An overview of Performance Appraisal and its
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Chapter 1
An overview of Performance Appraisal and its
Banks
1.1 Introduction
Performance appraisals are use in organizations, companies, banks etc. mostly for
managerial purpose, such as making promotions and formative salaries, incentives
and bonuses. Since the 1960s, however, companies and banks have more and more
worried the use of employee assessment fo r motivational and organizational
planning purposes. Indeed, for many banks performance appraisal has become a
vital tool for exploit the efficiency of all aspects of the organization, from staffing
and growth to production and customer service.
Performance appraisal in any organisation will be done at a precise period, like
annually or half yearly or quarterly or maybe regularly. It all depends upon the
nature or size of the organisation, and sometimes necessity of the managers decide
the period of performance appraisal of their employees. Most of organisations are
insisting employee appraisal should be a continuous process and should not be
limited to a formal review once a year. The frequency of formal appraisals will
depend on the nature of the organization and on the objectives of the system.
1.2 Performance Appraisal
The performance appraisal is the process of assessing employee performance by
way of comparing present performance with already established standards which
have been already communicated to employees, subsequently providing feedback
to employees about their performance level for the purpose of improving their
performance as needed by the organisation.
As said above the very purpose of performance uprising is to know performance
of employee, subsequently to decide whether training is needed to particular
employee or to give promotion with additional pay hike. Performance appraisal is
1|P agethe tool for determining whether employee is to be promoted, demoted or sacked
(remove) in case of very poor performance and no scope for improvement1.
1.2.1 Performance
The term performance actually mean employees are performing well when they
are productive. Productivity implies both concern for effectiveness and efficiency,
effectiveness refers to goal accomplishment. However it does not speak of the costs
incurred in reaching the goal. That is where efficiency comes in. Efficiency
evaluates the ratio of inputs consumed to outputs achieved the greater the output
for a given input, the greater the efficiency.
In addition to productivity as measured in terms of effectiveness and efficiency,
performance also includes personnel data such as measures of accidents, turnover,
absences, and tardiness. That is a good employee is one who not only performs
well in terms of productivity but also minimizes problems for the organisation by
being to work on time, by not missing days, and by minimizing the number of
work-related accidents.
1.2.2 Appraisal
Appraisals are judgments of the characteristics, traits and performance of others.
On the basis of these judgments we assess the worth or value of others and identify
what is good or bad. In industry performance appraisal is a systematic evaluation
of employees by supervisors. Employees also wish to know their position in the
organization. Appraisals are essential for making many administrative
decisions: selection, training, promotion, transfer, wage and salary administration
etc. Besides they aid in personnel research.
1.2.3 Concept of Performance Appraisal
Performance appraisal is a systematic and objective way of judging the relative
worth of ability of an employee in performing his/her task. It helps to identify those
who are performing their assigned tasks well and those who are not and the reasons
for such performance. Performance Appraisal is the systematic evaluation of the
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2|P ageperformance of employees and to understand the abilities of a person for further
growth and development. Performance appraisal is generally done in systematic
ways which are as follows:
1. The supervisors measure the pay of employees and compare it with targets
and plans.
2. The supervisor analyses the factors behind work performances of
employees.
3. The employers are in position to guide the employees for a better
performance.
4. An annual review of an employee’s overall contributions to the company
by his/her manager.
Performance appraisal is a method of evaluating the job performance of an
employee. It is an ongoing process of obtaining, researching, analysing and
recording information about the worth of an employee. Performance appraisals,
also called annual reviews, evaluate an employee’s skills, achievements and
growth, or lack thereof. Companies use performance appraisals to give employees
big-picture feedback on their work and to justify pay increases and bonuses, as well
as termination decisions2.
1.3 Objectives of Performance Appraisal
The main objective of performance appraisals is
To measure and improve the performance of employees
To increase their future potential and value to the company
To providing feedback, improving communication, understanding training
needs,
To clarifying roles and responsibilities and determining how to allocate
rewards3.
2
Kaur, R., (2010), Chapter 1: Introduction of performance appraisal,, pp1-9, Punjabi University,
and Patiala
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3|P ageAdditional Objectives Performance Appraisal
To review the performance of the employees over a given period of time
To judge the gap between the actual and the desired performance.
To help the management in exercising organizational control.
Helps to strengthen the relationship and communication between superior –
subordinates and management – employees.
To diagnose the strengths and weaknesses of the individuals so as to identify
the training and development needs of the future.
To provide feedback to the employees regarding their past performance.
Provide information to assist in the other personal decisions in the organization.
Provide clarity of the expectations and responsibilities of the functions to be
performed by the employees.
To judge the effectiveness of the other human resource functions of the
organization such as recruitment, selection, training and development.
To reduce the grievances of the employees.
1.4 Performance Appraisal System
Performance appraisal is a management tool which is helpful in motivating and
effectively utilizing human resources. Assessment of human potential is difficult,
no matter how well designed and appropriates the performance planning and
appraisal system is. The performance appraisal system should:
Be correlated with the organizational mission, philosophies and value system;
Cover assessment of performance as well as potential for development;
Take care of organizational as well as individual needs; and
help in creating a clean environment by linking rewards with achievements,
generating information for the growth of the employee as well as of the
organization, and suggesting appropriate person-task matching and career
plans.
4|P age Feedback is an important component of performance appraisal. While positive
feedback is easily accepted, negative feedback often meets with resistance
unless it is objective, based on a credible source and given in a skilful manner4.
1.5 Components of the Appraisal Format
Key performance areas, self-appraisal, performance analysis, performance ratings
and counselling are the important components of a performance appraisal system
oriented to development of human resources in an organization. The appraisal
format should be designed in consonance with the objectives of the performance
appraisal system, and generate information on a number of important aspects,
including (Rao, 1985)5:
1.5.1 Identification of key Performance Areas
The first step in an appraisal process is identifying key performance areas and
setting targets for the next appraisal period. This may be done either through
periodic discussions or at the beginning of the year, as in research institutions.
1.5.2 Self-appraisal by the Subject
At the end of the appraisal period, employees appraise their own performance
against the key performance areas, targets and pre-identified behaviour.
Information on these issues is provided in an appraisal format. The employees also
write their self-evaluation reports and hand them to their supervisors.
1.5.3 Analysis
The supervisor reflects on the performance of the employee, and identifies the
factors which facilitated or hindered the employee's performance. The manager
then calls the employee for a discussion to better understand his or her performance
and provide counselling on further improvements. During this discussion, appraisal
records (such as notes, observations, comments, etc.) are exchanged. The manager
then gives a final rating and recommendations regarding the developmental needs
of the individual. These are shown to the subject and his or her comments are
recorded on the appraisal form. The appraisal form is then transmitted to the
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http://www.fao.org/docrep/w7505e/w7505e06.htm
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http://www.fao.org/docrep/w7505e/w7505e06.htm
5|P agepersonnel department for the necessary administrative action. The personnel or
human resource development department uses these forms for identifying and
allocating training, rewards and other activities6.
1.5.4 Identification of Training Needs
The use of a development-oriented performance appraisal system is based on a
good understanding of the concept of human resources development. The need for
developing employee capabilities, the nature of capabilities to be developed, and
the conditions under which these capabilities can be developed have to be
appreciated. During the discussion between the supervisor and the employee, the
development needs of the subject are identified and goals set for the next period.
1.5.5 Identification of Qualities
The supervisor may also identify the qualities required for current as well as future
tasks, and assess the employee's potential and capabilities to perform jobs at higher
responsibility levels in the organization.
1.6 Performance Appraisal System Process
Performance appraisal involves an evaluation of actual against desired
performance. It also helps in reviewing various factors which influence
performance. Managers should plan performance development strategies in a
structured manner for each employee. In doing so, they should keep the goals of
the organization in mind and aim at optimal utilization of all available resources,
including financial. Performance appraisal is a multistage process in which
communication plays an important role. Craig, Beatty and Baird (1986) suggested
an eight-stage performance appraisal process7:
1.6.1 Establishing Standards and Measures
The first step is to identify and establish measures which would differentiate
between successful and unsuccessful performances. These measures should be
under the control of the employees being appraised. The methods for assessing
performance should be decided next. Basically, management wants to: know the
6
Qureshi, T. M., Zafar, M. K. and M. B. Khan, (2008), Customer Acceptance of performance
journal, Journal of Internet Banking and Commerce, Volume 13, No. 1, pp 2-5
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6|P agebehaviour and personal characteristics of each employee; and assess their
performance and achievement in the job.
There are various methods available for assessing results, behaviour and personal
characteristics of an employee. These methods can be used according to the
particular circumstances and requirements.
1.6.2 Communicating Job Expectations
The second step in the appraisal process is communicating to employees the
measures and standards which will be used in the appraisal process. Such
communication should clarify expectations and create a feeling of involvement.
1.6.3 Planning
In this stage, the manager plans for the realization of performance expectations,
arranging for the resources to be available which are required for attaining the goals
set. This is an enabling role.
1.6.4 Monitoring Performance
Performance appraisal is a continuous process, involving ongoing feedback. Even
though performance is appraised annually, it has to be managed 'each day, all year
long.' Monitoring is a key part of the performance appraisal process. It should
involve providing assistance as necessary and removing obstacles rather than
interfering. The best way to effectively monitor is to walk around, thus creating
continuous contacts, providing first-hand information, and identifying problems,
which can then be solved promptly.
1.6.5 Appraising
This stage involves documenting performance through observing, recalling,
evaluating, written communication, judgment and analysis of data. This is like
putting together an appraisal record.
1.6.6 Feedback
After the formal appraisal stage, a feedback session is desirable. This session
should involve verbal communication, listening, problem solving, negotiating,
compromising, conflict resolution and reaching consensus.
1.6.7 Decision Making
7|P ageOn the basis of appraisal and feedback results, various decisions can be made about
giving rewards (e.g., promotion, incentives, etc.) and punishments (e.g., demotion).
The outcome of an appraisal system should also be used for career development.
1.6.8 Development of Performance
The last stage of performance appraisal is 'development of performance,' or
professional development, by providing opportunities for upgrading skills and
professional interactions. This can be done by supporting participation in
professional conferences or by providing opportunities for further study. Such
opportunities can also act as incentives or rewards to employees8.
1.7 Approaches and Techniques in Performance Appraisal
Performance appraisal is a multistage process involving several activities, which
can be administered using a variety of approaches. Some of these approaches are
considered below, based on Einstein and LeMere-Labonte, 1989; and Monga,
1983:
Intuitive Approach In this approach, a supervisor or manager judges the
employee based on their perception of the employee's behaviour.
Self-appraisal Approach Employees evaluate their own performance
using a common format.
Group Approach The employee is evaluated by a group of persons.
Trait Approach This is the conventional approach. The manager or
supervisor evaluates the employee on the basis of observable dimensions
of personality, such as integrity, honesty, dependability, punctuality, etc.
Appraisal Based on Achieved Results In this type of approach, appraisal
is based on concrete, measurable, work achievements judged against fixed
targets or goals set mutually by the subject and the assessor.
Behavioural Method This method focuses on observed behaviour and
observable critical incidents9.
8
Kashyup, M. and D. K. Sharma (2012), Financial Appraisal system: Boom or Bane, GIAN Jyoti E-Journal,
Volume 1, Issue 2, pp 1-4
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8|P age1.8 Uses of an Appraisal System
A properly designed performance appraisal system cans (Rao, 1985):
Help each employee understand more about their role and become clear
about their functions;
Be instrumental in helping employees to better understand their strengths
and weaknesses with respect to their role and functions in the organization;
Help in identifying the developmental needs of employees, given their role
and function;
Increase mutuality between employees and their supervisors so that every
employee feels happy to work with their supervisor and thereby contributes
their maximum to the organization;
Act as a mechanism for increasing communication between employees and
their supervisors. In this way, each employee gets to know the expectations
of their superior, and each superior also gets to know the difficulties of their
subordinates and can try to solve them. Together, they can thus better
accomplish their tasks;
Provide an opportunity to each employee for self-reflection and individual
goal-setting, so that individually planned and monitored development takes
place;
Help employees internalize the culture, norms and values of the
organization, thus developing an identity and commitment throughout the
organization;
Help prepare employees for higher responsibilities in the future by
continuously reinforcing the development of the behaviour and qualities
required for higher-level positions in the organization;
9|P age Be instrumental in creating a positive and healthy climate in the
organization that drives employees to give their best while enjoying doing
so; and
Assist in a variety of personnel decisions by periodically generating data
regarding each employee10.
1.9 Benefits of Performance Appraisal
There are a number of benefits of performance appraisal (PAs). There has been a
general consensus in the belief that PAs lead to positive implications of
organizations. Furthermore, PAs can benefit an organization’s effectiveness. One
way is PAs can often lead to giving individual workers feedback about their job
performance. From this may spawn several potential benefits such as the individual
workers becoming more productive. There are different benefits which are
discussed in below.
1.9.1 Motivation and Satisfaction
Performance appraisal can have a profound effect on levels of employee
motivation and satisfaction - for better as well as for worse. Performance appraisal
provides employees with recognition for their work efforts. The power of social
recognition as an incentive has been long noted. In fact, there is evidence that
human beings will even prefer negative recognition in preference to no recognition
at all.
If nothing else, the existence of an appraisal program indicates to an employee that
the organization is genuinely interested in their individual performance and
development. This alone can have a positive influence on the individual's sense of
worth, commitment and belonging.
The strength and prevalence of this natural human desire for individual recognition
should not be overlooked. Absenteeism and turnover rates in some organizations
might be greatly reduced if more attention were paid to it. Regular performance
appraisal, at least, is a good start.
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10 | P a g e1.9.2 Training and Development
Performance appraisal offers an excellent opportunity - perhaps the best that will
ever occur - for a supervisor and subordinate to recognize and agree upon
individual training and development needs.
During the discussion of an employee's work performance, the presence or absence
of work skills can become very obvious - even to those who habitually reject the
idea of training for them.
Performance appraisal can make the need for training more pressing and relevant
by linking it clearly to performance outcomes and future career aspirations.
From the point of view of the organization as a whole, consolidated appraisal data
can form a picture of the overall demand for training. This data may be analysed
by variables such as sex, department, etc. In this respect, performance appraisal
can provide a regular and efficient training needs audit for the entire organization.
1.9.3 Recruitment and Induction
Appraisal data can be used to monitor the success of the organization's recruitment
and induction practices. For example, how well are the employees performing who
were hired in the past two years?
Appraisal data can also be used to monitor the effectiveness of changes in
recruitment strategies. By following the yearly data related to new hires (and given
sufficient numbers on which to base the analysis) it is possible to assess whether
the general quality of the workforce is improving, staying steady, or declining.
1.9.4 Employee Evaluation
Though often understated or even denied, evaluation is a legitimate and major
objective of performance appraisal. But the need to evaluate (i.e., to judge) is also
an ongoing source of tension, since evaluative and developmental priorities appear
to frequently clash. Yet at its most basic level, performance appraisal is the process
of examining and evaluating the performance of an individual.
Though organizations have a clear right - some would say a duty - to conduct such
evaluations of performance, many still recoil from the idea. To them, the explicit
11 | P a g eprocess of judgement can be dehumanizing and demoralizing and a source of
anxiety and distress to employees.
It is been said by some that appraisal cannot serve the needs of evaluation and
development at the same time; it must be one or the other.
But there may be an acceptable middle ground, where the need to evaluate
employees objectively, and the need to encourage and develop them, can be
balanced11.
1.9.5 Facilitation of Communication
Communication in organizations is considered an essential function of worker
motivation. It has been proposed that feedback from PAs aid in minimizing
employees’ perceptions of uncertainty. Fundamentally, feedback and
management-employee communication can serve as a guide in job performance.
1.9.6 Enhancement of Employee Focus Through Promoting Trust
Behaviours, thoughts, and/or issues may distract employees from their work, and
trust issues may be among these distracting factors. Such factors that consume
psychological energy can lower job performance and cause workers to lose sight
of organizational goals. Properly constructed and utilized PAs have the ability to
lower distracting factors and encourage trust within the organization.
1.9.7 Goal Setting and Desired Performance Reinforcement
Organizations find it efficient to match individual worker’s goals and performance
with organizational goals. PAs provide room for discussion in the collaboration of
these individual and organizational goals. Collaboration can also be advantageous
by resulting in employee acceptance and satisfaction of appraisal results.
1.9.8 Performance Improvement
Well-constructed PAs can be valuable tools for communication with employees as
pertaining to how their job performance stands with organizational expectations.
"At the organizational level, numerous studies have reported positive relationships
between human resource management (HRM) practices" and performance
improvement at both the individual and organizational levels.
11
Pamnani, V. and V. Gupta (2010), E-Banking and Security Transactions, pp 94-104, Allied
Informatics, Jaipur
12 | P a g e1.9.9 Determination of Training Needs
Employee training and development are crucial components in helping an
organization achieve strategic initiatives”. It has been argued that for PAs to truly
be effective, post-appraisal opportunities for training and development in problem
areas, as determined by the appraisal, must be offered. PAs can especially be
instrumental for identifying training needs of new employees. Finally, PAs can
help in the establishment and supervision of employees’ career goals 12.
1.10 Performance Appraisal Methods
Every corporate sector uses performance appraisal as a tool for knowing about the
employee and take decisions about particular employee. For the purpose of
performance appraisal of employees there are different methods which are
discussed in below.
1.10.1 Rating Scales Method
Rating scales method is commonly used method for assessing the performance of
the employees and well-known traditional method of performance appraisal of
employees. Many corporations and companies example in the country India,
telecommunications company likely Airtel and US IT companies like Dell
Corporation are using this method for evaluating the employees and subsequently
take decisions on concerned employee.
Depending upon the job of employee under this method of appraisal traits like
attitude, performance, regularity, accountability and sincerity etc, are rated with
scale from 1 to 10. 1 indicates negative feedback and 10 indicates positive
feedback.
Under this method of performance appraisal, employee may be assessed by his
superiors, colleagues, subordinates or sometimes by his customers which all
depends on nature of the company or job which is added where the employee.
Appraiser is a person who appraises employee will give rating for every trait given
by marking or choosing number basing on his observation and satisfaction.
Ultimately all numbers chosen or marked will be added to determine highest score
gained by employee. Employee who scored more points will be treated as top
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13 | P a g eperformer following descending scored employees will be treated as low performer
and the least scored employee will be treated as non-performers13.
1.10.2 Essay Appraisal Method
This traditional form of appraisal, also known as “Free Form method” involves a
description of the performance of an employee by his/her superior. The description
is an evaluation of the performance of any individual based on the facts and often
includes examples and evidences to support the information. A major drawback of
the method is the inseparability of the bias of the evaluator.
Under this method, the rather is asked to express the strong as well as weak points
of the employee’s behaviour. This technique is normally used with a combination
of the graphic rating scale because the rather can elaborately present the scale by
substantiating an explanation for his rating. While preparing the essay on the
employee, the rather considers the following factors:
Job knowledge and potential of the employee;
Employee’s understanding of the company’s programmes, policies,
objectives, etc.;
The employee’s relations with co-workers and superiors;
The employee’s general planning, organizing and controlling ability;
The attitudes and perceptions of the employee, in general.
Essay evaluation is a non-quantitative technique. This method is advantageous in
at least one sense, i.e., the essay provides a good deal of information about the
employee and also reveals more about the evaluator. The essay evaluation method
however, suffers from the following limitations:
It is highly subjective; the supervisor may write a biased essay. The
employees who are sycophants will be evaluated more favourably than
other employees.
13
Jadhav, R. A., (2011), Chapter 4: Bank Computerization, Problems and prospects of bank
computerization: a study of selected cooperative banks in Pune, pp 99-109, University of Pune.
14 | P a g e Some evaluators may be poor in writing essays on employee
performance. Others may be superficial in explanation and use flowery
language which may not reflect the actual performance of the employee.
It is very difficult to find effective writers nowadays.
The appraiser is required to find time to prepare the essay. A busy
appraiser may write the essay hurriedly without properly assessing the
actual performance of the worker. On the other hand, appraiser takes a
long time; this becomes uneconomical from the view point of the firm,
because the time of the evaluator (supervisor) is costly.
1.10.3 Ranking Method
Under the ranking method, the manager com-pares an employee to other similar
employees, rather than to a standard measurement. An offshoot of ranking is the
forced distribution method, which is similar to grading on a curve. Predetermined
percentages of employees are placed in various performance categories, for
example, excellent, above average, average, below average, and poor,. The
employees ranked in the top group usually get the rewards (raise, bonus,
promotion), those not at the top tend to have the reward withheld, and those at the
bottom sometimes get punished.
Managers have to make evaluative decisions, such as who is the employee of the
month, who gets a raise or promotion, and who gets laid off. So when make
evaluative decisions, generally use ranking method. However, ranking can, and
when possible should, be based on other methods and forms. Ranking can also be
used for developmental purposes by letting employees know where they stand in
comparison to their peers—they can be motivated to improve performance.
1.10.4 Paired Comparison
A better technique of comparison than the straight ranking method, this method
compares each employee with all others in the group, one at a time. After all the
comparisons on the basis of the overall comparisons, the employees are given the
final rankings.
15 | P a g e1.10.5 Critical Incidents Methods
This technique of performance appraisal was developed by “Flanagan and Burns”.
The manager prepares lists of statements of very effective and ineffective
behaviour of an employee. These critical incidents or events represent the
outstanding or poor behaviour of employees on the job. The manager maintains
logs on each employee, whereby they periodically records critical incidents of the
workers behaviour. At the end of the rating period, these recorded critical incidents
are used in the evaluation of the workers’ performance.
This method provides an objective basis for conducting a thorough discussion of
an employee’s performance. This method avoids regency bias (most recent
incidents get too much emphasis). This method suffers however from the following
limitations:
Negative incidents may be more noticeable than positive incidents.
The supervisors have a tendency to unload a series of complaints about
incidents during an annual performance review session.
It results in very close supervision which may not be liked by the employee.
The recording of incidents may be a chore for the manager concerned, who
may be too busy or forget to do it.
1.10.6 Confidential Report System
Confidential report system is well known method of performance appraisal system
mostly being used by the government organisations. In this method of appraising
system, subordinate is observed by his/her superiors regarding his/her performance
in the job and on his duties done. Thereafter superior writes confidential report on
his performance, mainly on his behaviour in the organisation and conduct and
remarks if any. Confidential reports will be kept confidential and will not be
revealed to anyone and finally confidential reports will be forwarded to the top
management officials for taking decision against person on whom confidential
report has made. Confidential reports are the main criteria for promoting or
transferring of any employee mainly in the government sector. All governmental
organisations example judiciary, police Department and other government
16 | P a g edepartments in the India are using confidential reports method as a tool to know
about the employee and to take any decision connecting to him.
Procedure of confidential report system
The superiors who appraise their subordinate’s performance, behaviour and other
key issues will be kept in the form of writing on paper, which is called as
confidential report. Confidential report should not be sent openly on a paper, it
must be kept in a sealed cover to send it to decision-making authorities. Only
authorised persons are allowed to open the sealed covers which consist of
confidential reports. Confidential reports shall not be handed over in loose sheets
to the subordinates.
Key factors assessed in Confidential Report writing
Character and conduct of an employee
Absenteeism of an employee
Knowledge of an employee
His nature and quality of work
Punctuality of employee
Unauthorised absenteeism or leave without permission
Behaviour of an employee with colleagues, superiors and with public
Ability of supervision and controlling
His/her integrity and honesty
If any complaints against employee
1.10.7 Checklist Method
The rater is given a checklist of the descriptions of the behaviour of the employees
on job. The checklist contains a list of statements on the basis of which the rater
describes the on the job performance of the employees.
Another simple type of individual evaluation method is the checklist. A checklist
represents, in its simplest form, a set of objectives or descriptive statements about
the employee and his/her behaviour. If the rater believes strongly that the employee
possesses a particular listed trait, he checks the item; otherwise, he leaves the item
blank. A more recent variation of the checklist method is the weighted list. Under
17 | P a g ethis, the value of each question may be weighted equally or certain questions may
be weighted more heavily than others.
1.10.8 Graphic Rating Scale
This is the very popular, traditional method of performance appraisal. Under this
method, core traits of employee pertaining to his/her job are carefully defined like
Attitude, Knowledge of Work, Managerial Skills, Team Work, Honesty,
Regularity, Accountability, Interpersonal relationships, Creativity and Discipline
etc. These traits are allotted with numerical scale to tabulate the scores gained by
appraise (employee) in performance assessment relating to his job by appraiser
(employer) and sum-up to determine the best performer. Appraiser ticks rating of
particular trait depending upon his endeavour in his/her job. Score vary from
employee to employee depending up on his performance levels and endeavour in
his/her job.
This method is popular because it is simple and does not require any writing ability.
The method is easy to understand and use. Comparison among pairs is possible.
This is necessary for decision on salary increases, promotion, etc.
Companies like DELL, Maruti Suzuki India Ltd and Airtel are using this graphic
rating scale method to appraise performance of their employees in their jobs and
to take decisions regarding the matters concerned to employees.
1.10.9 Forced Distribution
The system is 17 to 18 years old, and most big organisations started waking up to
this form of performance appraisal in the late '90s. The bell curve is nothing but a
graphical representation of the fact that everybody's performance is not the same.
Some employees will be outstanding, some average, and others at the bottom.
Irrespective of whether or not the bell curve is the most appropriate representation
of performance or human behaviour, some believe that it is the most viable option,
especially in services-driven sectors, which have large workforces.
The system requires the managers to evaluate each individual, and rank them
typically into one of three categories (excellent, good, poor). The system is thought
to be relatively widely-used, but remains somewhat controversial due to the
competition it creates, and also the reality that not all employees will fit neatly into
18 | P a g eone of the categories and might end up in a category that does not reflect their true
performance. One of the first companies to use this system was General Electric,
in the 1980s.
Forced ranking is a method of performance appraisal to rank employee but in order
of forced distribution. For example, the distribution requested with 10 or 20 percent
in the top category, 70 or 80 percent in the middle, and 10 percent in the bottom.
The top-ranked employees are considered “high-potential” employees and are
often targeted for a more rapid career and leadership development programs. In
contrast, those ranked at the bottom are denied bonuses and pay increases. They
may be given a probationary period to improve their performance.
Facts: many companies have been discarding this age-old appraisal system since it
has got few drawbacks like lack of transparency understanding the process of
assessment of employee, some people believe that this method treats employees as
machines and some feel that this system doesn't fit to present trend of management.
Companies which have dropped this method of addressing system are Microsoft,
Google and Adobe.
1.10.10 Field review method
Since individual assessors differ in their standards, they inadvertently introduce
bias in their ratings. To overcome this assessor-related bias, essay and graphic
rating techniques can be combined in a systematic review process. In the field
review method, 'a member of the HRM staff meets a small group of assessors from
the supervisory units to discuss each rating, systematically identifying areas of
inter-assessor disagreement.' It can then be a mechanism to help each assessor to
perceive the standards uniformly and thus match the other assessors. Although field
review assessment is considered valid and reliable, it is very time consuming.
1.10.11 Forced-choice rating method
Unlike the field review method, the forced-choice rating method does not involve
discussion with supervisors. Although this technique has several variations, the
most common method is to force the assessor to choose the best and worst fit
statements from a group of statements. These statements are weighted or scored in
advance to assess the employee. The scores or weights assigned to the individual
19 | P a g estatements are not revealed to the assessor so that she or he cannot favour any
individual. In this way, the assessor bias is largely eliminated and comparable
standards of performance evolved for an objective. However, this technique is of
little value wherever performance appraisal interviews are conducted.
1.10.12 Management by objectives
The employees are asked to set or help set their own performance goals. This
avoids the feeling among employees that they are being judged by unfairly high
standards. This method is currently widely used, but not always in its true spirit.
Even though the employees are consulted, in many cases management ends up by
imposing its standards and objectives. In some cases employees may not like 'self-
direction or authority.' To avoid such problems, the work standard approach is
used.
1.10.13 Work standard approach
In this technique, management establishes the goals openly and sets targets against
realistic output standards. These standards are incorporated into the organizational
performance appraisal system. Thus each employee has a clear understanding of
their duties and knows well what is expected of them. Performance appraisal and
interview comments are related to these duties. This makes the appraisal process
objective and more accurate. However, it is difficult to compare individual ratings
because standards for work may differ from job to job and from employee to
employee. This limitation can be overcome by some form of ranking using pooled
judgment.
1.10.14 Person-to-person rating
In the person-to-person rating scales, the names of the actual individuals known to
all the assessors are used as a series of standards. These standards may be defined
as lowest, low, middle, high and highest performers. Individual employees in the
group are then compared with the individuals used as the standards, and rated for
a standard where they match the best. The advantage of this rating scale is that the
standards are concrete and are in terms of real individuals. The disadvantage is that
20 | P a g ethe standards set by different assessors may not be consistent. Each assessor
constructs their own person-to-person scale which makes comparison of different
ratings difficult.
1.10.15 Behaviourally Anchored Rating Scales (BARS)
This is a relatively new technique. It consists of sets of behavioural statements
describing good or bad performance with respect to important qualities. These
qualities may refer to inter-personal relationships, planning and organizing
abilities, adaptability and reliability. These statements are developed from critical
incidents collected both from the assessor and the subject.
1.10.16 Assessment Centres
This technique is used to predict future performance of employees were they to be
promoted. The individual whose potential is to be assessed has to work on
individual as well as group assignments similar to those they would be required to
handle were they promoted. The judgment of observers is pooled and paired
comparison or alteration ranking is sometimes used to arrive at a final assessment.
The final assessment helps in making an order-of-merit ranking for each employee.
It also involves subjective judgment by observers 14.
1.11 SAMPLE BANKS: A History
A. Public sector banks:
Public sector banks are banks (PSBs) are banks where a majority stake (i.e. more
than 50%) is held by the government. The shares of these banks are listed on stock
exchanges. There are 27 PSBs in India [19 nationalized banks + 6 State bank group
(SBI+5 associates) + IDBI bank ltd + BMB].
14
http://www.whatishumanresource.com/traditional-methods-of-performance-
appraisal
21 | P a g eIn 2011, IDBI Bank and 2014, Bharatiya Mahila Bank were nationalized with a
minimum capital of 500 crores.
1. State Bank of India (SBI)
State bank of India was evolved in the first decade of 19 th century with the
establishment of the Bank of Calcutta, on 2 June, 1806. After three years, the bank
was redesigned as the Bank of Bengal and under the sponsorship of government of
Bengal; this bank was the first joint stock bank. Subsequently, the two other banks
named Bank of Bombay and Bank of Madras were also established on 15 April
1840 and 1 July 1843 respectively. On 27 January 1921, these three banks were
amalgamated to form the Imperial Bank of India. The launch of first five year plan
in 1951 was the turning point of the State Bank of India. The main aim of the plan
was to serve the rural economy and an Indian economy as a whole. Before this
plan, main emphasis by commercial bank including the Imperial Bank of India was
given on the development of urban areas and thus the development of the rural
sector was still untouched. In order to serve the economy as a whole including the
rural economy, establishment of state-sponsored was recommended by the All
India Rural Credit Survey Committee. This committee proposed to integrate the
Imperial Bank of India with the former state-owned bank. In May 1955 an act was
passed by the Parliament which resulted in the establishment of the State Bank of
India on 1 July 1955. Later, the State Bank of India (Subsidiary Banks) Act was
passed in 1959. The corporate office of SBI is located in Mumbai.
Financial performance of State Bank of India-
Deposits and advances-
Table 1.11.1 (A) Deposits and Advances of SBI in past two years
Deposits (in crores) Advances (in crores)
Bank Growth Growth
2014 2015 2014 2015
(%) (%)
22 | P a g eSBI 1394408.50 1576793.24 +13.08 1209828.71 1300026.39 +7.46
Source: SBI Annual Report 2014-15
Graph 1.11.1 (A) - Deposits and Advances of SBI in past two years
1600000
1400000
1200000
1000000
2014
800000
2015
600000
400000
200000
0
Deposits Advances
SBI’s total deposits are 1394408.50 crores in 2014 and it increased to 1576793.24
crores in 2015, which shows a growth rate of 13.08%. On the other hand the
advances in 2014 and 2015 were 1209828.71 crores and 1300026.39 crores
respectively, which show the growth rate of 7.46%.
Income, Expenditure and Net Profit
Table 1.11.2 (A) Income, Expenditure and Net profit of SBI in past two years
Income (in crores) Expenditure (in crores) Net Profit (in crores)
Growth Growth Growth
Bank 2014 2015 2014 2015 2014 2015
(%) (%) (%)
23 | P a g eSBI 15490.37 17497.29 +12.95 14401.25 16187.13 +12.40 10891.51 13102.89 +20.30
Source: SBI Annual Report 2014-15
Graph 1.11.2(A) Income, Expenditure and Net profit of SBI in past two years
18000
Income, Expenditure, net profit(in
16000
14000
12000
crores)
10000 2014
8000 2015
6000
4000
2000
0
Income Expenditure Netprofit
SBI’s total income was 15490.37 crores in 2014 which was increased to 17497.29
crores in 2015 which shows the growth rate of 12.95%. On the other hand the
expenditure was 14401.25 and 16187.13 in the year 2014 and 2015 respectively.
The increase in the value of expenditure was by 12.40%. As a result, the net profit
in the year increased by 20.30%.
2. Bank of Baroda (BOB)
Maharaja Sayajirao Gaekwad-III established the Bank of Baroda on 20 July 1908.
Its head quarter is in Vadodara, in the Gujarat state. The Bank was registered under
the Companies Act of 1887 with the paid up capital of Rs. 10 Lakhs. The bank
opened its branch in Ahmadabad in 1910, followed by the opening of another
branch in Maharashtra in 1919. Bank of Baroda is the second largest state- owned
bank after State Bank of India. Before and even after the World War II, the bank
grew domestically. The bank crossed the overseas boundary in the year 1953 and
established its branches in Kenya and Uganda to serve the Indian community there.
A big step was taken by the bank in 1957, of opening a branch in London which
later on became the Centre of British Common Wealth and an important banking
centre at international In 1969 it was nationalized along with the other 13 banks,
24 | P a g eby the government of India. At present, it is working with its 5000 branches and
staff strength of over 42000 and is providing its services worldwide.
Financial performance of Bank of Baroda-
Deposits and advances-
Table 1.11.3 (A) - Deposits and Advances of BOB in past two years
Deposits (in cores) Advances (in cores)
Bank Growth Growth
2014 2015 2014 2015
(%) (%)
BOB 568894.38 617559.52 +8.55 397005.81 428065.13 +7.82
*Source: BOB Annual Report 2014-15
Graph (A) 1.11.3 Deposits and Advances of BOB in past two years
700000
600000
Deposits & Advances (in crores)
500000
400000 2014
2015
300000
200000
100000
0
Deposits Advances
The deposits were 617559.52 crores in 2015 which showed a growth of 8.55 %
from 2014 to 2015 and the advances increased to 397005.81 crores from 428065.13
crores in the year 2015.
Income, Expenditure and Net Profit
Table 3.11.6(A) Income, Expenditure and Net profit of BOB in past two years
Income (in cores) Expenditure (in cores) Net Profit (in cores)
25 | P a g eBank Growth Growth Growth
2014 2015 2014 2015 2014 2015
(%) (%) (%)
BOB 43402.45 47365.55 +9.13 38861.37 43967.11 +13.14 3398.43 4541.08 +33.64
*Source: BOB Annual Report 2014-15
Graph 1.11.4(A) Income, Expenditure and Net profit of BOB in past two years
Income, Expenditure, Netprofit (in
50000
40000
crores)
30000
2014
20000 2015
10000
0
Income Expenditure Netprofit
The income of BOB was 47365.55 cores in the year 2015 and the expenditure was
increased to 43967.11 cores in 2015 from 38861.37crores in 2014 which shows the
growth rate of 13.14% and the net profit shows the growth of 33.64%.
3. State bank of Bikaner and Jaipur (SBBJ)
Brief History of the Bank
The genesis of State Bank of Bikaner and Jaipur dates back to the year 1943-44,
when the Bank of Jaipur Ltd. and the Bank of Bikaner Ltd. came into existence. In
1960, both banks were incorporated as subsidiaries of State Bank of India and
named as State Bank of Bikaner and State Bank of Jaipur. On January 1, 1963,
both banks were merged into one entity viz. State Bank of Bikaner and Jaipur. The
constitution, capital, management and other matters pertaining to the Bank are
governed by the provisions of SBI (Subsidiary Banks) Act, 1959. 75% of the shares
of SBBJ are held by SBI and the remaining by institutions and general public.
SBBJ went public in the year 1997-98 with an issue of 12.21 lakh shares of 100
each at a premium of 440/-. SBBJ is the only public sector bank with headquarter
in Rajasthan.
26 | P a g eThe number of branches increased to 1049 (862 in Rajasthan) as on 30.09.2013.
SBBJ had sponsored three Regional Rural Banks viz. Marwar Gramin Bank (set
up in 1976), Sriganganagar Kshetriya Gramin Bank (1984) and Bikaner Kshetriya
Gramin bank (1985). These were merged into single RRB viz. MGB Gramin Bank
in June 2006. On 25.02.2013 the MGB Gramin Bank (RRB sponsored by SBBJ)
and Jaipur Thar Gramin Bank (RRB sponsored by UCO Bank) were amalgamated
into a single Regional Rural Bank named 'Marudhara Gramin Bank' sponsored by
SBBJ with Head office at Jodhpur. The Bank shoulders Lead Bank responsibility
in 9 districts of the State.
Financial performance of SBBJ-
Deposits and advances-
Table 1.11.5 (A) - Deposits and Advances of SBBJ in past two years
Deposits (in crores) Advances (in crores)
Bank Growth
2014 2015 Growth (%) 2014 2015
(%)
PNB 451397 501397 +11.10 349269 380534 +9.0
*Source: SBBJ Annual Report 2014-15
The deposits were 501397 crores in 2015 which showed a growth of 11.10% from
2014 to 2015 and the advances increased to 380534 crores from 349269 crores in
the year 2015.
Graph 1.11.5(A) Deposits and Advances of SBBJ in past two years
600000
Deposits & Advances (in crores)
500000
400000
2014
300000
2015
200000
100000
0
Deposits Advances
27 | P a g e Income, Expenditure and Net Profit
Table 1.11.6(A) Income, Expenditure and Net profit of SBBJ in past two years
Income (in cores) Expenditure (in cores) Net Profit (in cores)
Bank Growth Growth Growth
2014 2015 2014 2015 2014 2015
(%) (%) (%)
PNB 47799.96 52206.09 +9.22 43109.43 48248.84 +11.92 3061.58 3342.59 +9.18
*Source: SBBJ Annual Report 2014-15
Graph 1.11.6(A) Income, Expenditure and Net profit of SBBJ in past two years
Income,Expenditure,Netprofit (in
60000
50000
40000
crores)
2014
30000
2015
20000
10000
0
Income Expenditure Netprofit
The income of SBBJ was 52206.09 cores in the year 2015 and the expenditure was
increased to 48248.84 cores in 2015 from 43109.43 cores in 2014 which shows the
growth rate of 11.92% and the net profit shows the growth of 9.18%.
4. Bank of India (BoI)
Bank of India was founded on 7th September, 1906 by a group of eminent
businessmen from Mumbai. The Bank was under private ownership and control
till July 1969 when it was nationalised along with 13 other banks. Beginning with
one office in Mumbai, with a paid-up capital of Rs.50 lakh and 50 employees, the
Bank has made a rapid growth over the years and blossomed into a mighty
institution with a strong national presence and sizable international operations. In
28 | P a g ebusiness volume, the Bank occupies a premier position among the nationalised
banks.
The Bank has 4963 branches in India spread over all states/ union territories
including specialized branches. These branches are controlled through 54 Zonal
Offices. There are 60 branches/ offices and 5 Subsidiaries’ and 1 joint venture
abroad. The Bank came out with its maiden public issue in 1997 and follow on
Qualified Institutions Placement in February 2008. While firmly adhering to a
policy of prudence and caution, the Bank has been in the forefront of introducing
various innovative services and systems. Business has been conducted with the
successful blend of traditional values and ethics and the most modern
infrastructure. The Bank has been the first among the nationalised banks to
establish a fully computerised branch and ATM facility at the Mahalaxmi Branch
at Mumbai way back in 1989. The Bank is also a Founder Member of SWIFT in
India. It pioneered the introduction of the Health Code System in 1982, for
evaluating/ rating its credit portfolio.
Presently Bank has overseas presence in 22 foreign countries spread over 5
continents – with 60 offices including 5 Subsidiaries, 5 Representative Offices and
1 Joint Venture, at key banking and financial centres viz., Tokyo, Singapore, Hong
Kong, London, Jersey, Paris and New York.
Financial performance of Bank of India Ltd-
Deposits and advances-
Table 1.11.7 (A) - Deposits and Advances of BoI in past two years
Deposits (in crores) Advances (in crores)
Bank Growth Growth
2014 2015 2014 2015
(%) (%)
IDBI
2,35,773.63 2,59,835.97 10.20 % 1,97,686.01 2,08,376.87 5.40 %
Bank Ltd
*Source: Bank of India Ltd. Annual Report 2014-15
29 | P a g eThe deposits were 2, 59,835.97crores in 2015 which showed a growth of 10.20%
from 2014 to 2015 and the advances increased to 2, 08,376.87crores from 1,
97,686.01crores in the year 2015.
Graph 1.11.7(A) - Deposits and Advances of Bank of India in past two years
300000
250000
Deposits & Advances (in crores)
200000
150000 2014
2015
100000
50000
0
Deposits Advances
Income, Expenditure and Net Profit
Table 1.11.8(A) Income, Expenditure and Net profit of Bank of India in past two years
Income (in cores) Expenditure (in cores) Net Profit (in cores)
Bank Growth Growth Growth/Deficit
2014 2015 (%) 2014 2015 (%) 2014 2015 (%)
IDBI
1873.
Bank 29576.3 32161.6 8.74 23894.9 26433.5 10.62 1121 22.11
4
ltd
*Source: Bank of India Ltd. Annual Report 2014-15
30 | P a g eThe income of Bank of India was 32161.6 crores in the year 2015 and the
expenditure was increased to 26433.5 cores in 2015 from 23894.9 crores in 2014
which shows the deficit rate of 10.62% and the net growth shows the growth of
22.11%.
Graph 1.11.8(A) Income, Expenditure and Net profit of Bank of India in past two years
35000
30000
25000
20000
2014
15000 2015
10000
5000
0
Income Expenditure Net Profit
5. Canera Bank
Widely known for customer centricity, Canara Bank was founded by Shri
Ammembal Subba Rao Pai, a great visionary and philanthropist, in July 1906, at
Mangalore, then a small port town in Karnataka. The Bank has gone through the
various phases of its growth trajectory over hundred years of its existence. Growth
of Canara Bank was phenomenal, especially after nationalization in the year 1969,
attaining the status of a national level player in terms of geographical reach and
31 | P a g eclientele segments. Eighties was characterized by business diversification for the
Bank. In June 2006, the Bank completed a century of operation in the Indian
banking industry. The eventful journey of the Bank has been characterized by
several memorable milestones. Today, Canara Bank occupies a premier position in
the comity of Indian banks. Canara Bank has several firsts to its credit. These
include:
Launching of Inter-City ATM Network
Obtaining ISO Certification for a Branch
Articulation of ‘Good Banking’ – Bank’s Citizen Charter
Commissioning of Exclusive Mahila Banking Branch
Launching of Exclusive Subsidiary for IT Consultancy
Issuing credit card for farmers
Providing Agricultural Consultancy Services
The Bank has successfully completed Aadhaar seeding through BC Terminal and
implemented renewal of Subscription for Social Security Schemes (PMJJBY &
PMSBY). Not just in commercial banking, the Bank has also carved a distinctive
mark, in various corporate social responsibilities, namely, serving national
priorities, promoting rural development, enhancing rural self-employment through
several training institutes and spearheading financial inclusion objective.
Promoting an inclusive growth strategy, which has been formed as the basic plank
of national policy agenda today, is in fact deeply rooted in the Bank's founding
principles. "A good bank is not only the financial heart of the community, but
also one with an obligation of helping in every possible manner to improve the
economic conditions of the common people". These insightful words of our
founder continue to resonate even today in serving the society with a purpose. We
strongly believe that the next century is going to be equally rewarding and eventful
not only in service of the nation but also in helping the Bank emerge as
a "Preferred Bank" by pursuing global benchmarks in profitability, operational
efficiency, asset quality, risk management and expanding the global reach.
Financial performance of Canera Bank-
Deposits and advances-
32 | P a g eTable 1.11.9 (A) - Deposits and Advances of Canera in past two years
Deposits (in crores) Advances (in crores)
Bank Growth Growth
2014 2015 2014 2015
(%) (%)
Canera 451397 501397 +11.10 349269 380534 +9.0
*Source: Canera Annual Report 2014-15
The deposits were 501397 crores in 2015 which showed a growth of 11.10% from
2014 to 2015 and the advances increased to 380534 crores from 349269 crores in
the year 2015.
Graph 1.11.9(A) Deposits and Advances of Canera bank in past two years
600000
Deposits & Advances (in crores)
500000
400000
2014
300000
2015
200000
100000
0
Deposits Advances
Income, Expenditure and Net Profit
Table 1.11.10 (A) Income, Expenditure and Net profit of Canera in past two years
Income (in cores) Expenditure (in cores) Net Profit (in cores)
Bank Growth Growth Growth
2014 2015 2014 2015 2014 2015
(%) (%) (%)
Canera
47799.96 52206.09 +9.22 43109.43 48248.84 +11.92 3061.58 3342.59 +9.18
Bank
*Source: Canera Annual Report 2014-15
33 | P a g eGraph 1.11.10(A) Income, Expenditure and Net profit of Canera in past two years
Income,Expenditure,Netprofit (in 60000
50000
40000
crores)
2014
30000
2015
20000
10000
0
Income Expenditure Netprofit
The income of PNB was 52206.09 cores in the year 2015 and the expenditure was
increased to 48248.84 cores in 2015 from 43109.43 cores in 2014 which shows the
growth rate of 11.92% and the net profit shows the growth of 9.18%.
B. Private Sector Banks
The private sector banks in India represent part of the Indian Banking Sector that
is made up of both private and public sector banks. The Private sector banks are
the banks where greater parts of the stake or equity are held by the private
shareholders not by government.
1. Industrial Credit and Investment Corporation of India
(ICICI)
The Industrial Credit and Investment Corporation of India Ltd. was incorporated
at the initiative of the World Bank, Government of India and representative of
Indian Industry, with the objective of creating a development financial institution
for providing medium- term and long- term project financing to Indian businesses.
The first chairman of the ICICI Ltd. was Mr. A. Ramaswami Mudaliar. It emerges
as a major bank that provides foreign currency loans to Indian Industries. It is the
first Indian bank who raises fund from International markets. It started as a wholly
owned subsidiary of ICICI ltd. in the year 1994, as an Indian financial institution..
Thereafter, in the same year its 2 subsidiaries named ICICI capital services Ltd.
and ICICI financial services Ltd. were amalgamated with the ICICI bank. At
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