A PROJECT REPORT ON PERFORMANCE APPRAISAL

SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENT FOR

MASTER OF COMMERCE (M. COM) MANAGEMENT GROUP SEMESTER-I IN HUMAN RESOURCE MANAGEMENT TO UNIVERSITY OF MUMBAI BY HANEEN SHEHBAZ KHAN ROLL NO.: 04

UNDER THE GUIDANCE OF PROF. JITENDRA AHAREKAR

RIZVI EDUCATION SOCIETYS RIZVI COLLEGE OF ARTS, COMMERCE & SCIENCE RIZVI COMPLEX, BANDRA (W), MUMBAI-50

DECLARATION

I, HANEEN SHEHBAZ KHAN, student of Master of Commerce (M.Com) in Management Group Semester-I, Rizvi College of Arts, Commerce and Science, hereby declare that I have completed the project entitled PERFPRMANCE APPRAISAL in the subject Human Resource Management for the academic year 2012-2013.

_________________ (HANEEN SHEHBAZ KHAN) Roll No.: 04 Date: 20th October, 2012.

CERTIFICATE
I, Prof. Jitendra Aharekar hereby certify that Ms. HANEEN SHEHBAZ KHAN , Roll No. - 04 of M.Com. Semester-I of Rizvi College of Arts, Commerce and Science , has successfully completed project on PERFORMANCE APPRAISAL in the subject Human Resource Management for the academic year 2012-2013.

_____________ Internal Guide

_____________ External Guide

_____________ Co-ordinator

ACKNOWLEDGEMENT
I, HANEEN SHEHBAZ KHAN student of RIZVI COLLEGE OF ARTS, COMMERCE &

SCIENCE. RIZVI COMPLEX, BANDRA (W), MUMBAI-50 studying in Master of Commerce (M.Com) in Management Group Semester-I, hereby declare that I have completed the project on PERFORMANCE APPRAISAL, Academic Year 2012 2013, under the guidance of Prof. Jitendra Aharekar, as a partial fulfillment of the course curriculum in Master Of Commerce (M. Com.)

The information submitted is true and original to the best of my knowledge.

DATE: ________________

_______________________ SIGNATURE OF STUDENT

PLACE: MUMBAI

(HANEEN SHEHBAZ KHAN)

CONTENT
Topic Chapter I 1.Introduction.......6 2. History ..8 3. Objectives & Rationale of the study.9. 4. Research Problems10 5.Research Methodology..10 Chapter II 1. Review ..11 Chapter III 1. Purpose of Performance Appraisal.12 2. Limitation of Performance Appraisal..15 3. Process of Performance Appraisal..18 4. Techniques of Performance Appraisal ..21 5. Recent Trends in Performance Appraisal ......25 Chapter IV 1. Complications Of Data....30 Chapter V 1. Findings..31 2.Conclusions 32 3. Recommendations...32 Pg. No.

BIBLIOGRAPHY
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CHAPTER I 1.Introduction
Human Resource (or personnel) management, in the sense of getting things done through people, is an essential part of every managers responsibility, but many organizations find it advantageous to establish a specialist division to provide an expert service dedicated to ensuring that the human resource function is performed efficiently. Performance appraisal is a process of evaluating work performance of the personnel so as to facilitate individual and organizational effectiveness. Performance appraisal is also referred as merit rating, employee rating and service rating. Performance appraisal is also a systematic and periodic process that assesses an individual employees job performance and productivity in relation to certain pre-established criteria and organizational objectives. Other aspects of individual employees are considered as well, such as organizational behavior, accomplishments, potential for future improvement, strengths and weaknesses, etc. Performance appraisal should provide answers to some important questions for both the employee and the organization such as How well an I performing in the organization? How well are our employee doing individually and collectively? What can we do to help our employees do better for us and for themselves?

Definitions:
Wayne Cascia - Performance appraisal is the systematic description of an employee's job relevant strengths and weaknesses. Micheal Crino -- Performance appraisal as the process of assessing the quantitative and qualitative aspects of an employees job performance. Sexton Adams - Performance appraisal is a method for management to make fair and impartial analysis of the value of employee to the organization Performance Appraisal is very important for every firm, it helps to improve the firms human resource which leads to improvement of it working.

2. History
In the past days performance appraisal was not give much of importance, it was only in terms of an income of a person. Performance appraisal systems began as simple methods of income justification. That is, appraisal was used to decide whether or not the salary or wage of an individual employee was justified. The process was firmly linked to material outcomes. If an employee's performance was found to be less than ideal, a cut in pay would follow. On the other hand, if their performance was better than the supervisor expected, a pay rise was in order.

Little consideration was given to the developmental possibilities of appraisal. It was felt that a cut in pay, or a rise, should provide the only required for an employee to either improve or continue to perform well. It was felt that employees with roughly equal work abilities could be provided with same amount of money, but they had different levels of morale, motivation & performance. So basically the payment structure was focused on amount of work rather than the outcome. Morale and Self-esteem was the issue which had a major impact on the performance of different individuals. As a result, the traditional emphasis on reward outcomes was progressively rejected. In the 1950s in the United States, the potential usefulness of appraisal as tool for motivation and development was gradually recognized. The general model of performance appraisal, as it is known today, began from that time.

3. Objective And Rational Behind The Study

The study was undertaken to understand the need and importance of Performance Appraisal and how does performance appraisal help in motivating the employees to perform better hence improving the performance of the organization on the whole. It also helps to understand why an employees performance is lower than the other when the working environment is the same for all. We will be studying some of the important aspects of Performance Appraisal and different ways of performance appraisal Some Objectives of the study are as follows: Need of Performance Appraisal Limitations of appraisal Systems Method of Performance Appraisal Advantages of Performance Appraisal

4. Research Problems
Some of the problems faced during the research were as follows: Detailed information could not be obtained due to limited time. Survey results may vary as it was conducted on a small group of people i.e. 25 employees. Surveys results may not be accurate due to less candidness

5. Research Methodology
Research Methodology: The research was conducted through both Primary data as well as Secondary data. The primary sources of the data are the employees working in different organizations. The sources of secondary data are the websites and search engines. Method of Data Collection & Sources of Data: Primary Data: Primary data was collected through direct communication with the employees. The survey was performed through a structured questionnaire. Secondary Data: Secondary data was collected through online search engines, articles etc.

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CHAPTER II Review
Performance appraisal is a process of assessing, summarizing and developing the work performance of an employee. In order to be effective and constructive, the performance manager should make every effort to obtain as much objective information about the employe e's performance as possible. Low performance can push the organization back in todays tough competition scenario. The project is aimed at analyzing the performance appraisal in companies Performance appraisal must be seen as an intrinsic part of a manager s responsibility and not an unwelcome and time-consuming addition to them. It is about improving performance and ultimate effectiveness. Performance appraisal is a systematic means of ensuring that managers and their staff meet regularly to discuss post a nd present performance issues and to agree what future is appropriate on both sides There 2 techniques of performance appraisal they are: TRADITIONAL TECHNIQUES MODERN TECHNIQUES

Now we will be studying in details the techniques of performance appraisal, its limitations and its process.

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CHAPTER III 1. Purposes Of Performance Appraisal

Why performance appraisal is important in an organization It is important for an organization to evaluate the performance level of their employees. And to help improve their performance if not as per satisfaction level of the organization. There are several purposes of c onducting performance appraisal some are as follows: Performance Feedback:

Employees are interested to know as to how well they are doing at present, as well as how they can do better in future. This provides them personal satisfaction and also to help them improve performance in order to be eligible for the organizational rewards such as promotions and merit pay. Performance feedback can improve the quality of employee's future performance. It may also serve as a source of satisfaction and motivation, and guide to the adjustments for performance improvement.

Promotions:

Performance appraisal gives management a means of identifying employees capability for promotion. The evaluation of the employee helps the employer to choose the best employee for a rais in salary or promotions

Transfers:

Performance appraisal is useful in effecting transfer decisions. As with promotions, transfers often involve changes in job responsibilities and it is important that the best suitable employee is chosen for
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the job. Identification of employees who can be transferred is possible through the reports of performance appraisal.

Compensation

Performance appraisal may also be used to compensate the employees in terms of increased pay and other incentives. Increase in pa or incentives has always been one of the most motivating factor for an employee. Although pay rise is a function of increases in cost of living, productivity, seniority, and the financial condition of the organization, employee merit is also an important factor.

Distinguishes Effective and Ineffective Performers :

Performance appraisal helps to identify the difference between effective and ineffective performers. Effective performers can be promoted or they may be rewarded with higher pay and incentives. Necessary guidance or training can be given to ineffective performers.

Employee Training and Development Decisions :

Performance appraisal information can also be helpful in determining whether an employee requires additional training and development. Deficiencies in performance may be due to inadequate knowledge or skills. Organization can then decide to provide additional training to the employees. Employee development and training can be very helpful in improving current job performance in areas such as supervisory techniques, planning and budgeting and so on.

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Human Resource Planning :

The appraisal process aids in human resource planning. Accurate and current appraisal data regarding employees may provide management with important information on which to base decisions for future employement. Without the knowledge of who is capable of being promoted, demoted, transferred, laid off or terminated, management is at a severe disadvantage with respect to framing various employment plans for the future of the organization.

Effetive Communication :

Appraisal interviews and reports can be very effective means of communication to the employee and can result in improved performance

Career Development :

Performance appraisal enables managers to coach, counsel and assist employees in their career development.

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2. Limitations Of Performance Appraisal

Performance Appraisal has many limitations as well which we have discussed further : Halo Effect:

The appraiser may rate the entire appraisal on the basis of one positive quality or trait which was assessed earlier. For instance, if a person is evaluated on one trait creativity ability and if he scores very high in the case of creativity ability, than the rater may also give him high scores in respect of other traits, such as intelligence and so on, even without assessing other traits. Horn Effect:

At times, the appraiser may evaluate on the basis of one negative quality of the employee. This results in overall lower rating of the employee concerned. Like if he does not shave regularly. He must be lazy at work as well. Central Tendency :

There are instances, where an appraiser assigns mostly middle range scores or values to all individuals being appraised. Extremely high or low evaluations are avoided.

Leniency and strictness

Some bosses are lenient in grading their empl oyees while some are very strict. Employee who really deserves promotions may lose the opportunity due to strict bosses while those who may not deserve may get benefits due to lenient boss.

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Spill over effect:

In this case the employee is judged positively or negatively by the boss depending upon the past performance. Therefore although the employee may have improved performance, he may still not get the benefit. Fear of losing subordinates and spoiling relations:

Many bosses do not wish to spoil their relations with their subordinates. Therefore when they appraise the employee they may end up giving higher grades which are not required. This is a n injustice to really deserving employees.

Personal Bias

Performance appriasal is affected by personal bias of the rater. If the rater has good relations with the ratee (an employee who is getting rated), he may give higher scores to the ratee, even though the ratee does not deserve such high scores. So personal bias may lead to favoured treatment for some employees, and bad treatment to others.

Paper Work:

Some supervisors complain that performance appraisal is pointless paper work. They complain because many times, performance appraisal reports are found only in the files. It does not serve any practical purpose. In other words, the performance appraisal reports are not used by some organizations. They are conducted just as a formality or for the name sake.

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Fear of confrontation:

Sometimes, supervisors tend to give above average rating to below average performers, so as to avoid confrontation. The Problem of appropriate Technique:

There are a number of evaluation techniques. Some techniques may be easier and economical to use. Others may be time consuming, inconveni ent and costly. Some appraisers may select the most convenient and simple technique rather than the more suitable but time consuming or inconvenient technique. Violation Of the Cardinal rule:

Cardinal rule is that the evaluation should be only based on the employees performance, this rule is often violated. In reality, it is the person being evaluated rather than his performance. Falling short of expectations calls for renewed effort or a change in tactics, but it probably is not a reflection of a basic ch aracter fault. It is to be noted that failure is an event and not a person.

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3. Process Of Performance Appraisal

There is a specific process of conducting a systematic and effective Performance Appraisal, It should be done in the following steps. Setting Performance Standards: The first step in the process of performance appraisal is the setting up of the standards which will be used to as the base to compare the actual performance of the employees. This step requires setting the criteria to judge the performance of the employees as successful or unsuccessful and the degrees of the ir contribution to the organizational goals and objectives. The standards set should be clear, easily understandable and in measurable terms. Communicating Standards: Once set, it is the responsibility of the management to communicate the standards to all the employees of the organization. The employees should be informed and the standards should be clearly explained to them. This will help them to understand their roles and to know what exactly is expected from them.

Measuring Performance: The most difficult part of the Performance appraisal process is measuring the actual performance of the employees that is the work done by the employees during the specified period of time. This stage requires the careful selection of the appropriate techniques of measurement.

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Comparing with Standards: The actual performance is compared with the desired or the standard performance. The comparison tells the deviations in the performance of the employees from the standards set. The result can show the actual performance be ing more than the desired performance or, the actual performance being less than the desired performance .

Discussing Results: The result of the appraisal is communicated and discussed with the employees on one to-one basis. The focus of this discussion is on communication and listening. The results, the problems and the possible solutions are discussed with the aim of problem solving and reaching consensus. The feedback should be given with a positive attitude as this can have an effect on the employees future performance.

Listing Corrective Measures: The next step is to list corrective measures, which includes 1. Training and development 2. Coaching and counselling 3. Firing and warnings, etc.

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Implementation: Out of the listed corrective measures, the most appropriate and suitable measure may be selected for implementation. For instance, if training and development is selected as a corrective measure, the following factors should be considered for its implementation

Review: The appraising authority must find out whether the corrective measures suggested are implemented or not. He must also find out whether the corrective actions taken have helped to improve the performance of the employee.

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4. Techniques Of Performance Appraisal

There are mainly two techniques of Performance Appraisal they are: Traditional Techniques Modern Techniques

These techniques are further divided into different methods they are as follows:

Traditional Technique
Check List: The rater is given a checklist of the descriptions of the behavior of the employees on job. The checklist contains a list of statements on the basis of which the rater describes the on the job performance of the employees in a yes and no check box answer.

Critical Incident Method: In this method of Performance appraisal, the evaluator rates the employee on the basis of critical events and how the employee behaved during those incidents. It includes both negative and positive points. The drawback of this method is that the supervisor has to note down the critical incidents and the employee behaviour as and when they occur.

Ranking Method : 1. This is one of the oldest and simplest techniques of performance appraisal. Ranking methods offer convenience to evaluate the performance and they are less time consuming. The ranking methods used are:
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(a) (b) (c)

Simple ranking method. Alternation ranking method. Paired comparison method.

Graphic Rating Scale: In this method, an employees quality and quantity of work is assessed in a graphic scale indicating different degrees of a particular trait. The factors taken into consideration include both the personal characteristics and characteristics related to the on the job performance of the employees.

Narrative Essay: The simplest method is the narrative essay. In this, the rater describes in detail an employee's strengths and weaknesses, and potential, together with suggestions for improvement. If essays are written well, they can give detailed feedback to the subordinates in respect of their performance

Modern Techniques
Role Analysis: Role analysis is a process of analysing the role of a manager in relation to roles of other managers or members who are affected by his performance. Here a performance of a manager affects the performance of another employee. The role set members can conduct performance appraisal of the focal role. The focal role can make necessary changes to improve his performance.

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Assessment Centres: This method is mostly used for selecting employees and managers. However, now-a-days this method is used for performance appraisal. It is used to decide which manager to promote to a higher level. The ratees are given many psychological tests, management games, oral presentations and other exercises. They are asked questions and they are judged by the raters.

MBO: It is an effective way it is also known as goal setting approach to appraisal .In this process the supervisor and subordinate members jointly identify the common goals of the organization and set the areas of the responsibility of each individual in terms of results expected from that person. These measures are use for operating the unit as well as for appraising the performance of the employees.

BARS: BARS method is a variation of simple graphic scale method. Here, the behaviour or attitude of the employee towards his job is rated. Some employees have a positive attitude towards their job. They continuously try to upgrade (improve) their knowledge and skills. However, some employees have a negative attitude towards their job. They do not try to upgrade and update their knowledge and skills So, the employees can be divided into two groups based on their behaviour towards their job.

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Psychological Appraisal; Psychological appraisal is done to find out the conceptual skills, human skills, technical skills, etc. of the employee. It is done by different methods, such as in-depth interviews, psychological tests, consultations and discussions with the employees, superiors, subordinates and others, who are working with the employee.

Human Resource Accounting (HRA): Human Resource Accounting means to measure the cost and value of the people (i.e. of employees and managers) in the organisation. It measures the cost incurred to recruit, hire, train and develop employees and managers . HRA also finds out the present economic value of its employees and managers. After measuring the cost and value of its employees and managers, the organisation prepares a report after which it can be decided whether contribution of the employee is more that the cost or not.

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5. Recent Trends In Performance Appraisal

Now a days new performance appraisal systems come up some are as follows:

i.

360 0 Appraisal

In 360-degree appraisal many different types of people are consulted about an employee's performance. This includes customers, suppliers, peers and direct reports. In the case of a manager, employees are often asked to give "upward feedback" on how well they are being managed. The people that are involved are: Immediate Superior: Mostly employees are evaluated by their immediate superior, since he works with his subordinated and has the more accurate and direct information on the work performance of the subordinate.

Subordinates: The subordinates could be asked to rate the performance of his superior. For instance, the student may be asked to rate the performance of his teacher. As the subordinate are constantly working under their superiors.

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Self-assessment: There can be self- assessment. The concerned employee may be asked to appraise his own performance. The purpose is to help an employee to review and control his own performance and to initiate efforts for self -development.

Peers : Peers or colleagues can rate each other's performance. This is more useful and accurate as they work in a team and team work matters most. For instance, a police officer can rate his partner who normally accompanies him on duty.

Top Management: Top management normally may rate the senior or middle level executives who directly report to them.

Customers: The customers or clients can also undertake performance appraisal of the employees with whom they interact. The customers are in a better position to g ive a feedback on the performance of those employees with whom they come into contact during the course of business transactions. The feedback given by customers can be utilized to improve strengths and to minimize weaknesses of the employees.

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ii.

Management By Objectives
The concept of MBO was popularised by Peter Drucker in 1950s. MBO involves planning and controlling activities by the subordinate managers. In the words of George Odiorne, MBO is defined as "The superior and subordinate managers of an organisation jointly define its common goals, define each individual's major areas of responsibility in terms of the results expected of them and use these measures as guides in operating the unit and assessing the contribution of each of its members."

Process Of M.B.O.
Collectively formulating goals: The goals are decided and formulated jointly by the superior and subordinate , which the subordinate needs to achieve.

Collectively formulating action plan: After setting goals, the subordinate manager along with his superior formulates an action plan(s) to achieve the goals. Normally, the superior and subordinate may frame alternative plans.

Evaluating the alternatives and Selection of the best plan : If alternative plans are framed, the superior and subordinate manager have to evaluate the alternative plans. After cost-benefit analysis of the alternative plans, they select the best feasible
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plan. The superior and subordinate manager would select the best plan that gives maximum benefits at minimum costs.

Implementation of the plan: The subordinate implements the best feasible plan by making optimum use of the resources. If required, he may take the assistance or guidance in the implementation of the plan.

Collectively monitoring performance: In the final stage, performance is reviewed by the subordinate by comparing against the planned targets. At the performance review, the superior acts as a coach or a guide rather than as a judge to see the results. If deviations occur, the superior and the subordinate once again frame objectives .

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Some advantages of MBO are as follows: 1. Better utilisation of resources 2. Aid in planning 3. Development of personnel. 4. Better Team Work 5. Objective Evaluation 6. MBO is result oriented 7. Sound Organisational Structure

Some disadvantages of MBO are as follows: 1. Time consuming 2. Paper Work 3. Problem in goal setting 4. Rewards may not match with efforts 5. Dominance by superiors: 6. Clash in objectives

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CHAPTER IV 1. Complication of Data

The data was only based on secondary source hence may not be accurate There can be some problems in performance appraisal which are as follows: Difficulty in choosing performance method. Less interest in conducting appraisal

There are many methods for performance appraisal as studied before; hence there can be a problem in opting for the best suited method for an organization If the managers or appraisers are less interested in taking a appraisal there can be a possibility that they give moderate ratings to the apraisees.

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CHAPTER V 1. Findings
Now a days there are many appraisal methods available for any organization Organizations can choose any method which are best suitably for their organization Performance appraisal not only evaluates the performance level of the employee but also improves the relation between the managers and subordinates. Performance appraisal helps in finding out strengths and weaknesses of an employee It also motivating if a employee performs wel l If he is at a low performance level it helps in finding a appropriate training method to improve it.

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2. Recommendations
Performance Appraisal should be carried out in all the organizations. Depending on the strength of the employees it should be carried on regular time bases. If the organization is large it should be conducted frequently 360 0 Performance appraisal method is the best method as it uses everyones views. If appraisal is undertaken for a specific reason or objective MBO is the best method.

3. Conclusions
Performance appraisal should be undertaken on regular bases as it is a systematic means of ensuring that managers and their staff meet regularly to discuss post and present performance issues and to agree what future is appro priate on both sides. It helps in discovering the reasons of a low performance level of an employee Provides help in improving ones performance.

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BIBLIOGRAPHY
www.google.com www.wikipedia.org en.wikipedia.org/wiki/Performance_appraisa

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