A Project Report

On
THE IMPACT OF PERFORMANCE APPRAISAL ON THE
ACHIEVEMENT OF ORGANISATIONAL GOAL AT ESCORTS Ltd.

For the partial fulfillment of the requirement of

MASTER OF BUSINESS ADMINISTRATION

Affiliated to Sikkim Manipal University

Under The Guidance of:

DR. NALIN SETH

Submitted by
SHALINI RAI

Roll No. 1408022880

Introduction of the Study of Performance Appraisal System and Its

Effectiveness in an Organization
The history of performance appraisal is quite brief.
Its roots in the early 20th century can be traced to Taylor's pioneering Time and Motion studies.
But this is not very helpful, for the same may be said about almost everything in the field of
modern human resources management.
As a distinct and formal management procedure used in the evaluation of work performance,
appraisal really dates from the time of the Second World War -not more than 60 years ago.
Yet in a broader sense, the practice of appraisal is a very ancient art. In the scale of things
historical, it might well lay claim to being the world's second oldest profession!
There is, says Dulewicz (1989), "... a basic human tendency to make judgments about those one
is working with, as well as about oneself." Appraisal, it seems, is both inevitable and universal.
In the absence of a carefully structured system of appraisal, people will tend to judge the work
performance of others, including subordinates, naturally, informally and arbitrarily.
The human inclination to judge can create serious motivational, ethical and legal problems in
the workplace. Without a structured appraisal system, there is little chance of ensuring that the
judgments made will be lawful, fair, defensible and accurate.
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, if any, was given to the developmental possibilities of appraisal. If was felt
that a cut in pay, or a rise, should provide the only required impetus for an employee to either
improve or continue to perform well.

Sometimes this basic system succeeded in getting the results that were intended; but more often
than not, it failed.
For example, early motivational researchers were aware that different people with roughly equal
work abilities could be paid the same amount of money and yet have quite different levels of
motivation and performance.
These observations were confirmed in empirical studies. Pay rates were important, yes; but they
were not the only element that had an impact on employee performance. It was found that other
issues, such as morale and self-esteem, could also have a major influence.
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.

Modern Appraisal
Performance appraisal may be defined as a structured formal interaction between a subordinate
and supervisor, that usually takes the form of a periodic interview (annual or in which the work
performance of the subordinate is examined and discussed, with a view to identifying
weaknesses and strengths as well as opportunities for improvement and skills development.
In many organizations -but not all -appraisal results are used, either directly or indirectly, to help
determine reward outcomes. That is, the appraisal results are used to identify the better
performing employees who should get the majority of available merit pay increases, bonuses
and promotions.
By the same token, appraisal results are used to identify the poorer performers who may require
some form of counseling, or in extreme cases, demotion, dismissal or decreases in pay.
(Organizations need to be aware of laws in their country that might restrict their capacity to
dismiss employees or decrease pay.)
Whether this is an appropriate use of performance appraisal -the assignment and justification of
rewards and penalties -is a very uncertain and contentious matter.

Controversy, Controversy
Few issues in management stir up more controversy than performance appraisal.
There are many reputable sources -researchers, management commentators, psychometricians
-who have expressed doubts about the validity and reliability of the performance appraisal
process. Some have even suggested that the process is so inherently flawed that it may be
impossible to perfect it (see Derven, 1990, for example). At the other extreme, there are many
strong advocates of performance appraisal. Some view it as potentially "... the most crucial
aspect of organizational life" (Lawrie, 1990).
Between these two extremes lie various schools of belief. While all endorse the use of
performance appraisal, there are many different opinions on how and when to apply it,
There are those, for instance, who believe that performance appraisal has many important
employee development uses, but scorn any attempt to link the process to reward outcomes
-such as pay rises and promotions. This group believes that the linkage to reward outcomes
reduces or eliminates the developmental value of appraisals. Rather than an opportunity for
constructive review and encouragement, the reward- linked process is perceived as judgmental,
punitive and harrowing. For example, how many people would gladly admit their work
problems if, at the same time, they knew that their next pay rise or a much-wanted promotion
was riding on an appraisal result? Very likely, in that situation, many people would deny or
downplay their weaknesses.

Nor is the desire to distort or deny the truth confined to the person being appraised. Many
appraisers feel uncomfortable with the combined role of judge and executioner.
Such reluctance is not difficult to understand. Appraisers often know their appraisees well, and
are typically in a direct subordinate-supervisor relationship. They work together on a daily
basis and may, at times, mix socially. Suggesting that a subordinate needs to brush up on
certain work skills is one thing; giving an appraisal result that has the direct effect of negating
a promotion is another.
The result can be resentment and serious morale damage, leading to workplace disruption,
soured relationships and productivity declines.

On the other hand, there is a strong rival argument which claims that performance appraisal
must unequivocally be linked to reward outcomes. The advocates of this approach say that
organizations must have a process by which rewards -which are not an unlimited resource -may
be openly and fairly distributed to those most deserving on the basis of merit, effort and results.
There is a critical need for remunerative justice in organizations. Performance appraisal
-whatever its practical flaws -is the only process available to help achieve fair, decent and
consistent reward outcomes. It has also been claimed that appraisees themselves are inclined to
believe that appraisal results should be linked directly to reward outcomes -and are suspicious
and disappointed when told this is not the case. Rather than feeling relieved; appraisees may
suspect that they are not being told the whole truth, or that the appraisal process is a sham and
waste of time.
The Link to Rewards
Recent research (Bannister & Balkin, 1990) has reported that appraisees seem to have greater
acceptance of the appraisal process, and feel more satisfied with it, when the process is directly
linked to rewards. Such findings are a serious challenge to those who feel that appraisal results
and reward outcomes must be strictly isolated from each other. There is also a group who argues
that the evaluation of employees for reward purposes, and frank communication with them
about their performance, are part of the basic responsibilities of management. The practice of
not discussing reward issues while appraising performance is, say critics, based on inconsistent
and muddled ideas of motivation.
In many organizations, this inconsistency is aggravated by the practice of having separate wage
and salary reviews, in which merit rises and bonuses are decided arbitrarily, and often secretly,
by supervisors and managers.
There are basically three purposes to which performance appraisal can be put. First, it can be
used as a basis for reward allocation. Decision as to who gets salary increase, promotion, and
other rewards are determined by their performance evaluation. Second, these appraisals can be
used for identifying areas where development efforts are needed. The performance appraisal is a
major tool for identifying deficiencies in individuals. Finally it can be used as a criterion against
which selection devices and development programs are validated. As a key input into

management's reward and punishment decision, performance appraisals can motivate or demotivate employees.

PERFORMANCE APPRAISAL
Since organization exist to achieve goals, the degree of success that individual employees have
in reaching their individuals goals is important in determining organizational effectiveness. The
assessment of how successful employees have been at meeting their individual goals, therefore,
becomes a critical part of HRM. This leads us to the topic of performance appraisal.
PURPOSE
There are basically three purposes to which performance appraisal can be put.

First, it can be used as a basis for reward allocations. Decisions as to who gets salary
increases, promotions, and other rewards are determined by their performance
evaluation.

Second, these appraisals can be used for identifying areas where development efforts
are needed. Management needs to spot those individuals who have specific skill or
knowledge deficiencies. The performance appraisals is a major tool for identifying these
deficiencies.

Finally the performance appraisal can be used as a criterion against which selection
devices and development programs are validated. It is one thing to say, for example, that
our selection process is successful in differentiating satisfactory performers from
unsatisfactory performers.

THE APPRAISAL PROCESS

Established performance standard

Communicate performance expectations to employee

Measure actual performance

Compare actual performance with standards

Discuss the appraisal with the employees.

If necessary, initiate the corrective action

The appraisal process begins with the establishment of performance standards. These should
have evolved out of job analysis and the job description discussed under human resource
planning. These performance standards should also be clear and objective enough to be
understood and measured. Too often, these standards are articulated in some such phrase as "a

full day's work" or "a good job". Communication only takes place when the transference has
taken place and has been received and understood by the subordinate. Therefore feedback is
necessary from the subordinate to the manager. Satisfactory feedback censures that the
information communicated by the manager has been received and understood in the way it was
intended.

The third step in the appraisal in the measurement of performance. To determine what actual
performance. To determine what actual performance is, it is necessary to acquire information
about it. We should be concerned with how we measure and what we measure.

What we measure is probably more critical to the evaluation process than how we measure,
since the selection of the wrong criteria can result in serious dysfunctional consequences. And
what we measure determines, to a great extent, what people in the organization will attempt to
excel at.

One of the most challenging tasks facing managers is to present an . accurate appraisal to the
subordinate and then have the subordinate accept the appraisal in a constructive manner.
Appraising performance touches on one of the most emotionally charged activities the
assessment of another individual's contribution and ability. The impression that subordinates
receive about their assessment has a strong impact on their self-esteem and, very important, on
their subsequent performance.

The final step in the appraisal is the initiation of corrective action when necessary. Corrective
action can, be of two types. One is immediate and deals predominantly with symptoms. The
other is basic and delves into causes. Immediate corrective action often described as "putting
out fires," whereas basic corrective action gets to the source of deviation and seeks to adjust the
difference permanently.

Immediate action corrects something right now and gets things back on track.

Three different approaches exist for doing appraisals. Employees can be appraised against
1.

Absolute standards

2.

Relative standards

3.

Objectives

Potential benefits : There are a number of potential benefits of organizational performance

management conducting formal performance appraisals (PAs). There has been a general
consensus in the belief that PAs lead to positive implications of organizations. Furthermore, PAs
can benefit an organization effectiveness. One way is PAs can often lead to giving individual
workers feedback about their job performance. From this may spawn several potential benefits
such as the individual workers becoming more productive. Other potential benefits include:

:Facilitation of communication: communication in organizations is considered an essential

function of worker motivation. It has been proposed that feedback from PAs aid in minimizing
employees perceptions of uncertainty. Fundamentally, feedback and management-employee
communication can serve as a guide in job performance. Enhancement of employee focus
through promoting trust: behaviors, thoughts, and/or issues may distract employees from their
work, and trust issues may be among these distracting factors. Such factors that consume
psychological energy can lower job performance and cause workers to lose sight of
organizational goals. Properly constructed and utilized PAs have the ability to lower distracting
factors and encourage trust within the organization. Goal setting and desired performance

reinforcement: organizations find it efficient to match individual worker goals and performance
with organizational goals. PAs provide room for discussion in the collaboration of these
individual and organizational goals. Collaboration can also be advantageous by resulting in
employee acceptance and satisfaction of appraisal results.

Performance improvement: well constructed PAs can be valuable tools for communication
with employees as pertaining to how their job performance stands with organizational
expectations.At the organizational level, numerous studies have reported positive relationships
between human resource management (HRM) practices" and performance improvement at both
the individual and organizational levels.Determination of training needs: Employee training and
development are crucial components in helping an organization achieve strategic initiatives. It
has been argued that for PAs to truly be effective, post-appraisal opportunities for training and
development in problem areas, as determined by the appraisal, must be offered. As can
especially be instrumental for identifying training needs of new employees. Finally, PAs can
help in the establishment and supervision of employees career goals.

PERFORMANCE MANAGEMENT

Since organisations exits to achieve goals, the degree of success that individual employees have
in reaching their individual goals is important in determining organisation effectiveness.
Performance system is fundamentally, a feed back process, which require sustained
commitment. The cost of failure to provide such feedback may result in a loss of key
professional employees, the continued poor performance of employees who are not meeting
performance standards and a loss of commitment by employees, in sum, the myth that the
employee know what. they are doing without adequate feedback from management can be an
expensive fantasy.

THE APPRAISAL PROCESS

1.

Establishing Performance Standard

2.

Communicate Performance expectations to employees

3.

Measure actual performance

4.

Compare actual performance with standards

5.

Discussion with the employees and identification development programs to bridge

the gap.

6.

Initiate action

WHO SHOULD EVALUATE PERFORMANCE?

The most fundamental requirement for any rater is that he or she has an adequate opportunity to
observe the rates job performance over a reasonable period of time. This suggest several possible
raters.
The immediate supervisor: Generally appraisal is done by this person. He is probably the most
familiar with the individual's performance and in most jobs has had the best opportunity to
observe actual job performance. Further more, the immediate supervisor is probably best able
to relate the individual's performings to department and organizational objectives.

In some jobs such as outside sales, law enforcement and teaching, the immediate supervisor
may observe a subordinate's actual job performance rarely (and indirectly thru written
reports). Here judgment of peers play important role. However, there is a danger of potential
bias.
Subordinates: Appraisal by subordinates can be useful input to the immediate development.
Subordinates know first-hand the extent to which the supervisor actually delegates, how well he
communicates, the type of leadership he has and the extent to which he or she plans and
orgasms.
Self appraisal: On one hand it improves the rate's motivation and moral, on the other it tends to
be more lenient, less variable and biased. The evidence on the accuracy of self assessment is
fairly complex.
In industry it is seen that feed back/ input is taken from various sources -Peers, subordinates,
superiors etc. Some companies have gone step ahead in taking feedback from the customers and
integrating it into the performance management process.
A satisfactory performance implies doing a job effectively and efficiently, with a minimum
degree of employee -created disruptions. Employees are performing well when they are
productive. Yet productivity itself implies both concern for effectiveness and efficiency.
Effectiveness refers to goal accomplishment. Efficiency evaluates the ratio of inputs consumed
to outputs achieved. The greater the output for a given input, the more efficient the employees.
Similarly, if output is a given, consumed to get that output results in greater efficiency.
There are basically three purposes to which performance appraisal can be put. First, it can be
used as a basis for reward allocations. Decisions as to who gets salary increases, promotions, and
other rewards are determined by their performance evaluation. Second, these appraisals can be
used for identifying areas where development efforts are needed. Management needs to spot
those individuals who have specific skill or knowledge deficiencies. The performance appraisal
is a major tool for identifying these deficiencies. Finally, the performance appraisal can be used
as a criterion against which selection devices and development programs are validated.

Executive Summary

Performance Appraisal
PURPOSE
The purpose of any performance appraisal program is employee development. The value of
perfor- mance appraisal is in the process of communication between supervisor and employee
and not merely in the completion of the form. Specific objectives of the Performance Appraisal
program areto increase professional development, skill level and performance of each employee; to
strengthen working relationships between supervisor and employee; to clarify job duties and
responsibilities; to establish mutually understood standards for measuring performance and to aid
in promotion, retention and salary decisions.
PREPARATION
For the reviewer: Review the appraisal guidelines manual. Complete all three parts of this
performance appraisal in advance of your conference with the employee and be prepared to
discuss it in detail. For the employee being reviewed: Two weeks prior to your review, you will
be given a blank appraisal form. Your completion of this form will serve as a self-evaluation and
acquaint you with the perfor- mance factors to be evaluated.
THE APPRAISAL FORM
Section I Appraisal Factors (Select the most appropriate statement [choose ONLY one]) Section
II Administrative/Professional Personnel Only. (Only those employees with administrative

responsibilities should be reviewed in this section) Section III Review Summary Sheet (includes
overall summary and appropriate signatures)

1. Objective of the Research

This project aims at studying the system of performance appraisal and its effectiveness in an
organisation. Performance appraisal is the most significant and indispensable tool for the
management as it provide useful information for decision making in area of promotion and
compensation reviews.
Thus broad objectives of the study include:

2.

To know the present system of performance appraisal

To know the extent of effectiveness of the appraisal system

To identify and know the area for improvement system

Sample of the study

The population covered for the present study consisted of employee belonging to supervisory
and the level above. For the purpose of this study, survey covered the employee of VATIKA
LTD. falling under supervisor and the level above.
The study covered a sample of 100 employee belonging to supervisory level an questionnaire
with objective and question was communicated tested and finalize. Employees at VATIKA Ltd.
by contacting them. The work relating to data entry compilation, data analysis and report writing
constituted the third stage. Interview index was also used at some places to get information on
the project subject.

Research Methodology
Research methodology is simple framework or plan for the study that is as guide in collection
and analyzing the data. It is the blue print that is followed in completes the study. Thus, good
research methodology ensures the completion of project efficiency and affectivity. Since there
are many aspect of research methodology, the line of action has to be chosen from the variety of
alternatives, to choose the suitable method through the assessment from various alternatives.
Research methodology gives the researcher an opportunity to put forward his
argument for having opted for certain alternatives and also at the same time he can justify his
ruling out some other possibility likes. Why research study has been undertaken, how the
research problem has been formulated what data has been collected, what particular technique if
analyzing the data has been used and lot of similar type question are usually answered when we
talk of research problem in study.

The details of the methodology adopted are presented below:

The Questionnaire
Keeping in view the objective of the study, questionnaire was designed and tested on few
employees. After getting the proper response and sanction from the concerned department the
questionnaire was finalised.

PRIMARY DATA
Market Survey.
Personal Interview.

SECONDARY DATA
Magazines.
Internet.
Business Journal.

Response to Questionnaire
In all 96 questionnaire were given to employees falling in the category of supervisors and
above. Out of which 48 could be collected back duly completed. The researcher individually
contacted the employees to get response on the questionnaire.
Data entry and analysis
It has been an uphill task to enter the enormous data received through the questionnaire which
consisted nearly 20 questions. Resgonse to the descriptive questions though very few but was
valuable for the purpose of study. Hence these were further structured in time with the system
adopted for compilation and data analysis.

REVIEW OF LITERATURE
Heidrick & Struggles an International Inc of Singapore published an article Internal
versus external hiring decision in 2006 by Charles Moore, Managing partner.
Is it better to hire from within or outside of your organization? This was the problem
faced by Heidrick International Inc. The firm had strong internal candidates, but was adamant
about entertaining outside talent for Friels successor. After a few months, the board met to
review a shortlist of external candidates, but despite the exhaustive process chose an internal
applicant. While some may argue that we could have saved time and money by only looking
within, the process ensured that every possible option was considered, and that we arrived at the
best solution for the firm.s
Hiring externally has a number of challenges. The more seniority a position
carries, the greater the chance for failure. Unlike middle managers, the spotlight is immediately
focused on the new senior executive. At many companies in Asia, the new executive will be
confronted with a sink or swim situation: He will either adapt to the new culture in which he
finds himself, or he will drown and the company will be left with little more than an
expensive lesson.
An internal hire, on the other hand, has proven his ability to operate within the
companys culture. So why not, then, stick with only internal candidates? While certainly safer in
the short term, relying only on internal promotions can lead to far greater long-term problems for
an organization.
Whether an external hire succeeds in his position often depends on the companys strong,
forward-looking human resources team, which understands a companys business strategy and
proactively puts systems in place to ensure new executives adjust to their new culture. They
provide the new executive with a mentoring and coaching network that will guide him through
the critical first 12 months on the job. As for the executive himself, he should refrain from
making radical changes as much as possible from day one.
The process includes formal mentoring and an external coaching program. And after six
months, a 360-degree appraisal is conducted with the new executive. Interestingly, Goodyears
on-boarding efforts apply not only to external candidates, but also to internal executives that take
on a new role.

Ultimately, the question to hire from within or outside an organization has no single
correct answer, but clever companies answer yes to both. They promote from within when
possible, provided their internal talent is first-rate, and from outside when they realize their
internal resources fail to stack up to external benchmarks. The company must also ensure that the
new senior executive has the support he needs to adapt to his new culture, which will help align
his abilities with the organizations strategic objectives.

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