SYNOPSIS

ON

IMPACT OF PERFORMANCE APPRAISAL

SYSTEM ON PRODUCTIVITY OF
EMPLOYEE
SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT
OF

Master of Business Administration (2014-16)

SUBMITTED TO:
MRS. TWEENA PANDEY
(ASST PROFESSOR)

SUBMITTED BY:
PRERNA SINGH

Arcadia Grant, P.O. Chandanwari, Chakrata Road, Prem Nagar, Dehradun,

Uttarakhand 248007

SYNOPSIS

1. CONCEPT OF PERFORMANCE APPRISAL

PERFORMANCE APPRAISAL
The concept of Performance Appraisal has been one of the most important and positive
developments in the sphere of Human Resource Management in recent years. Performance
Management is, of course, about performance. It is important to clarify what performance means,
because if performance cannot be defined, performance appraisal cant be done properly and
eventually performance management system cannot be successfully implemented. Performance
appraisal which is key to Performance Management System may be defined as a structured
formal interaction between a subordinate and supervisor, that usually takes the form of a periodic
interview (annual and semi-annual), in which the work performance of the subordinate is
examined and discussed, with a view to identifying weaknesses and strengths as well as
opportunities for improvement and skills development.
Organizations are now looking forward to obtain competitive edge through highly developed
employee skills by adopting an efficient Performance Management system. The efficiency of an
organization depends directly on the capability and talent of its personnel, and how motivated
and satisfied they are. This study throws light on the effectiveness of implementing Performance
Management System in the organization and how Performance appraisal as a key to Performance
Management System helps to increase productivity of employees, which makes the organization
efficiently.
APPRAISAL- the word means to fix a price or value for something. So it is a process in which
one values the employees contribution and worth to the organization

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.
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.
2

By focusing the attention on performance, performance appraisal goes to the heart of

personnel management and reflects the managements interest in the progress of the employees.
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. Therefore, performance management and performance appraisal is necessary to
understand each employees abilities, competencies and relative merit and worth for the
organization. Performance appraisal rates the employees in terms of 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. Here at naukrihub, we
attempt to provide an insight into the concept of performance appraisal, the methods and
approaches of performance appraisal, sample performance appraisal forms and the appraisal
softwares available etc. An attempt has been made to study the current global trends in
performance appraisal.
EMPLOYEE PERFORMANCE
If employee performance is found to be less than the expected level of performance then
this must be investigated and, if appropriate, a formal appraisal should be carried out including
360-degree feedback. The root causes of performance must be identified as these will determine
future actions. Root causes for less than expected performance may include:

Personal issues that are impacting performance such as bereavement, close family
member sickness, financial or relationship worries

Workplace issues that are impacting performance such as helping other colleagues to
meet their objectives before own objectives, issues with the work environment such as an
excessively noisy office or frequent interruptions

Overloaded with too many objectives or conflicting priorities, especially in a matrix

management environment

Team issues such as working relationship with other team members, dependencies on
others to complete their objectives first, access to needed tools, experts or third-party
suppliers

Employee development issues such as lack of training, experience or expertise to

complete the required objective, or lack of people skills to work and deal effectively with
others in the situations the employee is in

KEY FACTORS AFFECTING PERFORMANCE

Ability: Ability is one of the important factors affecting performance management system.
Performance Management of an employee depends upon the ability of an employee. The more
able the employee is, the more he/she is important to the organization. Character traits, skills and
knowledge, which are used in the performance, are termed as the ability of an employee. It is
always present and will not vary widely over short periods of time. Apart from ability many
people who are not motivated keep their performance to an acceptable level by expending only
20-30% of their ability. Managers who know how to motivate their employees can achieve 8090% ability levels and consequently higher levels of performance. The amount of effort i.e.
manual or mental energy that a person is prepared to expend on a job to reach a certain level of
performance varies according to incentive and motivation to the employee. (Likert, 1976)
Motivation: Motivation factors are present in the job itself. They include such things as
opportunity for recognition, achievement, and growth. Hence, a leader that recognizes employee
efforts and helps employees achieve and grow can help improve satisfaction, as long as pay is
perceived as fair.
Thus, regularly spending time with employees focusing on development and achievement adds
value.
4

Maslow and basic needs (1940s & 50s) - broader view extending beyond the work place.
Proposed a hierarchy of needs - the lowest level needs are dominant till satisfied and
performance is affected if the needs according to these levels are not taken care of which can
lead to the dissatisfaction of an employee.

Physiological (food, shelter)

Safety (insurance, security, protection from harm)

Love (peer groups, recreation, affection, acceptance)

Self- actualization (creativity, growth, achieving ones potential)

Esteem (achievement, status, self respect, recognition).

Also Herzbergs motivation theory focused on two factors, Motivation and Hygiene. Hygiene
factors such as pay if perceived as unacceptable lead to job dissatisfaction, if perceived as
acceptable lead only to a state of no dissatisfaction. Hence, a large raise may result in a
temporary euphoria, but would not lead to job satisfaction.
Career development: This indicates some key learnings relevant for our study and has hence
been reproduced. While managing careers we are essentially managing a process of enhancing
performance of individuals and groups to help them contribute concretely towards enhancing
shareholder value. Careers are built in corporations where basics of people management are
adhered to with sincerity and commitment are made only when the intellect merges conclusively
with the commercial and cultural realities of an organization and this cannot happen unless

intellect is given its rightful place through effective performance appraisal. Ever since companies
decided that maybe they should measure how their workers are doing and give the better
performers a raise, employers have married employee performance appraisals with annual salary
reviews. Within a short period of time, the argument began over whether the two should be
linked and, if so, to what extent. One facet of that ongoing debate is whether the size of pay
increase differences makes a difference and whether increasing pay for good performance is a
motivator for even better work the next year
Feedback: Performance Management System cannot be effective without feedback. As a basic
human tendency people tend to make judgments about those working with them. In the absence
of a meticulously structured objective system of appraisal, people will tend to judge the work
performance of others, including subordinates informally and arbitrarily based on their likes,
dislikes, biases and prejudices. The multi rater feedback process is called 360 Degree Feedback.
The powerful process is perhaps one of the most effective and widely used initiatives to develop
leadership capability, identify potential, and develop strong bonds between teams and for
enhancing key competencies in organizations. The focus of a 360-Degree implementation today,
continues to be on development. Rarely do companies use it for performance appraisals, rewards
and recognition, collecting data on employees or succession planning.
Compensation: Compensation reviews are another matter. In a compensation review, the goal is
to establish the employee's value to the corporation, based on their duties and responsibilities,
potential, and their own financial goals. If employees have a great performance review, they're
going to expect a great compensation package, and that might be difficult. They may view
themselves and their worth higher than the company does, hence dissatisfaction. Any number of
factors can come into play in compensation review, including the company's economic health
and how much it can prudently afford to pay, as well as the employee's skill level,
responsibilities, and longevity not only with the company, but in their current position. Some
companies have a salary range for various positions that can take experience, seniority, and skill
levels into account. But increases are frequently based more on the economy and how the
company's doing than on actual performance. Most leaders try to give larger increases to higher
performing employees, and smaller increases lower performers..

IN ESSENCE, Performance Management System is the most important tool for every
organization and there are several benefits that a PMS system can offer in making an
organization more efficient and effective. The biggest success factor in all our initiatives has
been the Managements commitment to fostering a culture of transparency and collaboration,
without which no system can be effective, however good they are. (Robbins, Low, Morel ; 1986.

REVIEW OF LITERATURE
Carroll and Schneier (1982):
Effectiveness in undertaking performance appraisal depends on the skills of the raters. Effective
performance evaluation requires many skills in the areas of communication, counseling, problem
solving and planning. In order for managers to acquire these skills, training is important. In
most instances, raters are given an orientation on the system that includes a brief review of the
design steps, procedures, review procedures, deadlines for completion of forms and thorough
instructions in form completion. However, training for users is far more complex. Carroll and
Schneier (1982) draws on the work of Baird, Beatty and Schneier (1982) in emphasizing that the
training helps raters to develop skills in areas such as communication and coaching, so that the
performance appraisal can be used effectively. Other important areas of focus that would help to
enhance appraisals are training on techniques of appraisal and ways to evaluate employees and it
is essential that raters acquire these skills.
Training can create a better understanding of what the organization hopes to accomplish with the
performance appraisal system. It can also create a better understanding of the system, forms and
terminology to be employed. By training raters, it may convince the participants

that the

organization is serious about obtaining useful ratings and also it may also contribute to
consistency among raters. In that case all raters would be using the same standards to measure
performance and they would be able to use appropriate rating strategies and behaviours, which
would result in more accuracy (Carroll and Schneier, 1982).
Roberts (1996):
As long as there is consistency among raters, the ratee would show higher level of acceptance of
the system. In many instances raters have low self confidence about their rating skills; therefore
by engaging in training there self confidence can be built leading to them conducting better
performance evaluations.

Although managerial awareness of the importance of training to

organizational success seems to be increasing, many managers still fail to appreciate the value of
performance evaluation in the training process. Roberts (1996), draws on the work of Woehr and
Huffcutt (1994) stating that very often organizations do not invest the required time and energy
to training. Few organizations incorporate training that will reduce rater errors in their

performance appraisal system. It is assumed that the careful construction of the appraisal
instrument will obviate the need for training raters. However, it has been proven time and time
again, no matter how hard you try to find an appropriate appraisal instrument, training will still
be necessary because without training the same problems will surface regardless of the
instrument used.
Driver (1942):
According to Driver (1942) training of those who are to rate employees is one of the fundamental
steps in the rating process. Those required to rate employees are skeptical of the procedure and
this may be demonstrated by lack of interest, antagonism, leniency and lack of confidence in
ratings. There is ample evidence to claim that supervisors lack confidence in ratings (Carroll
and Schneier, 1982) cause them to be overtly lenient in performance ratings as they are not
armed to deal with ratees defensive reactions (Bernardin and Buckle, 1981; cited in Neck et al,
1995).
Sulsky and Day, 1992:
In order to build their confidence they must get a clear understanding on the purpose of the
appraisal system, how to use and the necessary techniques required to get the best results. Even
though there is so much value placed on performance appraisal, it remains one of the most
neglected, least-like and least-rewarded activities a manager is asked to perform. Rater-training
research has focused on increasing observational accuracy (e.g., Thornton and Zorich, 1980),
reducing rating errors (e.g., Latham, Wexley, and Pursell, 1975), increasing rating accuracy (e.g.,
Woehr and Huffcutt, 1994), and providing raters with a common frame of reference (e.g., Sulsky
and Day, 1992).
These programs are designed to educate raters about the key cognitive and observational
demands of the rating process. Effective rater training would involve a program
where raters would acquire the necessary skills to both observe and evaluate subordi
nates performance objectively and accurately and provide feedback and cope with emotional
reactions. Therefore the training would not only eliminate the issue of rating error, but

it will increase the probability of getting more accurate results from appraisals. Hence the rater
training program increases validity, fairness and accuracy of ratings.

2. RATIONALE BEHIND THE PROJECT WORK

The studies which were done by students earlier covered their aspects and their objectives
but they were not able to touch some important aspects which are essential for study
thereby keeping these aspects in mind, for the benefit of the government and the society
there is need for this research.

3. OBJECTIVE OF THE PROJECT WORK

The main objective of the study is To examine Impact of Performance Appraisal on
employee productivity.
To examine the impact of performance appraisal on workman and management.
To examine whether present appraisal system is favourable and beneficial to the
employees.
To examine the methods followed by the organization in evaluating the performance of
their employees.

To examine whether this system brings uniformity in the increasing productivity and
welfare of the organization.

10

4. HYPOTHESIS OF THE PROJECT WORK

A null and alternative hypothesis will be stated to test the significance and validity of the
research.
H0: There is no impact of performance appraisal on employee productivity
H1: There is impact of performance appraisal on employee productivity

11

5. RESEARCH METHODOLOGY OF THE PROJECT WORK

1. RESEARCH DESIGN:
A research design is the specification of methods and procedures for acquiring the needed
information. It is overall operational pattern or framework of the project that stipulates what
information is to be collected from which source by what procedure.
There are three types of objectives in a marketing research project:

Exploratory Research.
Descriptive Research.
Casual Research.

a. Exploratory Research:The objective of exploratory research is to gather preliminary information that will help
define problems and suggest hypothesis.
b. Descriptive Research:The objective of descriptive research is to describe things, such as the market potential for a
product or the demographics and attitudes of consumers who buy the product.
c. Casual Research:The objective of casual research is to test hypothesis about casual and effect relationships.
Based on the above definitions it can be established that this study Descriptive Research would
be used for the study.
Descriptive or Survey Research Design due to its enormous advantages will be used in the
project report.

12

2. SAMPLING DESIGN
In this research, information will be collected by selected respondents. A survey will be collected
in Dehradun. An integral component of a research design is the sampling plan. Especially it
addresses three questions: Whom to survey (sample Unit), how many to survey (Sample Size)
and how to select them (sampling Procedure). Making the census study of the entire universe
will be impossible on the account of limitations of time and money. Hence sampling becomes
inevitable. A sample is only his portion of population. Properly done, sampling produces
representative data of the entire population.
i.
ii.

Through questionnaire
Through personal interview

SAMPLING TOOL:Questionnaire will be used as a main tool for the collection of data, mainly because it gives the
chance for timely feedback from respondents. Moreover respondents feel free to disclose all
necessary detail while filling up a questionnaire. Respondents seeking any clarification can
easily be sorted out through tool.

3. DATA COLLECTION:
Data collection is the process of gathering and measuring information on variables of interest, in
an established systematic fashion that enables one to answer stated research questions, test
hypotheses, and evaluate outcomes. The data collection component of research is common to all
fields of study including physical and social sciences, humanities, business, etc. While methods
vary by discipline, the emphasis on ensuring accurate and honest collection remains the same.
The goal for all data collection is to capture quality evidence that then translates to rich data
analysis and allows the building of a convincing and credible answer to questions that have been
posed.
a. Method:
In this study data collection would be collected through:
i. Survey
ii. Interview

13

b. Sources of data collection

The data for the research will be collected through Primary as well as secondary sources.

I. PRIMARY SOURCES
In this research Primary data will be collected through the questionnaire filled by various
respondents. Primary Data is the one which is of employee`s importance and backbone of any
study. It will be obtained from respondents with the help of widely used and well known method
of survey. In this study primary data will be collected through questionnaire. In this structured
questionnaire was will be. Questionnaire will be a list of questions given to number of persons. It
secures standardized results that can be tabulated and treated statistically. Structured
questionnaire are those questionnaire in which there are definite, concrete and predetermined
questions. In this questions are presented with exactly the same wordings and the same form to
all the respondents.
II.

SECONDARY SOURCES

In this research Secondary data is the one which is collected through the magazines, newspapers,
shopkeepers catalogue and the advertisement. This types of data is known as published data.
Data which is not originally collected is called secondary data. The first step in any research is
the collection of secondary data. In this project, data will be collected from company records,
internet and journals.

Sampling Plan:
A sampling plan is a detailed outline of which measurements will be taken at what times, on
which material, in what manner, and by whom. Sampling plans should be designed in such a way
that the resulting data will contain a representative sample of the parameters of interest and allow
for all questions, as stated in the goals, to be answered.

14

Sampling Unit

Employees

Sampling Size

100

Sampling Area

Dehradun

TOOLS OF HYPOTHESIS

After giving interpretation of the data, hypothesis will be tested through the use of various
statistical tools, appropriate diagrams, charts, table and graphs. Standard statistical package for
social science will be use for analyzing the data. SPSS is useful, versatile software that provides
descriptive analysis for each variable on the scale and inferential statistics for inter-item
correlations and co variances, reliability estimates among others.

6. NEED OF THE PROJECT WORK

The Project work is needed as

15

If appraisal is to be effective, staff must see the process attempting to meet their needs, otherwise
the system will not work. This means Heads of Department do need to form an overview of the
issues raised by their staff and if appropriate feed these into the planning process. Appraisal
should result in:
Benefits for the individual:
Gaining a better understanding of their role
Understanding more clearly how and where they fit in within the wider picture
A better understanding of how performance is assessed and monitored
Getting an insight into how their performance is perceived
Improving understanding of their strengths and weaknesses and developmental needs
Identifying ways in which they can improve performance
Providing an opportunity to discuss and clarify developmental and training needs
Understanding and agreeing their objectives for the next year.
An opportunity to discuss career direction and prospects.
Benefits to the line manager/supervisor/team leader:
Opportunities to hear and exchange views and opinions away from the normal pressure of
work
An opportunity to identify any potential difficulties or weaknesses
An improved understanding of the resources available
An opportunity to plan for and set objectives for the next period
An opportunity to think about and clarify their own role
An opportunity to plan for achieving improved performance
An opportunity to plan for further delegation and coaching
An opportunity to motivate members of the team.
Benefits to the organisation:
A structured means of identifying and assessing potential
Up-to-date information regarding the expectations and aspirations of employees
Information on which to base decisions about promotions and motivation

16

 An opportunity to review succession planning

Information about training needs which can act as a basis for developing training plans
Updating of employee records (achievements, new competencies etc)
Career counselling
Communication of information
Disadvantages of performance appraisal
Performance appraisals are usually part of a yearly review process in which a supervisor reviews
the job performance, goal completion and projects accomplished by an employee. While the
structure of performance appraisals offers a way for giving constructive feedback to employees,
which in turn can be used as a reward or a motivational tool, there are downsides to traditional
performance appraisals.
One Sided Input
Traditional performance appraisals involve a supervisor and supervisee, both of which have
limited perspectives. As with any situation, limited perspectives lead to a limited amount of
information by which to judge performance.
If a manager is busy supervising several people, as well as tasks and other projects, then there
will be limited time to take in the full scope and practice of the performance of the supervisee.
As an alternative, many industries today are utilizing 360-degree feedback, which takes into
account the relationships that an employee has with peers, customers, clients, supervisors and
those whom the supervisee is responsible for overseeing.

Forms Only Give Quantitative or Qualitative Data

Many times, feedback forms that are utilized in performance appraisals only use quantitative or
qualitative measures, but not both. Quantitative appraisals mainly measure numbers, such as how

17

many projects, how many were on time. While this is important, there are other things to take
into consideration.
Qualitative benchmarks involve the completion of personal or professional goals and the stories
of how the supervisee utilized opportunities to lead by example and proactively implement the
values and mission of the organization. Listening to the stories of what has happened over the
past year and looking at numbers and outcomes will result in a clearer picture of what the value
of the employee is to the organization.
Once-a-Year Raises
Performance appraisals are usually done once a year and are connected to an increase in salary.
This is a disadvantage in that supervisees generally live in fear and experience anxiety when
their review time comes up. Having more consistent interaction when it comes to feedback
between management and supervisees can help reduce the fear, anxiety and wondering about a
raise.
Furthermore, the employee naturally will want to bargain for more money focusing on their
strengths and the management will want to emphasize the constructive areas of performance
evaluation in order to keep from giving raises, since money is a limited resource in any
organization. This adds to the stress of the review

7. SCOPE AND PLAN OF THIS PROJECT WORK

18

Training and Development is the most significant and indispensible tool for the management as
its provide useful and improve organizational climate. The project work has been divided into six
chapters, which are as follows:-

CHAPTER-1: Concept of Performance Appraisal

CHAPTER-2: Problems of Performance Appraisal
CHAPTER-3: Steps for improvements of Performance Appraisal
CHAPTER-4: Impact of Performance Appraisal of Employee Productivity
CHAPTER-5: Analysis and Interpretation of Data.
CHAPTER-6: Findings and Suggestions of the study.

19

BIBLIOGRAPHY
BOOKS:

Kothari C.R. (1990) Research Methodology: Method and Techniques; Wishva

Prakashan, New Delhi.

Bodie.Z, Kane.A & Mracus.J : Essentials of Investments.

Prof. E Gordon & Dr. K. Natrajan Banking Theory Law and Practice.

Indian financial System & Commercial Banking by Khan Masood Ahmed

Banking in India by P.N.Varshney

Newspapers and Magazines:

Newspapers
1. Economic Times
2. Times of India
3. Business Standard
4. Financial Express
5. Indian Express
Journals & Magazines
1. The Human Factor - Journal
2. Business Today - Magazine
3. Indian Management - Journal
4. Human Resource Planning - Journal
5. Training & Development Journal - Journal
6. Indian Journal of Industrial Relations - Journal
7. Journal of Scientific and Industrial Research - Journal
WEBSITES:

www.rbi.org.in

www.iba.org.in

www.knowledgestom.com

www.igniter.com

20