

The Divisionwise/Groupwise summaries are then forwarded to

Performance Review Committee (PRC) for discussion and approval.
6.10 The GM-HRD will collate the data in Training & Development Section of the appraisal
form in respect of all members of management separately for each division/unit, under
the following heads.

• Plan for secondments to other departments/divisions/factories etc.

• Plan for seminars/Workshops (1 or 2 day’s duration).
• External training plan (specific long duration-above 3 days duration).
• In-company training plan.
• Overseas training plan.
 The collated data under these 5 heads will be discussed
with the department heads concerned by the Corporate HRD and the final Training &
Development Plan for each Division/Unit approved by the respective Division/Unit Heads for
implementation by the respective unit/functional managers.

6.11 The potential appraisal form is the last stage of the appraisal process which will be filled
by the Reviewer in consultation with the Appraiser in respect of the assessee and will not
be shown to the assessee.

6.12 After the entire appraisal process is completed the appraisal form along with Training &
Development Section will be filed in the employees Personal File.

THE DETAILS OF PERFORMANCE APPRAISAL FORM

The appraisal form (copy enclosed in Annexure-V) is based on 5-point rating scale having 10, 8,
6, 4 and 2 points respectively. A total number of 12 factors are included in the form. They are
narrated as bellows:

1. Quality:

If the appraisee exceptionally has high quality, he is rated

 10 points. If he makes an error at rare times, he is rated with 8 points. If he does a good job, he is
rated with 6 and if he just gets through he is rated with 4 points. If he is careless then he is rated
with 2 points.

2. Job knowledge:

If he is an expert in his own job and several others then he

is rated with 10 points. He is an expert only in his own job then he is rated with 8 points. If he
knows job fairly well he is rated with 6 points. If he just gets through he is rated with 4 points. If
he has inadequate knowledge then he is rated with 2 points.

3. Quantity:

If he comes out with more than expected then he is rated

with 10 points. If he is exceptionally fast he is rated with 8 points. If he frequently turns out more
than required amount then he is rated with 6 points. If he turns out required output but only at
rare options then he is rated with 4 points. If he turns out with required output he is rated with 2
points.

4. Dependability:

If he is dependable and there is no necessity of check, he is

rated with 10 points. If he requires with a little checking then he is rated with 8 points. If he
follows instructions then he is rated with 6 points. If he requires frequent checking then he is
rated with 4 points. If he requires continuous checking he is rated with 2 points.

5. Initiative:
 If he requires no supervision, he is rated with 10 points and
if requires minimum supervision then he is rated with 8 points. If he takes good decisions but
requires some supervision then is rated with 6 points. If he is just routine worker he is rated with
4 points. If he requires constant supervision then he is rated with 2 points.

6. Adaptability:

If he learns rapidly, he is rated with 10 points. If he is

willing to change then he is rated with 8 points. If its his normal ability, he is rated with 6 points.
If he learns slowly then he is rated with 4 points. If he prefers only old methods he is rated with 2
points.

7. Attitude:

If he is a good team worker, he is rated with 10 points. If

he is cooperative, he is rated with 8 points. If he is limited in being cooperative, he is rated with
6 points. If he has passive resistance, he is rated with 4 points and poor cooperation, he is rated
with 2 points.

8. Attendance:

If he is 2 to 3 days normal or 2 days on his own accord, he

is rated with 10 points. If he is 1 to 2 days normal or 2 days on his own accord then he is rated
with 8 points. If no days lost, he is rated with 6 points. If he is 3 to 4 days normal or 3 days on
his own accord then he is rated with 4 points. If he is absent for more than 4 days, he is rated
with 2 points.

9. Housekeeping:
 If he maintains safe norms and orderly worker, he is rated
with 10 points. If he keeps his work place clean and safe, he is rated with 8 points. If he
occasionally requires warning about cleanliness and safety, he is rated with 6 points. If he
requires repeated warning, he is rated with 4 points and if he keeps his area dirty and ignores
safety rules, he is rated with 2 points.

10. Potential:

If he has exceptional possibilities, he is rated 10 points. If

he has bright growth he is rated with 8 points. If he has slow development he is rated with 8
points. If his future is doubtful, he is rated with 4 points. If he has no more growth, he is rated
with 2 points.

11. Personality:

If he has winning personality, he is rated with 10 points. If he is

respected and well-liked and respected, he is rated 8 points. If he is reasonable, he is rated 6
points. If he is difficult to get along with, he is rated 4 points. If he is disagreeable, he is rated 2
points.

12. Supervisory Ability:

If he has outstanding leadership, he is rated 10 points. If he

has good planning, he is rated 8 points. If he is not outstanding, he is rated 6 points. If he has
adequate supervision, he is rated 4 points. If he has poor planning, he is rated 2 points.
 After combining all the points for all the factors, the appraisee will
be grouped into any 5 ranges viz. 100-120, 80-100, 60-80, 40-60 and 20-40 respectively. If the
appraisee gets 100-120 points, he will be awarded promotion. In case, vacancy is not available,
the promotional post’s pay scale will be given. If the appraisee gets 80-100 points, he will be
awarded additional increments. He may also be considered for sending to training and
development program to make him best from better. If the appraisee gets 60-80 points, he will be
warded normal increment. He will also be sent for training and development program in the areas
where he requires to improve his performance considerably and consistently. If the appraisee
gets 40-60 points, he will be given an opportunity of 6 months duration to improve his
performance. If the appraisee gets 20-40 points, he will be terminated from the service.

METHODOLOGY

Objective:

The main objective is primarily aimed at measuring the

effectiveness of Performance Appraisal System.

Scope of Study:

Non-Managerial Cadre.
Designing of the Questionnaire:

Once the information about the performance appraisal system was

collected from the project guide the Questionnaire is designed that comprises 15 questions
having “YES “or “NO “ options.

Data Sample:

Here the sample is a representative of the population and unbiased

of all facts, a Sample of 70 participants i.e. 20% of non-managerial cadre from all
departments/divisions have been chosen for the study.

Data Collection:

The data collected for this study is primary sources of data i.e. by
administering a questionnaire from a sample and secondary data i.e. Annual Report, other
available Official Records.

Limitations:

Since the duration of the study is short, it was not possible

to collect wide range of information, data that could enrich the study. Some of the questionnaires
were not completely filled. The opinions, behaviors and attitudes of the respondents reflected in
this study are restricted to the duration of the research and are subjected to change with the
passage of the time

ANALYSIS AND INTERPRETATION OF DATA

The questionnaire (copy enclosed in Annexure-VII) that comprises of 15 questions having two
replies i.e. YES or NO. Based on this, we can visualize the effectiveness of existing Performance
Appraisal System (PAS). The details are as follows:

• As regards, awareness among the appraisers on performance appraisal system, it got

positive reply from all the 70 participants (100%).
• As regards understanding PAS also, it got positive reply from all the 70 participants
(100%) whereby we can say that PAS gives the appraisees an idea of what is actually
expected form them.

• As regards with the goals, it got positive reply from 55 participants (78%) out of total 70
participants.

• As regards feedback, it got positive reply from all the 70 participants (100%). Thus the
feedback not only allows the appraisees to know where they are standing which helps
them to improve their performance in the present job and also allows them to know their
potential for higher level jobs.

• As regards open dialogue between the officer/appraiser and the appraisee, it got positive
reply from 54 participants (77%) out of total 70 participants whereby we can find the
level of inter-personal skills of the individuals.

• As regards with the competencies as per job requirements helping the appraisee, it got
positive reply from 52 participants (74%) out of total 70 participants.

• As regards with additional increments, it got positive reply from 43 participants (61%)
out of total 70 participants whereby PAS allows organisation to implement performance
based compensation package to is employees.
• As regards promotion, it got positive reply from 42 participants (60%) out of total 70
participants whereby we can find that PAS allows organisation to provide sound
promotional channels to its employees.

• As regards with creativity, it got positive reply from 49 participants (70%) out of total 70
participants.

• As regards with interpersonal relationships, it got positive reply form 51participants

(73%) out of 70 participants.

• As regards with the scope of self appraisal, it got positive reply from 35 participants
(50%) out of 70 participants.

• As regards with training, it got positive reply from 51 participants(73%) out of total 70
participants whereby PAS ensures to determine training needs of the appraisees.

• As regards with carrier development , it got positive reply from all the participants(100%)
, whereby we can find that with the help of PAS the organisation is in a position to
ensure growth-oriented career to its employees.

• As regards inter-departmental transfers, it got positive reply from 47 participants (67%)

out of total 70 participants whereby we can find that PAS allows the organisational to
implement Job Rotation Programme that helps the employees to improve potential and
multiple skills in new areas of carrer.
• As regards the change of period for appraisal, it got negative reply from all the
participants (100%) whereby we can find that PAS allows the appraisees sufficient time
so that they are in a position to achieve their targets/goals.
 0
10
20
30
40
50
60
70
80
90
100

awareness

understanding

goals

feedback

open dialoque

competencies

additional increments

promotion

percenatge
creativity

interpersonal relationships

self appraisal

training

carrier development

inter-dept transfers

change of period
 CONCLUSIONS

 The organisation is very keen and committed to appraisee the employee’s performance very
effectively from top-to-down for all round development of employees and organisation itself.

 The performance appraisal system has the legal compliance, since valid performance criteria
that is based on critical job components and specific standards are established during the
process of evaluation.

 For managerial cadre, the modern trend of appraisal approaches are being practiced.
Conducting appraisal interviews, goal-setting processes and establishing Key Result Areas
etc. may be mentioned in this regard.

 After completion of the appraisal, as per training needs, the employees are being sent for
Training & Development Programmes. Hence, management Development is ensured, for
increased responsibilities.

 Performance measurement is clearly linked to promotions, inter-departmental transfers,

compensations etc.

SUGGESTIONS
The suggestions regarding the appraisal system are:

♦ The time period for the evaluation must be biannual i.e. for every six months. By adopting
this particular method there will be an increase in the interaction levels between the superiors
and the workers by which there would exist with a high scope of understanding between the
both parties.

♦ Open-ended questions and discussion with the appraisee will yield in good results. This gives
a very good scope for encouraging the appraisee and making him to express his thoughts
without any constraints and also makes him feel free to put forward his ideas for the
development of the appraisal system.

♦ The appraisal system would be effective when the employee is given freedom to express his
views i.e. self-appraisal system must be implemented. This would make them understand
where they stand, where they want to be and their efforts may be directed to fill the gaps with
a sense of participation /involvement.

♦ The suggestions of the appraisee may be taken before framing the PAS to know his ideas.
His ideas must be considered if it is possible. This process may boost the self-morale of the
employee and increase his responsibility to follow it.

♦ The KRA’s must be clearly specified to the employees. If this is done the employee would be
able to assess his internal qualities which would help him to attain the objectives given to
him and would be able to concentrate on the areas given to him without deviating.
♦ The strengths and weaknesses must be well communicated and suggestions to overcome
them must be clearly specified. If the strengths of the employee are communicated the
employee morale would increase and as soon as the weaknesses of the employee are
communicated, suggestions must also be provided to overcome them, so that the mistakes
may not be repeated again.

♦ Few employees expressed that confidential report may be subject to bias; this must not
happen as it badly affects the morale of the employee. This must be eliminated. While filling
up the confidential forms, personal prejudice must not be considered as it leaves a scope in
creating differences between the employees.

♦ Thorough counseling must be done to the employees between each Performance Appraisal
cycle about their duties and responsibilities. This discussion should contain both constructive
compliments and criticism. At the end the employee must be clear with his job
responsibilities.

♦ The objective of conducting the performance appraisal must be clearly stated to the
employees. This helps the employee to match his competencies to meet the objective which
must be attained.

♦ Promotion policy’s should invariably depend upon the performance Appraisal system but not
only on seniority basis. All the employees must be clearly stated that the promotion policy is
depended on individual performance and not only on seniority basis because if it is not
conveyed to them in a proper sense clashes and internal differences would be created which
would make the organization atmosphere a chaos.
♦ Give the employee a few days notice of the discussion and its purpose. Encourage the
employee to give some preparatory thought to his job performance and development plans. In
some cases, have employees read their written performance evaluation prior to the meeting.

♦ The present appraisal system includes almost all aspects of good performance appraisal but
the organization must also adapt to the modern methods of appraisal such as management by
objectives, 3600 appraisal etc

ANNEXURE-II
 A VIEW OF PADS-PROCESS FLOW

 The process starts at the beginning of ‘Business Year’(April-March).

 Applicable to Deputy Managers and above.

 PADS forms are issued by Corporate HR.

 Based on the business plans, departmental/functional plans are made available by

Corporate Planning Department.

 Each Departmental/Functional Head has then the responsibility of facilitating key goal
setting (minimum 3 and maximum 5) for each job holder within his department/function.

 Each employee should specify based on his job description, routine work imperative for
job which do not come under key goals.

 The respective appraisers call for a meeting with the job holder to discuss his role for the
coming year and ensure that he has clear measurable objectives against which his
performance will be assessed.

 Mid-year review is conducted in light of set objectives. This will help in identifying
constraints and facilitate mid-course modifications, if any.

 A review for the entire year is done once in a business year.

 The appraisal form has to be signed by each appraisee, appraiser and the reviewer.
 The appraisal underwent will become one of the inputs for the next years performance of
the appraisee.

ANNEXURE-III
 KEY RESULT AREA (ASSESSMENT)

SI.NO OBJECTIVE(KRA) ACHIEVED/NOT RATING OF RATING

ACHEIVED APPRAISER OF M.D
1

ANNEXURE-IV

COMPETENCIES FOR MEASURING PERFORMANCE

Please mark A, B, C, and D as applicable in each box. Refer rating model as annexed.
SI.NO COMPETENCIES APPRAISER REVIEWER
1 Strategic Leadership
2 Leadership Skills
3 Work Process Improvement
4 Job Knowledge
5 Problem-Solving Skills
6 Administrative Capability
7 Initiative & Creativity
8 Cost Optimization
9 Quality & Quantity of output
10 Team Play
11 Communication Skills
12 Discipline

ANNEXURE-VI

RATING MODEL

A - OUTSTANDING PERFORMANCE
Indicates performance where exceptional results have been consistently achieved throughout the
year and has made one or more significant contribution which has been of unique value to
company.

B - ABOVE EXPECTATION

The assessee would have consistently exceeded targets/job requirements and displayed
commendable grasps of the job, initiative and leadership requires minimum supervision.

C - MEETS EXPECTATION

Indicated acceptable performance which meets normal expectations where targets have been met.

D - NEEDS IMPROVEMENT

Indicates marginal and unacceptable performance and does not meet job requirements except
occasionally, requires constant supervision.

ANNEXURE-VII

QUESTIONNAIRE

Name : Age :
Designation : Qualification :
Experience :
1. Are you aware of performance appraisal system in organization? Yes/No

2. Do the goals of the employee align with the organizational goals? Yes/No

3. Does the appraisal system give the appraisee an idea of what is expected Yes/No
of him?

4. Do you receive feedback about your potential for higher level jobs? Yes/No

5. Do you have any open dialogue with your officer or appraiser during Yes/No
the process of appraisal?

6. Does the present Performance Appraisal System help you to improve Yes/No
the competencies as per job requirements?

7. Did u receive any additional increments after appraisal is done? Yes/No

8. Did you receive any promotions? Yes/No

.
9. Did the performance appraisal system help you to bring out Yes/No
creativity within you?
10. Did the performance appraisal system help in developing the Yes/No
interpersonal relationship between the management and subordinates?

11. Does the management give scope for self appraisal? Yes/No

12. Have you been sent to any training and development program Yes/No
after the performance appraisal is done?

13. Does the imparted training help you in carrier development? Yes/No

14. In order to improve job rotation across the departments/divisions Yes/No

is there any job rotation?

15. Do you want to change the period of appraisal system? Yes/No