Exploring the Effectiveness of Performance Appraisal

EXPLORING THE EFFECTIVENESS OF PERFORMANCE APPRAISAL IN MULTI NATIONAL COMPANY. BY MITHILA S. PARAB 2007-08 A Dissertation presented in part consideration for the degree of â€Å"MA MANAGEMENT† ACKNOWLEDGEMENT I would like to thank my supervisor, Nick Bacon for his invaluable advice and guidance throughout the project. I would like to thank all the participants who participated in my research. I would like to thank my family and friends for their guidance and encouragement throughout the project, without which the project would have been impossible. ABSTRACT This dissertation seeks to present the effectiveness of the appraisal system of a Multi national company in India. Hence, the performance appraisal system of this company was studied. The study also explains how performance appraisal systems have encouraged employee development in the organization considered. The study explores the importance of performance appraisal in the organization.It explores how organizations have t o be organized and systematic in their approach, so that they can extract the exact performance from their employees which can help them, to create a balance between performance and achieving organizational objectives. This paper, explains how performance appraisal helps in evaluating and assessing the employees on a common ground and helps to establish training and development program which helps the employee to grow in the organization. It also helps, to understand how performance appraisal helps in other personnel decisions like promotion, salary increments etc. TABLE OF CONTENTS CHAPTER 1 INTRODUCTION Performance appraisal overview How widespread is performance appraisal? Objective of study Overview of chapters CHAPTER 2 LITERATURE REVIEW How was performance appraisal evolved? Linkage of Human resource management and Performance appraisal Pg. no 6 7 8 9 9 11 11 14 17 20 23 25 26 26 27 29 30 31 Purpose of performance appraisal Perception of PA in organization How is Pa conducted? Management by Objective: Graphic Rating Scale BARS and BOS Motivation and Goal setting theory Feedback 360 degree feedback Summary of Literature Review CHAPTER 3 RESEARCH METHOD Research objective Research methods Quantitative Vs Qualitative Why Qualitative? Research Tactics Primary data Design of interview questions When was research done? Secondary research Limitation of Qualitative research Summary of research methods CHAPTER 4 ANALYSIS OF DATA PART A COMPANY INFORMATION PART B ANALYSIS OF DATA Summary of chapter CHAPTER 5 CONCLUSION 34 34 34 34 35 36 36 36 37 38 38 39 40 40 42 53 54 5 Exploring the effectiveness of Performance Appraisal in Multi national company. CHAPTER 1 : INTRODUCTION:The purpose of this dissertation is to explore the effectiveness of performance appraisals in Multi national company and its effect on the employees and the organization. This paper, explains how performance evaluation helps in assessing, evaluating and appraising employees performance in the o rganization as well as rewarding employees and providing them with the necessary training and development. It tries to explain, how it motivates employees when goal setting theory is applied in order to perform better in the organization.The, study basically highlights the impact of performance appraisal on the employees and on the organization. The key purpose of performance management in organizations is that it helps in; measuring the effectiveness of performance in the organization also, it helps in identifying training needs and largely promotes motivation towards work. But, how exactly does performance appraisal help in running the organization? Every organization has a set of objectives and functions and the main task is to accomplish the desired objectives and functions.This can only be achieved, if the employees know their duties well. Employees form an important asset of the company, therefore they should be provided with a proper package, remuneration and good training an d development. All these facilities will only help the employee to be, highly motivated towards their work and would help in producing the right output i. e. performance. Performance appraisal is used all over the world. Many organizations use 6 performance appraisal in order to develop a clearer picture of their organization.The performance appraisal process allows an organization to measure and evaluate an individual employee’s behavior and accomplishments over a specific period of time (DeVries et al. , 1981). In recent years the attention towards performance appraisal has increased rapidly, due to its important potential implications ,relating to fair employment practices and the because of increasing concerns about employee productivity in the organization. (Pearce and Porter,1996 ) What ultimately lies is the end product which is performance which has to proper, therefore, in order to achieve that, the employees should be utilized to the full extent.Organizations have t o be organized and systematic in their approach, so that they can extract the exact performance from their employees which can help them, to create a balance between performance and organizational objectives. Performance Appraisal : Overview The most basic purpose of performance appraisal is to provide information to the employees about their job and the amount of effort and behavior expected from them. Performance appraisal (PA) systems aim to help, develop individuals, improve organizational performance and to develop the basis from which builds a baseline for planning for the future.Generally PA includes the following main purposes: 1 Creation of a shared vision of the organization's objectives, occasionally through a mission statement communicated to all employees. 2 Setting of individual performance targets relating to the operating unit's target within the overall organization. 3 A formal review of progress towards these targets, and/or the identification of training needs. 4 The PA system assessed regularly to evaluate its effectiveness for overall organizational performance. (Coates,1994) 7 McEvoy and Cascio(1990) suggested that employees should be told their duties i. . they should be told what is expected from them plus effective orientation towards effective performance. As a result, the intention is to provide employees with an adequate understanding about their job, and encourage employees to work towards their organizational goals. When objectives are set for the employees it becomes simpler for them to attain the desired task. Performance can be obtained, when a desired goal is given. Locke’s ( 1968) Goal setting theory emphasizes the importance of conscious goal levels as determinants of employee performance.Goal setting theory is summarized as follows- a. hard goals produce a higher level of performance than easy goals, b. some specific hard goals produce higher level of output; c. behavioral intentions regulate choice behavior. How wid espread is performance appraisal? Performance appraisal is widely used in many Western countries. In US the percentage of organizations using performance appraisal increased from 89 percent to 94 percent from 1970s to 1980s. (Locher and Teel,1988) Similarly, in UK the use of formal performance appraisal system has rapidly increased. Armstrong and Baron,1998) Appraisal is particularly prominent in some big industrial sectors in the UK, such as financial services. Cully et al (1998) add that performance appraisal has developed from an initial application to the middle managers and professional occupations and is now frequently applied to non-managers and professionals. 8 Performance appraisal is also used in non-western countries like China, India, Hong Kong and Japan. Objective of the study: The aim of this study is to explore the operation and effects of performance appraisal in Multi national company.It will assess whether the appraisal process creates a positive response or negati ve response from employees and assess the subsequent impact on employee attitudes and behaviors. The appraisal process studied is that of a Multi national company in India. The appraisal system of this company was designed to improve employee productivity. The findings, suggests that the performance appraisal system is important in the Multi national company among employees and the organization. The study also explains how performance appraisal systems have encouraged employee development in the organization considered.An over view of the existing literature relevant to this topic is considered in the following chapter. Over view of the chapters: Chapter 1: Introduction: A brief introduction about the purpose of the research is given. A brief overview of performance appraisal is presented. Then the research objective is mentioned. Then a brief description about the remaining chapters is given. Chapter 2 : Literature review: Chapter 2 comprises of Literature review. It starts with th e history of performance appraisal system.It explains how performance appraisal system was evolved in the industry and what its current importance in the industry is. The chapter then, explains 9 the various concepts relevant to the subject. The purpose and perception of appraisal system is explained. This is followed by the process of performance appraisal. The literature review was designed to explain the main motive of the research, therefore accordingly the relevant literatures pertaining to the research was only considered. Chapter 3 : Research methods Chapter 3 comprises of research method adopted in the.This chapter gives an overview of the research and the research objective. It then explains the purpose of qualitative research adopted in the research. It then highlights the relationship between the study and the research method adopted. The majority of the chapter explains how the data was collected for the research and the process of data analysis. Chapter 4 : Analysis of Data Chapter 4 comprises of the Analysis section. This section gives a brief introduction to the parameters on which the employees are tested in the organization and the scale on which they are judged are explained.This chapter then explains the findings of the research. This section broadly explains the reaction of the employees, of the appraisal system of their company. Chapter 5 : Conclusion Chapter 5 concludes the research by stating briefly the findings of the research and sums up the whole research. The conclusion also suggests recommendations for fur 10 CHAPTER 2 LITERATURE REVIEW: This chapter gives a review on the literature of performance appraisal. It explores areas from the time performance appraisal was evolved till the current rating scale in the industry. How was performance appraisal evolved?Evolution of performance appraisal. The formal performance appraisal system has a short but considerable historical background. Grint (1993 ) traces evidence of performance appra isal system in the third-century Chinese practice. In this context, â€Å"Imperial Raters† were employed by emperors of the Wei dynasty to rate the performance of the official family members. (Wiese and Buckley, 1998 ) Performance appraisal was seen in the industry in early 1800. In UK, Randell (1994) identified its use in Robert Owen’s use of â€Å"silent monitors† in the cotton mills of Scotland.Here, the Silent monitors were blocks of wood with different colors painted on each visible side and it was hung above each employee’s work station. At the end of the day, the block was turned so that a particular color, representing a grade (rating) of the employee’s performance, was facing the aisle for everyone to see. (Weise and Buckley, 1998) Anecdotal evidence indicates that this practice had a facilitating influence on subsequent behavior. 11 In US the trend of performance was started in1813 in the US War department. Here , an Army General submitte d an evaluation of each of his men.Using a global rating, with descriptions of his men such as â€Å"a good-natured man† or â€Å"a knave despised by all† (Bellows and Estep, 1954,Weise and Buckley,1998). One impetus of development of performance appraisals in United States was traced in salesman selection by industrial psychologists at Carnegie- Mellon University (Scott et al. , 1941), who used trait psychology to develop a ‘man-to-man' rating system. Historically, performance appraisals have been used for administrative purposes, such as retention, discharge, promotion, and salary administration decisions (DeVries et al. 1981; Murphy and Cleveland, 1995; Patten, 1977) as cited in Weise and Buckley (1998) By the early 1950s, 61 per cent of organizations regularly used performance appraisals, compared with only 15 per cent immediately after World War II (Spriegel, 1962,Weise and Buckley,1998). The primary tool was the trait-rating system, which focuses on past ac tions, using a standard, numerical scoring system to appraise people on the basis of a previously established set of dimensions (DeVries et al. , 1981). The main tool, used under here was rait rating system. But, there were a lot of inconsistencies found in it, as the manager had to take up the role of a judge and not a leader. This laid to the development of new systems based on management by objectives. Peter Drucker first proposed the concept of Management by objective in 1954. Mcgreror then used it in the appraisal process in the year 1957. He suggested that, employees should be appraised on the basis of short-term goals, rather than traits, which are jointly set by the employee and the manager. (Weise and Buckley,1998).This method was very advantageous as, this lead to a transformation of a managers role from being a judge to a helper. It also shows that, employee 12 productivity ultimately leads to performance. Thirdly, it shifts the orientation towards future actions instead of past behaviors (DeVries et al. , 1981; Patten, 1977) However, when employees performance was measured on the basis of units, then MBO was ineffective. This lead to new development in the appraisal process , where the employee was evaluated on the basis of ‘behaviour based rating'.The first tool, to focus on behaviors was the Behaviorally Anchored Rating Scales (BARS), designed by Smith and Kendall (1963) Therefore, it is seen that PA system has come a long way for the betterment of the organization and the employees. New development of PA was useful at every stage. Today, performance appraisals are expected to serve a number of purposes simultaneously. When discussing the uses of performance appraisal, it is important to distinguish between organizational goals, rater goals, and ratee goals. (Weise and Buckley,1998)Thus, Performance appraisals today should be used as a vital tool to identify the work potential of an employee, instead of choosing the best individual in the o rganization. Performance appraisal goals needs to become more inclusive – goals which are beneficial to both individual and organization. For example, instead of just assisting an organization make decisions concerning an individual, performance appraisals should be used to help an individual make personal decisions regarding his/her current performance and provide strategies for future development. (Weise and Buckley,1998)Performance appraisal is regarded widely as a necessary attribute of management, part of an over-riding value set of efficiency, of being seen to succeed, to perform and to control. (Barlow,1989) Performance management forms a baseline for setting the objectives and helps in giving a clear picture to employees and clearly explains, what is expected from them. Therefore, the question that arises is, whether performance appraisal system is meant only for completing the organizations objectives? Yes, performance appraisal does that ,but at the same time it giv es training and development to employees, proper pay package 3 and right remuneration packages which help in motivating the employees to produce the right output i. e. performance. Performance appraisal is a unique and significant managerial tool used to motivate and control workforce. Linkage of Human resource management and Performance appraisal: Human resource forms an indispensable part of the organization. Hence, it is very important to examine the role of appraisal in the effective and efficient utilization of this resource. (Cummings and Swab, pg 56) Fig : 1. The process of Human utilization PERFORMANCE HUMAN ABILITIES AND ENERGIESPROCESSING AND CONVERSION of HUMAN ENERGIES According to Bratton and Gold,(2003:7),† Human resource management (HRM) is a strategic approach to managing employment relations which emphasizes that leveraging peoples capabilities is critical to achieving competitive advantage, this being achieved through a distinctive set of integrated employmen t policies, programs 14 and practices. † HRM forms a core in understanding people's behavior towards their colleagues as well as their companies. The model laid down by Fombrun, Tichy and Devanna (1984) of HRM gives a clear picture of the HRM process. Bratton and Gold,2003) Fig 2. HRM Process Selection: Performance Human resource development Appraisal Rewards In this modelSelection: Selecting the right candidate who would fulfill the organisational goals and objectives Performance: The output of employee's abilities which add value to the organization Human resource development: Providing the necessary training session, this would help the employees to possess the relevant knowledge and skill to perform better in the organization. Due to this the employees would improve individual skills as well as advance in the organization. 15Appraisal: Appraisal which depends largely upon the employees capability to perform would then show the employee's competencies and talent. The modern human resource system may be divided into four parts acquisition of human resources(recruitment and selection),training and development ,motivation and compensation. Performance appraisal is involved in all four parts and serves to tie them together by providing feedback information for all of the other parts. ( Latham and wexley,1977 : griffin:604) Performance appraisal therefore is known as the powerful tool for managing human resources. Forbrum and Laud,1983) Therefore, an HRM process forms an important element in the organizational structure. HRM department knows the objectives and function well of the organization. Therefore, it knows what kind of people the company needs and recruits in that way. It provides adequate training session to employees so that they know their tasks, well in advance and act accordingly, it helps in encouraging and motivating employees and sees to it that, the employees do their duties well. When the employees know their task well, they would obvious ly perform well.But, still HRM has to do another important task is to check whether the performance of the employees is as per the standards or not. This is where a formal appraisal system comes into picture. Therefore, Huber,(1980) rightly puts it that in the context of human resource management, formal appraisal serve three purposes: 1. Evaluation, 2. development and 3. Employee protection. Richard & Johnson (2004) suggest that organizations need to match HR framework and practices up to holistically corporate strategy in order to achieve superior performance in the organization. 6 WHY is PA necessary? Earlier, PA did not exist in the organization. Then why did the need of performance appraisal arise? Why was it necessary to include performance appraisal system in an organization? Cant a organization run efficiently if there is no PA system ? Wiese and Buckley (1998 ) gave an answer to this. They said that, a formal performance appraisal system serves as an asset in conducting for mal decision process within the organization . It also helps employees, in developing their career and increasing their commitment towards their organization.Murphy and Cleveland (1995) add that it is always advantageous to use a formal appraisal system in the organization. Performance appraisal provides information that is relevant for many personnel decisions, like increments in salaries, it introduces scope for promotion, transfers, and training and development programs, as well as for employee development and performance feedback (Jacobs, Kafry, & Zedeck,1980) Huber(1980) is also of the same opinion that millions of public and private employees have their performance appraised in order to determine salary, promotions, tenure, layoffs and development potential.Purpose of performance appraisal: The most known purpose of performance appraisal is to improve performance of individuals. Performance appraisal has basically two important purposes, from an organizational point of view: 1 . The maintenance of organizational control and 2. the measurement of the efficiency with which the organizations human resources are being utilized. (Cummings and Shwab. 1973 pg. 55) But ,there are also a variety of other declared purposes and desired benefits for appraisal, including: Improving 17 otivation and morale of the employees, clarifying the expectations and reducing the ambiguity about performance, determining rewards, identifying training and development opportunities, improving communication, selecting people for promotion, managing career growths, counseling, discipline, planning remedial actions and setting goals and targets. (Bratton and Gold,2003:284, Bowles and Coates,1993). However, according to Armstrong and Baron, there is rise in more harder and judgmental forms of performance appraisal than softer and developmental approaches.Therefore there has been a shift in performance appraisal away from using it for career planning and identifying future potential and i ncreased use of it for improving current performance and allocating rewards. (Redman and Wilkinson,2001: pg. 60) Performance appraisal can be used as an effective tool to improve employees’ job performance by identifying strengths and weaknesses of the employees and determining how their strengths can be best utilized within the organization and overcome weakness over the period of time. The next question that comes into mind is that who gets more out of the appraisal process the organization or the employees?Who obtains more gain out of it? Both, i. e the organization and employees or any one of them. The following studies give us an explicit understanding of the different purposes of performance appraisal in the organizational context and highlights the different key features of performance appraisal. It also helps us to know who benefits from the appraisal system. Mcgregor (1972) in his paper, â€Å"An uneasy look at performance appraisal† said that formal performan ce appraisal plans are designed to meet three needs, one of the organization and one two for the individual: The following are his ideas about PA. 8 Firstly, PA provides systematic verdict to back up salary increases, promotions, transfers, demotions or terminations. Secondly, PA forms a means of telling subordinate how he is doing, how his performance is towards the organization and suggesting the changes in his behavior, attitudes, skills or job knowledge improvements ,they let him know â€Å"where he stands† with the boss. Thirdly, PA is increasingly being used as a basis for coaching and counseling of the individual by the superior.Similarly, Murphy and Cleveland (1995) studied how performance appraisal is used in organization. They compared ‘between individual' and ‘within-individual' performances. The ‘between individual' performances was able to provide information to make decisions regarding promotion, retention and salary issues. The ‘within i ndividual' performances was useful in identifying the training and development needs which includes performance feedback, identifying the strengths and weaknesses of employees as well as determining transfers.Another use of performance appraisal was found out through this study was that of ‘ system maintenance' which was used to identify the organizational goals and objectives, to analyze the organizational training needs and to improve the personnel planning system of the organization. Finally, documentation purposes are to meet the legal requirements by documenting personnel decisions and conducting validation research on the performance appraisal tools.Bowles and Coates (1993) conducted a postal survey of 250 West Midland companies in June 1992, where the organizations were asked questions pertaining to the use of Performance management in the organization. These questions included the perceived function of PA in the management of work, its strengths and weaknesses, the rol e of 19 commitment in the management of work. Through their survey they found out that PA was beneficial in the following ways: 1. PA was beneficial in developing the communication between employer and employee, 2.It was useful in defining performance expectations and 3. Identification of training needs. An important study in the field of employee’s performance appraisal program was conducted by Redman et al (2000) on National Health Service Trust hospital (UK). In this study, they explained the effectiveness of performance appraisal in public sector. Their research was mainly to check in what context does performance appraisal hold an upper hand in proving its worth in the public sector. The results however were pretty surprising.The results obtained showed that performance appraisal was considered as ‘organizational virus'. Nelson (2000) adds that PA largely helps the employee to have a focused and fixed approach towards the target goal. He elaborates that appraisal s ystem acts like a boosting factor for the employee to do his job well. It recognizes the employee's capabilities in order to achieve the given objective and function. It also helps in knowing the shortcomings of the employees and acts like an important element, for career development and planning.Perception of PA in organization It revolves if PA gives a positive impact or a negative impact to the employees. It shows whether the employees get motivated to perform better, if they receive a good feedback or do they get de-motivated and loose interest in their job. So far, we have 20 come across the purpose, uses of PA in the organization, but the perception i. e. the understanding of PA is not taken into consideration in most cases which is important for the employee as well as the organization.If the employees don't recognize this, then they would suffer unnecessarily in the organization the reason being that, an employee has a certain level of expectation from his company when he jo ins it; he expects sum kind of growth from it, also the organization expects a lot from him. But, a negative feedback of performance would largely hamper him mentally and make him loose his interest in his job. There would be change in his attitude, which would be problematic for him as well as the organization. He would be de motivated to achieve the organizational objectives.Many employees have a kind of view that, their promotion or salary increments largely depends on their performance. Employees therefore are in a dilemma and consider this situation as ‘survival of the fittest' . They know for a fact that, their performance is only taken into consideration at the end of the day, and in order to grow in the company they need to be pro active towards their work. The feedback the employee receives from his superior, may simply describe the level of performance achieved. (Evans,1986) Hence, it is important for the managers to conduct the appraisal process properly.Employees c an only accept criticism if it is useful and relevant to them. Managers should know how to provide information regarding improvement in performance and how to present criticism as well. Managers feel that whenever they have to provide a negative feedback, the employee is most likely be dejected and de-motivated. Meyer et. al (1965) carried out a study in General Electric Company where certain points relating to performance feedback was highlighted. In this study, 92 appraises were appraised by their managers on two 21 occasions over two weeks.The study was carried out by questionnaires, interviews and observation. The first interview, included performance and salary and the second performance and improvement. It was observed, that there was a lot criticism pointed out by the managers, which lead to defensive behavior of the employee. The conclusions from this study were that- Criticism leads to create a negative impact on the motivation and performance of the employees. Interviews d esigned to improve performance should not at the same time weigh salary and promotion issues. Participation by the employee in goal setting helps to produce favorable results.After this study, there were many studies which reflect upon employee's performance issues due to negative feedback. Ilgen et. al (1979) add that the appraisal has to be fair. Employees who believe that the appraisal system is under any kind of bias and misunderstanding between them and the managers are, most likely to be dissatisfied by their work and can also leave their jobs. The extent to which employees are able to accept feedback will vary to a considerable degree between employees and managers will need to be able to cope with such variations .That is ,they will need to ‘know' their people as individuals, and this itself will be a reflection of the development of managers. ( Bratton and Gold,2000,p. 286) One possible reason for the widespread dissatisfaction with performance appraisal in organizati on is that the systems used by organizations do not help them or their employees meet the desired goals. ( Murphy and Cleveland. ) It has been shown that individuals are motivated to seek feedback (if it is seen as a valuable resource) to reduce uncertainty and to provide information relevant to self evaluations (Ashford, 1986). 22 How is PA conducted?Performance appraisal system should not merely be a checklist of ‘do's and don’ts ‘,it should provide a wider perspective to the employees. Performance appraisal has to be designed in such a way that, both, the employee and the organization can obtain fruitful results from it. A performance appraisal system should be made in such a way that the organization can ensure proper accomplishment of goals; at the same time the employee can expect clear and concise work expectations. Knowing what is expected from them is the first step in helping one cope better with the stress usually associated with lack of clear divisions . Baker,1984) To make performance appraisal effective,our criteria need to be present. These are? Employees should be actively involved in the evaluation and development process ? Bosses need to enter performance appraisals with the constructive and helpful attitude. ? ? Realistic goals must be mutually set. Bosses must be aware,and have knowledge of the employee's job and performance. (Baker,1984) Cole (1988) presented the following appraisal process framework. This framework explains how the appraisal process is carried out.First, the appraisal form is completed by the manager and the employee then a formal interview is explained where a job improvement plan is established which gives three outcomes action agreed, promotion or transfer or salary review. 23 FIG. 3 PA PROCESS APPRAISAL FORM COMPLETED INTERVIEW CONDUCTED JOB IMPROVEMENT PLAN ACTION AGREED PROMOTION OR TRANSFER SALARY REVIEW 24 APPRAISAL METHODS: Management by Objective: Management by objective (MBO) was introduced by Peter Drucker in 1954 which changed a managers role from being a judge to a helper.Management by objective is an approach where employees are evaluated by how well they accomplish their tasks and objectives which are important to be critical in the successful completion of their job. MBO is a process, which converts organizational objectives into individual objectives. It helps in goal setting, planning, self review and performance review. In goal setting, the organizational objectives are used as guidelines through which the individual objectives are set up. Goals are set up between the managers and the employees, which become the standards against which the employee's results will be evaluated.MBO is used in planning process ie making the action plan for carrying out the assigned goals. It includes identifying the proper activities necessary to accomplish the objectives. Self-control is another important step in MBO, where a systematic monitoring of performance is done by the ind ividuals so that they get a clearer picture of their performance. (Rudman,2003) says that it is crucial to have very precise and well defined objectives, this will eradicate scenarios whereby the appraiser have to appraise performance based on unclear objectives which will in turn will affect motivation.The advantage of MBO lie in its result oriented emphasis. It assists the management for planning and control functions and is considered as a result oriented approach for performance appraisal ,because employees would know exactly what is expected of them and how they will be evaluated and how their evaluation will be based on their success in achieving their goal. MBO clearly defines an employee's goals and objectives to be achieved in the organization. 25 Although management by objectives has many positive features, its limitations need to be understood.The primary issue that needs to be addressed by the organization is the high level of management commitment and time required to r eorient the thinking of employees (Patten, 1977,Weise and Buckey,1998). Graphic Rating Scale (GRS) GRS is considered as the most popular and oldest of the appraisal systems. GRS is used mainly in evaluating performance based on quantity and quality of work. In this the rating of an employee is done on some specific areas only. The rater has to mark the employee on the basis of certain scale which best describes the employees performance in the organization.GRS helps in analyzing employees on a quantitative scale and can help to compare and contrast the employee's behavior on this scale. There is greater standardization of items so comparability with other individuals in diverse job categories is possible. (Henderson, 1984, p. 175) BARS and BOS : Behaviorally Anchored Rating Scales (BARS) was introduced by Smith and Kendall. BARS development is a long and arduous process, involving many steps and many people. From this process, performance dimensions are more clearly defined and are based on more observable behaviors. Weise and Buckley,1998) This system received special attention in the field of performance appraisal. This method was useful in analyzing the performance on the basis of behavior. BARS, clearly highlights the 26 definite, observable and measurable behaviors done in the job. Behaviorally Anchored Rating Scale was greatly accepted because it made use of specific behaviors which is derived for each job and which would produce relatively reliable and error-free ratings. Behavior observation scales were then introduced which were intended to improve BARS. (Latham and Wexley, 1977)Motivation and Goal setting theory Performance appraisal process and its outcome can affect an employee's motivation. Employee's performance is seen as most directly as a consequence of the employee's ability and his motivation to perform. (Cummings and Swabs, 1973, pp. 46) In Organisational context, the performance is evaluated by examining the employee's abilities and capabi lities to achieve the desired objectives. Behaviour Maintenance Model The BMM presented by Cummings and Swabs attempted to show how people become motivated to perform effectively in the organization.This model shows the importance of outcomes in the motivational process. 27 Fig 4 Behavior Maintenance Model SATISFACTION GOAL ATTAINMENT MOTIVATION GOAL ASPIRATIONS In the framework, Goal aspirations lead to goal attainment and motivation. When goal aspirations leads to goal attainment which when achieved by the employee give a sense of job satisfaction him. When an employee is satisfied then he ultimately becomes motivated to work more efficiently in the organization. Evans(1986) also presented a model of motivation in which a goal ie a starting point is set up by the supervisor or the individual and it is then accepted by them.This goal largely influences the employee's persistence, attention effort and the approach or the strategy which he adopts to complete the goal. These factors a nd the constraints of performance determine the actual performance. When this task has been accomplished then this actual performance is compared with the original 28 Fig 5 Evans Model of Motivation Goal set and goal accepted Effort Constraints on performance Attention Persistence Strategy Ability Performance Comparison with goals FeedbackLocke( 1968) introduced the Goal setting theory whereby the employee gets motivated to work for his organization when he has a goal to achieve. Locke's Goal setting theory is summarized as follows- a. hard goals produce a higher level of performance than easy goals, b. some specific hard goals produce higher level of output; c. behavioral intentions regulate choice behavior. Feedback Feedback about the effectiveness of an individual's behavior has long been recognized as essential for learning and for motivation in performance-oriented organizations. Ilgen et al 1979) Feedback is considered as an important tool in performance appraisal 29 process. Feedback can be a useful tool for development, especially if it is specific and behaviorally oriented, as well as both problem-oriented and solution-oriented (Murphy and Cleveland, 1995) One of the basic purposes of formal appraisal process is the provision of clear and performance based feedback to employees. ( Carroll and Scheiner,1982) Some organizations use feedback as a development tool ,while in some organizations it is used for merit evaluation and compensation adjustment. McEvoy and Buller,1987; London ,Wohlers and Gallagher,1990) Feedback is very essential for the employees because it forms a baseline for the employees which help them to get a review of their past performance and chance to improve their skills for the future. (Ashford,1986) says that when feedback is considered as a valuable resource, then only the individuals feel motivated to seek it, which helps in reducing uncertainty and provides information relevant to self evaluations. There is also evidence that per formance feedback (if given appropriately) can lead to substantial improvements in future performance (Guzzo et al. 1985; Kopelman, 1986; Landy et al. , 1982) 360 degree performance appraisal: 360 Degree appraisal is used to describe a comprehensive nature of feedback which is received by an individual through everyone in the job. It is also referred to as ‘multisource feedback' or ‘multi-rater feedback'(Kettley,1997) adds that when an individual receives feedback from different sources of the organization, including peers, subordinate staff ,customers and themselves, i. e. When a feedback is received from ‘all-round' a job, then the process is known as 360 degree appraisal or feedback. 0 Nearly all the Fortune 300 companies are adopting 360 degree appraisal process. (London and Smither, 1995). The demand of 360 degree, in UK is increasing rapidly. (Handy et al, 1996, Geake et. al, 1998) There hasn’t been a lot of empirical evidence on the 360 degree apprais al system. (Fletcher and Baldry 1999 : pg63) say that-‘The actual amount of empirical evidence on the impact of 360 degree feedback is disappointingly small considering its extent of its use; widespread adoption seems to have reflected faith rather than proven validity'.Even though 360 degree, is not widespread enough it is been used for a lot of purposes. Research has shown that 360 degree is used for the following purposes(Fletcher and Bailey 2003) state that 360 degree feedback gives a great scope to commend and criticize on their sub ordinates performance. It also helps in building up the competency of the organizations framework and objective. It aids in increasing self awareness as self-assessment corresponds to subordinates perception. Summary of literature review. Performance appraisal was evolved in the third century in China in the Wei dynasty. Weise and Buckley, 1998) PA was seen in industry in the early 1800. In UK, Randell (1994) observed it in Robert Owens Ã¢â‚¬Ë œsilent monitors'. In US, an Army General introduced it in for evaluation of his army men. Earlier, PA was used only for administrative administration. The linkage of human resource management and performance appraisal is shown in the research. Huber (1980) rightly puts it that in the context of human resource purposes like retention, discharges, promotion and salary 31 management, formal appraisal serves three main purposes: 1. Evaluation, 2. development and 3.Employee protection Richard & Johnson (2004) also suggest in this context that organizations need to match up with the HR framework, objectives and practices up to holistically corporate strategy in order to achieve superior performance in the organization. The research explained why a formal performance appraisal was necessary in the organization. PA gives an employee a proper understanding of his duties and tasks towards his organization. It helps the organization to evaluate employees on a common ground and gives scope for retention, salary decisions, promotions, training and development programs etc. Jacobs, Kafry & Zedeck,1980 ) Studies by McGregor, Murphy et al, Bowles and Coates etc explained the various purposes of performance appraisal. About 61% of organization adopted Performance appraisal by 1950. Performance appraisal developed on the basis of objectives and goal function, thus MBO was evolved. MBO was helpful in setting up goals, which became the standard against which the employee's performance was compared. However, MBO was ineffective performance was measured in units. Therefore, behaviorally monitored performance review was introduced.Thus, Behaviorally Anchored Rating System (BARS) was introduced. BARS was designed by Smith and Kendall in 1963. BARS was found to give more accurate rating of performance. Behavior observation scales were then introduced which were intended to improve BARS. (Latham and Wexley, 1977) It was seen that performance appraisal can be used as a motivational too l. The Behavior Maintenance Model presented by Cummings and Swab in 1973, which explained how people become motivated to perform effectively in the organization. 32Similarly, Evans (1986) also presented a model which explained how individual and manager decide a goal and how this goal largely influences the individual's persistence, attention and the strategy he/she adopts to complete the goal. These factors determine his actual performance. When the individual's tasks are achieved then this actual performance is compared with the original goal. Locke(1968) introduced the Goal setting theory which emphasizes the importance of conscious goal levels as determinants of actual performance. Goal setting theory is summarized as follows- a. ard goals produce a higher level of performance than easy goals, b. some specific hard goals produce higher level of output; c. behavioral intentions regulate choice behavior. Feedback is another important element in the field of performance appraisal. the feedback which an individual receives is the report of the performance achieved by him/her. 360 degree feedback was introduced which refers to feedback received by an individual through everyone in the organization. 360 degree feedback includes feedback from peers ,sub-ordinates and customers.It is also known as ‘multi-source feedback'. 33 Chapter 3 RESEARCH METHOD This section would help understand and explain the reasons behind the choice of the methodology I have adapted for this research The choosing of research methodology depends on the nature of study topic (Creswell, 1994 ). Research objective The research objective was to understand the effectiveness of an appraisal process on the employees. The main purpose of this dissertation was, to study the employees ability to perform well in the industry and to check the impact of performance feedback over their job.Research methods. Quantitative Vs Qualitative. Denzin and Lincoln ( 2000 ) say that, Qualitative research ge nerates the socially constructed nature of reality, the intimate relationship between the researcher and what is studied, and the situational constraints that shape inquiry. They seek answers to questions that stress how social experience is created and given meaning. In constrant, quantitative studies emphasize the measurement and analysis of casual relationships between variables, and not processes. (pg 8) 4 Qualitative research thus has a humanistic element to it, whereas Quantitative research is grounded in mathematical and statistical knowledge. (Gephart,2004) Qualitative research is a representation of peoples mind and, it is interpretative and highly inductive. (Van Maanen, 1998) Another interesting difference between the two methods is, that quantitative techniques require the researcher to produce and verify hypothesis and reduce entities into simple variables for the benefit of understanding and generalizing.Also, it assumes that all occurrences are independent events that have no connection to the surrounding environment. On the other hand, qualitative research attempts to prove and understand phenomena rather than explaining the cause and effect relationship. Further, it believes that all occurrences are linked in some way to the surrounding environment. (Easterby smith et al,2002) Why qualitative? The goal of qualitative research is to understand the research topic more explicitly, from the perspective of the interviewee, and to understand how and why they have arrived at this perspective. Gephart, 2004) adds that, qualitative research methodology largely depends on recounting, understanding and explaining complex or interrelated phenomena, namely, the methodology is to understand multi-dimensional, dynamic picture of a subject of study. Qualitative research method was ideal for this project, because it gave a deeper understanding of the, given theories and helped in obtaining an edge in knowing the concepts well. As the data obtained through qual itative is the interviewees own responses, it helps in gaining a broader perspective about the topic.The exact responses pertaining to the literature review helps in linking the data well. 35 Research Tactics The tactics used for data collection for the research are classified as follows: Primary data: The research deals with the reaction of the employees after being appraised. Hence , it was necessary to conduct the research through semi structured interviews. Cooper and Schindler (2001) suggest in this context , that if the research is an exploratory study, use of interviews is more appropriated for the researcher to understand and get an in depth view of the topic being explored.Design of interview question . : The interview questions were designed, keeping in mind the research objective. Eight questions were designed in accordance with the literature review. The interview questions were categorized into four parts. The first part, reflected the employees basic experience with pe rformance appraisal. The second part, focused on the training aspect of the organization, which forms an important part of the appraisal process. The third part, focused on the direct implications of the appraisal process on the employee's life.The last part was designed to reflect answers relating to motivation and better performance in the organization. The questions designed were open-ended because ,it could give the employee the chance to elaborate his given situation. Easterby-Smith, et al. , (2002) state that, investigators conduct qualitative interview to understand ‘how individuals construct the reality of their situation formed from the complex personal framework †¦ in order to help explain and predict events in their world’. 36 When was the research done? The research was done in mid July to mid August.Data analysis: For the data collected in this research through interviews, a framework given by Bryman and Bell(2003) was used. The framework is known as T heoretical sampling which is explained as follows. Theoretical Sampling: It is a process of data collection for generating theory where the researcher collects and analyzes data and decides what data to collect next and where to find it, in order to develop his theory as it emerges (Bryman and Bell, 2003. Thus, data was collected from various sources until there was a theoretical saturation.The same content leads to descriptive content analysis which is discussed in detail in the next section (Bryman and Bell, 2003, p. 330). Figure – Theoretical sampling 37 Secondary research This has been provided through the available research and various reports. This was done by accessing the library and books, journals, market reports and internet extensively. Limitations: Limitations of qualitative research. : The big problem with qualitative data is how to condense highly complex and context-bound information into a format which tells a story in a way that is fully convinced to the ead er. â€Å"(Cassell and Symon, 2004) Qualitative research methods are descriptive. Also ,they are subjective in nature which always leads to a kind of research bias. Sometimes, the interviewees were not willing to open up much, towards 38 some question. This would either lead to incomplete information or incorrect information. Another important limitation was time constraint. Due to time constraint, the researcher was not able to take many interviews. Summary of Research methods: The research method was done keeping the research objective in mind.The research method adopted for this research was Qualitative research method. Qualitative research method helps to understand multi-dimensional, dynamic picture of a subject of study. The research tactics adopted for the research were done in the form of primary data source and secondary data source. Primary data was obtained in the form of structured interviews. The questions designed for these interviews were open ended. The secondary da ta was obtained in the form of reports, books, journals etc. A theoretical sampling method of Bryman and Bell (2003) was adopted for data analysis method. 9 CHAPTER 4 ANALYSIS OF DATA: This section is divided into two partsPart A describes the parameters on which the performance appraisal process is designed in the organisation. The parameters helped the researcher to understand the effectiveness of performance appraisal in the organization. Part B describes the analysis of data. The analysis of data explained in detail the respondent's views about the appraisal system PART A : COMPANY INFORMATION; Following is brief description of the various parameters adopted by the company in order to conduct the formal appraisal system.The appraisal system is conducted twice every year. First, in June and the other in January . The performance appraisal system in the company is conducted on the basis of 5 parameters. 1. Business Acumen 2. People Leadership 3. Effective Communication 4. Executio n 5. Customer Centricity Business Acumen: 1. Business Acumen refers to the ability of the employees to conduct quick and accurate decisions pertaining to the business strategies. Performance appraisal considers Business Acumen as an important tool in analysing the individual's business related activities in the organisation. 40 . People Leadership : People leadership refers to the employees ability to show leadership skills. It also shows whether the employee is able to motivate employees, helps in building up morale of his subordinates. He acts with empathy and ensures better coordination in his team. The company considers this as an important parameter because it helps in knowing the leadership skill of the employee. 3. Effective Communication: Communication is an integral part of every organization. The employee should be having good communication skills. He/she should be able to communicate at all levels. . Execution: Execution is the process where the employee should be able to execute the given task in a specific period of time. Under this parameter, the employee's efficiency and potentiality is considered. His/her prompt reaction to any situation is considered. This parameter also tests an employee's capability to handle work load under pressure. 5. Customer centricity : ‘Customer is the King' . This parameter focuses on the employees way of handling customers. It checks the employee's promptness in handling the customer and his/her ability to make the customer satisfied.The above parameters are calculated with the help of the following 3 point rating chart. 41 3= Outstanding The employee understands his job very well. Performance is exceptionally good and much higher than the standard set up. Clearly understands the key objectives and goals of the organization and achieves them in time. Efficient and prompt. 2= Meet expectations Performance meets the required expectation. May exceed expectations in areas like communication and customer centricity . Good understanding of objectives and goals. = Needs Improvement Performance doesn’t meet the expectation and lacks consistency. Lack of understanding of key objectives and goals. Requires additional training and development sessions. PART B : .ANALYSIS OF DATA The analysis of data was done on the basis of the responses obtained through the interview process. The analysis is done by the respondent's views over the performance appraisal process present in the company. 42 A total of 6 respondents agreed to participate in the research. The interview was designed, taking into consideration the research questions.The interview considered four main aspects, which are as followsA. Performance appraisal process B. Training and development C. Feedback D. Impact of performance appraisal A. Performance appraisal process. The questions designed under this section were to understand the performance appraisal process in the organisation. This would give the researcher, a clearer picture o f the organisational PA process by presenting exact views of the interviewees. Questions under this section: Q 1) Do think it is necessary to have a formal appraisal process in the organisation?Q 2. ) What are your views about the appraisal system in your organization? Responses : Q. 1 ) Do think it is necessary to have a formal appraisal process in the organisation? Yes. We have a formal appraisal process twice a year in June and January where my manager shares the feedback on the goals defined to achieve by the end of given period. ( Respondent no. 1) 43 Yes, it is necessary to conduct a formal appraisal process. It gives a clearer understanding of our objectives and functions and makes us more competent to achieve our goals. ( Respondent No. 2) Yes.I have gone through a formal appraisal process about 10 times since 2002. I feel it an essential part of the organization. We, the employees , know our duties well in the organization ,we know what is expected from us and our target go als are laid down for the coming period. ( Respondent no. 4) Q 2. ) What are your views about the appraisal system in your organization? The appraisal system is very comprehensive as it focuses our accomplishment summary, strengths/growths, improvement and development needs and plans, Training needs and other certifications and potentially career interests.It also rates employees based on people leadership, effective communication and customer centricity. ( Respondent No. 1) I think it’s important to have formal appraisal system. It not only helps you achieve your long-term goals but also helps you understand where you stand in comparison to your colleagues. There will be lot of other hard working people in organization, who will be working towards the same goal or same position that you want, so this process gives you a more clear path, vision as to what you can do differently that will set you apart from other employees.It generates a healthy competition. (Respondent no. 2) 44 The Appraisal System in my organization is well-organized, both from the Performance Capturing viewpoint as well as from the Review and setting up the goals and expectations of an individual. ( Respondent no. 5) It was seen from the above responses that, the employee were generally happy about the current PA process, because it was designed to help them grow and develop in the organisation. It provided them with the necessary guidance to improve their performance and other key skills in the job.The employees stated that it lead to healthy competition amongst the employees. B. Training and Development The second part of the interview focused on the training skills obtained through the appraisal process. The questions were designed to understand if the organization really requires training and development program and whether it is useful for them to grow in the organisation. Questions asked- Q. 1) Do you think a formal appraisal process should include training and development prog rams? Why? 45 Q. 2. ) How did the training and development program of the appraisal process help you?Were you satisfied with it? Q. 1)Do you think a formal appraisal process should include training and development programs? Why? Responses to Q1. Yes, an appraisal process should possess training and development processes, because it helps an individual to work on his/her improvement areas which could be addressed by training in appropriate soft or technical skill-set. For example If an individual lacks delegation of work to its peer sub ordinates, then he can be recommended for ‘Delegation of Authority' training which would enable him to understand the concept and delegate responsibility. Respondent 1) Yes, it’s important to have training and development programs part of appraisal process. It’s important for every employee to understand how the appraisal process works and how are they evaluated. They should be given training so that process is very transparent for them and they understand everything. Also once the appraisal is done and employees have given their improvement areas, it’s important to conduct different development programs to help them work on their improvement areas. (Respondent 4) 46 Yes. The formal appraisal process should include the training and development programs.The main objective of an appraisal process is to showcase where an individual stands from the performance and organization expectations point of view, and what are his development needs and GnOs (Goals and Objectives) for the upcoming year. The Trainings and Development programs help and individual to enhance his abilities and acquire the required skills to meet the expectations/goals set for him by the organization/management and also help his to grow in the organization. (Respondent 3) Q. 2. ) How did the training and development program of the appraisal process help you? Were you satisfied with it?Answers to Q2. The training and development needs were fulfilled in some areas unlikely in certain areas like leadership it was not fulfilled based on project, location and time priorities. It’s a very costlier affair to organize training onsite and hence had to do a lot of self learning and receiving coaching feedback from assigned coaches. (Respondent 2) Yes, I was satisfied with the training and development programs as it helped me to work on my improvement areas. After going through different training and development programs, my Leadership and People management skills improved a lot.This in turn helped me to manage my team more efficiently, by understanding there needs, by motivating them and helping them to achieve their individual goals. This helped us to meet our targets set by the organization and also gave production benefit to the Customer. (Respondent 5) 47 I have attended various programs/training in my career till date. They have always helped me to enhance my abilities and skills . For example, the Six Sigma Green Belt Training and the LEAN Quality Trainings have given me a vision to think about Quality in every task we do and thus improvise the performance.The Coaching Manager and Leadership trainings have helped me to emerge as a better colleague, Team Lead and a mentors to my peers and subordinates. I have been pretty satisfied with these training and would look forward to the opportunities to attend more of them. (Respondent 3) The overall response in this context, was pretty positive. The employees thought that training and development formed an important element in the process. However, one respondent highlighted a different point where training and development was not provided.The training guidelines helped them to understand their organizational objectives and functions well. All the respondents were satisfied with the training and development program because it helped them to enhance their skills in the job. C. Feedback: The questions designed under this section helped to obtain the immediate reaction of the appraisal system. This was required in understanding how the employees feedback is in the organization. These are the following questions: 48 Q 1. What is your immediate response after being appraised? Q. 2.Was your performance discussed in detail? Were any improvements suggested? Q 1. What is your immediate response after being appraised? The responses obtained were as followed: Its always to good to know your strengths and your improvement areas. It provides platform to work on areas for the coming period. (Respondent 2) After appraisal I know what are my strong areas, which sets me apart from others and I have to keep working on that. It also helped me to identify my improvement areas, which I have to focus so that I can grow in the Organization and achieve my goal (respondent 3)This depends upon how the discussion goes along with my managers and appraisers. If the Managers convince me about