A SUMMER INTERNSHIP PROJECT REPORT ON

‘PERFORMANCE APPRAISAL IN
ROURKELA STEEL PLANT’

Submitted in partial fulfilment of the requirements for the degree of

Master of Business Administration (MBA)

SUBMITTED BY:
(Your Name)
Roll no. xxxxxxxxx

Company Advisor: Faculty Advisor:

Mr. xxxxxxxxxxxxxx Dr. Professor Name
Dy. Manager (Personnel-Modernisation) Associate Professor
Rourkela Steel Plant School of Management
SAIL College Name

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SCHOOL OF MANAGEMENT
YOUR COLLEGE NAME, CITY
July, 2015
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This is to certify that the project entitled “Performance appraisal in Rourkela Steel
Plant”, submitted by Your name bearing Roll no xxxxxxxxx for the partial fulfilment of
requirements for the course curriculum of Masters of Business Administration in School of
Management, (Your College name, City) embodies genuine work done under my
guidance.

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 DECLARATION

I do hereby declare that this project report entitled ‘PERFORMANCE APPRAISAL IN

ROURKELA STEEL PLANT’ is my genuine work. I have done this project for the
partial fulfilment of the requirement for the award of the degree of Master of
Business Administration (M.B.A) at School of Management, Your College name, City.

The project report submitted by me is original and has not been submitted to other institute/
examining body or board/ university for the award of any certificate/ diploma/ degree.

If at any stage, it is found that I have copied the project report in part or full, from a project
report earlier submitted to college abbr. or any other examining body, strict action may be
initiated against me, which includes cancellation of degree.

Place: Your Name

Date: School of Management
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 ACKNOWLEDGEMENT

Preparing a project of this nature is an arduous task and I was fortunate enough to get
support from a large number of people to whom I shall always remain grateful. I would
like to express my gratitude to Rourkela Steel Plant for allowing me to undertake this
project.

I would like to take this opportunity to thank Mr. XXXXXXXX, Dy. Manager (Personnel-
Modernisation), Rourkela Steel Plant for providing me with the various information and
data relevant to this project.

My sincere thanks to Mr. XXXXXXX, Jr. Manager (Personnel- Modernisation), my

project guide in RSP and also to all the managerial staff, office staff and employees who
extended their whole hearted co-operation and support for data collection and survey work
which helped me to reach the final stage of making this report.

I am also desirous of mentioning my profound indebtedness to Dr. Prof. Name, Associate

professor, School of Management, Your College Name, for the valuable advice, guidance
and precious time and support he offered.

I would be failing in my duty if I do not thank all the respondents for giving me their
precious time, relevant information and advice.

Last but not the least, I am also thankful to all the concerned persons who have helped me
directly and indirectly without which I would have not been able to complete this project.

Your name

School of Management
Your College name abbr.
 EXECUTIVE SUMMARY

This project report entitled: “PERFORMANCE APPRAISAL IN ROURKELA

STEEL PLANT‟ is intended to determine the employee satisfaction and awareness about
the performance appraisal system in Rourkela Steel Plant and also to provide suggestions
so as to improve the system as a whole.

Analysis of Performance Appraisal process and its application in a specific

company- “Rourkela Steel Plant, SAIL” will be carried out and the process will be
described. Opinions and attitudes of employees regarding performance evaluation process
will be surveyed. This project report will put light on what performance appraisal is and
theories related to it. Different methods of doing performance appraisal are also discussed
in brief. Literature review includes presentations of some theories in the area of
Performance Appraisal, in order to provide the reader with better understanding of the
current research. The detail about the company in which this study has been carried out has
been included. The review of the appraisal system and employees‟ opinions will be
followed by findings, recommendations of best practices and suggestions for
improvements. IBM SPSS analysis has been provided along with the responses of the
respondents.

Primarily the well-defined objectives were framed according to the study. Then a
questionnaire was prepared based on the defined objectives.

A survey was carried out in RSP. The responses were taken from the employees. It
was recorded, analyzed and interpreted using different types of statistical tools such as
Microsoft Excel and IBM SPSS.

According to the findings, the suggestions were given which would be helpful for
the organization.
 CONTENTS
TOPIC PAGE NO
1. Introduction 1
1.1 Rationale of the study 5
1.2 Industry/Sector Profile 6
1. 2.1 Global Scenario 7
1. 2.2 Domestic Scenario 7
1. 2.3 Growth of Indian steel sector 8
1. 2.4 Production 8
1. 2.5 Indian steel industry- Vision 2025 9
1. 2.6 Demand-availability projection 10
1. 2.7 Imports 10
1. 2.8 Exports 10
1.3 The growth trends 11
1.4 Major players of steel industry 11
1.5 Market share of steel industry in India 12
1. 5.1 India’s crude steel market share by production-FY 2015 12
1. 5.2 India’s finished steel market share by production-FY 2015 12
1.6 Government support and policies 12
2. Company profile 14
2.1. Overview of SAIL 15
2.2. Formation of Hindustan Steel Limited 15
2.3. Formation of SAIL 16
2.4. SAIL- Current Scenario 16
2.5. Board of directors 18
2.6. Vision Statement 18
2.7. Credo Statement 18
2.8. Rourkela Steel Plant 19
2.9. Mission statement of RSP 19
2.10. The samskar of RSP 19
2.11. The sankalpa of RSP 19
2.12. Expansion of RSP 20
2.13. Major facility in expansion 20
2.14. Special features of RSP 20
2.15. Major units in RSP 21
2.16. HRD centre of RSP 21
2.17. Product profile 22
3. Review of literature 23
3.1. Challenges of performance appraisal 29
3.2. Performance appraisal and employee engagement 31
3.3. Executive performance management system in RSP 33
3.4. Policy of performance appraisal system in RSP 33
TOPIC PAGE NO
3.5. Guidelines 40
4. Objectives and scope of the project 50
4.1. Objectives 51
4.2. Scope 51
5. Research methodology 53
5.1. Aim of the study 54
5.2. Type of research 54
5.3. Sampling 54
5. 3.1. Universe 55
5. 3.2. Sample frame 55
5. 3.3. Technique of sampling 55
5.4. Data collection techniques 55
5. 4.1. Sources of data collection 55
5. 4.2. Research instrument 56
5.5. Analysis techniques 56
5.6. Limitations 56
6. Data analysis and interpretation 57
6.1. Hypothesis 58
6.2. Summary of findings 59
6.3. Descriptive statistics 65
6.4. Test of hypothesis 67
6.4.1. Introduction 67
6.4.2. Scales development 67
6.4.3. Hypothesis testing 70
6.4.4. Hypothesis findings 73
7. Findings and recommendations 74
8. Conclusion 81
REFERENCES 83
ANNEXURES 84
 LIST OF TABLES

Sl. no. Table no. Title of table Page no.

1 1.1 Indian steel industry production 9

2 1.2 Indian steel industry imports 10
3 1.3 Indian steel industry exports 10
4 2.1 Steel plants and products 18
5 2.2 Rated capacity of plants after expansion 20
6 2.3 Major facilities in expansion 20
7 2.4 Production 22
8 3.1 Performance factors E1-E4 35
9 3.2 Potential factors E1-E4 35
10 3.3 Performance factors E5-E9 35
11 3.4 Potential factors E5-E9 36
12 5.1 Sampling 54
13 6.1 Gender of respondents 59
14 6.2 Age of respondents 59
15 6.3 Position of respondents 59
16 6.4 1st part of Questionnaire 60
17 6.5 2nd part of Questionnaire 62
18 6.6 Min, max, mean, std. dev. 65
19 6.7 Scale 1 statistics 69
20 6.7 Scale 2 statistics 69
21 6.9 Scale 3 statistics 70
22 6.10 Regression analysis 71
CHAPTER – 1
 1. INTRODUCTION

“What gets measured gets done”, is a famous quote. Performance appraisal (PA) is
one of the human resource management (HRM) tools used to evaluate the job performance
of employees (Dessler, 2011; Mondy et al. 2002; and Tompkins, 1995). The main aim of
performance appraisal is to maintain better performance in an organization by making an
objective assessment of performance and potential. After an employee is selected, trained
and motivated, the next step is the appraisal of his performance. It is the step which helps
an employer to know how effective it has been in hiring the individual. If any loop holes
are found, it is clearly communicated to the appraisee and necessary steps are carried out
for his/her development. It can also be called as performance evaluation or performance
review. It is a technique to evaluate an employee‟s previous year performance.
Performance appraisal is used to map an individual‟s performance with the goals of an
organization. We can say that it is the means by which employee‟s work behaviour are
aligned with the organization‟s goals. Many organizations link it to rewards and incentives.
This is pertinent to Herzberg‟s two-factor theory, which consists of two factors about
motivation. According to Bateman and Snell (2011), the first one focuses on motivators
such as the nature of the job, duties and responsibilities, and job satisfaction to determine
motivation. The second one known as hygiene factors includes working conditions,
supervision, compensation and the policy of an organization. From the theory it is clear
that these factors should be properly considered in order to motivate employees and to
serve HRM purposes such as promotion or termination.

The term „Performance Appraisal‟ can be divided into performance and appraisal.
Performance means efficiency of functioning or level of achievement or what is expected
to be delivered by an individual. What is expected to be delivered must be clearly
specified, the conditions of work must be specified and the time frame must be set prior to
the start of appraisal process. Performance has many dimensions like input, output or
result, time taken, quality of job and cost dimension. Therefore, we can say that
performance appraisal is the systematic description of the employee‟s job related strengths
and weaknesses. “Performance appraisal is the systematic evaluation of individuals with
regard to their performance on the job and their potential for development.” (Dale S.
Beach: 1980). “Performance appraisal is a method of evaluating the behaviour of
employees in the workplace, including both the quantitative and qualitative aspects of job

2
performance.” (Carrell and Kuzmits: 1982). “Performance appraisal is the process of
evaluating the performance and qualifications of the employee in terms of requirements of
the job lot which he is employed, for the purposes of administration including placement,
selection for promotion, providing financial rewards and other actions which require
differential treatment among the mebers of a group as distinguished from actions affecting
all members equally.” (C.Heyel: 1973). Performance appraisal deals with both quantitative
as well as qualitative factors with respect to the job.

The performance appraisal system is considered as an integral part of human

resource management system. In addition to allocating reward, organizations use appraisals
to provide developmental advice to employees, as well as obtain their perspectives and
justice perceptions about their jobs, departments, managers and organizations (Erdogan,
2002; Holbrook, 2002; Longenecker, 1997).Appraisal discussions are used by employees
to improve their performance by getting feedback form their supervisor. This feedback
includes their performance rating, suggestions and opinions of supervisor to help an
individual to improve and also words of motivation by the manager. Supervisors show the
growth path to the subordinates. They tell them about the benefits of developing overall
performance and how it is related to additional responsibilities, increased salary and
promotions. This is a very good way to motivate employees as the supervisor comes in
direct contact with his/her subordinate and the subordinate can also share his/her
difficulties in achieving good performance. It is a two-way communication process. In
addition, managers also come to know about their leadership styles and departmental
operations. This interchange of ideas between a subordinate and supervisor also helps to
strengthen their relationship which ultimately reflects in performance.

Most would agree however, that organizations‟ performance appraisal processes

operate in ways that are less than ideal (Holbrook, 2002; Kane, 1994; Murphy and
Cleveland, 1995). Time pressures, complex appraisal forms, fear and defensiveness are all
factors that may inhibit the usefulness and accuracy of the appraisal and its discussion
(Buckley, 2001; Longenecker, 1997; Roberts, 1998). Managers often feel constrained by
their simultaneous roles of evaluator and coach (Cederblom, 1982); usually, the role
evaluator takes precedence (Wilson and Western, 2001). In fact, employees report that,
when conducting appraisals, their managers give too little attention to career and
development issues (Lawler et al., 1983).

3
 Performance appraisal is nothing but a process of merit rating in which one
individual is better or worse in comparison to others. The basic purpose in this merit rating
is to ascertain an employee‟s eligibility for promotion. However, performance appraisal is
more comprehensive term for such activities because its use extends beyond ascertaining
eligibility for promotion. These activities are like training and development, salary hike,
transfer, discharge etc. besides promotion. A performance appraisal (PA) can also be called
as performance review, performance evaluation, career development discussion, or
employee appraisal. Performance appraisals are a part of career development and consist of
regular reviews of employee performance within organizations. A Performance appraisal is
a systematic and periodic process that assesses an individual employee‟s job performance
and productivity in relation to certain pre-established criteria and organisational objectives.
Other aspects of individual employees are considered as well, such as organisational
citizenship behaviour, accomplishments, potential for future improvement, strengths and
weaknesses. A central reason for the utilisation of Performance appraisals is performance
improvement which is initially at the level of the individual employee, and ultimately at the
level of the organisation. Other fundamental reasons include as a basis for employment
decisions (e.g. promotions, terminations, transfers), as criteria in research (e.g. test
validation), to aid with communication (e.g. allowing employees to know how they are
doing and organisational expectations from them), to establish personal objectives for
training programs, to get feedback for personal development, which will help in keeping
track of decisions and legal requirements and in wage and salary administration.
Additionally, Performance appraisals can aid in the formulation of job criteria and
selection of individuals who are best suited to perform the required organisational tasks.
Performance appraisal can be part of guiding and monitoring employee career
development. Performance appraisals can also be used to aid in work motivation through
the use of reward systems.

According to Dale Yoder, “Performance appraisal includes all formal procedures

used to evaluate personalities and contributions and potentials of group members in a
working organisation. It is a continuous process to secure information necessary for
making correct and objective decisions on employees.”

4
 1.1 RATIONALE OF THE STUDY

Performance appraisal practices shows that organisations undertake performance

appraisal to meet certain objectives which are in the form of salary hike, promotion, for
identifying training and development needs, providing feedback and opinion to employees
and putting pressure on employees for better performance. Appraisals give us a clear
picture of the characteristics, traits and performance of an individual. On the basis of these
results we assess the value of others and identify what is good or bad. Appraisals are
essential for making many administrative decisions such as selection, training,
development plans, promotion, transfer and salary etc. Besides they aid in personal
research. Performance appraisal is the most important tool for an organization. The
information which we get from a performance appraisal is essential because we can take a
lot oh decisions related to personnel management like promotion and merit increment.
Some benefits are mentioned below.

1. Salary Increase: Performance appraisal aids in salary hike decision making. In

general, we know that salary hike decisions are based on job performance. The
better you perform a job, the more you will be paid. Employees are continuously
evaluated on the basis of their performance. The process may be formal or
informal. In some small organisations, where there is direct contact between the
one who is evaluated and the one who will evaluate, informal appraisal can be used.
In case of larger organisations, these types of contact does not exist. There such
type of informal process cannot be used. We will require a formal system of
performance appraisal. The information that we will get from the appraisal will tell
us about the performance of an employee and also we can decide what will be the
appropriate compensation for his/her job.
2. Promotion: In some organisations merit plays a major role for promotion. In that
case performance appraisal is very essential. In some cases merit as well as
seniority is taken into consideration. From the report of performance we can
identify the strong and weak areas of an employee. When we know the weak areas,
appropriate training can be given. If the employee has a lot of strong points, he can
be given promotion. Transfer, demotion and discharge decisions can also be taken
on the basis of performance appraisal.
3. Training and Development: As stated above, performance appraisal can be used
to identify the weaknesses of an individual and this can be further used to identify
5
 the training needs of that person. There are many organisations that use
performance appraisal for identifying training needs.
4. Feedback: After performance appraisal, an individual gets feedback. From this, it
will be helpful for an individual to know where he/she stands in the organisation.
For a person to work better, it is important that he/she should know how he/she is
performing in the present job. Again it has two reasons for why a person performs
better by knowing his/her own performance. Firstly, By knowing the feedback,
he/she becomes aware and tries to remove the lacuna and perform better by his/her
own sincere efforts. Second, when an individual understands how important his
/her job is or how his/her job affects the objectives of the organisation, it will
motivate them to perform better. Thus, it is clear that proper organisational
performance appraisal system can help individuals to perform better.
5. Pressure on Employees: Performance appraisal puts some sort of pressure on
employees to perform better. When the employees know that they are being
continuously evaluated and this evaluation will decide their future prospective in
the organisation, they either willingly or forcefully will try to perform better.

1.2 INDUSTRY/SECTOR PROFILE

Steel is considered to be the backbone of human civilization. It is crucial for the

development of any modern economy. Steel is important for sustainable development of
people to satisfy their needs. Steel is used for making automobiles, railroads, buildings,
bridges, supplying water with pumps and pipelines etc. To know the socioeconomic
development and living standards of people in any country, the level of per capita
consumption of steel is an important index. More than hundred years ago, the first iron and
steel industry started in Jamshedpur by Sir Jamshedpur Tata when he started Tata Iron and
Steel Company Ltd. (TISCO) in 1911. Then, in 1936, Mysore Iron and Steel Works was
established which was later renamed as Visvesvaraya Iron and Steel Works. In 1939,
Indian iron and steel company; another private company, formed a committee to increase
steel production in India. Post-independence, the vision was to lay the foundation for rapid
industrialization in the country. Then the steel industry in India progressed steadily. At
present, India is the 4th largest producer of steel in the world. A major part of Indian steel
is consumed for engineering applications and automobile construction.

6
1.2.1 GLOBAL SCENARIO

In 2014, the world crude steel production reached 1661.5 million tonnes (mt) and
showed a growth of 1.2% over 2013. (Source: World Steel Association or WSA,
prov.). China remained the world‟s largest crude steel producer in 2014 (823 mt)
followed by Japan (110.7 mt), the USA (88.3 mt) and India (83.2 mt) at the 4th position.
Today, India is the 3rd largest producer of steel in the world. WSA has projected that
global apparent steel use will increase by 2% to 1,562 mt in 2014 following growth of
3.8% in 2013 while in 2015, world steel demand will grow by another 2% and will reach
1,594 mt. As per their forecast, India‟s outlook is improving and in 2014, India‟s steel
demand is expected to grow by 3.4% to 76.2 mt, following growth of 1.8% in 2013. In
2015 structural reforms and improving confidence will support a further 6% growth in
Indian steel demand but elevated inflation and fiscal consolidation remain key
downside risks to the outlook. Per capita finished steel consumption in 2013 is
estimated at 219 kg for world and 545 kg for China by WSA. (note: 2014 data has not yet
been released by WSA).As the trend in the world is towards producing low cost steel by
using more environment friendly means, steel producers worldwide are adopting new
technologies like Corex and Compact Strip Casting, adopting alternate routes like Electric
Arc Furnace instead of the traditional Blast Furnace-Basic Oxygen Furnace route, as well
as importing raw materials like coke.

1.2.2 DOMESTIC SCENARIO

The demand for steel started rising and Indian steel industry started its growth path from
2007-08. The steel production was rising sharply in that period and India became the 4 th
largest producer of crude steel. India also became the largest producer of sponge iron in
the world. There are many factors which has the potential to increase the per capita steel
income in the country. Some of the factors are investment of around a trillion dollars for
infrastructure, growth in manufacturing to 11-12% which is 8% currently, increase in
population in urban areas to 600 million by 2030 which is at present 400 million,
emergence of market for steel in rural areas which was consuming 10 kg per annum
mainly due to projects like Bharat Nirman, Pradhan Mantri Gram Sadak Yojana,
Rajiv Gandhi Awaas Yojana, Smart city among others. According to the National Steel
Policy 2005 by 2019-20 the steel production to reach 110 million tonnes (MT). But, by
seeing the ongoing mega projects, both in greenfield and brownfield, it has been

7
projected by Working Group on steel for the 12 th five year plan that the capacity of crude
steel in the country will be around 140 MT by 2016-17. It has also forecasted that it can
also reach up to 149 MT if all the requirements are adequately fulfilled. Since the release
of the policy in 2005 there has been a stable growth of the Indian economy. The domestic
steel industry has made rapid developments both on the demand and supply side.

1.2.3 GROWTH OF INDIAN STEEL SECTOR

India is one of the cheapest producers of hot metal in the world. The reason for this
cost advantage is that cheap and good quality iron ore is available here. Apart from this,
cheap labour is also available. But all these advantages can‟t be utilised fully because of
low labour productivity, high power cost and high cost of energy. Finance is also another
hindrance. The expansion plans of steel majors are likely to put tremendous pressure on
the availability of inputs and infrastructure resources within the country. For the
exploitation of huge iron ore reserves would require huge resources. Availability of coking
coal is decreasing over the past few years. This in turn is leading to higher imports.
Earlier some traditional suppliers of coking coal like China have curtailed exports in order
to feed their expanding iron & steel industry. Logistics will definitely play an important
role as the steel industry needs to be competitive in every field. It needs to increase its
efficiency across the entire value chain in an integrated manner. During the early 90s, the
steel melting scrap was becoming scarce. For this reason Sponge Iron industry was
promoted. Since then India has emerged as one of the largest producers of Sponge Iron.
According to a recent study India is on its way to be the second largest producer of steel
in 2015-16 study (Source: The Economic Times, Jan 5, 2015). India will rise from fourth
position to the world‟s second largest producer of crude steel by 2015-16. Its capacity is
projected to increase from 100 million tonne (MT) to about 112.5 MT in 2015-16. A
sectoral analysis by Frost and Sullivan‟s Metals and Mining Practice said that India will
move to the second position both in production and consumption as indicated by all the
indicators.

1.2.4 PRODUCTION

Steel industry was de-licensed in 1991. It was decontrolled in 1992. Today, India is
the 3rd largest producer of crude steel in the world. In 2014-15, production for sale of
total finished steel (alloy + non alloy) was 91.46 MT. The growth was of 4.3% over 2013-

8
14. Production for sale of Pig Iron in 2014-15 was 9.7 MT, a growth of 22% over 2013-
14. India is the largest producer of sponge iron in the world with the coal based route
accounting for 90% of total sponge iron production in the country. Data on production for
sale of pig iron, sponge iron and total finished steel (alloy + non- alloy) are given below
for last six years:

Indian steel industry: Production for sale (in million tonnes)

2009- 2010- 2011- 2012- 2013- 2014-
Category 10 11 12 13 14 15

Pig iron 5.88 5.68 5.371 6.870 7.950 9.694

Sponge iron 24.33 25.08 19.63 14.33 18.20 20.38

Total finished steel (alloy +
non-alloy) 60.62 68.62 75.70 81.68 87.67 91.46

Source: Joint Plant Committee

Table 1.1: Indian steel industry production

1.2.5 INDIAN STEEL INDUSTRY- VISION 2025

The Steel Industry in India is expected to grow at a faster rate in this

period. The reason for this is that the industries and economy is gaining
pace with t ime. We cannot ignore the fact that globalization and
l iberalization will play a vital role for the future of the Indian steel
industry in the global market. With a vision of achieving 6. 9 % growth rate
in steel consumption, 7 . 3 % in i ts production and a share of 23% of exports
in total production, the National Steel Policy 2005 (NSP 2005) set a goal and broad
policy framework to achieve the target of producing over 100 million tons steel by the
year 2019-20. Since then, the steel industry in Indian experienced a paradigm shift with
the actual statistics surpassing the projections in the National Steel Policy (NSP) 2005 by
significant margins. From 2005-06 to 2011-12 steel consumption and production grew by
10 per cent and 7.8 per cent per annum respectively. There was a faster growth in steel
consumption. For this reason India had to import steel from 2007-08 onwards. All these
drastic changes in the steel industry led to the formulation of the National Steel Policy
2012 which aims to reach crude steel capacity level of 300 million tons by 2025-26
(Vision 2025). It focuses on both domestic and foreign investment in the steel sector. Its
9
focus is also on taking the consumption level up to the global standards and a healthy share
of exports.

1.2.6 DEMAND-AVAILABILITY PROJECTION

Ministry of Steel in its Five Yearly Plan projects the demand and availability of
iron and steel in the country. The gaps between the requirement and availability is filled
mostly by imports. Regular interface with consumers exists by way of a Steel
Consumers‟ Council. Interface is helpful in many ways like redressing of problems
related due to availability, quality related complaints etc.

1.2.7 IMPORTS

As per the extant policy, iron and steel are freely importable. The data given
below is of total finished steel (alloy + non alloy) for the last five years:

Indian steel industry: Imports (in million tonnes)

2010- 2011- 2012- 2013- 2014-
Category
11 12 13 14 15
Total finished steel (alloy + non
6.66 6.86 7.93 5.45 9.32
alloy)
Source: Joint Plant Committee
Table 1.2: Indian steel industry imports

1.2.8 EXPORTS

Iron and steel are exportable. The data given below is of export of total finished
steel (alloy + non alloy) for the last five years:

Indian steel industry: Exports (in million tonnes)

2010- 2011- 2012- 2013- 2014-
Category
11 12 13 14 15
Total finished steel (alloy + non
3.64 4.59 5.37 5.98 5.59
alloy)
Source: Joint Plant Committee

Table 1.3 Indian steel industry exports

10
1.3 THE GROWTH TRENDS

The entry of private sector, their participation and growth in steel industry is the
result of liberalization of industrial policy. The government has taken many initiatives to
encourage private players to enter into this sector. The existing units are also being
modernized. Many are expanded. Some are modified to adopt new advanced technology
which will be cost effective and more productive. New units are coming up based on the
state of-the-art technologies. In the past few years there has been a significant increase in
the demand of steel. The demand is also stable which in turn is encouraging domestic
entrepreneurs to enter into fresh greenfield projects in various states of the country.

The capacity of crude steel was 109.85 MT in 2014-15. In 2015, India emerged as
the 3rd largest producer of crude steel in the world. (Source: „World Steel in Figures
2015‟, published by WSA in June 2015). WSA has the capability to produce various
grades of international quality standards. If all the requirements for making steel are
adequately met, India will very soon become the second largest producer of crude steel.

1.4 MAJOR PLAYERS OF STEEL INDUSTRY

 Rashtriya Ispat Nigam Limited

 Tata Steel
 JSW steel
 Bhushan Steel
 Essar Steel
 The Ferro Alloys Corporation Ltd.
 Mahindra Ugine Steel
 Welspun Corp Ltd.
 Ahmedabad Steelcraft Ltd.
 Akashna Global Steel Ltd.
 Anil Special Steel Inds. Ltd.
 Ashirwad Steel & Inds. Ltd.
 Bajaj Steel Inds. Ltd.
 Banga Laxmi Steel Trading Company Ltd.
 Bellary Steels & Alloys Ltd.
 Bengal Steel Industries Ltd.

11
1.5 MARKET SHARE OF STEEL INDUSTRIES IN INDIA

1.5.1 INDIA’s CRUDE STEEL MARKET SHARE BY PRODUCTION –

FY 2015 (Source: Ministry of Steel Annual Report 2015)

 TATA STEEL – 11.1%

 RINL – 3.8%
 SAIL – 16.3%
 OTHERS – 68.8%

1.5.2 INDIA’s FINISHED STEEL MARKET SHARE BY

PRODUCTION – FY 2015 (Source: Ministry of Steel Annual Report 2015)

 TATA STEEL – 10.1%

 RINL – 2.8%
 SAIL – 0.6%
 OTHERS – 86.5%

1.6 GOVERNMENT SUPPORT AND POLICIES

For modernisation and expansion of steel plants of Steel Authority of India Limited
(SAIL) and Rashtriya Ispat Nigam Limited (RINL) in various states, the Ministry of Steel
has announced to invest in the steel industry. The target for SAIL is to enhance the crude
steel production capacity from 12.84 MTPA in current phase to 21.4 MTPA. The target to
be achieved for RINL is from 3 MTPA to 6.3 MTPA. An industry driven Steel Research
and Technology of India (SRTMI) in association with the public and private sector steel
companies is being set up by the Ministry of Steel. An initial corpus of Rs 200 crore (US$
31.67 million) is being spent for research and development activities in the iron and steel
industry. There are many other initiatives are being taken by the government for the
development of the steel industry in India. They are as follows:

 For effective coordination and implementation of various investment projects in the

steel sector, an Inter-Ministerial Group (IMG) has been set up in the Ministry of
Steel.

12
  Under the Cabinet Secretariat, a Project Monitoring Group (PMG) has been
constituted. Their role is to ensure that there should not be delay in implementation
of projects. They have the power to give clearances or resolve any issue that may
hinder the process of project implementation.
 Duty on export of iron ore has been increased to 30 per cent. By this there will be
an increase in domestic value addition. The iron ore availability for domestic steel
industry will also be improved.
 The rates of custom duty on steel products have been increased from 5 per cent to
7.5 per cent in the Union Budget for 2014-15.

Some of the policies for regulating production of steel are as follows:

 National Steel Policy 2005 Export/Import Policy for Iron Ore Export
 Steel and Steel Products (Quality Control), 2012
 Steel and Steel Products (Quality Control) Second Order, 2012
 National Mineral Policy, 2008
 Industrial Policy
 Foreign Trade Policy
 National Environment Policy
 National Electricity Policy
 Coal Policies and Guidelines
 Distribution of Iron and Steel items to SSI sector
 Guidelines for investors in Mineral Sector

13
CHAPTER – 2
2. COMPANY PROFILE

2.1 OVERVIEW OF STEEL AUTHORITY OF INDIA LTD.

Steel Authority of India Ltd. (SAIL) is one of the leading steel-making public
sector companies with a turnover of Rs 50,627 crore. India has seven Maharatnas of
Central Public Sector Enterprises. SAIL is one of them. The Government of India on 19 th
May, 2010, through a memorandum accorded the status of „Maharatna‟ to SAIL. It has
five integrated steel plants, three special plants and one subsidiary spread across the
country. The Government of India owns about 75% of SAIL‟s equity. Thus, the
Government retains the voting control of the company. SAIL being a Maharatna company
enjoys significant operational and financial autonomy. Rakesh Singh, the steel secretary, is
the acting chairman of SAIL. There are 97,897 employees working as on 31-March-2014.

2.2 FORMATION OF HINDUSTAN STEEL LIMITED

The Government of India, when entered into the iron and steel production sector,
had envisaged that it will not run the firm as a departmental undertaking. Initially, the
administration of steel project was under Ministry of the central Government. Hindustan
Steel was formed as a limited company. On behalf of the people of India, the President of
India owned the shares. Thus, Hindustan Steel Limited was set up on January 19, 1954.
1959-73 saw the growth of Hindustan Steel Ltd. Hindustan Steel was initially designed to
manage only one plant at Rourkela. The supervision of Bhilai and Durgapur plants was
transferred to Hindustan Steel from April 1957. The original registered office was in New
Delhi. In July 1956, it was transferred to Calcutta (Kolkata). This was again shifted to
Ranchi in December 1959. Initially Hindustan Steel also had Bokaro project under it. In
January 1964, a new steel company was incorporated in Bokaro. It was Bokaro Steel Ltd.
By the end of December 1961, the 1 MT phases of Bhilai and Rourkela Steel Plants
were completed . In January 1962, the 1 MT phase of Durgapur was completed after
commissioning of wheel and axle plant. The crude steel production of HSL went up from
158 thousand tones (in 1959-60) to 1.6 MT (in 1961-62). On 2nd September, 1967, 2.5 MT
phase of Bhilai was completed after commissioning of Wire Rod Mill. On 17 th February,
1968, the last unit of 1.8 MT, Tandem Mill, in Rourkela was completed. On 6 th August,
1969, 1.6 MT phase of Durgapur was completed. Thus, after completion of 2.5 MT, 1.8

15
MT, and 1.6 MT in Bhilai. Rourkela and Durgapur respectively, the total output of crude
steel from HSL was 3.7 MT in 1968-69 and again risen to 4 MT in 1972-73.

2.3 FORMATION OF STEEL AUTHORITY OF INDIA LIMITED

The first Parliamentary Committee to put light on the question of setting up a

holding company for steel was the Committee of Public Undertaking of the Fifth Lok
Sabha. In 1971, it was considered for the first time in the department of steel because of
the following reasons. Firstly, there was a rapid growth in the industrial sector. Also a
rapid growth in the overall economy of the country. Secondly, in view of future
development, Government had the ability to divert investment in such areas. The public
sector had to be more efficient so that it will be able to contribute more than to the pool of
investible surplus in our economy. A holding company can also perform other functions
like long term planning of programmes, control and coordination of constituent units,
introducing necessary technological changes, R & D setup in organization and training
programmes for managerial personnel. In January 1972, Government approved the
proposal to set up a holding company for Steel. The Government approved the formation
of Steel Authority of India Limited in December, 1972. On January24, 1973, the
company was incorporated with an authorized capital of Rs.2,000 crore. SAIL was
restructured as an operating company in 1978. This was the history of SAIL.

2.4 SAIL- CURRENT SCENARIO

SAIL is now the major steel producer for India. It has five integrated steel
plants under its umbrella. They are Bokaro, Bhilai, Durgapur, Burnpur and Rourkela.
Durgapur, Bhadravati and Salem are the three special steel plants that produce a wide
range of special alloy steels, special steels, and stainless steel. Bulk Ferro Alloys‟
largest producer was MEL, Chandrapur, a subsidiary company. After that it merged
with SAIL. Technologists and professionals are the real strength for SAIL and for
them only SAIL is able to become one of the largest producer of steel. It has a manpower
of 1.17 lakhs as on 1st January, 2010. It hasd a sales turnover of 1,15,851 million as on
March, 2015.

16
 INTEGRATED STEEL PLANTS

STEEL PLANT LOCATION PRODUCTS

BHILAI STEEL Rails (13/26m), Long rails (65-260m),

PLANT Blooms, Billets, Slabs, Channels, Joists,
CHATTISGARH
Angles, TMT Rebars, Wire Rods, Crane
Rails, Plates, Pig iron & Coal Chemicals

DURGAPUR STEEL Blooms, Billets, Joists, Narrow Slabs,

PLANT WEST BENGAL Channels, Angles, TMT Rebars, Wheels &
Axles, Pig iron & Coal Chemicals

ROURKELA STEEL Plate Mill Plates, HR Plates, HR Coils,

PLANT Slabs, CR Sheet/Coil, Galvanised sheets
ODISHA (plain & corrugated), ERW pipes, Spiral
Weld pipes, CRNO, Pig iron & Coal
Chemicals

BOKARO STEEL HR Coils, Slabs, HR Sheets, Plates, CR Coils,

PLANT Sheets, GP Sheets, coils, GC Sheets,
JHARKHAND
Galvanealed steel, HRPO, Pig iron & Coal
Chemicals

IISCO STEEL PLANT Wire rods, Bars & rebars, Joists, Channels,
Angles, Blooms, Billets, Universal & Special
WEST BENGAL
section (Z-bar, MS Arch), Pig iron & Coal
Chemicals

SALEM STEEL Cold Rolled Stainless Steel, Hot Rolled

PLANT TAMIL NADU Carbon & Stainless Steel Products, Micro-
Alloyed Carbon Steel

ALLOY STEEL Alloy Steel Squares & Rounds, Wear

PLANT Resistant Plates, Forgings, Crane Wheels,
WEST BENGAL Forged Rolls/ Plates, Special Quality Slabs
& Stainless Steel Slabs (low Ni, 300 &
400 series)

17
 VISVESWARAYA High Quality Rolled & Forged Alloy &
IRON & STEEL KARNATAKA Special Steel Products
PLANT

CHANDRAPUR High/ Medium/ Low carbon Ferro-

FERRO ALLOY MAHARASHTRA Manganese, Silico-Manganese
PLANT
Table 2.1: Steel plants and products
Source: www.sail.co.in/company/about-us
2.5 BOARD OF DIRECTORS
Steel Authority of India Ltd. Is managed by an efficient and experienced board of
directors aided by the Chairman.
 Chairman & MD (Addl. Charge) - Shri Rakesh Singh
 A S & F A and Director, SAIL – Ms. Bharathi Sivaswami Sihag
 Director (Finance) – Shri Anil Kumar Chaudhary
 Director (Technical) – Shri S S Mohanty
 Director (Raw Material & Logistics) – Shri Kalyan Maity
 Director (Economy) – Dr. Atmanand
 Director (Commercial) – Shri Binod Kumar
 Joint Secretary to the Government of India – Shri Sunil Barthwal

2.6 VISION STATEMENT

“To be a respected world class corporation and the leader in Indian steel business
in quality, productivity, profitability and customer satisfaction.”

2.7 CREDO STATEMENT

 We build lasting relationships with customers based on trust and mutual benefit.
 We uphold highest ethical standards in conduct of our business.
 We create and nurture a culture that supports flexibility, learning and is proactive
to change.
 We chart a challenging career for employees with opportunities for advancement
and rewards.

18
  We value the opportunity and responsibility to make a meaningful difference in
people‟s lives. (Source: www.sail.co.in/company/vision)

2.8 ROURKELA STEEL PLANT (RSP)

RSP is the first of the three integrated steel plants that was set up in 1959 by
Government of India. It was setup with the collaboration of German. It had a capacity of 1
million tonnes during installation. Then, its capacity was enhanced to 1.9 million tonnes.In
the mid 1990s the plant was modernised with a number of new units having state of the art
facility. Other older units were reformed to improve the quality of products and for cost
reduction. At the same time cleaner environment was also ensured. It is the first plant
under SAIL and also the only one at present where 100 per cent of the slabs are produced
by the cost effective as well as quality centric route of continuous casting. Presently, RSP
has the capacity to produce 2 million tonnes of hot metal, 1.9 million tonnes of crude steel
and 1.67 million of saleable steel. It is the only plant under SAIL that produce silicon steel
for the power sector, tin plates for the packaging industry and high quality pipes for the oil
and gas sector. It has a wide and sophisticated product range. It includes tubular, flat and
coated products. To double its present cpacity around 12,000 crores is being invested.

2.9 MISSION STATEMENT OF ROURKELA STEEL PLANT

“Achieving total safety, perfect quality, optimum cost and maximum productivity
in a harmonious environment.”

2.10 THE SAMSKAR OF ROURKELA STEEL PLANT

“We have to create and sustain a peaceful work environment where every
employee can contribute to the plant in assigned area of work with full freedom and
dignity and without fear.”

2.11 THE SANKALPA OF ROURKELA STEEL PLANT

“We the employees of Rourkela Steel Plant have full faith in our unlimited potential and
we resolve to sustain our Samskar and commit ourselves to achieve total safety, perfect
quality, optimum cost and maximum productivity. It is our Sankalpa to spread Samridhi in
our steel plant, steel township and in the region.”

19
2.12 EXPANSION OF ROURKELA STEEL PLANT
To enhance the hot metal production capacity of Rourkela Steel Plant, as a corporate
plan – 2012 of Steel Authority of India Ltd., from 2 MTPA to 4.5 MTPA, saleable steel to
3.9 MTPA and crude steel to 4.2 MTPA by the year 2012, the board of SAIL approved the
expansion project on 21st May, 2007. The consultancy job for iron and steel zone hass been
taken up by M/s MECON. The integration of entire expansion and that of rolling mill zone
was given to M/s M N Dastur & Co. The consultant for CO Battery No 6 and auxiliaries is
CET/SAIL. For the infrastructure of rail, M/s RITES is the consultant. The following table
shows the rated capacity of the plant after expansion.
Rated Capacity after
S. No. Details Present Capacity
Expansion
1 Hot Metal 2.0 MTPA 4.5 MTPA
2 Crude Steel 1.9 MTPA 4.2 MTPA
3 Saleable Steel 1.671 MTPA 3.9 MTPA
Table 2.2: Rated capacity of plants after expansion

2.13 MAJOR FACILITIES IN EXPANSION:

Sl. Facilities
1 Augmentation and Modification In OBBP
2 New 7mtr Tall Battery # 6 (1 X 67 Ovens)
3 New Sinter Plant –III (1 X 360 M2)
4 New Blast Furnace # 5 (4060 M3)
5 Oxygen Plant
6 SMS-II – 3rd Basic Oxygen Furnace(150 T), RH-OB, 3rd Ladle Heating Furnace &
7 New Lime & Dolomite Plant ( 2 X 350 TPD)
8 New 4.3 M Wide Plate Mill
9 Auxiliary Packages, Utilities, Logistics for the whole Plant
Table 2.3: Major facilities in expansion
2.14 SPECIAL FEATURES OF ROURKELA STEEL PLANT:
RSP is the first plant in Asia to use LD process i.e. Linz and Donawitz process in
steel making. Basic Oxygen Process (BOS) is the other name of LD process. Rourkela
Steel Plant is the only ERW/SW pipes producing plant which conforms to the rigid
standard of API. RSP is also the first Indian plant to adopt external desulphurization of hot
metal by the process of injecting calcium carbide. Cold Rolled Non Oriented (CRNO)
Steel sheets are produced only in RSP under SAIL. It is used in electrical industries having
an installed capacity of 73,000 tonnes/year. The first plant having vacuum degassing
metallurgy is Rourkela Steel Plant. Primarily, this system was adopted for the production

20
of silicon steel which was used for cold rolled no orientation sheets. The system constitutes
of a degassing facility, vacuum oxygen refining unit and vacuum arc refining unit. The first
integrated steel plant to adopt cost effectiveness continuous casting route for quality
centered to process 100 per cent of produced steel. All the departments that were holding
the major role and some service departments certified to ISO 9001:2008 QMS.
2.15 MAJOR UNITS IN ROURKELA STEEL PLANT
 Ore Bedding and Blending Plant
 Coke Oven
 Sintering Plant
 Blast Furnaces
 Steel Melting Shops
 Plate Mill
 Hot Strip Mill
 Cold Rolling Mill
 Galvanising Lines
 Silicon Steel Mills
 Pipe Plants
 Traffic and Raw Material
 Environment Management
 Computerisation
 HRD Centre
 CPTI

2.16 HRD CENTRE OF RSP

The Human Resource Development Centre was set up during 1949 in Rourkela
Steel Plant. Afterwards, it came to be known as “Technical Institute”. The job was to
impart technical knowledge and skill to all new entrants to the then Hindustan Steel Ltd.
The primary job included training as well as developing the skill and competence of the
existing employees. As time passed by, the focus of the organization broadened which
resulted in the broadening of the spectrum of developmental activities carried by the
Technical Institute. Thus the name changed to “Training and Development Centre” and
again finally to “Human Resource Development Centre”. It was the HRD Centre under
SAIL‟s umbrella to have got the certificate of ISO 9001 Quality Management System in

21
 November 2003. The scope of the activities were growing rapidly and so did the
infrastructure of HRD Centre. In 1993, the refractory shop came up. The hydraulics and
Pneumatics Laboratory was commissioned in 1994 with a view to increase the
competency level of employees so that they will be able to cope up with the new
advanced latest technologies. An electronics laboratory was also commissioned in the
year 1994. The Computer Centre was brought up in 1989. The HRD center has played a
vital role in the transformation of RSP. It has taken many turnaround initiatives for the
growth of RSP. It has become a center stage for the process of transformation of RSP. It
has hosted many national and international workshops, seminars and conferences. It has
aided its employees for several professional development activities. HRD Centre makes
continuous efforts to bring about improvements. It tries to foster a culture of innovation
and learning. Linking the training activities and the strategic goals of the organization is
the prime focus of HRDC. To bridge the gap between competence and skill, the HRD
department organizes HR interventions. For the employees those who are posted in Hi-
technology related areas or those who deal with computer application, they organize
workshops to develop their competence and knowledge. To enhance the overall
performance of the organization it also addresses their varying needs and tries to co-
operate them. It gives effort to develop the multi-tasking and multi skilling of employees.
It also tries to enhance the managerial skills of employees.
2.17 PRODUCT PROFILE
PRODUCT MIX TONNES/ANNUM
Plate Mill Plates 2,99,000 from old Plate Mill
10,00,000 from New Plate Mill
HR Plates 92,500
HR Coils 3,98,000
ERW Pipes 75,000
SW Pipes 55,000
CR Sheets & Coils 4,33,000
Galvanized Sheets (GP & GC) 1,60,000
Silicon Steel Sheets 73,500
Table 2.4: Production

22
CHAPTER -3
3. REVIEW OF LITERATURE

The topic „Performance Appraisal‟ is very vast and there are many researches
regarding this topic. Revamping the rating system within the organization was the only
goal considered before 1980‟s according to many theoretical studies. The action was to
reduce the disorder of Performance appraisal system (Feldman,1981). As the time passed,
the rating system and methods got enriched and was appreciated by the employees and also
got the attention of managers. There is another scale to measure the performance of
employees i.e. Behavioral Observation Scale (BOS). In the period of 1960‟s and 1970‟s;
two new rating scales were introduced. They were Behaviorally Anchored Rating Scale
(BARS) and the Mixed Standard Scale (MSS).The innovations were worthy to be noted as
they reduced errors and improved the observation skills from the performance appraisal
system. Around hundreds of thousands of researches were carried out in the period marked
between 1950 to 1980 and the main focus was on different types of rating scales (Arvey
and Murphy, 1998). Landy and Farr (1980) carried out a research of reviewing the
performance appraisal in an organizational context in totally a different manner in which
they understood the rater process in organizational perspective.

The biasness in the performance appraisal system started occurring 1980 onwards.
In spite of giving priority to merit, knowledge, skills, discipline and style of work of the
employees, the performance appraisal started to be done on the basis of favoritism or race
or gender basis. The accuracy factor in the performance appraisal system started to be
given importance in the beginning of 1980‟s. Different psychometric biases which caused
diversified rating errors in the appraisal method were emphasized. Some of the rating
errors are like central tendency, halo and leniency. . It has been found from most of the
researches that the bias free appraisals were true or more accurate, but the research of
Hulin in 1982 refused the concept as according to them the appraisals were not accurate
(Murphy & Balzer, 1989).

Researches conducted in 1980 were found to be dominantly contributing to the

appraisal system. Some presumed assumptions regarding the performance appraisal were
clarified by these researches, as was done in case of the work of Murphy (1982). The
measure of employee attitude towards the performance appraisal system and its acceptance
was included by the research (Roberts, 1990). In the research (Bernardian and Beatty,

24
1984), it was suggested that the measures with behavior and attitude variables are better
anticipator than those with the traditional psychometric variables. In the research (Roberts,
1990) it is suggested that due to the insufficiency of approval from the end users, a
Performance Appraisal system is not effective in practice.

According to a number of researchers, the performance appraisal procedure and

method which are enhanced and upgraded will enhance the level of satisfaction of the
employees and will improve the process of setting of goal within the organization.

 DDI (1997) in his study states that the Performance Management Practice for
successful organizations is an important business tool to translate strategy into
results and is strongly associated with positive outcomes. The majority of CEOs in
the 88 Organizations were surveyed. Most of them were of the view that their
performance management system drives the major important factors which are
linked with both business and cultural strategies. Five critical organizational
outcomes are directly influenced by the Performance Management System (PMS),
which are productivity, financial performance, product or service quality, employee
job satisfaction and customer satisfaction. When PMS is flexible and linked to
strategic goals, then the team objectives, non- manager training and appraiser
accountability and quality management of the organization is improved.
 The study of Watkins (2007) states that according to the recent studies, the
organizational performance in both private & public sectors are benefitted by the
performance review but still most public sector organizations (like Delta State of
Nigeria) have not regarded performance management review as a tool for
improving performance. Performance management review has been stated as a
systematic approach to the management of people, using performance goal
measurement, feedback and recognition. This systematic approach is a means to
make them realize their maximum potential and motivate them to work efficiently.
Public sector organizations, that target to deliver quality services at competitive
prices, give importance to the various performance review practices to evaluate the
performance of their employee and motivate them with incentives.
 The study of Robert & Angelo (2001) states that the success or failure of public
sector organizations depends on the ability to attract, develop, retain, empower &
reward appropriately to the skilled people. This ability is the key to improve the

25
 performance of the organization. The concern of the human resource managers in
the public sector business should embark on performance management reviews of
their employees periodically so that they can re-position their business
organizations, though it may be a government owned company, for better
performance and improved competitiveness.
 The study by Wm. Schiemann & Associates (1996) states the national survey of
cross-section of executives. The survey concluded that the companies managed by
measurement, especially those that measure the performance of the employee,
outperform those that don‟t give much importance to measurement or downplay
measurement. This research studied 122 organizations that make sales between $27
million and $50 billion. Majority of the measurement-managed companies were
identified as industry leaders. The research suggests that the organization focusing
on strategic performance areas get long-term success. The strategic performance
areas are financial performance, operating efficiency, customer satisfaction,
employee performance, innovation/change and community/environment.
Successful industry leaders are better at measuring their workforce than non-
leaders.
 The study by Hewitt Associates (1994), states that performance management
system can have a very significant impact on financial performance and
productivity of the organization. The study kept track of the financial performance
of 437 publically held U.S. companies (1990-1992) by using the Boston Consulting
Group/HOLT financial database. The results of the study showed that the
companies with performance management system had higher profits, better cash
flows, stronger stock market performance and a greater stock value than companies
without performance management system. Firms without performance management
system have productivity and financial performance significantly below the
industry average, while productivity and financial performance is on par with the
industry average in the firms with performance management system.
 George Ndemo Ochoti, Elijah Maronga, Stephen Muathe, Robert Nyamao
Nyabwanga, Peter Kibet Ronoh (2012) presented a survey in their research paper.
The paper provided the multifaceted factors influencing employee Performance
Appraisal System (PAS) in the Ministry of State for Provincial Administration,
Nyamira District, Kenya. The nature of the relationship between PAS and the
factors that influence it was explained using the Multiple regression analysis
26
 technique in the study. Results of the study showed that all the five factors, which
are implementation process, interpersonal relationships, rater accuracy,
informational factors, and employee attitudes had a significant positive relationship
with the performance appraisal system. The result showed that if the ratees, the
raters and the government policy makers consider these factors then the PAS can be
a good performance management tool.
 The study of Jawaria Andleeb Qureshi, Asad Shahjehan, Zia-ur-Rehman and Bilal
Afsar (2010) stated the difficulties of implementation of effective Performance
Management System and also provided solutions for its implementation. The study
describes the findings of a comparative analyses conducted between a standard
performance management model and performance management systems as applied
by Local Development Organization (LDO). Many organizations install PMS
formally and informally in their organizations to achieve better organizational and
financial results. Practically, organizations have difficulty in implementing a PMS
because its different dimensions are not taken into considerations. In the survey
data was collected from 50 employees of the organization with a Cronbach Alpha
(0.935).
 Leena Toppo, Twinkle Prusty (2012) have explained, how organizations have
shifted from employee‟s performance appraisal system (PAS) to employee‟s
performance management system (PMS), through their research paper. This paper
has focused to study the evolution of employee‟s performance appraisal system,
criticizes how the system suffered and how the performance management system
came to the practice. The main purpose of this paper is to differentiate these two
systems, PAS and PMS. Performance management system eliminates the
shortcomings of performance appraisal system to the some extent and hence was
the reason for its shift.
 Gratton (1996) adopted a conceptual framework “People Process Framework” in
this paper to explain how HR policies have an impact on firm performance. This
model focuses on how individual performance is linked to organizational
performance. The model is designed to deliver short term business objectives as
well as long term sustainable success. The model provides a set of HR practices
which links individual effort to the overall objectives of the business. It establishes
a balance between achieving short term goals and preparing the company for its
future long term success. The research focused on the processes which contribute
27
 to short term business success, given their direct relevance to PMS and the role of
line managers in their implementation. These short term processes are important for
the overall success of the business. These provide the foundations to encourage
sustained performance through clear identification of objectives, continuous
assessment of performance, reward and incentive strategies, the provision of
training and skills which will improve performance. Long term success is only
possible when the short term processes are implemented correctly. By doing so, the
confidence of the employees are increased and they get an environment where they
“want to” perform rather than feeling like they “have to” perform.
 Williams (2002) stated in his study that performance appraisal provides the
mechanism to provide effective feedback on achievement which in turn improves
performance.
 In the study of Whittaker and Marchington (2003), it is stated that line managers
concentrated on financial or business objectives and did not focus on people
management issues. Hope Hailey et al (2005) reported in his study that line
managers focused only on their technical role and neglected their people
management responsibilities. In the research paper of Cook and Crossman (2004),
Holt-Larsen and Brewster (2003), it is stated that for the line managers the
appraisal process is of secondary importance to them and the appraisal process is
done with little preparation, training or enthusiasm. Hendry et al (2000) argue that
line managers should own the Performance Management Process and should also
be involved in its design.
 According to the study by Fletcher (2004), performance appraisal is described as a
“high risk activity” for managers as there are many pitfalls associated with it. The
study of Newton and Findlay (1996) stated that the appraisal process is likely to
make errors as they are open to manager manipulation. According to the study
(CIPD 2005a), despite the criticisms, the Performance Appraisal System is used
widespread and regarded as an effective part of a performance management system.
 In the study of Williams (2002), it is stated that many organizations have striven to
find ways to improve performance by linking it to pay that is Performance Related
Pay (PRP), and it can take many different forms. The study also states different
views on the effectiveness of PRP and also has discussed whether or not it
contributes to improved performance. According to the study by IDS (2003), the

28
 types of reward and incentives and how it is linked to performance management
differs form organization to organization. In the study by Hendry et al (2000), it has
been argued that PRP is a process of control, and does not contribute to real
development.
 The study from the Watson Wyatt Worldwide (2004) suggests that high performers
should be recognised and poor performers should be confronted as soon as
possible. Paper forms should be eliminated and a user-friendly automation should
be utilized. Researchers also asserted that if Performance Management Systems are
designed and implemented properly, then it will lead to positive impact on
individual performance and financial results for the organization in the form of
improvement in shareholder value.
 In the study of de Waal (2004), he noted that the focus is given only on the
“structural side” in the implementation of Performance Management Systems. He
stated that the focus is on “the structure that needs to be in place to be able to use
performance management such as critical success factors & key performance
indicators, possibly supported by a balance scorecard”. He argues that successful
implementation attention should also be given to the “behavioral side” that is, the
behavior that drives the necessary performance required from organizational
members to achieve the desired goal. According to him, appropriate behaviors,
(including attitudes and beliefs) depend on several factors including management
style, the degree to which employees influence change, and the quality of
communication within the employees in the organization.
3.1. CHALLENGES OF PERFORMANCE APPRAISAL
Performance Appraisal is being widely practiced in the organization worldwide.
Despite this fact there are a large number of managers, human resource professionals,
human resource consultants and researchers that recommend companies to get rid of the
performance appraisal systems.
The first and maybe be strongest argument is the existing discrepancy between the
theory and the practical implementation. Authors, like Bernardin & Klatt (1985); Hall,
Postner & Hardner (1989); Maroney & Buckley (1992), report there is a considerable gap
between theory and practice and that human resources specialists do not make full use of
the psychometric tools available. Counter argument maintained by line managers is that the
process needs to be simple and easy to use; otherwise it becomes time consuming and cost

29
ineffective. Another portion of criticism comes with the fact that performance appraisal
increases the dependency of the employees on their superiors. Where the process is
conducted by managers who are often not trained to be appraisers, the genuine feedback is
obstructed because it includes subjectivity and bias of the raters, which leads to incorrect
and unreliable data regarding the performance of the employee.
Performance Appraisal process can also be a bitter process which can create emotional
pressures, stress and sometimes can adversely affect the morale and lead to demotivation.
Performance appraisals are often time consuming and use incorrect methods to measure
performances. They are generating false results and the decisions taken can be politically
influenced.
An example to support the points mentioned above would be the case of a call
centre employee. The appraisal of a call center employee is based on the amount of work
they do, the number of calls they receive, the amount of revenue they collect, the average
time they spend on each call. But if analyzed, all these factors depend on other factors like
the response of the callers, the availability of the information asked for, the nature of the
calls etc. which are often not considered during appraisals. When an employee is being
aware of all these secondary factors that have not been considered when they are assessed,
the situation can create stress and dissatisfaction.
Walters (1995) outline the main Performance Appraisal challenges in the
performance appraisal process:
- Determining the evaluation criteria. Identification of the appraisal criteria is one
of the biggest problems faced by the top management. For the purpose of evaluation, the
criteria selected should be in quantifiable or measurable terms.

- Lack of competence. Evaluators should have the required expertise and the
knowledge to decide the criteria accurately. They should have the experience and the
training necessary to carry out the appraisal process objectively.
- Errors in rating and evaluation. Many errors based on the personal bias like
stereotyping, halo effect (i.e. one trait influencing the evaluator‟s rating for all other traits)
etc. may creep in the appraisal process. Therefore the rater should exercise objectivity and
fairness in evaluating and rating the performance of the employees.
- Resistance. The appraisal process may face resistance from the employees
because of the fear of negative ratings. Therefore, the employees should be communicated
and clearly explained the purpose as well the process of appraisal. The standards should be

30
clearly communicated and every employee should be made aware of what exactly is
expected from them.
3.2. PERFORMANCE APPRAISAL AND EMPLOYEE ENGAGEMENT
There are several definitions for Employee Engagement. Wellins, Bernthal, Phelps
(2006) define engagement as extent to which people enjoy and believe in what they do and
feel valued for doing it. Employee Engagement is assessed through attitudes or
organizational climate surveys. Surveys are typically filled in by managers and employees.
Scores from the survey are correlating with various business metrics including staff
turnover, absenteeism, productivity, sales etc.
Wright, Gardner and Moynihan (2003) ran a research whose results support the
notion that businesses which manage employees by using more progressive HR practices
can expect to see higher operational performance as a result.
Herzberg (1959) outlines some theories about work motivation. According to
Hertzberg key motivators are achievement, recognition, responsibility, advancement and
personal growth. These are also the elements of employee engagement.
It seems that when employees are managed with progressive HR practices they become
more committed to their organization. At least in part, this commitment leads them to
exhibit proper role behaviour (and thus lower workers‟ compensation costs, higher quality
and higher productivity). These operational performance outcomes result in lower overall
operating expenses and higher profitability.
Another important dimension of employee engagement power is closely related to
business results. When the working environment is positive employees have a drive to do
their best and the organization experiences higher level of productivity and profitability.
Satisfied employees are positive and behave friendly to customers, which usually brings
higher profits. Organizations with engaged employees have more satisfied customers
because employees are also improving other factors, such as customer satisfaction,
responsiveness, product quality, innovation. In the end higher engagement results into
higher and faster revenue growth.

31
3.3. EXECUTIVE PERFORMANCE MANAGEMENT SYSTEM IN
ROURKELA STEEL PLANT

SAIL is embarking upon a new era with the introduction of online Executive
Performance Management System (EPMS) which has been introduced in the company
w.e.f 1/4/08.This system has replaced the earlier Executive Appraisal System which was
introduced in SAIL in 1986. The Executive Performance Management System is aimed at
performance and development planning and assessing the performance, potential,
competencies and values of Executives‟ up to E-7 grade.

The main objectives of new system are to enable employees plan their work, utilize
their capabilities and maximize their contributions, to create a performance culture through
continuous performance improvements of individual employees, teams and the
organization and to identify and develop leadership talent for future. Some of the major
components of the new system are Performance and development planning, Online system
for performance management, assessing and developing competencies for future,
Performance Review and assessment, Final performance categorization of ratings by
Performance Management Committee (PMC), transparency through communication of
Performance rating to the executives, Feedback to assessors, Audit of EPMS, Leadership
development and Competency building through 360 Degree feedbacks and assessment
development centers (ADC). Also the concepts like team appraisals and performance
linked pay and other rewards are planned to be incorporated in next phase. The salient

features of the new EPMs are as under:

 Online Performance Management System.

 Goal Alignment cascade workshops for Performance Planning which would
include setting of departmental goals & thereby finalizing the individual
KPAs.
 Direct correlation of performance assessment with Key Performance Areas.
 KPAs would be quantifiable and weighted with clear cut evaluation criteria.
 Online performance diary available for all executives with 24 X 7 accesses.
 Independent assessment by reporting officer and reviewing officers.
 Assessment on Performance, Potential, Competencies and Values.
 Two separate grading, one on performance factors and other for competencies
32
  (Including Potential & Values).
 Transparency of the final grading on performance to the executives.
 Performance Management Committee (PMC) consisting of HOD, Reporting
officer and Reviewing officer to decide the final ratings of the executives.

3.4. POLICY OF PERFORMANCE APPRAISAL SYSTEM IN RSP

1. SCOPE

• The Executive Performance Appraisal System will be used to assess the

performance of executives and to plan for their development.
2. OBJECTIVES
 To integrate the company and individual goals through a process of
performance assessment linked to achievement of organizational objectives.
 To increase awareness of tasks/targets and the responsibility of executives at all
levels to ensure fulfilment of company‟s objectives.
 To ensure an objective assessment of performance and potential.
 To distinguish between differing levels of performance on relative basis.
 To identify the developmental actions to be taken to enhance the performance
of executives.
 To facilitate the process of executive development through performance
planning, self-review performance analysis and two way communication
between appraisee and appraiser.

3. APPRAISAL PROCESS

 Self-Appraisal
 Performance Review and Planning
 Performance Assessment
 Development Plan
 Evaluation and Final grading

4. SELF APPRAISAL

 Tasks/targets indicating a few Key Performance Areas will be set for

each appraise by his Reporting Officer in consultation with the former. This will

33
 be communicated to the appraisee by 31st March of every year, before the start
of the assessment year.
 The self-appraisal form will be filled up by the appraisee twice a year, once in
the first week of October and then in the first week of April.
 The appraisee will factually report on the following, in the Self- Appraisal
every six months:-
a. Tasks/targets fulfilled
b. Constraints faced
c. Facilitating resources
d. Suggestions for improvement

• In addition, the appraisee will indicate the following while filling up the self-
appraisal at the end of the assessment year:
a. The highlights of performance
b. Major strengths
c. Developmental needs

5. PERFORMANCE REVIEW AND PLANNING

 After the Self-Appraisal, Performance Review and Planning will be held twice
a year between the Appraisee and the Reporting Officer in October and April.
 During the PRP session, the Reporting Officer will ensure a conducive
climate for discussion.
 In the PRP session, the Reporting Officer and the Appraisee will discuss:
a. The extent of tasks/targets fulfilled
b. Major strengths of the appraisee
c. Developmental needs
d. Suggestions for improvement of the individual and the team performance

• In the PRP held in October, the discussion will be based on completion

of the tasks/targets upto the mid-year and will incorporate all mid-course
changes in the tasks/targets for the remaining six months. In the PRP held in
April, the discussion will be based on fulfilment of tasks/targets of the
assessment year.

• The outcome of PRP discussion will be noted in the specific form and signed by

34
 the Reporting Officer and Appraisee.
6. PERFORMANCE ASSESSMENT

• The performance of the appraisee will be assessed after the PRP is held.

• The Reporting Officer will assess the appraisee on 5 point rating

scale on the following factors. Each factor will carry a weight as indicated
below:

A. E1-E4

Sl no PERFORMANCE FACTORS WEIGHTAGE

1. Quantity of output 2
2. Quality of output 2
3. Cost control 2
4. Job knowledge and skill 2
5. Team spirit and lateral co-ordination 2
6. Discipline 1
7. Development and quality of assessment of subordinate(s) 1

8. Any other relevant factor 1

Table 3.1: Performance factors E1-E4

Sl no POTENTIAL FACTORS WEIGHTAGE

1. Communication 2
2. Initiative 1
3. Commitment and sense of responsibility 1
4. Problem analysis and decision making 1
5. Planning and organising 1
6. Management of human resources 1
Table 3.2 Potential factors E1-E4

B. E5-E9

Sl no PERFORMANCE FACTORS WEIGHTAGE

1. Quantity of output 1
2. Quality of output 1
3. Cost control 2
4. Lateral co-ordination 2
5. Team spirit 1
6. Development and quality of assessment of subordinates 2
7. Discipline 1
8. Any other relevant factor 1
Table 3.3: Performance factors E5-E9

35
 Sl no POTENTIAL FACTORS WEIGHTAGE
1. Commitment and sense of responsibility 2
2. Planning and organising 2
3. Management of human resources 2
4. Problem analysis and decision making ability 2
5. Communication 1
Table 3.4: Potential factors E5-E9

NOTE: A descriptive overall assessment will also be made on a separate sheet in the
form, in case of appraisees in E-5 and above.

The Reporting Officer will give comments or remarks/cite incidents in case he gives
extreme ratings.

 The Reporting Officer will make use of the definitions of the rating scales for
each factor which will be indicated in the Performance Appraisal Guidelines.

 One of the outputs of the system will be that the Appraisees will be classified
into the following grades in order of merit:

O A B C

 The sum total of the factor score given by the Reporting Officer will
indicate the category that the Reporting Officer would like to put the Appraisee
in. The following range of scores may be used as a guide for the indicative
grades of the Reporting Officer.

84 and above O
68 to 83 A
52 to 67 B
20 to 51 C
Note: For example if the total score given comes to 55, it indicates that the
appraisee is suggested to be finally graded as B.

 The Reporting Officer will differentiate between performance levels of

Appraisees under him and toe extent possible follow distribution pattern as
indicated below, in order of merit:
O 10%
A 20%
B 45%
C 25%
36
  The Reporting Officer may find some of the appraisees not fit for promotion
due to their poor performance. In such cases the Reporting Officer may
recommend that the appraisee may be declared as “Non-Promotable” for the
ensuing one year.
 The Reporting Officer will fill a summary sheet indicating the overall factor
score of the appraisees reporting to him, and send the same to the Reviewing
Officer.
 The Reporting Officer(O) will make his individual assessment independently
in the same pattern as listed out for the Reporting Officer.

7. PERFORMANCE ASSESSMENT BY THE REVIEWING OFFICER

 The Reviewing Officer will get the Appraisal forms and the summary sheets from
the Reporting Officer and the Reporting Officer (O).

 The Reviewing Officer will rate the individual on each of the factors listed.
He will follow the same principles as the Reporting Officer for making his
assessment as indicated at para 6.2 to 6.8. He will also prepare a summary sheet
indicating the factor scores of the appraisees assessed by him.

8. PRIMARY GRADING

 The Personnel department will help in compiling the total scores based on the
assessment on each individual factor by the Reporting Officer, Reviewing
Officer and the Reporting Officer (O) taking into account the weightages
attached to each individual factor and the weightage given to the Reporting
Officer, Reviewing Officer and Reporting Officer(O). This will be calculated
giving 50% weightage to the score given by Reporting Officer and 50% to the
Reviewing Officer. In case of assessment by Reporting Officer(O), the
weightage to Reporting Officer(O) will be 25% and to Reviewing Officer 25%.

 The total factor scores will then be arranged in descending order for an
Appraisal group and the primary gradings [10% - O, 20% - A, 45% - B and 25%
- C] will be worked out. The appraisal group will consist of appraisees belonging
too sections/departments functionally related to each other.

37
9. FUNCTIONING OF PERFORMANCE REVIEW COMMITTEE

 The constitution of PRC for different levels will be indicated in the

Performance Appraisal Guidelines. The Head of the Department/the next
higher authority of the Reviewing Officer will also be members of the PRC.

 The Performance Review Committee will receive the following information from
the Personnel department.

a. The factor scores given by Reporting Officer, Reporting Officer(O)

and Reviewing Officer to each appraisee.
b. The average factor score of each appraisee and the indicative grade
thereof.
c. The primary grading of each appraisee.

 The PRC will study the distribution pattern of primary gradings and the
indicative grades vis-a-vis the factor scores of the appraisees under
consideration. The PRC will harmonise the grades of some of the appraisees if
needed, to remove disparities, if any, in ratings. However, the moderations may
not be of more than one stage up or down with respect to the Primary gradings.

The PRC will decide the final gradings ensuring the distribution of appraisees as
indicated at para 6.7. The minutes of the PRC meeting will be signed by Chairman and
all members. The final assessment sheet in the Appraisal form will then be filled up and
signed by Chairman or any member of PRC. The PRC may, taking into account the
recommendations of the Reporting and Reviewing Officers, declare some of the
executives in the category C as non-promotable for the ensuing one year.

10. DEVELOPMENT PLAN

 The training needs of the appraisee will be indicated by the Reporting

Officer and Reviewing Officers. The training needs should have a linkage to
the development plan discussed by the Reporting Officer with the appraisee
during the performance review and planning discussion.

 Both the Reporting Officer and Reviewing Officer will indicate job
rotation/job suitability of the appraisee.

38
  The Personnel/Training department will utilise the training needs sheet to
develop suitable training plans for the appraisees in consultation with the
concerned heads of departments or higher authorities.

 Personnel department will make a job rotation plan based on comments

of the Reviewing Officer and implement the same in consultation with the
concerned heads of departments or higher authorities.

11. GENERAL

 Special provisions for executives reporting to Chairman/Chief Executives:-

For officers directly reporting to Chairman, there will be no Reviewing

Officer or Committee. Chairman, as the Reporting Officer, will appraise
such officers and 100% weightage will be attached to such assessment.
Chairman will also discharge the function of PRC and indicate the final gradings
(O/A/B/C) of the concerned appraisees. There will be no primary grading. The
performance appraisals of heads of functional departments, reporting directly to
the Chief Executive, will be reviewed by Chairman. In all such cases, the
Reporting Officer (O) will be the functional Director concerned in Corporate
Office. Relative assessment will be by an inter-plant Review Committee headed
by Chairman. For Officers up to E-5 level reporting to Chief Executives, final
gradings will be done by the Chief Executive himself.

12. APPRAISAL CALENDAR

 The appraisal calendar indicating dates on which various actions are to be

initiated and completed will be given in the Performance Appraisal Guidelines.

13. APPRAISAL FORMS

 Suitable appraisal formats will be used for making assessment of

executives, separately for E1 to E4 and E-5 and above.

14. TENURE

 The policy will come into force from a date notified by Chairman, SAIL and
shall remain in force for a period as decided by him.

39
  The Company reserves the right to approve the details under the policy and
the appraisal formats for implementation of the same. He is also authorised to
mend or modify the system, as and when required.

3.5. GUIDELINES

1. EXECUTIVE PERFORMANCE APPRAISAL SYSTEM COMPRISES OF:

Part A Self-appraisal

Part B Performance Review and Planning

Part C Performance assessment

Part D Development plan

Part E Final assessment

2. TASK/TARGET SETTING

2.1. The assessment will be based on tasks and targets set for the year.

2.2. The Reporting Officer should set down clearly defined tasks/targets, as far
as possible in quantifiable terms, for all executives reporting to him. A few key
performance areas (KPAs) may be identified for each appraisee. These
tasks/targets including KPAs should be set in the discussion with the appraisee
and communicated to the concerned appraisee(s) by 31st March of each year
for the next year starting from 1st April.

2.3. Key Performance Areas are the key or critical functions of a job or role,
contributing to the achievement of organisational goals. Each key performance
area may have one or more objectives. An objective be achieved, the level of
achievement etc. A set of objectives, quantifiable as far as possible, will be the
tasks/targets for each appraisee.

3. SELF APPRAISAL

3.1. The self-appraisal forms will be sent by the Personnel department to the
Reporting Officers to be handed over to the appraisees. Reviewing
Officers/HODs will also be kept informed of the same.

40
 3.2. The self-appraisal form will be completed by the appraisee twice every year,
once in the month of October for the period April 1 to September 30, and again
in the month of April for the period October 1 to March 31. The broad
guidelines mentioned below should be followed for completing the self-
appraisal:

 The self-appraisal should be completed on the basis of the tasks/targets set at the
beginning of year.
 The appraisee should furnish factual information and avoid evaluation of
performance.
 The appraisee should record only those constraints which were not ta into
account while setting targets and those which were outside appraisee‟s control.
 The appraisee should record resources which have facilitated performance
during the appraisal period. The facilitating resources could be attributable to:
a) The appraisee viz. Individual abilities, Efforts, Inter-personal competence
etc.
b) Reporting/Reviewing Officer viz. Quick decision making, Staff support,
Delegation, Approachability etc.
c) Organisation and its structures viz. Flexible policies, Good working conditions,
Effective control systems etc.,
d) Subordinates viz. Hard work by them, Motivation, Cooperation
e) External environment viz. Government policies, improved economic situation,
Poor image of competitors etc.
 While completing the annual self-appraisal form in the month of April every
year, the appraisee should also record the highlights of his performance, major
strengths and development needs.
 Highlights of performance should include targets achieved beyond stated norms,
innovative work processes, cost reduction measures etc.
 Developmental needs should mention specific areas, which in the appraisee‟s
opinion, need to be improved for enhancing the performance. These may
include suggestions for training, job rotation, exposure in other areas/functions etc.

3.3. After completing the self-appraisal form as per guidelines mentioned above,
the appraisee should return the same to the Reporting Officer duly signed.

41
 3.4. The Reporting Officer will study the self-appraisal and call the appraisee
for Performance Review and Planning (details at para 4)

3.5. The Personnel department will analyse the constraints, facilitating resources,
suggestions for improvement etc. department-wise and send them to the
respective Heads of Departments.

3.6. The Executive Performance Appraisal System Activity Schedule is given at

Annexure-I.

4. PERFORMANCE REVIEW AND PLANNING (PRP)

4.1. The appraisal system provides for formal review and planning of performance
twice a year between the appraisee and the Reporting Officer.

4.2. The first PRP session i.e. the mid-term PRP, should be help after the self-
appraisal form is completed by the appraisee in October.

4.3. The second PRP i.e. the annual PRP, should be held after the self-appraisal
for the last six months of the year is completed in April.

4.4. These PRP sessions are in addition to the informal performance review and
planning discussions which take place between the Reporting Officer and
appraisee on work related needs.

4.5. The Objective of PRP is to:

a) Discuss the performance of the appraisee in relation to the tasks/targets

set, the shortfalls and mid-course corrections, if any required.

b) Discuss the major strengths which have facilitated the

appraisee‟s performance and also those aspects that he/she needs to
develop. For example, planning ability could be a strength exhibited
and inability to maintain discipline within the team, a shortfall.

c) Identify and finalise the thrust areas for the next six month/one
year, resources required, constraints to be overcome and a mutual
understanding of expectations from each other.

42
 4.6. The Reporting Officer must record the highlights of the discussions in the
structured format provided and sign the form. This should be read and signed
by the appraisee also. The date on which the PRP was held should be recorded.

4.7. A good PRP should normally take about 2 hours.

4.8. Reporting Officer may, if necessary, avail assistance of any Internal Resource
Persons or the officers of Personnel department, for conducting PRP sessions.

4.9. The Executive Performance Appraisal system activity Schedule is

given at Annexure-I.

5. PERFORMANCE ASSESSMENT

5.1. After the Annual PRP session, the Reporting Officer, Reporting Officer(O)
and Reviewing Officer are required to assess the performance of the
appraisee on Performance and Potential factors.

5.2. In addition, there will be a special relevant factor specific to the

function/area of work of the appraisee, identified for the year. This factor
will be identified on the basis of the thrust areas of the year. Each appraisee
will be assessed on one such relevant factor also. Taking into account the thrust
areas of different departments, a few illustrations of special relevant factor are
given in Annexure-II. The Head of function/zone will identify the special factor
on which assessment will be made for that particular year. The factor so
identified will be communicated to each appraisee along with the tasks/targets
set for the year. The special relevant factor will be reviewed every year.
Personnel department will assist the Head of function/zone in the process of
identification and communication of the special relevant factor in the space
provided for in the appraisal form.

5.3. Each factor has been assigned a weight to indicate its importance in the
overall assessment.

5.4. Each factor is to be assessed on a 5 point rating scale. Ratings are to be given
in numbers 1 to 5 in the space provided. Each point on the five point rating
scale has been defined in Annexure III, which should be kept in view to ensure

43
 proper assessment.

5.5. Factor score will be arrived at by multiplying the scale point (i.e. 1,2,3,4, or 5)
with the assigned weight (i.e. 1 or 2) of the factor. The aggregate of factor
scores will be the total factor score.

5.6. In case extreme rating i.e. 1 or 5 is given for assessment of any factor,
comments/ incidents justifying the same may be indicated in the space
provided for comments on overall performance.

5.7. The Reporting Officer and the Reviewing Officer should note that final
distribution of executives will be in the following order of merit:-

10% O
20% A
45% B
25% C

While assessing, each Reporting Officer and Reviewing Officer should

differentiate between levels of performance of the executive working under
them and to the extent possible follow the above pattern. This will minimise
moderation by the Performance Review Committee.

5.8. The total factor score given by the assessing authority will indicate the category
that he/she would like to put the Appraisee in. the following range of scores
may be used as a guide for the indicative grades of the assessing authority.

84 and above O
68 to 83 A
52 to 67 B
20 to 51 C

The assessing authority will not however record the grade i.e. O, A, B, or C in
the form.

5.9. Comments on overall performance of the appraisee may be recorded in the

space provided. If an appraisee is deemed non-promotable due to his poor
performance, the assessing authority may record his/her recommendation that

44
 the appraisee may be declared non-promotable for the ensuing one year and the
reasons for such recommendation.

5.10. The Reporting Officer, after completing the performance assessment part,
will also complete the summary sheet in the format given at Annexure IV and
send it to the Reviewing Officer alongwith the appraisal forms.

5.11. The concept of Reporting Officer (O) applies to some of the service/staff
appraisees. The Reporting Officer (O), wherever applicable will assess the
appraisee on the above lines and return the form to the Reviewing Officer. The
Reporting Officer (O) will also complete the summary sheet(s) and send the
same to the concerned Reviewing Officer(s).

5.12. Reviewing Officer will give his assessment of the appraisee and will also
complete a summary sheet which will be an input for the final evaluation by
Performance Review Committee. He will send all the documents to the
Personnel department. The personnel department will analyse the trend/spread
of ratings and give suitable feedback to the Reviewing Officer.

5.13. Higher authority above the Reviewing Officer may, by exception, call
for the appraisal reports and record his/her comments on the overall
performance/ potential of the appraisee. In case of appraisees in the grade of E-
7/E-8 the Chairman may call for reports to record his comments.

6. DEVELOPMENT PLAN

6.1. Development of executives is envisaged through training, job

rotation/enrichment and counseling/coaching.

6.2. While indicating training needs the assessing authorities may keep the following
in mind:

 Training needs should be indicated for executives whom the

assessing authority recommends to be trained in the ensuing year.
Information regarding training programmes attended by the
executives in the last two years may be obtained from the Training
department. Please note that the training department will normally
plan to train about 30-40% of the executives in one year.
45
  Training recommended should be as specific as possible and take
into consideration the appraisee‟s own views also.

 Training needs and other development plans should be linked

to the appraisee‟s present area of responsibility, future assignments/
needs and major strength/ weakness.

 Assessing authorities should recommend the specific areas of training

rather than the names of the training programmes/institute etc.

6.3. In case the appraisee is recommended for job rotation/enrichment, the specific
area may be indicated. This should be based on appraisee‟s
potential/development needs/future growth etc.

6.4. Counseling/Coaching as a means to develop appraisees should also be

considered.

6.5. The detachable sheet indicating training needs will be sent to the
Training department by the Personnel department.

7. FINAL ASSESSMENT

7.1. Final assessment will be done by a Performance Review Committee (PRC)

7.2. The Performance Review Committees will be suitably constituted in such a

manner that the Head of the Department to which the assesse belongs or the
authority above the Reviewing Officer is included in the Committee. An
indicative list of constitution of PRC is given in Annexure-V. This should be
formalised with the approval of respective Chief Executive of the Plant/Unit.

7.3. For each appraisee there will be a maximum of 3 total factor scores awarded by
the Reporting Officer, Reporting Officer(O) and Reviewing Officer.

7.4. Weightages have been indicated for the assessment of the Reporting
Officer, Reporting Officer(O) and Reviewing Officer, namely 50% for the
Reporting Officer, 25% for the Reporting Officer(O) and 25% for
Reviewing Officer. If there is no Reporting Officer(O), the weightage for the
Reviewing Officer will be 50%.

46
 7.5. By multiplying the total factor score given by the assessing authorities with the
above weightages (i.e. 0.5 or 0.25 as the case may be), the weighted score for
Reporting Officer, Reviewing Officer and Reporting Officer(O) will be
obtained. A total of this will give the average appraisal score.

The average appraisal score would be converted, by the Personnel department,

into an indicative grading of the appraisee as per following guidelines:

Range of appraisal score Indicative grading

84 and above O
68 - 83 A
52 – 67 B
20 - 51 C
This would also be indicated in the final assessment sheet placed before the PRC.

7.6. All executives within an appraisal group will be listed in descending order
on the basis of the average appraisal score secured by them. An appraisal group
will consist of appraisees in the same grade or cluster of
grades belonging to departments/sections related to each other.

a) Each appraisal group will be finally evaluated by the PRC. The

Chairman of the PRC concerned will ensure grouping of executives
based on related functions.

b) In case of a large department, the executives of the department as whole

or particular section/sections may constitute one appraisal group. In
case of smaller departments two or more departments may be grouped
together to make an appraisal group for relative assessment. It will be
ensured that such grouping will be done only when the departments are
related to each other.

c) Personnel department will ensure a common approach in the plant/unit in

respect of formation of appraisal groups in different areas. The
appraisal grouping will be finalised in consultation with the corporate
office so as to maintain inter-plant parity to the extent possible.

7.7. The first 10% of the executives of the appraisal group listed in descending
order based on average appraisal score, will be categorised as „O‟, the following
20% will be categorised as „A‟, the next 45% as „B‟ and last 25% as „C‟. This is
47
 the primary grading.

7.8. The PRC will be given the following inputs for every executive in an appraisal
group. The format given at Annexure-VI will be used for this purpose.

a) Factor score awarded by Reporting Officer, Reviewing Officer and

Reporting Officer (O) (where applicable).

b) Indicative grading based on average appraisal score.

c) Primary grading based on the specified distribution of the score.

d) Overall performance of departments.

e) Discrepancies in the trend of scores awarded by different Reporting

or Reviewing Officers for the appraisees in an appraisal group.

7.9. Performance Review Committee will perform the following functions:-

a) To ensure moderation of assessments, the Performance Review

Committee may move officers one step up or down from the primary
grading subject to the condition that the overall distribution of 10% - O;
20% - A; 45% - B; and 25% - C prevails. The grading decided by the
PRC will be the Final grading.

b) PRC may declare executives non-promotable, for the ensuing one year,
out of the category „C‟ based on the recommendations of the Reporting
and Reviewing Officers. PRC will also record the reasons for declaring
the appraisee non-promotable.

c) PRC will also make job rotation plans for the executives.

7.10. Once the final grading is complete, the same should be entered in each
executive‟s appraisal form and duly signed by Chairman or a member of the
PRC.

7.11. Based on the decision of the PRC, the Personnel department will
ensure communication of the non-promotable ratings and the reasons thereof to
the appraisee(s) concerned.

48
 7.12. The assessment year is from 1st April to 31st March. The executives rated as
“non- promotable” will not be considered for promotion for the ensuing one
year i.e. the financial year following the assessment year. For example, the
executive declared non-promotable for the assessment year 2014-15 will not be
considered for promotions effected on 30 th June 2015 or 31st December 2015 or
any date of promotion during the financial year 2015-16, as the case may be.

7.13.The executive(s) rated as non-promotable may appeal for review of the

assessment. The appeal for review should be made to the Chairman of the PRC
within 10 days of receipt of communication from Personnel department
regarding non-promotable rating.

The PRC may review and either reverse or confirm its earlier decision. In
case PRC confirms the earlier decision, the case should be sent to the Chief
Executive whose decision will be final and binding on the executive concerned.
If PRC reverses the earlier decision, the case need not be sent to the Chief
Executive. PRC will consult the Reporting and Reviewing Officers concerned
in case of such review of decision.

In case of executives in E-6 and above, such appeals will be made to

Chairman, SAIL through the Chief Executive concerned. The Chief Executive
will give his comments and forward the appeal to the Chairman. The decision of
Chairman, SAIL will be final and binding.

8. INTERNAL RESOURCE PERSONS (IRP)

8.1. Each Plant/Unit will have a group of executives identified as Internal

Resource Persons who will act as change agents, facilitators and trainers
and help in the implementation of the appraisal system.

8.2. Similarly, a group of Personnel executives will be identified in each Plant/Unit

to work full time for implementation of the executive performance appraisal
system.

8.3. These executives may be contacted for any clarifications or assistance.

49
CHAPTER – 4
4. OBJECTIVES AND SCOPE OF THE PROJECT

4.1. OBJECTIVES

Evaluating individual performance is a human resources process that exists in one

or another form in any organization. Most of the managers and employees have only a few
positive things to say about Performance Appraisal and many of them even dislike it.

The objectives are as follows:

 To study the Performance Appraisal system in RSP.

 To know the employees’ awareness about the performance appraisal system in
RSP.
 To investigate the employees’ opinions about the performance appraisal and their
attitude towards work.
 To provide suggestions so as to improve the performance appraisal system in RSP.

In my work I seek answers to the following questions:

 How clearly do employees understand the purpose and outcome of the PA process?
 How frequent do they receive feedback and is the feedback clear enough?

4.2. SCOPE OF THE STUDY

Analysis of a Performance Appraisal process and its application in a specific

company- “Rourkela Steel Plant, SAIL” will be carried out and the process will be
described. Opinions and attitudes of employees regarding performance evaluation process
will be surveyed. This project report will put light on what performance appraisal is and
theories related to it. Different methods of doing performance appraisal are also discussed
in brief. Literature review includes presentations of some theories in the area of
Performance Appraisal, in order to provide the reader with better understanding of the
current research. The detail about the company in which this study has been carried out has
been included. The review of the appraisal system and employees’ opinions will be
followed by findings, recommendations of best practices and suggestions for
improvements. SPSS analysis has been provided alongwith the responses of the
respondents.

51
As an organization struggle to remain sustainable and competitive, strategic planners and
human resources professionals need to collaborate more intensely in designing strategies that
are productive and humane. According to many researchers, the most successful
organizations in the 21st century will be those to adopt a focused and integrated HR
processes and systems. “The art and science of empowering people, organizations and
communities to create maximum productivity, quality, opportunity and fulfillment has never
encountered so many challenges and opportunities”(Marquardt 2004).

The enormous transformation processes that take place in the social, political and
economic areas drive the need for organizations to become more responsive to the rapid
development of the global strategies and the local operational levels. Human Resource
Management focuses on personnel related areas such as job design, resource planning,
performance management system, recruitment, selection, compensations and employee
relations. Out of these one function plays a critical role for the global success of the
organization and this is performance evaluation. It is more significant than other processes
because its outcomes indicate the success of the realization of the other areas in the field of
Human Resources (recruitment, selection, placement, adaptation, training of the employees
and other personnel activities). Building block for enhancing performance is creating a
performance culture and implementing the performance management process.
Assumptions of corporate management are that this culture makes people be truly engaged
in the business of the organization. (Reid & Hubbell 2005).

A generation ago, appraisal systems tended to emphasize employee traits,

deficiencies and abilities. With the development of the employee/organization relations
modern appraisal philosophy emphasizes on the present performance and future goals.
Modern philosophy also stresses on employee participation in mutually set goals with the
supervisor. The underlying philosophy behind mutual setting of goals is that people will
work harder for goals or objectives that they have participated in setting. The assumption is
that people want to satisfy some of their needs through performing work activities that
provide them with a supportive environment. They also need to perform meaningful tasks,
share the objectives setting, share the rewards of their efforts and continue personal
growth.

52
CHAPTER – 5
5. RESEARCH METHODOLOGY

The research primarily consists of three parts:

1. Going through the various documents and procedures relating to Performance

Appraisal.
2. Questionnaire survey by using Likert scale administered to employees of Rourkela
Steel Plant.
3. Analysing the data collected through survey.

5.1. AIM OF THE STUDY

To ascertain the effectiveness of Performance Appraisal methodology used by the

Organization.

5.2. TYPE OF RESEARCH

It is a descriptive type of research. Descriptive research includes surveys and fact

finding enquiries of different kind. The major purpose of descriptive research is description
of the state of affairs as it exists at present. The researcher here has no control over the
variables. Researcher can only report what has happened and what is happening. Such
studies also include attempts by the researcher to discover the causes even when they
cannot control the variables. The methods of research utilized in descriptive research are
survey methods of all kinds, including comparative and correlational methods.

5.3. SAMPLING

Project research type Descriptive research

Data sources Primary and secondary data
Research approach Survey method
Research instrument Questionnaire
Sampling procedure Random sampling
Sample size 50 respondents
Geographical coverage Rourkela Steel Plant
Duration of the survey 60 days
Table 5.1: Sampling

54
5.3.1. UNIVERSE

The universe of this study consists of 17853 employees of Rourkela Steel Plant.
(Data as per the Financial Year Book of RSP, March 2015).

5.3.2. SAMPLE FRAME

The sample size of this research is 50 employees. To conduct the survey

questionnaires were administered to 50 employees among different grades. These sample
of 50 respondents represent the whole universe in consideration.

5.3.3. TECHNIQUE OF SAMPLING

The technique of sampling used is random sampling. Under this sampling design,
every item of the universe has an equal chance of inclusion in the sample. In this study out
of around 18000 employees, 50 employees were selected randomly to form the sample.

5.4. DATA COLLECTION TECHNIQUES

5.4.1. SOURCES OF DATA COLLECTION

The data necessary for the study is collected from both primary and secondary
sources of data collection.

PRIMARY SOURCES:

To collect primary data:

1. Questionnaires were administered to 50 employees.

2. Discussion with concerned authority.

SECONDARY SOURCES:

Secondary data is collected through:

1. Performance Appraisal manual of Rourkela Steel Plant.

2. Workbook on identification of key performance areas and tasks/targets setting.
3. Various circulars, documents and Journals on Performance Appraisal.
4. Financial year book, Rourkela Steel Plant

55
5.4.2. RESEARCH INSTRUMENT

The research instrument chosen for conducting the survey was structured
questionnaire, as shown in the annexure. To collect the data through questionnaire survey,
Likert rating scale is used to get a clear idea of the research study. The rating scales are as
follows:

(1) Strongly agree

(2) Agree
(3) Neither agree nor disagree
(4) Disagree
(5) Strongly disagree

5.5. ANALYSIS TECHNIQUES

Microsoft Excel and IBM SPSS tools has been used for the analysis of the data
collected through questionnaires. Excel is an electronic spread sheet program that is used
for storing, organizing and manipulating data. It is also used for graphing or charting data
to assist users in identifying data trends and sorting and filtering data to find specific
information. IBM SPSS is a comprehensive, easy to use set of data and predictive analysis
tool for business users, analysts and statistical programmers. In this study SPSS has been
used to find the mean, standard deviation and Cronbach’s Alpha.

5.6. LIMITATIONS

The various limitations which my research suffers are as follows:

 The time period did not seem to be sufficient to make me aware of tit-bits of
various interrelated areas of the study.
 The resources provided were limited to maintain business secrecy.
 There was also a lot of problem faced while collecting the information through
questionnaires. Many of the respondents might have been of unsound mind or may
not have taken the questionnaire too seriously due to which it is very difficult to
reach up to an accurate conclusion.

56
CHAPTER – 6
6. DATA ANALYSIS AND INTERPRETATION

The analysis of the collected information is made in a scientific manner. Likert

scale, a psychometric response scale primarily used in questionnaires is used to obtain
participants‟ preferences or degree of agreement with a statement. Likert scale is a non-
comparative scaling technique and are uni-dimensional (only measure a single trait) in
nature. Respondents are asked to indicate their level of agreement with a given statement
by way of an ordinal scale. It is often used to measure respondents‟ attitudes by asking the
extent to which they agree or disagree with a particular question or statement.

The Likert scale has ratings as follows:

(1) Strongly agree- Strongly favourable to the question

(2) Agree- Somewhat favourable to the question
(3) Can‟t say- Undecided
(4) Disagree- Somewhat unfavourable to the question
(5) Strongly disagree- Strongly unfavourable to the question

To conduct the analysis of the collected data through the questionnaires, Microsoft
Excel has been used. Excel is used to store the data, organize the data and analyse the data.
To find means, standard deviation and Cronbach alpha, SPSS has been used. Reliability
can be expressed by Cronbach alpha.

The first part of the questionnaire presents some demographic data questions.
Tables 6.1, 6.2 and 6.3 give information about the gender, age and professional level of the
respondents. Questionnaires were distributed to fifty employees of the selected company.
92 % of the respondents are male and only 8% are female. 46% of respondents are in the
age group of 41-50 years, 28% are above 50 years of age, and only 8% and 18% are in the
age group of 20-30 years and 31-40 years respectively. 74% of respondents are Executives
whereas the rest i.e. 26% are non-executives.

6.1. HYPOTHESIS

Based on the surveyed questionnaires I will draw a conclusion if there is a

correlation between clear purpose and understanding of performance appraisal, timely and
consistent feedback on individual performance and their eventual effect on the employees‟
satisfaction and engagement to the company. Assumption is that more engaged employees

58
are more stimulated to stay in the organization and to work harder for meeting business
objectives.

The hypothesis is:

“There is a correlation between clear purpose and understanding of performance appraisal

and the level of satisfaction and staff engagement”

6.2. SUMMARY OF FINDINGS

Gender Respondents Percentage

Male 46 92%
Female 4 8%
Total 50 100%
Table: 6.1 Gender of respondents

Age Respondents Percentage

20 – 30 4 8%
31 – 40 9 18%
41 – 50 23 46%
Above 50 14 28%
Total 50 100%
Table: 6.2 Age of respondents

Position Respondents Percentage

Executive 37 74%
Non-executive 13 26%
Total 50 100%
Table: 6.3 Position of respondents

The second part of the questionnaire is connected with the hypothesis used in the
research. There are 25 statements and the respondents are requested to tick the level of
agreement or disagreement, based on their attitude towards work, opinion of the
performance appraisal and their own satisfaction and engagement with the company.
Tables 6.4 and 6.5 present all statements and the answers of the respondents. The questions
are divided into 2 groups: the statements in Table 6.4 are linked to the frequency,
understanding and clarity of the performance appraisal and feedback. The other questions

59
(Table 6.5) reflect the level of engagement and satisfaction of the employees. These two
groups of questions aimed to find out the correlation between clear purpose and
understanding of performance appraisal and the level of satisfaction and staff engagement,
which is the hypothesis of the research. The first two questions are explaining the
variables. The questionnaire can be found in the Appendix.

Neither
Sl Strongly agree Strongly
Statement Agree Disagree
no agree nor disagree
disagree
My manager/supervisor
1 discusses regularly my job 32% 64% 2% 2% 0%
performance with me.
I clearly understand my
manager‟s/ supervisor‟s
2 40% 56% 4% 0% 0%
comments and opinion during
the feedback.
Performance management can
help people understand the
12 28% 66% 4% 2% 0%
organization‟s strategic
priorities.
I receive adequate training
and information about the
13 20% 62% 10% 8% 0%
performance appraisal cycle
before it starts.
I clearly understand the
14 purpose of performance 34% 60% 4% 2% 0%
appraisal.
Performance appraisal in my
15 24% 66% 6% 2% 2%
company is fair.
16 Performance appraisal reflects 20% 72% 6% 0% 2%
objectively my performance.
Performance appraisal makes
17 me better understand about 22% 72% 4% 2% 0%
what should be done.
Performance appraisal
process helps
18 22% 66% 12% 0% 0%
manager/supervisor to
manage people better.
Performance appraisal
19 process encourages co- 20% 68% 10% 2% 0%
operation and team spirit.
Performance appraisal
20 influences positively 16% 70% 8% 6% 0%
individual performance.
I can clearly understand the
24 26% 66% 6% 2% 0%
performance policies.
Table 6.4 1st part of questionnaire
60
 The questions given above are grouped in such a way that it will provide an idea
about attitudes of mind of the employees in RSP. The first thought is that the company
does a good job to make people aware of the objectives and outcomes of the performance
appraisal process. From the responses given by the respondents above clearly shows that
employees have a belief that their appraisal is fair and stimulates their performance. There
is also a belief that managers and supervisors are handling relatively well the process of
feedback.

In statement 14, i.e. “I clearly understand the purpose of performance appraisal”, is

asked to know the clarity of performance appraisal to the employees. There is no single
response for “strongly disagree” but 2% disagree to the statement. 34% have strongly
agreed and 60% have agreed to the statement. Only 4% replied for “neither nor”. This
shows that the purpose of the performance appraisal is relatively clear to the employees.

The statement, which has received the highest number of “Agree” (72%), is
“Performance appraisal makes me better understand about what should be done” and
“Performance appraisal reflects objectively my performance”. If we make connection with
the statement “Performance appraisal process encourages co-operation and team spirit”,
which has received 68% “Agree” and “Performance appraisal influences positively
individual performance” which got 70% responses as “agree”, we can confirm that the
respondents believe that the purpose of the performance appraisal can contribute to the
improvement of the performance.

It must be noted that all the statements have got more than 50% responses as
“Agree”. These statements show that company makes good use of the performance
appraisal, links successfully company-employees objectives, provides right understanding
of what people should be doing and PA is overall perceived as fair.

There are two statements which is not having any response as disagree or strongly
disagree. The statements are “I clearly understand my manager‟s/ supervisor‟s comments
and opinion during the feedback” and “Performance appraisal process helps
manager/supervisor to manage people better”. These statements confirm that the managers
in the company skillfully provide feedback to employees and also regularly provide
comments to staff – “My manager discusses regularly my job performance with me”,
confirmed by 32% with “Strongly Agree”, 64 % with “Agree”, 2% with “Neither agree nor

61
disagree”, 2% with “Disagree and only 0% with “Strongly Disagree”. Only 1 person
disagreed to the statement.

The employees in “RSP” believe in the fair and objective performance appraisal.
20% confirm with “Strongly Agree”, 72% with “Agree” and only 2% with “Strongly
Disagree” whereas 6% have given the response as “Neither agree nor disagree” to the
statement “Performance appraisal reflects objectively my performance”.

In spite of all these positive responses, we must notice that in the statement “I
receive adequate training and information about the performance appraisal cycle before it
starts” – 8% disagree to it and 10% neither agree nor disagree. This shows that though
some of them get access to adequate information required to be known by the appraisee
before the appraisal cycle starts, but not all. In the statement “Performance appraisal
influences positively individual performance” 6% disagree to it and 8% neither agree nor
disagree. There are some employees who feel that performance appraisal don‟t help an
individual to improve his/her performance. The reasons for this may be many. The fault
may on the part of manager or may be the employee. It needs to be addressed.

Neither
Sl Strongly agree Strongly
Statement Agree Disagree
no agree nor disagree
disagree
My manager/supervisor
3 recognizes me when I do a 36% 56% 6% 2% 0%
good job.
My manager plays a
4 significant role in my career 36% 48% 8% 6% 2%
development.
I am satisfied with the
5 relationship with my 36% 60% 2% 2% 0%
manager/supervisor.
6 My manager/supervisor is 36% 60% 2% 6% 0%
highly capable as manager.
My manager gives me fair
7 26% 66% 4% 4% 0%
feedback.
My manager/supervisor has
8 reasonable expectations from 28% 70% 0% 0% 2%
my work.
My manager/supervisor is
9 well informed about my 34% 62% 2% 0% 2%
work.
My job is fulfilling my
10 26% 62% 6% 4% 2%
needs.

62
 Neither
Sl Strongly agree Strongly
Statement Agree Disagree
no agree nor disagree
disagree
I feel proud to work for my
11 40% 54% 4% 2% 0%
company.
I would recommend my
21 28% 60% 6% 4% 2%
company to all my friends.
The salary is adequate
22 reflection of my 26% 46% 8% 18% 2%
performance.
I am satisfied with my
25 36% 56% 4% 4% 0%
company.
Table: 6.5 2nd part of questionnaire

In the second set of questions, surveying the level of satisfaction and engagement to
the company, we can find more statements with “Agree” replies. The reason might be
related to the strong employer‟s brand and corporate reputation. The statement “I am
satisfied with my company” has received more than 50% replies as “Agree” and 36% as
“Strongly Agree”. Another statement “I would recommend my company to all my friends”
has got 60% replies as “Agree” and 28% as “Strongly Agree”. Almost similar replies are
found for the statement “I feel proud to work for my company” with 54% replies as
“Agree” and 40% as “Strongly agree”. These facts demonstrate pride in the company and
also a high satisfaction.

The number of “Agree” scores (70%) and “Strongly agree” (28%) collected from the
statement “My manager has reasonable expectations for my work”, shows that employees
in the company mostly believe that their manager‟s judgments are fair and objective. Other
statements with more than 50% „Agree” replies which confirm the positive opinion of the
staff towards management are “My manager recognizes me when I do a good job” – 56%
“Agree” and 36% “Strongly agree”, “I am satisfied with the relationship with my
manager/supervisor” – 60% “Agree” and 36% “Disagree”, “My manager is well informed
about my work” – 62% “Agree” and 34% “Disagree”.

The good opinion of the employees of their managers is also supported by the
statements “My manager/supervisor is highly capable as manager” (32% strongly agree
and 60 % agree) and “My manager gives me fair feedback” (26% strongly agree and 66%
agree). In both the statements there are no answers “Strongly Disagree”. But at the same
time 6% and 4% people disagreed to the above two statements respectively.

63
 The employees also believe that managers could contribute to their future careers.
This could be seen from the answers of the statement “My manager plays a significant role
in my career development”, where 36 % “Strongly Agree” with the statement and 48 %
“Agree”. It is to be noted that out of two statements which got less than 50% replies as
“Agree”, this statement is one of them. 8% said they neither agree nor disagree, 6%
disagreed and 2% strongly disagreed.

One of the statements that differs from the others is “The salary is adequate
reflection of my performance”. Here 26 % scored “Strongly Agree”, 46% “Agree”, 8%
“Neither Agree or Disagree”, 18% “Disagree” and 2 % “Strongly Disagree”. This is the
statement which got the highest responses as “Disagree”. This suggests that some
employees feel that their salary is not adequate according to their performance.

62 % gave favorable response to the statement “My job is fulfilling my needs”,

which could possibly mean that they feel happy on their job, which also has link to their
level of engagement. 26% have strongly agreed to the statement.

The next questions are seeking opinions from the employees about the
consequences of the appraisal:

QUESTION: Do you think that positive performance appraisal should lead to increase the
salary?

RESULT: We can see that 76% of the respondents believe that positive performance
should lead to salary increase, while 12 people, representing 24%, do not support linkage
of salary increase and performance appraisal.

QUESTION: Do you think that positive performance assessment should influence the
employee‟s promotion?

RESULT: 84% respondents believe that positive performance assessment should lead to
employee promotion and the rest 16% disagree to it.

QUESTION: Do you think that your result is linked to the profitability of the company?

RESULT: We find that all the respondents believe that their own work is linked to the
profitability of the company.

64
6.3. DESCRIPTIVE STATISTICS

The statements which need to support the hypothesis could be also reviewed in
points of statistics. Pursuing this objective, I have quantified answers in the agree-disagree
scale, as follows: 1 – Strongly Agree, 2 – Agree, 3 –Neither Agree or Disagree, 4 -
Strongly Disagree and 5 - Disagree.

In table 6.6, we can find additional information about the statements. The first
column contains the statement; the next one “N” is the number of the respondents on every
question. Then the table shows “Minimum” and “Maximum” scores of each question on
the 5-points “agree-disagree scale”. The mean shows the average answer of every
statement from 1 to 5, where 1 is close to strongly agrees. Standard Deviation column
shows the actual variation of every question.

Sl. Std.
Statement N Minimum Maximum Mean
No Deviation
My manager/supervisor discusses
1 regularly my job performance with 50 1 4 1.74 .600
me.
I clearly understand my
2 manager‟s/ supervisor‟s comments 50 1 3 1.64 .563
and opinion during the feedback.
My manager/supervisor
3 recognizes me when I do a good 50 1 4 1.74 .664
job.
My manager plays a significant 50 1 5 1.90 .931
4
role in my career development.
I am satisfied with the relationship 50 1 4 1.70 .614
5
with my manager/supervisor.
My manager/supervisor is highly 50 1 4 1.82 .748
6
capable as manager.
My manager gives me fair 50 1 4 1.86 .670
7
feedback.
My manager/supervisor has
8 reasonable expectations from my 50 1 5 1.78 .648
work.
My manager/supervisor is well 50 1 5 1.74 .694
9
informed about my work.
10 My job is fulfilling my needs. 50 1 5 1.94 .818
I feel proud to work for my 50 1 4 1.68 .653
11
company.
Performance management can 50 1 4 1.80 .606
12
help people understand the

65
 organization‟s strategic priorities.
I receive adequate training and
13 information about the performance 50 1 4 2.06 .793
appraisal cycle before it starts.
I clearly understand the purpose of 50 1 4 1.74 .633
14
performance appraisal.
Performance appraisal in my 50 1 5 1.92 .752
15
company is fair.
Performance appraisal reflects 50 1 5 1.92 .665
16
objectively my performance.
Performance appraisal makes me
17 better understand about what 50 1 4 1.86 .572
should be done.
Performance appraisal process
18 helps manager/supervisor to 50 1 3 1.90 .580
manage people better.
Performance appraisal process
19 encourages co-operation and team 50 1 4 1.94 .620
spirit.
Performance appraisal influences 50 1 4 2.04 .699
20
positively individual performance.
I would recommend my company 50 1 5 1.92 .829
21
to all my friends.
The salary is adequate reflection 50 1 5 2.24 1.098
22
of my performance.
I am satisfied with the relationship 50 1 4 1.90 .707
23
with my manager.
I can clearly understand the 50 1 4 1.84 .618
24
performance policies.
25 I am satisfied with my company. 50 1 4 1.76 .716
Table: 6.6 Min, Max, Mean, Std. dev.

In the column “Minimum” to every statement the answer is 1, which means that to
every question someone has ticked “Strongly Agree”. In the column “Maximum”, we can
see that for statement 2 i.e. “I clearly understand my manager‟s/ supervisor‟s comments
and opinion during the feedback” and statement 18 i.e. “Performance appraisal process
helps manager/supervisor to manage people better”, the maximum is 3 which means no
body has disagreed to these two statements. The most interesting column is the mean. It
shows the opinion of all respondents on every statement. The lower the mean, the higher is
the level of agreement on the statement and vice versa.

The statement with lowest mean is statement-2 i.e. “I clearly understand my

manager‟s/ supervisor‟s comments and opinion during the feedback” having mean as 1.64.
This means most of the people have agreed to the statement. The next lower mean is 1.68

66
which is for the statement “I feel proud to work for my company”. Statement-5 i.e. “I am
satisfied with the relationship with my manager/supervisor” is having the third lowest
mean – 1.70. Here again, we can emphasize on the prestigious name and positive corporate
image which contributes to the higher level of satisfaction of the employees. Employees
are satisfied with relationships with their manager/supervisor.

The highest mean is in the statement “The salary is adequate reflection of my

performance” – 2.24. It means that if the issue is not properly addressed, this could bring
some future failures in the area of job satisfaction and motivation. The next statement
having high mean is “Performance appraisal influences positively individual
performance”- 2.04.

6.4. TEST OF HYPOTHESIS

6.4.1. INTRODUCTION

The statements in the questionnaire served as items to test if there is a correlation

between clear purpose and understanding of performance appraisal, timely and consistent
feedback on individual performance and their possible effect on the employee‟s
satisfaction and engagement with the company. The goal is to prove the main hypothesis of
the research, which is “There is a correlation between clear purpose, understanding of
performance appraisal, regular feedback and level of satisfaction and staff
engagement”.

To test it, 3 different measures have been identified for evaluating the satisfaction
of the employees with their manager, for understanding of the Performance appraisal
policies and the degree of overall satisfaction with the company. With these 3 measures
and with the first 2 questions from the survey (1.My manager discuss regularly my job
performance with me and 2. I clearly understand my manager‟s comments and opinion
during the feedback) a series of regression analyses were run. The purpose of these
regression analyses is to confirm relevance of the hypothesis. If all regressions are
significant, the hypothesis should be confirmed.

6.4.2. SCALES DEVELOPMENT

At the first stage of the data processing, on the basis of the items included in the
survey, three different measures for evaluating the degree of satisfaction of the employee

67
with the relationship with the manager, the degree of satisfaction with the Performance
Appraisal policies and the degree of overall satisfaction with the company have been
developed. To test the psychometric properties of the three measures item correlations have
been carried out and the means, standard deviations and Cronbach‟s Alpha are calculated. I
have separated all the questions in the survey (except the first 2 questions, which are the
independent variables) in 3 groups, to correspond respectively to each of the scales. I
firstly test the correlations between all the questions related to one and the same scale.

CRONBACH ALPHA

Reliability can be expressed in terms of stability, equivalence and consistency of a

test. Consistency check, which is commonly expressed in the form of Cronbach coefficient,
is a popular method. Generally speaking, the higher the Alpha is, the more reliable the test
is. There isn‟t a commonly agreed cut-off. Usually 0.7 and above is acceptable. (Nunnally,
1978). It is a common misconception that if the Alpha is Low, it must be a bad test.

LEVEL OF SIGNIFICANCE

For this study, the level of significance is 5%. This means if the probability is less
than or equal to 5 %, then the null hypothesis is rejected and the outcome is statistically
significant.

SCALE 1 (Satisfaction with manager relationship)

The first scale includes items of the survey:

3. My manager recognizes me when I do a good job

4. My manager plays a significant role in my career development

5. I am satisfied with the relationship with my manager/supervisor

6. My manager/supervisor is highly capable as manager

7. My manager gives me fair feedback

8. My manager/supervisor has reasonable expectations for my work

9. My manager/supervisor is well informed about my work

68
 Cronbach's Alpha Cronbach's Alpha Based on Standardized Items N of Items
.914 .914 7
Table6.7: Scale1 Statistics

Cronbach‟s Alpha here is 0.914, which is a significant result and we can accept it.
As mentioned earlier, Alpha‟s higher than 0.70 is accepted.

SCALE 2 (Understanding the Performance policies)

The second scale comprises the items:

12. Performance management can help people understand the organization‟s strategic
priorities

14. I clearly understand the purpose of performance appraisal

16. Performance appraisal reflects my performance objectively

17. Performance appraisal makes me better understand what I should be doing

18. Performance appraisal process helps manager/supervisor to manage people better

19. Performance appraisal process encourages co-operation & team spirit

20. Performance appraisal influences positively individual performance

Cronbach's Alpha Cronbach's Alpha Based on Standardized Items N of Items

.898 .900 7
Table6.8: Scale2 Statistics

Here also Alpha value is greater than .70 and hence accepted.

SCALE 3 (Job/Company Satisfaction)

The third scale includes the items:

10. My job is fulfilling my needs

11. I feel proud to work for my company

21. I would recommend my company to all my friends

22. The salary is adequate reflection of my performance

69
25. I am satisfied with my company

Cronbach's Alpha Cronbach's Alpha Based on Standardized Items N of Items

.823 .840 5
Table6.9: Scale3 Statistics

High reliability is confirmed and can be used in the further analysis.

6.4.3. HYPOTHESIS TESTING

The main hypothesis of the study is that two factors – clarity of Performance
appraisal and frequency of feedback influence the subjects:

- Satisfaction with their relationship with the manager

- Comprehension of performance appraisal policies

- Satisfaction with the company

The 2 factors in our study are the questions 1. My manager discusses regularly my
job performance with me and 2. I clearly understand my manager‟s comments and
opinions during the feedback. The subjects are the measured scales, which are described in
the previous paragraph.

To test them six regression analyses were done, each measuring scale with each of
the questions. Each of the regressions has a dependent variable which is one of the three
scales and also an independent variable which is one of the questions.

The Independent variables are from the first questions of the questionnaires and
these are as follows:

Frequency – Q1- My manager discusses regularly my job performance

Clarity - Q2- I clearly understand my manager‟s comments and opinion during the
feedback

70
The dependent variables are from the measured scales above and are as follows:

Scale 1 – Satisfaction with manager relationship

Scale 2 – Satisfaction with Performance policies

Scale 3 – Job/Company Satisfaction

Level of Significance of
Independent Dependent R-
Beta
Variable Variable Square Beta
Regression .038
Frequency Scale 1 .634 .482
1
Regression .007
Clarity Scale 1 .688 .586
2
Regression .000
Frequency Scale 2 .576 .418
3
Regression .000
Clarity Scale 2 .571 .518
4
Regression .000
Frequency Scale 3 .601 .441
5
Regression .000
Clarity Scale 3 .694 .416
6
Table 6.10 Regression analysis

The first regression tests the influence of frequency of Performance Appraisal

discussion on the relationship with the manager. The model is significant (p< 0.05). R-
Square for the model is 0.634. The influence of frequency of Performance Appraisal policy
discussion on relationship with the manager is also significant. (Beta = .482, p<0.05).
Conclusion: The more frequently performance is discussed, the more satisfied the
employee is with his/her relationship with the manager, notwithstanding the employee‟s
gender, age or job position.

The second regression tests the impact of clarity of presenting performance

appraisal policies on the relationship with the manager. This regression is also significant,
(p<0.05). R square is 0.688. The influence of clarity on the relationship with the manager is
also significant (Beta 0.586, p<0.05). Conclusion: The clearer the performance Appraisal
process, the more satisfied the employee is with the manager, notwithstanding the
employee‟s gender, age or job position.

The third regression tests the influence of frequency of Performance Appraisal on

comprehension of Performance Appraisal policies. The dependent variable in this

71
regression model is comprehension of Performance Appraisal policies. The independent
variable is frequency of Performance Appraisal. The regression model is significant
(p<0.05). R-Square is 0.576. The direct influence of frequency is also significant
Beta=.418, p< 0.05. Conclusion: The more frequently performance is assessed and
discussed, the more easily employees understand the Performance Appraisal process,
notwithstanding the employee‟s gender, age or job position.

The fourth regression tests the impact of the clarity of feedback on the Performance
Appraisal comprehension. The dependent variable in the regression equation is
Performance Appraisal comprehension, the independent – clarity of Performance
Appraisal, with control on age, gender, location and job position. As it can be expected the
model is significant (p< 0.05). R-Square is 0.571. The influence of clarity on
comprehension is also significant (Beta = 0.518, p< 0.05). Conclusion: The clearer the
feedback is communicated, the more easily it is comprehended, notwithstanding the
employee‟s gender, age or job position.

The fifth regression tests the influence of the factor frequency of Performance
Appraisal discussion on company satisfaction. Thus the dependent variable in the
regression model is Company satisfaction (measured with the developed Company
satisfaction scale) and the independent variable is Frequency of Performance Appraisal
(measured on a five point Likert type scale with the question „My manager discusses
regularly my job performance with me). The results show that the model is significant (p<
0.05). R-Squared is 0.601. The influence of PA frequency on satisfaction with the company
is also significant (Beta = .441, p < 0.05). Conclusion: In other words notwithstanding the
employee‟s age, gender or job position the more frequent Performance is reviewed, the
more satisfied he/she is with the company, notwithstanding the employee‟s gender, age or
job position.

The last regression tests the influence of the independent variable Clarity of
Performance Appraisal on Company satisfaction. The results show that the regression
model is significant, (p< 0.05). R-Squared is 0.694. The impact of clarity on company
satisfaction is also significant, Beta = 0.416, p< 0.05). Conclusion: We can conclude that
the more clearly Performance assessment is presented to the employee, the more satisfied
he/she is, notwithstanding the employee‟s gender, age or job position.

72
6.4.4 HYPOTHESIS FINDINGS

We can say that there is a correlation between the clear purpose and understanding
of performance appraisal and the level of satisfaction and staff engagement, based on the
conclusion, received from the regressions. Therefore we can say that our main hypothesis
could be accepted.

73
CHAPTER – 7
7. FINDINGS AND RECOMMENDATIONS

In this chapter I summarize my learning experience from the literature and the
qualitative survey run in the observed company. I add some possible pitfalls and general
mistakes in the process and how they can be overcome and some best practices for
effective Performance Appraisal.

SET GOALS EFFECTIVELY

Individual goals should derive from strategic direction and overall company goals.
Typically the process should start with senior functional managers setting goals for their
departments, based upon organization-wide goals that support the business strategy. From
this level target setting is cascading down to the organization. Best practice is the
employees to receive targets by their managers first and then they could set and agree their
own ones. This could help employees to see how their individual targets relate with the
company’s objectives on a higher level. (Murphy & Cleveland 1998)

Another aspect is that goals should be written down objectively and clearly so that the
expectations of the employee and the manager could be aligned. (Latham & Yukl, 1975)
Writing down goals effectively becomes easier when using the accepted framework of
SMART goals. When goals are specific, measurable and time-based, assessing and
tracking progress becomes easier. Establishing SMART goals provides clarity upfront to
employees who will be evaluated later against these goals.

PREPARATION IS THE KEY

Effective appraisal process requires serious preparation work to be done both by the
employee and the manager. They should know why appraisal exists, what the objectives
and expected results are. Obviously when this information comes from the top it
demonstrates management focus and relevance of the process for the overall company
performance. (Murphy & Cleveland 1995)

Employees should be informed, usually by HR department or by their managers,

how to prepare for the process. They should understand the connection between
Performance management and the other HR processes. Materials should be provided to
educate and prepare both staff and managers upfront, there are also e-learning tools and
DVDs that describe a good performance discussion and comment on potential pitfalls.

75
 HR department specialists in “RSP” shared that in the beginning it was difficult
especially for the young newcomers to see the relevance of Performance Appraisal and this
is the reason why the staff usually do not put sufficient efforts in preparation in the first
year. Gradually they started generating experience and learn from each other and usually in
the second or third year when the staff become aware of the benefits of Performance
Appraisal. From appraisal discussion employees can learn where they currently stand
versus Line Manager’s expectations, what the formal opinion about their performance is
and what they could do differently in order to address any performance or behavioral gaps.

FOCUS ON DEVELOPMENT

Discussion around staff development is a weak area, survey respondents confirmed

that the focus on the development as part of the Performance Appraisal process should
increase. The discussion should allow time both parties to discuss development areas and
to design and agree learning interventions that will help people to address their current
skills gaps. The employees expect Line Managers to put more effort and provide further
career guidance and counseling and support people to see their possible short and medium
term development. This is an area which also requires preparation. Line Managers should
be seeking some advice from HR advisors about how to handle staff development
discussion. One of the respondents’ comments: “I think that the performance appraisal
should have a greater influence on my career development “.

Use of the GROW model, a technique for goal setting, defined by Sir John
Whitmore (1996), could provide a good structure for the development part of the appraisal
discussion. It contains Goals (what do you want to be), Reality (where are you now),
Option (how could you get there) and Wrap-up (what would you do) and could be used as
a basis for effective communication in the appraisal meeting.

In the discussion one of the topics on development could be the current gaps and
future job opportunities. Based on this, a learning and development plan could be drafted.

OPEN AND HONEST FEEDBACK

“There should be a mechanism to reflect not only the personal opinion of the line
manager, but of other people (peers, subordinates, higher managers) as well in an objective
way of feedback. Performance should be assessed against clearly specified and agreed
tasks and targets and not in comparison to the perceived performance of other employees.”

76
 This opinion, expressed by one of the participants, demonstrates expectation for
improving the feedback collection process. The employee believes that objectivity in
assessment process will improve through collecting feedback. Although there is a well-
defined process of feedback collection in “RSP” in some cases line managers probably
miss the opportunity to collect input from others. Employees can suggest relevant
references and managers should seek additional feedback from others in the organization
about the performance of their own staff. Collecting information from different sources
increases objectivity and ensures all elements of performance to be covered. Use of 360
degree feedback can be also very helpful because here the self-evaluation can be compared
with the evaluation of the others against the same performance criteria. RSP uses 360 as an
additional tool for evaluating employees.

Another element – objective and consistent feedback – delivers a constructive and

honest feedback. (Lepsinger & Lucia 1997). It helps employees to understand their
strengths and weaknesses and the areas in which they need to improve their performance.
Managers should not only be able to give feedback but also to suggest corrective
behaviors. Because of its sensitivity the feedback should be given with care, without
personal criticism which might hurt the individual. Special attention must be given when
delivering negative feedback in order to get credibility and use it constructively for future
performance improvement. The manager should make sure that the message is well
understood and criticism is accepted by the individual.

Subjective, unsubstantiated comments, vague statements and criticism delivered in

a de-motivating manner can compromise the overall process. Giving feedback to employee
requires higher level of coaching skills. Generally speaking, supervisors like to be
messengers for the good news and tend to avoid difficult discussions and deal with
underperformance. The best way of doing this is to deliver a constructive and balanced
picture of how the company views their performance and what development opportunities
might help them to make a positive progress. Complying with best practices requires line
managers to avoid their own prejudices and focus on the behaviors and the quality of the
performance and not on the individual traits.

Credible and specific feedback could play a positive role in boosting individual
confidence and motivation. There are specific techniques for giving constructive and

77
effective feedback and managers who want to strive for perfection should be aware of best
practices.

In organizations with a performance-driven culture it is also acceptable for

managers to seek feedback from their subordinates. This is considered to be a best practice
– open and honest feedback from employees to their managers without fear of
consequences demonstrates mutual respect and shows that valuing differences is a
principle of people management.

LINE MANAGER’S ROLE

“The quality of performance appraisal process depends on high level of the line
manager leadership skills, experience and maturity. The fairness of the assessment is
currently cross-checked in ranking sessions. However the leadership skills and abilities of
the line managers should be further monitored and improved for a higher quality of the
performance appraisal process.” This one and many other views expressed by respondents
confirm the criticality of manager’s role in the process. Managing expectations and
performance of another person is not an easy task because it requires from line manager to
know how to achieve goals through other people. Managers need to understand the
psychology of human behaviors by observing people reactions. They should know what
factors could be motivating for each individual, how to coach and develop as well how to
resolve conflict situation. As people usually have high expectations for their leaders,
managers, especially newly recruited or promoted, should be educated and trained in
people management skills and should carefully prepare themselves for the appraisal cycle.

A supervisor’s attitudes and skills in the appraisal process are crucial – care,
empathy, listening, coaching and influencing, asking the right questions, paraphrasing,
summarizing, etc. (Armstrong & Baron 1998). These are skills that can and should be
trained. In order that supervisors could concentrate on improving their skills my
recommendation is that supervisors be appraised for the quality of the evaluation process.
In cases where the employee is very confident and willing to challenge manager’s opinion
and the boss does not have sufficient competence level, the discussion could go easily off
track with little or no benefit to the employee.

78
APPRAISAL DISCUSSION

Preparation for the appraisal meeting should start early. The place and time of the
meeting and the atmosphere are important factors for the success of conversation. The
purpose of the meeting and the agenda should be set first. The line manager should begin
the discussion with job requirements, strengths and accomplishments observed in the past
period. Managers must be well prepared to listen and discuss, he/she needs to have relevant
evidence and be able to provide facts for their judgments so that their comments be
accepted as credible by the employee. The meeting should be a discussion not a line
manager’s one-way communication. Best practice recommended by Walters (1995) shows
that the employee should talk 70-80% of the time about how they feel, what achievements
they have made, what was not achieved and why, what career objectives they have and
how they see their future in the organization. In order to successfully make the employee
talk the manager should be skillful in listening, understanding and questioning. At the end
of the session further actions and timelines should be agreed. Best practice is at the end of
the discussion both parties to reach an agreement based on trust and commitment to
fulfilling their own part of the agreement.

PERFORMANCE RANKING

Measuring performance is a very difficult activity – the performance should be

measured against defined success criteria, following the same format for everyone. Before
the appraisal, the supervisor should gather information on the employee’s work
performance by seeking input from other people. Information references include feedback
from other supervisors, managers and peers. The supervisor must weigh these up and make
his/her own assessment of the employee. The evaluation of performance should be based
on facts, recognizing and acknowledging what has been achieved. However, if there is no
controlling measure there is a high risk that Line Managers would give higher performance
ratings than their staff deserve.

PERFORMANCE REVIEW FREQUENCY

There is a wide spread opinion that an annual meeting to evaluate progress does not
have the same benefits as an ongoing dialogue and formal and informal feedback. Some
companies are moving towards conducting performance reviews twice a year, small
numbers of companies do it on more frequent basis.

79
Best practice requires the evaluation of performance to take place on a regular basis.
Mostly suggested are quarterly performance updates. Reviewing performance on
continuous basis will allow a bad performance or existing issues to be identified and
corrective measures to be designed at an earlier stage. Also tasks and targets should be
checked out several times a year (Murphy & Cleveland 1995). They are set at the
beginning of the year; however they are likely to change throughout the performance
period and should be kept updated.

PROPER PERFORMANCE RECORDING

Note taking must be a consistent practice. Documentation is important to support

performance decisions, and notes should be written with intent to be shared. (Reeves
2002)The performance log is the record that is kept by a manager and employee and serves
a number of purposes. The performance log can remind of a coaching need or can be a
reminder for providing recognition. Performance log is used when promotion or
development opportunity for the employee is considered. Performance records should
follow the same principles – be objective, based on observations, comment job-related
behaviors only, include achievements and deficiency areas and if applicable disciplinary
actions should be logged. Online administration in electronic systems used nowadays
makes it simple to remind managers and employees automatically when reviews are due,
late or incomplete, and HR professionals no longer have to track down the missing reports.

ENSURE ONGOING PROCESS, FULL PARTICIPATION AND SUCCESS

The performance management process must add value, otherwise problems with
resistance and non-participation will pop up on the surface. Participation and support from
upper level management is also important. Senior management should participate in the
same process. The effectiveness of the process increases if there is a culture that supports
honest communication, where employees can openly consider how to make improvements
in order to move forward. (Murphy & Cleveland 1995)

Another way of improving efficiency is to make a regular review of the process through
surveys and questionnaires or get opinions through focus group discussions. However,
their benefits are doubtful and would hardly compensate the time loss.

80
CHAPTER – 8
8. CONCLUSION
Our hypothesis suggests that effective appraisal process correlates with а higher
level of satisfaction and employee engagement. Engaged employees are those who are
willing to invest additional efforts towards enhancing market position of their company
and contribute to better financial results. This is their direct contribution to the company.
Engaged employees are not only motivated to work but they also know exactly what to do
and how to do it more effectively because they know the strategy and company objectives
and share them. All this could possibly mean that the more engaged to the company people
are, the better financial results are likely to be achieved. This correlation has been
confirmed by many surveys conducted by consulting companies.

Eventually we can conclude that raising and maintaining employee’s engagement

lies in the hands of an organization and requires a balanced blend of time, efforts,
commitment and investment.

82
REFERENCES
• Dechev, Z, (August, 2010), „Effective Performance Appraisal – a study into the
relation between employer satisfaction and optimizing business results‟, Erasmus
University Rotterdam
• Wright, P , Gardner, T & Mounihan LM (2003) „The impact of human resource
practices on business unit operating and financial performance‟, Human Resource
Management Journal, Issue-13, pp. 21-36
• Dr. Gangwani, S (2012), „Employee survey on Performance Appraisal System‟,
International Journal of Social Sciences & Interdisciplinary Research, Vol.1, No. 6,
pp. 124-141.
• Bhattacharjee, S and Sengupta, S (2011), „A Study of performance
• management in a corporate firm‟, International Journal of Business & Management
• Research‟, Vol.1 ,No.8, pp. 496-513.
• Dr. Mishra, S, (2002), „Under the magnifying glass‟, Rourkela Steel Plant
• Dogra, R, (2015), „Human Resource Management‟, Trueman‟s Publication
• Shaun, Tyson, (2006), “Essentials of Human Resource Management”, Butterworth-
Heinemann publication, 5th edition
• Dessler, Gary, (2005), “Human Resource Management”, Prentice Hall Inc., Tenth
edition
• Rastogi, Nupur, (2010), “Performance Management and Appraisal”, Sikkim
Manipal University
• Kothari, C.R., Garg, Gaurav, (2014), “Research Methodology”, Third edition

Online links

• http://www.sail.co.in/rourkela-steel-plant/about-rourkela-steel-plant
• http://economictimes.indiatimes.com/steel-authority-of- india-sail-
ltd/stocks/companyid-11974.cms
• http://steel.gov.in/overview.htm

83
ANNEXURE I (If Required)

FLOW CHART ON THE OPERATION OF THE EXECUTIVE PERFORMANCE

APPRAISAL SYSTEM
(ACTIVITY SCHEDULE)
Activity Responsibility Last Date

Prior to the art of the assessment year

Setting & Communication of Tasks/Targets including HOD 31st March

KPAs for each appraisee

Identification & Communication of Special Relevant HOZ/HOF/CE 31st March

Factor (Personnel Department to assist)

After the start of the assessment year

Detachable Self-appraisal-cum-PRP forms (Part A & B) Personnel Deptt. 15th Sept

sent to appraisees through Reporting Officers

Completed Self-appraisal for the period 1st April to 30th Appraisee 7th Oct.
Sept. sent to Reporting Officer

Performance Review and Planning (Mid-term) Reporting Officer/ 22nd Oct.

Appraisee

Self-appraisal and PRP form sent back to Personnel Reporting Officer 1st Nov
Department

Complete set of Appraisal forms including Self- Personnel 15th March

appraisal-cum-PRP forms sent to Reporting Officer for Department
annual appraisal

Self-appraisal form sent to the Appraisee Reporting Officer 21st March

Completed Self-appraisal for the 1st Oct. to 31st March Appraisee 5th April
sent to Reporting Officer

Annual Performance Review and Planning Reporting Officer/ 12th April

Appraisee

Reporting Officer completes Part C & D and the Reporting Officer 19th April
summary sheet, sends the same to Reviewing Officer or
Reporting Officer(O) wherever applicable

Reporting Officer(O) completes Part C and Summary Reporting 23rd April

sheet and sends the same to the Reviewing Officer Officer(O)

84
Reviewing Officer Completes Part C & D and summary Reviewing Officer 1st May
sheet and sends the same to Personnel Deptt.

Comments (by exception) of Higher Authority Personnel 7th May

(HOD/HOZ/Chief Executive/Director/Chairman) Department

Work out Primary Grading Personnel 15th May

Department

Summary sheet for PRC Personnel 25th May

Department

Final evaluation Performance 5th June

Review
Committee

Communication of non-promotable ratings Personnel 12th June

Department

Follow up Personnel & Continuous

Training Deptt.

85
ANNEXURE II

SPECIAL RELEVANT FACTOR – A FEW EXAMPLES

AREA EXAMPLES

Work/Mines Safety & house keeping

Projects Schedule compliance

Personnel/Admn. Employee services

Training/MS/Law Updating knowledge & skill/Self development

Finance Customer Orientation

Materials Management Lead time/ Inventory holding

Marketing Customer satisfaction

Medical Diagnosis/ Hygiene consciousness

Medical Research & Development Innovation

NOTE: The above examples are only illustrative. The Head of Function/ Head of Zone/
Higher Authority concerned may decide any factor relevant for assessment based on the
thrust areas identified for the year.

86
ANNEXURE III
DEFINITIONS OF RATING SCALE
QUANTITY OF OUTPUT Extent of target fulfilment and completion of assigned tasks
5. Output of work 4. Fulfilment of 3. Tasks 2. Output below 1. Output far below
exceptionally high and all tasks/ targets, assigned target/ expectation expectation.
above expectations/ tasks despite generally met despite lack of Target/ Tasks not
assigned despite high constraints. with moderate constraints. fulfilled. Low
degree of difficulty of effort. Moderate effort. effort.
tasks.

QUALITY OF OUTPUT General excellence of output, the extent of work free from errors
5. Excellent 4. Does a thorough and 3. Generally 2. Work 1. Works consistently
quality of accurate job. Work produces work of barely upto below required
output. Accurate needs minimum acceptable quality. the mark. standard. Makes no
in work under all correction. High Sometimes work Needs to be effort to improve. Does
conditions. quality consciousness. needs correction. corrected. not lay any emphasis on
quality of product/
work.

COST CONTROL Awareness of cost aspects in the job. Optimum utilisation of available resources and
reduction of waste
5. Always makes 4. All assigned tasks 3. Generally 2. Conscious of 1. Wasteful in work.
optimum utilisation completed within keeps within the need to effect Lacks desire to
of resources. Has the specified cost cost parameters economy and complete assignments
reduced costs and parameters. and time manage time. But in time. Unaware and
waste. Tasks Reduced cost and schedules. makes moderate uninterested in the
completed ahead of avoided wastes. effort. need to effect
schedule. economy.

JOB KNOWLEDGE AND SKILL Knowledge pertaining to the area of work and related areas
5. Excellent knowledge 4. Good knowledge 3. Knowledge 2. Knowledge 1. Poor
of own job and related of his own job and adequate in own inadequate in knowledge. No
areas. Professionally related areas. area. Needs own and related motivation to
upto date. Updates himself. updating in related areas. learn.
areas.

PLANNING AND ORGANISING Ability for anticipating work needs and development of effective action
plans in relation to tasks assigned.
5. Exceptional ability 4. Normally 3. Generally 2. Ability to 1. Very
to anticipate future anticipates Work systematic and plan and unsystematic and
work needs ahead of needs and is able to methodical. organise is unmethodical.
time, and to work in a prepare a plan of Sometimes slow in marginal. Does no planning
logical manner to action; generally good arranging work load at all.
meet plan. in arranging work load to meet plan.
to meet plan.

INITIATIVE Ability to be self-reliant and move forward on a task without outside direction.
5. Totally 4. Good initiative. 3. Generally shows 2. Needs 1. Always requires to be
self- Undertakes all tasks good initiative. guidance, told. Unable to function
reliant. A and overcomes Occasionally needs instructions and independently cannot do
self- obstacles some follow up. follow up. simple jobs without
starter. independently guidance and follow up.

87
COMMITMENT AND SENSE OF RESPONSIBILITY Dedication to work and company objectives.
Reliability to complete assigned tasks
5. Totally identifies with 4. High sense of 3. Accepts but 2. Low sense of 1. Alienated.
the job/ company. Seeks duty. Accepts and does not seek duty. Does not Evades/ sheds
and accepts responsibility seeks responsibility identify with the responsibility.
with full accountability. responsibility. job/ company.

COMMUNICATION Skill and desire to share available information with all concerned.
5. Excellent clarity of 4. Shares 3. Has moderate 2. Only believes in 1. Lacks both the
thought and information skill and desire to downward skill and the will to
expression. Uses all with all share information. communication. communicate.
channels of concerned. Relies heavily on Cannot express Keeps things to
communication. Is Good formal himself well. himself. Expresses
receptive to feedback expression. communication no desire to acquire
and aware of what is Open to channels. information.
happening. feedback.

DEVELOPMENT & QUALITY OF ASSESSMENT OF SUBORDINATES Interest taken in providing

opportunities to subordinates for development and fairness in assessing subordinates
5. Continuously 4. Encourages on 3. Takes some 2. Takes no interest 1. Takes no interest
guides, trains and the job learning. interest in sending in training & in training &
encourages Takes keen people for development of development of
subordinates. interest in training. Makes subordinates subordinates.
Delegates development of effort and beyond routine Provides no
responsibilities and subordinates, with sometimes forwarding of opportunities for
allows subordinates good follow up on follows up. names for training. them to grow on
to learn. Assessment training, fair in Reasonably fair in No follow up. Does the job or through
of the subordinates assessment of his assessment of not take much education. Makes a
very fair subordinates. subordinates. interest in fair poor assessment of
assessment of subordinates.
subordinates.

TEAM SPIRIT Co-ordination and co-operation with colleagues to achieve team objective
5. Outstanding team 4. Effective team 3. Marginal 2. Very passive 1. Cannot work with
member. Keeps the member. contribution. as a team others in a team.
larger goal in view. Contributes to the Prefers to work member. Does Creates conflicts and
Contributes. Is open team effort. Very alone. Not not contribute dissipates the energy
to ideas and can well aware of his comfortable in a and withdraws of the group in
influence working of own role. group. quickly. dysfunctional pursuits.
the group.

PROBLEM ANALYSIS AND DECISION MAKING Ability to identify problems, prioritise them, analyse
alternative courses of action and take decisions
5. Excellent analytical 4. Good 3. Moderate 2. Lacks analytical 1. Lacks
abilities. Good grasp of analytical analytical ability. ability. Occasionally analytical
complex issues. Always abilities. Handles day to day takes decisions. ability. Does
takes confident and Confident and decisions. Wavering and not take
quick decisions even on quick decision Sometimes delays uncertain. decisions.
complex problems. making most of decision making.
the time.

88
MANAGEMENT OF HUMAN RESOURCES Effective control and utilisation of subordinates, ensuring
discipline, integrating employees into teams and motivating them for higher levels of performance
5. Excellent control 4. Good utilisation 3. Plays basically a 2. Has little 1. Has no control
over and utilisation of people. Able to controlling function. control. over his people.
of people. Good enforce discipline Uses authority. Sometimes adds Unable to inspire
discipline, high level and obtain high Enforces discipline. to problems performance or
of motivation and performance Can obtain high through lack of enforce discipline.
good team work. An through leadership. performance in fair and firm Creates divisions
outstanding leader. patches. handling. and conflicts.

LATERAL CO-ORDINATION Ability to effectively coordinate with all linked departments to ensure
smooth functioning
5. Outstanding 4. Good co- 3. Sometimes 2. Coordination 1. Unable to
coordination abilities. ordination needs higher is weak. coordinate. Rapport
Excellent rapport with and abilities. Good level Frequent with colleagues is
knowledge of related areas relations with intervention to problems with not good. Unable to
and is able to obtain full colleagues. Able solve other either explain own
cooperation of to work well as a problems. departments of requirements or
colleagues/agencies. member of inter- outside agencies. appreciate the roles/
disciplinary team. problems of others.

DISCIPLINE Adherence to Company policy and rules

5. Exemplary behaviour 4. Good 3. Discipline is 2. Low in 1. In disciplined. Does
and conduct. Fully behaviour and generally good. discipline. not conform to
participate in the conduct. Sometimes Needs established rules/
implementation of Responds well to needs constant policies and does not
Company rules and Company correction. correction. follow instructions/
policies. policies, rules decisions taken. A bad
and decisions. example for others.

89
ANNEXURE IV
SUMMARY SHEET

Sl No. Name of the Appraisee Section/Deptt Total factor score

Signature :

Name :

Designation :

Date :

Note: Separate forms will be used by Reporting Officer, Reporting Officer (O) and
Reviewing Officer for different appraisal groups.

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ANNEXURE V

SUGGESTED COMPOSITION OF PERFORMANCE REVIEW COMMITTEES

Level Reporting Reviewing PRC PRC

Officer Officer Chairman Members
E1/E2 E3/E4 E5 Zonal Head Departmental Heads
E3/E4 E5 E6 Functional Head Zonal Heads
E5 E6 E7 CE/Director Functional Head
E6 E7 E8 Chairman CEs/Director
E7 E8 E9 Chairman CEs/Director
E8 E9 CE/Director Chairman CEs/Director

Note:

1. If the appraisee reports to a level higher than the suggested, the authority to whom
the appraisee reports assume the role of Reporting Officer.
2. In case of functional heads reporting to the CEs, the Chief Executive concerned
will be the Reporting Officer and Chairman will be the Reviewing Officer. The
Director concerned will be the Reporting Officer(O). The PRC will be headed by
Chairman.
3. HOD or the authority above the Reviewing Officer would necessarily be a member
of the Performance Review Committee in case of appraisees in E1-E5 grades.

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92
 ANNEXURE VII

QUESTIONNAIRE

Dear Madam / Sir, College Logo

You are invited to take part in a brief survey on “Performance appraisal in RSP”. This
would only take approximately 10 minutes to complete. This study is being undertaken as a
part of MBA curriculum by me, doing MBA at School of Management, (Your College
Name).

Please note that there are no right or wrong / good or bad answers to any questions /
statements in this survey and we are only interested in your perceptions and feelings. I
assure you that the responses provided by you will not be linked to any personal
identifying information or to your organization. Your participation in this study is
voluntary and you are free to withdraw at any time. Thank you for participating in this
study and please feel free to contact me if you need any additional information about this
study.

Sincerely

Your Name
School of Management
Your College Name
your email id required.
Mob: xxxxxxxxx

For questions stated below put a tick mark in appropriate boxes.

Name (optional) :

Gender : Male Female

Age : 20-30 years
31-40 years
41-50 years
Above 50 years
Experience : Less than 3 years
4-8 years
9-15 years
More than 15 years
Level : Executive Non-
executive Department :

93
 Neither
agree
Sl Strongly nor Strongly
no Statement agree Agree disagree Disagree disagree

My manager/supervisor discusses
regularly my job performance with
1 me.
I clearly understand my manager’s/
supervisor’s comments and opinion
2 during the feedback.

My manager/supervisor recognizes me
3 when I do a good job.

My manager plays a significant role in

4 my career development.

I am satisfied with the relationship

5 with my manager/supervisor.

My manager/supervisor is highly
6 capable as manager.

7 My manager gives me fair feedback.

My manager/supervisor has reasonable
8 expectations from my work.

My manager/supervisor is well
9 informed about my work.
10 My job is fulfilling my needs.
11 I feel proud to work for my company.
Performance management can help
people understand the organization’s
12 strategic priorities.

I receive adequate training and

information about the performance
13 appraisal cycle before it starts.

I clearly understand the purpose of

14 performance appraisal.
Performance appraisal in my company
15 is fair.

Performance appraisal reflects

16 objectively my performance.

94
 Neither
agree
Sl Strongly nor Strongly
no Statement agree Agree disagree Disagree disagree

Performance appraisal makes me

better understand about what
17 should be done.
Performance appraisal process helps
manager/supervisor to manage people
18 better.

Performance appraisal process

encourages co-operation and team
19 spirit.

Performance appraisal influences

20 positively individual performance.

I would recommend my company to

21 all my friends.
The salary is adequate reflection of my
22 performance.

I am satisfied with the relationship

23 with my manager.

I can clearly understand the

24 performance policies.

25 I am satisfied with my company.

26. Do you think that positive performance appraisal should lead to increase the salary?
YES NO
27. Do you think that positive performance assessment influences employee promotion?

YES NO
28. Do you think that your performance is linked to the profitability of the company?
YES NO
29. What would you recommend to be done differently in the performance appraisal?

We have reached the end of the survey.

Thank you once again for your time and cooperation.

95