Project of Hr

Major Project Report 2012

CHAPTER: 1

INTRODUCTION

1.1 Introduction to the study

MESCE Department of Management Science


The study was undertaken to know the employee’s perception regarding the effectiveness of

performance appraisal system at Malabar cements ltd. It consists of the systematic evaluation of

employees with respect to his/her performance on the job and potential for development.

Perception according to Kotler (1997) is the process through which people in choosing,

organizing and interpreting information in order to form a meaningful picture of the world.

According to Gibson (1996) is the process of person perception in understanding the

environment that involves organizing and interpretation as stimuli in a psychological experience.

The performance evaluation (performance appraisal) is a key factor in order to develop an

organization effectively and efficiently. Individual performance appraisal is very beneficial for

the growth dynamics of the organization as a whole. Performance appraisal is “the process of

evaluating how well employees perform their jobs when compared to a set of standards, and then

communicating that information to those employees “(Mathis and Jackson, 2000).

Cement Industry in India is on a roll at the moment. Driven by a booming real estate sector,

global demand and increased activity in infrastructure development such as state and national

highways, the cement industry has witnessed tremendous growth. Production capacity has gone

up and top cement companies of the world are to enter the Indian market, there by sparking off a

spate of mergers and acquisitions. Indian cement industry is currently ranked second in the world

Malabar Cements Ltd. Is a flagship company of the Government of Kerala. The company was

incorporated on August 11, 1978 and commenced production on April 24, 1984. This industrial

unit has a capital outlay of Rs.680 million. The factory is rated to produce 4.2 lakh tones cements

per annum. The company meets about 10 % of total cement consumption in Kerala. The

company moves with a work force of over 1000 dedicated and highly skilled personnel. Malabar

Cements have the state of the art, dry process technology for manufacture of super quality

cement, quality much above the national standard.

1.2 Need for the study



The study was conducted at Malabar cements Ltd, to understand the employee’s perception

regarding the effectiveness of performance appraisal system. The purpose of this study is to find

out how far the employees are perceived with the existing performance appraisal provided by the

Malabar cements and also tries to find out if the performance appraisal system provided is

sufficient enough to improve their performance level.

1.3 Objectives of the study

Primary objective

To study the employees perception regarding the effectiveness of performance appraisal

system.

Secondary objectives

To identify the employees expectation from the performance appraisal system

To evaluate the managerial attributes about their managers

To study employee’s perception regarding the present performance appraisal system

1.4 Problem statement

For any organization, employees are the main party to receive more concentration so that the

business organization has a successful future. Here the management of Malabar Cements

suspects that there lies some sort of defects in their performance appraisal methods followed by

the organization.



CHAPTER: 2

INDUSTRY PROFILE



1. INTRODUCTION

The cement industry is one of the main beneficiaries of the infrastructure boom. With robust

demand and adequate supply, the industry has bright future. The Indian Cement Industry with

total capacity of 165 million tones is the second largest after China. Cement industry is

dominated by 20 companies who account for over 70% of the market. Individually no company

accounts for over 12% of the market. The major players like L&T and ACC have been quiet

successful in narrowing the gap between demand and supply. Private housing sector is the major

consumer of cement (53%) followed by the government infrastructure sector. Similarly northern

and southern region consume around 20%-30% cement while the central and western region are

consuming only 18%-16%.India is the 2nd largest cement producer in world after china .Right

from laying concrete bricks of economy to waving fly over’s cement industry has shown and

shows a great future. The overall outlook for the industry shows significant growth on the back

of robust demand from housing construction, Phase-II of NHDP (National Highway

Development Project) and other infrastructure development projects. Domestic demand for

cement has been increasing at a fast pace in India. Cement consumption in India is forecasted to

grow by over 22% by 2009-10 from 2007- 08.Among the states, Maharashtra has the highest

share in consumption at 12.18%,followed by Uttar Pradesh, In production terms, Andhra Pradesh

is leading with 14.72% of total production followed by Rajasthan. Cement production grew at

the rate of 9.1 per cent during 2006-07 over the previous fiscal's total production of 147.8 mt

(million tons). Due to rising demand of cement the sales volume of cement companies are also

increasing & companies reporting higher production, higher sales and higher profits. The net

profit growth rate of cement firms was 85%.

Cement industry has contributed around 8% to the economic

development of India. Outsiders (foreign players) eyeing India as a major market to invest in the

form of either merger or FDI (Foreign Direct Investment). Cement industry has a long way to go

as Indian economy is poised to grow because of being on verge of development. The company

continues to emphasize on reduction of costs through enhanced productivity, reduction in energy

costs and logistics expenses. The cement sector is expected to witness growth in line with the

economic growth because of the strong co-relation with GDP. Future drivers of cement demand

growth in India would be the road and housing projects. As per the Working Group report on

Cement Industry for the formulation of the 11th Plan, the cement demand is likely to grow at



11.5 per cent per annum during the 11th Plan and cement production and capacity by the end of

the 11th Plan are estimated to be 269 million tones and 298 million tones, respectively, with

capacity utilization of 90 per cent. Despite the growth of Indian cement industry India lags

behind the per capita production. Supply for cement is expected to remain tight which, in turn,

will push up prices of cement by more than 50%. The most important factor for better prices is

consolidation of the industry. It has just begun and we will see more consolidation in the coming

years. Other budget measures such as cut in import duty from 12.5 per cent to nil etc. are all

intended to cut costs and boost availability of cement. Sadly the adverse effects of global

slowdown have not speared this industry too. Demand is sluggish, the government is keeping an

eagle eye on prizes, domestic coal and pet coke, prizes have increased sharply and utilizations

rates are down. The numbers coming out are a reflection of grim times.

ACC the country’s largest cement company that’s controlled by

Swiss giant HOLCIM, registered 2% fall in august sales. It is the biggest fall since Feb 2007.

Production fell by 5%. To stand against the problematic situation, government as well as cement

industry has taken some steps. Companies are focusing on cost of transportation. One of the

strategy is to decrease dependence on road & opt for sea logistics as that can cut transportation

cost by 30- 50 %. Some plants are adopting futuristic plan such as setting up captive power plant,

moving closer to the customers by creating clicker, crushing, and capacity in key markets, to be

more customer centric to generate better revenue. India should push for stricter regulations of

market place as to control the prices of big companies and prevent them from forming cartels and

exchanging information. To fight with the high inflation, government wants to import more

cement from Pakistan .However cement prizes are not very much high as other items but still

they are increasing. And the reason of high prize is surging cost of raw material and

transportation cost.

Apart from this government also discussed with cement industry not

to have increase in prizes and keep consumer interest in mind. Now the question arise in front of

the government is whether the demand by the government is possible to increase through

expenditure on infrastructure or not according to the current state of economy when so many

crises are going on or how the government allocation of US$ 3.23 billion for the National

Highway Development, Project will keep the demand for cement alive? And to what extent the

prizes of cement should be increase so that consumer can’t affect. Cement industry in India has



also made tremendous strides in technological up gradation and assimilation of latest technology.

Presently, 93 per cent of the total capacity in the industry is based on modern and environment-

friendly dry process technology. The induction of advanced technology has helped the industry

immensely to conserve energy and fuel and to save materials substantially. Indian cement

industry has also acquired technical capability to produce different types of cement like Ordinary

Portland Cement (OPC), Portland Pozzolana Cement (PPC), Portland Blast Furnace Slag Cement

(PBFS), Oil Well Cement, Rapid Hardening Portland Cement, Sulphate Resisting Portland

Cement, White Cement etc. Some of the major clusters of cement industry in India are: Satna

(Madhya Pradesh), Chandrapur (Maharashtra), Gulbarga (Karnataka), Yerranguntla (Andhra

Pradesh), Nalgonda (Andhra Pradesh), Bilaspur (Chattisgarh), and Chandoria (Rajasthan).

2. CURRENT SCENARIO

The Indian cement industry is the second largest producer of quality cement, which meets global

standards. The cement industry comprises 130 large cement plants and more than 300 mini

cement plants. The industry's capacity at the end of the year reached 188.97 million tons which

was 166.73 million tons at the end of the year 2006-07. Cement production during April to

March 2007-08 was 168.31 million tons as compared to 155.66 million tons during the same

period for the year 2006- 07.Despatches were 167.67 million tons during April to March 2007-

08 whereas 155.26 during the same period. During April-March 2007-08, cement export was

3.65 million tons as compared to 5.89 during the same period. Cement industry in India is

currently going through a consolidation phase. Some examples of consolidation in the Indian

cement industry are: Gujarat Ambuja taking a stake of 14 per cent in ACC, and taking over DLF

Cements and Modi Cement; ACC taking over IDCOL; India Cement taking over Raasi Cement

and Sri Vishnu Cement; and Grasim's acquisition of the cement business of L&T, Indian Rayon's

cement division, and Sri Digvijay Cements. Foreign cement companies are also picking up

stakes in large Indian cement companies. Swiss cement major Holcim has picked up 14.8 per

cent of the promoters' stake in Gujarat Ambuja Cements (GACL). Holcim's acquisition has led to

the emergence of two major groups in the Indian cement industry, the Holcim-ACC-Gujarat

Ambuja Cements combine and the Aditya Birla group through Grasim Industries and Ultratech

Cement. Lafarge, the French cement major has acquired the cement plants of Raymond and



Tisco. Italy based Italcementi has acquired a stake in the K.K. Birla promoted Zuari Industries'

cement plant in Andhra Pradesh, and German cement company Heidelberg Cement has entered

into an equal joint-venture agreement with S P Lohia Group controlled Indo- Rama Cement.

3. PROCESS TECHNOLOGY

While adding fresh capacities, the cement manufacturers are very conscious of the technology

used. In cement production, raw materials preparation involves primary and secondary crushing

of the quarried material, drying the material (for use in the dry process) or undertaking a further

raw grinding through either wet or dry processes, and blending the materials. Clinker production

is the most energy intensive step, accounting for about 80% of the energy used in cement

Production. Produced by burning a mixture of materials, mainly limestone, silicon oxides,

aluminum, and iron oxides, clinker is made by one of two production processes: wet or dry; these

terms refer to the grinding processes although other configurations and mixed forms (semi-wet,

semi-dry) exist for both types. In the dry process, the raw materials are ground, mixed, and fed

into the kiln in their dry state. In the wet process, the crushed and proportioned materials are

ground with water, mixed, and fed into the kiln in the form of slurry. Different types of cement

that are produced in India are:

• Ordinary Portland cement (OPC):

OPC, popularly known as grey cement, has 95 per cent clinker and 5 per cent gypsum and other

materials. It accounts for 70 per cent of the total consumption.

• Portland Pozzolana Cement (PPC):

PPC has 80 per cent clinker, 15 per cent pozzolana and 5 per cent gypsum and accounts for 18

per cent of the total cement consumption. It is manufactured because it uses fly ash/burnt

clay/coal waste as the main ingredient.

• White Cement:

White cement is basically OPC - clinker using fuel oil (instead of coal) with iron oxide content

below 0.4 per cent to ensure whiteness. A special cooling technique is used in its production. It is

used to enhance aesthetic value in tiles and flooring. White cement is much more expensive than

grey cement.

• Portland Blast Furnace Slag Cement (PBFSC):



PBFSC consists of 45 per cent clinker, 50 per cent blast furnace slag and 5 per cent gypsum and

accounts for 10 per cent of the total cement consumed. It has a heat of hydration even lower than

PPC and is generally used in the construction of dams and similar massive constructions.

• Specialized Cement:

Oil Well Cement is made from clinker with special additives to prevent any porosity.

• Rapid Hardening Portland cement:

Rapid Hardening Portland Cement is similar to OPC, except that it is ground much finer, so that

on casting, the compressible strength increases rapidly.

• Water Proof Cement:

Water Proof Cement is similar to OPC, with a small portion of calcium stearate or non-

saponifibale oil to impart waterproofing properties.

4. PROCEDURE

The main raw materials used in the cement manufacturing process are limestone, sand, shale,

clay, and iron ore. The main material, limestone, is usually mined on site while the other minor

materials may be mined either on site or in nearby quarries. Another source of raw materials is

industrial by-products. The use of byproduct materials to replace natural raw materials is a key

element in achieving sustainable development.

Raw Material Preparation

Mining of limestone requires the use of drilling and blasting techniques. The blasting techniques

use the latest technology to insure vibration, dust, and noise emissions are kept at a minimum.

Blasting produces materials in a wide range of sizes from approximately 1.5 meters in diameter

to small particles less than a few millimeters in diameter. Material is loaded at the blasting face

into trucks for transportation to the crushing plant. Through a series of crushers and screens, the

limestone is reduced to a size less than 100 mm and stored until required. Depending on size, the

minor materials (sand, shale, clay, and iron ore) may or may not be crushed before being stored

in separate areas until required.

Raw Grinding



In the wet process, each raw material is proportioned to meet a desired chemical composition and

fed to a rotating ball mill with water. The raw materials are ground to a size where the majority

of the materials are less than 75 microns. Materials exiting the mill are called "slurry" and have

flow ability characteristics. This slurry is pumped to blending tanks and homogenized to insure

the chemical composition of the slurry is correct. Following the homogenization process, the

slurry is stored in tanks until required. In the dry process, each raw material is proportioned to

meet a desired chemical composition and fed to either a rotating ball mill or vertical roller mill.

The raw materials are dried with waste process gases and ground to a size where the majority of

the materials are less than 75 microns. The dry materials exiting either type of mill are called

"kiln feed". The kiln feed is pneumatically blended to insure the chemical composition of the

kiln feed is well homogenized and then stored in silos until required.

Preprocessing

Whether the process is wet or dry, the same chemical reactions take place. Basic chemical

reactions are: evaporating all moisture, claiming the limestone to produce free calcium oxide,

and reacting the calcium oxide with the minor materials (sand, shale, clay, and iron). This results

in a final black, nodular product known as "clinker" which has the desired hydraulic properties.

In the wet process, the slurry is fed to a rotary kiln, which can be from 3.0 m to 5.0 m in diameter

and from 120.0 m to 165.0 m in length. The rotary kiln is made of steel and lined with special

refractory materials to protect it from the high process temperatures. Process temperatures can

reach as high as 1450oC during the clinker making process. In the dry process, kiln feed is fed to

a preheated tower, which can be as high as 150.0 meters. Material from the preheated tower is

discharged to a rotary kiln with can have the same diameter as a wet process kiln but the length

is much shorter at approximately 45.0 m. The preheated tower and rotary kiln are made of steel

and lined with special refractory materials to protect it from the high process temperatures.

Regardless of the process, the rotary kiln is fired with an intense flame, produced by burning

coal, coke, oil, gas or waste fuels. Preheated towers can be equipped with firing as well. The

rotary kiln discharges the red-hot clinker under the intense flame into a clinker cooler. The

clinker cooler recovers heat from the clinker and returns the heat to the preprocessing system



thus reducing fuel consumption and improving energy efficiency. Clinker leaving the clinker

cooler is at a temperature conducive to being handled on standard conveying equipment.

Finish Grinding and Distribution

The black, nodular clinker is stored on site in silos or clinker domes until needed for cement

production. Clinker, gypsum, and other process additions are ground together in ball mills to

form the final cement products. Fineness of the final products, amount of gypsum added, and the

amount of process additions added are all varied to develop a desired performance in each of the

final cement products. Each cement product is stored in an individual bulk silo until needed by

the customer. Bulk cement can be distributed in bulk by truck, rail, or water depending on the

customer's needs. Cement can also be packaged with or without color addition and distributed by

truck or rail.

5. DEMAND & SUPPLY

The demand drivers for the cement sector continue to be housing, infrastructure and commercial

construction, etc. We expect the proportion of infrastructure in total demand to improve further

in future, as the thrust on infrastructure development is on the rise. During April-November

2007, cement demand grew by 10 per cent year on- year (y-o-y) propelled by the growth

witnessed in end user segments such as housing, infrastructure etc. CRISIL Research expects

demand to remain strong and grow by over 12 per cent in the next 2 years. Cement demand is

expected to outstrip supply for the next year and a half as no major capacities are coming on

stream, thus providing enough flexibility to cement manufacturers to further hike the prices.

Today, cement from Andhra is going all over India, including Assam, Meghalaya, Jharkhand,

Orissa, West Bengal, Chattisgarh, Gujarat and Maharashtra. More cement is likely to flow into

Tamil Nadu from the state in view of cut in sales tax. Any further increase in demand in the

South India will benefit the cement industry here. Cement movement from Gujarat to Mumbai is

also coming down due to exports while cement movement from Orissa into Andhra has stopped

and, in fact, cement is flowing into Orissa as well. Earlier in 2006-07, the housing sector alone

consumed 65 per cent of the total domestic consumption. With the launch of several



infrastructure projects, the housing consumption may come down to 55 per cent as the

infrastructure and other sectors are expected to move up to 45 per cent from the present 35 per

cent. Still, the main sector of consumption continues to be housing, including commercial space,

occupying more than 60 per cent. The current demand in the state for 2005- 06 is expected to

cross 15 million tons (11.5 million tons). We expect the demand here to go past the 17.5-million

mark in 2006-07 in view of irrigation and infrastructure projects being taken up in the state.

Weaker sections’ housing, construction of public toilets, schools in rural areas apart from several

private and public infrastructure projects will also give tremendous boost to the cement

consumption in the state. Most importantly, irrigation projects, worth nearly Rs 1 lakh crore, will

trigger unprecedented demand for the next 5-7 years. Cement consumptions are as follows:

6. DEMAND DRIVERS

Indian cement demand skewed towards housing

The demand from the housing sector is ~53% of the total Indian cement demand. There are fears

of a slowdown in the demand from the housing sector due to a drop in real estate prices in the

country. The worry is that builders may postpone construction of new buildings if the property

prices were to correct.

Infrastructure to give demand a big boost

Our analysis shows that Infrastructure should be the biggest growth driver for cement demand in

the country. If we were to look only at order books of the top eight construction and

manufacturing equipment companies in India, we find that their combined order book has

virtually doubled over the last two years from INR1,000bn (USD25bn) to INR1,950bn

(USD48.75bn) for completion over the next 24-30 months.

7. COST

Over the past five years, cost of cement production has grown at a CAGR of 8.4%. Also, the

producers have been able to pass on the hike in cost to consumers on the back of increased

demand. Average realizations have increased from Rs. 1,880 per ton in FY 03 to Rs. 3,133 per

tons in FY 07, at a CAGR of 13.6%, which has been reflected in higher profit margins of the



industry. To reduce the cost of production, the industry has focused on captive power generation.

Proportion of cement production through captive power route has increased over the years. Also,

cement movement by rail has increased over the years. Freight and energy costs are also

increasing; however, in the current market scenario, manufacturers have the flexibility to pass on

the increase in costs to end consumers. Let us have a look at the cost factors affecting the cement

industry

Capacity Utilization:

Since the industry operates on fixed cost, higher the capacity sold, the wider the cost distributed

on the same base. But one should also keep in mind, that there have been instances wherein

despite a healthy capacity utilization, margins have fallen due to lower realizations.

Power:

The cement industry is energy intensive in nature and thus power costs form the most critical

cost component in cement manufacturing (about 30% to total expenses). Most of the companies

resort to captive power plants in order to reduce power costs, as this source is cheaper and results

in uninterrupted supply of power. Therefore, higher the captive power consumption of the

company, the better it is for the company.

Freight:

Since cement is a bulk commodity, transporting is a costly affair (over 15%). Companies, which

have plants located closer to the markets as well as to the source of raw materials have an

advantage over their peers, as this leads to lower freight costs. Also, plants located in coastal

belts find it much cheaper to transport cement by the sea route in order to cater to the coastal

markets such as Mumbai and the states of Gujarat and Tamil Nadu. On account of sufficient

reserves of raw materials such as limestone and gypsum, the raw material costs are generally

lower than freight and power costs in the cement industry. Excise duties imposed by the

government and labor wages are among the other important cost components involved in the

manufacturing of cement.

Operating margins:

The company should have a consistent record of outperforming its peers on the operational

performance front i.e. it should have higher operating margins than its competitors in the

industry. Factors such as captive power plants, effective capacity utilization results in higher



operating margins and therefore these factors should be looked into. Since cement is a regional

play on account of its high freight costs, the company should not have all its plants concentrated

in one region. It should have a geographical spread so that adverse market conditions in one

region can be mitigated by high growth in the other region

8. Government Policies

Government policies have affected the growth of cement plants in India in various stages. The

control on cement for a long time and then partial decontrol and then total decontrol has

contributed to the gradual opening up of the market for cement producers. The stages of growth

of the cement industry can be best described in the following stages:

Price and Distribution Controls (1940-1981)

During the Second World War, cement was declared as an essential commodity under the

Defense of India Rules and was brought under price and distribution controls which resulted in

sluggish growth. The installed capacity reached only 27.9 MT by the year 1980-81.

Partial Decontrol (1982-1988)

In February 1982, partial decontrol was announced. Under this scheme, levy cement quota was

fixed for the units and the balance could be sold in the open market. This resulted in extensive

modernization and expansion drive, which can be seen from the increase in the installed capacity

to 59MT in 1988-89 in comparison with the figure of a mere 27.9MT in 1980-81, an increase of

almost 111%.

Total Decontrol (1989)

In the year 1989, total decontrol of the cement industry was announced. By decontrolling the

cement industry, the government relaxed the forces of demand and supply. In the next two years,

the industry enjoyed a boom in sales and profits. By 1992, the pace of overall economic

liberalization had peaked; ironically, however, the economy slipped into recession taking the

cement industry down with it. For 1992-93, the industry remained stagnant with no addition to

existing capacity.

Government Controls

The prices that primarily control the price of cement are coal, power tariffs, railway, freight and

royalty on limestone. Interestingly, all of these prices are controlled by government



9. REQUIREMENTS

Coal

The consumption of coal in a typically dry process system ranges from 20-25% of clinker

production. This means for per ton clinker produced 0.20-0.25 ton of coal is consumed. This

contributes 35-40% of the production cost. The cement industry consumes about 10mn tons of

coal annually. Since coalfields like BCCL supply a poor quality of coal, NCL and CCL the

industry has to blend high-grade coal with it. The Indian coal has a low calorific value (3,500-

4,000 kcal/kg) with ash content as high as 25-30% compared to imported coal of high calorific

value (7,000-8,000 kcal/kg) with low ash content 6-7%. Lignite is also used as a fuel by blending

it with coal. However this process is not very common.

Electricity

Cement industry consumes about 5.5bn units of electricity annually while one ton of cement

approximately requires 120-130 units of electricity. Power tariffs vary according to the location

of the plant and on the production process. The state governments supply this input and hence

plants in different states shall have different power tariffs. Another major hindrance to the

industry is severe power cuts. Most of the cement producing states like AP, MP experience

power cuts to the tune of 25-30% every year causing substantial production loss.

Infrastructure

To reduce uncertainty relating to power, most of the leading companies like ACC, Indian Rayon,

and Grasim rely on captive power plants. A few companies are also considering power-

generating windmills.

Limestone

This constitutes the largest bulk in terms of input to cement. For producing one ton of cement,

approximately 1.6 ton of limestone is required. Therefore, the cement plant location is

determined by the location of limestone mines. The major cash outflow takes place in way of

royalty payment to the central government and cess on royalties levied by the state government.

The total limestone deposit in the country is estimated to be 90 billion tons. AP has the largest

share -- 34%, Karnataka 13%, Gujarat 13%, M.P 8%, and Rajasthan 6.5%. The plants near the

limestone deposit pay less transportation cost than others.



Transportation

Cement is mostly packed in paper bags now. It is then transported either by rail or road. Road

transportation beyond 200 kms is not economical therefore about 55% cement is being moved by

the railways. There is also the problem of inadequate availability of wagons especially on

western railways and southeastern railways. Under this scenario, manufacturers are looking for

sea routes, this being not only cheap but also reducing the losses in transit. Today, 70% of the

cement movement worldwide is by sea compared to 1% in India. However, the scenario is

changing with most of the big players like L&T, ACC and Grasim having set up their bulk

terminals.

Infrastructure for Future

The consumption of cement is determined by factors influencing the level of housing and

industrial construction, irrigation projects, and roads and laying of water supply and drainage

pipes etc. The level and growth of GDP and its sectoral composition, capital formation,

development expenditure, growth in population, level of urbanization, etc, in turn, determine

these factors. But the domestic demand for cement is mainly from the housing activities and

infrastructure development. The government paved the way for the entry of the private sector in

road projects. It has amended the National Highway Act to allow private toll collection and

identified projects, bridges, expressways and big passes for private construction. The budget

gave substantial incentives to private sector construction companies. Ongoing liberalization will

lead to an increase in industrial activities and infrastructure development. So it is hoped that

Indian cement industry shall boom again in near future.

Incentives in States

Most state governments, in order to attract investments in their respective states, offer fiscal

incentives in the form of sales tax exemptions/deferrals. In some states, this applies only to

intrastate sales, like Madhya Pradesh and Rajasthan. States like Haryana offer a freeze on power

tariff for 5 years, while Gujarat offers exemption from electric duty.

Installed Capacity

India is the world’s second largest cement producing country after China. The industry is

characterized by a high degree of fragmentation that has created intense competitive pressure on



price realizations. Spread across the length and breadth of the country, there are 120 large plants

belonging to 56 companies with an installed capacity of around 135mn tons as on March 2002.

10. OPPORTUNITIES, THREATS, RISKS AND CONCERNS

The cement industry is going through its boom period with full capacity utilization. Powered by

the GDP growth of 8-9%, the annual demand for cement in the country continues to grow at 8-

10%. As per NCAER study, under high growth scenario, the demand for cement (including

exports) is expected to increase to 244.82 million tons by 2010-11. As per the study, the demand

is expected to be much higher at 311.37 million tons, if the optimistic projections of the road and

the housing sectors are met. The industry has responded to this with substantial new capacity

announcements. The materialization of these capacities, however, is likely to be delayed due to a

number of factors including timely delivery of equipment and construction of the plant due to the

heavy order book position of the suppliers. It is expected that demand growth will outstrip supply

till the materialization of such new capacities. However, the current high level of international

crude prices and its impact on the domestic prices of petroleum products is likely to make a dent

in the profitability but its impact will have to be seen depending upon the ability of the economy

to pass on such cost increase to the consumer. While the freight cost could be optimized on the

imported coal through usage of company’s own ships for part of the quantity, the international

prices of imported coal and its volatility together with the strengthening of the dollar against

rupee could derail this. This could impact the delivery prices of imported coal and also the cost

of production. The Government has taken steps to increase the availability of indigenous coal for

its expanded capacity across various plants which can mitigate the impact of such high cost of

imported coal for the plants located near the coal fields in India. The Government’s continuing

efforts to rein in cement prices by freeing imports and banning exports could artificially disable

the normal market price mechanisms for determining the price. The rise in the price of cement is

because of the gap of demand & supply in the market. The demand for cement is much higher

than its actual supply. But with the production maximization, which can be encountered in next

few year, this gap may narrow down, that may ensure the market to be in equilibrium.

Decreasing per capita consumption doesn’t affect the total consumption for the cement. It means

the infrastructure; contacted housing is using the bulk of the production. In spite of High price of



the product, the hick of demand because of the increasing rate of infrastructural development.

Domestic price of cement is rising as well as the imported cement price is lowering. So

altogether the supply of the cement, which is affordable, will increase. This may in decrease the

gap between supply and demand. Major Demand was from the housing sector, which may shift

to infrastructure as lots of infrastructural development processes has already being taken up &

due to the increased price, housing segment started showing a slowdown.

11. Main Companies in India

Associated Cement Companies Ltd (ACCL)

Associated Cement Companies Ltd manufactures ordinary Portland cement, composite cement

and special cement and has begun offering its marketing expertise and distribution facilities to

other producers in cement and related areas. It has twelve manufacturing plants located

throughout the country with exports to SAARC nations. The company plans capital expenditure

through expansion of existing units and/or through acquisitions. Non-core assets are to be

divested to release locked up capital. It is also expected to actively pursue overseas project

engineering and consultancy services.

Birla Corporation Ltd.

Birla Corp's product portfolio includes acetylene gas, auto trim parts, casting, cement, jute

goods, yarn, calcium carbide etc. The cement division has an installed capacity of 4.78 million

metric tons and produced 4.77 million metric tons of cement in 2003- 04. The company has two

plants in Madhya Pradesh and Rajasthan and one each in West Bengal and Uttar Pradesh and

holds a market share of 4.1 per cent. It manufactures Ordinary Portland cement (OPC), Portland

pozzolana cement; fly ashbased PPC, Low-alkali Portland cement, Portland slag cement, low

heat cement and sulphate resistant cement. Large quantities of its cement are exported to Nepal

and Bangladesh. Going forward, the company is setting up its captive power plant to remain

Cost competitive.

Century Textiles and Industries Ltd (CTIL)

The product portfolio of CTIL includes textiles, rayon, cement, pulp & paper, shipping, property

& land development, builders and floriculture. Cement is the largest division of CTIL and

contributes to over 40 per cent of the company's revenues. The company has an installed capacity



of 4.7 million tons with a total cement production of 5.43 million tons in 2003-04. CTIL has four

plants that manufacture cement, one in Chhattisgarh, two in Madhya Pradesh and one in

Maharashtra. Going forward, the company has scripted a three-pronged strategy closing down its

shipping business, continuing with its chemicals and adhesive division, and focusing on cement,

rayon and paper as its long term business plan.

Grasim-UltraTech Cemco

Grasim's product profile includes viscose staple fibre (VSF), grey cement, white cement, sponge

iron, chemicals and textiles. With the acquisition of Ultra Tech, L&T's cement division in early

2004, Grasim has now become the world's seventh largest cement producer with a combined

capacity of 31 million tons. Grasim (with Ultra Tech) held a market share of around 21 per cent

in 2003-04. It has plants in Madhya Pradesh, Chhattisgarh, Punjab, Rajasthan, Tamil Nadu and

Gujarat among others. The company plans to invest over US$ 9 million in the next two years to

augment capacity of its cement and fibre business. It’s also plans to focus on its international

ventures, ramping up the capacity of Alexandra Carbon Black in Egypt to 1,70,000 tons per

annum (from 1, 20,000 tpa) and raising the capacity of the carbon black plant in China from

12,000 tpa to 60,000 tpa.

Gujarat Ambuja Cements Ltd (GACL)

Gujarat Ambuja Cements Ltd was set up in 1986 with the commencement of commercial

production at its 2 million tons plant in Chandrapur, Maharashtra. The group has clinker

manufacturing facilities at Himachal Pradesh, Gujarat, Maharashtra, Chhattisgarh, Punjab and

Rajasthan. The company has a market share of around 10 per cent, with a strong foothold in the

northern and western markets. Its total sales aggregated US$ 526 million with a capacity of 12.6

million tons in 2003-04. Gujarat Ambuja is India's largest cement exporter and one of the most

cost efficient firms. GACL has a 14.45 per cent stake in ACC, making it the second largest

cement group in the country, after Grasim-UltraTech Cemco. The company has free cash flows

that it is likely to use to grow inorganically. The company is scouting for a capacity of around

two million tons in the northern and western markets. It has also earmarked around US$ 195-220

million for acquisitions

India Cements

India Cements is the largest cement producer in southern India with a total capacity of 8.81

million tons and plants in Andhra Pradesh and Tamil Nadu. The company has a market share of



5.4 per cent with a total cement production of 6.36 million tons in 2003-04. Its product portfolio

includes ordinary Portland cement and blended cement. The company has limited its business

activity to cement, though it has a marginal exposure to the shipping business. The company

plans to reduce its manpower significantly and exit non-core businesses to turnaround its fortune.

It also expects the export market to open up, with the Gulf emerging as a major importer.

Jaiprakash Associates Limited

Jaiprakash Industries, now known as Jaiprakash Associates Limited (JAL) is part of the Jaypee

group with businesses in civil engineering, hospitality, cement, hydropower, design consultancy

and IT. It has an annual capacity of 4.6 million tons with plants located in Rewa & Bela (Madhya

Pradesh) and Sadva Khurd (Uttar Pradesh). The company has a market share of 3.8 per cent with

the cement division contributing US$ 172 million to revenue in 2003-04. The company is

upgrading its capacity to 6.5 million tons through the modernizing of the existing units and the

commissioning of a new grinding unit at Tanda (Uttar Pradesh) with an investment of US$ 163

million. Jaiprakash Associates has decided to concentrate on its core business of construction and

engineering and leave its cement plant to its subsidiary Jaypee Rewa Cement Ltd. The company

manufactures a wide range of world class cement of OPC grades 33, 43, 53, IRST-40 and special

blends of pozzolana cement.

JK Synthetics

JK Synthetics, a Singhania Group company, started manufacturing nylon at Kota in 1962.

Subsequently, it diversified into PSY/PFY, nylon tyre-cord, cement (in 1975), acrylic and white

cement (in 1984). The company has a market share of 2.7 per cent. JK Synthetics Limited is

restructuring its business divisions into two separate entities- JK Cements and JK Synthetics.

After the restructuring, it will be left with a cement plant at Nimbahera in Rajasthan, with a

capacity of 3.26 million metric tons and manufacturing white cement.

Madras Cements

Madras Cements Ltd is one of the oldest cement companies in the southern region and is a part

of the Ramco group. The company is engaged in cement, clinker, dolomite, dry mortar mix,

limestone; ready mix cements (RMC) and units generated from windmills. The company has

three plants in Tamil Nadu, one in Andhra Pradesh and a mini cement plant in Karnataka. It has a

total capacity of 5.47 million tons annually and holds a market share of 3.1 per cent. Madras

Cements plans to expand by putting up RMC plants. As Karnataka is a promising market, the



company is further expanding its capacity from the present 1.5 million tons to 3.4 million tons

through an investment of US$ 9 million.

Holcim

Holcim, earlier known as Holderbank, has a cement production capacity of 141.9 million tons. It

is a key player in aggregates, concrete and construction related services. It has a strong market

presence in over 70 countries and is a market leader in South America and in a number of

European and overseas markets. Holcim entered India by means of a long-term strategic alliance

with Gujarat Ambuja Cements Ltd (GACL). The alliance aims to strengthen their clinker and

cement trading activities in South Asia, the Middle East and the region adjoining the Indian

Ocean. Holcim also intends to use India as an additional base for its IT operations, R&D projects

as well as a procurement sourcing hub to generate additional synergies and value for the group.

Italcementi Group

The Italecementi group is one of the largest producers and distributors of cement with 60 cement

plants, 547 concrete batching units and 155 quarries spread across 19 countries in Europe, Asia,

Africa and North America. Italcementi is present in the Indian markets through a 50:50 joint

venture company with Zuari Cements. All initiatives in southern India are routed through the

joint venture company, while Italcementi is free to buy deals in its individual capacity in

northern India. The joint venture company has a capacity of 3.4 million tons and a market share

of 2.1 per cent.

Lafarge India

Lafarge India Pvt Ltd, a subsidiary of the Lafarge Group, has a total cement capacity of 5 million

tons and a clinker capacity of 3 million tons in the country. Lafarge commenced operations in

1999 and currently has a market share of 3.4 per cent. It exports clinker and cement to

Bangladesh and Nepal. It produces Portland slag cement, ordinary Portland cement and Portland

pozzolana cement. The Indian cement plants are located in Chhattisgarh and Rajasthan. Lafarge

Cement has become the largest cement selling firm in the Indian markets of West Bengal, Bihar,

Jharkhand and Chhattisgarh.



SWOT ANALYSIS OF CEMENT INDUSTRY

Strengths

The cement industry has much strength to be considered. Cement is, literally, the building

block of the construction industry. Almost every building constructed relies on cement for its

foundation. The cement business is a $10 billion industry, measured by annual cement

shipments. There is also a strong reputation behind the cement industry. Cement is a solid

material and consumers rarely have complaints about the product. Regional distribution plants

have also made cement widely available to any type of buyer.

Weaknesses

The cement industry is not without its drawbacks. The cement industry relies on

construction jobs to create a profit. But the cement industry heavily relies on weather. About

two-thirds of cement production takes place between May and October. Cement producers often

use the winter months to produce and stockpile cement, to meet demand. Another weakness is

the cost of transport; the cost of transporting cement is high and this keeps cement from being

profitable over long distances. In other words, shipping cement costs more than the profit from

selling it.

Opportunities

The cement industries have opportunities as well. One such opportunity is the cement

industry's efficiency. The cement industry has recently streamlined its production efforts, using

dry manufacturing instead of wet, which is heavier and more time-consuming. The cement

industry has also invested about $6 billion in expansion efforts to meet unmet cement needs.

Projections show that by 2012, the cement industry will have 25 percent more production

capabilities.

Threats

The nature of the economy has uncovered a number of threats to the cement industry. The

cement industry greatly relies on construction. The current economy has lessened the number of



construction jobs, which in turn hurts the cement industry. The cement industry controls the

majority of the United States market, but not all of it. About 11.5 metric tons of cement are

imported annually to support the unmet need. If other countries can produce and ship cement for

a reduced price, the U.S. cement industry is in danger. The U.S. government is also attempting to

regulate the cement industry's waste. The Environmental Protection Agency has introduced

regulations for the cement industry to cut down emissions.



CHAPTER: 3

COMPANY PROFILE



Company profile

Malabar Cements Limited is a high tech manufacturing company in the public sector, situated in

Walayar, palakkad district. Incorporated in the year 1978, the company commenced production

in 1984. The company, through its eighteen years of operation, could survive and prosper even

during the present era of liberalization and globalization.

Since 1996, company started consolidation, modernization and technical up gradation

phase to improve upon profitability, cutting production cost, improving the efficiency to face the

competitive environment. MCL achieved ISO-9002 certification in November 1996 being the

first cement factory in the public sector in the country. The major efforts of the modernization

and up gradation fronts are realigning and computerized operation of the kiln system, installation

of 2.5MW multi fuel diesel generator, belt bucket elevator etc. company could reduce production

cost and inefficiency due to these efforts.

The company achieved all time record performance during the year 1999-2000. MCL is

the first public sector company to receive the converted national award for energy conservation

from NCBM, New Delhi. Malabar cements contribute to the developmental activities of the state

by supplying a basic construction material. The presence of “Malabar” in the market helps to

control the cement price to some extent. MCL has the largest dealer network in Kerala for

cement sales. Only Malabar cements can reach its cement factory.

Fresh without any deterioration in the original strength either due to moisture or

humidity, within 12 hrs anywhere in Kerala. Company has systems to educate the consumer’s

usage of cement and provide after sales services.

Malabar Cements Limited, a fully owned Government of Kerala undertaking, is the only

major integrated cement manufacturing unit in the state. The company was incorporated in 11 th

April 1984 at its walayar plant. The company has a paid up equity of Rs 26 crores and capital

outlay of Rs 68 crors. It is rated to produce 4.2 lakh tons of cement per annum at its walayar

plant. As part of expansion program, it has commissioned a 2.0 lakh tons clinker gridding unit at

cherthala of MCL is 6.2 lakh tones. This ISO 9001:2000 company meets about 10 % of total

cement consumption in Kerala.



The customers

Malabar Cements Ltd marketing has always the customer centered, consumer satisfaction

wowed in product quality and after sales services. Not only that super quality is build in to the

produce through very sophisticated computerized process control system the dedicated and

dynamic quality control system the this superior product features are consistently maintained.

Objectives of MCL

1. To manufacture and supply quality cement at reasonable prices by making an optimum

profit

2. To ensure fair dealings with customers

3. To provide employment opportunity for the public

Quality policy

The employee of MCL commits to comply with all requirements to continually improve

the effectiveness of the quality management system and arrives.

1. To identify various groups of customer served by him

2. To understand their respective needs and desires either stated or implied

3. To ensure best possible quality in products and services

4. To meet and exceed their expectations

Credentials

Company could win several awards in the field of energy conservation, pollution control

and safety. The company has received the following awards

1. State award for the best performance in energy conservation 1995 from the state

electricity inspectors

2. Second place among large scale industries in making substantial and sustained effort in

pollution control in 1996 from Kerala pollution control board

Competitors



The main competitor of Malabar cements are sankar, corometal, L&T, ACC, RAASI,

Chettinad and others

MCL ORGANISATIONAL STRUCTURE

chairman

MD

GM

CC

FM MM OM HR PDN PRCSE

MD-Managing Director

GM-General Manager


GM(TS)GM(E) CE(

M)

GM(M)


GM (E)-General Manager (ENG)

CE (M)-Chief engineer (MECH)

GM (M)-General Manager (Mins)

CC-Chief chemist

GM (TS)-General Manager (tech service)

FM-finance

MM-marketing

OM-operations

HR-human resource

PDN-production

PURCSE-purchase

Product profile

Malabar Cements is simony for super quality, claim thousands of their customers spread

throughout the state. In Malabar cements, product improvement is not a onetime strategy for

boosting sales on the product life cycle theory. It is quest of excellence. Perfecting the product

quality is everybody’s concern here. Our distinction begins with scientifically selecting the best

raw material for clinker. Stringent quality control is exercised in relending raw materials,

clinkerisation. Clinker gridding, and finally into cement packaging.

Malabar super



Malabar super is fabulous in every sense: super in strength, wonderful in work ability,

incredible in aging, implausible in durability, and fantastic in strength gain. An AMAZING

performer!

Tests carried out by bureau of Indian standards have established unshakeable credentials

of Malabar super. Super strength accelerated setting time and fine finish. Malabar super is

superior in strength to ordinary “43” grade cement. It attains the 28 days strength required as per

IS just in 7 days time. Not only that, the strength attained in 28 days time is about 50% more than

the IS specification. The amazing strength of Malabar super arises out of its unequalled particle

fineness, 33% more than the IS specification and consistency in composition, more possible by

computerized process control system

Product characteristics

Malabar super offers better setting characteristics prolonged initial set and short final set

timings; providing more time for concrete mixing and placing, and less time for keeping the

concrete undistributed, free from movement and vibration, the property engineers and mansions

relish to have, in the cement they work with. Malabar super is finer when compared to normal

OPC, meaning rate of hydrogen and rate of strength gain is best

Benefits

Malabar super superiors setting properties, quick early strength gain, and higher finished

strength, gives at least 10% cement reduction in volume batching. By designing the mix,

reduction in cement requirement can go beyond 30% under good production and placement

practices. Malabar super is therefore economical

Malabar classic

Malabar classic offers better setting properties delayed initial set and early final set offering

better working time and reduced observation time, it is a superior class of its own among

cements

The structures achieve excellent dimensional stability with the heat resistant properties of

Malabar classic. It also reduces heat generation during hydration, making it a better workable



finished product absolutely reliable. The extra fineness welded into it allows Malabar classic

better coverage and finish in wall and roof plastering. This in turn, reduces paint consumption.

Product characteristics

The cement most suited to the south Indian climate proudly invented by us, through in house

studies and continues researchers in product improvement a way of life in MCL. An outcome of

this is Malabar classic. With scientifically proportioned sand and coarse aggregates, the most

cohesive mix possible with Malabar classic, will avoid the otherwise in the rent drawbacks of

concrete segregation and bleeding. The fly ash interweaved with Malabar classic makes it

sulphate resistant; a basic property, that cement should posses, for constructions and structures in

sea co and in alkaline waters. Malabar classic is best suited to resist alkali aggregate reaction, a

defect eventually resulting in excessive cracks and subsequent unserviceability of structures.

Benefits

The extra fineness welded in to it allows Malabar classic better coverage and finish in wall and

roof plastering. This in turn reduces the paint consumption, with its superior strength properties,

it is economical to use Malabar classic. 10% cement is normally guaranteed. Using a design mix

gain can go up to 30%

Malabar aiswarya

Malabar aiswarya brings prosperity in many ways. It increases the life of your structures by

safeguarding against sulphate attack. Aiswarya offers high quality at reduced price.

Aiswarya generates less heat of hydration, reduces the formation of getting cracks. This product

is best studied for constructions in soil and water with excess alkali metals, sulphates, alumina,

iron and acidic waters. To obtain the best quality cement, only glassy granulated slag is used for

product manufacturing. With very low magnesium oxide content this provides shape stability for

concrete structures.

Major players

The major players in the current sector are:



Ultratech cement

Century cement

Madras cement

ACC

Gujarat Abuja cement limited

Grasim industries

India cements limited

Jaiprakash associates

JK cements

Lafarge

Heidelberg cement

Vision

MCL industrial units have a capital outlay of Rs. 69 cores. The factory is rated to produce Rs 4.2

lakh tones cement per annum (24000 bags per day). The company meets about 10% of the total

cement consumption of Kerala and the company will reach near 13% of total consumption by

2010 and the company will achieve self sufficient its own power supply.

Mission

“Achieving prosperity through quality”

In a society where there is steep erosion of value and at time when relationship are

getting strain day by day. MCL a well run public sector company of the state, committed to the

society nurtures a corporate theme “of building values strengthening relationship” which also

relevant to its products.

Ownership pattern

MCL is fully owned by the government of Kerala. Initially there were some loans taken

by the company, which is fully repaid now. Government share capital currently is 2500 87 lakhs.

At the end of 2005-06 the company has working capital of Rs 107 lakhs from different banks of

the company.



Human resource department

According to jucins “human resource refers to a whole consisting of interrelated,

interdependent and interacting, psychological, sociological, and ethical components”. Thus

human resource represents the quantitative and qualitative measurement of workforce required in

an organization.

(Department structure)

Managers (P&A)

1) Supervision and guidance to the officers in P&A department on respective matters

2) Formulation of policies and strategies in connection with all matters related to P&A

All matters related to personnel, industrial relations, labor welfare, and advertisement, health,

legal, security, and statutory regulations related to P&A department of the including plant,

mines, CGU and other officers

Malabar cements ltd has a large but dedicated and skilled workforce. The personnel/human

resource department is the big at the same time important department of the company. The

department is headed by MPA (manager personnel & administration).

The department performs the following functions

Recruitment

Training & development

Wage & salary administration

Promotion

Performance appraisal

Canteen administration

Welfare activities

Safety activities

In MCL human resource are classified into two main categories. They are

1) Management staff



Executives

Officers

2) Management staff

3) Staff workers

The company has an efficient and enthusiastic human resource team. This is the only public

sector company in Kerala where there have been no strikes or lockouts since its inception.

The fact remains a testimonial to the brilliance of the human resource department.

Procurement of human resource

Recruitment

Recruitment is the process of searching for employees and stimulating and encouraging

them to apply for jobs in an organization. In MCL non management staff and management

staffs are recruited through advertisements, internet and employee exchanges.

Selection

Selection is a process of choosing the most suitable person out of all applicants. The purpose

of selection is to pick up the right person for right job. No organization can achieve its goals

without selecting the right people.

Selection process

Test

Interview

Physical examination

Employment



Final approval

In MCL tests are conducted only when the number of applicants is proportionately more.

Medical examination is compulsory before induction

Interview

The interview board consists of

Government nominee

Subject expert

Personnel & administrative manager

Managing director

Only after the acknowledgement of all the interview board members the applicant gets

selected

Placement

Once the candidate is employed there is probation period of 1 year during which his/her

performance is assessed quarterly. Based on the performance employee is made permanent.

Training and development

According to ISO it is mandatory that every employee should be trained for a stipulated

man hours. Training is two types

Internal training

It is a house training which is given by MCL to its employees and it

broadly covers safety aspects, operations, emergency institutions etc.

External training

In external training the employee is trained by an outside institution

regarding new technology which is to be introduced in the plant. It is

given when it is found necessary.



Performance appraisal and promotion

Both management and non management staffs are appraised for their performance and

promotions are given on the basis of their appraisal reports.

Working hours

Workers must work 8hrs/day. There are three shifts for the factory workers.

First shift -6am to 2 pm

Second shift -2 pm to 10 pm

Third shift -10 pm to 6 pm

The working time will be rotated for each worker, so that every worker should work for all the

three shifts. There are 25 working days in a month. Working time for office staff is 8.30 am to 5

pm.

Compensation

MCL pays compensation to the employees in exchange for their valuable contribution to

the organization. All permanent employees of MCL should be included in group personnel

accidental insurance. An employee will get compensation either due to

Death inside the company

Death during his journey to the company

A welfare fund board is functioning in MCL in which every employee should be a member. The

fund provides a certain amount to the diseased person’s family Rs 2500 for the funeral expense

of the employee and a lump sum amount to his family and also job to his dependents.

Wage payment

Employees of MCL are categorized into two namely

Managerial

Non managerial



For non managers employee wages are decided by the central wage board. During every 5 years

it will be revised. For managerial employees the pay scale relates to the Kerala government scale

of payments.

Incentives

Incentives are decided by the recognized union and company. MCL follows production

cum profit linked incentives to regular employees.

Leave

For every 20 days of work the employee will get 1 day leave

12 sick leave

12 casual leave

Every 4 th Saturday of the month will be holiday for to the office staffs

Bonus

Every person is eligible for minimum bonus as per the payment of bonus act. Bonus

percentage will be demand at government level.

Employee grievances

MCL employees have every freedom approach the welfare officer to redress their

grievances. On close talk with the employees there it was found that the employees had opinion

about the management and they even said that the management never hesitate in giving away

their duties and rights, and even looked into fulfilling better welfare schemes.

Personal records

A personal record of all the employees is kept in MCL from their joining date up to their

date of retirement. Separate files of each employee are kept in MCL.

Fringe benefits



Workers enjoy ESI hospital facility. The company has a dispensary in the employee

township.

Workers are given 2 pairs of shoes and uniforms every year. Rain coats are provided

Recreation facility

MCL also providers recreational facilities to its employees such a club facilities, sports

and cultural activities.

Trade union

There are three registered trade unions in MCLINTUC (Indian national trade union), CITU

(central Indian trade union) and STU. The representatives of these trade unions will have the

membership in committee, safety committee, canteen committee etc

Labor welfare activities

Statutory welfare measures

Welfare activities taken by MCL for its laborers are

Facilities for storing and drying cloth

Facilities for sitting rest room

First aid appliances

Canteen to its workers at subsidized rate

Voluntary welfare measures

Purified drinking water

Health centre

Safety measures

Medical centre

Rest rooms are provided to the labors

Library

Recreation club

Cooperative society



Ambulance

Accommodation facilities

Annual gifts

Existence of welfare committees

Various welfare committees exist in the MCL of which the representatives of the recognized

unions will be a member. The various welfare committees are

Works committee

Canteen committee

Safety committee

Labor welfare committee

Welfare facilities for the mine employees

Educational facility to the children of employees

Financial help for the construction of house

Financial advisers are given to the employees regarding obtaining of loan

Canteen facility to the mine employees

Allowances

The various allowances are

Dust allowances

Union allowances

Medical allowances

Industrial relations



A good employee employer relation is important to the smooth functioning of an

organization. Industrial relations mean not only the complex relation between the trade union and

the management but also refer to the general way of relationships normally obtaining between

employees and employers.



CHAPTER: 4

LITERATURE REVIEW

A study on “Employees perspectives regarding performance appraisal and reward philosophy in

insurance sector in Haryana” was conducted by “Neeraja & Aman” (2005). This paper talks

about the employee’s perspectives regarding performance appraisal and reward philosophy and

the effect of demographic variables on it. The sample is selected on the basis of convenient



sampling method. This study based on the hypothesis that demographic variables and

employee’s opinion are independent of each other. This paper analysis the data by using factor

analysis, reliability test and chi-square test. The basic premise of the paper is concentrated on the

fact that performance pay jobs that reward productive characteristics of workers have a more

competitive pay structure than other factors. They analyzed that compensation in performance

pay jobs is more closely tied to both measured and unmeasured productive characteristics of

workers.

The study on “merit based performance appraisal & productivity: do employees perceive the

connection” was conducted by “Gerald T Gabris & Kenneth Mitchell” (1985). The article reports

the findings of a study of the Biloxi, Mississippi, merit bonus pay plan. It compares employees at

different levels in the organizational hierarchy with regard to their perceptions of whether the

new system has increased their individual or group productivity. Findings indicate that employee

reaction to the system varies. Proximity to the system and how its fairness and effectiveness.

Top-level managers, who relate to the system primarily from a policy standpoint, were the

biggest supporters of the merit pay plan. Middle managers, who bore the brunt of

implementation, were the system's most severe critics. First-line rank and file employees, the

recipients of the bonuses, were mixed in their reactions. Thus it appears that whether employees

perceive merit pay as a direct stimulus to their productivity is not a black and white issue. Many

apparently do not perceive a connection between merit pay and productivity.

The study on “Perceived Fairness of Performance Appraisals in the Federal Government” was

conducted by “Seok Eun Kim & Dian Rubianty” (2000). Studies suggest that the success of the

performance appraisal system may depend on how to manage employees’ perceptions of its

fairness, not the system per se. using the 2005 Merit Principles Survey, this study tests the

efficacy of perceived fairness of performance appraisals as a key determinant of intrinsic

motivation. The purpose of this article is twofold: (a) to identify factors of perceived fairness of

performance appraisal and (b) to assess the differential impact of each factor of perceived

fairness of performance appraisal on intrinsic motivation. An exploratory factor analysis

generated three separate but interrelated notions of perceived fairness variables: distributive,

procedural, and interactional fairness. Using these three perceived fairness variables, a

hierarchical regression analysis was performed. The results showed that although all three



perceived fairness variables positively associated with intrinsic motivation, they accounted for

only 5% of variance in prediction. When control variables were added, only perceived

procedural fairness appeared to positively affect intrinsic motivation. The results raise the

question of the role of performance appraisals as a motivational tool for performance

improvement. Nonetheless, managing perceived procedural fairness may still be a useful lever

for enhancing intrinsic motivation.

The study on “Employee perceptions of performance appraisals: a comparative study on Indian

banks” was conducted by “Shrivastava a & Purang P” (2011). Performance appraisal is the most

critical human resource practice and an indispensable part of every organization; however, the

practice continues to generate dissatisfaction among employees and is often viewed as unfair and

ineffective. Indian banking sector is one of the biggest and fastest growing financial service

sectors. The post-liberalization era has witnessed significant changes in the structure and

operations of banks operating in India. Arrival of new private and foreign banks has given a

cause to public sector banks to be more competitive, effective and innovative in their approach.

Past researches have compared public and private sector banks and have indicated that new

private sector banks are outscoring public sector banks in terms of technical and economic

efficiency parameters. However, no study could be found that compared public and private banks

in India on fairness perceptions of performance appraisal system. Therefore, this research studied

the differences between public and private sector banks with respect to perception of fairness of

the performance appraisal system and performance appraisal satisfaction. Perception of fairness

of the performance appraisal system has been studied through nine factors. The study used

independent samples t-test and qualitative analysis to study the mean differences between the

two banks. Results indicated that private sector bank employees perceive greater fairness and

satisfaction with their performance appraisal system as compared to public sector bank

employees

The study on “Employees’ Perceptions about the Effectiveness of Performance Appraisals: The

Case of Pakistan” was conducted by “Muhammad Kashif Saeed and Nosheen Shahbaz” (2011).

The current research investigates employees’ perceptions about the outcomes of performance

appraisal and aims to identify the factors which can harm the successful implementation of

performance appraisal. The sample of 120 employees at managerial level was selected on the



basis of simple random sampling technique from the plastic furniture manufacturing

organizations located in the province of Punjab in Pakistan. The findings suggest that the

employees are aware of the useful outcomes of the performance appraisal but they lack

knowledge in implementing an effective performance appraisal system. A significant difference

in perceptions regarding the outcomes of performance appraisal was found among the

respondents. The study will help policy makers in designing effective performance management

systems for their organizations by minimizing the perceived risks and detriments to effective

implementation of performance management systems.

The study on “Multi-Source Performance Appraisals: Employee Perceptions of Fairness” was

conducted by “Linda deLeon and Ann J. Ewen” (1997). Performance appraisal is crucial to

effective human resource management, but there is evidence that current processes are not very

effective This study reports on experience with a relatively new appraisal system in the

operations office of a large federal agency The method, multi-source assessment (MSA, or "360°

Feedback") utilizes ratings from peers, direct-reports, the supervisor, and the employee

Comparison of survey results from before and after implementation of MSA found significant

improvement in employee perceptions of the fairness and effectiveness of appraisals, particularly

among protected classes The implications of these findings and suggestions for future research

are discussed.

The study on “An “expert witness” perspective on performance appraisal in universities and

colleges” was conducted by “John Simmons” (2002). Effective performance management of

professionals in knowledge based organizations has particular significance, but is an under

researched area in the literature. Universities and colleges are knowledge based organizations

especially dependent on the expertise, commitment and innovation of their staff. The paper

analyses performance appraisal systems in universities and colleges with particular emphasis on

staff perspectives and expectations. A brief history of performance appraisal in HE and FE is

provided and related to issues of power, accountability and control. Academic staff from two

business schools, together with a national sample of those teaching performance appraisals

within CIPD professional programmers’, was constituted as an “expert witness” group and their

views sought on performance appraisal in their institutions. These data are used to develop a

philosophy of performance appraisal for academic institutions, to assess the acceptability of



particular performance criteria to academic staff, and to highlight the importance of staff

involvement in appraisal system design.

The study on “Performance appraisal fairness perceptions in supervisory and non- supervisory

employees: a case of civil servants in district dera Ismail khan, Pakistan” was conducted by

“Malik Ikramullah” (2000). Research suggests that employees’ role and level in organization

influence reactions towards performance appraisal system (PAS). The present study investigates

fairness perceptions of PAS among supervisory (appraisers/appraises) and non-supervisory

employees (appraises) in the civil service of Pakistan. Data was collected from civil servants

working in the two departments in far flung district Dera Ismail Khan, Khyber Pakhtunkhwa. T-

test of significance was performed to test the hypothesis in of the study. The results revealed that

there was significant difference of fairness perceptions among supervisory and non supervisory

employees working in the two public sector departments. And supervisory employees perceive

the system fairer as compared to non-supervisory employees. In the article we discuss literature

of organizational justice and fairness of PASs. Subsequently, we discuss methods, limitations

and directions for future research in the PAS of the civil service.

The study on “employee perceptions of performance appraisal fairness in two organizations” was

conducted by “Evans, Elaine M.; McShane, Steven L” (1988). Studied the characteristics

comprising the appraisal process from the employees' perspective and how those characteristics

related to employee perceptions of performance appraisal fairness. Based upon factor analysis of

survey data from a total of 397 management and professional employees in 2 large Canadian

organizations, 6 characteristics were found to comprise the appraisal process: appraiser's

knowledge of the employee's job and performance, opportunity for employee participation,

establishment of specific and relevant job goals, discussion of employee development goals,

discussion of company and department goals, and feedback on results. The relative importance

of these characteristics to overall appraisal fairness ratings was different in the 2 companies. The

favorableness of the most recent appraisal was associated with the employee's belief in the

overall fairness of the appraisal process in both companies. (French abstract) (PsycINFO

Database Record (c) 2010 APA, all rights reserved).

The study on “Relationship between Perceived Fairness in Performance Appraisal and Ocb;

Mediating Role of Organizational Commitment “was conducted by “Ishfaq Ahmed1,



Muhammad Ramzan2, Saher Khushi Mohammad3, Talat Islam3” (2011). Performance appraisal

is a key element of management practices. Performance appraisal plays an important role for

continuous improvement. Lot of researchers has worked on performance appraisal from both

employee and organizations point of view. This study is aimed to find out the relationship

between perceived fairness in performance appraisal and organizational citizenship behavior

considering the mediation effect of organizational commitment. For the study 318 employees of

banking sector were randomly selected. Questionnaire was used for data collection. Findings of

the study indicate that there is significant and positive relationship between perceived fairness in

performance appraisal and OCB while organizational commitment mediates this relationship.

The study on “perceived fairness of and satisfaction with employee performance appraisal” was

conducted by “marie burns walsh” (2003). Employee performance appraisal is one of the most

commonly used management tools in the United States. Over 90 percent of large organizations

including 75 percent of state employment systems require some type of annual performance

appraisal (seldon, ingraham & jacobson, 2001). Performance appraisal is one of the most widely

researched areas in industrial/organizational psychology (murphy & Cleveland, 1993). However,

the traditional research agenda has done little to improve the usefulness of performance appraisal

as a managerial tool. Recent research has moved away from studies of rater accuracy and

psychometric measures to themes of employee reactions towards performance appraisal as

indicators of system satisfaction and efficacy. Employee perception of fairness of performance

appraisal has been studied as a significant factor in employee acceptance and satisfaction of

performance appraisal. This study investigated employee reactions to fairness of and satisfaction

with an existing performance appraisal system utilizing a hypothesized four-factor model

(Greenberg, 1993) of organizational justice as the theoretical basis. The underlying hypothesis

was that the conceptualized four-factor model, which differentiated between the constructs of

interactional and procedural justice, would best represent the underlying factor structure of the

data. Data were obtained via a survey questionnaire from 440 participants from two

organizations that were part of a large public employment system. Ten multi-item scales x

representing four factors of organizational justice and performance appraisal fairness and three

scales indicating satisfaction were included. The findings of the study indicated that respondents

perceived the performance appraisal system was to be fair as indicated by their agreement with 9



of the 10 scales used to measure reactions to fairness. The respondents also indicated their

relative satisfaction with their most recent performance appraisal rating and with their

supervisor. Less satisfaction (although not dissatisfaction) was indicated with the performance

appraisal system overall. The conceptualized four-factor model was not found to represent the

underlying factor structure substantially better than alternative plausible three-factor models. the

best fit three–factor model, however, provided some support for the differentiation between

procedural and interactional organizational justice factors, which is a distinction that has been

debated in the organizational justice literature.

The study on “employees’ perception of the problems and practices of employee performance

evaluation: a case study of awash international bank (aib)” was conducted by “zelalem bayisa”

(2000). This project is designed to assess the perception of employees towards the practices and

problems of performance evaluation in awash international bank to this end; the study has the

objective to assess the perception of employees towards the problems and practices of

performance evaluation. on the basis of data collected through questionnaires and interview

which are founded on the theoretical assessment of related literatures; i have tried to unearth

some of the real problems of appraisals based on the opinion of the rates in that particular

organization. The questionnaire was distributed to 80 employees of the bank working in four

branches: bole, head office, stadium and art kilo branches in which only 65 were fully completed

and returned. The questionnaire was distributed to the employees on the basis of convenience

sampling based on the willingness and cooperation of the respondents. The data collected were

analyzed using spss software. On the basis of the data obtained from the respondents, the study

identified the lack of transparency both during the evaluation and after evaluation as its major

findings. Almost all the participants vented out that they are not allowed to see the result of their

ratings. As a result, they do not have a confidence on the appropriateness of the evaluation to

make crucial human resource decisions. The lack of clarity of performance evaluation criteria

and the subjectivity involved in the evaluation which resulted in role ambiguity and frustration

viii among the employees were identified to be the other problem of performance appraisal in

awash international bank (aib). On the other hand, the subjective nature of the standards against

which the performance of employees are judged lead raters to manipulate the evaluation for their

own personal agendas. The universal purpose of performance evolutions across the board were

also common problems in the system. The performance evaluation forms do not reflect the



performance of the employees as they can be irrelevant for some jobs. In this regard, it was

identified that raters evaluate the performance of employees on the basis of recent behaviors.

Based on the findings of the study.

The study on “The Perception of the Employees toward the Outcomes and Detriments of

Performance Appraisal System” was conducted by “Mert, Ibrahim Sani” (2011). Although

performance appraisal is one of the most important functions of human resources management, it

cannot be said that the organizations have obtained the full benefit from performance appraisal

system as they expected. Lack of enough investigation about employees’ perception toward the

effectiveness of the performance appraisal system can be mentioned as one of the reasons. The

perception of employees toward the effectiveness of performance appraisal system helps human

resources employees and researchers to obtain the benefit expected from performance appraisal

system. Therefore, the employees’ perception of the outcomes and detriments of an effective

performance appraisal system were investigated in this research. According to the findings of the

study, the perceptions of employees toward the performance appraisal system have an effect on

their thoughts of their own appraisals. Besides, it was determined that women perceive the

performance appraisal system as more effective than men and the employees who work as a

manager have a more sensitive perception toward the detriments of performance appraisal

systems than who do not. It is thought that, the findings of this research may be beneficial to both

the researchers who study performance appraisal and human resources employees to evaluate the

effectiveness of performance appraisal systems.

The study on “Boswell, Wendy R. and Boudreau, John W. , "Employee Attitudinal Effects of

Perceived Performance Appraisal Use”" was conducted by Boswell, Wendy R. and Boudreau,

John W. (1997). This research investigates how employee perceptions of performance appraisal

use relate to employee satisfaction with the performance appraisal and with the appraiser—the

employees’ immediate supervisor. Employee perceptions that appraisals were used for

development positively associated with both attitudinal variables, after controlling for justice

perceptions, performance, and demographics. Perceptions of PA use for evaluation did not show

a significant relationship with either employee attitude. Implications of these findings are

discussed.



The study on “Managers' theories of subordinates: A cross-cultural examination of manager

perceptions of motivation and appraisal of performance” was conducted by “Iyengar, Sheena S.,

De Voe, Sanford E.” (2004). A cross-cultural study involving managers and employees of a

global organization in North America, Asia and Latin America researched on managers

perception of their employee's motivation and which kind of motivation according to them

related better with performance appraisal of the employee. While North American managers

perceived their employees to be extrinsically motivated and considered intrinsic motivation to be

better related with performance appraisal, Latin American managers perceived their employees

to be intrinsically motivated and considered extrinsic motivation to be better related with

performance appraisal. Asian managers perceived their employees to be both extrinsically and

intrinsically motivated and both kinds of motivations related with performance appraisal. In

contrast, the employees reported to be more intrinsically motivation.

The study on “Linking strategic HRM, performance management and organizational

effectiveness: perceptions of managers in Singapore” was conducted by “Pauline &alan

Nankervis” (2011). Strategic human resource management (SHRM) theory is predicated on the

assumption that effective human resource management (HRM) processes have the capacity to

contribute significantly to organizational effectiveness, expressed in terms of productivity,

flexibility, effectiveness, efficiency, return on investment, competitiveness, and ultimately,

profitability. Earlier research studies have explored the overall value-adding potential of HRM

processes as a whole. Few have focused on the links between strategic HRM, performance

management systems and organizational effectiveness, and even fewer have examined these

relationships in Southeast Asia. This paper addresses this gap in the literature by examining the

perceptions of a split sample of senior managers in Singapore. It reveals an interesting gap

between their rhetoric and the realities of their performance management systems, and suggests

future research directions.

Theoretical background

Performance appraisal system is one of the oldest and most universal practices of management. It

is widely used technique to evaluate the people. Formal appraisal of an individual’s performance

began in china in 221-265 AD. Later on in 1883, the New York City civil service in USA



introduced formal appraisal program shortly before the World War 1. US Army adopted the man

to man rating system evaluating military personal. In India the formal appraisal system started

after World War 2 nd. In the early fifties performance appraisal technique was called merit rating

and to use for technical, managerial, and professional personal.

Meaning

It is the process of evaluating the performance and qualification of employee in terms of the

requirements of the job for which he is employed, for the purpose of administration, including

placement, selection for promotion providing financial rewards and other actions. Performance

appraisal is the process of evaluating personnel job performance and his potential for

development. Appraisal is the valuation of work, quality or merit. In the organization context,

performance appraisal is an evaluation of personnel by superiors or other who are familiar.

Definitions

According to Scot, clothier and spreigal.”Performance appraisal is a process of evaluating an

employee’s performance of a job in terms of its requirements.”

Edwin B Flippo defines, performance appraisal system is the systematic, periodic and so far as

humanly possible, an impartial training of an employee’s excellence in matters pretaing to his

potentialities for a job.

Features of performance appraisal

1. Performance appraisal is a continuous process which consist of a series of steps

2. It is the systematic examination of an employee’s strength and weakness in terms of the

job

3. It is arranged periodically according to a definite plan

4. The main purpose of performance appraisal is to secure information necessary for making

objective and correct decision on employees, it is an impartial rating of an employee’s

excellence

Objectives of performance appraisal system



1. Salary increases

Normally salary increases of an employee depend on how he is performing his work. There is a

direct contact between the employee and the one who makes decision about salary increase. This

may disclose how well an employee is performing and how much he should be compensated.

2. Promotion

Most of the organizations often use a combination of merit and seniority for promotion.

Performance appraisal discloses how an employee is working in his present job and what his

strong and weak points are. In the light of these it can be decided whether he can be promoted to

the next year

3. Training and development

Performance appraisal systems try to identify the strength and weakness of employees on his

present job. This information can be used for devising training and development programs

appropriate for overcoming weakness of employees.

4. Feedback

Performance appraisal provides feedback to employees about their performance. It tells them

where they stand. A person can work better when he knows how he is working, how his efforts

are contributing to the achievement of the organizational objectives.

5. Pressure on employees

Performance appraisal puts a sort of pressure on employees for better performance. If the

employees are conscious that they are being appraised in respect of certain factors and their

future largely depends on such appraisal, they tend to have positive and acceptable behavior in

this respect. Thus, appraisal can work automatically are control device.

Process of performance appraisal

1. Determining the objectives

2. Establishing the performance standards

3. Communicating the standards



4. Measurement of performance

5. Comparing the actual with standards

6. Discussion

7. Take corrective action

Determining the objectives

It is the first step of performance appraisal. The objective of performance appraisal is

determined. It may be evaluate the actual performance of the individual on the job or to

determine the potential of individual on the job.

Establishing the performance standards

The job related standard is set up for appraising the performance of employees. Job performance

standards are the work requirements that are expected from an employee on a particular job. This

output may be physical nature such as output, sales, revenue etc. if work performance cannot be

measured in qualitative terms. The standard may includes mans performance, honesty, reliability,

job knowledge, cooperative, initiative, leadership, learning ability, judgment, sense of

responsibility, communication etc. these standard should be mentioned in the appraisal form.

Communicating the standards

After determining the standard of performance, it must be communicated to employee. By

knowing the performance standards, employees are able to know what is expected from them. It

should also communicate to evaluators and employees.

Measuring the performance

It is the next stage of the performance appraisal process. The actual performance of employees

must be measured. Performance measurement techniques are used for these purposes. Personal

observation, written reports, face to face interaction is the way to gather information related to

performance. Performance appraisal methods one used for evaluating and measuring

performance standards.

Comparing the actual performance with standards



It is the next step in the process. After measuring the performance, it should be compared with

performance standards and deviations are to be found.

Discussion

The results of the appraisal are then communicated to the employees. The deviations and reasons

are analyzed and discussed with the employees. The discussion will enable employees to know

the strength and weakness of his own. By knowing this, he tries to improve the performance.

Take corrective action

By way of conducting discussion with the employees, the steps required for improving

performance can be assessed and corrective action can be taken. Coaching, training, counseling

etc can be conducted to improve the performance of employees.

Methods of performance appraisal

There is no single effective method of performance appraisal. Each organization has its own

performance appraisal methods and techniques are used for evaluating performance. It can be

classified into two categories:

1. Traditional method

2. Modern method

Traditional methods includes

1. Ranking method

2. Paired comparison method

3. Grading method

4. Graphic scale

5. Check list

6. Forced distribution method

7. Critical method

8. Field review

9. Confidential report



10. Group appraisal

11. Self appraisal

Modern methods includes

1. Assessment center

2. Human resource accounting

3. Behavioral anchored rating scales

4. MBO

5. 360 degree method

Traditional method

1. Ranking method

It is very simple and easy method of judging the work of employees in a group. Ranks are

assigned in order of their performance. The workers differ in their performance. The best

performer is ranked first and the worst worker is ranked last. Under this method employees are

rated on overall basis with reference to their job performance. This method has certain

limitations, there is the chance of personnel bias, and it does not indicate how much a person is

better or worse than other.

2. Paired comparison method

Each person is compared with other person in pairs at one time, only one trait is considered. The

number of times of an employee is judged better than the others determine the rank. For

example, there are five employees A, B, C, D, and E. employee A performance is compared with

B performance and decision is taken whose performance is better. Then A performance is

compared with C,D, and E in order. The number of comparison is to be made is determined by

applying the following formula N (N-1)/2. Where N is the persons to be compared B, C, D and E

is compared likewise. The result of these comparisons is tabulated and a rank is assigned to each

employee. The paired comparison method gives a more reliable result rather than ranking

method.

3. Grading method



Under this method certain categories of abilities are defined in advance. Categories of abilities

are excellent, very good, average, poor, very poor, outstanding, satisfactory etc. the actual

performance is compared with these categories of abilities and the person is allocated a grade

with best describes performance.

4 check list method

A check list is statement on the traits of the employee and his or her job is prepared in two

columns viz, YES column and NO column. The appraiser rater is required to read the statement

and put tick mark in YES column, if the statement is positive and in NO column if the statement

is negative. After ticking of each item, the rater forwards the list to human resource department.

Actual evaluation is done by human resource department. The HR departments assign certain

points to each YES ticked. The total score is arrived by adding the points assigned to YES. When

points are allotted to the check list the techniques become a weighted check list.

5. Forced choice method

The rate is given a series of statement about an employee. These statements are arranged and the

rater indicates which statement is most descriptive of the employee. Here the rate is forced to

select statement is most or least descriptive of the employee.

6. Forced distribution method

Rating scales are used in this method also. As per this method the appraise or rater is required to

distribute his rating on the rating scale. It is done in the form of a normal frequency curve. The

purpose is to eliminate the raters’ bias of central tendency. It is simple and easy to follow.

7. Critical incidents method

The supervisor records the employee’s behavior during critical events may be good or bad. The

rating is done on the basis of employee’s positive or negative behavior during these events. E.g.,

sudden breakdown of machinery, here the supervisor exams how employees reacted and

behaved. One of the advantage of this method is the evaluation is done on the basis of actual job

behavior. It also reduces bias, if the supervisor records incidents throughout the rating period.

8. Field review method



An officer of human resource department revise employees records and holds interviews with the

rate and his or her supervisor. The officer who is the interview preparer’s questions and is asked.

The supervisor’s answers questions about subordinates level of performance, his work in

progress, his strength and weakness; promotional potential etc. the officer takes detailed notes of

the interview. These notes are approved by the supervisor and placed in employees service

records. As per this system, the rate is required to fill appraisal form. The rates bias is

considerably reduced. Field review method is useful when comparable in formations are needed

from employees in different units.

9. Confidential reports

Confidential records are mainly used in government organizations. The immediate supervisor

prepares confidential report of his subordinates. It covers attendance, initiative, technical ability

of reasoning, responsibility, leadership quality, self impressions etc. this system is highly

secretive and confidential.

10. Self appraisal method

Self appraisal involves appraising an employee himself in terms of either how he has performed

in the review period. It helps to improves communication between superior and subordinate. Self

appraisal creates self awareness in an employee.

Modern methods

1. Assessment centers

This method was first developed in USA & UK in 1943. An assessment center is a central

location where a group of employees come together and work on an assignment for two or three

days which should have performed on a higher post. It is evaluated by trained observatory. The

evaluators or observatory evaluates all employees both individually and collectively by using

simulation techniques like role playing, business games, computer simulation etc.

2. Human resource accounting method

This method is in transitional stage. Human resource is considered as valuable asset on an

organization. The performance is judged in terms of cost and contribution of employees. Cost of



human resource includes expenditure incurred on human resource planning, recruitment,

selection, orientation, placement etc. Contribution is measured in terms of money. Difference

between cost and contribution shows the performance of the employees.

3. Behavioral anchored rating scales (BARS)

It is sometimes called behavioral expectation scales. This method is a combination of graphic

rating scales, and critical incident method. BARS are scales which represent a range of

descriptive statements of behavior of employees. It is the comparison of actual behavior with

expected behavior. The rating under BARS method is done by experts. This formatted

performance appraisal is based on making rates on behaviors or sets of indicators to determine

the effectiveness or ineffectiveness of working performance.

4 Management by objectives (MBO)

MBO is a method of performance appraisal in which managers or employers set a list of

objectives and make assessments on their performance on a regular basis, and finally make

rewards based on the results achieved. This method mostly cares about the results achieved

(goals) but not to the way how employees can fulfill them.

5.360 degree method

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

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

that come in contact with the employee on his job.

Essential requirements of an effective performance appraisal

1. Confidence and mutual trust

2. Definite objectives

3. Well defined performance standards

4. Training



5. Feedback and participation

6. Review and appeal

7. Size of the organization

Limitations of performance appraisal

The limitations of performance appraisal is as follows

1. Halo effect

In this case the superior appraises the person on certain positive qualities only. The negative

traits are not considered. Such an appraisal will not give a true picture about the employee. And

in some cases employees who do not deserve promotions may get it.

2. Horn effect

In this case only the negative qualities of the employee are considered and based on this

appraisal is done. This again will not help the organization because such appraisal may not

present a true picture about the employee.

3. Central tendency

In this case the superior gives an appraisal by giving central values. This prevents a really

talented employee from getting promotions he deserves and some employees who do not deserve

anything may get promotion.

4. Leniency and strictness

Some bosses are lenient in grading their employees while some are very strict. Employee who

really deserves promotions may lose the opportunity due to strict bosses while those who may

not deserve may get benefits due to lenient boss.

5. Spillover effect



In this case the employee is judged +vely or –vely by the boss depending upon the past

performance. Therefore although the employee may have improved performance, he may still

not get the benefit.

6. Fear of losing subordinates and spoiling relations

Many bosses do not wish to spoil their relations with their subordinates. Therefore when they

appraise the employee they may end up giving higher grades which are not required. This is an

injustice to really deserving employees.



CHAPTER: 5RESEARCH METHODOLOGY

5.1 Research methodology



The methodology followed for conducting the study includes the specification of research

design, sample design, questionnaire design, data collection and statistical tools used for

analyzing the collected data.

5.2 Type of the study

The research design used for this study is the descriptive type. Descriptive research studies are

those studies which are concerned with describing the characteristics of a particular individual or

a group. In descriptive research, it deals with everything that can be counted and studied. The

research must have an impact to the employees for their work

5.3 Population

The total element of the universe from which sample is selected for the purpose of study is

known as population. Here the population constitutes the total number of employees in Malabar

cements

5.4 Sampling unit

The study was conducted among the employees in Malabar Cements, Walayar.

5.5 Sampling size

All the items consideration in any field of inquiry constitutes a universe of population. In this

research, only a few items are selected to form the population for our study purpose. The items

selected constitute what is technically called a sample. Here sample size is 100 employees from

the total population.

5.6 Sampling method

Sampling method used for this study is convenience sampling. When population elements are

selected for inclusion in the sample based on the ease of access, it can be called convenience

sampling.

5.7 Type of data and sources



The data source: Primary and Secondary

5.8 PRIMARY DATA:

Primary data is the first hand data collected from the EMPLOYEES. It collects through

questionnaire.

The method used for data collection was “questionnaire method”. The questionnaire is a

structured one, using a close ended questionnaire for our research study.

Questionnaire survey method was adopted for completing the data collection in this research.

5.9 SECONDARY DATA:

The data has been collected from company’s profile, journals, websites, Reference book and

past record.

5.10 Tools for data collection

Questionnaire Method

Tools for analysis

Simple percentage analysis

The percentage refers to the special kind of ratio. Percentage is used in making comparisons

between two or more series data. Percentage can also be used to compare the relative teams,

the distribution of two or more series data.

The easy and simplicity calculating the general understanding of its purpose and the

universal application of the personal static have made it, most widely and standardized tool

in researchers. The percent really need everything to a common base and there by meaningful

comparison to be made with the data. The percentage analysis is calculated by dividing

number of respondents with total population of sample

Percentage analysis= Number of respondents

Total number of population

Central tendency



A measure of central tendency is a single value that attempts to describe a set of data by

identifying the central position within that set of data. As such, measures of central tendency

are sometimes called measures of central location. They are also classed as summary

statistics. The mean (often called the average) is most likely the measure of central tendency.

The mean, median and mode are all valid measures of central tendency but, under different

conditions, some measures of central tendency become more appropriate to use than others

Mean (Arithmetic)

The mean (or average) is the most popular and well known measure of central tendency. It

can be used with both discrete and continuous data, although its use is most often with

continuous data. The mean is equal to the sum of all the values in the data set divided by the

number of values in the data set. So, if we have n values in a data set and they have values x1,

x2, ..., xn, then the sample mean, usually denoted by (pronounced x bar), is:

This formula is usually written in a slightly different manner using the Greek capitol letter, ,

pronounced "sigma", which means "sum of...":

Ranking method

A method of handling data which has the same observed frequency occurring at two or more

consecutive ranks; it consists of assigning the average of the ranks as the rank for the

common frequency.

5.11 LIMITATION OF THE STUDY

Some of them did not fill the questionnaire due to lack of time



Some of the employees didn’t respond in a positive manner

Most of the employees feared to disclose the fact

The questionnaire contained mostly multiple-choice questions; therefore many

Respondents may not have given a proper thought before answering the questions.

Most respondents might be influenced by their peers in answering the questions.



CHAPTER: 6

DATA ANALYSIS AND INTERPRETATION

DATA ANALYSIS AND INTERPRETATIONS

The data collected from the various respondents through questionnaire were tabulated and

analyzed to find their perception regarding the effectiveness of performance appraisal system.

This chapter discusses the major findings from the study.



A) Gender-

Table no 1

Gender No: of respondents % of respondents

Males 92 92

Female 8 8

Total 100 100

Chart no 1

Interpretation:-

From the above table and graph, it is found that majority of the employees are male (92%) and

only 8% are female. It is inferred that most of the employees employed there in the organization

are males.

B) Marital statusTable no 2

Marital status No: of respondents % of respondents



Married 83 87

Unmarried 17 13

Total 100 100

Chart no 2

Interpretation:-

From the above table and graph, it was found that majority of the respondents are married (83%)

and only 17% are unmarried. It is inferred that most of the respondents are married.

C) Work shifts

Table no 3

Services No: of respondents PercentageDay shift 38 38Night shift 8 8



Rotation shift 46 46General shift 8 8Total 100 100

Chart no 3

Interpretation:-

From the above table and graph, it can be seen that majority of the respondents (46%) work in

rotation shift, 38% of the respondents work in day shift and only 8% of respondents are work in

night shift and general shift. It is inferred that most of the employees work on rotation shifts in

the organization.

D) Year of Experience

Table no 4

Services No: of respondents Percentage



Less than 3

8 8

3-5 years 0More than 5 92 92Total 100 100

Chart no 4

Interpretation:-

From the above table and graph, it can be seen that majority of the respondents (92%) have more

than 3 years of experiences. only 8 % of respondents have less than 3 year of experience. It is

inferred that most of the respondents have better work experience in the present company.

1. The awareness about the performance appraisal system

Table no 5

Opinion No: of respondents PercentageYes 100 100No 0 0



Total 100 100

Chart no 5

Interpretation:-

From the above table and graph, it can be seen that all the respondents (100%) are aware about

the performance appraisal system in the organization.

2. The main purpose of performance appraisal

Table no 6

Opinion No: Of respondents Percentage

Wage determination 0 0



For promotion 34 34

Improve performance 66 66

Others 0 0

Total 100 100

Chart no 6

Interpretation:-

From the above table and graph, it can be seen that majority (66%) of the respondents favored

towards improve performance and 34% respondents favored for promotion. It is inferred that

most of the respondents are considering that performance appraisal purpose is for improving the

performance of employees.

3. The main factors for evaluating the performance appraisal

Table no 7

Opinion No: of respondents Percentage



Job knowledge 11 11

Quality of work 34 34

Output 20 20

Work related skill 35 35

Total 100 100

Chart no 7

Interpretation:-

From the above table and graph it is seen that majority (35%) of the respondents are considering

work related skill, 34% of respondents are considering quality of work, 20% of respondents are

considering output and only 11% of respondents are said job knowledge. It is inferred that most

of the respondents consider quality of work for the evaluation of their performance.

4. The evaluation periods

Table no 8



Opinion No: of respondents Percentage

Quarterly 25 25

Half yearly 25 25

Yearly 50 50

Other 0 0

Total 100 100

Chart no 8

Interpretation:-

From the above table and graph it is be seen that majority (50%) of the respondents preferred

yearly based evaluation and 25% of respondents preferred quarterly and half yearly. It is

inferred that majority of the respondents expect yearly based evaluation.

5. Your choice of appraiser



Table No 9

Appraiser No: of respondents Percentage

Department head 80 80

Immediate

superior

9 9

Hr department 11 11

Others 0 0

Total 100 100

Chart no 9

Interpretation:-

From the above table and graph it is seen that majority (80%) of the respondents prefer

department head, 11% of the respondents prefer human resource department and only 9% of

respondents prefer immediate superior as their appraiser. It is inferred that most of the

respondents prefer to have department head as their appraiser.

6. Satisfaction level of present appraisal system



Table no 10

Opinion No: of respondents PercentageHighly satisfied 10 10Satisfied 70 70Neutral 20 20Dissatisfied 0 0

Highly dissatisfied 0 0Total 100 100

Chart no 10

Interpretation:-

From the above table and graph, it can be seen that, 10% of the respondents are highly satisfied with the present appraisal system, 70% of the respondents are satisfied and 20% of the respondents are neutral opinion. It is inferred that most of the respondents are satisfied with the present appraisal system in the organization.



7. The method of performance appraisal system is being followed by the organization

Table no 11

Methods No: of respondents Percentage

Self appraisal

method

35 35

Ranking method 33 33

Grading method 32 32

Others 0 0

Total 100 100

Chart no 11

Interpretation:-

From the above table and graph, it can be seen that majority (35%) of the respondents viewed

that the organization followed self appraisal method, 33% of respondents experienced

ranking method and 32% of the respondents experienced grading method. It is inferred that

the majority of the respondents had experienced self appraisal method.



8. Adopting any new method for performance appraisal

Table no 12

Opinion No: of respondents PercentageYes 78 78No 22 22Total 100 100

Chart no 12

Interpretation:-

From the above table and graph, it can be seen that majority (78%) of the respondents wants new

method and 22% of the respondents are do not expect any change. It is inferred that most of the

respondents are in need of new method for performance appraisal.



9. Preferred method

Table no 13

Methods No: of respondents Percentage

MBO 6 6

720 degree method 70 70

360 degree method 2 2

Others 0 0

Total 78 78

Chart no 13

Interpretation:-

From the above table and graph, it can be seen that majority (70%) of the respondents prefer 720

degree method,6% of respondents prefer MBO and only 2% of respondents prefer 360 degree

method. It is inferred that most of the respondents prefer to have 720 degree method for

evaluating their performance.



10.Satisfaction level of overall performance from the last one year

Table no 14

Opinion No: of respondents PercentageHighly satisfied 11 11Satisfied 89 89Neutral 0 0Dissatisfied 0 0

Highly dissatisfied 0 0Total 100 100

Chart no 14

Interpretation:-

From the above table and graph, it can be seen that 11% of the respondents are highly satisfied

and 89% of respondents are satisfied. It is inferred that most of the respondents are satisfied with

their overall performance in the last year.



11.The performance appraisal system is too time-consuming

Table no 15


Chart no 15

Interpretation:-

From the above table and graph it can be seen that all of the employees agree that the present

appraisal system is not time consuming.



12.The performance process does support our values/cultural change

Table no 16


Chart no 16

Interpretation:-

From the above table and graph it can be seen that all respondents agree with the statement that

the organization supports the values and culture for evaluating performance appraisal



13.The performance appraisal helps in

Table no 17

Opinion No: of respondents PercentageEvaluation of employees 16 16Promotion of employees 17 17Job satisfaction of employees 0 0Employee motivation 67 67Total 100 100

Chart no 17

Interpretation:-

From the above table and graph it can be seen that majority (67%) of the respondents agreed

with employee motivation, 17 % of respondents with promotion of employees, 16 % of

respondents with the evaluation of employees as the reason for which performance appraisal is

being done. It is inferred that the performance appraisal is done for the employee motivation.



14. The performance appraisal gives constructive criticism in a friendly

and positive manner

Table no 18


Chart no 18

Interpretation:-

From the above table and graph it can be seen that majority (67%) of the respondents gave positive criticism regarding performance appraisal and 33% of respondents responded in a negative manner. It is inferred that majority of the respondents are having a positive opinion towards performance appraisal.



15.Number of training programs attended

Table no 19

Opinion No: of respondents PercentageOne 8 8Two 10 10Three 0 0More than three

82 82

Total 100 100

Chart no 19

Interpretation:-

From the above table and graph can be seen that majority (82%) of the respondents have

attended more than three,10% of respondents attended two and only 8% respondents attended

one training programme. It is inferred that most of the respondents have attended more than

three training programmes.



16.Type of training given for better performance in your job

Table no 20

Opinion No: of respondents PercentageOn the job training 63 63Off the job training 37 37Total 100 100

Chart no 20

Interpretation:-

From the above table and graph it can be seen that majority (63%) of the respondents prefer

on the job training method and 37% of respondents prefer off the job training. It is inferred

that most of the respondents prefer on-the-job training for the better performance.



17. What do you expect from a Performance appraisal

Table no 21

Particulars Rank PercentageSalary administration and benefits 294 14.59

Determination of promotion or transfer 233 11.56

Decision on layoff 148 7.34

Assistance in achieving goals and

objectives

517 25.67

Guideline for training plan 468 23.23

An insight into your strengths and

weakness

354 17.57

Total 2014 100

Chart no 21

Interpretation:-

From the above table and graph, the majority (25.67) of the respondents are expected from the

performance appraisal assistance in achieving goals and objective. It is inferred that most of the

respondents consider performance appraisal as assistance in achieving goals and objectives.



18. The evaluation of managerial attributes about their managers

Table no 22

Attributes Rank PercentageJob knowledge 495 10.59

Planning, organizing, & controlling 466 9.97

Communication 448 9.59

Creativity 439 9.40

Cost consciousness 485 10.38

Developing subordinates 444 9.50

Relationship 488 10.44

Leadership 468 10.02

Judgment 487 10.42

Potential for handling higher level

responsibility

450 9.63

Total 4670 100

Chart no 22



Interpretation:-

From the above table and graph majority (10.59%) of the managers have good job knowledge

(the level of knowledge in regards to all phases of his/her work including knowledge of latest

trends and development in the area and the ability to put them to use) and the lowest rate for the

creativity (ability and interest in developing and putting into practice new and beneficial ideas or

improvements) aspect. The manager’s skill from top to bottom is as follows (on the basis of

employee’s perception)

1. Job knowledge2. Relationship3. Judgment4. Cost consciousness5. Leadership6. Planning, organizing, and controlling7. Potential for handling higher level responsibility8. Communication9. Developing subordinates10. Creativity



19. The employee’s perception regarding the present performance appraisal system

Table no 23

Factors Mean valueStrongly agree 5Agree 4Neutral 3Disagree 2Strongly disagree 1

Chart no 23

Interpretation:-

From the above table and graph the respondents strongly agree with the present appraisal system.

The present appraisal system is fully effective and respondents are satisfied with the system

followed by the organization.



CHAPTER: 7

FINDINGS, SUGGESTIONS, CONCLUSION



Findings

70% of employees are satisfied with the present appraisal system followed by the

organization.

Majority of the employees are male, married and have more than 5 years of experience.

82% of the employees have attended more than three training programmes.

All of them are aware about the performance appraisal system followed in the

organization.

66% of employees agree that the main purpose of performance appraisal is to improve

their performance.

35% of employees’ view that the main factor for considering the evaluation of

performance appraisal is work related aspects.

50% of employees prefer evaluation is done annually.

80% of the respondents prefer to have department head as their appraiser.

67% of employees agree that the performance appraisal helps for employee motivation.

63% of employees agree that on-the-job training methods are helping them in better

performance.

55% of employees’ agree that good relationship between superiors and the subordinates

is being maintained in the work premise.



Suggestions

Management may include more number of female employees.

Management may implement new performance appraisal methods like 720 degree

performance appraisal method, if required in the future.

Management may provide off-the-job training method like sensitivity training to enhance

better performance.

There should be training sessions to improve team building aspects.

There should be proper pre-performance and post performance counselling given to

employees.

In the beginning of the year itself, employee must know the performance standards on

which his/her performance will be judged at end of year.

Overtime should be considered at the time of performance appraisal as it would motivate

the employees to perform better for longer hours.

Performance appraisal should be done at regular intervals rather than doing them

annually.

Performance appraisal should be done by expert professionals.



Conclusion

This study was done to provide Malabar Cements a full insight into the employees’

perception regarding the effectiveness of performance appraisal system in the organization. After

conducting a deep study it was found that majority of the employees are of the view that the

company’s present appraisal system is effective as far as the present methods used are

concerned. Also the employees got benefitted through performance appraisal, as the results are

used for promotion. The employees suggest that there should be pre-performance and post

performance counseling mechanism to be introduced in the organization.


Project of Hr

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