Performances appraisal

A performance appraisal, employee appraisal, performance review, or (career)

development discussion[1] is a method by which the job performance of an employee is
evaluated (generally in terms of quality, quantity, cost, and time) typically by the corresponding
manager or supervisor[2]. A performance appraisal is a part of guiding and managing career
development. It is the process of obtaining, analyzing, and recording information about the
relative worth of an employee to the organization. Performance appraisal is an analysis of an
employee's recent successes and failures, personal strengths and weaknesses, and suitability for
promotion or further training. It is also the judgement of an employee's performance in a job
based on considerations other than productivity alone.

Aims
Generally, the aims of a performance appraisal are to:

 Give employees feedback on performance

 Identify employee training needs
 Document criteria used to allocate organizational rewards
 Form a basis for personnel decisions: salary increases, promotions, disciplinary actions,
bonuses, etc.
 Provide the opportunity for organizational diagnosis and development
 Facilitate communication between employee and administration
 Validate selection techniques and human resource policies to meet federal Equal
Employment Opportunity requirements.
 To improve performance through counseling, coaching and development.

Objectives of Performance appraisal:

 To review the performance of the employees over a given period of time.

 To judge the gap between the actual and the desired performance.

 To help the management in exercising organizational control.

 Helps to strengthen the relationship and communication between superior – subordinates
and management – employees.

 To diagnose the strengths and weaknesses of the individuals so as to identify the training
and development needs of the future.

 To provide feedback to the employees regarding their past performance.

 Provide information to assist in the other personal decisions in the organization.

 Provide clarity of the expectations and responsibilities of the functions to be performed

by the employees.

 To judge the effectiveness of the other human resource functions of the organization such
as recruitment, selection, training and development.

 To reduce the grievances of the employees.

Purposes of Performance Appraisal
Performances appraisal of employees is needed for the following two based purposes

1. Administration purposes
2. Self-improvement purposes

(1) ADMINISTRATION PURPOSES

Administration purposes relates to human resource management in an
organization. Such functions are useful for taking decisions in regard to HRM. Decisions
relating promotions, transfers, etc. are taken under administration purposes of
performance appraisal. Administration purposes of performance appraisal are as follows

 Promotions and Placement of Employees

 Transfers and Demotions
 Wage and Salary administration
 Training and Manpower Development Programmes
 Personnel Research
 Favourable impact on employees
 Miscellaneous administration
 To confirm the services of probationary employees after the completion of
probationary period successfully
 To improve internal communication
 To determine whether HR programmes( selection, training, transfers) have
been effective or not

(2) SELF-IMPROVEMENT OF EMPLOYEES

Performance appraisal also facilitates self improvement and self development
(career development) of an employee. In fact, this purpose is more important as it relates
to human resource development. Such appraisal suggests the weaknesses ans
shortcomings of the ratees. It serves as a feedback to the employee. This is followed by
discussion between the rater and the ratees in a spirit of co-operation and mutual
understanding. Counselling of employees for improving their performance is always
through such post appraisal interviews. This gives opportunity to an employee to
overcome his weaknesses and to improve skills, abilities, performance, behavior and so
on. Thus performance appraisal is needed for performance improvement of employees.
This positive purpose is more important and useful to the employees and the organization
in the long run.
The purposes of performance appraisal in regard to self-improvement/self
development of employees are as noted below
 To assess the critical attributes of the executives.
 To highlight the strengths and weaknesses and areas of improvement in the case
of an executive.
 To evaluate and compare the performance of an executive on contrast to other
executives.
 To identify the development areas of the executives and provide the right kind of
opportunities.
 To discover the latent/hidden skills, talents, etc. available with an executive.
 To assess whether the executive is on the right job, right place or not.
 To find out how far the executive can grow in the organization taking his
capabilities into account.
 To find out the kind of job rotation or career opportunities should be provided to
an executive.
 Methods of performance appraisal

Traditional methods/ Modern Methods/techniques

techniques

1. Confidential Reports 1. Human Resources

2. Ranking Methods Accounting
3. Grading Methods Methods
4. Graphic Rating Scales 2. Appraisal by Results
5. Checklist Methods or Management By
6. Forced Choice Rating Objectives
Method 3. Assessment Centre
7. Critical Incident Method 4. Behaviourally
8. Essay Method Anchored Rating
9. Group Appraisal Scales (BARS)
10. Field Review Method 5. 360 Degree
appraisal

Modern Methods/Techniques
A common approach to assessing performance is to use a numerical or scalar rating system
whereby managers are asked to score an individual against a number of objectives/attributes. In
some companies, employees receive assessments from their manager, peers, subordinates, and
customers, while also performing a self assessment. This is known as a 360-degree appraisal and
forms good communication patterns.

The most popular methods used in the performance appraisal process include the following:

 Management by objectives
Management by Objectives (MBO) is a process of defining objectives within an
organization so that management and employees agree to the objectives and understand
what they are in the organization.
 The term "management by objectives" was first popularized by Peter Drucker in his 1954
book 'The Practice of Management'.[1]The essence of MBO is participative goal setting,
choosing course of actions and decision making. An important part of the MBO is the
measurement and the comparison of the employee’s actual performance with the
standards set. Ideally, when employees themselves have been involved with the goal
setting and choosing the course of action to be followed by them, they are more likely to
fulfill their responsibilities.

Features and Advantages

Unique features and advantage of the MBO process

The basic principle behind Management by Objectives (MBO) is for employees to have a clear
understanding of the roles and responsibilities expected of them. They can then understand how
their activities relate to the achievement of the organization. MBO also places importance on
fulfilling the personal goals of each employee.

Some of the important features and advantages of MBO are:

1. Motivation – Involving employees in the whole process of goal setting and increasing employee
empowerment. This increases employee job satisfaction and commitment.
2. Better communication and Coordination – Frequent reviews and interactions between superiors
and subordinates helps to maintain harmonious relationships within the organization and also
to solve many problems.
3. Clarity of goals
4. Subordinates have a higher commitment to objectives they set themselves than those imposed
on them by another person.
5. Managers can ensure that objectives of the subordinates are linked to the organization's
objectives.

Domains and levels

Objectives can be set in all domains of activities (production, marketing, services, sales, R&D,
human resources, finance, information systems etc.).

Some objectives are collective, for a whole department or the whole company, others can be
individualized.

Practice
Objectives need quantifying and monitoring. Reliable management information systems are
needed to establish relevant objectives and monitor their "reach ratio" in an objective way. Pay
incentives (bonuses) are often linked to results in reaching the objectives
Limitations
There are several limitations to the assumptive base underlying the impact of managing by
objectives, including:

1. It over-emphasizes the setting of goals over the working of a plan as a driver of outcomes.

2. It underemphasizes the importance of the environment or context in which the goals are set.
That context includes everything from the availability and quality of resources, to relative buy-in
by leadership and stake-holders. As an example of the influence of management buy-in as a
contextual influencer, in a 1991 comprehensive review of thirty years of research on the impact
of Management by Objectives, Robert Rodgers and John Hunter concluded that companies
whose CEOs demonstrated high commitment to MBO showed, on average, a 56% gain in
productivity. Companies with CEOs who showed low commitment only saw a 6% gain in
productivity.

3. Companies evaluated their employees by comparing them with the "ideal" employee. Trait
appraisal only looks at what employees should be, not at what they should do.

When this approach is not properly set, agreed and managed by organizations, self-centered
employees might be prone to distort results, falsely representing achievement of targets that were
set in a short-term, narrow fashion. In this case, managing by objectives would be
counterproductive.

The use of MBO must be carefully aligned with the culture of the organization. While MBO is
not as fashionable as it was before the 'empowerment' fad, it still has its place in management
today. The key difference is that rather than 'set' objectives from a cascade process, objectives
are discussed and agreed upon. Employees are often involved in this process, which can be
advantageous.

A saying around MBO -- "What gets measured gets done", ‘Why measure performance?
Different purposes require different measures’ -- is perhaps the most famous aphorism of
performance measurement; therefore, to avoid potential problems SMART and SMARTER
objectives need to be agreed upon in the true sense rather than set.
  360-degree appraisal
In human resources or industrial/organizational psychology, 360-degree feedback, also
known as multi-rater feedback, multisource feedback, or multisource assessment, is
feedback that comes from all around an employee. "360" refers to the 360 degrees in a
circle, with an individual figuratively in the center of the circle. Feedback is provided by
subordinates, peers, and supervisors. It also includes a self-assessment and, in some
cases, feedback from external sources such as customers and suppliers or other interested
stakeholders. It may be contrasted with "upward feedback," where managers are given
feedback by their direct reports, or a "traditional performance appraisal," where the
employees are most often reviewed only by their managers.The results from 360-degree
feedback are often used by the person receiving the feedback to plan training and
development. Results are also used by some organizations in making administrative
decisions, such as pay or promotion. When this is the case, the 360 assessment is for
evaluation purposes, and is sometimes called a "360-degree review." However, there is a
great deal of controversy as to whether 360-degree feedback should be used exclusively
for development purposes, or should be used for appraisal purposes as well (Waldman et
al., 1998). There is also controversy regarding whether 360-degree feedback improves
employee performance, and it has even been suggested that it may decrease shareholder
value (Pfau & Kay, 2002).

The German Military first began gathering feedback from multiple sources in order to evaluate
performance during World War II (Fleenor & Prince, 1997). Also during this time period, others
explored the use of multi-rater feedback via the concept of T-groups.

One of the earliest recorded uses of surveys to gather information about employees occurred in
the 1950s at Esso Research and Engineering Company (Bracken, Dalton, Jako, McCauley, &
Pollman, 1997). From there, the idea of 360-degree feedback gained momentum, and by the
1990s most human resources and organization development professionals understood the
concept. The problem was that collecting and collating the feedback demanded a paper-based
effort including either complex manual calculations or lengthy delays. The first led to despair on
the part of practitioners; the second to a gradual erosion of commitment by recipients.

Multi-rater feedback use steadily increased in popularity, due largely to the use of the Internet in
conducting web-based surveys (Atkins & Wood, 2002). Today, studies suggest that over one-
third of U.S. companies use some type of multi-source feedback (Bracken, Timmereck, &
Church, 2001a). Others claim that this estimate is closer to 90% of all Fortune 500 firms
(Edwards & Ewen, 1996). In recent years, Internet-based services have become the norm, with a
growing menu of useful features (e.g., multi languages, comparative reporting, and aggregate
reporting) (Bracken, Summers, & Fleenor, 1998).

Accuracy
A study on the patterns of rater accuracy shows that length of time that a rater has known the
person being rated has the most significant effect on the accuracy of a 360-degree review. The
study shows that subjects in the group “known for one to three years” are the most accurate,
followed by “known for less than one year,” followed by “known for three to five years” and the
least accurate being “known for more than five years.” The study concludes that the most
accurate ratings come from knowing the person long enough to get past first impressions, but not
so long as to begin to generalize favorably (Eichinger, 2004).

It has been suggested that multi-rater assessments often generate conflicting opinions, and that
there may be no way to determine whose feedback is accurate (Vinson, 1996). Studies have also
indicated that self-ratings are generally significantly higher than the ratings of others (Lublin,
1994; Yammarino & Atwater, 1993; Nowack, 1992).

 Behaviorally anchored rating scales

Behaviorally Anchored Rating Scales (BARS) are scales used to rate performance. BARS are
normally presented vertically with scale points ranging from five to nine.It is an appraisal
method that aims to combine the benefits of narratives, critical incident incidents, and
quantified ratings by anchoring a quantified scale with specific narrative examples of good,
moderate, and poor performance.

Background
BARS were developed in response to dissatisfaction with the subjectivity involved in using
traditional ratings scales such as the graphic rating scale[2] A reviews of BARS concluded that the
strength of this rating format may lie primarily in the performance dimensions which are
gathered rather than the distinction between behavioral and numerical scale anchors. [3]

Benefits of BARS
BARS are rating scales that add behavioral scale anchors to traditional rating scales (e.g. graphic
rating scales). In comparison to other rating scales, BARS are intended to facilitate more
accurate ratings of the target person's behavior or performance. However, whereas the BARS is
often regarded as a superior performance appraisal method, BARS may still suffer from
unreliability, leniency bias and lack of discriminant validity between performance dimensions[4][5]

Developing BARS
BARS can be developed using data collected through the critical incident technique[6], or through
the use of comprehensive data about the tasks performed by a job incumbent, such as might be
collected through a task analysis. In order to construct BARS several basic steps, outlined below,
are followed.

1. Examples of effective and ineffective behavior related to job are collected from people
with knowledge of job using the critical incident technique. Alternatively, data may be
collected through the careful examination of data from a recent task analysis.
2. These data are then converted in to performance dimensions. To convert these data into
performance dimensions, examples of behavior (such as critical incidents) are sorted into
homogeneous groups using the Q-sort technique. Definitions for each group of behaviors
are then written to define each grouping of behaviors as a performance dimension
3. A group of subject matter experts (SMEs) are asked to retranslate the behavioral
examples back into their respective performance dimensions. At this stage the behaviors
for which there is not a high level of agreement (often 50%- 75%) are discarded while the
behaviors which were retranslated back into their resepctive performance dimensions
with a high level of SME agreement are retained. The retranslation process helps to
ensure that behaviors are readily identifiable with their respective performance
dimensions.
4. The retained behaviors are then scaled by having SMEs rate the effectiveness of each
behavior. These ratings are usually done on a 5 to 9 point Likert-type scale.
5. Behaviors with a low standard deviation (for examples, less than 1.50) are retained while
behaviors with a higher standard deviation are discarded. This step helps to ensure SME
agreement about the rating of each behavior.
6. Finally, behaviors for each performance dimensions- all meeting retranslation and criteria
will be used as scale anchors.

Trait-based systems, which rely on factors such as integrity and conscientiousness, are also
commonly used by businesses. The scientific literature on the subject provides evidence that
assessing employees on factors such as these should be avoided. The reasons for this are twofold:
1) Because trait-based systems are by definition based on personality traits, they make it difficult
for a manager to provide feedback that can cause positive change in employee performance. This
is caused by the fact that personality dimensions are for the most part static, and while an
employee can change a specific behavior they cannot change their personality. For example, a
person who lacks integrity may stop lying to a manager because they have been caught, but they
still have low integrity and are likely to lie again when the threat of being caught is gone.

2) Trait-based systems, because they are vague, are more easily influenced by office politics,
causing them to be less reliable as a source of information on an employee's true performance.
The vagueness of these instruments allows managers to fill them out based on who they want
to/feel should get a raise, rather than basing scores on specific behaviors employees
should/should not be engaging in. These systems are also more likely to leave a company open to
discrimination claims because a manager can make biased decisions without having to back them
up with specific behavioral information.

 Employment integrity testing

Integrity as defined by Webster's Dictionary [1] is a firm adherence to a code of
especially moral or artistic values. Some synonyms are uprightness, honesty, probity,
rectitude, truthfulness, veracity, trustworthiness, fairness, honor, moral fiber, principle,
soundness, wholeness, and oneness. All of these words describe the type of employee one
would like to hire.

Integrity testing, pre employment screening, pre-employment screening tests, employee

assessments, credibility testing and employment testing are all synonyms for the analyses
used in detecting employee concealment. These tests are supplemental to background
checks and can also be administered after candidates have started to work. With today's
technology a well trained organization can objectively evaluate a candidate's potential
both positive and negative. Industrial espionage is one of the most important security
issues in the business world today and regular integrity testing can assist in the reduction
of negligent hiring liability.

These supplemental tests can augment the requirement by all US states that require
employers to complete criminal background checks for certain jobs, which may include
teaching, childcare and healthcare professions that involve contact with vulnerable
segments of our society [2]. The advantage of the integrity test is that it does not require
the access to a candidate's criminal records, it gives pertinent information about how that
person measures up to the company's code of conduct. According to ADP [3] and the
United States Department of Justice (DOJ)[4] pre employment screening has become
commonplace and has gained popularity of the last 25 years.
US Laws

The US laws can be interpreted differently and privacy advocates are quick to point out
what can and cannot be accessed by companies. However, by using a test that evaluates
the candidate on the spot and does not require outside involvement eliminates those
issues. Integrity tests evaluate the integrity of the candidate not whether the information
on the resume is correct. For that reason this type of test [5] is invaluable.

Pre Employment Screening Tests

Pre-employment screening tests are an invaluable tool to Human Resource Professionals.
They enable the company to verify the veracity of the information provided to them by
the potential employee. However, these background tests and credit checks require
authorizations and may not create a correct profile of the candidate. Supplemental tests
that can verify the characteristics. These tests are called Integrity Tests. test

Periodic Employment Testing

This type of reusable testing enables employers to verify that the employees
that are currently working are performing to the company's code of conduct.
In addition it enables companies to obtain an accurate assessment of its'
workforce.
 Procedure/Process of performance
appraisal

Performances Appraisal Process

1. Establishing Setting Performance Standards

6.Offering Guidance/Taking corrective 2. Communicating standards to Employees

Measures

5. Discussing Actual Performance 3. Measuring Performance

4. Comparing with Standards

 HDFC BANK
HDFC Bank Ltd. (BSE: 500180, NYSE: HDB) is a major Indian financial services company
based in India, incorporated in August 1994, after the Reserve Bank of India allowed
establishing private sector banks. The Bank was promoted by the Housing Development Finance
Corporation, a premier housing finance company (set up in 1977) of India. HDFC Bank has
1,725 branches and over 4,232 ATMs, in 779 cities in India, and all branches of the bank are
linked on an online real-time basis. As of 30 September 2008 the bank had total assets of
Rs.1006.82 billion.[4] For the fiscal year 2008-09, the bank has reported net profit of 2,244.9
crore (US$ 509.59 million), up 41% from the previous fiscal. Total annual earnings of the bank
increased by 58% reaching at 19,622.8 crore (US$ 4.45 billion) in 2008-09.[5]

History
HDFC Bank was incorporated in 1994 by Housing Development Finance Corporation Limited
(HDFC), India's largest housing finance company. It was among the first companies to receive
an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private
sector. The Bank started operations as a scheduled commercial bank in January 1995 under the
RBI's liberalisation policies.

Times Bank Limited (owned by Bennett, Coleman & Co. / Times Group) was merged with
HDFC Bank Ltd., in 2000. This was the first merger of two private banks in India. Shareholders
of Times Bank received 1 share of HDFC Bank for every 5.75 shares of Times Bank.

In 2008 HDFC Bank acquired Centurion Bank of Punjab taking its total branches to more than
1,000. The amalgamated bank emerged with a base of about Rs. 1,22,000 crore and net advances
of about Rs.89,000 crore. The balance sheet size of the combined entity is more than Rs.
1,63,000 crore.

Business focus
HDFC Bank deals with three key business segments - Wholesale Banking Services, Retail
Banking Services, Treasury. It has entered the banking consortia of over 50 corporates for
providing working capital finance, trade services, corporate finance and merchant banking. It is
also providing sophisticated product structures in areas of foreign exchange and derivatives,
money markets and debt trading and equity research.
Wholesale banking services

The Bank's target market ranges from large, blue-chip manufacturing companies in the Indian
corp to small & mid-sized corporates and agri-based businesses. For these customers, the Bank
provides a wide range of commercial and transactional banking services, including working
capital finance, trade services, transactional services, cash management, etc. The bank is also a
leading provider of structured solutions, which combine cash management services with vendor
and distributor finance for facilitating superior supply chain management for its corporate
customers. HDFC Bank has made significant inroads into the banking consortia of a number of
leading Indian corporates including multinationals, companies from the domestic business
houses and prime public sector companies. It is recognized as a leading provider of cash
management and transactional banking solutions to corporate customers, mutual funds, stock
exchange members and banks.

Retail banking services

[[The objective of the Retail Bank is to provide its target market customers a full range of
financial products and banking services, giving the customer a one-stop window for all his/her
banking requirements. The products are backed by world-class service and delivered to
customers through the growing branch network, as well as through alternative delivery channels
like ATMs, Phone Banking, NetBanking and Mobile Banking.]] [[HDFC Bank was the first bank
in India to launch an International Debit Card in association with VISA (VISA Electron) and
issues the Mastercard Maestro debit card as well. The Bank launched its credit card business in
late 2001. By March 2009, the bank had a total card base (debit and credit cards) of over 13
million. The Bank is also one of the leading players in the “merchant acquiring” business with
over 70,000 Point-of-sale (POS) terminals for debit / credit cards acceptance at merchant
establishments.]] The Bank is well positioned as a leader in various net based B2C opportunities
including a wide range of internet banking services for Fixed Deposits, Loans, Bill Payments,
etc.

Treasury

Within this business, the bank has three main product areas - Foreign Exchange and Derivatives,
Local Currency Money Market & Debt Securities, and Equities. These services are provided
through the bank's Treasury team. To comply with statutory reserve requirements, the bank is
required to hold 25% of its deposits in government securities. The Treasury business is
responsible for managing the returns and market risk on this investment portfolio.
Distribution network

An HDFC Bank Branch

HDFC Bank is headquartered in Mumbai. The Bank has an network of 2000 branches spread in
771 cities across India. All branches are linked on an online real-time basis. Customers in over
500 locations are also serviced through Telephone Banking. The Bank has a presence in all
major industrial and commercial centres across the country. Being a clearing/settlement bank to
various leading stock exchanges, the Bank has branches in the centres where the NSE/BSE have
a strong and active member base.

The Bank also has 3,898 networked ATMs across these cities. Moreover, HDFC Bank's ATM
network can be accessed by all domestic and international Visa/MasterCard, Visa
Electron/Maestro, Plus/Cirrus and American Express Credit/Charge cardholders.