Performance Appraisal in HBL

Performance Appraisal Report in Habib Bank Limited.

Submitted by :
Birra mazhar(15)
Faryal Anwar(32)
Anoosha Tahir(27)
Session:
2022-2024
NOON BUSINESS SCHOOL, UNIVERSITY OF SARGODHA.

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Performance Appraisal in HBL

Abstract
The aim of this research paper is to determine the factors that
affect the performance appraisal system in Habib Bank Limited.
To achieve this, an exploratory research was conducted. Primary
data was collected through filling out the questionnaires from the
employees of HBL and also by face-to-face interviews from the
executives. The data hence collected helped in identifying the
factors that are critical and inhibit the performance appraisal
system in Habib Bank Limited. Findings concluded that
transparent appraisal system is the need of the organization and
the results of the appraisal affect the performance of any
employee heavily. Intangible factors such as employee
motivation, loyalty, and inter-personal relations of employees plus
level of commitment are immensely influenced. It is held that
performance appraisal is "an important measure of devolvement
as it helps to evaluate whether things are working according to
plans or not, and what changes will be required in the future."
(Budhwar and Sparrow, 2002)
This research paper will be helpful in knowing deeply about the
performance appraisal system in Habib Bank Limited and the pros
and cons of this system and also how this system affects the
intrinsic and extrinsic factors related to employees. With respect
to this research paper it would be easy to address the problematic
factors prevailing in Habib Bank Limited and to improve them by
taking proper measures.

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1. Introduction
Humans are the building blocks of any organization. Out of three
general resources of every organization i.e. physical, financial and
human, the third one is the most critical and important. These are
the human who help the organization in achieving its goals or can
demolish the hope of any organization to progress. As Henry Ford
said that, take my business, burn up my building, but give me my
people and I'll build the business again. Hence that’s why humans
are considered as the fundamental part of an organization.
The firm can develop when its employees are performing well
accordingly because the success of any organization depends
upon the performance of the employees. Those businesses are
likely to flourish who pay extra attention in improving the
performance of the employees. Hence for this purpose proper
evaluation system should be present which identifies how the
employees are working according to the set standards and if any
employee lacking that level what measures should be taken to
improve their performance.
The performance of any employee is judged by performance
appraisal. The aim of performance appraisal is to give feedback to
the employees about their performance on work and to identify
those employees who need training. With performance appraisal,
an employee’s performance can be improved through counseling,
coaching and development.
The current research helps in creating awareness about the basic
human resource practice, performance appraisal. As employees
of any organizations are motivated to work efficiently if they know

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their management is observing their work transparently and

without any biasness. In this case they are urged to work to
achieve the objectives set by organization. Under performance
appraisal the job performance of the employees is evaluated on
the basis of their past performance in terms of quantity, quality,
cost and time. Performance appraisal helps the management to
know which employees deserve the rewards, salary increase, job
promotion and bonuses etc. Performance appraisal also creates
the communication between employees and management.
A private bank Habib Bank Limited has been selected for this
research in order to have in-depth investigation of different issues
and their effect on performance appraisal. This particular bank
was chosen because Habib Bank Limited is the largest bank in
Pakistan and offers the basic range of banking services to its
customers. The bank has a system of above 1450 branches in
Pakistan and 55 branches worldwide. The domestic share of HBL
is over 40% and it dominates the commercial banking sector with
loans to small industries, traders and farmers. Muhammad Ali
Jinnah established this bank in 1941 in Mumbai (then Bombay)
when he realized the need and importance of a financial
intermediation during the campaign of developing a new
homeland for Muslims in India. In 1947 HBL’s headquarters was
moved to Karachi.
The bank was owned and managed by the Habib family until
Pakistan’s government nationalized it on 1 January, 1974. In 2010
HBL was given set of awards named as; Best Bank – Pakistan,
Best Trade Finance Provider – Pakistan and Best Foreign
Exchange Provider – Pakistan.

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It is the slogan of the bank that they grab the best people from the
pool of applicants. Therefore it is the basic reason why the bank
is on the top position in the country. HBL cannot be among the list
of the top banks if its employees are not performing according to
the set standards. It is necessary to evaluate the performance of
the employees of HBL. For this reason there also exists a
performance appraisal system in HBL which helps the
management to know the difference between efficient and non-
efficient employees.
As Cullen Hightower quoted that, when performances go beyond
ambition the overlap is known as success. Habib Bank Limited is
investing in its employees by identifying their training needs and
providing them many learning facilities to improve their
performance. For the very purpose, this research has elaborated
various factors that can affect or are affected through the
performance appraisal in Habib Bank Limited. Those factors are
influential in performance evaluation and betterment. This
research will provide the information to the lay man about the
performance appraisal system prevailing in Habib Bank Limited.

2. Objectives
Objectives of the current research are as follows:
 To point out various issues of performance appraisal in
Habib Bank Limited.
 To explain the problems faced by the employees of the bank
under the identified issues.
 To suggest the recommendations with their implications to
solve the respective issues

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While conducting the research these points were kept in mind to

get the reliable and valid results.

3. Literature Review
Performance appraisal is an effective tool for an organization to
move forward and progress. It is an opportunity for a two-sided
communication hence employees are inspired and motivated to
improve their performance. (Martin, et al 2002)
Douglass (2011) says that performance appraisal is a method
through which you can acquire and achieve the information which
is essential for an employee to improve its performance and
accomplishments. Hence for an organization who wants to
improve the performance of their employees, performance
appraisal is an effective tool with the help of which information
regarding their corresponding job will be given.
Newstrom (2011) revealed that performance appraisal is actually
a process of evaluating the performance of employees. In this
process information is shared with the employees and the ways
are identified through which they can improve their performance.
Performance appraisal is done on the basis of evaluating the
current and past job performance of an employee. The results
thus obtained are not reliant upon the personal characteristics of
an employee but on his/her job performance. There is an open
communication during the appraisal that’s helps in making
effective relationships among the employees and the managers.
History of Performance appraisal can be traced in the era of
Taylor and motion study in the early 20th century. But proper
tracks of performance appraisal can be found out from the 2 nd

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World War which may not be more than 60 years from now
(Anchor North, 2011). The proper performance appraisal system
was recognized in 1950s in United States and it is used in many
organizations since then for the performance evaluation.
According to Dulewicz (1989), it is the ability of the human being
to make verdicts about workings of other people and also about
oneself. Hence there is a need of the general scheme through
which the performance of any person can be evaluated with
justified calculations or judgments. Similarly, Beer (1981) pointed
out that through performance appraisal system employees get to
know about themselves, that how they are performing and also
what their management values.
Performance Appraisal can be done to evaluate the individual as
well as group performance. There are certain different methods
adopted that assess the performance by the individual or group.
Those methods which are commonly user are:
 Behaviorally Anchored Rating Scales (BARS)
 Forced Choice
 Management by Objectives
 360-Degree Appraisal
Behaviorally Anchored Rating Scale (BARS) is a method to asses
the performance with the help of scales on which the job
performance is rated. BARS is known as the better performance
appraisal method. It combines the words with numbers to give the
valid evaluation of the performance.
In forced choice method, respondents have to choose the best or
most preferred from two or more given options.

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While in Management by Objectives method, objectives are set to

tell the management and employees what they have to achieve
within the organization. This method is helpful as in it the
performance of the employees is compared with the set goals and
objectives of the organization. As the employees are also involved
in assigning the objectives they are more like to perform well.
360-Degree feedback is done to gain the response about the
performance of an employee from all around the organization.
Peers, subordinates and supervisors also give the feedback about
the job performance.
The above given methods were designed to effectively assess the
performance of an employee. Many organizations do performance
appraisal taking it as their obligation, while others do not
emphasize on the performance appraisal and take it just as the
document in the file. Performance appraisal comes with certain
pros and cons.
Advantages of conducting performance appraisals:
 Source of information about the job performance
periodically.
 Managers get a chance to talk about the performance with
an employee.
 Provide an opportunity to the employees to obtain feedback
about their performance and ways to improve in case of any
imperfections.
 Helpful to motivate employees with rewards and
compensation.
 Employees plan about the upcoming year to improve the
loopholes in their performance.

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While the disadvantages of the performance appraisal system are

as follows:
 Consumes a lot time of the managers to evaluate the
performance of many employees.
 If performance is not assessed properly, it results in absolute
misuse of time.
 All the methods of performance appraisal are based on the
human judgment hence the error probability is much higher.
 It is done periodically mostly once a year. Hence employees
get salary increases or other benefits after a year
irrespective of their performance.
It is said that performance appraisal helps the employees to
improve his/her skills as it provides the knowledge and
information to them about their performance. In this case, Nurse
(2005, as cited in Ishaq et al, 2009) reveals that performance
assists in the training and development of an employee after
seeking the knowledge of their performance.
Similarly Ishaq et al (2009) stressed that efficiency of
performance appraisal system results in assured outcomes.
These outcomes are an employees’ knowledge about himself and
his organizations’ goals that are to be achieved. Likewise
Teratanavat et al (2006) also stressed that the important
outcomes of the performance appraisal are less employee
anxiety, assessment of potential performance and improvement to
achieve future goals. These outcomes or results play an important
role in the progress of an organization. Organizations are likely to
develop when their employees are more dedicated towards their

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work and that will be possible only if they are satisfied and
working according to the standards set.
Different factors that are done under the name of performance
appraisal put a bad impact on the employee and should be
avoided by the organization, if they want to create the sense of
equity and satisfaction within their employees are (Deluca, 1993):
 Freedom is given to those employees who participate more
and are among favorites of the managers.
 Non-efficient employees are penalized with performance
appraisal.
 Rewards and reimbursements are not provided to low
performing employees.
 Employees are uncertain about the outcomes of the
performance appraisal and what will happen after the
appraisal.
 Politics prevailing in the organization that highly affect the
performance of an employee.
 Some organizations use those appraisal methods that are
not much helpful in evaluating the job performance.
 The goal of an appraisal is more for short term rather than
long term. Hence the goals set are not strategic.
 Managers feel unenthusiastic to give response to the
employees about their corresponding performance.
All of these factors discourage the employees individually or
even in a group.
So we can say performance appraisal should be done in such
a way that it enables the employees to learn. As it is quoted
that employees can expand their expertise but capabilities can

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only be learned. And if an employee is lacking the ability that is

required it clearly shows the deficiency of learning ability or in
other case just one individual can have the propensity to stand
out in different areas. In this case rating scale method will be
appropriate to assess the performance of an employee.
Performance appraisal or evaluation is one of the most
significant and critical issue that is to be handled efficiently and
effectively by the managers in order to motivate the employees.
For this very purpose result-deducing methods should be used
to evaluate the performance that’s appropriate to the current
situation in the organization. Hence like this the objectives or
goals of a company can be achieved.
Similarly Malik et al (2011), describes that performance
appraisal affects the performance of an employee. Other than
performance appraisal, employee motivation, job satisfaction
and training and development are some other factors that also
likely to influence the performance of the employee of any
organization. But those two factors that are extremely
responsible for shaping the performance are that structure of
an organization and employee motivation.
Employee motivation can be increased by satisfying the unmet
or unfulfilled needs of the employee. As said by Kreitner
(1995), this process of employee motivation is psychological
and mental and has direct effect on the performance and
behavior of any person.
Hence performance appraisal is a backbone of an organization.
It can help to motivate the employees to get the objectives and

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can even produce negative results if proper method of

valuation is not utilized.

4. Research Methodology
To explore the factors and issues influencing the performance
appraisal in Habib bank Limited, exploratory research was
conducted. For this primary data was collected through in-depth
interviews and questionnaires from the managers and employees
of the bank respectively.
A comprehensive questionnaire containing 15 questions or
statements was distributed to the 25 employees of the bank to
know their valuable opinions. The statements were designed in
such a way that they give a detailed insight about the issues of
performance appraisal prevailing in the bank. Then the response
of these questionnaires was analyzed in terms of percentage by
using Microsoft Excel. The results after analyzing the
questionnaires have been discussed in the later portion to know
which factor or issue is more connected with performance
appraisal in Habib Bank Limited.
To increase the reliability of this current research, in-depth
interviews were conducted. Questions regarding different matters
related to performance appraisal were asked from the top
managers of the bank and to know what they think about the
factors linked with this Human Resource practice.

5. Findings and Discussions

The survey in order to collect the data was conducted in two
branches of Habib Bank Limited that is Farid Gate Branch and

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Islamia University Branch, Bahawalpur. Questionnaires were

given to the employees while interview was conducted from the
managers of the branches. Personal information of the employees
was kept optional and many of them were hesitant in disclosing
their information.
On exploring motivation of employees as an issue related to the
performance appraisal in HBL, results show that employees are
motivated if there is transparent and bias-free appraisal. Almost
all the employees were in favor of this as they believed if
management is evaluating their performance according to the job
performance and awarding them with bonuses or incentives
respective to that, employees will definitely be motivated to work
harder than before.
On the response to the statement that “the performance appraisal
increases employee motivation”, 56% employees agreed strongly
while 44% of the employees agreed with this statement. Hence
proved that transparent and proper performance appraisal does
motivate the employees to work to achieve the objectives of the
organization.

Figure1. Response on Motivation

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Another issue that was found during the research is “increase in

performance”. An efficient performance appraisal increases the
performance of an employee. As we all know that performance
appraisal is done to evaluate the job performance and if it is done
according to the set rules keeping in mind the hard work done by
the worker, the employees will perform their job tasks happily and
efficiently.

On the response to the statement “performance appraisal helps to

win co-operation and teamwork”, results show that 8% of the
respondents agreed with this statement strongly, 40% simply
agreed while 8% respondents were neutral, they neither agreed
nor disagreed. Remaining 44% disagreed with the above given
statement strongly. This response of the employees show that
they do not believe that with performance appraisal teamwork and
co-operation between the employees is appreciated.

Figure2. Response on co-operation and teamwork

Likewise performance of an employee, loyalty is also affected by

the performance appraisal. If an employee is appraised according
to the efforts he/she has put up in the job he/she will likely to stay

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with the organization and hence will become loyal to the

organization. Employees HBL are completely in favor of this.
Habib Bank Limited can also flourish when the turnover of the
employees is low. The credibility of the bank increases as
employees prefer them over other banks in the marketplace.
On response to the statement, “performance appraisal can help in
reducing grievances among employees and organization”, 28% of
the employees agreed with the statement, 48% stayed neutral
while 24% of the employees disagreed with the statement
strongly. In their opinion in HBL, performance appraisal does not
help to reduce the complaints or any other related problem among
employees and management. This shows that there is lack of
communication and proper feedback between management and
employees.

Figure3. Response on Grievances

While inquiring about the issues affecting the performance
appraisal in HBL, it was found out that it helps the management to
locate those employees who need training to enhance their
abilities and capabilities in performing a specific job task. If the
appraisal of any employees is not up to the mark then the
management will take measures to improve his/her skills so that
that employee can be beneficial for the bank by producing fruitful

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results. Those employees are also given training who have

potential to perform some task that need advanced skills or
knowledge, hence such employees are fruitful for HBL in the long
run.
When the employees were asked in a questionnaire the
statement, “promotions in HBL are purely based on performance
appraisal” they result which came out is illustrated by the figure
below.

Figure4. Response on promotions in HBL

The graph above shows that the majority of the employees

agreed with the statement given above. As according to the
employees promotions and other benefits are given to the
employees with reference to their performance.
Another factor that influences performance appraisal in Habib
Bank Limited is potential for promotions. Performance appraisal
helps the management to distinguish those employees who
deserve to be awarded with extra responsibilities, tasks and better
remuneration. Due to performance appraisal system, the
performance of the employees is evaluated and consistent
employees are being awarded.

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In a questionnaire there was a statement, “transfer, demotion,

suspension and dismissal are based on performance appraisal”.
The response of this statement is as follows:

Figure5. Response on transfer, demotion, suspension and

dismissal

As it is obvious from the figure that an equal percentage of

employees that is 32%, agreed and also disagreed with the
statement given above. In view of the employees of HBL
demotion, transfer, dismissal and suspension is occasionally
dependent on the performance appraisal of the employees.
With the help of performance appraisal, the effectiveness of the
selection process can be evaluated. As for those employees who
are working consistently to achieve the organization’s goals, it
means that they have been selected for the post appropriate for
them hence depicts the effectiveness of the selection process.
Results from the performance appraisal also reveal that whether
the employee was selected on the basis of his/her competencies
and abilities or whether there was a bias decision to select the
particular employee for the particular post.
On response to the statement, “performance appraisal helps the
management to identify strength and weakness of the
employees”, 28% employees agreed with the statement strongly,

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40% simply agreed and 8% of the employees remained neutral.

Only 24% employees of HBL were against this statement. The
particular response is depicted in a figure as follows:

Figure6. Response on strength and weakness of employees

Employees of HBL believe that with the help of performance

appraisal, productivity and quality of work of employees is
affected. If the employees are satisfied with the performance
appraisal system existing in the organization they will work
efficiently and consistently to complete the job task. But if the
employees have any ambiguity about the transparency of the
system they will not perform accordingly.
Employees were asked that what they think whether the desired
target of HBL is achieved through the performance appraisal or
not. 80% of the employees were in a favor that performance
appraisal helps in achieving the desired targets of the bank while
remaining 20% negate this statement. The response to this
statement is illustrated as follows:

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Figure7. Response on Desired target of HBL

Performance appraisal in Habib Bank Limited also helps in

controlling the absenteeism of the employees. As employees are
motivated to work and they likely to stay at the workplace more
than ever so they avoid to leave any working day.
Employees of HBL on the response to the statement
“performance appraisal helps in improving personal skills”
believed that this practice does help in improving the
competencies and abilities of the employees. Hence the response
is depicted by the help of graph.

Figure8. Response on improving personal skills

All of the above given factors were to be found during the

research done in Habib Bank Limited to know about issues that
exist with the performance appraisal.

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6. Suggestions and Recommendations

On the basis of the research conducted following suggestions are
given to the bank management:
1. During the research it was found out that few of the
employees were not satisfied with the existing performance
appraisal system of the bank. This shows that they have a
doubt on the transparency and validity of the evaluation
done. To avoid such issues management should try to
conduct transparent and bias-free performance appraisal
which evaluates the employee according to his/her job
performance.
2. Sometimes management is unable to assess the
performance of the employee according and enhance the
outcome is not as expected by the employee that’s why they
get de-motivated and do not perform their job task efficiently.
3. There is a need for a separate committee in Habib Bank
Limited to review the performance appraisal results. This will
help to satisfy the employees by ensuring them that the
results will not be influenced by anyone and will be accurate.
This act motivates the employees and gains their trust on the
bank.
4. Management of Habib Bank Limited should be very specific
in awarding the promotions, incentives and bonuses etc on
the basis of the job performance of the employee. This
shows the clearness of the system.

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5. As performance appraisal helps in creating communication

between management and employees so managers should
be keen to reduce any grievances between them. During the
research it was noticed that there was low contact among
the employees and the managers which creates
miscommunications and other related conflicts.
6. In order to increase the performance capabilities of the
employees, management of the bank is advised to give them
training to perform the task that require technical and
advanced skills. In this sense there will be increase in the
performance of the employees and other employees will also
be motivated to gain the advanced knowledge.

7. Conclusion
The primary goal of this research was to explore the issues and
factors that influence the performance appraisal in Habib bank
Limited and how they affect the performance of any employee
after and before the evaluation of his/her job performance.
Results of the study suggest that with clear and transparent
performance appraisal system in Habib Bank Limited, employees
can be motivated to perform well. And if they are rewarded
against their performance the employees will likely to stay with the
bank and their level of loyalty will increase as they will take the
bank as the best evaluator.
It is the basic obligation of an organization to keep its employees
happy and satisfied with the job and work environment for this
purpose performance appraisal is done to create the bridge
between the management and the employees.

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Better performance appraisal in Habib Bank Limited can do

wonders as their employees will be satisfied and pleased with the
organization and the job.

References
Anchor North, 2011.
http://www.performance-appraisal.com/intro.htm

Beer, M. (1981, Winter). Performance appraisal: dilemmas and

possibilities. Organizational
Dynamics, 9(3), 24 – 36. Retrieved August 24, 2007, from
Business Source Premier Database,
http://search.epnet.com

McClelland, S. B. (1993, July/August). A systematic approach to

determining productivity
improvement training needs. Industrial Management, 35(4), 15–
18. Retrieved May 04, 2005,
from Business Source Premier database, http://search.epnet.com

Dulewicz, V. (1989) Performance appraisal and counseling, in

Herriot, P., Assessment and selection in organizations: methods

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and practices for recruitment and appraisal, John Wiley & Sons,
New York, pp645-649.

Hafiz Muhammad Ishaq, (2009) Effectiveness of Performance

Appraisal: Its Outcomes and
Detriments in Pakistani Organizations, European Journal of Social
Sciences – Volume 10, Number 3.

Kreitner, R. (1995). Management, 6th Edition, Boston, Houghton

Mifflin Company.

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