Chapter One: Introduction

1
1.2 Origin of study:

Master of Business Administration (MBA) Program requires a three months attachment with
an organization followed by a study assigned by the supervisor of the university. I was
attached with IDLC Finance Ltd as an intern. My supervisor has asked me to make a study on
Employee Performance Appraisal of IDLC Finance Ltd-A Study at Gulshan branch as a
part of the fulfillment of MBA degree.

1.3 Objectives of the study:

To present an overview of IDLC Finance Limited.

To present an employee performance appraisal of IDLC Finance Ltd.
To identify the problems regarding employee performance appraisal of IDLC Finance
Ltd.
To provide some recommendations to improve service quality of the IDLC Finance
Ltd.

1.4 Scope of the study:

I completed my report entitled Employee Performance Appraisal of IDLC Finance Ltd-A
Study at Gulshan branch. That means, in this study all the aspects of Employee Performance
Appraisal have been discussed. Moreover, the problems and proposed solutions of Employee
Performance Appraisal also have been conferred in this study.

1.5 Significance of the Study:

IDLC is one of the leading private financial companies in Bangladesh. It provides highest
benefits to its clients among the companies in Bangladesh. In this report I have discussed the
employee performance appraisal procedure and also attached their problems and tried to give
some recommendations on the basis of the problems. If IDLC will follow my suggestions
they can create opportunities in future. It will help the HR & Admin department to take better
decisions.

1.6 Methodology of the study:

For smooth and accurate study, everyone has to follow some rules and regulations, the study
impute were collected from two sources:
1) Primary sources:
Practical desk work

2
 Face to face conversation with the officer
Directs observations
2) Secondary Sources:
Annual Study of IDLC
Files & Folders

1.7 Limitations of the Study:

Although I have obtained warm cooperation from employees of IDLC Finance Ltd. They
were too busy to help me sometimes. I have faced the following problems, which may be
termed as the limitation / short coming of the study:
Most of the primary data were not in the form those can help in writing a study.

Secondary data is also very rare. It is just only the annual study and the website.

Confidentiality of data is another barrier that was confronted during the conduct of
this study.
Lack of comprehension of the respondents was the major problem that created many
confusions regarding verification of conceptual and theoretical perception.

Chapter Two:

3
 History of IDLC Limited

2.1 History of IDLC Finance Ltd:

IDLC was initially established in Bangladesh in 1985 through the collaboration of

International Finance Corporation (IFC) of the World Bank, German Investment and
Development Company (DEG), Kookmin Bank and Korean Development Leasing
Corporation of South Korea, the Aga Khan Fund for Economic Development, the City Bank
Limited, IPDC of Bangladesh Limited, and SadharanBima Corporation. As the company
evolved, initial foreign shareholding of 49% was gradually withdrawn and the last foreign
shareholding was bought out by local sponsors in 2009.

Although they initially started with Lease Financing as their core product, IDLC has grown to
become the largest multi-product Non-Bank Financial Institution of Bangladesh, with almost
equal focus in Corporate, Retail and SME sectors. Moreover, IDLC has a significant presence

4
in the Capital Markets. Their merchant banking arm, IDLC Investments Limited, a wholly-
owned subsidiary of IDLC is a premier brand for investment banking in the country. Stock
brokerage arm, IDLC Securities Limited, another wholly-owned subsidiary of IDLC is also
amongst the top five brokers in the country.

Over the years, IDLC has attained a significant presence in the corporate sector of
Bangladesh. IDLC is highly respected by their clients, peers, employees and regulators for
their strong corporate governance, statutory compliance, high ethical standards, a progressive
and enabling working environment, and strong commitment to environmental and social
development.

IDLC continues to play a pioneering role in introducing and popularizing a variety of

financial instruments suiting ever-changing requirements of its fast-growing clients. They are
continuously expanding their presence to ensure the best quality of service to their clients at
all times.

2.2 Subsidiaries:

IDLC Securities Limited, a fully owned subsidiary of IDLC, offers full-fledged international
standard brokerage service for retail and institutional clients. It has seats on both Dhaka Stock
Exchange Limited and Chittagong Stock Exchange Limited. It is also a Depository
Participant (DP) of Central Depository Bangladesh Limited (CDBL).
IDLC Investments Limited as advised by the Securities & Exchange Commission (SEC), the
Company formed a separate subsidiary on May 19, 2010 in the name and style
IDLCInvestments Limited to transfer its existing merchant banking activities. The
Company has applied to the SEC to transfer the existing merchant banking license of IDLC
Finance Limited in the name of IDLC Investments limited.
After getting approval from SEC, the companys existing merchant banking services will be
provided by its wholly owned subsidiary, IDLC Investments limited.

2.3 Capital Structure:

The company has authorized capital of Taka 4,000,000,000 (400,000,000 shares of Taka 10
each) and paid up capital of Taka 990,000,000 (99,000,000 ordinary shares of Taka 10 each).

2.4 Shareholding Structure:

5
IDLC was incorporated in the year 1985 as a joint venture public limited company among
five foreign and three local financial institutions. In 2009, the foreign sponsors sold their
shareholdings to City Bank Limited. Companys current shareholding structure is shown in a
pie chart below.

2.5 Mission of IDLC Finance Ltd:

Mission: Create maximum possible values for all the stakeholders by adhering to the highest
ethical standards.

2.6 Vision of IDLC Finance Ltd:

Vision: Become the best performing and most innovative financial solutions provider in the
country.

2.7 Guiding Principles:

IDLC is a multi-product financial institution offering an array of diverse financial services

and solutions to institutional and individual clients to meet their diverse and unique
requirements. Following are the guiding principles that shape the organizational practice of
IDLC.

Customer first: IDLC has grown with its customers, who are believed to be the center of all
actions. As the crux of IDLCs corporate philosophy, customer service gets the highest
priority.

Innovation: IDLC has continuously introduced new financial products for meeting the needs
of the entrepreneurs in a complex & challenging business environment. The concept of
innovation is in-built into the working culture.

Professional Knowledge: IDLC is staffed with qualified professionals and innovative minds
in the country. Years of operational experience, large industrial database and competent
workforce have given them unparalleled advantages.

Professional ethics: The professional at IDLC maintain the highest degree of financial and
business ethics in all transactions with the clients. Over the last two decades, IDLC have put
in bets efforts to meet the expectations of the clients and investors.

6
One stop solution: Work at IDLC begins with the idea generation, then goes on into the
feasibility study followed by arrangement of financing to implement the project. IDLC
advises the clients, finance them and even arrange financing for them via different financing
modes, namely: lease financing, term loan, bridge loan, syndication, ordinary shares,
preferred shares and debentures.

For the Company: Relentless pursuit of customer satisfaction through delivery of top quality
services.

For the Shareholders: Maximize shareholders wealth through a sustained return on the
investment.

For the employees: Provide job satisfaction by making IDLC a center of excellence with
opportunity of career development.

For the society: Contribute to the well-being of the society, in general, by acting as a
responsible corporate citizen.

Goal: Long term maximization of Stakeholders value.

2.8 Organizational Structure:

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2.9 SWOT Analysis of IDLC Finance Ltd:

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SWOT analysis is an important tool for evaluation the companys strengths weakness and
opportunities treats, it helps the organization to identify evaluate its performance and can
scan the macro environment, which in turn is would help the organization to navigate in the
turbulence ocean of competition. Following is given the SWOT analysis of IDLC Finance
Ltd.

2.9.1Strengths:

Top Management:

The top management of the IDLC, the key strengths for IDLC Finance Ltd has contributed
heavily towards the growth and development of the financial institution. The Top
management officials are enough capable to manage their work so they have a good idea
about the current situation.

Company Reputation:

IDLC Finance Ltd has created a good reputation in the financial industry of the country.
Their main customers are many respective organization and respective person also. The
popularity of IDLC is increase day by day.

Modern Facility and computer:

From the very beginning IDLC Finance Ltd tries to furnish their work surrounding with
modern equipment and facilities. For speed service to the customer IDLC Finance Ltd had
installed money country machine in the teller counter. The financial institution has
computerized financial operation under software called PC investment. More over computer
printer statement are available to internal use and occasionally for the customer IDLC
Finance Ltd is equipped with telex and fax facilities.

Interactive Corporate Culture:

The corporate culture of IDLC Finance Ltd is very much interactive compare to other local
organization. This interactive environment encourages the employees to work
alternatively. Since the financial job is very much routine work oriented and lovely
environment boots up the work capability of the employees.

2.9.2 Weaknesses:

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Hierarchy problem:

The hierarchy problem treated as a weakness for IDLC Finance Ltd, because the employee
will not stay for a long.

Advertisement problem:

There is another weakness for IDLC Finance Ltd is advertisement. Their media coverage is
so much low that people do not know the IDLC thoroughly.

2.9.3 Opportunities:
Diversification:
IDLC Finance Ltd pursue diversification strategy in expanding its current line of business.
They do serve not only the organization but also individual person.

2.9.4 Threats:
Implementation Method:
Implementation of this new method is still facing resistance from a large part of the
employee. This resistance might result from the lack of proper knowledge about MBO
method.

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 Chapter Three:

Theoretical Aspects

11
3.0 Theoretical Aspect:

3.1 Performance Appraisal:

Performance appraisal is a continuous system of tracking and measuring performance against

agreed targets and identifying opportunities for improvement. In other words, performance
appraisal is a set of policies to achieve a shared vision of the organization to help each
individual employee to understand and recognize their contribution. But Performance
Appraisal is also the tool to determine and communicate to an employee about his/ her
performance on the job, ideally, establishing a plan of development for both parties.

Managers are reluctant to provide candid feedback and have honest discussions with
employees for fear of reprisal or damaging relationships with the very individuals they count
on to get the work done. Employees feel that their managers are unskilled at discussing their
performance and ineffective at coaching them on how to develop their skills. Many complain
that performance appraisal systems are cumbersome, bureaucratic and time consuming
comparing to the value that it adds. This leads both managers and employees to treat
performance appraisal as a burden rather than a tool to a successful working relationship.

The primary reason for having a PA program is to monitor employees performance, motivate
staff and improve company morale. Monitoring performance requires routine documentation,
which is accomplished through completing a performance appraisal form. When employees
are aware that the company is paying special attention to their performance and that they
could be rewarded with merit increases and promotions, they are motivated to work harder.
Morale is improved when employees receive recognition or reward for their work.
An effective PA program will assist the company in achieving its goals and objectives. Not
only will training needs be identified and addressed during a PA review, but hidden talent can
be discovered as well. Through identifying these training needs, staff can perform their jobs
at the highest level and be in a better position to address clients, members and customers
concerns and questions. A well-developed staff is more likely to be proactive, productive and
resourceful, all of which helps to give the company a competitive edge, from improved
customer relations to increased profits.

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3.2 Importance of Performance Appraisal:

1. Feedback: This provides a structured format for the discussion of performance issues on
a regular basis.

2. Motivating Superior Performance: Performance appraisal helps to motivate people to

deliver superior performance in several ways.

3. Setting and Measuring Goals: Goal setting has consistently been demonstrated as a
management process that generates superior Performance.

4. Counseling poor performers: Not everyone meets the organizations standards.

Performance appraisal forces mangers to confront those whose performance is not
meeting the company's expectations.

5. Determining compensation changes: Performance appraisal provides the mechanism to

make sure that those who do better work receive more pay.

6. Encouraging coaching and mentoring: Performance Appraisal identifies the areas

where coaching is necessary and encourages managers to take an active coaching role.

7. Supporting Manpower Planning: Well-managed organizations regularly assess their

bench strength to make sure that they have the talent that they will need for the future.

8. Determining Individual Training and Development Needs: If the performance

appraisal procedure includes a requirement that individual development plans be
determined and discussed, individuals can then make good decisions about the skills and
competencies they need to acquire to make a greater contribution to the company. As a
result, they increase their chances of promotion and lower their odds of layoff.

3.3 Different Methods of EPA:

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Balanced Scorecard: A Balanced Scorecard defines what management means by
"performance" and measures whether management is achieving desired results. The Balanced
Scorecard translates Mission and Vision Statements into a comprehensive set of objectives
and performance measures that can be quantified and appraised.

Critical incident method: The critical incident method for performance appraisal is a
method in which the manager writes down positive and negative performance behavior of
employees throughout the performance period.

Weighted checklist method: This method describes a performance appraisal method where
rater familiarize with the jobs being evaluated, prepares a large list of descriptive statements
about effective and ineffective behavior on jobs.

Paired comparison analysis: Paired comparison analysis is a good way of weighing up the
relative importance of options. A range of plausible options is listed. Each option is compared
against each of the other options. The results are tallied and the option with the highest score
is the preferred option.

Graphic rating scales: The Rating Scale is a form on which the manager simply checks off
the employees level of performance. This is the oldest and most widely used method for
performance appraisal.

Essay Evaluation method: This method asks managers/ supervisors to describe strengths
and weaknesses of an employees behavior. Essay evaluation is a non-quantitative technique.
This method is usually used with the graphic rating scale method.

Behaviorally anchored rating scales: This method used to describe a performance rating
that focused on specific behaviors or sets indicators defining effective or ineffective
performance.
It is a combination of the rating scale and critical incident techniques of employee
performance evaluation.

Performance ranking method: Ranking is a performance appraisal method that is used to

14
 evaluate employee performance from best to worst. Manager will compare an employee to
another employee, rather than comparing each one to a standard measurement.

Management by Objectives (MBO) method: MBO is a process in which managers/

employers set objectives for the employee, periodically evaluate the performance, and reward
according to the result. MBO focuses attention on what must be accomplished (goals) rather
than how it is to be accomplished (methods).

360-degree performance appraisal: 360 Degree Feedback is a system or process in which

employees receive confidential, anonymous feedback from the people who work around them
supervisors, peers and subordinates.

Forced ranking (forced distribution): 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.

3.4 Factors Distorting Performance Appraisal:

Performance appraisal is done by the managers or supervisors. They do this job under
different situation, at different place and different state of mind and at different time. Their
judgments are likely to be affected. They are human being. Their psychology, liking,
disliking, preference, judgment etc. are likely to affect the appraisal of employees. There are
chances that errors are likely to take place. But efforts should be there so that these can be
minimized. Proper care should be taken to give fair and impartial assessment. Generally, the
following errors are likely to take place in assessment:
(a) General Bias Errors: It depends upon the attitude of the assessor. Some may be very strict
and other may be very liberal during the assessment work. They may not consider the
actual performance of the employees for assessment work. It affects everyone in general.
(b) Halo Effect: During assessment when the assessor considers or gives importance to one
criterion of the assessment and ignoring the other factor, the error is likely to take place.
This is called halo effect. It gives wrong assessment of the employees.
(c) Relation Rating Error: When one task is related to another task then the assessor
gives importance to that logical relationship more. It creates the error in the assessment.

(d) Contrast and Similarity Errors: The assessors assess the other employees based on their

15
 own assessment. The assessment may be similar or contrast to assessment of the

employees.

(e) Central Tendency Errors: When the evaluator does not take the extreme steps for
evaluation, he avoids the extreme two ends. He follows the central path and gives and
average rating for the performance. The range of assessment is very narrow. It dissatisfies
the excellent performers but protect the poor performers also.

(f) Proximity Errors: When raters assess one high side then he assesses others also high side
this is called proximity error. He wants to justice with everyone but in the beginning, he has
done the assessment on wrong side and that affects the whole assessment.
(g) Rating Inflation: When supervisors rating goes very high without any reason is called
inflated rating. The supervisor should make that the ratings are on fact basis and not based on
emotions or feeling of individuals. The aforesaid factors affect the performance appraisal
individually or collectively. Hence, performance appraisal may not be correct or may be
biased. There is no hard and fast rule that these errors will take place with every assessor. But
these are like to affect the assessment work of the assessors. The assessors should keep these
points in mind and review the rating errors on regular basis. If the proper care is taken then
the assessment work will be adequate. Accountability can be rated as, does not meet
standards, needs improvement, meets standards or exceeds standards. One each rating the
assessor is supposed to give clear comments on the appraisal form. For example, if the person
exceeds standard them comment should be, very good, keep it up in future also. Similarly,
the other criteria like behavior, leadership, quantity and quality of output, discipline,
commitment to the work, level of competencies etc. are to be rated. Finally, the overall
performance of the employees is to be rated. It should be followed by the comments from the
assessor. The assessor is to sign the assessment form and submit to the concerned cell in HR
department.

3.5 Principles of the Performance Appraisal System:

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 Increase management's time commitment to personnel matters on an ongoing basis.
Shift performance emphasis from short-term, component specific individual goals to
include long-term, team-oriented goals that are consistent with continuous improvement
of the Industry as a whole.
Communicate with each employee in honest, timely dialogue aimed at performance
improvement.
Increase mutual involvement in goal-setting and definition of performance standards.
Improve management skills in communicating and taking responsibility for making the
performance Appraisal System operate effectively.
Increase employee responsibility for their career planning.

3.6 Definition of Employee Performance Appraisal:

EPA is an evaluation process of an employee with regard to his job performance. It is a

formal system of review and evaluation of individual or team task performance. The appraisal
measures skills and accomplishments with reasonable accuracy and uniformity. It provides a
way to help identify areas for performance enhancement and to help promote professional
growth. EPAs actively involve employees in understanding what is expected of them. By
setting agreed objectives and later reviewing the results each employee is responsible
for his or her own performance. It is an important tool for performance management and also
used as a medium of communication between supervisor & subordinate.

3.7 Objectives of Employee Performance Appraisal:

The main objectives of an appraisal system are usually to review performance, potential and
identify training and career planning needs. In addition, the appraisal system may be used to
determine whether employees should receive an element of financial reward for their
performance. Performance reviews - give managers and employees opportunities to discuss
how employees (1 are progressing and to see what sort of improvements can be made or help
given to build on their strengths and enable them to perform more effectively. Review of
potential and development needs - predicts the level and type of work that employees will be
capable of doing in the future and how they can be best developed for the sake of their own
career and to maximize their contribution to the organization. Reward reviews - determine the
'rewards' that employees will get for their past work. The reward review is usually a separate

17
process from the appraisal system but the review is often assisted by information provided by
the EPA.

3.8 Benefits of Appraisal:

The benefits of EPA are as follows:

Setting a practicable target for the employee

Enhanced control system by clearly specifying the target and reviewing the progress

Facilitating equitable reward system

Enhanced communication channel

Determining the need for personnel training and development

Predicting the performance of a job applicant

3.9 Who conducts the appraisal and When:

EPA is a part of performance management. HR dept. conducts performance management.

Performance management systems consist of the activities and processes adopted by an
organization in anticipation of improving employee performance as well as organizational
performance. Consequently, performance management is conducted at the organizational
level and the individual level. At the organizational level, performance management oversees
organizational performance and compares present performance with organizational
performance goals. The achievement of these organizational performance goals depends on
the performance of the individual organizational members. Therefore, measuring individual
employee performance can prove to be a valuable performance management process for the
purposes of HR and for the organization.

The performance management process begins with leadership within the organization
creating a performance management policy. Primarily, management governs performance by
influencing employee performance input (e.g. training programs) and by providing feedback
via output (i.e. performance assessment and appraisal. The PA process should be able to
inform employees about the organization's goals, priorities, and expectations and how well
they are contributing to them.

18
There are no steadfast rules about the frequency or timing of the appraisal process. It can be
carried out half yearly, quarterly, yearly or in any frequency that the management thinks
necessary. But generally, EPAs are conducted at least annually, and annual employee
performance reviews appear to be the standard in most organizations.

3.10 Data Collection Methods:

There are three main methods used to collect EPA data: objective production, personnel, and
judgmental evaluation.

Objective production:

The objective production method consists of direct, but limited, measures such as sales
figures, production numbers, the electronic performance monitoring of data entry workers,
etc. The measures used to appraise performance would depend on the job and its duties.

Although these measures deal with unambiguous criteria, they are usually incomplete
because of criterion contamination and criterion deficiency.

Criterion contamination acknowledges that the variability of performance can happen due to
factors beyond Criterion employee s deficiency refers to control the fact that the quantity. of
production does not necessarily indicate the quality of the products. Due to these bias, data
collected in objective method most often provide incomplete result.

Personnel:

The personnel method is the recording of withdrawal behaviors (i.e. absenteeism, accidents).
Most organizations consider unexcused absences to be indicators of poor job performance,
even with all other factors being equal. But this is subject to criterion deficiency. The quantity
of an employee s absences may be to the job and its duties. For this reason, the validity of
this method is questionable.

Judgmental evaluation:

Judgmental evaluation appears to be a collection of methods. A common approach to

obtaining PAs is by means of raters. The main methods used in judgmental EPA are:

Graphic Rating Scale: graphic rating scales are the most commonly used system in PA. On
several different factors, subordinates are judged on 'how much' of that factor or trait they
possess. Typically, the raters use a 5- or 7-point scale; however, there are as many as 20-point
scales.

19
Employee-Comparison Methods: rather than subordinates being judged against pre-
established criteria, they are compared with one another. This method is subject to halo effect
the forced-distribution method is good for large groups of rates. The raters evaluate each
subordinate on one or more dimensions and then place each subordinate in a 5 to 7 category
normal distribution. The method of top-grading identifies the 10% lowest performing
subordinates and dismisses them leaving the 90% higher performing subordinates.

Behavioral Checklists and Scales: In this method, Supervisors record behaviors of what
they judge to be job performance relevant and keep a running tally of good and bad
behaviors. A discussion on performance may then follow. The behaviorally anchored rating
scales (BARS) combine the critical incidents method with rating scale methods by rating
performance on a scale but with the scale points being anchored by behavioral incidents.

3.11 EPA Process:

The starting point for the EPA process is identifying specific performance goals. An appraisal
system cannot effectively serve every desired purpose, so management should select the
specific goals it believes to be most important and realistically achievable. The system the
organization chooses must specifically meet its desired goal. Too many EPA systems fail
because management expects too much from one method and does not determine specifically
what it wants the system to accomplish.

Fig: EPA process

20
The next step in this ongoing cycle continues with establishing performance criteria
(standards) and communicating these performance expectations to those concerned. Then the
work is performed and the supervisor appraises the performance. At the end of the appraisal
period, the appraiser and the employee together review work performance and evaluate it
against established performance standards. This review helps determine how well employees
have met these standards, determines reasons for deficiencies, and develops a plan to correct
the problems. At this meeting, goals are set for the next evaluation period, and the cycle
repeats.

3.12 EPA Methods:

Managers may choose from among a number of appraisal methods. The type of EPA system
used depends on its purpose. If the major emphasis is on selecting people for promotion,
training, and merit pay increases, a traditional method, such as rating scales, may be
appropriate. Collaborative methods, including input from the employees themselves, may
prove to be more suitable for developing employees.

Annual Confidential Reports:

During a certain period, a manager prepares annual confidential reports for each subordinate
who reports to him. In these reports, he talks of the highs and lows of the employee
performance in the past year. This report is tabulated and documented by the human resources
department and forwarded to management for a decision on the employee's future in the
organization. The drawback here is that the employee does not get the chance to make
improvements on his performance as this report is kept confidential.

MBO Method:

Management by objectives (MBO) is a process of defining objectives within an organization

so that management and employees agree to the objectives and understand what they need to
do in the organization in order to achieve them. Management by Objectives defines roles and
responsibilities for the employees and help them chalk out their future course of action in the

organization. It is an interactive method that encourage setting process. Management by

objectives guides the employees to deliver their level be stand achieve the targets within the
stipulated time frame.

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360-Degree Feedback Evaluation Method:

The 360-degree feedback evaluation method is a popular EPA method that involves
evaluation input from multiple levels within the firm as well as external sources. The 360-
degree method is unlike traditional performance reviews, which provide employees with
feedback only from supervisors. In this method, people all around the rated employee may
provide ratings, including senior managers, the employee himself for herself, supervisors,
subordinates, peers, team members, and internal or external customers. As many as 90
percent of Fortune 500 companies use some form of 360-degree feedback for either employee
evaluation or development. Many companies use results from 360-degree programs not only
for conventional applications but also for succession planning, training, and professional
development. Unlike traditional approaches, 360-degree feedback focuses on skills needed
across organizational boundaries. Also, by shifting the responsibility for evaluation to more
than one person, many of the common appraisal errors can be reduced or eliminated.
Software is available to permit managers to give the ratings quickly and conveniently. The
360-degreefeedback method may provide a more objective measure of a persons
performance.

Rating Scales Method:

Rating scales method is an EPA method that rates employees according to EPA defined
factors.

Using this approach, evaluators record their judgments about performance on a scale. The
employees according to scale include several categories, normally 57 in number, defined by
adjectives such as defined factors. Outstanding, meets expectations, or needs improvement.
Although systems often provide an overall rating, the method generally allows for the use of
more than one performance criterion.

Rating scales method is very popular because of its simplicity, which permits quick
evaluations of many employees. When the ratings are quantified, the method facilitates
comparison of employees performances.

The factors chosen for evaluation are typically of two types: job-related and personal
characteristics. Job-related factors include quality and quantity of work, whereas personal
factors include such behaviors as interpersonal skills and traits, like adaptability. The
appraiser completes the form by indicating the degree of each factor that is most suitable for

22
the employee and his or her performance. These rates are then converted into grades or
points. In case of extreme rating, appraiser can add comment supporting his or her rating.

Critical Incident Method:

The critical incident method is a EPA method that requires keeping written records of highly
favorable and unfavorable employee work actions. What affects the departments
effectiveness sig manager writes it down. At the end of the appraisal period, the rater uses
these records along with other data to evaluate employee performance.

With this method, the appraisal is more likely to cover the entire evaluation period and not
focus on the past few weeks or months.

Work Standards Method:

The work standards method is a EPA method that compares each employee a predetermined
standard or expected level of output. Standards reflect the normal output of an average
worker operating at a normal pace. Firms may apply work standards to virtually all types of
jobs, but production jobs generally receive the most attention. An obvious advantage of using
standards as appraisal criteria is objectivity.

In order for employees to perceive that the standards are objective, they should understand
clearly how the standards were set. Management must also explain the rationale for any
changes to the standards.

Ranking Method:

The ranking method is a EPA method in which the rater ranks all employees from a group in
order of overall performance. For example, the best employee in the group is ranked highest,
and the poorest is ranked lowest. This procedure is repeated until all employees are ranked. A
difficulty occurs when all individuals have performed at comparable levels.

Paired comparison is a variation of the ranking method in which the performance of each
employee is compared with that of every other employee in the group. A single criterion, such
as overall performance, is often the basis for this comparison. The employee who receives the
greatest number of favorable comparisons receives the highest ranking.

23
 Chapter Four:
Employee Performance Appraisal of
IDLC Limited

24
4.1 EPA Process of IDLC Finance Ltd:
Although employee appraisal is done in every level by the organization, it is the HR
department that authorizes the entire EPA process. At a specific time in a year, the process is
carried out. Employees are given recent high priority task in or appraisal process.

It is a long ranged and widespread process. HR department gives high priority in this activity.
The process starts with setting up of goal and ends with recommendation based on appraisal
rating.

Fig: EPA Process of IDLC Finance Ltd.

Setting Goal:

MBO method is based on the core concept of interactive management. This encourages
involving employees in the goal setting process. The goal of the organization is set through a
discussion between the supervisor and the subordinate. This goal is set for organization as a
whole. Every branch, department and division is equally responsible for carrying out the goal.
So, this general goal is then allocated to each segment. During this allocation, a discussion
takes place between the employee and supervisor regarding whether the allocation is
practicable by the Employee. Based on the discussion, the goal for that specific branch or
division is allocated.

25
Setting Targets:
Once the goal is set, the targets for each specific sector are determined. The goal fulfillment
is the responsibility of all the employees of a particular segment of the organization. This
goal is distributed among individual employees through various sectors, like-

Deposit target

Import target

Export target

Advances target

Guarantee target

Operating Profit target

These targets are also set through an interactive process.

The goal and target setting process can be illustrated through an example-

Actual Performance:

Once the individual target for employees is set, each employee works toward reaching the
target. This target works as the guideline for their task schedule.

Self-Appraisal:

After evaluation of actual performance with regard to target performance, an employee self-
rates his performance. For every targeted objective, he rates himself. This rating is done on
the basis of the employees evaluation of performance. The point to be remembered here is
that, in this stage it is not only the business target that is considered.

Appraisal by Appraiser:
The employee appraises himself on the basis of certain factors. After the self-appraisal,
Appraiser appraises the employee on the same factors. This appraised rating can be very
different from the self-appraisal. Appraiser appraises employee on the qualitative as well as
quantitative factors. Based on the evaluation on how much of the targeted goal the employee
has been able to fulfill, his immediate supervisor or appraiser rates him.

Appraisal by Appraiser's Supervisor:

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The appraised form is submitted to the appear supervisors review the appraised form and then
make necessary adjustments. Then he approves it by signing in it.

Approval by Employee EPA Review Committee:

The final approval authority lies with the Employee EPA Review Committee. From all the
branches, departments and divisions Employee Appraisal Forms are sent for approval of the
committee. This committee thoroughly scrutinizes all the forms and makes adjustments
accordingly. Throughout this adjustment process the recommendation can be accepted with or
without any modification. Or it can be rejected and new recommendation can be suggested
and considered for implementation. With this final approval, the employee appraisal process
comes to its end.
4.2 EPA Evaluation Process:

Appraisal method to a great extent depends on how the employee performance is evaluated.
Organizations choose from a number of evaluation systems. Again, the process chosen by the
organization largely depends on the purpose of the organization.

IDLC Finance Ltdstrives to ensure an objective, efficient and sound appraisal system to guide
employees toward the organizational goal through an interactive and effective way. The
management tries to achieve this goal through the use of MBO process.

Once the employees are rated on the basis of certain criteria (explained in the previous
section), they are then being evaluated.

The total evaluation is done on the scale of 100 marks. This total marks is distributed into
different categories.

Stage 1: Evaluation of Achievement of Business Target (marks-50)

This part evaluates an employees performance. This analysis is done again on two segments.

Achievement of business target (for different sectors)-marks 30

Achievement of business target (for operating profit of the organization)-marks 20

Each employee has to fulfill a target on different sectors. Marks allocation for this segment is
30.

The sectors include-

Deposits

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 Loans & Advances

Guarantee Business

The maximum allocated marks for each sector are 6. An employee self-rates his position on
the basis of percentage completed of the target assigned to him. Then the supervisor appraises
on the same scale.

An employee is then evaluated on the basis of his contribution in total operating profit. This
segment is allocated 20 marks out of 50. The percentage of profit earned with regard to the
targeted profit is then evaluated.

This total 50 marks evaluates an employees to him.

If, for example, an employees targets are as

Deposit tk. 25000

Advances tk. 20000

If he succeeded to fulfill 80% of Deposits and 60% of Advances, then his percentage of target
completed is-

Deposits tk. 20000 (80% of 25000)

Advances tk. 12000 (60% of 20000)

If he has no other targets in any other sectors, then the marking will be awarded out of 30 in
following way-

target % marks Actual % marks

performance

Deposits 25000 100 6 20000 80 4.8

Advances 20000 100 6 12000 60 3.6

Export 0 0 6 0 0 0

Import 0 0 6 0 0 0

Guarantee 0 0 6 0 0 0

Total marks 30 8.4

So, the mark awarded to the Appraise is 21.

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Stage 2: Evaluation of Compliance (marks-10)

This part considers since with an internal employees control system, rules, regulation,
comply by laws and any such compliance authority. Rating information in this category will
be provided by Head office, Internal Control & Compliance Division. On the basis of the
information the employee is rated.

Stage 3: Evaluation of Competency & Leadership Quality (marks-40)

This is a judgmental evaluation part. Employees leaded evaluated on the scale of 0 to 5

points. Where 0-5 scale indicates-

Points indicator

05 Outstanding

04 Very good

03 Good

02 Average

01 Below Average

The evaluation is done on eight criteria which are of qualitative nature and which mainly
indicates the characteristics of an employee that might have a significant effect on the
workplace. After an employee has rated himself on the specified criteria, his supervisor
appraises him on the same criteria.

Stage 4: Final Rating

In this stage, the results from stage 1,2 & 3 are aggregated and a final score is awarded.
Based on the score, the appraiser rate the appraise on a percentage basis as follows-

Outstanding 80% or above

Very good 70% ..

Good 60% ..

Average 50% ..

Below Average below 50%

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In case of self-appraisal, this rating can be regarding any factors that he considers as
hindrances towards the achievement of his goal.

Stage 5: Recommendation of the Appraiser

Based on the final rating, appraiser recommends some initiatives to be taken for the appraise.
Such initiatives may include-

Recommendation for annual increment

Recommendation for promotion

Recommendation for accelerated promotion

Denied promotion, needs further development

The first three recommendations stated above are positive recommendations and last two are
non-positive recommendations. The recommendations are based on the rating as following
way-

Rating Recommendations

Outstanding, Annual increment,

Very good, Promotion,
Good Accelerated Promotion

Average, Need for development

Below average Considered for another assignment

4.3 Variations in EPA Process in IDLC Finance Ltd:

The Appraisal Process is more or less same throughout the organization. But variations can be
seen with regard to some cases. Such variations are discussed below-

Head office vs. Branch:

Brach deals with customers in a more direct way than that of the Head Office. Again, more
transactions are processed in the Branches. Head Office, on the other hand, deals with policy
implementation, compliance, and other control related activities. Due to these differences in
the operational characteristics, the appraisal process in Branch and Head Office also differs,
though very slightly. Branch employees have greater target in terms of business sectors and

30
operating profit. They are responsible for bring about more deposits, guarantees, advances
and operating profit. This reflects in appraisal evaluation process where 50% marks is
allocated to this part. Head Office employees have less target in terms of Business Activities.
As a result, the marks allocated for business activities are less than that of branch.

Differences in Employee level:

An organization has different level of employees for different categories of work. Not every
employee does same nature of work. So, appraising each employee in same criteria is not
practicable. A Manager and a Cash Officer does very different type of job. As their job
differs, so should be their appraisal system. For this variation occurs.

Competency based Appraisal: For regular-job employees like Cash Officer, Office Assistant
and such, competency based appraisal is used. It is not too different from the regular appraisal
method. These employees too are assigned some limited targets, but these are not the basis
for their appraisal. Rather employees with such job specification are appraised on the basis of
their specific regular job competency.

Trait based Appraisal: This method is used for appraising Support Staffs Like-Security
Staff, Office Attendant, Driver and such. No targets are assigned to them. They are simply
appraised on the basis of their personal traits and etiquettes and on how well they are carrying
on their jobs.

4.4 Automation in EPA system in IDLC Finance Ltd:

The whole process of employee appraisal has been being carried out in a manual system. But
manual system possesses some deficiencies that ultimately threaten the effectiveness of the
appraisal process. The processing of every approval form requires review by immediate
supervisor and appraisers supervisor. Finally Review Committee needs to review all the
files. Most of the time employee personal files are also considered for valuable information
regarding employee. This whole process becomes a very lengthy one when done manually.
Automation can solve this problem. IDLC Finance Ltd is recently undertaking an initiative to
automate the appraisal system. A software naming ORBIT is being developed to conduct the
appraisal process through automation. This initiative is expected to

Increase efficiency in terms of human resource and other sectors of the organization

Decrease cost due to reduced employee need

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 Save time

Increase employee productivity

Ensure transparency

4.5 Employee Performance Appraisal of IDLC Finance Ltd:

Employee Performance Appraisal (EPA) is the tool for measuring the performance of an
individual and identifies the gaps and plan future development in order to enable a better
performance between the jobs and the incumbent.

It is an HR process for driving business outcomes. It is defining in advance what the

employees must do as an individual to win in the market place and later on assessing the
performance based on the extent to which the organization achieve result.

Employee Performance Appraisal is quite structured that it can measure of assess both goal
(What) and the management competencies (How)

Goals-Key Result Areas (KRA) is the specific major objectives to be set at the beginning of
the year through consultation with the reporting manager or supervisor. These needs to be
aligned to the objectives of the function and consequently to overall objectives of the IDLC
(IDLC, 2015).

A management competency is a skill, ability or trait that predicts success to perform a job.

The Performance Appraisal needs to be implemented as per PAS format which will be
circulated by HR at the beginning of the year. The definition of rating in performance
appraisal is given below for reference:

Performance Standard

Excellent (4.5-5.0)

Very Good (3.5-4.5)

Good (2.5-3.5)

Average (1.5-2.5)

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 Below Average (1.0-1.5)

IDLC Finance Ltdconsider the following term for Appraisal-

Indication key job responsibilities/ Targets/ Work plan of the employee for the year.

Performance on the job.

Knowledge level.

Behavioral competence level.

Excellent= 91-100, Very Good= 71-90, Good= 51-70, Average= 31-50 and Below Average=
0-30

Consider on the Job Performance and the results delivered by employee (Judge Quantity and
Quality) - anyone of the following:

A Strongest all around performer, Exceptionally Exceeded targets/ given what plan for
above expectation.

A Stronger all performer, Reasonably Exceeded or target/ given work plan above
expectation.

A Strong Performer Met targets/ given work plan satisfactorily within expectation.

A Reasonable performer, Closely Met target/ given work plan, but not fully satisfactory.

Performance standard is Well Below, targets/ given work plan, needs serious tanning and
serious efforts to improve.

Those who are rated in Excellent, Very Good, Good, Average and Below Average are eligible
for incentive bonus or promotion.

4.6The completion process of Performance Appraisal Forms:

It is already mentioned that there are two types of forms one is for the managers and another
one is for the employees who are working under them that means other than Managers. Now

33
the completion process of two different types of forms will be discussed below to make it
more understandable:

At first the performance appraisal form of the managers will be mentioned:

The form consists of four pages. At the beginning of the format page one it needs to mention
the year for which the organization is evaluating his employees. Then the name of the
appraise (the person who is evaluating) and also the designation, age, last promotion date,
service period with IDLC Finance Ltdetc.informationhas to be mention. Service period of the
present position and also need to mention the job location means where the employee was
working on that particular period of time.Then the Management Committee have to fill up the
section A where they need to mention the profit that the branch Manager achieved and the
targeted profit that was decided by the authority.After finishing section A management have
to fill up part B which is named other strategic targets contributed to part A. If A is achieved
then B may be ignored. But if A is not achieved then they must fill up the percentages of
different factors that is mentioned in that particular area. These factors are deposits, loans,
advances, imports, exports, remittances, bonds etc.After completing section B they have to
complete section C. in this section they have to give some points about quality of
achievements. These achievements are audit compliances, NPL new and recovery, operating
budget, employee development etc. after completing these three parts they put the marks
below and add them.If the average is:

Equal or
Less than 65% 65 - 79% 80% -100% 101% - 109%
above 110%
Below Average Average Good Very Good
Excellent

Exceptionally
Far below Achieved Exceeded
Near to target exceeded
target target target
target

Then after completing first page they have to move to page 2. Here they need to fill up some
Assessment of Knowledge & behavioral competence for Potential Listing only. Scoring will
be like this:

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1 = Need development,

2 = Average,

3 = Good,

4 = Very Good &

5 = Excellent.

Here they have to fill up nearly fifteen questions about the knowledge & behavioral
competence factors of Managers. These questions vary according to the situation. The
questions that are asked in this section are:

1. Overall Knowledge profile in assigned job responsibilities (core job)

2. Knowledge about IDLC Finance Ltd product & services, Organization, Policies &
Processes (updated)

3. Appreciation in financial business

4. Computer literacy & IT knowledge related

5. Planning: Ability to plan own job activities and able to prioritize and drive actions for
results

6. Customer understanding and care

7. Awareness about compliance issues

8. A self-starter with drive & initiatives

9. Attitude (a positive thinker & adoptable to change)

10. Analytical ability

11. Communication ability

12. Inter-personal relationship

13. A team worker believes in team commitment

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14. Ability to influence others & gain commitment

15. Speed in action

These are the questions that are mainly asked in this section. Management has to put tick
mark on the number that the person (Manager) deserves. Then they have to comment on
question number 16 about his Integrity & Conduct in service. This is a very crucial part for
the Manager. Because it shows the job sincerity of the Managers.

In section D the evaluator tries to identify two key areas that should be developed. There are
two areas like Knowledge and Behavioral competence. If the appraise needs any
development in this two areas, then they have to mention them in this box. Basically, from
this box information employee are selected for training on that basis.

In section E Supervisors overall comment (Performance Summary & Rating) is given.

Actually, it shows the summary of the appraisal. This rating is directly entered into the
performance appraisal calculation software. The input process of software will be described
later. After completing this part appraiser have to sign below.

Employee view point about this appraisal and own career wishes will be mentioned in the
section F. if appraise agrees with the appraisers evaluation then he has to write agreed and
sign below. If any appraise feels that their performance evaluation by the line managers is
influenced by discrimination or unfair and biased judgment the appraise may appeal to Head
of HR with their grievance in writing. In such cases the Head of HR will be the first point
contract. If the issue remains unresolved than it will referred to the MD for his/her review and
decision and in that case the decision of MD will be final.

Special Recommendations (career etc.) Place with justification are filled up in section G. if
the appraiser think that the employee should get the annual increment then they have to write
it in this box. If employee is eligible for next higher level promotion, then it also has to
mention there. If the appraiser thinks that the employee should get both of them then he must
write that in this box with proper justification.

In section H there is a box for HR review and comment. If HR thinks that there should be
added any more things than they can add it here. Even if they think that this evaluation is not

36
properly completed then they can also write it here. Then the proper actions will be taken
further.

Interview outcome & comment by HR Steering Committee is written here in section I. This
part is mainly considered if the person is recommended for promotion. This part is optional.
HR can directly put this comment in the Managers personal file. If the person is not
recommended then this part does not count or necessary to complete. These are the main
things that are to be considered when the appraisal form of the managers evaluated.

Now the performance appraisal form of all employees other than manager will be explained.
In that case, the last three pages of the appraisal form are similar to the Managers form. The
basic difference is in the first page of the form. So, the first page of the form will be
described.

At the beginning of the form as previous it needs to mention the year for which Managers are
evaluating the employees. Then they have to fill up the name of the appraise (the person
whom we evaluating) and also the designation, age, last promotion date, service period with
IDLC Finance Ltd, service period of the present position and also the job location means
where the employee was working on that particular period of time.

Then in section A mangers have to write the key job responsibilities, targets and work plans
of the employee in brief. Here they have to mention all the work which is done by the
employee in that particular period of time.

Then the manger has to fill section B which is called performance category. Here manger has
to mention in which category this employee fall in to with proper justification. There are five
performance categories. They are:

EXCELLENT (EX) 100%++ ACHIEVER: Exceptionally Exceeded Performance

Standards / Targets / Given Work Plan far above expectation.

VERY GOOD (VG) 100%+ ACHIEVER: Reasonably Exceeded Performance Standards /

Targets / Given Work Plan above expectation.

GOOD (G) TARGET ACHIEVER: Met Performance Standards /Targets / Given Work
Plan satisfactorily within expectation

37
AVERAGE (AVG) Nearly TARGET ACHIEVER: Closely Met Performance Standards /
Targets / Given Work Plan, but not fully satisfactory.

BELOW AVERAGE (BAVG) Performance Far Below the Standard Expectation / Targets /
Given Work Plan A poor performer.

Mangers have to describe the category which the employee belongs to and also have to give a
tick mark in the right side of the form. After that section, all the sections are similar as the
mangers form. The Manager has to fill this form accordingly.

With a view to explaining the performance appraisal system of IDLC Finance Ltd Limited a
small case study has been undertaken where in the performance appraisal of a respondent has
been described. For the sack of anonymity, the name of the respondent has not been disclosed
in the present report.

This is a performance appraisal form for year 2009 of an employee who is other than
manager. So, as it mentioned earlier that in section A manger have to describe the key job
responsibilities of that employees. In this case, the employees key job responsibilities are:

1. L/C Opening.

2. Management of SWIFT.

3. Preparation of PSI forms.

4. Preparation of CCIE statement.

5. Preparation of Land Customs statement.

6. Management of TI systems.

7. TR disbursement and adjustment when related officer is absent or overloaded.

8. To develop myself in financial carrier and serve the IDLC effectively and efficiently.

9. To improve business worthiness & Marketing of the products to improve IDLC profit.

10. Other assignment as assigned by the branch management time to time.

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11. Successfully achieved my business target for Tk,70.00 (Seventy) lacks set by the branch
management.

In section B manager has to mention in which category the appraise fall into. In that case, the
manger selected him in as EX (excellent) category. Appraiser also wrote the justification for
that category.

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 Chapter Five:

Findings and Recommendations

5.1 Findings and Recommendations:

Every organization has its positives as well as negatives and in case of IDLC Finance Ltd
existence of the later one is less than the earlier one and as the management is determined to
reach the pick of success it seems that in near future the negatives will be eliminated. During
the internship at IDLC Finance Ltd, after collecting and analyzing data I have got the
following findings and recommendations which are completely my personal point of view.

1. The working environment of IDLC is so much poor and employee

Recommendations:

IDLC should ensure a favorable environment where employees will feel free to work.

40
2. Training process of IDLC is so poor. For this the employees cannot get proper idea about
their responsibilities

Recommendations:

IDLC should increase training house, written guidelines. Formal and informal training
sessions might be arranged to reduce the gap of knowledgeable. They should hire well
qualified trainer to teach how to work in the automated EPA process and deliver quality
services. This training process should be started as early as possible then customer che
employees.

3. Implementation of MBO method faces certain weaknesses in IDLC Finance Ltd and it
should be

Recommendations:

IDLC should follow the MBO method and learn about method and serve good qulaity to their
customer.

4. The employees are not satisfied with their compensation. Sometimes they are to involve in
extra responsibilities but they dont get any incentives for this.

Recommendations:

IDLC should more concern about the satisfactions of the employees and they should give
incentives to motivate them.

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 Chapter Six:

Conclusion

6.1 Conclusion:

The importance of human resource for an organization is tremendous. An organization with a

dynamic and effective workforce certainly enjoys competitive advantages over its
competitors. Recognizing the fact, IDLC Finance Ltd. has taken a timely decision to
modernize its HR Management System. Adopting MBO method for EPA system is the first
step toward it.

Automation in EPA is another forwarding step towards change management. Through an

42
advance EPA system IDLC Finance Ltd is striving toward reaching its goal.

But challenge lies in proper implementation of MBO method in EPA system. Automation
process can also face difficulties if not handled properly. Adequate workforce with sound
knowledge about MBO method as well as overall EPA system. By successfully and
efficiently meeting the challenges, IDLC Finance Ltdcan achieve competitive advantage.

Bibliography:

Studys:
1. Prospectus of IDLC Finance Ltd.
2. Form Journals.

Websites:

IDLC, Official Site: www.idlc.com

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 http://www.scribd.com/doc/2179I869/employee-performance-appraisal-in-financial-
sector,retrieved on 31/01/2017at 09.57 am

http://www.assignmentpoint.com/employee-performance-appraisal-in-financial-
sector,retrieved,on 14/01/2017at 06.56 pm

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