Performance Management System - Nivedita

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N.L. Dalmia Institute of Management
Studies & Research
Mira Road (East)

Project Report On
“Study, Analysis of Performance
Management System with
Recommendations”

Compiled By:
Miss. Nivedita Dasgupta
PGDBM-HR (2009-2011)

ACKNOWLEDGEMENT
I take immense pleasure in submitting the project report on “Study, Analysis of Performance
Management System with Recommendations”.
With a deep sense of gratitude I would like to thank Mr. Harindran Pillai, Ms. Ashwini
Vinekar, Mrs. Chaitrali Shirur and all the other support staff of Shamrao Vithal Cooperative Bank for devoting their valuable time and guiding me to complete my project as
and when I approached them.
I owe a special thanks to my project guide, Prof. Rajan for providing constant support &
guidance throughout the project. I am highly obliged for the recourses he provided to me for
the completion of the project.
I am also thankful to Prof. P.L. Arya for giving me this opportunity.
I would like to thank each and every person who has contributed towards the successful
completion of the project work.

Nivedita Dasgupta
PGDBM-Human Resources

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TABLE OF CONTENTS
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PARTICULARS
Introduction
An Overview of Banking
HR in Banking
HR challenges in Co-operative Banks
Performance Management System
Components of a Performance Management System
Reasons for measuring performance
Methods of measuring performance
HR Functions applicable to Performance Management System
Impact of HR professional on the Performance Management
System
Performance Appraisal
Appraisal process in an organization
Challenges of Performance Appraisal
Introduction of The Shamrao Vithal Co-operative Bank Ltd.
SVCB Hierarchy
The old appraisal system at SVCB
The new appraisal system and its objectives
Process of formulating the new appraisal system
Process flow chart of e-appraisal at SVCB
Benefits of e-appraisal module
Analysis of the appraisal system
Recommendations
Bibliography

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EXECUTIVE SUMMARY
Many companies regularly administer performance appraisals to evaluate an employee's
current or past performance relative to his or her performance standards. This process
involves an employer (1) setting work standards; (2) assessing the employee's actual
performance relative to these standards; and (3) providing feedback to the employee with the
aim of motivating that person to eliminate performance deficiencies or to continue to perform
above par. If the appraisals are conducted fairly and constructively, the technique can be very
beneficial in helping an employee grow in skills and become more promotable.
Unfortunately, many performance appraisal rating come to a surprise to an employee due to
the lack of communication from their supervisors.
Appraisees and appraising managers have both been given guidelines in evaluation process
and subsequently the review meeting. It emphasizes how this approach will help the
appraisees by giving them an opportunity to assess and correct areas that their supervisors
feel may have overlooked. Such incidences do happen due to personal likes and dislikes of
superiors. The system can help management to take informed decisions on pay-hikes and
career enhancement for their employees.
Performance Appraisal can assist the company in many ways including goal setting wherein
manager works with employee and agree on a set of goals to achieve during a specific time;
reinforcing and sustaining performance wherein the supervisor encourages employees to
continue on a positive trajectory; improving performance wherein the employer suggests
ways in which employee can perform better in the future.
This project explains the meaning of Performance Appraisal, different methods used to
evaluate the performance of employees, its effective implementation and the benefits of the
system.
It also aims at understanding the problems associated with performance appraisal and
suggests measures to be adopted to overcome these issues. Overall objective of the project is
to understand the effectiveness of performance appraisal system.
This project report includes The Shamrao Vithal Co-operative Bank Ltd as a case study and
covers the benefits and drawbacks of the traditional methods as well as recent advances in the
field of performance appraisal. The project also throws light on the concern areas for different
people involved in the appraisal process and attempts to find out ways to overcome those
problems.
The conclusion arising out of this project is that an online appraisal system is far superior
than the traditional appraisal process. Even though the switch from traditional to modern
appraisal process can be difficult, it will be beneficial for the organization in the long run.

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INTRODUCTION
The last decade has seen many positive developments in the Indian banking sector. A few
banks have established an outstanding track record of innovation, growth & value creation.
India’s banking industry must strengthen itself significantly if it has to support the modern &
vibrant economy that India aspires to be. The onus of this lies on the bank’s management who
must ensure that the performance of its employees is always upto the mark.
The focus of all aspects of Human Resource Development is on developing the most superior
workforce so that the organization and individual employees can accomplish their work goals
in service to customers. With increasing complexities in business of banking, it is getting
increasingly difficult to acquire competent employees in the organization. This makes it
absolutely essential to retain the current employees.
Apart from acquiring professionally qualified personnel, it is quite a task to retain current
employees. Growing competition from other banks increases the risk of attrition. Poaching of
senior level employees is a common phenomenon in the banking industry. Employees now
have greater expectations from the organization they work in.
To address the employee concerns as well as to provide the employees with greater
opportunities to develop their career potential and align their performance with the
organization, organizations are now enhancing their performance management system. For an
organization, the focus should not be just to have the best people; but also to retain them and
get the best out of them. To ensure that its workforce retained a high level of competence and
motivation, organizations focus towards establishing a robust performance management
system that facilitates continuous improvement of the knowledge, skills and performance of
its employees.
Performance management should be a process that contributes to the organization's overall
success and has a positive impact on the employees. It's about letting employees know what
is expected of them, and providing feedback throughout the year on how they are doing and
how they can improve.
Performance management is a management tool used to measure employee performance and
extend rewards to employees who achieve company objectives. Many companies implement
a performance management system to set standards and expectations for employees at all
levels in the organization. Performance management systems take the subjectivity out of
individual employee reviews and performance rewards conducted by managers. Such systems
also create a broad sense of equality since any employee can achieve the performance
rewards by following the expectations and goals set forth by the company.
The impact of effective performance management is clear i.e. employee performance affects
company performance. If clear expectations are expressed to the employees, the company and
its employees will enjoy increased motivation. And all that translates directly into clearly
measurable goals, improved morale, a happier workplace and higher profits.

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AN OVERVIEW OF BANKING
The banking sector has grown from a few institutions primarily involved in deposit
acceptance and trade finance into a complex multi player markets where large number of
commercial banks, financial institutions and specialized banks are operating with various
products and activities.
The changes staring in the face of bankers relate to the fundamental way of banking – which
is undergoing a rapid transformation in the world of today in response to the forces of
competition, productivity and efficiency of operations, reduced operating margins, better
asset/liability, risk management, anytime and anywhere banking. The major challenge faced
by banks is to protect the falling margins due to the impact of competition.
The business profile of banks has transformed dramatically to include non-traditional
activities like merchant banking, mutual funds, new financial services and products, personal
investment counseling, etc. The entry of new banks intensified the competition to attract and
retain customers.
The Reserve Bank of India (RBI) is the central banking system of India and controls the
monetary policy of currency reserves. It is wholly owned by the union government. Its main
functions are regulating country-wide financial systems, regulating external trade &
payments, securing foreign exchange reserves, issuing currency notes, etc.
Three types of banks function under the control of RBI. They are commercial banks, cooperative banks and development banks.

Reserve Bank of India

Commercial banks

Co-operative Banks

Development Banks

A Commercial Bank is a type of financial intermediary and a type of bank. Commercial
banking is also known as business banking. It is a bank that provides checking accounts,
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savings accounts, and money market accounts and that accepts time deposit. Some poplar
commercial banks in India are State Bank of India, ICICI Bank, Standard Chartered Bank,
HDFC, etc.

Commercial Banks

Indian

State Bank
Group

Foreign

Nationalized
Banks

Private Sector
Banks

Regional
Rural Banks

A Development Bank is a developmental finance institution devoted to improving the social
and monetary development of its associate nations. Its main emphasis is the welfare of the
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people. For example the Asian Development Bank's overarching goal is to decrease poverty
in Asia and the Pacific. It helps improve the value of people's lives by providing loans and
scientific support for a broad variety of development activities. IDBI Bank is another
example of this type of bank.

Development Banks

IFCI

Industrial Finance Corporation of India

SIDBI

Small Industries Development Bank of India

ICICI

Industrial Credit and Investment Corporation of
India

IDBI

Industrial Development Bank of India

NABARD

National Bank for Agriculture and Rural
Development

EXIM

Export and Import Bank

The co-operative banks in India started functioning almost 100 years ago. The cooperative bank is an important constituent of the Indian Financial System, judging by the role
assigned to the co-operative, the expectations the co-operative is supposed to fulfill, their
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number, and the number of offices the co-operative bank operate. Though the co-operative
movement originated in the West, the importance of such banks have assumed in India is
rarely paralleled anywhere else in the world. The co-operative banks in India play an
important role even today in rural financing. The business of co-operative bank in the urban
areas also has increased phenomenally in recent years due to the sharp increase in the number
of primary co-operative banks.

Co-operative banks in India are registered under the Co-operative Societies Act. The
cooperative bank is also regulated by the RBI.

Co-operative Banks

State
Cooperative
Banks

Central
Cooperative
Banks

Urban
Cooperative
Banks

Primary
Cooperative
Banks

Salary earner’s societies satisfying the
definition of primary cooperative
bank in the B.R. Act 1949

HR IN BANKING
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Indian co-operative banking movement has passed through hundred years of its existence. At
the same time, human resources management has been a neglected field in co-operative banks
over a period of time.
It is understood that co-operative banks approach human resource management (HRM) from
the wrong perspective and their financial performance suffers as a result. Instead of focusing
on how to execute strategy through the performance of the employees in many co-operative
banks, the first priority is cost control and the focus often begins with the HR function.
World over, the technology driven channels such as ATM, net banking and mobile banking
have reduced walk-in customers at the bank branches. However, in India, it is observed that
the customers still find it difficult to use these technology based channels and they are more
comfortable in traditional banking over the counter personally to ensure error-free and riskfree banking service. This clearly establishes that employees of co-operative banks play a
vital role in managing not only ‘the transaction’ of a customer but also future long-term
relationship.
The core function of HRD in the banking industry is to facilitate performance improvement,
measured not only in terms of financial indicators of operational efficiency but also in terms
of the quality of financial services provided. Factors like skills, attitudes and knowledge of
the human capital play a crucial role in determining the competitiveness of the financial
sector. The quality of human resources indicates the ability of banks to deliver value to
customers. Capital & technology are replicable but not the human capital which needs to be
valued as a highly valuable resource for achieving that competitive edge.
The primary emphasis needs to be on integrating human resource management strategies with
the business strategy. HRM strategies include managing change, creating commitment,
achieving flexibility and improving teamwork. The other processes representing the overt
aspects of HRM, viz. recruitment, placement, performance management are complementary.

HR CHALLENGES IN CO-OPERATIVE BANKS
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Instead of focusing on how to execute strategy through the performance of the employees in
many co-operative banks, the first priority is cost control and the focus often begins with the
HR function. A few of the current challenges faced by the banking industry in terms of
human resource management may be the following:
Human Resource Policies: In practice, there is no specific written document of HR policies
in many co-operative banks. It is neither necessary nor desirable to have every rule
documented, but it is advisable to take time to formalize the important ones.
Recruitment & selection: A time-consuming and hectic job is to hunt the right talent. Higher
the professional value of the vacancy, tougher is the search. Identifying the right people
followed by negotiation is the element which makes the job tough for the employer.
Data base management problem: Banking jobs being apparently lucrative for many, attract
a large number of candidates against advertised vacancies in media. These applications have
to be stored with the human resource department for a required period thus creating a data
base management problem.
Right people: The most difficult agenda of HRM across the banking sector is to retain the
right people. Sudden growth of retail banking and other services has put pressure on HR
mangers in banks to engage more professionals within shorter span of time thereby attracting
manpower in other banks on attractive packages has made the job market very competing.
A bank in a normal course invests time and money to hire and train the appropriate work
force for its own operations. This ready-made force is often identified and subsequently
picked-up on better terms by others.
Compensation: A drawback of co-operative banks is that they are not able to attract
professionally qualified candidate because of the poor salary structure. Also, banks often face
the dilemma regarding how much to pay to the right employee and how much to the
outstanding performer.
Training & Development: Designing and implementing effective training and development
systems is a particular challenge because all the costs are borne in present, while all the
benefits will accrue in future.
Performance Appraisal: Co-operative banks have not used any sophisticated methods to
evaluate their employees’ performance. This is the major reason for poor performance of
employees in co-operative banks.
Job satisfaction: Everybody in the bank wants to work in the preferential department,
preferential location, city of his own choice and boss of his liking. An administrative
deviation from any of these results in lowered job satisfaction. Although hiring is normally
based on regional requirement matching the area of activity with that of employee's nativity
yet other elements like appointment in the department of choice and preference makes the job
of HR manager quite challenging. What the HR manger cannot afford is the dissatisfied
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employee who not only disrupts the smooth working himself but also spreads the negativity
to others by his de-motivated attitude.
Mergers and acquisitions: There are many mergers & acquisitions happening between and
among co-operative banks that have given rise to many challenges to the HR personnel. HR
will be a key player in the managing board of the company and mergers and acquisition will
be key capability of a HR.
To put in a nut shell, high attrition/poaching of skilled and quality staff, difficulty in hiring
highly qualified youngsters aspiring high remuneration are some of the threats the banking
industry is facing and hence need to be addressed. However, employee engagement and
learning culture still remains the real issue in co-operative sector banks.

PERFORMANCE MANAGEMENT SYSTEM
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Besides effective hr policies, performance management system also can be used as a tool to
address the various challenges that exist in the banking industry. Issues like performance
appraisal, training and development, giving appropriate compensation to the employee can be
resolved by using a performance management system. Such a system can be adapted as per
the needs of the organization.
An important component of a performance management system involves the job expectations
and goals for each position in the company. Each department in the company usually has
different expectations for its employees based on the requirements for the positions in the
department. Clearly defined expectations and goals give employees the greatest opportunity
for advancing in the company. Managers will also discuss the review and feedback process of
the performance management system.
Performance awards are an important part of the performance management system.
Employees are best motivated by the thought of earning rewards for their actions, whether
financial rewards or another form of benefit. Companies will usually link an employee's
performance review with his financial bonus or pay raise; this ensures that the company gets
the best performance out of each employee.
Performance management systems do not benefit a company unless a timely employee
review and feedback system is implemented in the program. These review sessions will
inform employees how well they are performing in their position and what areas need to be
corrected or improved. Most companies have an annual review process, although six-month
reviews are often used.
Employees who do not meet the standards for performance rewards may need additional
training or coaching by their superiors to improve their job skills. Performance reviews will
be used as a starting point for the additional training; subsequent performance reviews may
be scheduled to see how well the employee improved from the initial review. Performance
management systems are ineffective if they only reward employees for good work
performance. The system also needs to include training or coaching processes to ensure all
company employees are able to improve their performance.
Many people mistake performance appraisal for performance management. Actually,
performance management is a much bigger system, and is much more valuable to managers
and companies (and employees) than performance appraisal. Performance management
begins when a job is defined. Performance management ends when an employee leaves the
company. Between these points, the following must occur for a working performance
management system:




Develop clear job descriptions- Job descriptions are the first step in selecting the right
person for the job, and setting that person up to succeed. This does not include traditional
job descriptions that end with "and whatever else you are assigned by the manager." Job
descriptions provide a framework so the applicants and new employees understand the
expectations for the position so these must be clearly expressed as outcomes.
Select appropriate people with an appropriate selection process- People have different
skills and interests. Jobs have different requirements. Selection is the process of matching
the skills and interests of a person to the requirements of a job. Finding a good job "fit" is
exceptionally important. A selection process that maximizes input from potential
coworkers and the person to whom the position will report should be used.
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Negotiate requirements and accomplishment-based performance standards,
outcomes and measures- The first reason why people sometimes fail to meet expectations
is because employees don’t know what they’re supposed to do. Hence it is extremely
important to clearly communicate to the employees the expected outcomes & measures.



Provide effective orientation, education, and training- Before a person can do the best
job, he or she must have the information necessary to perform. This includes job-related,
position-related, and company-related information; an excellent understanding of product
and process use and requirements; and complete knowledge about customer needs and
requirements.



Provide on-going coaching and feedback- People need ongoing, consistent feedback that
addresses both their strengths and the weaker areas of their performance. Effective
feedback focuses more intensely on helping people build on their strengths. Feedback is a
two-way process that encourages the employee to seek help.



Conduct quarterly performance development discussions- If supervisors are giving
employees frequent feedback and coaching, performance reviews can change from
negative, evaluative, one-sided presentations to positive, planning meetings. Held
quarterly, employees always know how they are performing and their next goals and
challenges.



Design effective compensation and recognition systems that reward people for their
contributions- The power of an effective compensation system is often overlooked and
downplayed in some employee motivation related literature. This is a mistake. It is often
not so much about the money as it is about the message any reward or recognition sends to
an individual about their value.



Provide promotional/career development opportunities for staff- Growth goals,
changing and challenging job assignments and responsibilities, and cross-training
contribute to the development of a more effective staff member. Such an environment must
be created in which people feel comfortable to experiment and make mistakes.



Assist with exit interviews to understand why valued employees leave the
organization- When a valued person leaves the company, it is necessary to understand
why the person is leaving. This feedback will help the company improve its work
environment for people. An improved work environment for people results in the retention
of valued staff.

So in a performance management system, all components must be present and working to
create value for each employee and the organization.

COMPONENTS OF A PERFORMANCE
MANAGEMENT SYSTEM
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PLANN
ING
Set goals &
measures
Establish &
communica
te elements
and
standards

REWARDING
Recognize & reward
good performance

MONITORING
Measure performance
Provide feedback
Conduct progress review

RATING
Summarizing
performance
Assign the rating of
record

DEVELOPING
Address poor
performance
Improve good
performance

Performance Management’s five key components

Performance Management System has five main contents namely planning, monitoring,
developing, rating, and rewarding:


Planning – Every process has to start with proper planning so that the activity is carried
out in efficient manner and desired results are achieved. A performance management
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system is important to the organization as well as to the employees. Hence the system must
be planned carefully.
While planning the flow of the performance measurement, the goals of the organization
must be determined. The elements and standards of measuring the performances must be
duly communicated to all the employees so as to make him fully aware of all the
parameters.


Monitoring – Monitoring the way performances are measured is very crucial since this is
the crux of the performance management system. In this stage, a performance of the
employees is measured and feedback is provided regarding the same.
A review of the overall progress is done by the appraiser where he communicates to the
employee what are his strengths and in which areas he needs to improve. It also lets the
employee know that his efforts are being recognized and monitored.



Developing – Once the performances are measured, it is necessary to work on the weaker
aspects of the employees’ performance. Any employee showing poor performance must be
provided with training so as to enable him to overcome his weaknesses.
At this stage, employees having good performance must further be encouraged to keep
improving. Such employees are valuable to the organization and efforts must be taken to
retain such employees.



Rating – The performance of the employees must be summarized and rated. Doing so will
enable a quick analysis of the overall performance of the employee. Such ratings can be
very useful during promotions pr succession planning.



Rewarding – In order to motivate employees to perform effectively, it is important to
recognize and reward the performances of the employees. This lets the employee know
that the efforts contributed by them are valued by the organization and this motivates them
to keep performing for the welfare of the organization.

Reasons for measuring performance:Fundamental purpose behind measures is to improve performance. 8 reasons for adapting
performance measurements are as follows:
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1. To Evaluate-To evaluate performance, managers need to determine what the organization
is supposed to accomplish; for this a clear, coherent mission, strategy, and objectives need to
be formulated. Then based on this information choose how you will measure those activities.
Evaluation process consists of two variables: organizational performance data and a
benchmark that creates framework for analyzing that data.
As in order for organizations to evaluate performance, it requires standards (benchmark) to
compare its actual performance against past performance/ from performance of similar
agencies/ industry standard/political expectations.
2. To Control- how can managers ensure their subordinates are doing the right thing.
Today managers do not control their workforce mechanically. However managers still use
measures to control, while allowing some space for freedom in the workforce. Organizations
create measurement systems that specify particular actions they want to be executed. They
want to measure to see whether the employees have in fact taken those actions which lead to
the fulfillment of the objectives. There is a need to measure input by individual into
organization and process. Officials need to measure behavior of individuals then compare this
performance with requirements to check who has and has not complied.
Often such requirements are described only as guidelines. Do not be fooled. These guidelines
are really requirements and those requirements are designed to control. The measurement of
compliance with these requirements is the mechanism of control.
3. To Budget- Budgets are crude tools in improving performance. Poor performance not
always may change after applying budgets cuts as a disciplinary action. Sometimes budget
increase could be the answer to improving performance. Like purchasing better technology
because the current ones are outdated and harm operational processes. So decision highly
influenced by circumstance, you need measures to better understand the situation.
4. To Motivate- Giving people significant goals to achieve and then use performance
measures- including interim targets- to focus people’s thinking and work, and to provide
periodic sense of accomplishment.
Performance targets may also encourage creativity in developing better ways to achieve the
goal. Thus measure to motivate improvements may also motivate learning.
Also it is able to provide how workforce is currently performing.
Primary aim behind the measures should be output. Managers cannot motivate people to
affect something over which they have little or no influence.
5. To Celebrate- Organizations need to commemorate their accomplishments- such rituals tie
their people together, give them a sense of their individual and collective relevance.
Moreover, by achieving specific goals, people gain sense of personal accomplishment and
self-worth.
Links from measurement to celebration to improvement is indirect, because it has to work
through one of the likes- motivation, learning.
Celebration helps to improve performance because it brings attention to the agency, and thus
promotes its competence- it attracts resources.
 Dedicated people who want to work for successful agency.
 Potential collaborators.
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Learning-sharing between people about their accomplishments and how they
achieved.

6. To Promote- Measuring performance enables the organization to know which employees
are performing upto the mark & such employees can be promoted accordingly. This serves
the purpose of recognition for the employee and also motivates him to perform better.
7. To Learn- Learning is involved with some process, of analysis information provided from
evaluating corporate performance (identifying what works and what does not). By analysing
that information, corporations are able to learn reasons behind its poor or good performance.
However if there is too many performance measures, managers might not be able to learn
anything. Because of rapid increase of performance measures there is more confusion or
“noise” than useful data. Managers lack time or simply find it too difficult to try to identify
good signals from mass of numbers.
Also there is an issue of “black box” enigma (data can reveal that organization is performing
well or poorly, but they don’t necessarily reveal why). Performance measures can describe
what is coming out of “black box” as well as what is going in, but they do not reveal what is
happening inside; they do not reveal how are various inputs interacting to produce the output.
Benchmarking is a traditional form of performance measurement which facilitates learning
by providing assessment of organizational performance and identifying possible solutions for
improvements.
Identifying core process in organization and measuring their performance is basic to
benchmarking. Those actions probably provide answer to issue presented in purpose section
of the learning.
Measurements that are used for learning act as indicators for managers to consider analysis of
performance in measurement’s related areas by revealing irregularities and deviations from
expected data results.
8. To Improve- What exactly should one do differently to improve performance? In order for
an organization to measure what it wants to improve it first needs to identify what it will
improve and develop processes to accomplish that.
Also you need to have a feedback loop to assess compliance with plans to achieve
improvements and to determine if those processes created forecasted results (improvements).
Improvement process also related to learning process in identifying places that are need
improvements.
After that they need to identify actions they can take that will give them improvements they
looking for and how organization will react to those actions ex.

Methods of measuring performance:-

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Performance measurement is an ongoing activity for all managers and their subordinates.
Performance measurement uses the following indicators of performance, as well as
assessments of those indicators:1. Quantity- The number of units produced, processed or sold is a good objective indicator
of performance. Be careful of placing too much emphasis on quantity, lest quality suffer.
2. Quality- The quality of work performed can be measured by several means. The
percentage of work output that must be redone or is rejected is one such indicator. In a sales
environment, the percentage of inquiries converted to sales is an indicator of salesmanship
quality.
3. Timeliness - How fast work is performed is another performance indicator that should be
used with caution. In field service, the average customer’s downtime is a good indicator of
timeliness. In manufacturing, it might be the number of units produced per hour.
4. Cost-Effectiveness - The cost of work performed should be used as a measure of
performance only if the employee has some degree of control over costs. For example, a
customer-service representative’s performance is indicated by the percentage of calls that he
or she must escalate to more experienced and expensive reps.
5. Absenteeism/Tardiness - An employee is obviously not performing when he or she is not
at work. Other employees’ performance too may be adversely impacted by absences.
6. Creativity- It can be difficult to quantify creativity as a performance indicator, but in many
white-collar jobs, it is vitally important. Supervisors and employees should keep track of
creative work examples and attempt to quantify them.
7. Adherence to Policy- This may seem to be the opposite of creativity, but it is merely a
boundary on creativity. Deviations from policy indicate an employee whose performance
goals are not well aligned with those of the company.
8. Gossip and Other Personal Habits- They may not seem performance-related to the
employee, but some personal habits, like gossip, can detract from job performance and
interfere with the performance of others. The specific behaviors should be defined, and goals
should be set for reducing their frequency.
9. Personal Appearance/Grooming- Most people know how to dress for work, but in many
organizations, there is at least one employee who needs to be told. Examples of inappropriate
appearance and grooming should be spelled out, their effects upon the employee’s
performance and that of others explained, and corrective actions defined.
10. Manager Appraisal - A manager appraises the employee’s performance and delivers the
appraisal to the employee. Manager appraisal is by nature top-down and does not encourage
the employee’s active participation. It is often met with resistance, because the employee has
no investment in its development.
11. Self-Appraisal - The employee appraises his or her own performance, in many cases
comparing the self-appraisal to management's review. Often, self-appraisals can highlight

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discrepancies between what the employee and management think are important performance
factors and provide mutual feedback for meaningful adjustment of expectations.
12. Peer Appraisal - Employees in similar positions appraise an employee’s performance.
This method is based on the assumption that co-workers are most familiar with an employee’s
performance. Peer appraisal has long been used successfully in manufacturing environments,
where objective criteria such as units produced prevail. Recently, peer appraisal has expanded
to white-collar professions, where soft criteria such as “works well with others” can lead to
ambiguous appraisals. Peer appraisals are often effective at focusing an employee’s attention
on undesirable behaviors and motivating change.
13. Team Appraisal - Similar to peer appraisal in that members of a team, who may hold
different positions, are asked to appraise each other’s work and work styles. This approach
assumes that the team’s objectives and each member’s expected contribution have been
clearly
defined.
14. Assessment Center - The employee is appraised by professional assessors who may
evaluate simulated or actual work activities. Objectivity is one advantage of assessment
centers, which produce reviews that are not clouded by personal relationships with
employees.
15. 360-Degree or “Full-Circle” Appraisal - The employee’s performance is appraised by
everyone with whom he or she interacts, including managers, peers, customers and members
of other departments. This is the most comprehensive and expensive way to measure
performance and it is generally reserved for key employees.
16. MBO (Management by Objectives) - The employee’s achievement of objective goals
set in concert with his or her manager is assessed. The MBO process begins with action
statements such as, “reduce rejected parts to 5 percent.” Ongoing monitoring and review of
objectives keeps the employee focused on achieving goals. At the annual review, progress
toward objectives is assessed, and new goals are set.
There are as many indicators of performance as there are companies and jobs. The various
assessment methods can be used in combinations. It is important to choose indicators that
align with your company’s goals and assessment methods that effectively appraise those
indicators.

HR FUNCTIONS APPLICABLE TO PERFORMANCE
MANAGEMENT SYSTEM
20

TRAINING
TRAINING

REWARDS &
BENEFITS

PERFORMANCE
APPRAISAL

SUCCESSION
PLANNING

FORMATION
OF HR
POLICIES

CAREER
PLANNING

EXIT
INTERVIEW

PERFORMANCE MANAGEMENT SYSTEM

Various hr functions are applicable during the execution of a performance management
system in an organization. The functions as well as their usage are listed below:

21



Performance Appraisal – This is one of the major functions in a performance management
system. It is very critical to the system since it measures employee performance using
various methods. Any further decision can be made only after the performances of the
employees are correctly measured.



Training – After appraisals are completed, weaker performing employees can be sent for
training. High performers can also be sent for training so that they can be prepared to take
higher responsibilities in the future.



Rewards & Benefits – High performing employees can be rewarded so that they feel
motivated to keep up the performance. This also provides job satisfaction to the employees
and helps in employee retention.



Career Planning– This is one of the best methods to reward better performing employees.
Providing promotions to employees signifies to the employees that their efforts are duly
recognized by the organization. Aspiring employees can be given desired responsibilities if
the appraisal founds them suitable.



Formation of HR Policies – Based on the feedback received during the appraisal process,
various corrective measures can be taken. Existing hr policies can be improved or newer
policies can be formed so as to benefit the employees as well as the organization which in
turn can boost the overall performance of the organization.



Exit Interview - When a valued person leaves the company, it is necessary to understand
why the person is leaving. This feedback will help the company improve its work
environment for people as well as impact their performance in a positive manner. An
improved work environment for people results in the retention of valued staff.



Succession Planning – By conducting performance management, the potential of many
employees is realized. Such employees can be given opportunities when succession
planning is carried out.

The impact of the Human Resources professional on the performance management system is
powerful:

22



HR professional is involved in the process of performance management right from the
stage of designing the system. There has to be careful planning of the process after taking
into due consideration the welfare of the employees as well as the organization.



There has to be numerous interactions with various Head of Departments, Managers,
Supervisors so that the performance management system can be developed without
eliminating any key aspects of the job duties.



After the performance management system has been developed, the execution stage is very
crucial. Many difficulties may arise at this stage which needs to be effectively handled by
the hr professional.



Once the process starts, the hr professional must continuously monitor the overall progress
and take necessary actions. All the queries and doubts regarding the execution of the
process must be taken care of.



It is the hr professional’s role to analyze the results yielded by the performance
management system. The results will further enable to take necessary steps in the benefit
of the organization.



Apart from measuring the performance of employees, the hr professional can also get
valuable feedback regarding the system itself and use the inputs to further develop the
performance management system.



Managers and supervisors can be encouraged to take responsibility for managing
performance in their work area and cooperating for performance improvement across the
organization.



An understanding that even if one individual’s work area, shift, or department is
successful, this will not result in a well-served customer can be promoted. Because all
components of the organization are part of a system that creates value for the customer, all
components must be successful.

PERFORMANCE APPRAISAL
People differ in their abilities and their aptitudes. There is always some difference between
the quality and quantity of the same work on the same job being done by two different
23

people. Performance appraisals of employees are necessary to understand each employee’s
abilities, competencies & relative merit and worth for the organization. Performance appraisal
rates the employees in terms of their performance.
Performance appraisals are widely used in the society. The history of performance appraisal
can be dated back to the 20th century and then to the second world war when the merit rating
was used for the first time. An employer evaluating their employees is a very old concept.
Performance appraisals are an indispensable part of performance measurement. Performance
appraisal is necessary to measure the performance of the employees and the organization to
check the progress towards desired goals and aims.
Once an annual ritual, performance appraisal has become a continuous process by which an
employee understands the company’s goals and his or her progress toward contributing to
them are measured.
The latest mantra being followed by organizations across the world being – "get paid
according to what you contribute" – the focus of the organizations is turning to performance
management and specifically to individual performance. Performance appraisal helps to rate
the performance of the employees and evaluate their contribution towards the organizational
goals. If the process of performance appraisals is formal and properly structured, it helps the
employees to clearly understand their roles and responsibilities and give direction to the
individual’s performance. It helps to align the individual performances with the
organizational goals and also review their performance.
Performance appraisal takes into account the past performance of the employees and focuses
on the improvement of the future performance of the employees. It is a part of career
development. It plays the role of the link between the organization and the employees’
personal career goals.
There is no such thing as an "ideal" appraisal format and system. Every organization must
design an appraisal instrument and process that supports the organizational goals that it
wishes to accomplish.

Pre-requisites for Effective & Successful Performance Appraisal:

Documentation – There must be continuous noting and documenting the performance. It
also helps the evaluators to give a proof and the basis of their ratings.

24



Standards/Goals – The standards set should be clear, easy to understand, achievable,
motivating, time bound and measurable.



Practical and simple format – The appraisal format should be simple, clear, fair and
objective. Long and complicated formats are time consuming, difficult to understand and
do not elicit much useful information.



Evaluation technique – An appropriate evaluation technique should be selected; the
appraisal system should be performance based and uniform. The criteria for evaluation
should be based on observable and measurable characteristics of the behavior of the
employee.



Communication – Communication is an indispensable part of the performance appraisal
process. The desired behavior or the expected results should be communicated to the
employees as well as the evaluators. Communication also plays an important role in the
review or feedback meeting. Open communication system motivates the employees to
actively participate in the appraisal process.



Feedback – The purpose of the feedback should be developmental rather than judgmental.
To maintain its utility, timely feedback should be provided to the employees and the
manner of giving feedback should be such that it should have a motivating effect on the
employees’ future performance.



Personal Bias – Interpersonal relationships can influence the evaluation and the decisions
in the performance appraisal process. Therefore, the evaluators should be trained to carry
out the processes of appraisals without personal bias and effectively.

Purpose of Performance Appraisal:-

25

Performance appraisal is closely linked to other HR processes like helps to identify the
training and development needs, promotions, demotions, changes in the compensation etc.
The performance appraisal process in itself is developmental in nature.
A feedback communicated in a positive manner goes a long way to motivate the employees
and helps to identify individual career developmental plans. Based on the evaluation,
employees can develop their career goals, achieve new levels of competencies and chart their
career progression. Performance appraisal encourages employees to reinforce their strengths
and overcome their weaknesses.
Typically, performance appraisal is aimed at

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



To diagnose the training and development needs of the future



Provide information to assist in the HR decisions like promotions, transfers etc.



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



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

The approaches to conducting a performance appraisal is as follows:-

26

Traditional approach:
Traditionally, performance appraisal has been used as just a method for determining and
justifying the salaries of the employees. Then it began to be used as a tool for determining
rewards (a rise in the pay) and punishments (a cut in the pay) for the past performance of the
employees.
This approach was a past oriented approach which focused only on the past performance of
the employees i.e. during a past specified period of time. This approach did not consider the
developmental aspects of the employee performance i.e. his training and development needs
of career developmental possibilities. The primary concern of the traditional approach is to
judge the performance of the organization as a whole by the past performance of its
employees.
Therefore, this approach is also called as the overall approach. In 1950s the performance
appraisal was recognized as a complete system in itself and the Modern Approach to
performance appraisal was developed.

Modern approach:
The modern approach to performance development has made the performance appraisal
process more formal and structured. Now, the performance appraisal is taken as a tool to
identify better performing employees from others, employees’ training needs, career
development paths, rewards and bonuses and their promotions to the next levels.
Appraisals have become a continuous and periodic activity in the organizations. The results
of performance appraisals are used to take various other HR decisions like promotions,
demotions, transfers, training and development, reward outcomes. The modern approach to
performance appraisals includes a feedback process that helps to strengthen the relationships
between superiors and subordinates and improve communication throughout the organization.
The modern approach to performance appraisal is a future oriented approach and is
developmental in nature. This recognizes employees as individuals and focuses on their
development.

360 degree method of performance appraisal:
27

360 degree feedback, also known as 'multi-rater feedback', is the most comprehensive
appraisal where the feedback about the employees’ performance comes from all the sources
that come in contact with the employee on his job.
360 degree respondents for an employee can be his/her peers, managers (i.e. superior),
subordinates, team members, customers, suppliers/ vendors - anyone who comes into contact
with the employee and can provide valuable insights and information or feedback regarding
the "on-the-job" performance of the employee.
360 degree appraisal has four integral components:
1. Self appraisal
2. Superior’s appraisal
3. Subordinate’s appraisal
4. Peer appraisal

Superior
Suppliers/
Vendors

Customers

Peers

EMPLOYEE

Team Members

Subordinate

Self appraisal gives a chance to the employee to look at his/her strengths and weaknesses, his
achievements, and judge his own performance. Superior’s appraisal forms the traditional part
of the 360 degree performance appraisal where the employees’ responsibilities and actual
performance is rated by the superior.
Subordinates appraisal gives a chance to judge the employee on the parameters like
communication and motivating abilities, superior’s ability to delegate the work, leadership
28

qualities etc. Also known as internal customers, the correct feedback given by peers can help
to find employees’ abilities to work in a team, co-operation and sensitivity towards others.
Self assessment is an indispensable part of 360 degree appraisals and therefore 360 degree
performance appraisals has high employee involvement and also has the strongest impact on
behavior and performance. It provides a "360-degree review" of the employees’ performance
and is considered to be one of the most credible performance appraisal methods.
360 degree performance appraisal is also a powerful developmental tool because when
conducted at regular intervals (say yearly) it helps to keep a track of the changes others’
perceptions about the employees. A 360 degree appraisal is generally found more suitable for
the managers as it helps to assess their leadership and managing styles. This technique is
being effectively used across the globe for performance appraisals. Some of the organizations
following it are Wipro, Infosys, and Reliance Industries etc.

Arguments against 360 Degree Performance Appraisal:
Despite the fact that 360 degree appraisals are being widely used throughout the world for
appraising the performance of the employees at all levels, many HR experts and professionals
argue against using the technique of 360 degree appraisals. The main arguments are:


360 degree performance rating system is not a validated or corroborated technique for
performance appraisal.



With the increase in the number of raters from one to five (commonly), it became difficult
to separate, calculate and eliminate personal biasness and differences.



It is often time consuming and difficult to analyze the information gathered.



The results can be manipulated by the employees towards their desired ratings with the
help of the raters.



The 360 degree appraisal mechanism can have an adverse effect on the motivation and the
performance of the employees.



360 degree feedback as a process requires commitment of the top management and the
HR, resources(time, financial resources etc), planned implementation and follow up.



360 degree feedback can be adversely affected by the customers perception of the
organization and their incomplete knowledge about the process and the clarity of the
process.
Often, the process suffers because of the lack of knowledge on the part of the participants
or the raters.



THE APPRAISAL PROCESS IN AN ORGANIZATION
29

CONDUCT MEETINGS

DECIDE THE PARAMETERS

DESIGN THE APPRAISAL FORM

DECIDE THE FLOW OF APPRAISALS

FIXING THE DATE RANGE

PROVIDE ORIENTATION & TRAINING
ABOUT THE PROCESS
CONDUCT SELF- APPRAISALS

APPRAISAL BY THE MANAGER /
SUPERVISOR
MEASUREMENT OF APPRAISALS

FEEDBACK TO EMPLOYEES

CONSOLIDATION OF REPORTS

The appraisal process needs to be planned meticulously. Numerous meetings have to be
conducted between the human resource department and the various department heads so that
various key issues can be finalised. These issues may include designing the appraisal process
and the appraisal forms, the parameters of performance on which employees will be
30

measured, discussions regarding the method of appraisal, taking approvals for conducting the
appraisal process, etc.
Since performance of employees is measured against parameters, it is very important that
these parameters be chosen carefully. For this purpose, job descriptions & key result areas of
employees working at all levels needs to be made. The parameters need to be reviewed by the
department heads and necessary changes should be made.
An appraisal form needs to be developed after parameters have been selected. Performance
appraisal form provides the basis for the performance review, providing the feedback to the
employees and the final rating of the employee. It also facilitates various other HR decisions
and career development plans and decisions of the employees. Therefore, performance
appraisal from should be filled with utmost care and objectivity. All the instructions and
guidelines on the appraisal form should be read and followed carefully.
After the appraisal forms have been designed, the flow of the appraisal forms must be
decided. This also includes assigning the supervisors and department heads as appraisers and
approvers. The duration of the appraisal process also needs to be fixed at this stage.
Appraisals are often conducted by the managers and the supervisor who sometimes, are
themselves not aware of the procedures to be followed. They should be explained the
importance and the implications of the performance appraisal to the organizations, the
methods to be followed, the principles and the processes of the appraisal.
All managers & supervisors who conduct performance appraisals should be given training.
The training can be given by conducting special workshops by professional HR consultants
or qualified and experienced HR professionals of human resource management. The venue
for the purpose can be a suitable seminar hall, training room, conference hall, boardroom, or
at some place away from the workplace like some hotel etc.
During such orientation and training sessions, the appraiser needs to be alerted about certain
occurrences:
 Halo effect- Halo effect is the tendency of the rater to allow one aspect of a man’s
character to influence his overall rating of the employee.
 Central tendency- Central tendency is the tendency of the rater to give average ratings to
the employee without actually appraising or condemning them.
 Recent behaviour - As per the human nature, it is a common tendency to rate the people on
the basis of their recent behaviour and forgetting the events and their performance in the
starting of the period.
 Stereotyping- Stereotyping an employee on the basis of the performance of his/her team is
another common error.
A typical appraisal process may begin with the self appraisal conducted by the employee
himself. Self appraisal is an important part of the performance appraisal process where the
employee himself gives the feedback or his views and points regarding his performance.
Usually this is done with the help of a self appraisal form where the employee rates himself
on various parameters, tells about his training needs, if any, talks about his accomplishments,
strengths, weaknesses, problems faced, etc.

31

While writing self appraisals, it is important to be honest and objective. All the aspects
concerning development and improvement must be duly noted. It is also important that the
employee seeks future responsibilities in his self appraisal.
The performance appraisal form should then be filled by the immediate supervisor or
manager of the employee in order to ensure that the appraiser is fully acquainted with the
performance, responsibilities, targets and standards of the employee. A rater or a manager
needs:
 An objective rating method to assess an employee’s performance, behavior, and skills and
knowledge.
 All the relevant data related to the employee’s performance, the standards, his job
description.
 To observe and accurately recall the employee’s behavior throughout the time period of the
appraisal.
 Using meaningful, unambiguous and clear language for the description in the document.
The performances of the employees need to be measured after the appraisal forms have been
filled. It is perhaps the most difficult part of the performance appraisal process to accurately
and objectively measure the employee performance. Measuring the performance covers the
evaluation of the main tasks completed and the accomplishments of the employee in a given
time period in comparison with the goals set at the beginning of the period. Measuring also
encompasses the quality of the accomplishments, the compliance with the desired standards,
the costs involved and the time taken in achieving the results.
Accurate and efficient performance measurement not only forms the basis of an accurate
performance review but also gives way to judging and measuring employee potential. All the
perspectives thus received should be combined in the appropriate manner and to get an
overall, complete view of the employees’ performance.
Measuring the performance of the employees based only on one or some factors can provide
with inaccurate results and leave a bad impression on the employees as well as the
organization. Therefore, a balanced set of measures (commonly known as balanced
scorecard) should be used for measuring the performance of the employee.
Performance appraisal process is incomplete without the feedback given to the employee
about his appraisal and his performance. But the way of giving as well as receiving the
feedback differs from person to person and their way of handling and their outlook towards
the issue.
On the part of the person receiving the feedback, the following points are important to be
taken care of:
 The employee should have a positive attitude towards the feedback process
 He should listen to the suggestions of the appraiser calmly and try to incorporate them in
his plans.
 He should not hesitate to ask for the help of his superiors.
 Should have a co-operative attitude during the feedback meeting.
 Don’t judge the appraiser as a person.
 Should take the feedback objectively.
32

 Should not judge the appraiser as a person on the basis of the feedback.
On the part of the appraiser or the manager / person giving the feedback, the following points
are to be taken care of:
 The appraiser should make the receiver feel comfortable during the feedback meeting.
 The appraiser should make it a two–way conversation i.e. let the employee speak.
 Listen to the employee and note his points, suggestions, problems etc.
 The appraiser should not adopt a confrontational approach towards the meeting. The goal
is not to criticize the employee.
 Provide a constructive feedback to the employee i.e. in a way which will motivate him to
perform better.
 Have a positive attitude towards the process.
 Try to understand the reasons of his failure.
 Be fair and objective.
 Prepare yourself for what to say and how to say.
 Make the appraisal feedback meeting useful and productive for the organization and the
employee.
On completion of the appraisal process, the appraisal reports need to be consolidated. These
reports maybe used for many purposes such as determining training needs, giving promotions
and monetary rewards to deserving employees, identifying potential employees for the
purpose of succession planning, etc. The appraisal can also be kept as a part of the HR
records of the employee.
The individual performance reviews should be kept confidential and should not be accessible
to other employees. They should also be stored at a safe place with limited access. Outdated
reviews should be destroyed.

Challenges of Performance Appraisal:33

An organization comes across various problems and challenges of performance appraisal in
order to make a performance appraisal system effective and successful. The main
Performance Appraisal Challenges involved in the performance appraisal process are:


Determining the evaluation criteria- Identification of the appraisal criteria is one of the
biggest problems faced by the top management. The performance data to be considered for
evaluation should be carefully selected. For the purpose of evaluation, the criteria selection
should be in quantifiable or measurable terms.



Creating a rating instrument- The purpose of the performance appraisal process is to
judge the performance of the employees rather than the employee. The focus of the system
should be on the development of the employees of the organization.



Lack of competence- Top management should choose the raters or the evaluators
carefully. They should have the required expertise and the knowledge to decide the criteria
accurately. They should have the experience and the necessary training to carry out the
appraisal process objectively.



Errors in rating and evaluation- Many errors based on the personal bias like
stereotyping, halo effect (i.e. one trait influencing the evaluator’s rating for all other traits)
etc. may creep in the appraisal process. Therefore the rater should exercise objectivity and
fairness in evaluating and rating the performance of the employees.



Resistance- The appraisal process may face resistance from the employees and the trade
unions for the fear of negative ratings. Therefore, the employees should be communicated
and clearly explained the purpose as well the process of appraisal. The standards should be
clearly communicated and every employee should be made aware that what exactly is
expected from him/her

Arguments against Performance Appraisal:34



Performance appraisal is a bitter process for most of the employees which can create
emotional pressures and stress for the employees.



PA is often looked upon as a tool to control the employees by the superiors who dampen
the intrinsic motivation of the employees.



Most of the managers and superiors are not trained enough to carry the processes in the
appropriate and the structured manner.



PA process increases the dependency of the employees on their superiors.



PA process encourages accountability, approvals and discourages the spirit of creativity
and initiative by employees and also demotivates them.



Performance appraisals are conducted by managers who are often not trained to be
appraisers. This obstructs the genuine feedback, as it includes subjectivity and bias of the
raters leading to incorrect and unreliable data regarding the performance of the employees.



PA can adversely affect the morale of the employees and create dissatisfaction among
them, thereby affecting the organizational performance.



Performance appraisals and reviews are often time consuming, with faulty methods to
measure performances and generating false results and the decisions taken can be
politically influenced.

35

Study of the Performance Management System in Shamrao Vithal Co-operative Bank Ltd.
with Analysis and Recommendations

Logo of svc

36

THE SHAMRAO VITHAL CO-OPERATIVE BANK LTD.
The Shamrao Vithal Co-op Bank Ltd. was founded when co-operation was just beginning to
gain ground in the country. Late Rao Bahadur Shripad Subbarao Talmaki was the main
architect of the Bank and he named it after Late Shamrao Vithal Kaikini, who was his main
guiding force and Guru.
The Bank was originally registered as a Co-operative Credit Society on 27 th December 1906.
It was set up with the primary objective of helping the less fortunate members of the
Chitrapur Saraswat community in its economic enterprises, to encourage savings and to
create funds for providing financial aid to deserving members.
Its been an innovative 103 years. As the decades unfolded, varied services were introduced to
address an ever-widening spectrum of retail, corporate and institutional clients. The Rs.1000
crore total business mark was crossed in the year 1998; Rs.5000 crore was achieved in 2006;
and the turnover has now accelerated beyond Rs. 8900 crore.
Growth has equally been reflected in network expansion too – 33 outlets in 1998 boomed to
48 in 2006 and have now grown to 91, and counting…
Innovation has been in evidence in every aspect of the Bank’s operations. Administratively, in
nurturing human resources and a positive work environment. Operationally, by enhancing
security exponentially at various levels. Managerially, through astute goal-definition and an
emphasis on transparency. And at corporate level, through network expansion and mergers
and acquisitions. Yet, perhaps, the most significant aspect of innovation has been the
development and roll-out of Genius – internally constructed banking software that has
increased operational efficiency across the Bank’s entire branch network.
The Bank’s human capital is remarkable in terms of quality. The Human Resource
Department of the Bank is well equipped with effective means to select, recruit and retain a
high performing workforce, choosing the right fit for the right job and preserving a dynamic
culture for employees that foster achievement.
Human Resource management and development practices are major practices in productivity,
progress and profits for any institution, and with 1280 employees, the Bank’s HRD programs
respond to the opportunities created by the organization’s growth, technological
advancements and the productivity challenge faced by it.

37

SVCB HIERARCHY

CHIEF EXECUTIVE OFFICER
(CEO)
DEPUTY GENERAL MANAGER
(DGM)
ASSISTANT GENERAL MANAGER
(AGM)
DIVISIONAL MANAGER
(DM)

SVCB Officers Association

SVCB Employees’ Union

SENIOR MANAGER
MANAGER
ASSISTANT MANAGER
OFFICER
CLERK
SUB-STAFF

38

STUDY:
The old appraisal systemThe old system of conducting performance appraisal at SVC Bank consisted of hard copy of
the appraisal forms. The forms had to be manually filled by the employees.
The old system of performance appraisals had many drawbacks:
 Employees were appraised on the basis of the duties and responsibilities mentioned in the
handbook which had been written in early 90s. These duties and responsibilities had
become outdated in today’s dynamic environment.
 Monitoring the status of appraisal completion was done by contacting managers and
asking them how far they have progressed with it. This process of tracking was time
consuming and could also lead to inaccuracies.
 Performance record notes were kept in electronic (typically MS Word) format.
Such notes had chances of getting easily lost, plus they were difficult to sort through when
used during appraisal interviews.
 The appraisal forms was needed to be gathered by the HR department from all managers,
and then added to employee personal files - by hand or electronically - which were both
extremely time-consuming, plus some forms would get misplaced in the process. It was
also time-consuming to retrieve those forms again if necessary.
 Performance ratings and feedback from other managers an employee has worked with
were gathered on separate, paper-based appraisal forms. This was a logistical nightmare,
plus averages have to be calculated by hand or by using a spreadsheet.
 To view the contents of employee appraisal forms, Managers and HR would have to first
find the file/s where they were stored. This would be very time consuming if the files were
not kept at not-so-easily-accessible physical location.
 Employee performance percentages and/or rating averages had to be calculated manually,
or ratings were needed to be added into a spreadsheet for calculations.
This would lead to potential data input and calculation errors, not to mention the amount
of time to do all of this. Maintaining these files was also a tedious process.
 Staff performance data inputs and comparisons had to be done by using tools such as
spreadsheets. The amount of time inputting these data; possible errors with inputting;
limited capability to do different reports on a spreadsheet posed many problems.

Since the old appraisal system had so many drawbacks, there emerged a need to upgrade to a
better way of conducting employee performance appraisals.

39

The new appraisal systemThe old system of appraising employees was completely revamped into an online procedure.
The new appraisal system known as “e-appraisal” has been designed by the HR department
and developed by the in-house IT department of SVC Bank. The appraisal process is now
connected to the HRMS, which is the master repository of all employee related data. The
appraisal forms have been drafted after due consultation with the zonal heads. This new
system will be effective from this year onwards.
OBJECTIVES OF E-APPRAISAL
 The main purpose of introducing the e-appraisal system is to facilitate easy tracking,
monitoring and maintenance of records.
 The task of generating reports about performance of the employees will become much
simpler as reports will be made available in the HRMS. This will save a lot of time for the
HR department.
 After the completion of the appraisal process, it will become convenient to identify the
performers as well as the non-performers.
 Individuals with specific talents / potential for growth can be identified and groomed to
shoulder higher responsibility.
 Training and development needs of the employees can be ascertained after appraisals of
the employees have been carried out. Appraisals can also measure to some extent the
success rate of the training programs provided to the employees.
 From a broader perspective, e-appraisals will gauge the performance level of the
employees in comparison to the bank’s growth.

40

PROCESS OF FORMULATING THE NEW APPRAISAL SYSTEM  Job Descriptions: JD as they are popularly known have to be designed, as SVCB did not
have them in place.
 Key Result Areas: KRA were then defined from the respective JD
 Common Appraisal Parameters were drawn out for each cadre, merged and a final draft
was prepared
Let’s understand each of the above in detail:
JOB DESCRIPTIONS:
The new appraisal process began with the preparation of job descriptions for each cadre at
branch / department. Job descriptions are lists of the general tasks, or functions, and
responsibilities of a position. Typically, they also include to whom the position reports,
specifications such as the qualifications needed by the person in the job, salary range for the
position, etc.
Typically, job descriptions are used especially for advertising to fill an open position,
determining compensation and as a basis for performance reviews. Here at SVC Bank, they
have been used for the purpose of developing performance appraisals.
Job descriptions were developed by conducting a job analysis, which included examining the
tasks and sequences of tasks necessary to perform the job. For this purpose, the method of
observation was used. The analysis looks at the areas of knowledge and skills needed by the
job.
Positives Aspects about Employee Job Descriptions:
 Employee job descriptions provide an opportunity to clearly communicate the
organization’s goals and they tell the employee where he or she fits inside the big picture.
 Employee job descriptions set clear expectations for what the organization expects from its
people.
 Employee job descriptions help the organization cover all its legal bases.
 Employee job descriptions tell the candidate exactly what you want in your selected
person.
 Well-written employee job descriptions help organization employees, who must work with
the person hired, understand the boundaries of the person's responsibilities.
Negative Potential of Employee Job Descriptions:
 Employee job descriptions become dated as soon as you write them in a fast-paced,
changing, customer-driven work environment.
 Poorly-written employee job descriptions can serve as evidence of wrong-doing or wrongtelling in a wrongful termination lawsuit.
Hence, preparing correct and accurate job descriptions is absolutely essential because
employee job descriptions are communication tools that are significant in the organization's
41

success. Poorly written employee job descriptions, on the other hand, add to workplace
confusion, hurt communication, and make people feel as if they don't know what is expected
from them.
Job descriptions should be reviewed periodically to make sure it accurately reflects what the
employee is doing and the organization’s expectations of results from the employee.
JD was prepared for each cadre mentioned in the hierarchy (i.e. from Clerk to Manager). As
the Clerk and Officer work in all departments of the branch on a rotational basis, the JD
comprises of work related to all departments of the branch. The Assistant Manager & Branch
Head have a consolidate JD. The actual JD are copyright of the Bank, hence cannot be
reproduced here.
KEY RESULT AREAS:
Key Result Area (KRA) refers to general areas of outputs or outcomes for which the
department’s role is responsible. In simple terms it may be defined as primary responsibility
of an individual, the core area for which each person is accountable.
Each job can be broken down into about five to seven key result areas, seldom more. These
are the results that one must absolutely, positively have to get to fulfill one’s responsibilities
and make maximum contribution to the organization. Failure to perform in a critical result
area of the work can lead to failure at the job.
There is essential knowledge and skill that one must have for his/her job. These demands are
constantly changing. There are core competencies that a person must have developed that
make it possible to do the job in the first place.
Preparation of the KRAs gives the employee the exact idea of his job responsibilities. For the
new appraisal process, key result areas have been prepared by summarizing the job
descriptions. Those duties that will have a direct impact on the organization’s goals have been
designated as KRAs.
KRA for each cadre was established based on the JD. The KRA was then merged with all
cadres/grades so that a common pattern could be established for designing the appraisal
parameters.
PARAMETERS:
With the help of job descriptions & key result areas, relevant parameters have been formed
based on which the performance of the employees will be measured. These parameters have
been finalised after holding numerous consultations with the branch / department heads.
In today’s competitive banking industry, having knowledge only about bank’s products and
services is no longer sufficient. Bank staff must also have good communication skills through
which they can provide effective customer service and thus attract or retain their customers.
To work cordially in the work environment, a person must have certain traits which will
enable him to avoid conflicts at workplace.
42

Based on these factors, four parameters have been selected in the new appraisal system for
the purpose of conducting appraisals. The following parameters are applicable to all the
cadres:
 Individual traits
 Work related
 Customer service
 Communication
For Assistant Managers and Branch / Department Heads, additional parameters based on
management capabilities have been used.

PROFORMA OF THE APPRAISAL FORM:
Self – appraisal:
State your important achievements
during the appraisal period
State your specific qualification /
skill upgrades achieved during the
appraisal period
Mention aspects of your job which
you do best; and those which you do
not do so well
What could be done by you and /
your supervisor to improve your
performance
What are your career goals: short
term / long term

The actual performance appraisal form is the copyright of the Bank, hence it cannot be
reproduced here.

43

THE PROCESS FLOW CHART OF ONLINE PERFORMANCE APPRAISALS AT
SVCB

CONDUCT MEETINGS

REVIEW & CHANGES IN PARAMETERS

APPRAISAL ROUTING

MARKING OF BRANCH HEADS / DEPARMENT
HEADS
FIXING THE DATE RANGE

RUN THE SYSTEM

HANDLE PROBLEMS THAT MAY OCCUR IN THE
PROCESS

CONSOLIDATION OF REPORTS

44

PROCESS OF CONDUCTING E-APPRAISALS:
 Conduct meetings - The e-appraisal system has been designed solely by the HR
department and the online software has been developed internally by the IT department.
For this purpose, numerous meetings had to be conducted between the HR and IT
department. There are many components of the e-appraisal system such as deciding the
parameters, appointing appraisers and approvers, finalizing the duration of the appraisal
season, taking sanctions from the board etc. which can be decided only after conducting
numerous meetings with various departments.
 Review & change of parameters – In the old appraisal system, due to the absence of job
descriptions and key result areas, the basis for measuring employee performance was
outdated. In the e-appraisal process, job descriptions and key result areas were duly
prepared and they were summarized to form the parameters.
Since parameters are the very base of measuring performance, they must be formed in the
most suitable manner. They must contain all the important aspects of the job to be
performed yet, they must be in easy language which would be simple to understand. These
parameters need to be finalized after due consultations with the Branch heads and the
Department heads.
 Appraisal routing - This includes determining the work flow of the appraisals. For the
smooth flow of the appraisal forms, it is necessary to chalk out a path. This must be
designed in such a manner so that there would be no roadblocks during the appraisal
process due to which there would be any delay or confusion in the execution of the
process.
The self appraisal forms would be routed to the appraisers which would then be routed to
the reviewer / approver. The completed form would be available on the HRMS software.
The workflow for branches and departments have been set up through meetings with
branch managers and department heads and incorporated into the system, hence the
appraisal will move automatically.
 Marking of Branch Heads / Department Heads – This is one of the important aspects of
the e-appraisal process as it involves deciding who would be the appraisers and who would
be approvers. The onus of accurately measuring the performance of the employees lies on
the appraisers and approvers. After the Branch Heads and Department Heads are marked,
they need to be given orientation regarding the e-appraisal process.
 Fixing the date range – For the smooth and timely transition of the appraisal forms, it is
extremely crucial to fix a date range. A period of one week is given to the employees to
complete their self-appraisal forms. Next whole week is devoted to the appraisers doing
the employee appraisals. The appraisers need to have a meeting with the employee and
discuss his appraisal form.
The reviewer / approver will also be given a duration of one week to approve the appraisal
form and submit it to the HRMS after which no changes can be made.

45

 Run the system – After all the planning part is over, it is essential to look after the
operational aspects of the e-appraisal process. Since this is the first year where e-appraisal
where will be launched, it is important to take care that no technical difficulties may arise.
A pilot project was executed in the HR department and at Vakola Branch for the system
and it has been accepted by the staff therein. The suggestions / recommendations given by
the staff have been incorporated into the module. Orientation of the staff with regards to
understanding the appraisal process, tips to appraise effectively and a system orientation
have been planned in the month of July 2010.
 Handle problems that may occur in the process – Inspite of planning everything to the
last detail, some unforeseen problems may crop up. Some of the problems may be inability
of a staff to access his appraisal form, delays in submission of the forms, etc. In such
instances, the HR department has to fix the problems immediately so that the appraisal
process stays on schedule.
 Consolidation of reports – At the end of the appraisal season, reports regarding the
overall performance of the employees need to be generated. These reports are available in
HRMS, they need to be generated by the HR department. These reports maybe used for
recognizing well performing employees, for the purpose of promotions, for determining
training needs, etc.
Thus the e-appraisal system is a much better method of conducting employee performance
appraisals.

46

Following is an example of the flow of appraisals at branch level for the cadre of sub-staff
and clerk:
AT BRANCH
Sub-Staff & Clerk
Assistant Branch Manager –
Assigned by BM

APPRAISER

ADMINISTRATOR

Branch Manager

REVIEWER
&
APPROVER

ADMINISTRATOR

47

ABM will submit his appraisal report into
the system. Before submitting the report
that he has discussed the appraisal with
the Appraisee and if the Appraisee
disagrees with the Appraiser, the points
of disagreement need to be mentioned.

The Reviewer will get both appraiser report of
the appraisee. He marks the appraisee on the
Global Factors on a scale of 1(min) to 5(max).
For Branch level, for SS & Clerk, Reviewer
will be the Approver also.

BENEFITS OF E-APPRAISAL MODULE:
 Since the e-appraisals have been linked to HRMS which is the master repository of all
employee related data, it has become convenient for the HR department to maintain the
records of the employees.
 Appraisal Forms are automatically stored in the database on completion, per employee and
department. Retrieval is easy and instant. Also in respect of any number of previous years'
appraisals, they will be easily accessible.
 The new module has been designed in a user-friendly manner. Also, navigation through the
module has been made simple. This will be convenient to employees who will be
apprehensive of using online system for their self appraisal. Easier navigation will also be
time saving.
 The parameters in the appraisal form are descriptive choices and not as rating scale. This
will make rating simpler and quicker. Since there are only four answer options, it will be
easier to rate the performance of the employee. The answer options are simple which are
easy to understand.
 Under the new e-appraisal module, it is necessary to have a review meeting between the
appraiser (reporting authority) and appraisee (staff to be appraised). This meeting is very
crucial because there is a two-way communication which facilitates better understanding
of the organization’s as well as personal goals. This dialogue between the appraiser and
appraisee is integral without which the appraisal cannot be submitted.
 In the review meeting that is part of the e-appraisal, the dialogue with employees brings
out their opinions/expectations from the Bank and vice versa. This opens up the channels
of communication which will be beneficial for the organization in the long run.
 There is no separate id or password to access the e-appraisal module. All users can access
their appraisal forms through their own Windows login. Hence there is no new user idpassword to memorize. This is one of the user friendly features of the module which will
encourage the employees to adapt themselves to the module.
 In the e-appraisal module, every cadre of employees has to fill in self appraisal. For SubStaff who would be uncomfortable in filling their self appraisal, the Branch Manager /
Department Head can nominate an Officer to assist him to fill in his self appraisal.
 Since the e-appraisal will be introduced for the first time, employees may have many
difficulties in using the online appraisal system. For this purpose, a help menu and tips for
usage are uploaded into the module. This will enable easy navigation for the users.
 The HR department can track each appraisal and monitor its progress since all the
appraisal reports will be available on the HRMS. Any delays in the process can be tracked
and necessary action can be taken.

48

 Confidentiality is an important factor in the appraisal process which cannot be neglected.
Confidentiality issues are also taken care of in the module.
 It often happens that the process of appraisal gets delayed as employees tend to get busy in
their work. The new module has the feature of sending auto-email reminders in respect of
appraisals approaching and those past their due date. Thus, the HR department won’t have
to send reminder emails manually.
 The e-appraisal module calculates performance percentages and rating averages
automatically, instantly, and error-free. This saves lot of time for the HR department who
had to do the calculation manually.
 Based on the consolidated appraisal reports generated from the system, Training Needs
Analysis (TNA) for all employees can be evaluated. Training programs can be designed
accordingly. Non – performer issues can be dealt with adequate training, counseling.

49

ANALYSIS:
 The transition of the appraisal system from manual to online is an evolving process. The
job descriptions have yet to be formally accepted by the management and staff.
 Even though the development of the e-appraisal system is progressive for the Bank,
whether it will be adapted by the employees or not is yet to be seen.
 Since the e-appraisal will be introduced for the first time in the Bank, employees maybe
apprehensive about it. To add to it, there is a cultural shift involved. The technology
savvyness of the employees is not known. Therefore it can’t be judged at present whether
the new appraisal system will be successful or not.
 Based on the staff response to the new system, the e-appraisal module is likely to get
developed further to be more efficient.
 It will be essential to conduct orientation sessions about the online appraisal system for all
the employees. This can be a two-way communication where the staff can put forth their
queries.
 Having online appraisal process will be highly convenient for the HR department of the
Bank. It will be time saving and more organized as compared to the earlier process.
 The biggest challenge for the HR department will be to ensure that all the stages of the
appraisal process get completed within the stipulated period.
 The Bank has to move towards a performance oriented organization i.e. towards linking
pay with performance. That will be the true test of the new appraisal system.

50

RECOMMENDATIONS:
 The Bank management needs to take ownership of this appraisal system as a policy
decision and a top-down approach is necessary to initiate the change to a performance
driven organization.
 The HR departments needs to be strengthened with HR professionals equipped with the
skills of employee engagement & development to drive the change and seek the results.
 Orientation & training of the new system has to be organization-wide and not limited to a
few employees who will be the appraisers/approvers.
 Leadership qualities of the employees must be encouraged and rewarded so that the
organization has a superior talent pool.
 The appraisal system is an evolving system and hence the continuity in the system and
process need to be maintained, hence the entire process needs to be documented well by
the people handling it.

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BIBLIOGRAPHY






Performance Appraisals – T.V. Rao
Human Resource Management – Gary Dessler
www.abouthr.com
www.citehr.com
www.svcbank.com

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