Performance Appraisal in Banks

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Performance Appraisal in Banks

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PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANKCHAPTER 1INTRODUCTION

Performance appraisal is term used to describe the set by an organization ensure to all employee are aware of the level of performance expect of in that role, as well as individual objective they will need to achieve. To achieve over all organization objective appraisal is a continues process and done annually as a formal exercise before the completion of a financial year. appraisal has tremendous motivation impact on people through meaningful is a powerful tool of recognition .This project explain performance and system tries to find out how efficiently to the performance appraisal is conducted and if performance is doesnt meet its objective them, what are the factors causing failure. Performance appraisal gives the employee opportunity to have one to one time with their manager to discuss their the a performance, training need and future prospectus. The main objective of performance appraisal is system provide to the employee with clear feedback about overall performance in the duties there are employee to which may be linked to the overall business objectives. The performance appraisal should never contain any surprise for the employee regarding their performance, as performance management should be done with a continues observation approach of the manage, highlighting any deficiencies the employee has a soon as possible and providing appropriate training. Error of poor employee performance should not be stored up for the monthly or six monthly meeting.Generally the employees line manager will conduct the performance appraisal, as they generally known the staff better as individual and are responsible for their performance in most organization, a senior manager assesses and approves the appraisal outcome to ensure operational fairness, especially there a remuneration or performance bonus linked from the discussion, the employee and manager should be able to formulate and agree on a plan of training and development for the employee participate in this commonly known as a Personal Development Plan(PDP).These PDPs are particularly useful documents to have your manager using especially if you are dealing with employee who have poor performance issues which could lead to potential disciplinary action.

CHAPTER 2OBJECTIVES 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.

CHAPTER 3BENEFITS OF APPRAISAL

One of the most significant benefits of performance appraisal is that, in the rush and bustle of daily working life, it offers a rare chance for a supervisor and subordinate to have "time out" for a one-on-one discussion of important work issues that might not otherwise be addressed.Almost universally, where performance appraisal is conducted properly, both supervisors and subordinates have reported the experience as beneficial and positive.

Appraisal offers a valuable opportunity to focus on work activities and goals, to identify and correct existing problems, and to encourage better future performance. Thus the performance of the whole organization is enhanced.For many employees, an "official" appraisal interview may be the only time they get to have exclusive, uninterrupted access to their supervisor. Said one employee of a large organization after his first formal performance appraisal, "In twenty years of work, that's the first time anyone has ever bothered to sit down and tell me how I'm doing."The value of this intense and purposeful interaction between a supervisors and subordinate should not be underestimated.

Motivation and SatisfactionPerformance appraisal can have a profound effect on levels of employee motivation and satisfaction - for better as well as for worse.Performance appraisal provides employees with recognition for their work efforts. The power of social recognition as an incentive has been long noted. In fact, there is evidence that human beings will even prefer negative recognition in preference to no recognition at all.If nothing else, the existence of an appraisal program indicates to an employee that the organization is genuinely interested in their individual performance and development. This alone can have a positive influence on the individual's sense of worth, commitment and belonging.The strength and prevalence of this natural human desire for individual recognition should not be overlooked. Absenteeism and turnover rates in some organizations might be greatly reduced if more attention were paid to it. Regular performance appraisal, at least, is a good start.

Training and DevelopmentPerformance appraisal offers an excellent opportunity - perhaps the best that will ever occur - for a supervisor and subordinate to recognize and agree upon individual training and development needs.During the discussion of an employee's work performance, the presence or absence of work skills can become very obvious - even to those who habitually reject the idea of training forthem!Performance appraisal can make the need for training more pressing and relevant by linking it clearly to performance outcomes and future career aspirations.From the point of view of the organization as a whole, consolidated appraisal data can form a picture of the overall demand for training. This data may be analysed by variables such as sex, department, etc. In this respect, performance appraisal can provide a regular and efficient training needs audit for the entire organization.

Recruitment and InductionAppraisal data can be used to monitor the success of the organization's recruitment and induction practices. For example, how well are the employees performing who were hired in the past two years?Appraisal data can also be used to monitor the effectiveness of changes in recruitment strategies. By following the yearly data related to new hires (and given sufficient numbers on which to base the analysis) it is possible to assess whether the general quality of the workforce is improving, staying steady, or declining.

Employee EvaluationThough often understated or even denied, evaluation is a legitimate and major objective of performance appraisal.But the need to evaluate (i.e., to judge) is also an ongoing source of tension, since evaluative and developmental priorities appear to frequently clash. Yet at its most basic level, performance appraisal is the process of examining and evaluating the performance of an individual.Though organizations have a clear right - some would say a duty - to conduct such evaluations of performance, many still recoil from the idea. To them, the explicit process of judgement can be dehumanizing and demoralizing and a source of anxiety and distress to employees.It is said by some that performance appraisal cannot serve the needs of evaluation and development at the same time; it must be one or the other.But there may be an acceptable middle ground, where the need to evaluate employees objectively, and the need to encourage and develop them, can be balanced.

CHAPTER 4ADVANTAGES OF PERFORMANCE APPRAISALIt 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 includes 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: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 persons 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.

Disadvantages of Performance Appraisal:

1. The Halo effect:Halo effect is defined as the influence of a raters general impression on ratings of specific rate qualities. It tends to occur when an evaluation rates an employee high on all jobs criteria, even if he has performed well only in one area.2. Contrast error:The rating is always based on performance standards. The contrast error occurs when employee is rated without taking into account the performance standard. This can also occur if a rater compares an employees present performance with their past performance.3. Rater bias:The raters prejudices and biasness can also influence rating. For example, a supervisor can underrate an employee based on race, sex, religion, appearance and favouritism.4. Central tendency error:When the supervisor rates all the employees within a narrow range, thinking all employees are of average level, this type of error occurs.5. Leniency or severity:Performance appraisal demands that the rater should objectively draw a conclusion about employees performance.

6. Sampling error:If the rater uses a very small sample of the employees work, it may be subject to sampling error.7. Primary and regency errors:Behaviour of an employee at the initial stage of rating and at the end of appraisal can affect the rating. For example, a salesmans performance may be very low for some part of the year.

CHAPTER 5THE BANKING REFORMS

In 1991, the Indian economy went through a process of economic liberalization, which was followed up by the initiation of fundamental reforms in the banking sector in 1992. The banking reform package was based on the recommendations proposed by the Narasimham Committee Report (1991) that advocated a move to a more market oriented banking system, which would operate in an environment of prudential regulation and transparent accounting. One of the primary motives behind this drive was to introduce an element of market discipline into the regulatory process that would reinforce the supervisory effort of the Reserve Bank of India (RBI). Market discipline, especially in the financial liberalization phase, reinforces regulatory and supervisory efforts and provides a strong incentive to banks to conduct their business in a prudent and efficient manner and to maintain adequate capital as a cushion against risk exposures. Recognizing that the success of economic reforms was contingent on the success of financial sector reform as well, the government initiated a fundamental banking sector reform package in 1992.Banking sector, the world over, is known for the adoption of multidimensional strategies from time to time with varying degrees of success. Banks are very important for the smooth functioning of financial markets as they serve as repositories of vital financial information and can potentially alleviate the problems created by information asymmetries. From a central banks perspective, such high-quality disclosures help the early detection of problems faced by banks in the market and reduce the severity of market disruptions. Consequently, the RBI as part and parcel of the financial sector deregulation, attempted to enhance the transparency of the annual reports of Indian banks by, among other things, introducing stricter income recognition and asset classification rules, enhancing the capital adequacy norms, and by requiring a number of additional disclosures sought by investors to make better cash flow and risk assessments. During the pre economic reforms period, commercial banks & development financial institutions were functioning distinctly, the former specializing in short & medium term financing, while the latter on long term lending & project financing. Commercial banks were accessing short term low cost funds thru savings investments like current accounts, savings bank accounts & short duration fixed deposits, besides collection float. Development Financial Institutions (DFIs) on the other hand, were essentially depending on budget allocations for long term lending at a concessionary rate of interest. The scenario has changed radically during the post reforms period, with the resolve of the government not to fund the DFIs through budget allocations. DFIs like IDBI, IFCI & ICICI had posted dismal financial results. Infect, their very viability has become a question mark. Now, they have taken the route of reverse merger with IDBI bank & ICICI bank thus converting them into the universal banking system.

BASEL - II ACCORD

Bank capital framework sponsored by the world's central banks designed to promote uniformity, make regulatory capital more risk sensitive, and promote enhanced risk management among large, internationally active banking organizations. The International Capital Accord, as it is called, will be fully effective by January 2008 for banks active in international markets. Other banks can choose to "opt in," or they can continue to follow the minimum capital guidelines in the original Basel Accord, finalized in 1988. The revised accord (Basel II) completely overhauls the 1988 Basel Accord and is based on three mutually supporting concepts, or "pillars," of capital adequacy. The first of these pillars is an explicitly defined regulatory capital requirement, a minimum capital-to-asset ratio equal to at least 8% of risk-weighted assets. Second, bank supervisory agencies, such as the Comptroller of the Currency, have authority to adjust capital levels for individual banks above the 9% minimum when necessary. The third supporting pillar calls upon market discipline to supplement reviews by banking agencies. Basel II is the second of the Basel Accords, which are recommendations on banking laws and regulations issued by the Basel Committee on Banking Supervision. The purpose of Basel II, which was initially published in June 2004, is to create an international standard that banking regulators can use when creating regulations about how much capital banks need to put aside to guard against the types of financial and operational risks banks face.

Advocates of Basel II believe that such an international standard can help protect the international financial system from the types of problems that might arise should a major bank or a series of banks collapse. In practice, Basel II attempts to accomplish this by setting up rigorous risk and capital management requirements designed to ensure that a bank holds capital reserves appropriate to the risk the bank exposes itself to through its lending and investment practices. Generally speaking, these rules mean that the greater risk to which the bank is exposed, the greater the amount of capital the bank needs to hold to safeguard its solvency and overall economic stability.

The final version aims at:1. Ensuring that capital allocation is more risk sensitive;2. Separating operational risk from credit risk, and quantifying both;3. Attempting to align economic and regulatory capital more closely to reduce the scope for regulatory arbitrage. While the final accord has largely addressed the regulatory arbitrage issue, there are still areas where regulatory capital requirements will diverge from the economic. Basel II has largely left unchanged the question of how to actually define bank capital, which diverges from accounting equity in important respects. The Basel I definition, as modified up to the present, remains in place.The Accord in operationBasel II uses a "three pillars" concept (1) Minimum capital requirements (addressing risk),(2) Supervisory review and (3) Market discipline to promote greater stability in the financial system.

The Basel I accord dealt with only parts of each of these pillars. For example: with respect to the first Basel II pillar, only one risk, credit risk, was dealt with in a simple manner while market risk was an afterthought; operational risk was not dealt with at all.

1. The First Pillar

The first pillar deals with maintenance of regulatory capital calculated for three major components of risk that a bank faces: credit risk, operational risk and market risk. Other risks are not considered fully quantifiable at this stage. The credit risk component can be calculated in three different ways of varying degree of sophistication, namely standardized approach, Foundation IRB and Advanced IRB. IRB stands for "Internal Rating-Based Approach". For operational risk, there are three different approaches - basic indicator approach, standardized approach and advanced measurement approach. For market risk the preferred approach is VaR (value at risk). As the Basel II recommendations are phased in by the banking industry it will move from standardized requirements to more refined and specific requirements that have been developed for each risk category by each individual bank. The upside for banks that do develop their own bespoke risk measurement systems is that they will be rewarded with potentially lower risk capital requirements. In future there will be closer links between the concepts of economic profit and regulatory capital. Credit Risk can be calculated by using:-

1. Standardized Approach2. Foundation IRB (Internal Ratings Based) Approach3. Advanced IRB ApproachThe standardized approach sets out specific risk weights for certain types of credit risk. The standard risk weight categories are used under Basel 1 and are 0% for short term government bonds, 20% for exposures to OECD Banks, 50% for residential mortgages and 100% weighting on commercial loans. A new 150% rating comes in for borrowers with poor credit ratings. The minimum capital requirement (the percentage of risk weighted assets to be held as capital) has remains at 8%.

For those Banks that decide to adopt the standardized ratings approach they will be forced to rely on the ratings generated by external agencies. Certain Banks are developing the IRB approach as a result.

2. The Second Pillar

The second pillar deals with the regulatory response to the first pillar, giving regulators much improved 'tools' over those available to them under Basel I. It also provides a framework for dealing with all the other risks a bank may face, such as systemic risk, pension risk, concentration risk, strategic risk, reputation risk, liquidity risk and legal risk, which the accord combines under the title of residual risk. It gives banks a power to review their risk management system.

3. The Third Pillar

The third pillar greatly increases the disclosures that the bank must make. This is designed to allow the market to have a better picture of the overall risk position of the bank and to allow the counterparties of the bank to price and deal appropriately. The new Basel Accord has its foundation on three mutually reinforcing pillars that allow banks and bank supervisors to evaluate properly the various risks that banks face and realign regulatory capital more closely with underlying risks. The first pillar is compatible with the credit risk, market risk and operational risk. The regulatory capital will be focused on these three risks. The second pillar gives the bank responsibility to exercise the best ways to manage the risk specific to that bank. Concurrently, it also casts responsibility on the supervisors to review and validate banks risk measurement models. The third pillar on market discipline is used to leverage the influence that other market players can bring. This is aimed at improving the transparency in banks and improves reporting.

CHAPTER 6STATE BANK OF INDIA

The State Bank of India, the countrys oldest Bank and a premier in terms of balance sheet size, number of branches, market capitalization and profits is today going through a momentous phase of Change and Transformation the two hundred year old Public sector behemoth is today stirring out of its Public Sector legacy and moving with an ability to give the Private and Foreign Banks a run for their money.The bank is entering into many new businesses with strategic tie ups Pension Funds, General Insurance, Custodial Services, Private Equity, Mobile Banking, Point of Sale Merchant Acquisition, Advisory Services, structured products etc each one of these initiatives having a huge potential for growth.The Bank is forging ahead with cutting edge technology and innovative new banking models, to expand its Rural Banking base, looking at the vast untapped potential in the hinterland and proposes to cover 100,000 villages in the next two years.It is also focusing at the top end of the market, on whole sale banking capabilities to provideIndias growing mid / large Corporate with a complete array of products and services. It is consolidating its global treasury operations and entering into structured products and derivative instruments. Today, the Bank is the largest provider of infrastructure debt and the largest arranger of external commercial borrowings in the country. It is the only Indian bank to feature in the Fortune 500 list.The Bank is changing outdated front and back end processes to modern customer friendly processes to help improve the total customer experience. With about 8500 of its own 10000 branches and another 5100 branches of its Associate Banks already networked, today it offers the largest banking network to the Indian customer. The Bank is also in the process of providing complete payment solution to its clientele with its over 21000 ATMs, and other electronic channels such as Internet banking, debit cards, mobile banking, etc.With four national levelApexTrainingCollegesand 54 learning Centres spread all over the country the Bank is continuously engaged in skill enhancement of its employees. Some of the training programes are attended by bankers from banks in other countries.The bank is also looking at opportunities to grow in size in Indiaas well as Internationally. It presently has 82 foreign offices in 32 countries across the globe. It has also 7 Subsidiaries inIndia SBI Capital Markets, SBICAP Securities, SBI DFHI, SBI Factors, SBI Life and SBI Cards - forming a formidable group in the Indian Banking scenario. It is in the process of raising capital for its growth and also consolidating its various holdings.Throughout all this change, the Bank is also attempting to change old mindsets, attitudes and take all employees together on this exciting road to Transformation. In a recently concluded mass internal communication programme termed Parivartan the Bank rolled out over 3300 two day workshops across the country and covered over 130,000 employees in a period of 100 days using about 400 Trainers, to drive home the message of Change and inclusiveness. The workshops fired the imagination of the employees with some other banks inIndiaas well as other Public Sector Organizations seeking to emulate the programme.The CNN IBN, Network 18 recognized this momentous transformation journey, the State Bank of India is undertaking, and has awarded the prestigious Indian of the Year Business, to its Chairman, Mr. O. P. Bhatt in January 2008.The elephant has indeed started to dance.The origin of theState Bank of Indiagoes back to the first decade of the nineteenth century with the establishment of the Bank of Calcutta in Calcutta on 2 June 1806. Three years later the bank received its charter and was re-designed as the Bank of Bengal (2 January 1809 ). A unique institution, it was the first joint-stock bank of British India sponsored by the Government of Bengal. The Bank of Bombay (15 April 1840) and the Bank of Madras (1 July 1843) followed the Bank of Bengal. These three banks remained at the apex of modern banking in India till their amalgamation as the Imperial Bank of India on 27 January 1921.Primarily Anglo-Indian creations, the three presidency banks came into existence either as a result of the compulsions of imperial finance or by the felt needs of local European commerce and were not imposed from outside in an arbitrary manner to modernise India's economy. Their evolution was, however, shaped by ideas culled from similar developments in Europe and England, and was influenced by changes occurring in the structure of both the local trading environment and those in the relations of the Indian economy to the economy of Europe and the global economic framework.

CHAPTER 7SWOT ANALYSIS

STRENGTHS:-

It is the largest bank of India in terms of market share, revenue & asset. As per recent data the bank has more than outlets & ATM centers. It has its presence in 32 countries engaging currency trade all over the world. The bank has merged with Stata Bank of Saurashtra, State Bank of Indore and the bank is planning to go further acquisition in current FY-2012 It has the first mover advantage in commercial banking services SBI has recently Changed its vision & mission statement showing sign up inclination towards new age banking services It has a powerful brand name over the country & overseas. It became the synonymous for banking in rural area. SBI has a portfolio of product and services. It succeeded in cross selling of its product and services. All the branches of SBI has core banking which enable the customer to bank anywhere same as local bank.

Weakness:- Lack of proper technology driven services when compared to private banks. Employees show reluctance to solve issues quickly due to higher job security and customers waiting period is long when compared to private banks. The banks spends a huge amount on its rented buildings. SBI has the largest number of employees in banking sector, hence the bank spends a considerable amount of its income in employees salary compensation. In spite of modernization, the bank still carries the perception of traditional bank to new age customers. SBI fails to attract salary accounts of corporate and many government sector employees salary accounts are also shifted to private bank for ease of operations unlike before. It is fully computerized but lack of computer efficiency made the banking very slow. NPA in credit card is more. Resistance from employees and trade union against merger of associate bank. Opportunities:- SBIs merger with five more banks namely State Bank of Hydrabad, State bank of Patiala, State bank of Bikaner and Jaipur, State of bank of Travancore and State bank of Mysore are in approval stage Mergers will result in expansion of market share to defend its number one position SBI is planning to expand and invest in international operations due to good inflow of money from Asian Market Since the bank is yet to modernize few of its banking operations, there is a better scope of using advanced technologies and software to improve customer relations Young and talented pool of graduates and B schools are in rise to open new horizon to so called old government bank Threats:- Net profit of the year has decline from 9166.05 in the year FY 2010 to 7,370.35 in the year FY2011 This shows the reduce in market share to its close competitor ICICI Other private banks like HDFC, AXIS bank etc FDIs allowed in banking sector is increased to 49% , this is a major threat to SBI as people tend to switch to foreign banks for better facilities and technologies in banking service Other government banks like PNB, Andhra, Allahabad bank and Indian bank are showing Customer prefer to switch to private banks and financial service providers for loans and mortgages, as SBI involves stringent verification procedures and take long time for processing

PERFORMANCE INTERVIEW

Performance interview is another step in the appraisal process. Once appraisal has been made of employees, the raters should discuss and review the performance with the rates, so that they will receive feedback about where they stand in the eyes of superior. Feedback is necessary to effect improvement in performance, especially when it is inadequate. Specifically, performance interview has three goals: (i) to change behaviour of employees whose performance does not meet organizational requirements or their own personal goals. (ii) To maintain the behaviour of employees who perform in an acceptable manner and (iii) to recognize superior performance behaviours so that they will be continued.

Raters offer feedback to the rates through several methods-tell and sell, tell and listen, problem solving and mixed. In tell and sell, also called directive interview, the interviewer let assesses know how well they are doing and sells them on the merits of setting specific goals for improvement, if needed. The tell and listen interview provides the subordinates with chances to participate and establish a dialogue with their superiors. Its purpose is to communicate the rater's perceptions about the rate's strength and weaknesses and let the subordinates respond to these perceptions. In the problem -solving or participative interview, an active and open dialogue is established between the superior and the subordinate. Not only are perceptions shared, but also solutions to problems are presented, discussed, and sought. Mixed interview is a combination of tell and sell and problem solving interviews.

Whatever be the approach followed, the emphasis in the interview should be on counseling and development and not on criticism, witch-hunting and buck passing. Because of the significance of appraisal interview, every effort must be made to make it effective. Guidelines given in Table below will help make the interview successful.

GUIDELINES FOR EFFECTIVE APPRAISAL INTERVIEW

Select a good time Minimize interruptions Welcome, set at ease Start with something positive Ask open ended questions to encourage discussion Listen Manage eye contact and body language Be specific Rate behaviour, not personality Layout development plan Encourage subordinate participation Complete form Set mutually agreeable goals for improvement End in a positive, encouraging note Set time for any follow up meetings

USE OF APPRAISAL DATA

The final step in the evaluation process is the use of evaluation data. The data and information generated through performance evaluation must be used by the HR department.

It may be recollected that the most significant rewards employers offer to employees are:

1. Money to purchase goods and services required not only for current and future survival, but also for the luxuries modern life has to offer.2. The opportunity to use innate and learned skills and talents in a productive manner that the individual and his or her managers and co-workers recognize as valuable.3. Opportunities to interact with other people in a favorable working environment.4. Opportunities to learn, grow, and make full use of their potential.5. A sense of performance and stability through the continuing existence of the organization and the job.6. The opportunity to perform work assignments within an environment that not only protects. But promotes physiological, emotional and psychological health. In one way or another, data and information outputs of a performance-appraisal programme can critically influence these coveted employer-employee reward opportunities. Specifically, the data and information will be useful in the following areas of HRM:I. Remuneration administration2. Validation of selection programmes3. Employee training and development programmes4. Promotion, transfer and lay-off decisions5. Grievance and discipline programmes

CHAPTER 8APPRAISAL PROCESS

Figure below outlines the performance- appraisal process. Each step in the process is crucial and is arranged logically. The process as shown in Fig. Below is somewhat idea1ised. Many organizations make every effort to approximate the ideal process, resulting in first-rate appraisal systems. Unfortunately, many others fail to consider one or more of the steps and, therefore, have less-effective appraisal system.

Objectives ofAppraisal

Establish jobExpectation

Design an appraisal performance

Performance interview

Use appraisal data for appropriate purposes

1. Objectives of Appraisal Objectives of appraisal as stated above include effecting promotions and transfers, assessing training needs, awarding pay increases, and the like. The emphasis in all these is to correct problems. Theses objectives are appropriate as long as the approach in appraisal is individual. Appraisal in future, would assume systems orientations. In the systems approach, the objectives of appraisal stretch beyond the traditional ones.In the systems approach, appraisal aims at improving the performance, instead of merely assessing it. Towards this end, an appraisal system seeks to evaluate opportunity factors. Opportunity factors include the physical environment such as noise, ventilation and lightings, available resources such as human and computer assistance and social processes such as leadership effectiveness. These opportunity variables are more important than individual abilities in determining work performance.

In the systems approach the emphasis is not on individual assessment and rewards or punishments. But it is on how the work systems affect an individuals performance. In order to use a systems approach, managers must learn to appreciate the impact that systems levels factors have on individual performance and subordinates must adjust to lack of competition among individuals. Thus, if a systems approach is going to be successful, the employee must believe that by working towards shared goals, everyone will benefit. Not that the role of the individual is undermined. The individual is responsible for a large percentage of his or her work performance. Employees should not be encouraged to seek organizational reasons for his failures. The identifications of systems obstacles should be used to facilitate development and motivation, not as an excuse to poor performance. The following table displays some of the differences between the traditional approach and the systems-oriented one.

PERFORMANCE APPRISAL SYSTEM

TraditionalModern

Guiding value Primary rolesAttribution to individualControl, documentationAttribution to systemsDevelopment, problem solving

Leadership practicesAppraisal frequencyDirectional, evaluativeOccasionalFacilitative, coachingFrequent

Degree of formalityReward practicesHighIndividual orientationLow Group orientation

2. Establish Job Expectations

The second step in the appraisal process is to establish job expectations. This includes informing the employee what is expected of him or her on the job. Normally, a discussion is held with his or her superior to review the major duties contained in the job place of formal performance evaluation.

3. Design Appraisal Programme

Designing an appraisal programme poses several questions which we need to answers. They are: -1. Formals versus informal appraisal2. Whose performance is to be assessed?3. Who are the raters?4. What problems are encountered?5. How to solve the problems?6. What should be evaluated?7. When to evaluate?8. What methods of appraisal are to be used?

CHAPTER 9METHODS OF APPRAISAL

The last to be addressed in the process of designing an appraisal programme is to determine methods of evaluation. Numerous methods have been devised to measure the quantity and quality of employees job performance. Each of the methods discussed could be effective for some purposes, for some organizations. None should be dismissed or accepted as appropriate except as they relate to the particular needs of the organization or of a particular type of employees. Broadly, all the approaches to appraisal can be identified into (i) past-oriented methods, and (ii) future-oriented methods. Each group has several techniques as shown in the figure below: Appraisal MethodsPast-Oriented MethodsRating Scales: This is the simplest and most popular technique for appraising employee performance; the typical rating-scale system consists of several numerical scales, each representing a job-related performance criterion such as dependability, initiative, output, attendance, attitude, co-operation, and the like. Each scale ranges from excellent to poor. The rater checks the appropriate performance level on each criterion, and then computes the employees total numerical score. The number of points scored may be linked to salary increases, whereby so many points equal a rise of some percentage.

RATING SCALE

Instructions: For the following performances factors, please indicate on the rating Scale your evaluation of the employee named below:Employees Name: DepartmentRaters Name Date.

Excellent Good Acceptable Fair Poor 5 4 3 2 1

1. Dependability ------ ------ ------ ----- -----

2. Initiative ------ ------ ------ ----- -----

3. Overall Output ------ ------ ------ ----- -----

4. Attendance ------ ------ ------ ----- -----

5. Attitude ------ ------ ------ ----- -----

6. Co-Operation ------ ------ ------ ----- -----

------ ------ ------ ----- -----

------ ------ ------ ----- -----

------ ------ ------ ----- -----

20. Quality of Work ------ ------ ------ ----- ----- TOTAL + + + +

TOTAL SCORE

Rating scales offer the advantages of adaptability, relatively easy use and low cost. Nearly every type of job can be evaluated in a short time, and the rater does not need any training to use the scale. The disadvantages of this method are several. The raters biases are likely to influence evaluation, and the biases are particularly pronounced on subjective criteria such as co-operation, attitude and initiative. Furthermore, numerical scoring gives an illusion of precision that is really unfounded.

Checklist: Under this method a checklist of statements on the traits of the employee and his or her job is prepared in 2 columns viz., a Yes column and a No column. All that the rater (immediate superior) should is tick the Yes column if the answer to the statement is positive and in column No if the answer is negative. A typical checklist is given in the table below. After ticking off against each item, the rater forwards the list to the HR department. The HR department assigns certain points to each Yes ticked. Depending upon the number of Yes the total score is arrived at. When points are allotted to the checklist, the technique becomes a weighted checklist. The advantages of as checklist are economy, ease of administration, limited training of rater, and standardization. The disadvantages include susceptibility to raters biases (especially the halo effect), use of personality criteria instead of performance criteria, misinterpretation of checklist items, and the use of improper weights by the HR department. Another disadvantage of this approach is that it does not allow the rater to give up relative ratings.

Table: - Checklist for Operators

SR. NO.QUESTIONSYESNO

1.Is the employee really interested in the job?--

2.Does he or she possess adequate knowledge about the job--

3.Is his or her attendance satisfactory?--

4.Does he/she maintain his/her equipment in good condition?--

5.Does he/she co-operate with co-workers?--

6.Does he/she keep his/her temper?--

7.Does he/she obey orders?--

8.Does he/she observe safety precautions?--

9.Does he/she complete what he/she commences?--

10.Does he/she evade responsibility?--

Forced Choice Method: In this, the rater is given a series of statements about an employee. These statements are arranged in blocks of 2 or more, and the rater indicates which statement is most or least descriptive of the employee. Typical statements are :1. Learns fast _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ works hard2. Work is reliable_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ performance is a good example for3. Absents often_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ others usually tardy.As in the checklist method, the rater is simply expected to select the statements that describe the rate. Actual assessment is done by the HR Department. This approach is known as the forced choice method because the rater is forced to select statements, which are readymade. The advantage of this method is the absence of personal bias in rating. The disadvantage is that the statements may not be properly framed they may not be precisely descriptive of the ratees traits.

Forced Distribution Method:

One of the errors in rating is leniency clustering a large number of employees around a high point on a rating scale. The forced distribution method seeks to overcome the problem by compelling the rater to distribute the ratees on all points on the rating scale. The method operates under an assumption that the employee performance level conforms to a normal statistical distribution. Generally, it is assumed that employee performance levels conform to a bell shaped curve. For example, the following distribution might be assumed to exist excellent 10 %, good 20 %, average 40 %, below average 20 %, and unsatisfactory 10 %. The major weakness of the forced distribution method lies in the assumption that the employee performance levels always conform to a normal distribution. In organizations that have done a good job of selecting and retaining only the good performers, the use of forced distribution approach would be unrealistic, as well as possibly destructive to the employee morale. The error of central tendency may also occur, as the rater resists from placing an employee in the lowest or in the highest group. Difficulties also arise for the rater to explain to the rate why he or she has been placed in a particular group. One merit of this approach is that it seeks to eliminate the error of leniency. However, the forced choice method is not acceptable to raters and ratees, especially, in small groups or when group members are of high ability.Critical Incidents Method: The critical incidents method of employee assessment has generated a lot of interest these days. The approach focuses on certain critical behaviors of an employee that make all the difference between effective and non-effective performance of a job. The supervisors as and when they occur record such incidents. CONTINUING DUTIES TARGETSCRITICAL INCIDENTS

Schedule Production for PlantFull Utilization of personnel and machinery in the plant, order delivered on timeInstituted new production scheduling system; decreased late orders by 10% last month; increased machine utilization in plant by20% last month

Supervise procurement of raw materials and inventory controlMinimize inventory costs while keeping adequate supplies on handLet inventory storage costs rise 15% last month; Over Ordered parts A and B by 20%;Under Ordered part C

Supervise machinery maintenance No shutdowns due to faulty machineryInstituted new preventive maintenance system for plant;Prevented a machine breakdown by discovering faulty part.

One of the advantages of the critical incidents methods is that the evaluation is based on actual job behavior. Further, the approach has descriptions in support of particular ratings of an employee. Giving job-related feedback to the ratee is also easy. It also reduces the personal biases, if raters record incidents throughout the rating period. Finally, this approach can increase the chances that the subordinates will improve because they learn more precisely what is expected of them. The method however has significant limitations. These include:1. Negative incidents are generally more noticeable that positive ones.2. The recording of incidents is a chore to the supervisor and may be put off an easily forgotten. 3. Overly close supervision may result.4. Managers may unload a series of complaints about incidents during an annual performance review session. The feedback may be too much at one time and thus appearing as a punishment to the rate. More appropriately, the management should use incidents of poor performance as opportunities for immediate training and counseling.

Behaviorally Anchored Rating Scales: Behaviorally Anchored Scales, sometimes called behavioral expectation scales, are rating scales whose scale points are determined by statements of effective and ineffective behaviors. They are said to be behaviorally anchored in that the scales represent a range of descriptive statements of behavior varying from the least to the most effective. A rater must indicate which behavior on each scale best describes an employees performance.

Behaviorally anchored rating scales (BARS) have the following features:

1. Areas of performance to be evaluated are identified and defined by people who will use the scales.2. The scales are anchored by descriptions of actual job behavior that, supervisors agree, represent specific levels of performance. The result is a set of rating scales in which both dimensions and anchors are precisely defined.3. All dimensions of performance to be evaluated are based on observable behaviors and are relevant to the job being evaluated since BARS are tailor-made for the job.4. Since the raters who will actually use the scales are actively involved in the development process. They are more likely to be committed to the final product. BARS were developed to provide results which subordinates could use to improve performance.Superiors would feel comfortable to give feedback to the rates. Further, BARS help overcome rating errors. Unfortunately, this method too suffers from distortion inherent in most rating techniques.

Field Review Method

This is an appraisal by someone outside the, assessors own department. Usually someone from the corporate office or the HR department. The outsider reviews Employee records and holds interviews with the ratee and his or her superior.This method is primarily used for making promotional decision at the managerial level. Field reviews are also useful when comparable information is needed from employees in different units or locations.

CHAPTER 10360-DEGREE FEEDBACK

As stated earlier, where multiple raters are involved in evaluating performance, the technique is called 360 degree appraisal. The 360 degree technique is understood as systematic collection of performance data on an individual or group, derived from a number of stakeholders--the stakeholders being the immediate supervisors. team members, customers, peers, and self. In fact, anyone who has useful information on how an employee does the job may be one of the appraisers.

The 360-degree appraisal provides a broader perspective about an employee's performance. In addition, the technique facilitates greater self-development of the employees. For one's development, multi-source feedback is highly useful. It enables an employee to compare his or her perceptions about self with perceptions of others. Besides, the 360-dcgree appraisal provides formalized communication links between an employee and his or her customers. It makes the employee feel much more accountable to his or her internal or external customers. The technique is particularly helpful in assessing soft skills possessed by employees. By design, the 360-degree appraisal is effective in identifying and measuring interpersonal skill, customer satisfaction, and team-building skills.

However, there are drawbacks associated with the 360-degree feedback. Receiving feedback on performance from multiple sources can be intimidating. It is essential that the organization create a non - threatening environment by emphasizing the positive impact of the technique on an employee's performance and development. Further, firms that use the technique take a long time on selecting the rater, designing questionnaires, and analyzing the data. In addition; multiple raters are less adept at providing a balanced and objective feedback than the supervisors who are sought to be replaced. Raters can have enormous problems separating honest observations from personal differences andbiases.

APPRAISE THE PERFORMANCE

The next step in the appraisal process is to measure the performance. We revert to the moral of the story narrated in the beginning of this chapter. The moral taught us that we need to measure the performance and not mere activities.

What then is performance? Performance is essentially what an employee does or does not do. Employee performance common to most jobs include the following elements: Quantity of output Quality of output Timeliness of output Presence at work Cooperativeness

In addition to these, other elements that deserve assessment are job knowledge, leadership abilities, judgement, supervision, versatility and health. Assessment should also include one's potential to perform and not just actual performance.

Performance measurement needs to be based on the benchmarks listed above. These benchmarks vary from job to job. The job of a professor needs to be assessed against parameters that are different to those used to evaluate the performance of a sales representative.

LEGAL ISSUES ASSOCIATED WITH PERFORMANCE APPRAISAL

Performance appraisal data as stated earlier, are used to make many important HR decisions (e.g. Pay, promotion, training, transfer and termination). The appraisal system is a common target of legal disputes by employees involving charges of unfairness and bias. An employee may seek the legal recourse to obtain relief from a discriminatory performance appraisal. One such case goes back to 1980s. In 1981, three junior employees of Williamsons Magor were promoted superseding 15 of their senior workmen. The basis for promotion was recommendations of the departmental heads and other authorities. The 15 workmen challenged the promotion to the three workmen in the Supreme Court and the court upheld the contention of the petitioners on the ground that he said recommendations of departmental heads and authorities were arbitrary and could not be the main basis for effecting promotions.There are several recommendations 10 assist employees in conducting fair performance appraisal and avoiding legal suits. Gleaned from case laws, these recommendations are intended to be prescriptive measures that employers should take to develop fair and legally defensible performance appraisal systems.

1. Legally Defensible Appraisal Procedures

All personnel decisions should be based on a formal standardized performance appraisal system. Any performance appraisal process should be uniform for all employees within a job group, and decisions based on those performance appraisals should he monitored for differences according o race, sex. national origin. Religion or age of the employees. While obtained differences as a function of these variables are not necessarily illegal.

All specific performance standards should be formally communicated to employees. All employees should be able to review their appraisal results. There should be a formal appeal process for the rate to rebut rater judgments. All raters should be provided with written instructions and training on how to conduct appraisals properly to facilitate systematic, unbiased appraisals. All personnel decision-makers should be well informed of anti-discrimination laws. They should be made aware of the fine distinctions between legal and illegal activities regarding decisions based on appraisals.

2. Legally Defensible Appraisal Content

Any performance appraisal content should be based on a job analysis. Appraisals based on traits should be avoided. Objectively verifiable performance data (e.g. sales, productivity, not ratings) should be used whenever possible. Constraints on an employee's performance that are beyond the employee's control should be prevented from influencing the appraisal to ensure that the employee has an equal opportunity to achieve any given performance level. Specific job-related performance dimensions should be used rather than global measures or single overall measures. The performance dimensions should be assigned weights to reflect their relative importance in calculating the composite performance score.

3. Legally Defensible Documentation of Appraisal Results

A thoroughly written record of evidence leading to termination decisions should be maintained(e.g. performance appraisal and performance counseling to advise employees of performance deficit, and to assist poor performers in making needed improvements)

Written documentation (e.g. specific behavioural examples) for extreme ratings should he required and they must be consistent with the numerical ratings. Documentation requirements should he consistent among the raters.

4. Legally Defensive Raters

The raters should be trained in how to use an appraisal system The raters must have the opportunity to observe the rate`s first hand or to review important rate`s performance products Use of more than rater is desirable in order to lessen the amount of influence of any one rater and to reduce the effects of biases. Peers, subordinates, customers, and clients are possible sources.

CHALLENGES OF PERFORMANCE APPRAISAL With the increased significance of performance appraisal, challenges confronting the system are mounting. One serious challenge facing the performance appraisal system relates to assessment of self-managed teams. Popularly called empowered teams, these self-managed teams create special challenges for performance appraisal-empowered teams perform without supervisors. Historically, if one recalls, it is the supervisor who assesses the performance of his or her subordinates. Another challenge is that both, individual and team performance, need to be measured. A suitable device needs to be developed to assess the performance of empowered teams because more and more firms use such teams to enhance productivity. Figure below contains a typical model of team appraisal.

Identify KRAs critical to business during the yearSet tangible targets for each KRA. Incorporate stretch elements for each target. Fix the minimum acceptable targetDetermine intangible parameters (like initiative), which indicate pockets of individual excellence with the teamEvaluate performance of the team against predetermined targetsCommunicate the results to ensure transparencyMeasure the performance of the team (actual versus targets) every monthIdentify individuals who have excelled. Discount subjective factors by including assessors from outside the team to identify outstanding individuals.

The Following table contains challenges of Performance Appraisal - Challenges of Appraisal: Create a culture of excellence that inspires every employee to improve and lend himself or herself to be assessed Align organizational objectives to individual aspirations Clear growth paths for talented individuals Provide new challenges to rejuvenate careers that have reached the plateau stage Forge a partnership with people for managing their careers Empower employees to make decisions without the fear of failing Embed teamwork in all operational processes Debureaucratise the organization structure for ease of flow of information.

CHAPTER 11CONCLUSION

State bank is the one largest public sector bank. It has shown tremendous growth over the past 5 years. State bank of India has been able to withstand the acid test ofCAMELS model. However it should not rest on its laurels. SBI will also open its branches outside India. NAP of SBI has also decreased from previous year. Its CASA deposits is more than any other banks.SBI is also giving more focus on retail banking sector. It should also gear up for BASEL-III norms which are imminent in the near future. It should also strive for disruptive innovative banking practices to beat other stronger competitors, both in the domestic as well as international arena. All in all, State bank is a bank with sound fundamentals which is growing at a really fast pace but there are so many challenges which it must prepare itself for to sustain and succeed.

CHAPTER 12WEBILOGRAPHY

http://books.google.co.in/book?idhttp://www.sbi.co.inhttp://books.co.inwww.ukessays.com/challenges/business.in

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