CHAPTER-I

INTRODUCTION
FOR
“PERFORMANCE APPRAISAL”

IN

HDFC STANDARD LIFE

1
 INTRODUCTION

The overall objective of taking up a project on “Performance appraisal” is to study and evaluate

the growing importance of human element in organizational sector. With this unprecedented

growth, the importance of Performance appraisal as a tool for the growth and development of

both employee and organization has also tremendously increased.

It is now been realized that simply having a good system in place does not make the firm

successful. This has therefore given a need for integrating the strategic concerns of firm with its

performance monitoring system.

NEED FOR THE STUDY:

This topic is specifically selected to study those best practices which are under

implementation with a view to suggest the management about the problems and

perspectives to refine further to achieve organizational goals. It is useful for achieving

Organizational goals as well as implementing the new methodology for achieving the

Organizational goals. The main need of the study is gain the practical knowledge in the

subject. And to know the process and purpose of Performance Appraisal in HDFC.

2
OBJECTIVES OF THE STUDY:

1. To find out whether the employees are satisfied with the performance appraisal program.

2. To ensure organizational effectiveness through correcting employee for standard and

improved performance and suggesting the change in employee behavior.

3. To help the organization as well as the superiors to have a proper understanding about their

subordinates.

4. To identify developmental needs of employees and also to establish objectives for training

programs.

5. To create and maintain a satisfactory level of performance.

SCOPE OF THE STUDY;

By this study, the company may know the factors, which according to the employees

determines the performance and motivation levels. If the company tries to consider the

concerns of the employees, it may then lead to better performance and there, by increased

loyalty among employee dedication towards achieving the organizational goals. The

study aims at to investigate the opinion of staff, manager, senior manager, deputy

3
manager and assistant manager about their performance levels at the work place. The

study is limited to concerned staff only.

LIMITATIONS OF STUDY:

The Limitations of this project are:

 As the period of the study is limited for only 45 days the data collected is very

limited.

 As the data is collected in the working hours of the employees, they are busy and

they could not give the complete response.

 Unable to obtain proper feed back because of the limited time period & busy

schedule of the employees.

 Unable to interact with all the employees.

 Problem with the confidential information.

METHODOLOGY AND DATABASE:

There are two basic types of sampling depending on who or what is allowed to

govern the selection of the sample. They are probability sampling and non-probability

sampling.

In probability sampling the decision whether a particular element is included in

the sample or not is governed by chance along. In non-probability sampling samples may

be picked up based on the convenience of the numerator.

4
 For the present study, researcher wants to adopt convenience-sampling method

(non-probability sampling).

SAMPLE DESIGNING:

A sample of 60 employees selected on a simple random basis on a total . And the percentages of

employees in data analysis are found using the formula

Percentage = (no. of respondents/sample size)*100.

SOURCES OF DATA COLLECTION

Primary source: Primary data are those data, which are collected by fresh and for the first time

and thus happen to be original data. It has been collected through a questionnaire. Questionnaire is

prepared by me and distributed to the participants and collected the required material from the

employees of an organisation. Questions in questionnaire are of closed ended type and the rating is

on 2 - point and 4- point scale.

Rating scale:

Yes / No / NA And Strongly agree/Agree/Disagree/Strongly disagree

5
Secondary source: Secondary data are those data, which are collected from the already

existing information through reference. The secondary data has been collected by analyzing various

materials like company profiles, journals, and related websites.

CHAPTER-II

REVIEW OF LITERATURE

6
 PERFORMANCE APPRAISAL

(A theoretical Background)
Introduction:

People differ in their abilities and their aptitudes. There is always some difference

between the quality and quantity of the same work on the same job being done by two

different people. Performance appraisals of Employees are necessary to understand each

employee’s abilities, competencies and relative merit and worth for the organization.

Performance appraisal rates the employees in terms of their performance.

Performance appraisals are widely used in the society. The history of performance

appraisal can be dated back to the 20th century and then to the second world war when

the merit rating was used for the first time. An employer evaluating their employees is a

very old concept. Performance appraisals are an indispensable part of performance

measurement.

Performance appraisal is necessary to measure the performance of the employees and the

organization to check the progress towards the desired goals and aims.

7
The latest mantra being followed by organizations across the world being – "get paid

according to what you contribute" – the focus of the organizations is turning to

performance management and specifically to individual performance. Performance

appraisal helps to rate the performance of the employees and evaluate their contribution

towards the organizational goals. If the process of performance appraisals is formal and

properly structured, it helps the employees to clearly understand their roles and

responsibilities and give direction to the individual’s performance. It helps to align the

individual performances with the organizational goals and also review their performance.

Performance appraisal takes into account the past performance of the employees and

focuses on the improvement of the future performance of the employees.

Definition and concept:

Performance appraisal is the process of obtaining, analyzing and recording information

about the relative worth of an employee. The focus of the performance appraisal is

measuring and improving the actual performance of the employee and also the future

potential of the employee. Its aim is to measure what an employee does.

According to Flippo, a prominent personality in the field of Human resources,

"performance appraisal is the systematic, periodic and an impartial rating of

an employee’s excellence in the matters pertaining to his present job and his

potential for a better job." Performance appraisal is a systematic way of reviewing

8
and assessing the performance of an employee during a given period of time and planning

for his future.

It is a powerful tool to calibrate, refine and reward the performance of the employee. It

helps to analyze his achievements and evaluate his contribution towards the achievements

of the overall organizational goals. By focusing the attention on performance,

performance appraisal goes to the heart of personnel management and reflects the

management's interest in the progress of the employees.

Objectives Of Performance appraisal:

 To review the performance of the employees over a given period of time.

 To judge the gap between the actual and the desired performance.

 To help the management in exercising organizational control.

 Helps to strengthen the relationship and communication between superior –

subordinates and management – employees.

 To diagnose the strengths and weaknesses of the individuals so as to identify the

training and development needs of the future.

 To provide feedback to the employees regarding their past performance.

 Provide information to assist in the other personal decisions in the organization.

 Provide clarity of the expectations and responsibilities of the functions to be

performed by the employees.

 To judge the effectiveness of the other human resource functions of the

organization such as recruitment, selection, training and development.

9
 To reduce the grievances of the employees.

PROCESS OF PERFORMANCE APPRAISAL

ESTABLISHING PERFORMANCE STANDARDS:

The first step in the process of performance appraisal is the setting up of the standards

which will be used to as the base to compare the actual performance of the employees.

This step requires setting the criteria to judge the performance of the employees as

successful or unsuccessful and the degrees of their contribution to the organizational

goals and objectives. The standards set should be clear, easily understandable and in

measurable terms. In case the performance of the employee cannot be measured, great

care should be taken to describe the standards.

COMMUNICATING THE STANDARDS:

Once set, it is the responsibility of the management to communicate the standards to all

the to the. This will help them to understand their roles and to know what exactly is

expected from employees of the organization. The employees should be informed and the

standards should be clearly explained them. The standards should also be communicated

to the appraisers or the evaluators and if required, the standards can also be modified at

this stage itself according to the relevant feedback from the employees or the evaluators.

MEASURING THE ACTUAL PERFORMANCE:

The most difficult part of the Performance appraisal process is measuring the actual

10
performance of the employees that is the work done by the employees during the

specified period of time. It is a continuous process, which involves monitoring the

performance throughout the year. This stage requires the careful selection of the

appropriate techniques of measurement, taking care that personal bias does not affect the

outcome of the process and providing assistance rather than interfering in an employees

work.

COMPARING THE ACTUAL WITH THE DESIRED PERFORMANCE:

The actual performance is compared with the desired or the standard performance. The

comparison tells the deviations in the performance of the employees from the standards

set. The result can show the actual performance being more than the desired performance

or, the actual performance being less than the desired performance depicting a negative

deviation in the organizational performance. It includes recalling, evaluating and analysis

of data related to the employees’ performance.

DISCUSSING RESULTS:

The result of the appraisal is communicated and discussed with the employees on one-to-

one basis. The focus of this discussion is on communication and listening. The results,

the problems and the possible solutions are discussed with the aim of problem solving

and reaching consensus. The feedback should be given with a positive attitude as this can

have an effect on the employees’ future performance. The purpose of the meeting should

be to solve the problems faced and motivate the employees to perform better.

11
DECISION MAKING:

The last step of the process is to take decisions which can be taken either to improve the

performance of the employees, take the required corrective actions, or the related HR

decisions like rewards, promotions, demotions, transfers etc.

12
 PRE-REQUISITES FOR EFFECTIVE & SUCCESSFUL
PERFORMANCE APPRAISAL

The essentials of an effective performance system are as follows:

 Documentation – means continuous noting and documenting the performance. It

also helps the evaluators to give a proof and the basis of their ratings.

 Standards / Goals – the standards set should be clear, easy to understand,

achievable, motivating, time bound and measurable.

 Practical and simple format - The appraisal format should be simple, clear, fair

and objective. Long and complicated formats are time consuming, difficult to understand,

and do not elicit much useful information.

 Evaluation technique – An appropriate evaluation technique should be selected;

the appraisal system should be performance based and uniform. The criteria for

evaluation should be based on observable and measurable characteristics of the behavior

of the employee.

 Communication – Communication is an indispensable part of the Performance

appraisal process. The desired behavior or the expected results should be communicated

to the employees as well as the evaluators. Communication also plays an important role

in the review or feedback meeting. Open communication system motivates the employees

to actively participate in the appraisal process.

13
 Feedback – The purpose of the feedback should be developmental rather than

judgmental. To maintain its utility, timely feedback should be provided to the employees

and the manner of giving feedback should be such that it should have a motivating effect

on the employees’ future performance.

 Personal Bias – Interpersonal relationships can influence the evaluation and the

decisions in the performance appraisal process. Therefore, the evaluators should be

trained to carry out the processes of appraisals without personal bias and effectively.

CHALLENGES OF PERFORMANCE APPRAISAL

An organization comes across various problems and challenges Of Performance

Appraisal in order to make a performance appraisal system effective and successful. The

main Performance Appraisal challenges involved in the performance appraisal process

are:

Determining the evaluation criteria

Identification of the appraisal criteria is one of the biggest problems faced by the top

management. The performance data to be considered for evaluation should be carefully

selected. For the purpose of evaluation, the criteria selected should be in quantifiable or

measurable terms.

14
Create a rating instrument
The purpose of the Performance appraisal process is to judge the performance of the

employees rather than the employee. The focus of the system should be on the

development of the employees of the organization.

Lack of competence

Top management should choose the raters or the evaluators carefully. They should have

the required expertise and the knowledge to decide the criteria accurately. They should

have the experience and the necessary training to carry out the appraisal process

objectively.

Errors in rating and evaluation

Many errors based on the personal bias like stereotyping, halo effect (i.e. one trait

influencing the evaluator’s rating for all other traits) etc. may creep in the appraisal

process. Therefore the rater should exercise objectivity and fairness in evaluating and

rating the performance of the employees.

Resistance

The appraisal process may face resistance from the employees and the trade unions for

the fear of negative ratings. Therefore, the employees should be communicated and

clearly explained the purpose as well the process of appraisal. The standards should be

clearly communicated and every employee should be made aware that what exactly is

expected from him/her.

15
 PURPOSE OF PERFORMANCE APPRAISAL

Performance Appraisal is being practiced in 90% of the organisations worldwide. Self-

appraisal and potential appraisal also form a part of the performance appraisal processes.

Typically, Performance Appraisal is aimed at:

 To review the performance of the employees over a given period of time.

 To judge the gap between the actual and the desired performance.

 To help the management in exercising organizational control.

 To diagnose the training and development needs of the future.

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

 Provide clarity of the expectations and responsibilities of the functions to be

performed by the employees.

 To judge the effectiveness of the other human resource functions of the

organization such as recruitment, selection, training and development.

 To reduce the grievances of the employees.

 Helps to strengthen the relationship and communication between superior –

subordinates and management – employees.

According to a recent survey, the percentage of organisations (out of the total

organisations surveyed i.e. 50) using performance appraisal for the various purposes are

as shown in the diagram below:

16
The most significant reasons of using Performance appraisal are:

 Making payroll and compensation decisions – 80%

 Training and development needs – 71%

 Identifying the gaps in desired and actual performance and its cause – 76%

 Deciding future goals and course of action – 42%

 Promotions, demotions and transfers – 49%

Other purposes – 6% (including job analysis and providing superior support, assistance

and counseling).

PERFORMANCE APPRAISALS AS CAREER

DEVELOPMENT

17
Performance appraisal is a part of career development. The latest mantra being followed

by organizations across the world being – "get paid according to what you contribute" –

the focus of the organizations is turning to performance management and specifically to

individual performance. Performance appraisal helps to rate the performance of the

employees and evaluate their contribution towards the organizational goals. Performance

appraisal as Career Development leads to the recognition of the work done by the

employees, many a times by the means of rewards and appreciation etc. It plays the role

of the link between the organization and the employees’ personal career goals.

Potential appraisal, a part of Performance appraisal, helps to identify the hidden talents

and potential of the individuals. Identifying these potential talents can help in preparing

the individuals for higher responsibilities and positions in the future. The performance

appraisal process in itself is developmental in nature.

Performance appraisal is also closely linked to other HR processes like helps to identify

the training and development needs, promotions, demotions, changes in the compensation

etc. A feedback communicated in a positive manner goes a long way to motivate the

employees and helps to identify individual career developmental plans. Based on the

evaluation, employees can develop their career goals, achieve new levels of competencies

and chart their career progression. Performance appraisal encourages employees to

reinforce their strengths and overcome their weaknesses.

18
 APPROACHES TO PERFORMANCE DEVELOPMENT

Performance appraisal - Traditional approach

Traditionally, performance appraisal has been used as just a method for determining and

justifying the salaries of the employees. Than it began to be used a tool for determining

rewards (a rise in the pay) and punishments (a cut in the pay) for the past performance of

the employees.

This approach was a past oriented approach, which focused only on the past performance

of the employees i.e. during a past-specified period of time. This approach did not

consider the developmental aspects of the employee performance i.e. his training and

development needs or career developmental possibilities. The primary concern of the

traditional approach is to judge the performance of the organization as a whole by the

past performances of its employees Therefore; this approach is also called as the overall

approach. In 1950s the performance appraisal was recognized as a complete system in

itself and the Modern Approach to performance appraisal was developed.

19
Performance appraisal - Modern approach

The modern approach to performance development has made the performance appraisal

process more formal and structured. Now, the performance appraisal is taken as a tool to

identify better performing employees from others, employees’ training needs, career

development paths, rewards and bonuses and their promotions to the next levels.

Appraisals have become a continuous and periodic activity in the organizations. The

results of performance appraisals are used to take various other HR decisions like

promotions, demotions, transfers, training and development, reward outcomes. The

modern approach to performance appraisals includes a feedback process that helps to

strengthen the relationships between superiors and subordinates and improve

communication throughout the organization.

The modern approach to Performance appraisal is a future oriented approach and is

developmental in nature. This recognizes employees as individuals and focuses on their

development.

Balanced scorecard and performance management:

Balanced Scorecard

To evaluate the organisational and employee performance in Performance appraisal

management processes, the conventional approach measures the performance only on a

few parameters like the action processes, results achieved or the financial measures etc.

20
The Balanced scorecard – an approach given by Kaplan and Norton provides a

framework of various measures to ensure the complete and balanced view of the

performance of the employees. Balanced scorecard focuses on the measures that drive

performance.

The balanced scorecard provides a list of measures that balance the organizations internal

and process measures with results, achievements and financial measures.

The two basic features of the balanced scorecard are:

 A balanced set of measures based on. The four perspectives of balanced scorecard

 Linking the measures to Employee Performance

The four Perspectives recommended by Kaplan and Norton for the managers to collect

information are:

 The financial measures – The financial measures include the results like

profits, increase in the market share, return on investments and other economic measures

as a result of the actions taken.

 The customers’ measures - These measures help to get on customer

satisfaction, the customer’s perspective about the organisation, customer loyalty,

acquiring new customers. The data can be collected from the frequency and number of

customer complaints, the time taken to deliver the products and services, improvement in

quality etc.

21
 The internal business measures – These are the measures related to the

organization’s internal processes which help to achieve the customer satisfaction. It

includes the infrastructure, the long term and short term goals and objectives,

organisational processes and procedures, systems and the human resources.

 The innovation and learning perspective - The innovation and learning

measures cover the organisation’s ability to learn, innovate and improve. They can be

judged by employee skills matrix, key competencies, value added and the revenue per

employee.

Balanced Scorecard Approach to Measure

Performance

The balanced scorecard focuses on the measures that drive the employee performance.

The balanced scorecard provides a list of measures that balance the organizations internal

and process measures with results, achievements and financial measures. The two basic

features of the balanced scorecard are:

 A balanced set of measures based on. the four perspectives of balanced scorecard

 Linking the measures to Employee Performance

A balanced set of measures

Instead of relying on just one instrument or measure, using a balanced set of measures

ensures that all the aspects of the employees’ performance are covered and provide

relevant support for the decisions taken.

Therefore, it is necessary that the manager should be capable of observe and note the

22
several instruments and measures simultaneously. The four perspectives given by Kaplan

and Norton are the financial measures, the customer’s perspective, the internal business

perspectives and the innovation and learning perspectives.

For each perspective of the following things are measured:

 Objectives: the goals and the targets to be achieved.

 Measures: the standards which will be used to measure the actual performance

and the progress.

 Action plans: the initiatives taken and the course of action to be followed to

achieve the objectives Tie-In to Employee Performance.

The balanced scorecard approach can be used and applied at both the individual and the

organizational level. It provides a balanced approach to evaluate the employees’

performance (for the purpose of Performance appraisal) in a comprehensive manner

rather than a partial view. In most of the organizations, the common practice of

measuring the employee performance refers to only the comparison of their action plans

and behaviors with the standards set i.e. without actually measuring the results of their

actions like profits and increase in market share. This conventional practice can lead to

the appraisal of most of the employees without any or little progress towards achieving

the goals and objectives of the organization. Thus, the balanced scorecard gives the

complete view of the employees and the organizational performance and helps to align

the employee performance/action plans with the organizational goals.

23
 TECHNIQUES OF PERFORMANCE APPRAISAL

The various methods and techniques used for Performance appraisal can be categorized

as the following traditional and modern methods:

24
Traditional Methods of Performance Appraisal

1. ESSAY APPRAISAL METHOD

This traditional form of appraisal, also known as "Free Form method" involves a

description of the performance of an employee by his superior. The description is an

evaluation of the performance of any individual based on the facts and often includes

examples and evidences to support the information. A major drawback of the method is

the inseparability of the bias of the evaluator.

2. STRAIGHT RANKING METHOD

This is one of the oldest and simplest techniques of performance appraisal. In this

method, the appraiser ranks the employees from the best to the poorest on the basis of

their overall performance. It is quite useful for a comparative evaluation.

3. PAIRED COMPARISON

A better technique of comparison than the straight ranking method, this method compares

each employee with all others in the group, one at a time. After all the comparisons on

the basis of the overall comparisons, the employees are given the final rankings.

4. CRITICAL INCIDENTS METHODS

In this method of Performance appraisal, the evaluator rates the employee on the basis of

critical events and how the employee behaved during those incidents. It includes both

negative and positive points. The drawback of this method is that the supervisor has to

note down the critical incidents and the employee behaviour as and when they occur.

25
5. FIELD REVIEW

In this method, a senior member of the HR department or a training officer discusses and

interviews the supervisors to evaluate and rate their respective subordinates. A major

drawback of this method is that it is a very time consuming method. But this method

helps to reduce the superiors’ personal bias.

6. CHECKLIST METHOD

The rater is given a checklist of the descriptions of the behaviour of the employees on

job. The checklist contains a list of statements on the basis of which the rater describes

the on the job performance of the employees.

7. GRAPHIC RATING SCALE

In this method, an employee’s quality and quantity of work is assessed in a graphic scale

indicating different degrees of a particular trait. The factors taken into consideration

include both the personal characteristics and characteristics related to the on the job

performance of the employees. For example a trait like Job Knowledge may be judged on

the range of average, above average, outstanding or unsatisfactory.

8. FORCED DISTRIBUTION

To eliminate the element of bias from the rater’s ratings, the evaluator is asked to

distribute the employees in some fixed categories of ratings like on a normal distribution

curve. The rater chooses the appropriate fit for the categories on his own discretion.

26
Modern Methods of Performance Appraisal

ASSESSMENT CENTRES
An assessment centre typically involves the use of methods like social/informal events,

tests and exercises, assignments being given to a group of employees to assess their

competencies to take higher responsibilities in the future. Generally, employees are given

an assignment similar to the job they would be expected to perform if promoted. The

trained evaluators observe and evaluate employees as they perform the assigned jobs and

are evaluated on job related characteristics.

The major competencies that are judged in assessment centres are interpersonal skills,

intellectual capability, planning and organizing capabilities, motivation, career

orientation etc. assessment centres are also an effective way to determine the training and

development needs of the targeted employees.

BEHAVIORALLY ANCHORED RATING SCALES

Behaviorally Anchored Rating Scales (BARS) is a relatively new technique which

combines the graphic rating scale and critical incidents method. It consists of

predetermined critical areas of job performance or sets of behavioral statements

describing important job performance qualities as good or bad (for eg. the qualities like

inter personal relationships, adaptability and reliability, job knowledge etc). These

statements are developed from critical incidents.

In this method, an employee’s actual job behaviour is judged against the desired

behaviour by recording and comparing the behaviour with BARS. Developing and

racticing BARS requires expert knowledge.

27
HUMAN RESOURCE ACCOUNTING METHOD

Human resources are valuable assets for every organization. Human resource accounting

method tries to find the relative worth of these assets in the terms of money. In this

method the Performance appraisal of the employees is judged in terms of cost and

contribution of the employees. The cost of employees include all the expenses incurred

on them like their compensation, recruitment and selection costs, induction and training

costs etc whereas their contribution includes the total value added (in monetary terms).

The difference between the cost and the contribution will be the performance of the

employees. Ideally, the contribution of the employees should be greater than the cost

incurred on them.

360-Degree-Performance-Appraisals

360 degree feedback, also known as 'multi-rater feedback', is the most comprehensive

appraisal where the feedback about the employees’ performance comes from all the

sources that come in contact with the employee on his job.

360 degree respondents for an employee can be his/her peers, managers (i.e.

superior), subordinates, team members, customers, suppliers/ vendors - anyone who

comes into contact with the employee and can provide valuable insights and information

or feedback regarding the "on-the-job" performance of the employee.

360 degree appraisal has four integral components:

28
1. Self appraisal

2. Superior’s appraisal

3. Subordinate’s appraisal

4. Peer appraisal.

Self-appraisal gives a chance to the employee to look at his/her strengths and weaknesses,

his achievements, and judge his own performance. Superior’s appraisal forms the

traditional part of the 360 degree performance appraisal where the employees’

responsibilities and actual performance is rated by the superior.

Subordinates appraisal gives a chance to judge the employee on the parameters like

communication and motivating abilities, superior’s ability to delegate the work,

leadership qualities etc. Also known as internal customers, the correct feedback given by

peers can help to find employees’ abilities to work in a team, co-operation and sensitivity

towards others.

29
 Self assessment is an indispensable part of 360 degree appraisals and therefore 360

degree Performance appraisal have high employee involvement and also have the

strongest impact on behavior and performance. It provides a "360-degree review" of the

employees’ performance and is considered to be one of the most credible performance

appraisal methods.

360 degree performance appraisal is also a powerful developmental tool because

when conducted at regular intervals (say yearly) it helps to keep a track of the changes

others’ perceptions about the employees. A 360 degree appraisal is generally found more

suitable for the managers as it helps to assess their leadership and managing styles. This

technique is being effectively used across the globe for performance appraisals. Some of

the organizations following it are Wipro, Infosys, and Reliance Industries etc.

Management By Objective

30
The concept of ‘Management by Objectives’ (MBO) was first given by Peter Drucker in
1954. It can be defined as a process whereby the employees and the superiors come
together to identify common goals, the employees set their goals to be achieved, the
standards to be taken as the criteria for measurement of their performance and
contribution and deciding the course of action to be followed.

The essence of MBO is participative goal setting, choosing course of actions and
decision making. An important part of the MBO is the measurement and the comparison
of the employee’s actual performance with the standards set. Ideally, when employees
themselves have been involved with the goal setting and the choosing the course of action
to be followed by them, they are more likely to fulfill their responsibilities.

THE MBO PROCESS

31
 PERFORMANCE APPRAISAL FOR EMPLOYEES AT
DIFFERENT LEVELS
Performance appraisal is important for employees at all levels throughout the

organization. The parameters, the characteristics and the standards for evaluation may be

different, but the fundamentals of performance appraisal are the same. But as the level of

the employees’ increases, performance appraisal is more effectively used as the tools of

managing performance.

Performance appraisal of Managers

Appraising the performance of managers is very important, but at the same time, it is one

of the most difficult tasks in the organization. It is difficult because most of the

managerial work cannot be quantified i.e. it is qualitative in nature like leading his/her

team, guiding, motivating, planning etc.

Therefore, the two things to be noted and evaluated for the purpose of appraisals are:

 Performance in accomplishing goals, and

 Performance as managers

Performance in accomplishing goals

Managers are responsible for the performance of their teams as a whole. Performance in

accomplishing goals would mean to look at the completion or achievement of the goals

set for a team of employees which is being assigned to or working under a particular

32
manager. The best measuring criteria for a manager are hi goals, his plans of course of

action to achieve them and the extent of achievement of the goals.

Performance as managers

The responsibilities of managers include a series of activities, which are concerned with

planning, organizing, directing, leading, motivating and controlling. Managers can be

rated on the above parameters or characteristics.

Criteria for measuring performance at different levels:

The criteria for measuring performance changes as the levels of the employees and their

roles and responsibilities change.

A few examples for each level are described below:

For top level management

 Degree of organizational growth and expansion

 Extent of achievement of organizational goals

 Contribution towards the society

 Profitability and return on capital employed

For middle level managers

33
 Performance of the departments or teams

 Co-ordination with other departments

 Optimal use of resources

 Costs Vs. revenues for a given period of time

 The communication with superiors and subordinates

For front line supervisors

 Quantity of actual output against the targets

 Quality of output against the targets

 Number of accidents in a given period

 Rate of employee absenteeism.

CURRENT GLOBAL TRENDS IN PERFORMANCE APPRAISAL

PROGRAM

34
The performance appraisal process has become the heart of the human resource
management system in the organisations. Performance appraisal defines and measures the
performance of the employees and the organisation as a whole. It is a tool for accessing
the performance of the organisation.

The important issues and points concerning performance appraisal in the present world

are:

 The focus of the performance appraisals is turning towards career development relying

on the dialogues and discussions with the superiors.

 Performance measuring, rating and review systems have become more detailed,

structured and person specific than before.

 Performance related pay is being incorporated in the strategies used by the

organisations.

 Trend towards a 360-degree feedback system.

 The problems in the implementation of the performance appraisal processes are being

anticipated and efforts are being made to overcome them.

 In India, the performance appraisal processes are faced with a lot of obstacles, the

most prominent being the lack of quantifiable indicators of the performance.

GLOBALTRENDS

35
The emergence of following concepts and the following trends related to Performance

appraisal can be seen in the global scenario:

 360 Degree Appraisal

360 degree feedback, also known as 'multi-rater feedback', is the most comprehensive

appraisal where the feedback about the employees’ performance comes from all the

sources that come in contact with the employee on his job. Organisations are increasingly

using feedback from various sources such as peer input, customer feedback, and input

from superiors. Different forms with different formats are being used to obtain the

information regarding the employee performance.

 Team Performance Appraisal

According to a wall street journal headline, "Teams have become commonplace in U.S.

Companies". Most of the performance appraisal techniques are formulated with

individuals in mind i.e. to measure and rate the performance of the individual employee.

Therefore, with the number of teams increasing in the organisations, it becomes difficult

to measure and appraise the performance of the team. The question is how to separate the

performance of the team from the performance of the employees. A solution to this

problem that is being adopted by the companies is to measure both the individual and the

team performance. Sometimes, team based objectives are also included in the individual

performance plans.

 Rank and Yank Strategy

36
Also known as the "Up or out policy", the rank and yank strategy refers to the

performance appraisal model in which best-to-worst ranking methods are used to identify

and separate the poor performers from the good performers. Then the action plans and the

improvement opportunities of the poor performers are discussed and they are given to

improve their performance in a given time period, after which the appropriate HR

decisions are taken. Some of the organisations following this strategy are Ford, Microsoft

and Sun Microsystems.

 720 degree performance appraisal

Today, these are two points of view about 720 degree performance appraisal as follows:

Internal and external of appraisal:

In traditional 360 degree appraisal, raters include:

• Boss

• Colleagues and internal customers

• Peers – immediate & functional colleagues

• Direct reporters

Then, 540 degree appraisal add more external customers and suppliers.

Of courses, 720 degree would also take the feedback from stakeholders & family. So that

in 720 degree appraisal, feedback is taken from external sources such as stakeholders,

family, suppliers, communities….

37
We can refer to definition of Wikipedia: In human resources, 360-degree feedback, also

known as ‘multi-rater feedback’, ‘multi-source feedback’, or ‘multi-source assessment…

Although you can follow any point of view, these are two matters that we can pay

attention to:

Enough raters (boss, supervisors, peers, subordinates, family, stakeholders, customers,

suppliers, communities…)Improvement of appraisal.

Performance Appraisal Training

Every organisation conducts performance for assessing the performance of the employees

and the organisation. But if not conducted properly, they can give a false impression

about the performance of the employees and affect the overall performance of the

organisation; therefore, there is a need to train the appraisers to ensure the maximum

effectiveness of the process.

Studies have revealed that appraisals are often conducted by the managers and the

supervisor who sometimes, are themselves not aware of the procedures to be followed.

They should be explained the importance and the implications of the Performance

appraisal to the organisations, the methods to be followed, the principles and the

processes of the appraisal.

All managers and supervisors who consult performance appraisals should be given

training for the following:

38
 Methods, techniques and guidelines for setting goals and objectives

 How to evaluate the performance and rate the employees Standards for

performance documentation

 How to complete a performance appraisal form

 How to maintain objectivity in the appraisal

 Questioning techniques for appraisals

 Responding to employee reactions

 Improves rapport and communication

 Building morale and motivating employees

 Observing and measuring performance

 Tracking results

 Structuring the interview with the focus on improving performance

 Feedback techniques (providing constructive feedback)

 How to deal with non-performers and people who refuse to co-operate

 Post review actions

The training can be given by conducting special workshops by professional HR

consultants or qualified and experienced HR professionals of human resource

management. The venue for the purpose can be a suitable seminar hall, training room,

conference hall, boardroom, or at some place away from the workplace like some hotel

etc.

39
 ARGUMENTS AGAINST PERFORMANCE APPRAISAL

A large number of managers, human resource professionals, human resource consultants

and researchers are recommending companies to get rid of the performance appraisal

systems. The main argument given by the researchers is that the system of performance

appraisals itself is based on a few wrong assumptions and it fails to fulfill its basic

purpose.

The major arguments against performance appraisal given in favour of abolishing the

performance appraisals are:

 The first and the foremost argument is the fact that discrepancies between the

theory and its application. There is often a disconnect between the theory and the

practical implementation.

 PA is a bitter process for most of the employees, which can create emotional

pressures and stress for the employees.

 The focus of the PA process is too narrow i.e. just to determine the rewards and

punishments for the employees by measuring their past performance.

 PA is often looked upon as a tool to control the employees by the superiors, which

dampen the intrinsic motivation of the employees.

40
 Most of the managers and superiors are not trained enough to carry the processes

in the appropriate and the structured manner.

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

 PA process encourages accountability, approvals and discourages the spirit of

creativity and initiative by employees and also demotivates them.

 Performance appraisal is conducted by managers who are often not trained to be

appraisers. This obstructs the genuine feedback, as it includes subjectivity and bias of the

raters leading to incorrect and unreliable data regarding the performance of the

employees.

 PA can adversely affect the morale of the employees and create dissatisfaction

among them, thereby affecting the organizational performance.

 Performance appraisals and reviews are often time consuming, with faulty

methods to measure performances and generating false results and the decisions taken

can be politically influenced.

41
An example to support the above mentioned points would be the case of an call centre

employee - The appraisal of a call center employee is based on the amount of work they

do, the number of calls they receive, the amount of revenue they collect, the average time

they append on each call. But if analysed, all these factors depend on other factors like

the response of the callers, the availability of the information asked for, the nature of the

calls etc. which are often not considered during appraisals. But the employee being aware

of all these factors, the situation can create stress and dissatisfaction among the

employee.

USES OF PERFORMANCE APPRAISAL

Why you do performance appraisal? Use of performance appraisal include elements as

follows:

1. Career Development

• This provides an opportunity for discussion of career objectives, and creation of a

strategy designed to maximize career potential.

• To provide an opportunity for career counseling

• To help in succession planning.

• To assess training needs

• To plan for career development

• To assess and develop individual abilities

• To provide an objective basis on which to base decisions about training and promotion.

2. Feedback
42
• As well, feedback is encouraged in both directions: as such, employees are encouraged

to prepare ratings of their supervisors.

• To provide constructive feedback to the individual regarding how their performance is

seen.

• This provides a structured format for the discussion of performance issues on a regular

basis.

• Feedback either reinforces performance strengths, or provides the opportunity to discuss

resolution of performance deficiencies.

3. Administrative Uses of Performance appraisal

• Salary

• Promotion

• Retention/termination

• Recognition of performance

• Layoffs

• Identification of poor performers

4. Performance History

• This provides a performance history which is not dependent upon human memory, and

which may be useful in the full range of personnel decisions, including compensation

decision-making.

• To review past and present performance, identifying strengths and weaknesses.

5. Organizational Goals

43
• To clarify, for the individual, organizational expectations

• To set objectives for the next period

• This provides an opportunity to view one’s performance in the context of broader

organizational goals.

• To assess future promotion prospects and potential

6. Job Standards

This provides an opportunity for clearer articulation and definition of performance

expectations.

7. Documentation use of of Performance appraisal

• Documentation for HR decisions.

• Helping to meet legal requirements

PROBLEMS IN PERFORMANCE APPRAISAL

1. Problems with leniency and strictness:

• The leniency bias crops when some raters have a tendency to be liberal in their rating by

assigning higher rates consistently.

• Equally damaging one is assigning consistently low rates.

44
2. Problems with central tendency:

• Some raters appraise all the employees around the middle point of the rating scale and

they avoid rating the people higher or lower level.

• They follow play safe policy because of answer ability to management or lack of

knowledge about the job and person he is rating or least interest in his job.

3. Problems with personal prejudice:

If the rater dislikes any employee, he may rate them at the lower end and this may distort

the rating purpose and affect the career of these employees.

4. Problems with halo effect:

• A person outstanding in one area tends to receive outstanding or better than average

ratings in other areas as well, even when such a rating is undeserved.

• To minimizing the halo effect, you should appraise all the employees by one trait before

going to rate on the basis of another trait.

5. Problems with recent performance effect:

In general, raters remember the recent appraisal of the employee and they usually follow

appraisal results last time.

45
 CHAPTER-III

COMPANY PROFILE

COMPANY PROFILE

46
 Background and inception of the company

HDFC Standard Life Insurance Company Limited is one of India's leading private
insurance companies, which offers a range of individual and group insurance solutions. It
is a joint venture between Housing Development Finance Corporation Limited (HDFC
Limited), India's leading housing finance institution and a Group Company of the
Standard Life Plc, UK. As on February 28, 2009 HDFC Ltd. holds 72.43% and Standard
Life (Mauritius Holding) 2006, Ltd. holds 26.00% of equity in the joint venture, while the
rest is held by others.

HDFC Limited

HDFC Limited, India’s premier housing finance institution has assisted more than 3.3
million families own a home, since its inception in 1977 across 2400 cities and towns
through its network of over 250 offices. It has international offices in Dubai, London and
Singapore with service associates in Saudi Arabia, Qatar, Kuwait and Oman to assist
NRI’s and PIO’s to own a home back in India. As of December 2008, the total asset size
has crossed more than Rs. 95,000 crores including the mortgage loan assets of more than
Rs. 82,800 crore. The corporation has a deposit base of Rs. 17,551 crore, earning the trust
of more than 9, 00,000 depositors. Customer Service and satisfaction has been the
mainstay of the organization. HDFC has set benchmarks for the Indian housing finance
industry. Recognition for the service to the sector has come from several national and
international entities including the World Bank that has lauded HDFC as a model housing
finance company for the developing countries. HDFC has undertaken a lot of
consultancies abroad assisting different countries including Egypt, Maldives, and
Bangladesh in the setting up of housing finance companies.

Standard Life Group (Standard Life plc and its subsidiaries)

The Standard Life Group has been looking after the financial needs of customers for
over 180 years. It currently has a customer base of around 7 million people who rely on
the company for their insurance, pension, investment, banking and health-care needs. Its
investment manager currently administers £125 billion in assets. It is a leading pensions
provider in the UK, and is rated by Standard & Poor's as 'strong' with a rating of A+ and
47
as 'good' with a rating of A1 by Moody's. Standard Life was awarded the 'Best Pension
Provider' in 2004, 2005 and 2006 at the Money Marketing Awards, and it was voted a 5
star life and pension’s provider at the Financial Adviser Service Awards for the last 10
years running. The '5 Star' accolade has also been awarded to Standard Life Investments
for the last 10 years, and to Standard Life Bank since its inception in 1998. Standard Life
Bank was awarded the 'Best Flexible Mortgage Lender' at the Mortgage Magazine
Awards in 2006.

Nature of the business carried

HDFE standard life is on the business of life insurance. But HDFC is in diversified
business like banking, housing finance, securities etc.

Vision, Mission and quality policy

Vision

“The most successful and admired life insurance company, which mean that we are the
most trusted company, the easiest to deal with, offer the best value for money, and set the
standards in the industry. In short, “The most obvious choice for all”.

Mission

We aim to be the top new life insurance company in the market. This does not just mean
being the largest or the most productive company in the market, rather it is a combination
of several things like-

 Customer service of the highest order

 Value for money for customers
 Professionalism in carrying out business
 Innovative products to cater to different needs of different customers
 Use of technology to improve service standards

48
 Increasing market share

Values

 Integrity
 Innovation
 Customer centric
 People Care “One for all and all for one”
 Team work
 Joy and Simplicity

Quality policy

49
Quality road map – time lines

Phase-1 to phase-3 should run simultaneously

Phases Objectives Visible proof when

Business BE award (external)/service

Phase-5 excellence guarantee 12-24 months and

Improve levels

Value stream map 6 sigma processes, SLA, 6-8 months and

Phase-4 projects financial benefit. improve

Process maturity Process complaint functions 8-12 months and

sustenance
Phase-3

Organized work Zone/region/branch/location 6-10 months and

places certification sustenance
Phase-2

Current business Completion of projects and 4-6 months and

improvement benefits derived and sustenance
Phase-1 programs sustenance

How (1) how (2) how (3) how (4)

BUSINESS
EXCELLEN
50 CE
 VALUE
STREAM
Process MAP
Workplace manage
O organizatio PROJECT
ment S
B Align and n
J integrate
E long term
C loans
T
I Optimize
IMPROVEMENT
V value
PROJECTS
E streams
Process (KNOWN
S OPPORTUNITY)
maturity
Organized
workplace
Current Prioritized All Business Primary Organization
business functions/CF locations Processes value and Stake
improvement T Streams holders

BREADTH OF QUALITY INTERVENTION

How (1): How to achieve

 Quality awareness
 Identify known opportunities
 Implement prioritized projects
 Develop capability- BB/GB
 Deliver and quantify value
 Share and recognize
 Basic workplace hygiene

How (2): How to achieve

51
 Standard processes
 Process rollout
 Process adherence
 Dash board

How (3): How to achieve

 Value stream projects.

 SLA
 Service guarantee

How (4): How to achieve

 Stake holders delight

 Business excellence

Product/service profile

1. Protection Plans

 HDFC Term Assurance Plan: This plan is designed to help secure family’s
financial needs in case of uncertainties. The plan does this by providing a lump sum
to the family of the life assured in case of death or critical illness (if option is chosen)
of the life assured during the term of the contract. One can choose the lump sum that
would replace the income lost to one’s family in the unfortunate event of one’s death.

 HDFC Loan Cover Term Assurance Plan: This plan aims to protect family from
loan liabilities in case of unfortunate demise within the policy term. It provides the
beneficiary with a lump sum amount, which is a decreasing percentage of the initial
Sum Assured. This means that as the outstanding loan decreases as per the loan
schedule, the cover under the policy also decreases as per the policy schedule.

52
 HDFC Home Loan Protection Plan: This plan aims to protect family from loan
liabilities in case of unfortunate demise within the policy term. It ensures that family
does not lose the dream house that person have purchased for them, in case person is
not around to repay the outstanding monthly installments on their housing loan.

2. Children's Plans

 HDFC Children's Plan: As a parent, everyone priority is their child’s future and
being able to meet their child’s dreams and aspirations. With HDFC Children’s Plan,
they can start building their savings today and ensure a bright future for their child.

 HDFC Young Star Super: This Plan provides valuable protection to insured person
child in case his/her is not around and gives them an outstanding investment
opportunity to maximize their savings by providing them a choice of thoroughly
researched and selected investments. This plan also gives Bumper Addition to the
fund value at Maturity.

 HDFC Young Star Super Suvidha: It is a convenient plan, which saves insured
person from the need of going for Medicals. This Unit Linked Plan provides valuable
protection to his/her child in case he is not around and gives him with an outstanding
investment opportunity to maximize their savings by providing them a choice of
thoroughly researched and selected investments. This plan also gives Bumper
Addition to the fund value at Maturity.

 HDFC Young Star Supreme Suvidha: This Plan provides valuable protection to
insured person child in case he is not around and gives him an outstanding investment
opportunity to maximize his savings by providing him a choice of thoroughly

53
 researched and selected investments. This plan also gives Bumper Addition to the
fund value at Maturity.

 HDFC SL Young Star Champion Suvidha: This is a convenient plan, which saves
him from the need of going for Medicals. This Unit Linked Plan gives him with an
outstanding investment opportunity to maximize his savings by providing you a
choice of thoroughly researched and selected investments. This plan also gives
Bumper Addition to the fund value at Maturity.

3. Retirement Plans

 HDFC Personal Pension Plan: The HDFC Personal Pension Plan is a ‘With Profits’
insurance policy that is designed to provide a post-retirement income for life with the
freedom to choose your retirement date.

 HDFC Pension Super: The HDFC Personal Pension Plan is a ‘With Profits’
insurance policy that is designed to provide a post-retirement income for life with the
freedom to choose your retirement date.

 HDFC Pension Supreme: The HDFC Pension Supreme is Unit Linked plan,
designed to provide a post-retirement income for life with the freedom to choose their
retirement date. This plan gives them with an outstanding investment opportunity to
maximize their savings by providing them a choice of thoroughly researched and
selected investments. This plan also gives Bumper Addition to the fund value at
vesting.

 HDFC SL Pension Champion: The HDFC SL Pension Champion is Unit Linked

plan, designed to provide a post-retirement income for life with the freedom to choose
their retirement date. This plan gives them with an outstanding investment
opportunity to maximize their savings by providing them a choice of thoroughly

54
 researched and selected investments. This plan also gives Bumper Addition to the
fund value at vesting.

 HDFC SL Unit Linked Pension Maximiser II: HDFC SL Unit Linked Pension
Maximiser II is a unique Single Premium unit linked plan, designed to provide a post-
retirement income for life with the freedom to maximize their investment returns.
This plan also gives Bumper Addition* of 5% of initial single premium at vesting and
on death.

 HDFC Immediate Annuity: The HDFC Immediate Annuity is a contract that uses
investor capital to provide them with a guaranteed gross income throughout their
lifetime or over a period of their choice. The income is guaranteed and is unaffected
by the rise and fall of interest rates. This means the investor can plan their life the
way they want it to be, safe in the knowledge that their gross income will not fall
during the period they have selected. The HDFC Immediate Annuity offers a number
of options to meet all their income needs.

4. Savings & Investment Plans

 HDFC Endowment Super: With HDFC Endowment Super, investors can start
building their savings and it ensures that their family remains financially independent,
even when they are not around. This Unit Linked Plan also gives them with an
outstanding investment opportunity to maximize their savings by providing them a
choice of thoroughly researched and selected investments.

 HDFC Endowment Supreme: With HDFC Endowment Supreme, investors can start
building their savings today and it ensures that their family remains financially
independent, even when they are not around. It is a convenient plan, which saves
them from the need of going for Medicals. This Unit Linked Plan gives them with an
outstanding investment opportunity to maximize their savings by providing them a

55
 choice of thoroughly researched and selected investments. This plan also gives
Bumper Addition to the fund value at Maturity.

 HDFC SimpliLife: It is a convenient plan, which saves investors from the need of
going for Medicals. This Unit Linked Plan gives them with an outstanding investment
opportunity to maximize their savings by providing them a choice of thoroughly
researched and selected investments.

 HDFC Endowment Super Suvidha: It is a convenient plan, which saves investors

from the need of going for Medicals. This Unit Linked Plan gives them with an
outstanding investment opportunity to maximize their savings by providing you a
choice of thoroughly researched and selected investments. This plan also gives
Bumper Addition to the fund value at Maturity.

 HDFC Endowment Supreme Suvidha: It is a convenient plan, which saves insured

person from the need of going for Medicals. This Unit Linked Plan gives them with
an outstanding investment opportunity to maximize their savings by providing them a
choice of thoroughly researched and selected investments. This plan also gives
Bumper Addition to the fund value at Maturity.

 HDFC Wealth Builder: HDFC Wealth Builder is an exclusive plan crafted for elite
achievers. An investment cum insurance plan that will actively help in building
investor wealth and give them twin advantage of exclusive funds (actively managed )
along with choice of limited premium payment term. This plan provides the financial
protection to their loved ones and builds up their wealth effortlessly. This plan also
gives Bumper Addition to the fund value at Maturity.

 HDFC Endowment Assurance Plan: With HDFC Endowment Assurance Plan,

investors can start building their savings today and ensure that their family remains
financially independent, even when they are not around. This ‘With Profits’ plan is

56
 designed to secure their family’s future by giving their family a guaranteed lump sum
on maturity or in case of their unfortunate demise, early into the policy term.

 HDFC Money Back Plan: With HDFC Money Back Plan, investors can plan now to
ensure that they have the necessary funds to have the necessary funds to secure their
long-term as well as short-term financial goals. This ‘With Profits’ plan gives them a
proportion of the basis Sum Assured as Cash lump sums at regular 5-year intervals
within the policy term.
 HDFC Single Premium Whole of Life Insurance Plan: HDFC Single Premium
Whole of Life Plan is a tailor made plan well suited to meet investors long-term
investment needs and help them to maintain their family’s financial independence.
This single premium investment plan is a Whole of Life plan aimed at providing
long-term real growth of their money.

 HDFC Assurance Plan: HDFC Assurance Plan helps investors conveniently build
their long-term savings while keeping their family’s future protected. This ‘With
Profits’ savings plan helps them to build their long-term savings while securing their
family’s future.

 HDFC Savings Assurance Plan: HDFC Savings Assurance Plan is a ‘With Profits’
savings plan which helps investors conveniently build their long-term savings and
ensure that their family is protected even if they are not around.

5. Health Plans

 HDFC Critical Care Plan: HDFC Critical care plan provides for a lump sum
payment on survival post diagnosis of a critical illness, so that in the event a critical
illness strikes, investors don’t have to dig into those precious savings of them.

57
 HDFC SurgiCare Plan: HDFC SurgiCare Plan provides investors with timely
support in case they have to undergo a major surgery and hospitalization, as the case
maybe, ensuring their financial independence at all times.

6. Rural Products

 HDFC Gramin Bima Kalyan Yojana

 HDFC Gramin Bima Mitra Yojana
 HDFC Bima Bachat Yojana

7. Social Products

 HDFC Development Insurance Plan

8. Area of operation

HDFC STANDARD LIFE is operating internationally, that means all over INDIA and

outside India; it is rendering its insurance services including rural places.

58
 CHAPTER-IV

INDUSTRY PROFILE

59
 INDUSTRY PROFILE

The insurance sector in India has come a full circle from being an open competitive
market to nationalization and back to a liberalized market again. Tracing the
developments in the Indian insurance sector reveals the 360 degree turn witnessed over a
period of almost two centuries.

A brief history of the Insurance sector

The business of life insurance in India in its existing form started in India in the year
1818 with the establishment of the Oriental Life Insurance Company in Calcutta.

Some of the important milestones in the life insurance business in India are:

1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate
the life insurance business.

1928: The Indian Insurance Companies Act enacted to enable the government to collect
statistical information about both life and non-life insurance businesses.

1938: Earlier legislation consolidated and amended to by the Insurance Act with the
objective of protecting the interests of the insuring public.

1956: 245 Indian and foreign insurers and provident societies taken over by the central
government and nationalized. LIC formed by an Act of Parliament, viz. LIC Act,1956,
with a capital contribution of Rs. 5 crore from the Government of India.

The General insurance business in India, on the other hand, can trace its roots to the
Triton Insurance Company Ltd., the first general insurance company established in the
year 1850 in Calcutta by the British.

60
Insurance sector reforms

In 1993, Malhotra Committee headed by former Finance Secretary and RBI Governor
R.N. Malhotra was formed to evaluate the Indian insurance industry and recommend its
future direction.

The Malhotra committee was set up with the objective of complementing the reforms
initiated in the financial sector.

The reforms were aimed at “creating a more efficient and competitive financial system
suitable for the requirements of the economy keeping in mind the structural changes
currently underway and recognizing that insurance is an important part of the overall
financial system where it was necessary to address the need for similar reforms…”

In 1994, the committee submitted the report and some of the key recommendations
included:

i) Structure
 Government stake in the insurance Companies to be brought down to 50%
 Government should take over the holdings of GIC and its subsidiaries so that these
subsidiaries can act as independent corporations.
 All the insurance companies should be given greater freedom to operate

ii) Competition

 Private Companies with a minimum paid up capital of Rs.1bn should be allowed to

enter the industry.
 No Company should deal in both Life and General Insurance through a single entity.
 Foreign companies may be allowed to enter the industry in collaboration with the
domestic companies.

61
 Postal Life Insurance should be allowed to operate in the rural market.
 Only one State Level Life Insurance Company should be allowed to operate in each
state

iii) Regulatory Body

 The Insurance Act should be changed

 An Insurance Regulatory body should be set up
 Controller of Insurance (Currently a part from the Finance Ministry) should be made
independent

iv) Investments

 Mandatory Investments of LIC Life Fund in government securities to be reduced

from 75% to 50%
 GIC and its subsidiaries are not to hold more than 5% in any company (There current
holdings to be brought down to this level over a period of time)

v) Customer Service

 LIC should pay interest on delays in payments beyond 30 days

 Insurance companies must be encouraged to set up unit linked pension plans
 Computerization of operations and updating of technology to be carried out in the
Insurance industry

The committee emphasized that in order to improve the customer services and increase
the coverage of the insurance industry should be opened up to competition. But at the
same time, the committee felt the need to exercise caution as any failure on the part of
new players could ruin the public confidence in the industry.

62
Hence, it was decided to allow competition in a limited way by stipulating the minimum
capital requirement of Rs.100 crore. The committee felt the need to provide greater
autonomy to insurance companies in order to improve their performance and enable them
to act as independent companies with economic motives. For this purpose, it had
proposed setting up an independent regulatory body.

The Insurance Regulatory and Development Authority (IRDA)

Reforms in the Insurance sector were initiated with the passage of the IRDA Bill in
Parliament in December 1999. The IRDA since its incorporation as a statutory body in
April 2000 has fastidiously stuck to its schedule of framing regulations and registering
the private sector insurance companies.

The other decision taken simultaneously to provide the supporting systems to the
insurance sector and in particular the life insurance companies was the launch of the
IRDA’s online service for issue and renewal of licenses to agents.

The approval of institutions for imparting training to agents has also ensured that the
insurance companies would have a trained workforce of insurance agents in place to sell
their products, which are expected to be introduced by early next year.

Since being set up as an independent statutory body the IRDA has put in a framework of
globally compatible regulations. In the private sector 12 life insurance and 6 general
insurance companies have been registered.

63
 CHAPTER-V

DATA ANALYSIS
AND
INTERPRETATION

64
 Table 1

Performance appraisal is an idea or a method to ascertain whether an employee has

shown his or her best performance on a given job.

Response No of respondents Percentage

Strongly agree 20 33
Agree 30 50
Disagree 9 15
Strongly disagree 1 2
Total 60 100

60

50

40
No. Of Respondents
30
Percentage Of
Respondents
20

10

0
Strongly Agree Disagree Strongly
agree disagree

Table-1 Analysis:

From the observation it is evident that 33% of employees strongly agree with the

statement, 50% of employees agree with the statement,15% of employees disagree with

the statement and 2% of employees strongly disagree with the statement that performance

appraisal is the method of ascertaining the performance of the employee.

65
 Table 2

The purpose of performance appraisal system in your organization is to

determine.

Response No of respondents Percentage

Wage increase 50 83
Transfer 2 3
Promotion 7 12
Layoff 1 2
Total 60 100

90
80
70
60
No. Of Respondents
50
40 Percentage Of
Respondents
30
20
10
0
Wage Transfer Promotion Layoff
increase

Table-2 Analysis:

From the observation it is evident that 83% of employees strongly agree that wage

increase is the purpose, 3% of employees agree that transfer is the purpose, 12% of

employees disagree that promotion is the purpose, and 2% of employees strongly

disagree that layoff is the purpose of performance appraisal in their organization.

66
 Table 3

The appraisal process should follow a formalized system to derive an

effective output.

Response No of respondents Percentage

Strongly agree 20 33
Agree 30 50
Disagree 5 8
Strongly disagree 5 8
Total 60 100

60

50

40
No of respondents
30
Percentage of
respondents
20

10

0
Strongly Agree Disagree Strongly
agree disagree

Table- 3 Analysis:

From the observation it is evident that 33% of the employees strongly agree with

the statement, 50% of the employees agree with the statement, 8% of the employees

disagree with the statement, and 8% of the employees strongly disagree with the

statement that appraisal process should follow a formalized system to derive an effective

output.

67
 Table 4

Performance appraisal program helps in identifying the training and development needs
of employees.

Response No of respondents Percentage

Strongly agree 10 17
Agree 40 67
Disagree 1 2
Strongly disagree 9 15
Total 60 100

70

60

50
No of respondents
40

30 Percentage of
respondents
20

10

0
Strongly Agree Disagree Strongly
agree disagree

Table- 4 Analysis:

From the observation it is evident that 17% of the employees strongly agree with

the statement, 67% of the employees agree with the statement, 2% of the employees

disagree with the statement, and 15% of the employees strongly disagree with the

statement that Performance appraisal program helps in identifying the training and

development needs of employees.

68
 Table 5
According to you Performance appraisal should be conducted for

Response No of respondents Percentage

Every three months 0 0
Every six months 20 33
Every nine months 0 0
Once in a year 40 67
Total 60 100

70

60

50
No. of respondents
40

30 percentage of
respondents
20

10

0
Every three Every six Every nine Once in a
months months months year

Table- 5 Analysis:

From the observation it is evident that 33% of the employees feel that performance

appraisal should be conducted for every six months, and the remaining 67% of the

employees feels that performance appraisal should be conducted once in a year.

Table 6

69
The appraiser should be provided with written instructions and training on how to

conduct appraisals properly to facilitate systematic, unbiased appraisals.

Response No of respondents Percentage

Strongly agree 35 58
Agree 15 25
Disagree 9 15
Strongly disagree 1 2
Total 60 100

60

50

40
no. of respondents
30
percentage of
20
respondents

10

0
Strongly Agree Disagree Strongly
agree disagree

Table- 6 Analysis:

From the observation it is evident that 58% of the employees strongly agree with

the statement, 25% of the employees agree with the statement, 15% of the employees

disagree and the 2% of the employees strongly disagree with the statement that the

appraiser should be provided with written instructions and training on how to conduct

appraisals properly to facilitate systematic, unbiased Appraisals.

Table 7

70
The present performance appraisal of your organization distinguishes the

performers and non-performers.

Response No of respondents Percentage

Strongly agree 35 58
Agree 20 33
Disagree 5 8
Strongly disagree 0 0
Total 60 100

60

50

40
no. of respondents
30
percentage of
20
respondents

10

0
Strongly Agree Disagree Strongly
agree disagree

Table- 7 Analysis:

From the observation it is evident that 58% of the employees strongly agree with the

statement, 33% of the employees agree with the statement, 8% of the employees disagree

with the statement that the appraisal method, which is followed in their organization,

distinguishes the performers and non-performers.

Table 8

According to you the performance appraisal system in your organization is

71
 Response No of respondents Percentage
Strongly effective 10 17
Effective 30 50
Moderately effective 20 33
Ineffective 0 0
Total 60 100

50
45
40
35
30
no. of respondents
25
20 percentage of
15 respondents
10
5
0
Strongly Moderately
effective effective

Table- 8 Analysis:

From the observation it is evident that 17% of the employees feels that the appraisal

system in their organization is strongly effective, 50% of the employees feels that it is

effective, 33% of the employees that it is moderately effective.

Table 9

The current performance appraisal system is motivating the employees.

72
 Response No of respondents Percentage
Strongly agree 10 17
Agree 40 67
Disagree 9 15
Strongly disagree 1 2
Total 60 100

70

60

50

40 no. of respondents
30
percentage of
20 respondents

10

0
Strongly Agree Disagree Strongly
agree disagree

Table- 9 Analysis:

From the observation it is evident that 17% of the employees strongly agree with the

statement, 67% of the employees agree with the statement, 15% of the employees

disagree with the statement, and 2% of the employees strongly disagree that their current

appraisal system is motivating the employees.

Table 10

The performance appraisal system helps for the overall development of the

organization.

Response No of respondents Percentage

73
 Strongly agree 50 83
Agree 10 17
Disagree 0 0
Strongly disagree 0 0
Total 60 100

90
80
70
60
50 no. of respondents
40
percentage of
30
respondents
20
10
0
Strongly Agree Disagree Strongly
agree disagree

Table- 10 Analysis:

From the observation it is evident that 83% of the employees strongly agree with the

statement, 17% of the employees agree with the statement that the performance appraisal

system helps for the overall development of the organization.

Table 11

The performance appraisal used more as a routine functions of

appreciation to reward or promote employees than as a developmental

tool.

74
 Response No of respondents Percentage
Strongly agree 20 33
Agree 30 50
Disagree 10 17
Strongly disagree 0 0
Total 60 100

50
45
40
35
no. of respondents
30
25
percentage of
20 respondents
15 Series3
10
5
0
Strongly Agree Disagree Strongly
agree disagree

Table- 11 Analysis:

From the observation it is evident that 33% of the employees strongly agree with the

statement, 50% of the employees agree with the statement, 17% of the employees

disagree with the statement that the performance appraisal used more as a routine

functions of appreciation to reward or promote employees than as a developmental tool.

Table 12

Performance appraisal is followed by rewards and recognition. Rewarding system is

satisfactory.

75
 Response No of respondents Percentage
Strongly agree 25 42
Agree 10 17
Disagree 15 25
Strongly disagree 10 17
Total 60 100

45
40
35
30
no. of respondents
25
20 percerntage of
respondents
15
10
5
0
Strongly Agree Disagree Strongly
agree disagree

Table- 12 Analysis:

From the observation it is evident that 42% of the employees strongly agree with the

statement, 17% of the employees agree with the statement, 25% of the employees

disagree and the 17% of the employees strongly disagree with the statement.

Table 13
The management compensation system influences your performance.

Response No of respondents Percentage

Strongly agree 40 67
Agree 20 33
Disagree 0 0
Strongly disagree 0 0

76
 Total 60 100

70

60

50
no. of respondents
40

30 percentage of
respondents
20

10

0
Strongly Agree Disagree Strongly
agree disagree

Table- 13 Analysis:

From the observation it is evident that 67% of the employees strongly agree that the

management compensation system influences the employees performance and 33% of the

employees jus agree with the above statement.

Table 14

An effective and efficient appraisal system is imperative for a company to achieve

financial success.

Response No of respondents Percentage

Strongly agree 55 92
Agree 5 8
Disagree 0 0

77
 Strongly disagree 0 0
Total 60 100

100
90
80
70
60 no. of respondents
50
percenage of
40 respondents
30
20
10
0
Strongly Agree Disagree Strongly
agree disagree

Table- 14 Analysis:

From the observation it is evident that 92% of the employees strongly agree that an

effective and efficient appraisal system is imperative for a company to achieve financial

success and 8% of the employees jus agree with the above statement.

Table 15

Measuring performance and making evaluation is a stressful experience for most of the

evaluators.

Response No of respondents Percentage

Strongly agree 35 58
Agree 15 25
Disagree 7 12
Strongly disagree 3 5
Total 60 100

78
 70

60

50
no. of respondents
40

30 percentage of
respondents
20

10

0
Strongly Agree Disagree Strongly
agree disagree

Table- 15 Analysis:

From the observation it is evident that 58% of the employees strongly agree with the

statement, 25% of the employees agree with the statement, 12% of the employees

disagree and 5% of the employees strongly disagree with the statement that measuring

performance and making evaluation is a stressful experience for most of the evaluators.

Table 16

The result of the appraisal should be communicated and discussed with

the employees.

Response No of respondents Percentage

Strongly agree 40 67
Agree 15 25
Disagree 4 7
Strongly disagree 1 2
Total 60 100

79
 70

60

50

40 no. of respondents
30
percentage of
20 respondents

10

0
Strongly Agree Disagree Strongly
agree disagree

Table- 16 Analysis:

From the observation it is evident that 67% of the employees strongly agree with the

statement, 25% of the employees agree with the statement, 7% of the employees disagree

and 2% of the employees strongly disagree with the statement that the result of the

appraisal should be communicated and discussed with the employees.

80
 CHAPTER-VI

FINDINGS

AND
SUGGESTIONS

Findings

1. It is evident that 33% of employees strongly agree that the

performance appraisal is the method to ascertain the performance of the employee,50%

of employees agree with the same, 15% of employees disagree with the statement

and 2% of employees strongly disagree with the statement that performance

appraisal is the method of ascertaining the performance of the employee.

81
2. It is evident that 83% of employees strongly agree that wage increase is the

purpose , 3% of employees agree that transfer is the purpose, 12% of employees

disagree that promotion is the purpose, and 2% of employees strongly disagree

that layoff is the purpose of performance appraisal in their organization.

3. It is evident that 33% of the employees strongly agree with the statement,

50% of the employees agree with the statement, 8% of the employees disagree

with the statement , and 8% of the employees strongly disagree with the statement

that appraisal process should follow a formalized system to derive an effective

output.

4. It is evident that 17% of the employees strongly agree with the statement, 67% of

the employees agree with the statement, 2% of the employees disagree with the

statement, and 15% of the employees strongly disagree with the statement that

Performance appraisal program helps in identifying the training and development needs

of employees.

5. It is evident that 33% of the employees feel that performance appraisal should be

conducted for every six months, and the remaining 67% of the employees feels that

performance appraisal should be conducted once in a year.

6. It is evident that 58% of the employees strongly agree with the statement, 25% of

the employees agree with the statement, 15% of the employees disagree and the 2% of

the employees strongly disagree with the statement that the appraiser should be provided

82
with written instructions and training on how to conduct appraisals properly to facilitate

systematic, unbiased Appraisals.

7. It is evident that 58% of the employees strongly agree with the statement, 33% of

the employees agree with the statement, 8% of the employees disagree with the statement

that the appraisal method, which is followed in their organization, distinguishes the

performers and non-performers.

8. It is evident that 17% of the employees feels that the appraisal system in their

organization is strongly effective, 50% of the employees feels that it is effective, 33% of

the employees that it is moderately effective.

9. It is evident that 17% of the employees strongly agree with the statement, 67% of

the employees agree with the statement, 15% of the employees disagree with the

statement, and 2% of the employees strongly disagree that their current appraisal system

is motivating the employees.

10. It is evident that 83% of the employees strongly agree with the statement, 17% of

the employees agree with the statement that the performance appraisal system helps for

the overall development of the organization.

11. It is evident that 33% of the employees strongly agree with the statement, 50% of

the employees agree with the statement, 17% of the employees disagree with the

statement that the performance appraisal used more as a routine functions of appreciation

to reward or promote employees than as a developmental tool.

12. It is evident that 83% of the employees are highly satisfied with the rewarding

system of an organization after the performance appraisal system, and 17% of the

employees are moderately satisfied.

83
13. It is evident that 67% of the employees strongly agree that the management

compensation system influences the employees performance and 33% of the employees

jus agree with the above statement.

14. It is evident that 92% of the employees strongly agree that an effective and

efficient appraisal system is imperative for a company to achieve financial success and

8% of the employees jus agree with the above statement.

15. It is evident that 58% of the employees strongly agree with the statement, 25% of

the employees agree with the statement, 12% of the employees disagree and 5% of the

employees strongly disagree with the statement that measuring performance and making

evaluation is a stressful experience for most of the evaluators.

16. It is evident that 67% of the employees strongly agree with the statement, 25% of

the employees agree with the statement, 7% of the employees disagree and 2% of the

employees strongly disagree with the statement that the result of the appraisal should be

communicated and discussed with the employees.

SUGGESTIONS

1. The appraiser should be provided with written instructions and training on how to

conduct appraisals properly to facilitate systematic, unbiased appraisals.

84
2. The appraisee must know what exactly appraisal is and it is necessary that each

and every stage of the process should be discussed with the employees (even though it is

bit difficult).

3. The results of the performance appraisal should be discussed with the employees

so that they can understand their level of performance.

4. Performance appraisal if conducted twice a year will help in boosting the

employee motivational level.

5. The purpose of the performance appraisal must also take promotion, lay off and

termination as one of its considerations besides wage increase.

6. The PA system should give weightage to those who experiment with new

methods and creative ideas.

CHAPTER-VII

85
 CONCLUSION

CONCLUSION

From this study I have come to know that the organization makes use of

360-degree appraisal method in order to appraise the performance of their employees.

And the purpose of the performance appraisal in this organization is wage increase. The

employees of the organization are comfortable with the existing performance appraisal

method and they want it to be improved in some of the areas in order to differentiate

performers and non-performers because some of them feel that the performers are not

recognized. I feel that existing performance appraisal should be followed by recognizing

86
the work in the form of granting awards/merit certificates in order to motivate the

employees. Finally I conclude that an effective and efficient appraisal system is

imperative for a company to achieve financial success and organizational objectives.

BIBLIOGRAPHY

BOOKS

1. Essentials of Human Resource Management and Industrial Relations – P. Subba

Rao – Himalaya Publishing House.

2. Performance Management and Appraisal Systems – T.V. Rao.

87
INTERNET

1. http://appraisal.naukrihub.com

2. www.citehr.com

WWW.NETWORTH.COM

Performance appraisal questionnaire

I/ Employee information

1. Employee name:

2. Position:

3. Department:

4. Part time/full time employee:

88
II/ Rating scales
Strongly agree/Agree/Disagree/Strongly disagree

III/ Appraisal questions

1) Performance appraisal is an idea or a method to ascertain whether an employee has

shown his or her best performance on a given job.

a) Strongly agree.

b) Agree.

c) Disagree.

d) Strongly disagree.

2) The purpose of performance appraisal system in your organization is to determine.

a) Wage increase.

b) Transfer.

c) Promotion.

d) Lay off.

3) The appraisal process should follow a formalized system to derive an effective

output.

a) Strongly agree.

b) Agree.

c) Disagree.

d) Strongly disagree

89
4) Performance appraisal program helps in identifying the training and development

needs of employees.

a) Strongly agree.

b) Agree.

c) Disagree.

d) Strongly disagree.

5) According to you Performance appraisal should be conducted for

a) Every three months.

b) Every six months.

c) Every nine months.

d) Once a year.

6) The appraiser should be provided with written instructions and training on how to

conduct appraisals properly to facilitate systematic, unbiased appraisals.

a) Strongly agree.

b) Agree.

c) Disagree.

d) Strongly disagree.

7) The present performance appraisal of your organization distinguishes the performers

and non-performers.

a) Strongly agree.
90
b) Agree.

c) Disagree.

d) Strongly disagree.

8) According to you the performance appraisal system in your organization is

a) Very effective.

b) Effective.

c) Moderately effective.

d) Ineffective.

9) The current performance appraisal system is motivating the employees.

a) Strongly agree.

b) Agree.

c) Disagree.

d) Strongly disagree

10) The performance appraisal system helps for the overall development of the

organization.

a) Strongly agree.

b) Agree.

c) Disagree.

d) Strongly disagree

91
11) The performance appraisal used more as a routine functions of appreciation to reward

or promote employees than as a developmental tool

a) Strongly agree.

b) Agree.

c) Disagree

d) Strongly disagree

12) Performance appraisal is followed by rewards and recognition. Rewarding system is

satisfactory.

a) Strongly agree.

b) Agree.

c) Disagree.

d) Strongly disagree

13) The management compensation system influences your performance.

a) Strongly agree.

b) Agree.

c) Disagree.

d) Strongly disagree

92
14) An effective and efficient appraisal system is imperative for a company to achieve

financial success.

a) Strongly agree.

b) Agree.

c) Disagree.

d) Strongly disagree

15) Measuring performance and making evaluation is a stressful experience for most of

the evaluators.

a) Strongly agree.

b) Agree.

c) Disagree.

d) Strongly disagree

16) The result of the appraisal should be communicated and discussed with the

employees.

a) Strongly agree.

b) Agree.

c) Disagree.

d) Strongly disagree
93
94