“‘‘COMPARATIVE STUDY OF PERFORMANCE APPRAISAL SYSTEMS IN

BANKS.’’

(BANK OF BARODA AND HDFC)

A PROJECT SUBMITTED TO

UNIVERSITY OF MUMBAI FOR PARTIAL COMPLETION OF THE

DEGREE OF BACHELOR IN COMMERCE (BANKING AND
INSURANCE)

UNDER THE FACULTY OF COMMERCE

BY
AKASH PRAKASH BHUD

UNDER THE GUIDANCE OF

MONI DEEPA DAS

TILAK COLLEGE OF SCIENCE AND COMMERCE

VASHI NAVI MUMBAI -400705

MARCH 2020
 DECLARATION

I AKASH PRAKASH BHUD I hereby Declare that the work embodied in

this project work titled “COMPARATIVE STUDY OF PERFORMANCE
APPRAISAL SYSTEMS IN BANKS (BANK OF BARODA & HDFC) ”
forms my own contribution to the research work carried out under the
guidance of “MONI DEEPA DAS” is a result of own research work and has
not been previously submitted to any other university of any other degree /
diploma to this or any other university.

Whenever reference has been made to previous work of other, it has been
clearly indicated as such and included in the bibliography.

I, here by further declare that all information of this document has been
obtained and presented in accordance with academic rules and ethical
conduct.

Name and Signature of the learner

AKASH PRAKASH BHUD

Certified by

Name and Signature of the Guiding Teacher

MONI DEEPA DAS

 ACKNOWLEDGMENT

I would like to acknowledge the following as being idealistic channels and

fresh dimensions in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me

chance to do this project.

I would like to thank my Principal, DR. ANITA JOSHIfor providing the

necessary facilities required for completion of this project.

I take this opportunity to thank our Coordinator DR.AABHA

MAHESHWARI, for her moral support and guidance.

I would also like to express my sincere gratitude towards my project guide,

MONI DEEPA DAS, whose guidance and care made the project successful.

I would like to thank my College Library, for having provided various

reference books and magazines related to my project.

Lastly, I would like to thank each and every person who directly or
indirectly helped me in the completion of the project especially my Parents
and Peers who supported me throughout my project.
 SUMMARY

Performance appraisal is no doubt a management tool for aligning corporate

performance with individual performance. It is used for many different
purposes such as pay increases, improvement and training, transfers,
compensations, promotion, employee recognition, and termination. In this
study, three famous private banking companies of Bangladesh have come
under scrutiny for making an assessment of prevalent performance appraisal
system in the banking sector. The study reveals that all the sample banks
follow some hard and fast framework for assessing their executives and
managers. While revealing the commonalities among the performance
assessment schemes of the sample companies, the study reveals that
punctuality, creativity, dynamic leadership, initiative & drive, dealing with
customers, timekeeping, knowledge of banking rules & regulation and
communication skill are given necessary weight in all the three banks.
However, the study also have found a good number of factors which are
taken into account by only a sample bank and the other two totally ignored
those factors. Further, the study also reveals all the three performance
appraisal schemes as narrows ones which could not provide a
comprehensive view on all the aspects to be taken care off. In this backdrop,
the study has developed a comprehensive model for performance evaluation
based on recent and relevant literatures and this model has been applied for
opinion survey of the executives of the sample banking companies.
 INDEX

Sr. No. Contents Page no.

1 INTRODUCTION
1.1 Concept of Performance Appraisal 1-3
1.2 Definitions of Performance Appraisal 4
1.3 History & Origin of working capital 5-6
1.4 Uses & Importance of Performance 7-9
Appraisal
1.5 Advantages of Performance Appraisal 10-11
1.6 Essentials of Good Performance Appraisal 12-14
System
1.7 Process of performance Appraisal 15-18
1.8 Performance Appraisal & techniques 19-23
1.9 Methods of Performance appraisal 24-28
1.10 Performance Appraisal & banks 29-30
1.11 Bank of Baroda 31
1.12 Performance Appraisal Schemes of BOB 32
1.13 Housing Development Finance
33
Corporation
1.14 Performance Appraisal Schemes of
HDFC 34
1.15 Comparison of Appraisal in BOB &
HDFC 35-39
1.16 Problems in Performance Appraisal 40-41
1.17 Performance Appraisal biases 42-43
2 RESEARCH METHODOLOGY
2.1 Objectives of the study 44
2.2 Scope of the study 45
2.3 Limitations of the study 46
2.4 Tools used for analysis 47
3 LITERATURE REVIEW
3.1 studies based on Performance Appraisal in 48-52
banks
4 DATA ANALYSIS,
INTERPRETATIONS AND
53-72
PRESENTATION
5 CONCLUSION AND
SUGGESTIONS
5.1 Findings & Suggestions 73
5.3 Conclusion 74
6 BIBLIOGRAPHY AND
WEBLIOGRAPHY 75-76
 CHAPTER 1

INTRODUCTION

1.1 Concept of performance appraisal

The performance appraisal is the process of assessing employee performance by way of

comparing present performance with already established standards which have been
already communicated to employees, subsequently providing feedback to employees
about their performance level for the purpose of improving their performance as needed
by the organisation.

As said above the very purpose of performance uprising is to know performance of

employee, subsequently to decide whether training is needed to particular employee or to
give promotion with additional pay hike. performance appraisal is the tool for
determining whether employee is to be promoted, demoted or sacked ( remove ) in case
of very poor performance and no scope for improvement.

It is a regular review of an employee's job performance and overall contribution to a

company. Also known as an "annual review," "performance review or evaluation," or
"employee appraisal," a performance appraisal evaluates an employee’s skills,
achievements and growth, or lack thereof. Companies use performance appraisals to give
employees big-picture feedback on their work and to justify pay increases and bonuses,
as well as termination decisions. They can be conducted at any given time but tend to be
annual, semi-annual or quarterly.

It is a systematic, general and periodic process that assesses an individual employee's 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 citizenship developement, accomplishments, potential for future
improvement, strengths and weaknesses, etc.

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WHAT IS PERFORMANCE ?

What does the term performance actually mean? Employees are performing well when
they are productive. Productivity implies both concern for effectiveness and efficiency,
effectiveness refers to goal accomplishment. However it does not speak of the costs
incurred in reaching the goal. That is where efficiency comes in. Efficiency evaluates the
ratio of inputs consumed to outputs achieved. The greater the output for a given input, the
greater the efficiency. It is not desirable to have objective measures of productivity such
as hard data on effectiveness, number of units produced, or percent of crimes solved etc
and hard data on efficiency .

In addition to productivity as measured in terms of effectiveness and efficiency,

performance also includes personnel data such as measures of accidents, turnover,
absences, and tardiness. That is a good employee is one who not only performs well in
terms of productivity but also minimizes problems for the organisation by being to work
on time, by not missing days, and by minimizing the number of work-related accidents.

WHAT IS APPRAISAL ?

Appraisals are judgments of the characteristics, traits and performance of others. On the
basis of these judgments we assess the worth or value of others and identify what is good
or bad. In industry performance appraisal is a systematic evaluation of employees by
supervisors. Employees also wish to know their position in the organization. Appraisals
are essential for making many administrative decisions: selection,
training, promotion, transfer, wages and salaray and salary administration.

Performance Appraisal thus is a systematic and objective way of judging the relative
worth of ability of an employee in performing his task. Performance appraisal helps to
identify those who are performing their assigned tasks well and those who are not and the
reasons for such performance.

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Why companies give performance appraisal ?

Because companies have a limited pool of funds from which to award raises and bonuses,
performance appraisals help determine how to allocate those funds. They provide a way
for companies to determine which employees have contributed the most to the company’s
growth so companies can reward their top-performing employees accordingly.

Performance appraisals also help employees and their managers create a plan for
employee development through additional training and increased responsibilities, as well
as to identify shortcomings the employee could work to resolve.

Ideally, the performance appraisal is not the only time during the year that managers and
employees communicate about the employee’s contributions. More frequent
conversations help keep everyone on the same page, develop stronger relationships
between employees and managers, and make annual reviews less stressful.

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1.2 Definitions of performance appraisal

Performance appraisal has been defined by different scholars in various ways. Some of
the important definitions are as follows:

Dale S. Beach, "Performance appraisal is systematic evaluation of the individual with

respect to his or her performance on the job and his or her potential for development".

Randall S. Schuler, "Performance appraisal is a formal, structured system of measuring

and evaluating an employees job, related behaviour and outcomes to discover how and
why the employee is presently performing on the job and how the employee can perform
more effectively in the future so that the employee, organisation, and society all benefit."

Heyel, "It is the process of evaluating the performance and qualifications of the
employees in terms of the requirements of the job for which he is employed, for purposes
of administration including placement, selection for promotions, providing financial
rewards and other actions which require differential treatment among the members of a
group as distinguished from actions affecting all members equally."

Dale Yoder, ''Performance appraisal includes all formal procedures used to evaluated
personalities and contributions and potentials of group members in a working
organisation. It is a continuous process to secure information necessary for making
correct and objective decisions on employees."

Performance appraisal from employee point of view - "A performance appraisal is

meant to help employees realise their strengths and shortcomings and receive a
compensation accordingly."

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1.3 History & Origin of Performance Appraisal

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 judgements 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 judgements 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.

5
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.

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1.4 Uses and Importance of Performance Appraisal

1. Performance feedback :

Most employees are very interested in knowing how well they are doing at present and
how they can do better in a future. They want this information to improve their
performance in order to get promotions and merit pay. Proper performance feedback can
improve the employee’s future performance. It also gives him satisfaction and
motivation.

2. Employee training and development decisions :

Performance Appraisal information is used to find out whether an employee requires

additional training and development. Deficiencies in performance may be due to
inadequate knowledge or skills. For e.g. A professor may improve his efficiency by
attending workshops or seminars about his subjects. Performance appraisal helps a
manager to find out whether he needs additional training for improving his current job
performance. Similarly, if the performance appraisal results show that he can perform
well in higher position, then he is given training for the higher level position.

3. Validation of selection process :

Performance appraisal is a means of validating both internal (promotions and transfers)

and external (hiring new employees from outside) sources. Organisations spend a lot of
time and money for recruiting and selecting employees. Various tools used in the
selection process are application blanks, intervies, psychological tests, etc. these tools are
used to predict the candidate’s performance on the job. A proper performance appraisal
finds out the validity of the various selection tools and so the company can follow
suitable steps for selecting employees in future.

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4.Promotions

Performance appraisal is a way of finding out which employee should be given a

promotion. Past appraisals together with other background data, will enable management
to select proper persons for promotion.

5. Transfers

Performance appraisal is also useful for taking transfer decisions. Transfer often involve
changes in job responsibilities, and it is important to find out the employees who can take
these responsibilities. Such identification of employees who can be transferrd is possible
through the performance appraisal.

6. Layoff Decisions

Performance appraisal is a good way of taking layoff decisions. Employees may be asked
to lay off, if the need arises. The weakest performers are the first to be laid off. If there is
not performance appraisal, then there are chances that the best men in the department
may be laid off.

7. Compensation decision

Performance appraisal can be used to compensate the employees by increasing their pay
and other incentives. This is truer in case of managerial jobs and also in case of
employees in non-unionized organizations. The better performances are rewarded with
merit-pay.

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8. Human Resource Planning

The appraisal process helps in human resource planning (HRP). Accurate and current
appraisal data regarding certain employees helps the management in taking decisions for
future employment. Without the knowledge of who is capable of being promoted,
demoted, transferred, laid off or terminated, management cannot make employment plans
for the future.

9. Career Development

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

10. Communication

For an organization, effective communication between employees and employers is very

important. Through performance appraisal, communication can be sought for in the
following ways:

a. Through performance appraisal, the employers can understand and accept skills of
subordinates.
b. The subordinates can also understand and create a trust and confidence in
superiors.
c. It also helps in maintaining cordial and congenial labour management
relationship.
d. It develops the spirit of work and boosts the morale of employees.

9
1.5 Advantages of Performance Appraisal

Documentation:

A PA provides a document of employee performance over a specific period of time. It’s

a piece of paper that can be placed in an employee file.

Structure:

This process creates a structure where a manager can meet and discuss performance with
an employee. It forces the uncomfortable conversations that often need to happen.

Feedback:

Employees crave feedback, and this process allows a manager the opportunity to
provide the employee with feedback about their performance and discuss how well
the employee goals were accomplished. It also provides an opportunity to discuss
employee development opportunities.

Clarify Expectations:

Employees need to understand what is expected of them and the PA process allows for a
manager to clarify expectations and discuss issues with their employee.

Annual Planning:

It provides a structure for thinking through and planning the upcoming year and
developing employee goals.

10
Motivation:

The process should motivate employees by rewarding them with a merit increase and as
part of a comprehensive compensation strategy.

Employee Development:

Performance appraisal helps determine who is in need of more training as it gives

information regarding the strengths and potentials as well as weaknesses of the
employees.

Corrects Deficiencies:

Performance appraisal detects employee deficiency and suggests on corrective measures

to be taken.

Career Growth:

Appraisal serves as a tool for the employees’ career planning and development as it
assists in preparing each employee’s SWOT analysis.

Improves Performance:

Performance appraisals major focus on improving employees performance as it analyses

and evaluates the opportunity factors like social process and technology.

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1.6 Essential of good performance appraisal system

To effective, a performance appraisal system should the following requirement

Trust:

An atmosphere of mutual trust and confidence should be created in the organisation

before introducing the appraisal system. Such an atmosphere is necessary for frank
discussion of appraisal. It also helps to obtain the faith of employees in the appraisal
system.

Performance appraisal is an emotional process involving feelings of fairness and equal

treatment. The human element in it must be considered if is to serve the individual and
organizational purposes.

Clear objectives :-

The objectives and uses of performance appraisal should be made clear and specific. The
objectives should be relevant, timely and open. The appraisal system should be fair so
that it is beneficial to both the individual employee and the organization. The system
should be adequately and appropriately linked with other subsystems of human resource
management.

Standardization :-

Well – defined performance factors and criteria should be developed. These factors as
well as appraisal form, procedures and techniques should be standardized. It will help to
ensure uniformity and comparison of ratings.

12
The appraisal techniques should measure what they are supposed to measure. These
should also be easy to administer and economical to use. Employees should be made
fully aware of performance standards and should be involved in setting the standards.

Training :-

Evaluators should be given training in philosophy and techniques of appraisal. They

should be provided with knowledge and skills in documenting appraisals, conducting
post appraisal interviews, rating errors, etc.

Job Relatedness :-

The evaluators should focus attention on job-related behaviour and performance of

employees. Multiple criteria should be used for appraisal and appraisal should be done
periodically rather than once a year.

Documentation :-

The raters should be required to justify their ratings. Documentation will encourage
evaluators to make conclusions efforts minimizing personal biases. It will also help to
impart accountability for ratings.

Feedback and participation :-

Arrangements should be made to communicate the ratings to both the employees and the
raters. The employees should actively participate in managing performance and in the
ongoing process of evaluation. The superior should play the role of coach and counseller.
The overall purpose of appraisals should be developmental rather than judgemental. The
feedback message must contain comments with examples and suggestions for
improvement.

13
Individual differences :-

While designing the appraisal system, individual differences in organisations should be

recognized. Organisations differ in terms of size, nature, needs and environment.
Therefore, the appraisal system should be tailor-made for the particular organisation. The
needs of ratees in terms of feedback, mobility, confidence and openness should also be
considered.

Post appraisal Interview :-

After appraisal, an interview with the employee should be arranged. It is necessary to

supply feedback, to know the difficulties under which the employees work and to identify
their training needs. The rater should adopt a problem – solving approach in the interview
and should provide counseling for improving performance.

Review and appeal :

A mechanism for review of ratings should be provided. The review may be made by a
committee consisting of line executives and personnel experts. The committee will see
whether the raters are unusually strict or lenient. It may compare ratings with operating
results and may require the raters to give specific examples or tangible proof. Differences
if any are discussed and dissent is recorded. Provision must be made for an appeal
in case the employee/ratee is not satisfied with the ratings.

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1.7 Process of Performance Appraisal

STEP 1 : Defining Objectives Of Appraisal :

The first basic step in effective and systematic appraisal system is to define the objectives
of the appraisal itself. Appraisal is used for different purposes ranging from motivating
the appraisees to controlling their behaviour. In each case, the emphasis on different
aspects of appraisal differs. For example, reward- providing appraisal such as salary
revision or promotion differs from appraisal for training and development.

STEP 2 : Defining Appraisal Norms

When we evaluate anything in terms of good or bad, we always have some norms in our
mind against which we say whether the thing is good or bad. In the same way, appraisal
is done in the context of certain norms or standards. These may be in the form of various
traits of the appraisees or their expected work performance results.
Since one of the basic long-term objectives is to improve performance, appraisal is more
performance oriented. Therefore, performance norms are to be specified in the beginning
of the period for which appraisal is concerned. As we shall see later, when performance is
taken as the basis of appraisal, the performance standards should be determined jointly by
appraiser and appraisee.
Further, since performance of an employee in the organization is affected by a number of
factors, and many of these may not be within the control of the employee, there should be
provisions of revision of performance norms mid-way to take into account the impact of
uncontrollable factors. For example, Pepsi India evaluates performance norms for its
various managers twice or thrice in a year to make these more meaningful.

15
STEP 3 : Designing Appraisal Programme

In designing performance appraisal programme, there are several issues which require
attention- the types of personnel to be appraised, types of personnel to act as appraisers,
appraisal methodology, and timing of appraisal. The first basic issue is the determination
of personnel who will be included in the formal appraisal system. Ideally speaking, all
personnel of the organization should be covered by the appraisal system.
However, various organizations keep lower-level employees out of the purview of formal
appraisal system and adopt informal system for them. The second issue is the
determination of personnel who will conduct performance appraisal. Most often, the
superior concerned appraises his subordinates.
However, the present trend in appraisal suggests the concept of 360-degree appraisal
which involves appraisal by the appraisee himself known as self-appraisal, appraisal by
superior concerned, HR personnel, and outside personnel with whom the appraisee
interacts in performing his jobs.
The next issue in designing appraisal programme is the methodology to be used in
appraisal whether through structured forms and questionnaires or personal interview of
appraisee or a combination of both.
Usually, a combination of both in preferable because structured forms may not give full
relevant information. The last issue in designing of appraisal programme is the
determination of time period and timing of appraisal. Most of the organizations which
link appraisal with reward system follow annual system and undertake appraisal after the
end of the year.
Others which link appraisal with promotion and identification of training needs do not
follow annual system but devise the time period on the basis of appraisal needs.

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STEP 4 : Implementing Appraisal Programme

In implementing appraisal programme, the appraisal is conducted by the appraisers and

they may also conduct interview if it is provided in the appraisal system. The results of
the appraisal are communicated to HR department for follow-up actions which should be
oriented towards the objectives of the appraisal.

STEP 5 : Appraisal Feedback

Perhaps appraisal feedback is the most crucial stage in appraisal process, specially when
the superior’s rating is not as per the expectations of the appraisee, even though such
expectations may be based on false premise. For example, Larry Cipolla has observed
that most people want feedback as long, of course, as it mirrors their self perception.
When it does, they tend to like it. When it doesn’t, they don’t. There is an ethical
consideration is giving feedback of performance if it is against the employees. Many
managers feel that employees often experience a profound face-saving issue they hear
that their actual performance is not as good as they had perceived it to be. Upon hearing
this, some become stoic and quiet, others cry, and a few become overtly angry, hostile,
and verbally abusive. The managers put question- Is it ethical for them to share their
honest perceptions of employee performance at the risk of hurting them? To some extent,
this problem may be overcome by objective appraisal and feedback.

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STEP 6 : Post-Appraisal Actions

Performance appraisal is not an end in itself, but it is a means for improving long-term
performance of personnel by taking appropriate actions based on the information as
revealed by the appraisal. These actions may be in the form of suitable rewards to
outperformers, counselling and guiding underperformers and providing training to them
for better performance, and identifying and removing those organizational factors which
hinder effective performance.
In fact, in the systems approach, appraisal aims at improving performance, instead of
merely assessing it. Towards this end, appraisal system seeks to evaluate opportunity
factors. Opportunity factors include the physical environment and social processes at the
work. These opportunity variables are more important than individual abilities in
determining work performance.

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1.8 Performance Appraisal Tools and Techniques

Following are the tools used by the organizations for Performance Appraisals of their
employees.

1. Ranking

2. Paired Comparison

3. Forced Distribution

4. Confidential Report

5. Essay Evaluation

6. Critical Incident

7. Checklists

8. Graphic Rating Scale

9. BARS

10. Forced Choice Method

11. MBO

12. Field Review Technique

13. Performance Test

19
We will be discussing the important performance appraisal tools and techniques in
detail.

1. Ranking Method

The ranking system requires the rater to rank his subordinates on overall
performance. This consists in simply putting a man in a rank order. Under this
method, the ranking of an employee in a work group is done against that of
another employee. The relative position of each employee is tested in terms of his
numerical rank. It may also be done by ranking a person on his job performance
against another member of the competitive group.

Advantages of Ranking Method

i. Employees are ranked according to their performance levels.

ii. It is easier to rank the best and the worst employee.

Limitations of Ranking Method

iii. The “whole man” is compared with another “whole man” in this method.
In practice, it is very difficult to compare individuals possessing various
individual traits.
iv. This method speaks only of the position where an employee stands in his
group. It does not test anything about how much better or how much
worse an employee is when compared to another employee.
v. When a large number of employees are working, ranking of individuals
become a difficult issue.
vi. There is no systematic procedure for ranking individuals in the
organization. The ranking system does not eliminate the possibility of
snap judgements.

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2. Forced Distribution method

This is a ranking technique where raters are required to allocate a certain

percentage of rates to certain categories (eg: superior, above average, average) or
percentiles (eg: top 10 percent, bottom 20 percent etc). Both the number of
categories and percentage of employees to be allotted to each category are a
function of performance appraisal design and format. The workers of outstanding
merit may be placed at top 10 percent of the scale, the rest may be placed as 20 %
good, 40 % outstanding, 20 % fair and 10 % fair.

Advantages of Forced Distribution

i. This method tends to eliminate raters bias

ii. By forcing the distribution according to pre-determined percentages, the
problem of making use of different raters with different scales is avoided.

Limitations of Forced Distribution

iii. The limitation of using this method in salary administration, however, is

that it may lead low morale, low productivity and high absenteeism.

Employees who feel that they are productive, but find themselves in lower
grade(than expected) feel frustrated and exhibit over a period of time
reluctance to work.

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3. Critical Incident techniques

Under this method, the manager prepares lists of statements of very effective and
ineffective behaviour of an employee. These critical incidents or events represent
the outstanding or poor behaviour of employees or the job. The manager
maintains logs of each employee, whereby he periodically records critical
incidents of the workers behaviour. At the end of the rating period, these recorded
critical incidents are used in the evaluation of the worker’s performance. Example
of a good critical incident of a Customer Relations Officer is : March 12 - The
Officer patiently attended to a customers complaint. He was very polite and
prompt in attending the customers problem.

Advantages of Critical Incident techniques

i. This method provides an objective basis for conducting a thorough

discussion of an employees performance.
ii. This method avoids recency bias (most recent incidents are too much
emphasized)

Limitations of Critical Incident techniques

iii. Negative incidents may be more noticeable than positive incidents.

iv. The supervisors have a tendency to unload a series of complaints about the
incidents during an annual performance review sessions.
v. It results in very close supervision which may not be liked by an
employee.
vi. The recording of incidents may be a chore for the manager concerned,
who may be too busy or may forget to do it.

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4. Checklists and Weighted Checklists

In this system, a large number of statements that describe a specific job are given.
Each statement has a weight or scale value attached to it. While rating an
employee the supervisor checks all those statements that most closely describe the
behaviour of the individual under assessment. The rating sheet is then scored by
averaging the weights of all the statements checked by the rater. A checklist is
constructed for each job by having persons who are quite familiar with the jobs.
These statements are then categorized by the judges and weights are assigned to
the statements in accordance with the value attached by the judges.

Advantages of Checklists and Weighted Checklists

i. Most frequently used method in evaluation of the employees performance.

Limitations of Checklists and Weighted Checklists

ii. This method is very expensive and time consuming

iii. Rater may be biased in distinguishing the positive and negative questions.
iv. It becomes difficult for the manager to assemble, analyze and weigh a
number of statements about the employees characteristics, contributions
and behaviours.

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1.9 Methods of Performance Appraisal

1. Management by Objectives (MBO)

Management by objectives (MBO) is the appraisal method where managers and
employees together identify, plan, organize, and communicate goals. After setting clear
goals, managers and subordinates periodically discuss the progress made to control and
debate on the feasibility.

This process usually lays more stress on tangible work or career-oriented goals. So,
intangible aspects like interpersonal skills, job commitment, etc. are often brushed under
the rug. This method is slightly expensive and time-intensive.

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2. 360-Degree Feedback

Once-in-a-year performance appraisals are lackadaisical and don’t work. Workers need
ongoing communication with team leaders and managers. A continuous process, like
360-degree feedback, can help employees stay motivated. This is one of the most widely
used appraisal methods.

In 360-degree feedback, every employee in an organization appraises his/her managers,

peers, customers, suppliers, and also does a self-evaluation. This method ensures
effective performance analysis and Total Employee Involved (TEI). If not handled
properly, this method can also suffer from the subjectivity of the appraiser.

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3. Assessment Centre Method

The assessment centre method tests employees in a social-related situation. This concept
was introduced way back in 1930 by the German Army but it has been polished and
tailored to fit today’s environment. Employees are asked to take part in situation
exercises like in-basket exercises, work groups, simulations, and role-playing exercises
that ensure success in a role.

While it gives an insight of the employee’s personality (ethics, tolerance, problem-

solving skill, introversion/extroversion, adaptability, etc.), it can also breed unhealthy
competition among the workers and bears adverse effects on low performers.

26
4. Behaviorally Anchored Rating Scale (BARS)
Behaviorally anchored rating scales (BARS) bring out both the qualitative and
quantitative benefits in a performance appraisal process. BARS compares employee
performance with specific behavioral examples that are anchored to numerical ratings.

This performance appraisal method is said to be better than the traditional methods.
BARS provides clear standards, improved feedback, accurate performance analysis, and
consistent evaluation. However, when done manually it suffers from the usual distortions
that are inherent in most review methodologies.

27
5. Psychological Appraisals
Psychological appraisals come in handy to determine the hidden potential of employees.
This method focuses on analyzing an employee’s future performance rather than their
past work.

Qualified psychologists conduct a variety of tests (in-depth interviews, psychological

tests, discussions, and more) to identify an employee’s emotional, intellectual, and other
related traits. However, it is a rather slow and complex process and the quality of results
is highly dependent on the psychologist who administers the procedure.

6. Human-Resource (Cost) Accounting Method

Human resource (cost) accounting method analyses an employee’s performance through
the monetary benefits he/she yields to the company. It is obtained by comparing the cost
of retaining an employee (cost to company) and the monetary benefits (contributions) an
organization has ascertained from that specific employee.

When an employee’s performance is evaluated based on cost accounting methods, factors

like unit-wise average service value, quality, overhead cost, interpersonal relationships,
and more are taken into account. Its high-dependency on the cost and benefit analysis and
the memory power of the reviewer is the drawback of human resources accounting
method.

28
1.10 Performance Appraisal and Banks

(Bank of Baroda & HDFC)

Performance appraisal constitutes an important tool of Human Resource Management.

Employees performance at all levels have to be appraised on a continuous basis. Such
appraisal is vital for the growth of both the organization and the employees. The
organizations have realized the vital role of performance appraisal and as such have
developed more reliable performance appraisal programmes (Arnold and Feldman, 1986)

Now a day’s organizations understand that performance appraisal as a corrective device

and an essential tool for improving employee abilities and potential. The scientific and
systematic performance appraisal recognizes and develops the performance of the
employees as well as finds a suitable position where he can prove his efficiency in
achieving the desired goals and objectives of the self and organization (Dudeja, 2000). It
acts as an instrumental value for extracting the best from the individual employees
towards the achievement of organizational goal.

The bank personnel should also plan their job in right direction for better performance.
They should take performance appraisal system seriously. The employees should
perceive the performance appraisal reports as an opportunity for future growth.

Therefore it is in this context that present study has under taken performance appraisal as
one of the dimensions of the HRD practices and it was found that both public as well as
Bank of Baroda follow performance appraisal practice. It is interesting to note that there
is a significant difference in the practices followed by both the Banks s. Bank of Baroda
showed better performance appraisal practices than HDFC Bank as is evident from the
higher mean value of Bank of Baroda.

Performance Appraisal of the Selected Bank 164 In the HDFC Bank dimensions of
managerial effectiveness (decision making / problem solving and assessment of task)
showed a positive and significant relationship with performance appraisal. It can be
concluded that various aspects of performance appraisal followed by HDFC Bank leads
better decision making and problem solving ability of the employees.

29
In the Bank of Baroda performance appraisal features showed significant and positive
correlation with nine dimensions of managerial effectiveness. This shows that in the
Bank of Baroda performance appraisal is well linked with dimensions of managerial
effectiveness this will lead to better performance, healthy relationship and conducive
environment. Belief in subordinates was found to be significantly yet negatively
correlated to performance appraisal. This indicates that the employees of the Bank of
Baroda should try to build friendly, congenial as well as relationship of trust with the
subordinates.

It was also found in the study that performance appraisal is a predictor of number of
dimensions of managerial effectiveness like empowerment, example setting, training,
motivation, decision making for both the Banks under study.

Therefore, the personnel of both the Banks have to understand that the performance
appraisal system performs the vital role in improving the managerial effectiveness of the
employees .It is an important source of competitive advantage in its own right, and
requires due attention of HR professionals. The management of these Bank should
develop more reliable performance appraisal programmes and let the employees
understand the basic purpose of these appraisal programmes.

30
1.11 Bank of Baroda

Bank of Baroda is an Indian state-owned International banking and financial services

company headquartered in Vadodara (earlier known as Baroda) in Gujarat, India. It is the
second largest bank in India, next to State Bank Of India. Its headquarters is in Vadodara,
it has a corporate office in the Mumbai.

The bank was founded by the Maharaja of Baroda, Maharaja Sayajirao gaekwad III on
20 July 1908. The bank, along with 13 other major commercial banks of India, was
nationalized on 19 July 1969, by the Government of India and has been designated as a
profit-making public sector undertaking (PSU).

The bank, along with 13 other major commercial banks of India, was nationalised on 19
July 1969, by the Government of India and has been designated as a profit-making public
sector undertaking (PSU).

Logo: The Baroda Sun

The logo is a unique representation of a universal symbol. It comprises dual ‘B’

letterforms that hold the rays of the rising sun. BOB call this the Baroda Sun. The sun is
an excellent representation of what the Bank stands for. It is the single most powerful
source of light and energy. Its far-reaching rays dispel darkness to illuminate everything
they touch.

Tagline: India’s international bank

31
1.12 Performance Appraisal Schemes of Bank of Baroda

In Bank Of Baroda, the executives are rated under 5 point scale for each of the criteria
and this criteria necessarily include personality, judgment & sense of proportion,
initiative and drive, power of expression, ability to perform assign work, discipline,
perseverance & devotion to duty, ability to implement decision, integrity, sense of
responsibility, ability to plan, organize and supervise work, capacity to take
independent decision, punctuality, dealing with colleagues, knowledge of banking rules
and dealing with clients.
In Bank of Baroda, the executives are rated under 5 points scale for each of the criteria
and this criteria necessarily personality, judgement & sense of proportion, initiative and
drive, power of expression, ability to perform assign work, discipline, preserverance and
devotion to duty, ability to implement decision, integrity, sense of responsibility, ability
to plan, organize and supervise work, capacity to take independent decision, punctuality,
dealing with collegues, knowledge of banking rules and dealing with clients.

For branch manager, ten performance evaluation factors are taken into consideration
which are categorically, achievement of yearly target deposit, achievement pf yearly
advances target, achievement of yearly profit target, achievement of yearly account
opening target, cumulative deposite amount as at end of December, cumulative profit
amount of the year as at end of December, cumulative number of CASA amount as at end
of December, percentage of FDR as at end of December, no classification status as at end
of December.

DBBL also categorizes ten factorson the basis of weights, for example, some factors
carry ten pointa and the other factors carry 5 points. The total weight for above
mentioned ten factors is equal to eighty five. Finally, on the basis of individual executives
scores, the total scores earned by the executives are properly calculated which is later
considered as one of the prime bases for performance appraisal of the branch manager.

32
1.13 Housing Development Finance Corporation

The HDFC Bank was incorporated on August 1994 by the name of 'HDFC Bank
Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations
as a Scheduled Commercial Bank in January 1995. The Housing Development Finance
Corporation (HDFC) was amongst the first to receive an 'in principle' approval from the
Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBI's
liberalization of the Indian Banking Industry in 1994.

HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable network
of over 1416 branches spread over 550 cities across India. All branches are linked on an
online real–time basis. Customers in over 500 locations are also serviced through
Telephone Banking. The Bank also has a network of about over 3382 networked ATMs
across these cities.

The promoter of the company HDFC was incepted in 1977 is India's premier housing
finance company and enjoys an impeccable track record in India as well as in
international markets. HDFC has developed significant expertise in retail mortgage loans
to different market segments and also has a large corporate client base for its housing
related credit facilities. With its experience in the financial markets, a strong market
reputation, large shareholder base and unique consumer franchise, HDFC was ideally
positioned to promote a bank in the Indian environment.

33
1.14 Performance Appraisal Schemes of HDFC Bank

In HDFC bank, the performance appraisal scheme is typical one which considered three
broad areas of performances under the heads of i) self appraisal (score 100), ii)
competency and demonstration of leadership behaviors (score 100), and iii) skill and
knowledge assessment (score 100).

As far as self assessment executive is concerned, the authority asks the incumbent to
assess himself/herself against his/her job description which clearly demonstrates his/her
business performance. It is mentioned earlier that this self appraisal system constitutes
one-third of the total scores of the performance appraisal systems.

With regard to competency and leadership behaviors, the important factors that are taken
into account are: clarity on business, initiative and drive, creativity, analytical power and
communication, customer focus, strategic influence, team commitment integrity and
leading, developing skill, organizational awareness and inter-personal relationship and
conduct in service. This broad section also carries one-third of the total weights.

The third broad category of performance appraisal is skill and knowledge assessment
which essentially include a number of performanve indicators which are: cost skills,
planning, performance proficiency and creativity, time and record management, project
management, change management, customer management, banking rules and regulations,
knowledge of other functions, organization and people, information management and
understand economy. Like the other two broad areas, this section also carries one-third of
the total weights.

Finally the aggregate score of each executive is counted for final assessment of the
executives, At this stage, the achievement of the executive are rated and fallen under six
categories which are: i) Excellent (score from 255% and above), ii)Very good (score
form 225% to 254%). Iii) Good Plus (score from 195% to 224%), iv) Good (score from
165% to 194%0, v) Fair (score from 135% to 164%) and vi) Marginal Passed (score from
less than 135%).

34
1.15 Comparison of appraisal in BOB and HDFC

 The head office delivers a questionnaire to be filled up by the appraisee. The

questionnaire comprises the following things:

SR.NO. PARTICULARS BANK OF HDFC

BARODA
1 Knowledge of organization,  
product, services
2. Awareness of the  
policies/mannuals
3. Knowledge of banking rules  
and regulations.
4. Problem solving  *
5. Punctuality and time  
consciousness
6. Independent working  
7. Communication skill  
8. Commitement to the  *
organization it’s advancement
9. Marketing and selling ability  
10. Initiative and drive  
11. Preparedness to learn and  
implement
12. Response to customer  
reactions
13. Leadership  *
14. Team Orientation  *
15. Decision making  *
16. Multi-tasking  
17. Readiness to work under  
pressure
18. Resilience  
 Yes * No

35
  The head office delivers a questionnaire to be filled up by the appraiser. The
questionnaire includes the following things:

SR.NO. PARTICULARS BANK OF HDFC

BARODA
1 Initiative, drive, enthusiasm  
2. Acceptability to the colleagues and  
seniors
3. Acceptability to the customers  
4. Time consciousness, attendance,  
punctuality
5. Sense of commitment and  
belongingness to the bank
6. Knowledge in banking, accounting,  
finance, laws practices.
7. Knowledge about the bank’s  
product,
services and policies
8. Skill of presentation in English and  
hindi
9. Physical and mental health condition  *
10. Outer presentation and adherence to  
discipline
11. Preparedness to work under pressure  
12. Desk related job accomplishment  
13. Compliance with instruction in  
accomplishment of jobs assigned
14. Response to customer, Reactions  
response to supervisor’s instructions
15. Accuracy in accomplishments  
 Yes * No

36
Marks Allocation:

A) Bank of Baroda :

In bank, Total evaluation marks are 100. as a financial institution 20 marks for deposit
mobilization. Employee who gets below 60 marks is not eligible for promotion.
Promotion must be due after 2 years. Every employee gets 1 increment in a year.
Training need is not assessed individually. The need is assessed divisionally. Whether an
employee shall receive training or not depends on immediate supervisor’s report and
recommendation. The employee get two festival bonus & a single leave, medical
allowance, house rent allowance which depends on their basic pay.
The Bank of Baroda rates the employees in the following ways:

SCALE STANDARD/CRITERIA FOR ACHIEVING GOALS

1 Significantly above the performance level required by the business.

2 Consistently better than the performance level required by the business.

3 Consistently achieved the performance level required by the business.

4 Not consistently achieving the performance level by the business.

5 Significantly below the performance level required by the business.

The scores achieved by the employees indicate the following:

1-2: Indicates above business expectation.
3: Benchmark Behavior (meets business expectation for effective performance)
4-5: Below business expectation

37
B) HDFC :

1. Rating appraisal system: Among various kinds of performance appraisal system,

banks widely use the point rating system. On the other hand, although Bank of Barodas
give more emphasis on quality of work, dependability, job knowledge, attendance,
accuracy, etc.
2. Time:

HDFC banks generally evaluate the performance of employee on annual basis. In

contrast, Bank of Barodas evaluate the divisional performance of employee on quarterly
basis.
3. Level:

HDFC banks categorize the performance under three levels. a. Junior level b. Mid-level
c. High level On the other hand, Bank of Barodas categorize the employees under three
categorizes for performance appraisal. a. Non-executive level b. Executive level (Mid-
level) c. Top Management
4. Rating Scale:

For most of the HDFC banks, the rating of the employees is done under the following
scale:
i) Outstanding (80 and above): Superior actions and results that consistently deliver very
high quality performance far exceeding expectation.

ii) Very good (70 and 79): High quality performance where actions and results frequently
exceed expectation.

iii) Good (60-69): satisfactory performance that effectively meets expectation.

iv) Average (50-59):Actions and results that sometimes fall short of expectation and do
not always meet requirements of the job.

38
SR.NO. PARTICULARS TOTAL MARKS
MARKS SECURED
1 Appraisal of performance 40
(assessment)
2. Business performance 20
3. Length of banking service 5
4. Academic qualification 10
5. Institute of bankers examination 3(1+2+=3)
(Part1-
1mark,part-2 -2marks)

6. Professional training 2
7. Interview performance 20
TOTAL 100

39
1.16 Problems in Performance Appraisal ( Limitations of performance
appraisal)

1. Bias of Appraiser:
The presence of ‘Halo Effect’ in evaluation of employees is the biggest weakness of this
method. A high rate is given to favoured employees whereas unfriendly employees are
rated low.

2. Ambiguity in Standards:
If the standards are not clear, the supervisors may follow different standards for different
employees.

3. Insufficient Evidence:
An employee who can impress the boss may get a positive evaluation though his
impression in his own department may be very poor. In such cases, the performance
appraisal will be superfluous.

4. Several Qualities Remain Without Appraisal:

Through performance appraisal, only few qualities of employees can be measured. All
individuals differ from each other in terms of background, values and behaviour.

40
5. Leniency or Strictness Tenancy:
Every evaluator has his own valuation procedure which is regarded as his own standard
for evaluation. For example, some teachers are strict in evaluation of answer books
whereas others are lenient. The lenient tendency is known as ‘Positive Leniency Error’
whereas strict tendency is called as ‘Negative Leniency Error’. The rating may be high or
low depending upon the nature of evaluators.

6. Average Rating Problem:

In order to give very low or very high rating, the top managers are required to give
reasons to justify the rating. The most common error committed in performance appraisal
is to give average rating to all employees. Moreover, low rating antagonizes the
subordinates.

7. Influence of Man’s Job:

There is a tendency to give a high rating to highly paid jobs. So a senior employee may
get a higher rating than a junior employee.

8. Similarity Error:
The evaluator tries to look those qualities in subordinates which he himself possesses.
Those who show the similar characteristics are rated high.

41
1.17 Performance Appraisal Biases
Managers commit mistakes while evaluating employees and their performance. Biases
and judgment errors of various kinds may spoil the performance appraisal process. Bias
here refers to inaccurate distortion of a measurement. These are:

1. First Impression (primacy effect):

Raters form an overall impression about the ratee on the basis of some particluar
characteristics of the ratee identified by them. The identified qualities and features
may not provide adequate base for appraisal.

2. Halo Effect:

The individual’s performance is completely appraised on the basis of a perceived

positive quality, feature or trait. In other words this is the tendency to rate a man
uniformly high or low in other traits if he is extra-ordinarily high or low in one
particular trait. If a worker has few absences, his supervisor might give him a high
rating in all other areas of work.

3. Horn Effect:

The individual’s performance is completely appraised on the basis of a negative

quality or feature perceived. This results in an overall lower rating than may be
warranted. “He is not formally dressed up in the office. He may be casual at work
too!”.

4. Excessive Stiffness or Lenience:

Depending upon the raters own standards, values and physical and mental makeup
at the time of appraisal, ratees may be rated very strictly or leniently. Some of the
managers are likely to take the line of least resistance and rate people high,
whereas others, by nature, believe in the tyranny of exact assessment, considering
more particularly the drawbacks of the individual and thus making the assessment

42
 excessively severe. The leniency error can render a system ineffective. If
everyone is to be rated high, the system has not done anything to differentiate
among the employees.

5. Central Tendency:

Appraisers rate all employees as average performers. That is, it is an attitude to

rate people as neither high nor low and follow the middle path. For example, a
professor, with a view to play it safe, might give a class grade near the equal to B,
regardless of the differences in individual performances.

6. Personal Biases:

The way a supervisor feels about each of the individuals working under him -
whether he likes or dislikes them - as a tremendous effect on the rating of their
performances. Personal Bias can stem from various sources as a result of
information obtained from colleagues, considerations of faith and thinking, social
and family background and so on.

7. Spillover Effect:

The present performance is evaluated much on the basis of past performance.

“The person who was a good performer in distant past is assured to be okay at
present also”.

8. Recency Effect:

Rating is influenced by the most recent behaviour ignoring the commonly

demonstrated behaviours during the entire appraisal period.

Therefore while appraising performances, all the above biases should be avoid

43
 CHAPTER 2

RESEARCH METHODOLOGY

2.1 Objectives of the study

The object of the proposed study is to examine the Performance Appraisal Systems of
both the banks i.e. Bank of Baroda and the HDFC Bank. It attempts to study the methods
and techniques employed for Performance Appraisal. It attempts to study the satisfaction
level of employees regarding the Performance Appraisal System. It also seeks to study as
to how the results of Performance Appraisal conducted in these banks are being utilized
for Performance Pay and incentives of employees, training need assessment and
Promotion of employees. In view of these potentialities the proposed study will be
designed to achieve the following objectives:

1. To have some understanding of organization and management of Bank of Baroda

and the HDFC Bank.
2. To assess the Performance Appraisal Systems of both the banks i.e. Bank of
Baroda and the HDFC Bank.
3. To find out the significant differences in Performance Appraisal Systems of Bank
of Baroda and the HDFC Bank.
4. To determine which functions are served by Performance Appraisal Systems in
both Bank of Baroda and the HDFC Bank.
5. To find out the satisfaction level of employees regarding the Performance
Appraisal System.
6. To find out the significant differences in perceptions of the appraisers and the
appraisees of Bank of Baroda and the HDFC Bank.
7. To explore as to what extent Performance Appraisal System acts as a tool for
employee growth and enhance productivity.
8. To determine the problems, if any, in the Performance Appraisal Systems in both
Bank of Baroda and the HDFC Bank and to make suitable suggestions to
overcome these problem

44
2.2 Scope of the study

Keeping in view the time and resources at the disposal, the study is confined to the
performance appraisal systems of both Bank of Baroda and HDFC Bank and seeks to
give a comparative study of the performance appraisal systems of both the banks.

The proposed study would be confined to the following areas:

1. A study of performance appraisal systems of both Bank of Baroda and the

HDFC bank.

2. A study of how performance appraisal system affects the employees of both

Bank of Baroda and the HDFC bank.

3. A study of what functions are being served by performance appraisal system

in Bank of Baroda and the HDFC Bank.

4. A study of perception, attitudes and the responses of employees of Bank of

Baroda and the HDFC Bank towards the performance appraisal system.

5. A study of problems in the performance appraisal systems of both Bank of

Baroda and the HDFC bank and to make a suitable suggestions to overcome
the specific problems.

45
2.3 Limitations of the study

TIME :

Performance appraisals are very time consuming and can be overwhelming to managers
with many employees. I’ve known managers who were responsible for doing an annual
PA on hundreds of employees. The entire process can be a waste of time if not done
appropriately. Think about the time investment when the end result is negative. It is time
wasted on all fronts. Most of the forms are incredibly long and time-consuming. As a
result, some managers routinely recycle “last year’s” evaluations. If HR is required to sit
in on the sessions, the amount of wasted time increases significantly.

BIASED FEEDBACK :

Human assessment are subject to natural biases that result in rater errors. Managers need
to understand these biases to eliminate them from the process. Performance appraisals are
done by human beings who may have their own biases and prejudices. In India, there
have been numerous examples to show prejudicial approaches of the supervisors,
managers and even executives in evaluating their subordinates’ performance based on
considerations of caste, tribe, religion, language and region.

ELEMENT OF MANIPULATION :

There are instances where managers and supervisors dominate over the entire process of
performance appraisal and are in a position to manipulate things with a view to favouring
employees of their own liking. On the other hand, there may be dominant employees,
such as group or union leaders who exert undue pressure on the appraiser to
accommodate them even when their performance has been consistently poor. In such
cases, the option left before the raters is either to decline to be a rater or to manipulate
things to accommodate them.

46
2.4 Methods of Data Collection

There are two main sources of collection of data, one is primary and second source is
secondary. The primary data are those which are collected afresh and the first time, and
thus happens to be original in character. The secondary data, on the other hand, are those
which have already been collected by someone else and which have already been passed
through the statistical process. The data and the research material which are required for
these study are based on the primary as well as secondary sources.

Primary data will be collected from employees and it will be collected from three
categories of employees of both the banks. i.e. Bank of Baroda and HDFC bank. These
categories will be higher management, middle management and the general employees.

 Primary data

1. Questionnaire
2. Interview
3. Observation
4. Discussion

 Secondary data

The secondary data will be collected from the records of various departments of
the banks such as, personnel and HR department, public relations department,
promotion and transfer section, training and management development department,
marketing department, etc. Moreover, the data will also be collected from the annual
reports of both the banks, published booklets of the training centres and the public
relation cell, house jopurnal, and house news letter, if any, of both the banks,
economic survey and published articles in various journals and newsletters.

47
 CHAPTER 3

LITERATURE REVIEW

3.1 Studies based on performance appraisal in banks

Dr. Shambhu Nath Chowdhury (2008), banking services is one sector where a great
degree of attention is being paid to Performance Appraisal Systems. Several of the public
sector banks (PSBs) have changed their PAS or are in the process of changing them.

Y. Zhang ( 2009) suggested that banking industry, employees’ perception of justice has a
positive relationship to their overall satisfaction with both the performance appraisal
process and its outcomes. However, statistically significant differences were found in
relation to whether employees had received training in performance appraisal or not.

Ekta Bhatia (2010) The performance appraisal or review is essentially an opportunity for
the individual and those concerned with their performance in the bank , most usually their
line manager - to get together to engage in a dialogue about the individual’s performance,
development and the support required from the manager. It should not be a top down
process or an opportunity for one person to ask questions and the other to reply. It should
be a free flowing conversation in which a range of views are exchanged.

A. Shrivastava and P. Purang (2011) studied the differences between public and private
sector banks with respect to perception of fairness of the performance appraisal system
and performance appraisal satisfaction. Perception of fairness of the performance
appraisal system has been studied through nine factors. The study used independent
samples t-test and qualitative analysis to study the mean differences between the two
banks..

Gary Dessler in his contribution “Human Resource Management” (2008) provides a

comprehensive review of essential personnel- management concepts and techniques.
Divided into five parts, it begins with an introduction, and then covers recruitment and
placement, training and development, compensation, and labor relations and employee
security.

48
David A. Decenzo and Stephen P. Robbins in their contribution “Personnel/ Human Resource
Management” (2008) writes in a straightforward and conversational style and covers all aspects
of Human Resource Management in six parts in their book – Important Environmental
Influences; Acquisition of Human Resources; Development of Human Resources; Motivation of
Human Resources; Maintenance of Human Resources; and Research and the future.

Wayne F. Cascio in his contribution “Managing Human Resources: Productivity,

Quality of Work life, Profits” (2006) makes a premise that the three critical strategic
objectives guide all HR functions: Productivity, Quality of Work life, and Profits. The
functions- employment, development, compensation, labor management accommodation
and safety, health, and international implications- in turn are carried out in multiple
environments: competitive, legal, social, and organizational.

Dreher Dougherty in his contribution “Human Resource Strategy: A Behavioral

Perspective for the General Manager” (2005) praises the concept of an integrated
HRM System, comprised of multiple managerial activities, designed to influence a set of
critical employee behaviors. It differs from other HRM texts, which focus on the
traditional human resource (HR) functions.

Robert L. Cardy in his contribution “Performance Management” (2008) professes

that effective Performance Management involves far more than simply assessing the
performance of workers. Performance Management includes providing meaningful
feedback, collaborating with workers to solve performance problems, and developing
improved levels of performance.

John M. Ivancevich in his contribution “Human Resource Management” (2003) takes

a managerial orientation, that is, HRM is viewed as relevant to managers in every unit,
project, or team. Managers constantly face HRM issues, challenges, and decision making.
Each manager must be a human resource problem solver and diagnostician who can
deftly apply HRM concepts,models, tools, and techniques.

49
Gary Dessler in his contribution “Human Resource Management” (2008) provides a
comprehensive review of essential personnel- management concepts and techniques.
Divided into five parts, it begins with an introduction, and then covers recruitment and
placement, training and development, compensation, and labor relations and employee
security.

David A. Decenzo and Stephen P. Robbins in their contribution “Personnel/ Human

Resource Management” (2008) writes in a straightforward and conversational style and
covers all aspects of Human Resource Management in six parts in their book – Important
Environmental Influences; Acquisition of Human Resources; Development of Human
Resources; Motivation of Human Resources; Maintenance of Human Resources; and
Research and the future.

A. S. Kohli and Tapomoy Deb in their contribution “Performance Management”

(2008) says that Performance Management is an ongoing dynamic process that articulates
organizational vision and objectives, installs performance criteria in the light of these
objectives, and continuously reviews internal procedures to integrate them with
organizational philosophy and culture. Thus Performance Management emerges as a
major element of HRM.

R. K. Sahu in his contribution “Performance Management System” (2007) professes

that the fundamental purpose of Performance Management is to establish a culture in
which individuals and groups take responsibility for continuous improvements based on
common understanding of organization’s goals and priorities.

Bani Kochar in her contribution “Performance Management Systems in Indian

Organisations” (HRM Review) (July 2008) takes the view in his article that
performance is the lifeline of any organization. The onus of HR people who could either
‘make or break’ the career of people at large, has been offloaded to the performance of
employees either individually or in teams.

50
Renu Sharma in her dissertation study “Human Resource Management in Public
Sector Banks (With special reference to State Bank of Bikaner and Jaipur)” (2003It
studies the organizational structure, recruitment and selection, performance appraisal
training, promotion, and service rules etc. It also makes certain valuable suggestions to
the Performance Appraisal System in State Bank of Bikaner and Jaipur.

N. L. Sharma in his dissertation study “Human Resource Management in Central

Undertakings in Rajasthan (A Case Study of Instrumentation Limited, Kota)”
(1997) analyses the various aspects of Human Resource Management in the
Instrumentation Limited. It discusses the policies and rules of recruitment, selection,
performance appraisal, and promotion adopted by the Instrumentation Limited and the
methods exploring the feelings of human resources about these aspects.

Manishankar Chakraborty in his contribution “Performance Management Systems:

A Strategic Tool for Competitive Advantage” (HRM Review) (January 2008).The
concept of knowledge industries has brought to the fore the new tribe of knowledge
workers who are more conscious, informed and well read, which is resulting in these
employees knowing about their contribution and the deserving emoluments and
remuneration

T. V. Rao in his contribution “Performance Management and Appraisal Systems: HR

Tools for global competitiveness” (2004). It says that Appraisal is only incidental and,
at best, it may be called an unavoidable evil. The focus is on performance improvements.
The focus of the system is on learning, development, and improvement.

Robert E. Lefton, V. R. Buzzotta, Manuel Sherberg and Dean L. Karraker in their

contribution “Effective Motivation through Performance Appraisal: Dimensional
Appraisal Strategies” (1977) show how to conduct Performance Appraisals that pay-off
for your organization in terms of higher profits, greater efficiency, better morale, faster
growth, lower costs, better public image, etc.

51
T. V. Rao in his contribution “Lessons from Experience: A New look at Performance
Management Systems” (Vikalpa, The Journal for Decision makers, Indian Institute of
Management, Ahmedabad, India) (July-September 2008) says that the concept of
Performance Appraisal has changed over the years. Performance has been usually
equated with annual appraisals which measure the entire year’s effort of an employee in
terms of numbers.

Lalita Rani, Naveen Kumar and Sushil Kumar (2014), in their study come to the crux
that appraisal process is necessary as it staffs the very important purpose of improving the
future performance. The study clarifies that most of the banks uses 360 Degree Appraisal
Method and almost all of the employees settled on the grounds that performance
appraisal helps in improving performance, achieving organization goals, helps in
increasing motivation and satisfaction.

Dr. Shagufta Showkat (2013), in her study examined that performance appraisal system
should be HRD oriented. Above and beyond being a base for making administrative and
developmental decisions, performance appraisal can be beneficial mechanism for
building a good relationship with employees, planning employee performance,
discovering employee potential and improving organizational effectiveness.

Migiro S.O., Taderera M.M. (2011), in his study addresses varied scope of
improvement for the Bank’s performance appraisal system and the performance based
pay system to be effective. The researcher suggested that training should be provided to
both the employees and the evaluators, there must be the delivery of continuous feedback
to employees on their performance

Eichel and Bender (1984) stated that performance appraisal can also be called as the
Achilles heel of management.Although leaders of many public organizationsstrive to be
employee focused or employee centered, a lack of emphasis is given to a process
intended to assist the employee in achieving both personal and organizational goals.

52
 CHAPTER 4

DATA ANALYSIS, INTERPRETATIONS AND PRESENTATION

The future of performance management includes both data analytics and employee
feedback. Rather than relying upon scheduled reviews spaced far apart, companies should
use ongoing reviews, feedback and "check-ins" to offer more engagement on a real-time
basis. A combination of manager and HR assessments with peer reviews can offer better
engagement and give workers the tools and information they need to do their jobs well. It
will also motivate them to improve on their weaknesses and capitalize on their strengths.

While data analytics is an integral part of effective performance management, this is

merely a tool for enhanced performance management. Employee engagement and trust
comes from human interaction and ongoing feedback that uses data to enhance accuracy,
objectivity and efficiency. The human touch is still an important part of the process, and
managers and HR personnel must continue to personally interact with workers to offer
guidance, support, feedback and information.

Since most business results are driven by team performance, not individual performance,
this should be the focus on performance management. If your goal is engagement and
profitable growth, I suggest looking at companies who excel at both. Industry leaders,
like Southwest Airlines, Capital One, BHP Billiton, and hundreds of private companies
empower employees to think and act like owners, driving and participating in the
profitable growth of the company. Their engagement and business results speak for
themselves.

53
1. What is your age ?

From the data, we have seen that the respondents are of different age groups. The age
groups are between 16-20, 20-22, 22-24, 24-28, 28-34, 34-44, 44-54, 54-63, 63-76, 76-
87. The most of the responses are given by age groups of 22-24 i.e. 12.5% of the total
responses. The respondents of 20 years has given 8.8% responses of overall responses.

The persons of 22 years and 34 years age has given similar responses i.e. 4.7% of total
responses. The age group between 76 years to 87 years responded very less. We have
collected only 1.81% of the total responses from them.

54
2. In Your Opinion Performance Appraisal Is?

Responses

9%
Evaluation of Employees
34%
25% Promotion of Employees

Job satisdfaction of
Employees
Promotion
32%

Data Interpretation

Though the responses from this question we ccn interpret that the responses for four
options i. e. Evaluation of Employees, Promotion of Employees, Job satisfaction of
Employees & Promotions we can see that Evaluation of Employees, Promotion of
Employees have slighltly equal percentage of answers which means that people believe
that Performance Appraisal is nothing more that Evaluation & Promotion of Employees.
55
3. Which Method Of Performance Appraisal Is Implemented In Your
Organization?

Responses

19%
33% Merit

Grading

Other

48%

Data Interpretation

Though from the responses of this question we can interpret that the most of the banks
uses Grading method of Performance Appraisal of their employees. Almost 50% of the
respondents responded to Grading method & others banks may follow Merit method or
they may have their different techniques of Evaluating Performances of employees.

56
4. Do You Receive Any Increment In Your Salary After Performance
Appraisal ?

Responses

31%

Yes

69% No

Data Interpretation

Though from the responses of this question we can interpret that most of the peoples are
not receiving any salary increment after performance appraisal in their banks. The 69% of
total respondents are responded for No. Only 31% respondents are may getting salary
increments or any other increments after Performance Appraisal in their banks.

57
5. Do You Think That Performance Appraisal Help To Provide An
Atmosphere Where All Are Encourage To Share One Another
Burden?

Responses

32%
Yes

No
69%

Data Interpretation

Though from the responses of this question we can interpret that Performance Appraisal
may not provide an Atmosphere where all are encourage to share one another burden. As
69% of the respondents responded for No option. Only 32% of the respondents are agree
with performance appraisal providing healthy environment.

58
6. Do You Think Performance Appraisal Help People Achieve
Meaningful Goals?

Responses

45%
Yes

55% No

Data Interpretation

Though from the responses of this question we can interpret that the responses for two
options i. e. Yes and No have similarly equal percentage of answer which means that the
people believe that Performance Appraisal may or may not help to achieve meaningful
goals of the banks. Some people may believe that it will help positively and other people
may believe that it does not help that much in achieving goals of the banks.

59
7. Do You Think Performance Appraisal Give Constructive Critisam
In A Friendly And Positive Manner?

Responses

32%

Yes

No
68%

Data Interpretation

Though from the responses of this question we can interpret that most of the people are
agree with the fact that Performance Appraisal give constructive critisam in Friendly or
Positive manner, which indirectly help in smooth functioning of the organization. 32% of
the total responses does not agree with Performance Appraisal helping in giving
constructive ctritisam in friendly or positive manner.

60
8. Do You Think Performance Appraisal Improves Organization
Result As It Requires A Huge Expense Please State?

Responses

18%

42% Yes
No
Other

40%

Data Interpretation

Though the responses from this question we can interpret that the responses for three
options i. e. Yes, No & Other 42% of the people responded for option Yes and 40% and
18% are responded for No and Other option. It shows that Performance Appraisal
improves Organisations Results and it also incurs huge expenses. It shows that the
Performance Appraisal is an expensive activity for an organization.

61
9. Do You Think That Performance Appraisal Can Be Done In Only
Monetary Team?

Responses

47%

Yes

53% No

Data Interpretation

Though from the responses of this question we can interpret that people are not agree
with Performance Appraisal can be done only in Monetary Terms. People may think that
performance appraisal can be done in other terms such as evaluation of employees,
promotion of employees, training to the employees etc. The monetary values are not an
only option for doing Performance Appraisal.

62
10. How Performance Appraisal Affects The Productivity Of
Employees?

Responses

11%

Positively
25%
Negatively

64% Both

Data interpretation

Though the responses from this question we can interpret that the responses for four
options i. e. Positively, Negatively And Both most of the people i.e. 64% of the total
respondents are responded for option Positively. And other 25% and 11% are responded
for option Negatively And Both. Thus, it is concluded that Performance Appraisal has
impacted always positively in the organizations.

63
11. Does Performance Appraisal Lead To Identification Of Hidden
Potential?

Responses

10%

Yes

No

90%

Data Interpretation

Though the responses from this question we can interpret that the Performance Appraisal
can lead to identification of the hidden potentials of the individual. It also helps to bring
more energy and more satisfaction while performing the job. Total 90% of the
respondents are responded positively and agreed with performance appraisal helping in
identifying the hidden potential. Only 10% of the respondents are not agreed.

64
12. When Performance Appraisal Is Done In Organization?

Responses

19%
23%
Monthly

Quarterly

Yearly

29% 29% Other

Data interpretation

Though the responses from this question we can interpret that from the four options i.e.
Monthly, Quarterly, Yearly and Other, 23% of the total respondents are responded for
Monthly option. 29% of the total respondents are responded for Quarterly option. 29% of
the total respondents are responded for Yearly option. 19% of the total respondents are
responded for Other option. Quarterly and Yearly has similar percentage of answer i.e.
29% of the total responses.

65
13. Is There Any Conflict After Performance Appraisal Is Made?

Responses

15%

28% Frequently

Often

29% Sometimes

Never
28%

Data Interpretation

Though the responses from this question we can interpret that from the four options i.e.
Frequently, Often, Sometimes And Never the options Frequently and often has similar
percentage of answer i.e. 28%. Some other people think that it may not be always but
sometimes. Only 15% of the total respondents think that there are not any conflicts after
the performance appraisal in the organization.

66
14. Who Rates The Performances ?

Responses

16%

Superior

15%
Subordinate
58%

Client

11%
Other

Data Interpretation

Though the responses from this question we can interpret that the option Other has most
the responses. It means that in very less organisations i.e. 16% of the total respondents
think that Superior rates the performance appraisal. 15% are responding to the
Subordinates rating the performance appraisal and only 11% respondents thinks that
clients are rating performance appraisal.
67
15. On What Basis Performance Appraisal Is Made?

Responses

15%

35%
Total Output

Behavioural
efficiency

Other
50%

Data Interpretation

Though the responses from this question we can interpret that the Performance Appraisal
is based on the Behavioural Efficiency. Out of the total 50% are agreed with Behavioural
efficiency. Out of other 50%, 35% peoples think that it is based on the total output. And
other 15% think that there are other bases on which Performance Appraisal is made. Thus
it is concluded that the Behavioural Efficiency is an important base on which
performance Appraisal in made.

68
16. Do You Think Performance Appraisal Helps To Change Behaviour
Of Employees?

Responses

16%

Yes

No
84%

Data Interpretation

Though the responses from this question we can interpret that the performance appraisal
changes the behavior of the employees. From the Total 84% of the people agreed with the
fact that performance appraisal changes the behavior of the employees. Only 16% of the
people does not think that it really changes the employee behavior. Change in behavior
may be positively or negatively. Thus it can affect the organizations performances.

69
17. What Are Techniques Used By Your Organization For Answering
Performance?

Responses

13%

29%
Observation

27% Development
Centre
checklists

Other
32%

Data Interpretation

Though the responses from this question we can interpret that the development centre
technique is mostly used by the many organizations for answering the performance
appraisal. Other techniques of answering the performance appraisal are Observations And
Checklists.

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 Timestamp Name
1/26/2020 14:46:12 Shruti Gawade
1/26/2020 14:56:39 Vrushali Gawade
1/26/2020 14:58:06 Adesh G
1/26/2020 15:02:03 Prasad
1/26/2020 15:02:18 Pranali Dikole
1/26/2020 16:24:19 Shivani palav
1/26/2020 18:18:19 Aarti Gurav
1/26/2020 22:13:45 Abhishek singh thakur
1/26/2020 23:27:57 Aadesh Gawade
1/26/2020 23:35:23 Rudhali parab
1/26/2020 23:35:52 Vrushali P
1/26/2020 23:35:53 Shashank Golvankar
1/26/2020 23:36:18 Praful Parab
1/26/2020 23:36:19 Vandana Parab
1/26/2020 23:36:45 Ruchita More
1/26/2020 23:37:14 Rughuveer P
1/26/2020 23:37:51 Snehal Kadam
1/26/2020 23:37:51 VIshwanath G
1/26/2020 23:38:10 Shanti Gawde
1/26/2020 23:38:43 Aniket Nachare
1/26/2020 23:39:16 Shubham Bagwe
1/26/2020 23:39:50 Neha Ghanekar
1/26/2020 23:40:20 Bhakti
1/26/2020 23:40:25 Tawde
1/26/2020 23:40:49 Rutuja
1/26/2020 23:40:54 Aksahy
1/26/2020 23:41:13 Shrutika
1/26/2020 23:41:24 Nikita
1/26/2020 23:41:36 Shivani
1/26/2020 23:41:49 Aditya Gosawi
1/26/2020 23:42:00 Neha
1/26/2020 23:42:11 Maitree

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1/26/2020 23:42:24 Mayuri
1/26/2020 23:42:36 Savita
1/26/2020 23:42:47 Manasi
1/26/2020 23:43:13 Swapnil
1/26/2020 23:43:19 Aishwarya
1/26/2020 23:43:39 Sopya
1/26/2020 23:43:41 Vighnesh
1/26/2020 23:44:04 Prathamesh
1/26/2020 23:44:08 Sushant
1/26/2020 23:44:23 Kapil
1/26/2020 23:44:34 Asmita
1/26/2020 23:44:44 Vikas
1/26/2020 23:45:02 Parvita
1/26/2020 23:45:04 Aniket
1/26/2020 23:45:28 Shubham
1/26/2020 23:45:49 Vishal
1/26/2020 23:46:03 Anuja
1/26/2020 23:49:34 Shanti
1/26/2020 23:50:01 Kshitija
1/26/2020 23:50:24 Shilpa
1/26/2020 23:50:49 Aarya
1/26/2020 23:51:13 Sejal
1/26/2020 23:51:53 Akash
1/26/2020 23:52:14 Adarsh
1/26/2020 23:52:37 Siddhi

72
 CHAPTER 5

SUGGESTIONS AND CONCLUSION

5.1 Findings & Suggestions

It has been seen that the concerned HDFC bank sets its human resource strategies that
emphasize efficiency, control and firm-specific knowledge. Such strategies include
internal recruitment (“making” skills), on-the-job training, and high dependence of
supervisors. It is evaluating the employees’ performance mostly objectively and the final
decision regarding the appraisee has been taken by the higher authority, where sometimes
the appraiser’s or immediate supervisor’s recommendation is neglected. The liking and
disliking of higher authority do matter and the personal influence from the appraise
distorts the true judgment by the evaluation board. On the contrary, as the multinational
market segment, it benefits from those human resource strategies that include external
recruitment (“buying” skills), decentralized pay decisions and customized appraisals. The
evaluation process is hindered by lack of positive communication, negative attitudes,
inflexibility, defensiveness, and a non- developmental approach both in case of HDFC
bank and Bank of Baroda.

Subjective judgment, prudence and the personal knowledge of the appraiser about the
appraisee play significant role in deciding the reward or punishment for the concerned
employee. Most of the employees do not have proper knowledge regarding the existing
performance appraisal system and the factors or areas of the work they need to give
emphasis. Failure to use evaluations in personnel decision-making and personnel
development negates the primary purpose of performance evaluations. The use and
weighting of multiple criteria as well as the frequency of evaluation also present
problems. To overcome the errors in performance appraisals management can take some
pragmatic approaches, like: to make refinements in the design of appraisal methods, to
initiate a more promising approach to overcoming errors in performance appraisals is to
improve the skills of raters by training..

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5.2 Conclusion

The findings of the study reveals that all executives of the three sample banks have
placed high emphasis on knowledge of banking rules and regulations, writing skill and
knowledge about the bank’s products, services and polices, appearance and dress code,
creativity & innovative ideas, attendance and punctuality, personality, discipline, capacity
to taking independent decision, perseverance, ability to adopt in changing circumstances,
attitude / temperament, human quality, dynamic /proactive leadership, Initiative, Drive
and Enthusiasm, Ability to negotiate, Power of Judgment in decision making, Ability to
plan, organize and supervise work, Sense of responsibility of assigned jobs and
commitment to work, Managing capabilities including crisis Management, marketing
ability, ability to collect deposits as per set target, ability to market company’s banking
products to existing corporate and retail customers, ability to motivate existing customers
to pay the dues in time, ability to enhance business of both clients and the bank, ability to
recover the outstanding loans of the classified accounts, customer client Relationship/
dealing with bank’s client and problem solving ability in customer need satisfaction. The
findings also makes it evident that all executives of the three banks have placed less
importance on knowledge of other functions and intelligence and mental alertness,
displaying high level of professionalism to clients, dealing with colleagues and superior
officers, pleasing character, foreseeing and managing the business risk factors and
communication skill, participation in planning, preparedness to work under pressure,
ability to implement decision, skill for setting strategy, quality and quantity of works,
overall contribution to profit of the branch and the company as a whole. Finally, the study
also uncovers that the morale of the employees highly depends on the existence of fair
performance assessment scheme. Apart from this, the working condition, training &
development opportunities, job securities and other HR policies have implication on
morale of the executives.

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Bibliography

I. D K Bhattacharyya ‘Human Resource Planning’, Excel Book India, 2009

II. William J. Rothwell & H. C. Kazanas, ‘Planning & Managing Human Resources’ ,
Jaico Publishing House; First edition (10 November 2005)

III. Agarwala Tanuja, ‘Strategic Human Resource Management’ , OUP India 2007 edition

75
Webliography

www.google.com

www.acamediaedu.com

www.abhinavjournal.com

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