CHAPTER - 1

1
 COMPANY'S PROFILE

The Housing Development Finance Corporation Limited (HDFC) was

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

MISSION

HDFC Bank‟s mission is to be “a World Class Indian Bank” , benchmarking

ourselves against international and best practices in terms of product
offerings, technology, service levels, risk management and audit &
compliance. The objective is to build sound customer franchises across
distinct businesses so as to be a preferred provider of banking services for
target retail and wholesale customer segments, and to achieve a healthy
growth in profitability, consistent with the Bank‟s risk appetite. We are
committed to do this while ensuring the highest levels of ethical standards,
professional integrity, corporate governance and regulatory

2
BUSINESS FOCUS

HDFC Bank‟s mission is to be a World Class Indian Bank. The objective is

to build sound customer franchises across distinct businesses so as to be the
preferred provider of banking services for target retail and wholesale
customer segments, and to achieve healthy growth in profitability, consistent
with the bank‟s risk appetite. The bank is committed to maintain the highest
level of ethical standards, professional integrity, corporate governance and
regulatory compliance. HDFC Bank‟s business philosophy is based on five
core values: Operational Excellence, Customer Focus, Product Leadership,
People and Sustainability.

CAPITAL STRUCTURE
As on 31st March, 2015 the authorized share capital of the Bank is Rs. 550
crore. The paid-up share capital of the Bank as on the said date is
Rs501,29,90,634/- ( 2506495317 ) equity shares of Rs. 2/- each). The HDFC
Group holds 21.67 % of the Bank's equity and about 18.87 % of the equity is
held by the ADS / GDR Depositories (in respect of the bank's American
Depository Shares (ADS) and Global Depository Receipts (GDR) Issues).
32.57 % of the equity is held by Foreign Institutional Investors (FIIs) and the
Bank has 4,41,457 shareholders. The shares are listed on the Bombay Stock
Exchange Limited and The National Stock Exchange of India Limited. The
Bank's American Depository Shares (ADS) are listed on the New York Stock
Exchange (NYSE) under the symbol 'HDB' and the Bank's Global
Depository Receipts (GDRs) are listed on Luxembourg Stock Exchange
under ISIN No US40415F2002.

3
DISTRIBUTION NETWORK

HDFC Bank is headquartered in Mumbai. As of March 31, 2015, the Bank‟s

distribution network was at 4,014 branches in 2,464 cities. All branches are
linked on an online real-time basis. Customers across India are also serviced
through multiple delivery channels such as Phone Banking, Net Banking,
Mobile Banking and SMS based banking. The Bank‟s expansion plans take
into account the need to have a presence in all major industrial and
commercial centers, where its corporate customers are located, as well as the
need to build a strong retail customer base for both deposits and loan
products. Being a clearing / settlement bank to various leading stock
exchanges, the Bank has branches in centers where the NSE / BSE have a
strong and active member base .The Bank also has a network of 11,766
ATMs across India. HDFC Bank‟s ATM network can be accessed by all
domestic and international Visa / MasterCard, Visa Electron / Maestro, Plus /
Cirrus and American Express Credit / Charge cardholders.

MANAGEMENT

Mrs. Shyamala Gopinath holds a Master‟s Degree in Commerce and is a

CAIIB. Mrs. Gopinath has 39 years of experience in financial sector policy
formulation in different capacities at RBI. As Deputy Governor of RBI for
seven years and member of the Board. Mrs. Gopinath had been guiding and
influencing the national policies in the diverse areas of financial sector
regulation and supervision, development and regulation of financial markets,
capital account management, management of government borrowings, forex
reserves management and payment and settlement systems. The Managing
Director, Mr. Aditya Puri, has been a professional banker for over 25 years

4
and before joining HDFC Bank in 1994 was heading Citibank's operations in
Malaysia.

The Bank's Board of Directors is composed of eminent individuals with a

wealth of experience in public policy, administration, industry and
commercial banking. Senior executives representing HDFC are also on the
Board.

Senior banking professionals with substantial experience in India and abroad

head various businesses and functions and report to the Managing Director.
Given the professional expertise of the management team and the overall
focus on recruiting and retaining the best talent in the industry, the bank
believes that its people are a significant competitive strength.

TECHNOLOGY

HDFC Bank operates in a highly automated environment in terms of

information technology and communication systems. All the bank‟s branches
have online connectivity, which enables the bank to offer speedy funds
transfer facilities to its customers. Multi-branch access is also provided to
retail customers through the branch network and Automated Teller Machines
(ATMs).
The Bank has made substantial efforts and investments in acquiring the best
technology available internationally, to build the infrastructure for a world
class bank. In terms of core banking software, the Corporate Banking
business is supported by Flexcube, while the Retail Banking business by
Finware, both from i-flex Solutions Ltd. The systems are open, scalable and
web-enabled.

5
The Bank has prioritized its engagement in technology and the internet as
one of its key goals and has already made significant progress in web-
enabling its core businesses. In each of its businesses, the Bank has
succeeded in leveraging its market position, expertise and technology to
create a competitive advantage and build market share.

6
 BUSINESS PROFILE

HDFC Bank caters to a wide range of banking services covering commercial

and investment banking on the wholesale side and transactional / branch
banking on the retail side. The bank has three key business segments:

 Wholesale Banking

The Bank‟s target market is primarily large, blue-chip manufacturing

companies in the Indian corporate sector and to a lesser extent, small & mid-
sized corporates and agri-based businesses. For these customers, the Bank
provides a wide range of commercial and transactional banking services,
including working capital finance, trade services, transactional services, cash
management, etc. The bank is also a leading provider of structured solutions,
which combine cash management services with vendor and distributor
finance for facilitating superior supply chain management for its corporate
customers. Based on its superior product delivery / service levels and strong
customer orientation, the Bank has made significant inroads into the banking
consortia of a number of leading Indian corporates including multinationals,
companies from the domestic business houses and prime public sector
companies. It is recognized as a leading provider of cash management and
transactional banking solutions to corporate customers, mutual funds, stock
exchange members and banks.

 Treasury

Within this business, the bank has three main product areas - Foreign
Exchange and Derivatives, Local Currency Money Market & Debt Securities,

7
 and Equities. With the liberalization of the financial markets in India,
corporates need more sophisticated risk management information, advice and
product structures. These and fine pricing on various treasury products are
provided through the bank‟s Treasury team. To comply with statutory reserve
requirements, the bank is required to hold 25% of its deposits in government
securities. The Treasury business is responsible for managing the returns and
market risk on this investment portfolio.

 Retail Banking

The objective of the Retail Bank is to provide its target market customers a
full range of financial products and banking services, giving the customer a
one-stop window for all his/her banking requirements. The products are
backed by world-class service and delivered to customers through the
growing branch network, as well as through alternative delivery channels like
ATMs, Phone Banking, Net Banking and Mobile Banking.
The HDFC Bank Preferred program for high net worth individuals, the
HDFC Bank Plus and the Investment Advisory Services programs have been
designed keeping in mind needs of customers who seek distinct financial
solutions, information and advice on various investment avenues. The Bank
also has a wide array of retail loan products including Auto Loans, Loans
against marketable securities, Personal Loans and Loans for Two-wheelers. It
is also a leading provider of Depository Participant (DP) services for retail
customers, providing customers the facility to hold their investments in
electronic form.
HDFC Bank was the first bank in India to launch an International Debit Card
in association with VISA (VISA Electron) and issues the MasterCard

8
Maestro debit card as well. The Bank launched its credit card business in late
2001. By March 2015, the bank had a total card base (debit and credit cards)
of over 25 million. The Bank is also one of the leading players in the
“merchant acquiring” business with over 235,000 Point-of-sale (POS)
terminals for debit / credit cards acceptance at merchant establishments. The
Bank is well positioned as a leader in various net based B2C opportunities
including a wide range of internet banking services for Fixed Deposits,
Loans, Bill Payments, etc.

AWARDS
Awards and Accolades :

HDFC Bank began operations in 1995 with a simple mission: to be a "World-

class Indian Bank". We realized that only a single-minded focus on product
quality and service excellence would help us get there. Today, we are proud
to say that we are well on our way towards that goal.
2015

AIMA Managing India Business Leader of the Year - Aditya

Awards 2015 Puri
Barron's World's 30 Best CEOs - Mr. Aditya
Puri
Finance Asia poll on Asia's Best Managed Public Company India'
Best Companies 2015 Best CEO- Aditya Puri
Best Corporate Governance-Rank3
Best Investor Relations- Rank 3

9
J. P Morgan Quality Best in class straight Through
Recognition Award Processing Rates

2014

Euro money HDFC Bank wins Best Private Banking

Services for Super affluent clients for 5
years in a row at Euro money Awards
Euro money Private Best Private Banking Services award for
Banking and Wealth Net-worth-specific services category for
Management Survey 2015 Super affluent clients (US$ 1 million to
US$ 5 million).
Best Private Banking Services award
Asset Management
FE Best Bank Awards Best Bank in the New Private sector
Winner - Profitability
Winner - Efficiency
Business Today - KPMG Best Large Bank - Overall
Study 2014 Best Large Bank - Growth
Business world-PwC India Best Large Bank
Best Banks Survey 2014 Fastest Growing Large Bank
Asiamoney FX Poll 2014 Best Domestic Provider of FX options
Best Domestic Provider of FX products &
Services
Best Domestic Provider of FX research &
market coverage
Best Domestic provider for FX Services

10
 The Asian Banker Strongest Bank in India in the Asian
Banker 500 (AB 500) Strongest Bank by
Balance Sheet Ranking 2014
Dun & Bradstreet - Polaris Best Bank - Managing IT Risk (Large
Financial Technology Banks)
Banking Awards 2014 Best Bank - Mobile Banking (Large
Banks)
Best Bank - Best IT Team (Private Sector
Banks)
Forbes Asia Fab 50 Companies List for the 8th year

11
CHAPTER - 2

12
 INTRODUCTION

PERFORMANCE APPRAISAL

Performance Appraisal is the systematic evaluation of the performance of

employees and to understand the abilities of a person for further growth and
development. Performance appraisal is generally done in systematic ways
which are as follows:

1. The supervisors measure the pay of employees and compare it with

targets and plans.
2. The supervisor analyses the factors behind work performances of
employees.
3. The employers are in position to guide the employees for a better
performance.

13
 MAIN FEATURES

A performance appraisal is a systematic and periodic process that assesses

an individual employee's job performance and productivity in relation to
certain pre-established criteria and organizational objectives. Other aspects
of individual employees are considered as well, such as organizational
citizenship behavior, accomplishments, potential for future improvement,
strengths and weaknesses, etc.

To collect PA data, there are three main methods: objective production,

personnel, and judgmental evaluation. Judgmental evaluations are the most
commonly used with a large variety of evaluation methods. Historically,
PA has been conducted annually (long-cycle appraisals); however, many
companies are moving towards shorter cycles (every six months, every
quarter), and some have been moving into short-cycle (weekly, bi-weekly)
PA. The interview could function as "providing feedback to employees,
counseling and developing employees, and conveying and discussing
compensation, job status, or disciplinary decisions". PA is often included
in performance management systems. PA helps the subordinate answer two
key questions: first, "What are your expectations of me?" second, "How am
I doing to meet your expectations?"

Performance management systems are employed "to manage and align" all
of an organization's resources in order to achieve highest possible
performance. "How performance is managed in an organization determines
to a large extent the success or failure of the organization. Therefore,
improving PA for everyone should be among the highest priorities of
contemporary organizations".

14
Some applications of PA are compensation, performance improvement,
promotions, termination, test validation, and more. While there are many
potential benefits of PA, there are also some potential drawbacks. For
example, PA can help facilitate management-employee communication;
however, PA may result in legal issues if not executed appropriately, as
many employees tend to be unsatisfied with the PA process. PAs created in
and determined as useful in the United States are not necessarily able to be
transferable cross-culturally.

15
 OBJECTIVES OF PERFORMANCE APPRAISAL

Performance Appraisal can be done with following objectives in mind:

1. To maintain records in order to determine compensation packages,

wage structure, salaries raises, etc.
2. To identify the strengths and weaknesses of employees to place right
men on right job.
3. To maintain and assess the potential present in a person for further
growth and development.
4. To provide a feedback to employees regarding their performance and
related status.
5. To provide a feedback to employees regarding their performance and
related status.
6. It serves as a basis for influencing working habits of the employees.
7. To review and retain the promotional and other training programmes.

16
 ADVANTAGES OF PERFORMANCE APPRAISAL

It is said that performance appraisal is an investment for the company

which can be justified by following advantages:

1. Promotion: Performance Appraisal helps the supervisors to chalk

out the promotion programmes for efficient employees. In this
regards, inefficient workers can be dismissed or demoted in case.
2. Compensation: Performance Appraisal helps in chalking out
compensation packages for employees. Merit rating is possible
through performance appraisal. Performance Appraisal tries to give
worth to a performance. Compensation packages which include
bonus, high salary rates, extra benefits, allowances and pre-requisites
are dependent on performance appraisal. The criteria should be merit
rather than seniority.
3. Employees Development: The systematic procedure of performance
appraisal helps the supervisors to frame training policies and
programmes. It helps to analyse strengths and weaknesses of
employees so that new jobs can be designed for efficient employees.
It also helps in framing future development programmes.
4. Selection Validation: Performance Appraisal helps the supervisors
to understand the validity and importance of the selection procedure.
The supervisors come to know the validity and thereby the strengths
and weaknesses of selection procedure. Future changes in selection
methods can be made in this regard.
5. Communication: For an organization, effective communication
between employees and employers is very important. Through
performance appraisal, communication can be sought for in the
following ways:
17
 a. Through performance appraisal, the employers can understand
and accept skills of subordinates.
b. The subordinates can also understand and create a trust and
confidence in superiors.
c. It also helps in maintaining cordial and congenial labour
management relationship.
d. It develops the spirit of work and boosts the morale of
employees.

All the above factors ensure effective communication.

6. Motivation: Performance appraisal serves as a motivation tool.

Through evaluating performance of employees, a person‟s efficiency
can be determined if the targets are achieved. This very well
motivates a person for better job and helps him to improve his
performance in the future.

18
 TECHNIQUES / METHODS OF PERFORMANCE
APPRAISALS
Numerous methods have been devised to measure the quantity and quality
of performance appraisals. Each of the methods is effective for some
purposes for some organizations only. None should be dismissed or
accepted as appropriate except as they relate to the particular needs of the
organization or an employee.
Broadly all methods of appraisals can be divided into two different
categories.

 Past Oriented Methods

 Future Oriented Methods
Past Oriented Methods

1. Rating Scales: Rating scales consists of several numerical scales

representing job related performance criterions such as dependability,
initiative, output, attendance, attitude etc. Each scales ranges from excellent
to poor. The total numerical scores are computed and final conclusions are
derived. Advantages – Adaptability, easy to use, low cost, every type of job
can be evaluated, large number of employees covered, no formal training
required. Disadvantages – Rater‟s biases

2. Checklist: Under this method, checklist of statements of traits of

employee in the form of Yes or No based questions is prepared. Here the
rater only does the reporting or checking and HR department does the
actual evaluation. Advantages – economy, ease of administration, limited
training required, standardization. Disadvantages – Raters biases, use of
improper weighs by HR, does not allow rater to give relative ratings

19
3. Forced Choice Method: The series of statements arranged in the
blocks of two or more are given and the rater indicates which statement is
true or false. The rater is forced to make a choice. HR department does
actual assessment. Advantages – Absence of personal biases because of
forced choice. Disadvantages – Statements may be wrongly framed.

4. Forced Distribution Method: here employees are clustered around a

high point on a rating scale. Rater is compelled to distribute the employees
on all points on the scale. It is assumed that the performance is conformed
to normal distribution. Advantages – Eliminates Disadvantages –
Assumption of normal distribution, unrealistic, errors of central tendency.

5. Critical Incidents Method: The approach is focused on certain critical

behaviors of employee that makes all the difference in the performance.
Supervisors as and when they occur record such incidents. Advantages –
Evaluations are based on actual job behaviors, ratings are supported by
descriptions, feedback is easy, reduces regency biases, chances of
subordinate improvement are high. Disadvantages – Negative incidents can
be prioritized, forgetting incidents, overly close supervision; feedback may
be too much and may appear to be punishment.

6. Behaviourally Anchored Rating Scales: statements of effective and

ineffective behaviors determine the points. They are said to be
behaviourally anchored. The rater is supposed to say, which behavior
describes the employee performance. Advantages – helps overcome rating
errors. Disadvantages – Suffers from distortions inherent in most rating
techniques.

7. Field Review Method: This is an appraisal done by someone outside

employees‟ own department usually from corporate or HR department.
Advantages – Useful for managerial level promotions, when comparable

20
information is needed, Disadvantages – Outsider is generally not familiar
with employees work environment, Observation of actual behaviors not
possible.

8. Performance Tests & Observations: This is based on the test of

knowledge or skills. The tests may be written or an actual presentation of
skills. Tests must be reliable and validated to be useful. Advantage – Tests
may be apt to measure potential more than actual performance.
Disadvantages – Tests may suffer if costs of test development or
administration are high.

9. Confidential Records: Mostly used by government departments,

however its application in industry is not ruled out. Here the report is given
in the form of Annual Confidentiality Report (ACR) and may record ratings
with respect to following items; attendance, self-expression, team work,
leadership, initiative, technical ability, reasoning ability, originality and
resourcefulness etc. The system is highly secretive and confidential.
Feedback to the assessee is given only in case of an adverse entry.
Disadvantage is that it is highly subjective and ratings can be manipulated
because the evaluations are linked to HR actions like promotions etc.

10. Essay Method: In this method the rater writes down the employee
description in detail within a number of broad categories like, overall
impression of performance, promote ability of employee, existing
capabilities and qualifications of performing jobs, strengths and weaknesses
and training needs of the employee. Advantage – It is extremely useful in
filing information gaps about the employees that often occur in a better-
structured checklist. Disadvantages – It its highly dependent upon the
writing skills of rater and most of them are not good writers. They may get
confused success depends on the memory power of raters.

21
 11. Cost Accounting Method: Here performance is evaluated from the
monetary returns yields to his or her organization. Cost to keep employee,
and benefit the organization derives is ascertained. Hence it is more
dependent upon cost and benefit analysis.

12. Comparative Evaluation Method (Ranking & Paired

Comparisons): These are collection of different methods that compare
performance with that of other co-workers. The usual techniques used may
be ranking methods and paired comparison method.

 Ranking Methods: Superior ranks his worker based on merit, from best to
worst. However how best and why best are not elaborated in this method. It
is easy to administer and explanation.
 Paired Comparison Methods: In this method each employee is rated with
another employee in the form of pairs. The number of comparisons may be
calculated with the help of a formula as under.
N x (N-1) / 2

Future Oriented Methods

1. Management By Objectives: It means management by objectives and

the performance is rated against the achievement of objectives stated by the
management. MBO process goes as under.

 Establish goals and desired outcomes for each subordinate

 Setting performance standards
 Comparison of actual goals with goals attained by the employee
 Establish new goals and new strategies for goals not achieved in previous
year.
Advantage – It is more useful for managerial positions.

22
Disadvantages – Not applicable to all jobs, allocation of merit pay may
result in setting short-term goals rather than important and long-term goals
etc.

2. Psychological Appraisals: These appraisals are more directed to

assess employees potential for future performance rather than the past one.
It is done in the form of in-depth interviews, psychological tests, and
discussion with supervisors and review of other evaluations. It is more
focused on employees emotional, intellectual, and motivational and other
personal characteristics affecting his performance. This approach is slow
and costly and may be useful for bright young members who may have
considerable potential. However quality of these appraisals largely depends
upon the skills of psychologists who perform the evaluation.

3. Assessment Centres: This technique was first developed in USA and

UK in 1943. An assessment centre is a central location where managers
may come together to have their participation in job related exercises
evaluated by trained observers. It is more focused on observation of
behaviours across a series of select exercises or work samples. Assesses are
requested to participate in in-basket exercises, work groups, computer
simulations, role playing and other similar activities which require same
attributes for successful performance in actual job. The characteristics
assessed in assessment centre can be assertiveness, persuasive ability,
communicating ability, planning and organizational ability, self-confidence,
resistance to stress, energy level, decision making, sensitivity to feelings,
administrative ability, creativity and mental alertness etc. Disadvantages –
Costs of employees traveling and lodging, psychologists, ratings strongly
influenced by assesses inter-personal skills. Solid performers may feel

23
suffocated in simulated situations. Those who are not selected for this also
may get affected.

Advantages – well-conducted assessment centre can achieve better

forecasts of future performance and progress than other methods of
appraisals. Also reliability, content validity and predictive ability are said to
be high in assessment centres. The tests also make sure that the wrong
people are not hired or promoted. Finally it clearly defines the criteria for
selection and promotion.

4. 360-Degree Feedback: It is a technique which is systematic

collection of performance data on an individual group, derived from
a number of stakeholders like immediate supervisors, team members,
customers, peers and self. In fact anyone who has useful information
on how an employee does a job may be one of the appraisers. This
technique is highly useful in terms of broader perspective, greater
self-development and multi-source feedback is useful. 360-degree
appraisals are useful to measure inter-personal skills, customer
satisfaction and team building skills. However on the negative side,
receiving feedback from multiple sources can be intimidating,
threatening etc. Multiple raters may be less adept at providing
balanced and objective feedback.

24
CHAPTER - 3

25
 LITERATURE REVIEW
Study by DDI (1997), Performance Management Practices is the most
recent performance management study. It proves that successful
organizations realize that performance management is a critical business
tool in translating strategy into results. The CEOs in the majority of the 88
Organizations surveyed say their performance management system drives
the key factors associated with both business and cultural strategies.
Performance management systems directly influence five critical
organizational outcomes : Financial performance, productivity, product or
service quality, customer satisfaction & employee job satisfaction. When
performance management systems are flexible & linked to strategic goals,
organization are more likely to see improvement in the five critical areas :
team objectives, non- manager training, appraiser accountability & links to
quality management are the specific practices most strongly associated with
positive outcomes.

Watkins (2007) puts it, most public sector business organization like those
in Delta State of Nigeria have not given adequate attention to performance
management review as a tool for improving performance even when recent
studies suggest that performance review benefit organizational performance
in both private & public sectors. Performance management has been
described as a systematic approach to the management of people, using
performance goal measurement, feedback and recognition as a means of
motivating them to realize their maximum potentials. Public sector business
organizations that strive to deliver quality services at competitive prices are
those that embrace various performance review practices to assess their
employee performance & motivate them with incentives.

26
Robert & Angelo (2001), The success or failure of public sector business
organizations depends on the ability to attract, develop, retain, empower &
reward a diverse array of appropriately skilled people and is the key to
improving organizational performance. The explanation therefore is that
human resource managers in the public sector business concerns should
embark on periodic performance management reviews of their employees
in order to re-position their business organizations though owned by
government for better performance & improved competitiveness.

Study by Wm. Schiemann & Associates (1996), this national survey of

cross-section of executives concluded that measurement-managed
companies- especially those that measure employee performance-
outperform those that downplay measurement. These research studied 122
organizations making between $27 million and $50 billion in sales. A
higher percentage of measurement-managed companies were identified as
industry leaders, as financially in the top third of their industry, and as
successfully managing their change efforts. The research examined
performance in six strategic performance areas deemed crucial to long-term
success : Financial performance, operating efficiency, customer
satisfaction, employee performance, innovation/change,
community/environment. The findings revealed that the biggest
measurement area separating successful from less successful firms is
employee measurement. Successful industry leaders simply do a better job
than non-leaders at measuring their workforce, which the study say is
where real change won or lost.

27
Study by Hewitt Associates (1994), The impact of performance
management on organizational success substantiates that performance
management system can have a significant impact on financial performance
and productivity. The study used the Boston Consulting Group/HOLT
financial database to track the financial performance of 437 publically held
U.S. companies from 1990 through 1992.The study results showed that:
Companies with performance programs have higher profits, better cash
flows, stronger stock market performance and a greater stock value than
companies without performance management. Productivity in firms without
performance management is significantly below the industry average, while
productivity in firms with performance management is on par with the
industry average. Companies with performance management significantly
improved their financial performance and productivity after implementing
performance management.

Williams (2002) identifies globalization, increased competition and the

increasingly individualistic rather than collective employee relationship as
some of the major drivers contributing to the increased visibility of
performance management systems (PMS). Faced with fast moving and
competitive environments, companies are constantly searching for unique
ways in which to differentiate themselves from their competition and are
increasingly looking to their “human resources” to provide this
differentiation. This has led to much interest in the performance of
employees, or more importantly, how to get the most out of employees in
order to sustain competitive success.

28
The study by Eleni T. Stavrou, Christakis Charalambous and Stelios
Spiliotis utilizes an innovative research methodology (kohonen‟s Self-
organizing Maps (SOMs), Neural Network Analysis) to explore the
connection between human resource management as a source of
competitive advantage and perceived organizational performance in the
European Union‟s private and public sectors. While practices in these two
sectors did not differ significantly, three diverse but overlapping HRM
models did emerge, each of which involved a different set of EU member
states. Training & Development practices were strongly related to
performance in all three models and communication practices in two. These
results show the usefulness of an innovative technique when applied to
research so far conducted through traditional methodologies, and brings to
the surface questions about the universal applicability of the widely
accepted relationship between superior HRM and superior business
Performance.

Sharmistha Bhattacharjee and Santoshi Sengupta (2011) studied that

employees are the most valuable and dynamic assets of an organization. For
achieving the strategic objective of sustained & speedy growth, managing
human resource has been featured as a vital requirement in all
organizations. It is a challenge to monitor the entire cycle of defining the
competence requirement of the business, accessing existing competence in
the organization and bridging the gap between the two. HR practices are
crucial for any organization. Every phase from recruitment to exit interview
is under the HR department. It is a challenge to monitor the entire cycle of
defining the competence requirement of the business, accessing existing
competence in the organization and bridging the gap between the two. In a

29
manufacturing industry, with every technical advancement business
opportunities can show up. These opportunities can be converted into
business success only with performance alignment and competence
management.

The research paper of Mohammad Tanvi Newaz (2012) provides an

analysis and evaluation of the role of performance management system in
shaping psychological contract at Sainsbury‟s UK by a case study
approach. Sainsbury‟s has adopted the performance management system to
utilize the potential of their employees but result of data analysis indicates
that line managers have failed to achieve the objective of the performance
management system. This research analysis reveals how the line managers
of Sainsbury‟s focus on short term goal i.e. financial success instead of
long term goal i.e. employee development. However, the performance
management system of Sainsbury‟s comprises all the necessary
components to play a significant role in developing employees as well as
facilitating the formation of a positive psychological contract. But partial
and inattentive implementation of the system makes the situation
unfavourable for the psychological contract to develop at Sainsbury‟s UK.

The article of Javed Iqbal, Samina Naz, Mahnaz Asla Saba Arshad
(2012), offers a survey of selected literature on performance management.
Purpose is to identify key themes that govern the topic in the contemporary
turbulent economic and business environment where employees are more
uncertain that anything else because every day they face downsizing,
volunteer retirement and “golden hand shakes‟‟ to get rid of them. Under

30
these circumstances it is worthwhile to look into the ways by which they
can be motivated to work under hard conditions. It is found that
performance management processes, evaluation, its impact and factors are
key themes. Researchers apply popular research approaches for data
collection analysis and communication.

The paper of Akua Asantewaa Aforo and Kodjo Asafo-Adjei Antwi

(2012) shows that academic libraries have a performance appraisal system
comprising setting of goals, feedback, participation and incentives for
performance. This study aimed at evaluating the performance appraisal
system in the KNUST and GIMPA libraries in Ghana and give
recommendations on improving the system. Questionnaires were randomly
administered to 46 staff members of these libraries.

Fletcher (2013) describes it as a “high risk activity” for managers, given

the many pitfalls associated with it and Newton and Findlay (1996)
highlight the fallibility of appraisals as they are open to manager
manipulation. Despite the criticisms, the use of performance appraisal is
widespread and perceived to be an effective part of a performance
management system.

Results from the Watson Wyatt Worldwide (2004) study suggest that PM
systems should recognize high performers and confront poor performers as
soon as possible, eliminate paper forms, and utilize a user-friendly
automation. Researchers from Watson Wyatt Worldwide also assert that if
31
PM systems are designed and implemented properly, they can lead to
positive impact on individual performance as well as better financial results
for the organization (i.e., improvement in shareholder value).

Sung & Ashton,(2005)It is the business strategy that gives the high
performance working practices their dynamism and provides the framework
against which performance can be evaluated and improved. Thus, the
concern is not with the specific type or number of practices employed, but
the way they are linked to organizational performance.

Robert and Angelo, (2001) The success or failure of public sector business
organizations hinges on the ability to attract, develop, retain, empower and
reward a diverse array of appropriately skilled people and is the key to
improving organizational performance The explanation therefore is that
human resource managers in the public sector business concerns should
embark on periodic performance management reviews of their employees
in order to re-position their business organizations though owned by
government for better performance and improved competitiveness.

32
CHAPTER - 4

33
 PROBLEM DEFINITION

 To find out the effectiveness of contemporary performance appraisal

techniques in HDFC bank which indicates the satisfaction level
leading to the turnover of the employees.
 Main aim is to find out the relation between effectiveness of PAS
with the satisfaction level of employees.

34
 OBJECTIVES

 To study the performance appraisal used in the branches of HDFC

bank in Varanasi.
 To find out the satisfaction level of employees towards the existing
performance appraisal system.

35
 NEED FOR THE STUDY

 Performance appraisal is a very important part of an organization as

the process of performance appraisal helps an organization to analyse
the performance of their employees on a regular basis.
 The performance appraisal system in an organization for the purpose
of proper motivation and retention of employees.

36
 HYPOTHESIS

The following hypothesis is laid down for the present study purpose:

 The level of satisfaction of employees with the existing performance

appraisal system is satisfactory.

37
CHAPTER-5

38
 SAMPLING PLAN

 Sample size= 30 employees

 Sample area= HDFC Bank, Varanasi.
 Sample technique used= simple random sampling
 Simple random sampling= this type of sampling is also known as
chance sampling or probability sampling where each item in the
population has an equal chance of being selected in the sample.

39
 RESEARCH METHODOLOGY

Research design

It refers to “framework or plan for a study that guides the collection and
analysis of data”.

Research design used in this report:

 Explorative research design

 Descriptive research design

EXPLORATIVE RESEARCH DESIGN

Exploratory research, as the name states, intends merely to explore the
research questions and does not intend to offer final and conclusive
solutions to existing problems. Exploratory research is the initial research,
which forms the basis of more conclusive research. It can even help in
determining the research design, sampling methodology and data collection
method.

DESCRIPTIVE RESEARCH DESIGN

The research design used in this study is descriptive research design. It
includes surveys and fact finding with the help of a structured closed
ended questionnaire.

Descriptive research involves gathering data that describe events and then
organizes, tabulates, depicts, and describes the data collection . It often uses
visual aids such as graphs and charts to aid the reader in understanding the

40
data distribution. Because the human mind cannot extract the full import of
a large mass of raw data, descriptive statistics are very important in
reducing the data to manageable form. When in-depth, narrative
descriptions of small numbers of cases are involved, the research uses
description as a tool to organize data into patterns that emerge during
analysis.

41
 TOOLS AND TECHNIQUES FOR DATA
COLLECTION

 Primary data: data collected from primary methods or which is the

first hand information is known as primary data.
 Sources:
o Questionnaire
o Interview method
 Secondary data: data collected from secondary methods or which is
already available, second hand data is known as secondary data.

Sources:

1. Company profile
2. Magazines
3. Internet
4. Books
5. Previous report

42
CHAPTER-6

43
 DATA ANALYSIS AND INTERPRETATION

1. For how many years are you working with this

organization?

percentage

5% 0-5yrs

15% 30% 5-10 yrs

10-15 yrs

40% more than 15

yrs

Interpretation:

30% of the employees are working with the organisation for less than 5
years and 40% of employees is working within 5-10 years. And the rest
percentage of employees is working for more than 10 years.

44
2. In your opinion performance appraisal is?

performance appraisal

5% evaluation of
employees
19%
promotion of
employees
6% job satisfaction
of employees
70%
motivation

Interpretation:

70% of the employees think that performance appraisal is the evaluation

of the employees

45
3. Does your organization follow 360 degree performance appraisal?

360 degree
1%

yes
no

99%

Interpretation:

360 degree performance appraisal system is followed in the organisation

46
 4. Do you think that the current performance appraisal
system help to provide an atmosphere where all are
encouraged to share one another’s burden?

360 degree PA

3% 4%
strongly disagree

22% 7%
disagree

neither agree
nor disagree
agree

64% strongly agree

Interpretation:

Majority of employees considers performance appraisal provides an

atmosphere where all are encouraged to share one another‟s burden.

47
 5. Do you think the current performance appraisal system
helps people set and achieve meaningful goals?

achievement of goal

1% 2% 2%
strongly disagree
10%
disagree

neither agree nor

disagree
agree

85%
strongly agree

Interpretation:

85% of the employees thinks that the current performance appraisal system
helps people achieve meaningful goals.

48
 6. Does current performance appraisal gives constructive criticism
in a friendly and positive manner?

Feedback

1% 2%
strongly disagree
10%
27% disagree

neither agree
nor disagree
agree

60%
strongly agree

Interpretation:

Almost 80% of employees thinks that the current performance appraisal

gives constructive criticism in a friendly and positive manner.

49
 7. Does performance of employees improve due to current
performance appraisal system?

performance

2% 2%
strongly disagree
6%
disagree

neither agree
40%
nor disagree
30% agree

strongly agree

Interpretation:

40% of employees strongly agree that the current performance appraisal

improves their performance. 30% of employees agree with the statement
and 2% disagree with the statement.

50
 8. Does the current performance appraisal system creates a
participative environment in the organisation ?

participative env.

strongly disgree
4%
10%
disagree
10%
neither agree nor
disagree
56%
20% agree

strongly agree

Interpretation:

56% strongly agrees with this statement and 4% strongly disagree with this
statement

51
 9. Do you think the current performance appraisal system
improves motivation &job satisfaction?

motivation

strongly disagree
5%
10%
25% disagree

neither agree nor

20%
disagree
agree

40% strongly agree

Interpretation:

Almost 50 % of the employees think that current performance appraisal

system improves motivation & job satisfaction while almost 10% disagree
with this statement.

52
 10.Do you think current performance appraisal helps to change the
attitude of the employees?

behaviourial change

2%
strongly disagree
5%
15%
10% disagree

neither agree nor

disagree
agree

60% strongly agree

Interpretation:

60 % of employees think that performance appraisal helps in behavioural

change while almost 7% disagrees with the statement

53
 11.Are you satisfied with the existing performance appraisal?

Sales
2% 3%
highly dissatisfied

20% 10%
dissatisfied

neither satisfied
nor dissatisfied
satisfied

55% highly satisfied

Interpretation:

Majority of the employees working in the HDFC Bank are satisfied with
the 360 degree performance appraisal system.

54
CHAPTER - 7

55
 FINDINGS

 40% of the employees are working with the organization for more than five
years but less than ten years.
 According to 70% of the employees, performance appraisal is the evaluation
of employees.
 90% of the employees‟ response was that 360 degree performance appraisal
system is followed in their organization.
 64% of the employees agree that performance appraisal system helps to
provide an atmosphere where all are encouraged to share one another‟s
burden.
 85% of the employees strongly agree that current performance appraisal
system helps people set and achieve meaningful goals.
 60% of the employees agree that performance appraisal gives constructive
criticism in a friendly and positive manner.
 40% of the employees strongly agree that that their performance has been
improved due to the current performance appraisal system.
 56% of the employees strongly agree that current performance appraisal
system creates a participative environment in the organization.
 40% of the employees agree with the statement that current performance
appraisal system improves motivation & job satisfaction.
 60% employees agree that current performance appraisal system helps
change the attitude of the employees.
 55% of the employees are satisfied with the current performance appraisal.

56
 CONCLUSION

 The existing technique of performance appraisal in HDFC Bank is

highly effective and motivating which leads to a higher satisfaction
level of the employees leading to higher retention ratio.
 HDFC Bank must maintain this technique to carry out the operation
with higher success.

57
 RECOMMENDATION AND SUGGESTION

 Since 360 degree is the most sought appraisal technique used at

HDFC, then look for the upgraded versions of technique which is
used or will be used globally especially in the banking sector.
 Look for the creditability of the techniques and find out the modern
variables which may be used/implemented in this technique to make
results more optimized.
 Customization of appraisal techniques could be also dragged forward
to come up with the techniques like “individual based appraisal
rather than appraising everybody with a same technique, as
everybody‟s‟ strength and weaknesses couldn‟t be measured in a
same way.
 Inviting third parties for the appraisals to reduce discrimination and
biasness to null, no fingers on appraisal should be raised then.

58
 REFERENCES

BOOKS-

 Human resource – V.S.P. Rao

 Research methodology- C.R. Kothari
 Human resource planning- Ashwathappa

Websites-

o www.hdfc.com
o www.proquest.com
o www.wikipedia.org

59
 APPENDIX

QUESTIONNAIRE

Name…………………………………………………………...........
Designation………………………………………………………….
Department…………………………………………………………

1. For how many years are you working with this organization?
a. 0-5 years b. 5-10 years
c. 10-15 years d. More than 15 years
2. In your opinion performance appraisal is?
a. evaluation of employees b. promotion of employees
c. job satisfaction of employees d. motivation
3. Does your organization follow 360 degree performance
appraisal?
a. Yes b. No
4. Do you think that the current performance appraisal system help
to provide an atmosphere where all are encouraged to share one
another’s burden?
a. Strongly Agree b. Agree
c. Neither agree nor disagree
d. Disagree e. Strongly Disagree
5. Do you think the current performance appraisal system helps
employees set achieve meaningful goals?
a. Strongly Agree b. Agree
c. Neither agree nor disagree d. Disagree
e. Strongly Disagree

60
6. Does current performance appraisal gives constructive criticism
in a friendly and positive manner?
a. Strongly Agree b. Agree
c. Neither agree nor disagree
d. Disagree e. Strongly Disagree
7. Does performance of employees improve due to current
performance appraisal system?
a. Strongly Agree b. Agree
c. Neither agree nor disagree
d. Disagree e. Strongly Disagree
8. Does the current performance appraisal system create a
participative environment in the organization?
a. Strongly Agree b. Agree
c. Neither agree nor disagree
d. Disagree e. Strongly Disagree
9. Do you think the current performance appraisal system
improves motivation & job satisfaction?
a. Strongly Agree b. Agree
c. Neither agree nor disagree
d. Disagree e. Strongly Disagree
10. Do you think the current performance appraisal helps to change
the attitude of the employees?
a. Strongly Agree b. Agree
c. Neither agree nor disagree
d. Disagree e. Strongly Disagree

61
11. Are you satisfied with the existing performance appraisal
system?
a. Highly satisfied b. Satisfied
c. Neither satisfied nor disagree dissatisfied
d. Dissatisfied e. Highly Dissatisfied

*****

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