performance appraisal

INTRODUCTION Its roots in the early 20th century can be traced to Taylor's pioneering Time and Motion studies. But this is not very helpful, for the same may be said about almost everything in the field of modern human resources management. As a distinct and formal management procedure used in the evaluation of work performance, appraisal really dates from the time of the Second World War - not more than 60 years ago. Yet in a broader sense, the practice of appraisal is a very ancient art. In the scale of things historical, it might well lay claim to being the world's second oldest profession! A basic human tendency to make judgments about those one is working with, as well as about oneself." Appraisal, it seems, is both inevitable and universal. In the absence of a carefully structured system of appraisal, people will tend to judge the work performance of others, including subordinates, naturally, informally and arbitrarily. The human inclination to judge can create serious motivational, ethical and legal problems in the workplace. Without a structured appraisal system, there is little chance of ensuring that the judgements made will be lawful, fair, defensible and accurate. Performance appraisal systems began as simple methods of income justification. That is, appraisal was used to decide whether or not the salary or wage of an individual employee was justified.

The process was firmly linked to material outcomes. If an employee's performance was found to be less than ideal, a cut in pay would follow. On the other hand, if their performance was better than the supervisor expected, a pay rise was in order. Little consideration, if any, was given to the developmental possibilities of appraisal. If was felt that a cut in pay, or a rise, should provide the only required impetus for an employee to either improve or continue to perform well. Sometimes this basic system succeeded in getting the results that were intended; but more often than not, it failed. For example, early motivational researchers were aware that different people with roughly equal work abilities could be paid the same amount of money and yet have quite different levels of motivation and performance. These observations were confirmed in empirical studies. Pay rates were important, yes; but they were not the only element that had an impact on employee performance. It was found that other issues, such as morale and self-esteem, could also have a major influence. As a result, the traditional emphasis on reward outcomes was progressively rejected. In the 1950s in the United States, the potential usefulness of appraisal as tool for motivation and development was gradually recognized. The general model of performance appraisal, as it is known today, began from that time.

Relationship of Performance Appraisal and Job analysis Performance appraisal is a formal, structured system of measuring and evaluating an employee¶s job related behaviors and outcomes to discover how and why the employee is presently performing on the job and how the employee can perform more effectively in the future so that the employee, organization, and society all benefit. Job Analysis Performance Standards Performance Appraisal

Describes work & personnel requirement of a particular job

Translate job requirements into levels of acceptable or unacceptable performance

Describes the job-relevant strengths & weaknesses of each individual

Job analysis sets out requirements, which are translated into performance standards, which in turn form the basis for performance appraisal. Appraisal Process

Objectives of Performance Appraisal

Establish job expectations

Design an Appraisal Programme

Appraise Performance

Performance Interview

Use Appraisal Data for Appropriate Purposes

(a) Objectives of Appraisal: Objectives of appraisal include effecting promotions and transfers, assessing training needs, awarding pay increases, and the like. The emphasis in all these is to correct the problems. (b) Establish Job Expectations: This includes informing the employee what is expected of him or her on the job. Normally, a discussion is held with his or her superior to review the major duties contained in the job description.

(c) Design Appraisal Programme: Designing an appraisal programmes poses several questions which needs answers: They are: (I) formal versus informal appraisal (ii) How performance is to be assessed? (iii) Who are the raters (iv) What problems are encountered? (v) How to solve the problems? (vi) What should be evaluated? (vii) When to evaluate (viii) What methods of appraisal are to be used? Modern Appraisal Performance appraisal may be defined as a structured formal interaction between a subordinate and supervisor, that usually takes the form of a periodic interview (annual or semi-annual), in which the work performance of the subordinate is examined and discussed, with a view to identifying weaknesses and strengths as well as opportunities for improvement and skills development. In many organizations - but not all - appraisal results are used, either directly or indirectly, to help determine reward outcomes. That is, the appraisal results are used to identify the better performing employees who should get the majority of available merit pay increases, bonuses, and promotions. By the same token, appraisal results are used to identify the poorer performers who may require some form of counseling, or in extreme cases, demotion, dismissal or decreases in pay. (Organizations need to be aware of laws in their country that might restrict their capacity to dismiss employees or decrease pay.)

Whether this is an appropriate use of performance appraisal - the assignment and justification of rewards and penalties - is a very uncertain and contentious matter. Controversy, Controversy Few issues in management stir up more controversy than performance appraisal. There are many reputable sources - researchers, management commentators, psychometricians - who have expressed doubts about the validity and reliability of the performance appraisal process. Some have even suggested that the process is so inherently flawed that it may be impossible to perfect it. At the other extreme, there are many strong advocates of performance appraisal. Some view it as potentially "... the most crucial aspect of organizational life". Between these two extremes lie various schools of belief. While all endorse the use of performance appraisal, there are many different opinions on how and when to apply it. There are those, for instance, who believe that performance appraisal has many important employee development uses, but scorn any attempt to link the process to reward outcomes - such as pay rises and promotions. This group believes that the linkage to reward outcomes reduces or eliminates the developmental value of appraisals. Rather than an opportunity for constructive review and encouragement, the reward-linked process is perceived as judgmental, punitive and harrowing.

For example, how many people would gladly admit their work problems if, at

the same time, they knew that their next pay rise or a much-wanted promotion was riding on an appraisal result? Very likely, in that situation, many people would deny or downplay their weaknesses.

Nor is the desire to distort or deny the truth confined to the person being appraised. Many appraisers feel uncomfortable with the combined role of judge and executioner. Such reluctance is not difficult to understand. Appraisers often know their appraisees well, and are typically in a direct subordinate-supervisor relationship. They work together on a daily basis and may, at times, mix socially. Suggesting that a subordinate needs to brush up on certain work skills is one thing; giving an appraisal result that has the direct effect of negating a promotion is another. The result can be resentment and serious morale damage, leading to workplace disruption, soured relationships and productivity declines. On the other hand, there is a strong rival argument which claims that performance appraisal must unequivocally be linked to reward outcomes. The advocates of this approach say that organizations must have a process by which rewards - which are not an unlimited resource - may be openly and fairly distributed to those most deserving on the basis of merit, effort and results. There is a critical need for remunerative justice in organizations. Performance appraisal - whatever its practical flaws - is the only process available to help achieve fair, decent and consistent reward outcomes.It has also been claimed

that appraisees themselves are inclined to believe that appraisal results should be linked directly to reward outcomes - and are suspicious and disappointed when told this is not the case. Rather than feeling relieved, appraisees may suspect that they are not being told the whole truth, or that the appraisal process is a sham and waste of time. The Link to Rewards Recent research (Bannister & Balkin, 1990) has reported that appraisees seem to have greater acceptance of the appraisal process, and feel more satisfied with it, when the process is directly linked to rewards. Such findings are a serious challenge to those who feel that appraisal results and reward outcomes must be strictly isolated from each other. There is also a group who argues that the evaluation of employees for reward purposes, and frank communication with them about their performance, are part of the basic responsibilities of management. The practice of not discussing reward issues while appraising performance is, say critics, based on inconsistent and muddled ideas of motivation. In many organizations, this inconsistency is aggravated by the practice of having separate wage and salary reviews, in which merit rises and bonuses are decided arbitrarily, and often secretly, by supervisors and managers. There are basically three purposes to which performance appraisal can be put. First, it can be used as a basis for reward allocation. Decision as to who gets salary increase, promotion, and other rewards are determined by their performance evaluation. Second, these appraisals can be used for identifying areas where development efforts are needed. The performance appraisal is a

major tool for identifying deficiencies in individuals. Finally it can be used as a criterion against which selection devices and development programs are validated. As a key input into management¶s reward and punishment decision, performance appraisals can motivate or de-motivate employees. Three different approaches exist for doing appraisals. Employees can be appraised against 1. Absolute standards 2. Relative standards 3. Objectives OBJECTIVES OF STUDY

A) Primary Objectives 1) To study the performance appraisal system in different organization. 2) To study the transformation of performance appraisal form traditional to modern. 3) To get an insight into the relative importance of performance appraisal in organization. 4) To study the effectiveness of performance appraisal system in different organization. 5) To study the practical application of performance appraisal. 6) To compare appraisal system of different organization and find out the most common parameters for appraisal. 7) How can companies use performance appraisal as an effective tool to achieve organisational effectiveness and efficiency.

B) Secondary Objectives. 1) To observe the work environment in organization. 2) To get experience and expertise in making projects. 3) To enhance my communication skills. 4) To increase my confidence. LIMITATIONS OF STUDY

1) To get contacts of HR Mangers for interviews was difficult. 2) Getting the views and opinion of the interviewee (HR Manager) was a difficult task.

COMPANY PROFILE

HPCL, a fortune 500 company, is one of the major integrated oil refining and marketing companies in India. It is a Mega Public Sector Undertaking (PSU) with Navaratna status.

HPCL accounts for about 20% of the market share and about 10% of the nation's refining capacity with two coastal refineries, one at Mumbai (West Coast) having a capacity of 6.5 Million Metric Tonnes Per Annum (MMTPA) and the other in Vishakapatnam (East Coast) with a capacity of 8.3 MMTPA. HPCL also holds an equity stake of 16.95% in Mangalore Refinery & Petrochemicals Limited (MRPL), a state-of-the-art refinery at Mangalore with a capacity of 9 MMTPA.

HPCL owns the country's largest Lube Refinery with a capacity of 335,000 Metric Tonnes which amounts to 40% of the national capacity of Lube Oil production. HPCL has given India a firm ground in this sector with its world class standard of Lube Base Oils. Presently HPCL produces over 300+ grades of Lubes, Specialities and Greases.

HPCL has earned "Excellent" performance for fifteen Consecutive

years upto 2005-06, since signing of the first MOU with the Ministry of Petroleum & Natural Gas. HPCL won the prestigious MOU Award for the year 2007-08 for Excellent Overall Performance, and for being one of the Top Ten Public Sector Enterprises who fall under the 'Excellent' category. HPCL's performance for the year 2008-09 also qualifies for "Excellent" rating.

HPCL, over the years, has moved from strength to strength on all fronts. The refining thruput has increased three fold between 1984/85 to 2007/08, rising from 4.47 MMTPA in 1984/85 to 15.76 MMTPA (2009-10).

Consistent excellent performance has been made possible by highly motivated workforce of over 11,360 employees working all over India at its various refining and marketing locations.

HPCL continually invests in innovative technologies to enhance the effectiveness of employees and bring qualitative changes in service. Business Process Re-Engineering exercise, creation of Strategic Business Units, ERP implementation, Organizational Transformation, Balanced Score Card, Competency Mapping, benchmarking of refineries and terminals for product specifications, ISO certification of Refineries and Supply Chain Management are some of the

initiatives that broke new grounds. HPCL has successfully integrated Information Technology in its activities at different levels. The Enterprise Resource Planning (ERP) system is now operational on J.D.Edwards, an Oracle product, across the Corporation.

1952: The Company was incorporated in the name of Standard Vacuum Refining Company of India Limited on July 5, 1952 1962: On 31st March,1962 the name was changed to ESSO Standard Refining Company of India Limited. 1974: Hindustan Petroleum Corporation Limited comes into being after the takeover and merger of erstwhile Esso Standard and Lube India Limited 1976: Caltex Oil Refining (India) Ltd. - CORIL is taken over by the Government of India with an Ordinance in 1976, subsequently ratified by an Act in 1977 and merged with HPCL in 1978. 1979: Kosan Gas Company, the concessionaries of HPCL in the domestic LPG market, are taken over and merged with HPCL. HPCL thus comes into being after merging four different organisations at

different points of time. Our Mission ³HPCL, along with its joint ventures, will be a fully integrated company in the hydrocarbons sector of exploration and production, refining and marketing; focusing on enhancement of productivity, quality and profitability; caring for customers and employees; caring for environment protection and cultural heritage.

It will also attain scale dimensions by diversifying into other energy related fields and by taking up transnational operations." Our Vision To be a World Class Energy Company known for caring and delighting the customers with high quality products and innovative services across domestic and international markets with aggressive growth and delivering superior financial performance. The Company will be a model of excellence in meeting social commitment, environment, health and safety norms and in employee welfare and relations

Code Of Conduct For Board Members and Senior Management Personnel

Introduction

1.1 The Code of Conduct for Board Members and Senior Management Personnel´ of Hindustan Petroleum Corporation Limited (hereinafter referred to as ³the Company´). 1.2 The purpose of this Code is to enhance further ethical and

transparent process in managing the affairs of the Company.

1.3 The Company currently has Conduct, Discipline & Appeal Rules for Officers (³the CDA Rules´), which govern the conduct of all Officers of the Company including Whole-time Directors but excluding Non - whole time Directors. The Code of Conduct for Board Members and Senior Management Personnel has now been framed specifically in compliance with the provisions of Clause 49 of the Listing Agreement with Stock Exchanges. In respect of Whole-time Directors and Senior Management Personnel this Code is to be read in conjunction with the CDA Rules 1.4 It shall come into force with effect from 1st day of January, 2006. Definitions & Interpretation In this Code, unless repugnant to the meaning or context thereof, the following expressions shall have the meaning given to them below:

2.1

The term ³Board Members´ shall mean the Directors on the

Board of Directors of the Company. 2.2 who The term ³Whole-time Directors´ shall mean the Board Members are in whole-time employment of the Company.

2.3

The term ³Non-Whole-time Directors´ shall mean the Board

Members who are Part-time Directors and not in whole time employment of the Company. 2.4 The term ³Relative´ shall mean µrelative¶ as defined in Section

2(41) and Section 6 read with Schedule IA of the Companies Act, 1956.

2.5

The term ³Senior Management Personnel´ shall mean personnel

of the Company who are members of its core management team excluding Board of Directors and would comprise of all members of management one level below the Whole time Directors and includes all Functional Heads, irrespective of the levels. 2.6 The term ³the Company´ shall mean HPCL.

In this Code words importing the masculine shall include feminine and words importing singular shall include the plural or vice versa. 1. Applicability

3.1 This Code shall be applicable to the following persons: a. All Whole-time Directors b. All Non- Whole time Directors including Independent Directors under the provisions of law. c. Senior Management Personnel

2. Key Requirements The Board Members and the Senior Management Personnel shall act within the authority conferred upon them, keeping the best interests of the Company and observe the following :
y y

Shall act with care, skill, diligence and integrity. Shall act in good faith and fulfill the fiduciary obligations without allowing their independence of judgment to be compromised.

y

Shall not involve in taking any decision on a subject matter in which a conflict of interest arises or which in his opinion is likely to arise.

y

Shall avoid conducting business with (a) a relative or (b) a Private Limited Company in which he or his relative is a Member or a Director (c) a Public Limited Company in which he or his relative holds 2% or more shares or voting right and (d) with a firm in which the relative is a partner, except with the prior approval of the Board.

y

Shall not have any personal and/or financial interest in any business dealings concerning the Company.

y

Shall avoid any dealings with a Contractor or Supplier that compromises the ability to transact business on a professional, impartial and competitive basis or influence decision to be made by the Company.

y

Shall not hold any positions or jobs or engage in outside businesses or other interests that are prejudicial to the interests of the Company.

y

Shall not exploit for their own personal gain, opportunities that are discovered through use of corporate property, information or position, unless the opportunity is disclosed fully in writing to the Board of Directors of the Company and the Board declines to pursue such opportunity.

y

Shall not make any statement which has the effect of embarrassing the relations between the Company and the public including the stakeholders.

y

Shall not commit any offence involving moral turpitude or any act contrary to law or opposed to public policy resulting in a conviction.

y y

Shall comply with the Insider Trading Code of the Company. Shall keep in confidence all sensitive information concerning the Company¶s business, its customers, suppliers, etc.

y

Shall not provide any confidential information either formally or informally, to the press or any other publicity media, unless

specifically authorized.
y

Shall protect the Company¶s assets including physical assets, information and intellectual rights and shall not use the same for personal gain.

y

Shall be held accountable for fully complying with this Code.

Compliance Of Law Board Members and Senior Management Personnel shall comply with all applicable laws, rules and regulations. Other Directorships Unless specifically permitted, the whole-time Directors, and Senior Management Personnel shall not serve as Director or in any other position of any other Company or as Partner of a Firm that is engaged in a competing business with the Company. Related Party Disclosures The Board Members shall make disclosure to the Board of Directors and Senior Management Personnel shall make disclosure to the Chairman and Managing Director/Competent Authority under the provisions of Accounting Standard 18 governing related party transactions.

Amendments To The Code The provisions of this Code can be amended/ modified by the Board of Directors of the Company from time to time and all such amendments/ modifications shall take effect from the date stated therein. Placement Of The Code On Website Pursuant to Clause 49 of the Listing Agreement, this Code and any amendments thereto shall be posted on the website of the Company. Annual Compliance Reporting It terms of Clause 49 of the Listing Agreement, all Board Members and Senior Management Personnel shall affirm compliance of this Code within 30 days of close of every financial year. A proforma of Annual Compliance Report is annexed to this Code as Appendix-I. The Annual Compliance Report shall be forwarded to the Company Secretary. Consequences Of Non- Compliance Of this Code 11.1 In case of breach of this Code by the Non Whole time Directors, the same shall be considered by the Board of Directors for initiating appropriate action, as deemed necessary. 11.2 In case of breach of this Code by the Whole time Directors and Senior Management Personnel, the same shall be dealt with in

accordance with the CDA Rules of the Company. Acknowledgement Of Receipt Of the Code All Board Members and Senior Management Personnel shall acknowledge the receipt of this Code or any modification(s) thereto, in the prescribed acknowledgement form annexed to this Code vide Appendix-II and forward the same to the Company Secretary.

Corporate Governance Overview

The evolution of Corporate Governance in India began in early 90s. The starting point was the recommendations of the Cadbury Committee Report after which followed various committees, leading to a formal Corporate Governance Code. This code was notified by Securities Exchange Board of India (SEBI) by inserting a new Clause 49 in the listing guidelines to the Stock Exchanges making it mandatory for the listing companies to follow the requirements of Clause 49 effective January 01, 2006.ÿ The major areas of compliance in Clause 49 are
y y

Appointment of required number of independent directors Larger role of Audit Committee

y

CEO/CFO Certification of Accounts (will become applicable for 2005-06 Accounts)

y y y y y

Code of Conduct for Board / Senior Management Risk Minimization Report to the Board Legal Compliance Report to the Board Compliance relating to Subsidiary Companies Information items to Board

Corporate Governance in HPCL Implementation

HPCL has taken necessary steps to comply with the requirement and spirit of Corporate Governance HPCL lays special emphasis on conducting its affairs within the framework policies, internal and external regulations and in a transparent manner.ÿ Being a Government Company, its activities are subject to review by several external agencies like the Comptroller & Auditor General of India (CAG), the Central Vigilance Commission (CVC), Parliamentary Committees, Statutory Auditors etc.

Decision making process :

Like any other corporate, at the apex level is the HPCL Board of Directors (The Board). The Board has constituted several subcommittees, such as the Committee of Functional Directors (CFD), the Audit Committee, the Investment Committee, the HR Committee, the Investor Grievance Committee, etc. The composition of these Committees is given in this Report. The meetings of these committees are convened on need basis and minutes of these meetings are placed for information of the Board. Majority of the members of the Committees except the CFD are Independent Non-Executive or Government nominated Directors with the Whole Time Directors playing a facilitating role. The Corporation has constituted an Executive Council comprising of Chairman & Managing Director, the Functional Directors and the SBU Heads of the Corporation. This council discusses important issues concerning the organization, analyses the same and recommend the µway forward¶ in respect of matters discussed. Emphasis is laid on team approach, mutual support of functions and joint deliberations on issues by the council which has enhanced further the decision making process. It has thus facilitated an integrated thinking process and an aligned approach across the Corporation for achieving the Corporate Vision and each one of the aspirational aspects contained in the Vision Statement.

Advisory Council :

In the context of a highly competitive and dynamic environment of the Oil and Gas Sector, the Corporation felt that an external Committee comprising of eminent people could be constituted to seek their views and guidance, not only on the various ongoing activities, but also on its strategic initiatives aimed towards growth and development. With this background, the Committee called as Advisory Council was constituted in July, 2005 with the approval of the Board.

This Council has met twice so far on October, 01, 2005 and February 20, 2006. Aspects related to performance of the Corporation, HPCL¶s endeavour for global standards for various operations, initiatives under the areas of Corporate Governance, Corporate Social Responsibilities etc. were placed before this council. The suggestions/ observations made by the Council is being progressed further by the Corporation. The advice from this highly eminent group would immensely benefit the Corporation in the time to come.

Exercise of Authority :

The Corporation has well documented Limits of Authority Manual, Purchase Manual, Chart of Accounts, etc., facilitating the decentralized decision making process throughout the organization spread out throughout the country at various levels of the organization.

Limits of Authority Manual (LAM) :

The LAM lays down the authorities that can be exercised at various levels i.e. the Board, Committee of Functional Directors, the Executive Committee, the Contracts Committee, the Bids Committee and the senior individual positions etc. for different activities of the Corporation. The manual is divided into segments representing different functions like Sales, Crude & Shipping, Capital Projects, Operations & Distribution, Finance, HR etc., and provides for a decision making process through various committees as above, represented by inter-functional groups including Finance. This ensures a transparent well considered and streamlined decision making process adhering to the laid down systems and procedures and thereby leaving no room for arbitrariness.

Right to Information Act 2005:

HPCL has implemented The Right to Information Act, 2005 (RTI) that became effective 12th October 2005. HPCL has provided detailed information on this Website www.hindustanpetroleum.com, and updates the same from time to time. Officers across the country, representing different Departments, have been appointed as Public Information Officers and Appellate Authorities to deal with the queries read from the Indian Citizens under RTI Act.

Integrity Pact:

The Corporation has introduced ³Integrity Pact´ (IP) to enhance ethics / transparency in the process of awarding contracts. A MoU has been signed with ³Transparency International´ on July 13, 2007. This was made applicable in the Corporation effective September 01, 2007. The Integrity Pact has now become a part of tender documents to be signed by the Company and by the successful vendor / bidder.

The Integrity Pact is applicable for HPCL Tenders and Contracts of value above Rupees 1 Crore.

Throughout its functioning period, HPCL has upheld the important features like total transparency, integrity and accountability. The virtues are integrated into the system as prerequisite for achieving its Vision of becoming a major integrated energy major. HPCL's business relationships with its numerous domestic and international contractors and vendors of goods and services are steered constantly towards a well thought of direction with high transparency and ethical standard as guiding lights in the transaction process.

Under the above mechanism IEM(s) is/are appointed by HPCL in consultation with TII and Central Vigilance Commission (CVC). The implementation procedure is full of co-operation and monitoring of standard. HPCL has effortlessly stood the test of time to emerge as the organization with integrity and commitment to transparency.

The Salient Features of the Integrity pact include:
y

The Commitment of HPCL and bidder/contractor to take all measures necessary to prevent corruption.

y

Disqualification from tender process and exclusion from future contracts in the event of misconduct disregarding the "Integrity

Pact".
y y

The provision of compensation for damages. Declaration by the bidder with reference to any previous transgression.

y

Equality in dealing with of all bidders/contractors/subcontractors

y

The

provision

of

filing

criminal

charges

against

bidders/contractors/sub-contractors that violate the 'Integrity Pact'.
y

Provision of Independent External Monitor (IEM) to oversee the bidding process, award of contracts and the progress of the contract. The assurance of highest possible transparency.

Public Grievance Redressal

The Corporation has set up a Public Grievance Redressal system wherein designated officers of the Corporation will be available every Friday of the week from 4.00 PM to 5.00 PM at all Major locations to hear & facilitate Redressal of Grievances of the Public, if any. Also the Public Grievance Redressal Officers for Retail and LPG can be contacted for issues regarding their respecitive jurisdiction.

Public, who experience any difficulty, in speaking to the concerned designated officers, can submit their complaint by clicking on the appropriate link below , giving all the relevant details.

y y y

Petrol, Diesel, AutoLPG and PDS Kerosene LPG Others

Vigilance Administration

The concept of Vigilance as an investigative agency for punitive action, has today evolved to that of "Vigilance for Corporate Growth". The emphasis too has shifted from "punitive vigilance" to "preventive and proactive vigilance." Vigilance function in HPCL is an integral part of the management and supports ethical business decisions.

HPCL, with two operating refineries, about 2300 km of pipelines network, and a countrywide marketing and distribution network, has

its main Vigilance Department at the Corporate Office in Mumbai.

The CVO provides advice to the Chairman and acts as a link between the Corporation and outside agencies like MOP&NG, PMO, CBI, CVC, etc., on vigilance matters. The Vigilance executives function under the direct control and overall guidance of CVO. The unit Vigilance functionaries also provide assistance to the unit heads in respect of interpretation of CVC, CTE instructions, standing instructions of CVO, and other norms of statutory bodies like CBI, etc

Infrastructure

HPCL's infrastructure is at par with that of the best global corporations in the hydrocarbons sector. For over a quarter century

now, HPCL has been consistently breaking new grounds in production and marketing. A glimpse of the vast marketing network already developed is given below in a table.

HPCL presently owns and operates two coastal refineries at Mumbai and Visakhapatnam along with a joint venture refinery at Mangalore. Another Refinery of 9 MMTPA is under constructuion in Bhatinda, Punjab by HMEL, a Joint Venture with Mittal Energy Investments Pte.Ltd. A massive infrastructure comprising two cross country pipelines and an extensive network of terminals, depots, LPG Bottling plants, Lube Filling Plants and Aviation Service Facilities (ASF) contributes to India's growth every Major Ongoing Projects

In order to strengthen core processes and modernize, HPCL has developed ambitious plans for expansion and diversification in the areas of increasing energy demand, technological upgradation and environment management. HPCL has proposed capital expenditure (including equity investments in Joint Ventures) of Rs. 11487 Crores during the eleventh plan. Currently, several projects are in progress in different parts of India. Here is a brief introduction to these projects.

y

New FCCU at Mumbai Refinery:

y

Lube Oil Base Stock (LOBS) Up gradation project at Mumbai Refinery:

y

Diesel Hydro Treating (DHT) at Mumbai & Visakhapatnam refineries:

y y y y

SPM Project at Visakh Refinery: Resitement of Visakh Terminal: Guru Gobind Singh Refinery Products Evacuation Project: Ennore Terminal Project:

In the recent past, HPCL has commissioned some major projects like:
y

Mundra-Delhi Pipe Line (MDPL): A 1056 KM Product pipeline connecting the port of Mundra in Gujarat to Delhi with Tap-offs in between. Completed in 36 months at an cost of Rs. 1757 Crores. Dedicated to the nation on 3rd Feb 2009

y

LPG Cavern Storage at Visakhapatnam by SALPG, a Joint Venture of HPCL: 60000 MT of LPG storage at a cost of Rs. 333 Crores, Commissioned in January 2008.

y

Visakh-Vijayawada-Secunderabad Pipe Line (VHPCLL): Length of Pipeline: 571 Km, Cost: Rs. 841 Crores, Commissioned in 2002.

New FCCU at Mumbai Refinery: HPCL is setting up New Fluidized Catalytic Cracking Unit (FCCU) at its Mumbai Refinery. Under this project new FCCU of 1.456 MMTPA with Gas concentration unit (GCU) and Flue Gas Desulphurization (FGD -158 TPH) Units of matching capacity will be installed. This will enhance the secondary processing capacity of the refinery.

The following major facilities are also to be made available through this project.

y y

FCCU Feed Section consisting of feed Pre-heaters & Furnace Reactor ±Regeneration section consisting of catalyst circulation circuit, catalyst handling section, MAB, flue gas cooling circuit

y y y y

Main Fractionator and Gas Concentration Unit (GCU) Flue Gas Scrubbing Unit (FGSU) Fuel Gas Treating Unit (FGTU) Associated utilities, DCS, Substation etc.

The cost of the project has been estimated at INR 900 Crores. Completion of the project (except FGD unit) is expected in July

2010. Completion of FGD unit is expected in Sept. 2010.

Lube Oil Base Stock (LOBS) Upgradation project at Mumbai Refinery:

HPCL operates one of the largest Lube refineries in the country with production in the tune of 335 TMT of various Grades of API Group-1 LOBS having Sulphur above 300 ppm and saturates below 90%.

The market demand for LOBS quality with Sulphur below 300 ppm and saturates above 90% (i.e. API Group-II category) has increased in recent years. Hence HPCL is working to upgrade the production of LOBS quality up to 200 TMT per annum of API Group II category with a capability to produce API Gr-III under the Lube Oil Base Stock Quality Upgradation project.

The cost of this project has been estimated at INR 1030 Crores.

The project is expected to be completed by June 2010.

Single Point Mooring (SPM) Project at Visakh Refinery:

The SPM project is to facilitate unloading of large crude parcels of the size of around 300,000 Metric Tonnes from Very Large Crude Carriers (VLCCs) at Visakhapatnam. The VLCCs cannot be berthed in the existing crude receiving jetties due to draft restrictions.

The SPM has been commissioned in February 2011. The installation of SPM reduces the freight cost and wharfage charges and thus improves the economics of the Refinery. The cost of this project has been estimated at about INR 643 Crores

The Environmental Clearance for this project has been obtained. View status of Compliance of Stipulated EC Conditions. The offshore and onshore installation work of the project has been

completed. The Environmental Statement for the financial year (FY2009-10) has also been submitted to the Andhra Pradesh Pollution Control Board ( APPCB).

Resitement of Visakhapatnam Terminal

In order to provide additional ground area to Visakh Refinery for setting up facilities to produce green fuels, it is proposed to shift the adjacently located marketing facilities consisting of POL terminals and LPG Plant. The scope of the green field project consists of setting up of new Black oil, White oil and LPG facilities in the plots acquired from VPT.

Black Oil facilities include setting up of about 94,000 KL storage tanks and two tank truck gantries of 8 bays each to handle Bitumen, Furnace oil (FO), Low Sulphur Heavy stock (LSHS), Light Diesel Oil (LDO) Jute Batching Oil (JBO) and High Flash HSD (HF HSD).

White Oil facilities include storage of about 1,68,000 KL Motor

Spirit (MS), High Speed Diesel (HSD), Naphtha & Aviation Turbine Fuel (ATF), two tank truck loading gantries of 8 bays each and a single spur T/W gantry to load 46 BTPN tank wagons.

LPG facilities include setting up of mounded storage of about 4,400 MT capacity to store LPG, Auto LPG and Propylene, a single spur tank wagon gantry to load 32 BTPN TG wagons and bottling facilities of capacity 88,000MTPA.

The total project cost is about Rs 750 Cr. and the completion schedule is as under:
y y y

Black Oil Terminal: December 2010 White Oil Terminal: Dec 2011 LPG Facilities: March 2011

Guru

Gobind

Singh

Refinery

Products

Evacuation

Project

(GGSRPEP)

Hindustan Mittal Energy Ltd. (HMEL), a Joint Venture Company of HPCL with M/s Mittal Energy Investments Pte Ltd is setting up a Green field State of the Art 9 MMTPA capacity refinery at Bathinda

in Punjab. Marketing of products of GGSR is entrusted with HPCL.

A new storage cum dispatch terminal is being put up near the refinery at Raman Mandi for receiving POL products (MS, HSD, SKO & ATF) from the refinery and further pumping into two product pipelines.
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Raman Mandi - Bathinda Pipeline (10´ dia, 30 km long with a capacity of approximately 1.37 MMTPA)

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Raman Mandi - Bahadurgarh Pipeline. (18´ dia, 250 km long with a capacity of approximately 4.71 MMTPA)

The estimated cost of the project is Rs 605 Crores. The project is scheduled for completion by March 2011.

Ennore Terminal

HPCL is setting up a Greenfield Oil Terminal at Ennore, located in northern outskirts of Chennai City. Ennore is approx. 30 Kms. away from Chennai City and falls under Tiruvalur district of Tamil Nadu. This is relocation of the existing facilities at Tondiarpet, Chennai.

The terminal shall have tankages of capacity 1,40,000 KL for storage and dispatch of products of Motor Spirit (MS), High Speed Diesel (HSD), Superior Kerosene Oil (SKO) and Aviation Turbine Fuel (ATF).

Project includes setting up of facilities including tankages, Tank Truck loading facility, Tank Wagon loading/ receipt facility along with product receipt facilities from the Ennore Port and Chennai Petroleum Corporation Ltd (CPCL). The tank farm and Tank Truck Loading operations will be fully automated.

The total project cost is about Rs 224 Cr. and the scheduled completion is February 2011.

Training and Development HPCL has a full-fledged Corporate Training Department, to augment the learning and development requirements of its officers.

The HR Department's Vision is ³Excellence in harnessing the full potential of all employees for becoming a World Class Energy Company´

With this Vision in focus, the Corporate Training Department's vision is to ³Create value through enhanced competencies and be a strategic partner to business by enabling employees realize their full potential through innovative and progressive learning initiatives´.

Basis the above, the key focus areas of the Department are as under:
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Objectives Training Policy Identifying Training Needs Training Plans
o o o o o o o o

HP Management Development Institute, (HPMDI) Nigdi. Customized Programs External Seminars/ Conferences Foreign Training E-Learning Learning Centers Education Refund Plan (ERP) Study leave policy

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Training Effectiveness Summer Internship/Training for students

Objectives

y y y y

Improve the performance of Employees in their respective assignments Enhance competencies to take up higher responsibilities Strengthen the Leadership Pipeline Bring cultural change from Command & Control to Team based structure

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Leverage technology in human resources development Facilitate learning in the organization and build a "Learning Organization"

The specific training needs of individual employees are identified through Competency Mapping Exercises. The Training Department interacts with all Business Units/functions to identify and design training programs to cater to these needs. These programs enable employees to enhance their skills and realize their full potential.

Training Policy The Training Policy at HPCL provides broad directions to guide the learning solutions and initiatives.
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Management Staff
o

Entry level: Samavesh - (Induction/ orientation Training) facilitates a new employee to build a sense of belongingness.

o

Supervisory level: Employee is equipped with function specific inputs and job related technical skills.

o

Managerial Level: Employee is exposed with the principles of Management which will help blend theory with practice, with focus on leadership development.

o

All training initiatives are planned in order to address new needs required by change in the market scenario.

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Non-Management Staff
o

Trainings with focus on Safety at locations, Skills relating to job requirement - (technical, computer operations, team spirit etc.)

Identifying Training Needs
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Individual

Level:

Mainly

through

recommendation

from

the Performance Appraisal System.
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Functional / Departmental Level: Customized Training programs are developed for the departments in consultation with the SBU/Functions.

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Organizational Level: Individual Development Plan obtained from the Competency mapping exercise is used to provide specific Training to bridge the observed the employee skill gaps.

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Other Training Plans for enhancement of the officers' competencies are scheduled.

Training Plans: In-Company Programs The In-company programs are conducted through internal faculty, external faculty and external courses. Focus is given to the development of core internal faculty members, who will effectively train employees at different levels of the Corporation.

HP Management Development Institute, (HPMDI) Nigdi.

HPCL has a full-fledged, well equipped Training Institute at Nigdi, Pune, standing testimony to the value that HPCL places on training. Away from distractions, it is the ³Temple of learning´ by virtue of its perfect learning ambience. HPMDI is equipped with the best infrastructure conducive for effective learning. It is also having adequate recreational facilities to keep the employees occupied before / after learning hours.

The faculty is largely drawn from premier institutes or reputed independent training consultants. They are academicians and professionals who are well versed with the updated techniques and changing trends in the field of professional training. Tools like Group discussions, Role plays, case studies, presentations etc are used in the training. Customized Programs The training plan for the year for each Business Unit / Function is finalized after mutual discussions with them. The SBU specific requirements due to the change in market scenario and thereby required competencies are delved upon. Then suitable Consultants/ practitioners are identified and customized programs are designed in consultation with line functions. Training Plans: External Seminars/ Conferences:

HPCL nominates officers for external seminars and conferences in connection with their functional requirements. Foreign Training: Advanced Management Programs are organized for officers of levels DGM and above, by reputed Business Schools like ASCI- Hyderabad, MDIGurgaon, ISB- Hyderabad and IIM-Kolkata, including visit to select foreign countries. HPCL also sponsors Study Tour for employee groups to enrich their knowledge and skills, a few employee groups for select foreign training to enrich their knowledge and skills, in the form of select foreign training. E-Learning Various e-learning programs on defined competencies, including Online certification courses on Project Management, Supply Chain Management, different e learning resources on various behavioral areas are facilitated. Learning Centers Learning Centers are available in all Zones and Corporate HQO for accessing information through internet, books and CDs. leading to learning. Education Refund Plan (ERP) Education Refund Plan (ERP) enables the employees to undertake academic courses to further their self-development process, in relation to Corporation's requirement.

Study leave policy For employees interested in higher studies, to further on their own, Corporation has a detailed Study leave policy.

Training Effectiveness Based on the post-training evaluation, the Training department continuously monitors the effectiveness of the facilitator and relevance of the content. Alterations / modifications take place on this basis. Similarly Participant assimilation of training is also recorded. Summer Internship/Training for students Students undergoing Graduate / Postgraduate professional courses from reputed Management and Engineering Institutions will be engaged for Summer Internship for a period of 6 to 8 weeks during April-June every year.

Towards Employee Delight

The welfare of Our employees is the key theme in our organization. The benefits we offer them are on par with the best available.

Salary Grades:

During the training period, trainees are entitled to a consolidated stipend of Rs.33,000/- per month.

VDA (Variable Dearness Allowance), HRA (House Rent Allowance), CCA (City Compensatory Allowance) etc. and other perquisites as applicable to particular grade are also provided.

Perquisites:

We have a comprehensive medical insurance program that covers the whole array of medical expenses for you. Your growth in the company will be complemented by your own self-development. Our educational refund plan offers you the support in pursuing the course of your interest. Our study leave policy also includes a time-off to pursue higher studies related to your profession. Our responsibility towards employees doesn¶t stop at compensation alone. We offer all possible help to facilitate their settling down. We provide housing and vehicle loans at a very nominal interest rate that will help in securing your family¶s future. Our other benefits include furniture and

computer advance, home lease facility, accommodation at a very minimal charge depending upon availability and a host of allowances and insurance schemes to make your stay in our company comfortable. All these in addition to a host of deferred benefits like provident fund and gratuity.

CSR Activities

Component Plan:

The following activities involving the expense of INR 5.75 crores under the following heads were taken up:

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Primary Education: Provided Uniforms, notebooks, library books, school furniture stationary items, study materials, computers, lab equipments, etc.

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Scholarships: Granted scholarships to SC/ST/OBC college/university students from various colleges/university for Graduation & Post Graduation studies.

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Drinking Water Facilities: Provided borewells, tubewells, pumps, water

storage tanks in the tribal villages across the country.
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Health Care: Conducted medical/health camps, eye camps, distributed spectacles, provided free medicines, ambulance/medical vans, various hospital equipments/machines such as Auto Refractometer, Ultrasound machine, Ultrasound Scanner, QBC Malaria Testing equipment, Oculus, LCD Projector etc. Constructed blood bank building with ACs, dispensary building. Also, provided daily usage items for hospital patients.

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Income Generating Schemes / Vocational Training: Provided computers for µO¶ level computer training for women. Provided raw material to artisans to make handicraft items/soft-toys/artificial flowers, sewing machines, over locking machines, designer machines for tailoring training for upliftment of rural women. Provided training in internet technology skills for SC/ST/OBC students thru CISCO Network Academy. Constructed buildings for vocational training centers to impart vocational training for school drop out

children/students.
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Rehabilitation of Persons with Disabilities: Provided study material, artificial limbs, calipers, speech trainer, group hearing aid, Braille computers for blinds,tricycles/cycle rickshaw with PCO, Kiosks, PCO booth, etc.

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Other Welfare Activities: Constructed community hall for villagers at

Panewadi, Nasik for Young Mizoram Association at Aizwal, Mizoram. Constructed reading room as rural library at Burdwan. Provided blankets for slum children/villagers through NGOs, provided TVs, Computers for benefit of prisoners of Central Jail, Raipur.

Corporate Social Responsibility:

The following projects have been undertaken under the Corporation¶s CSR Policy during FY 2007/08:

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Swablamban Imparted vocational training in various trades to 550 youth through Confederation of Indian Industry (CII). On Successful completion of training, they were issued Certificates on the basis of which they have obtained employment and are now not only helping themselves but are in a position to help their families.

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Navjyot Provided regular health check-up and health care services to 3100 slum children from the resettlement colonies in Bawana Dist. in the state of

Haryana, through Navjyothi Delhi Police Foundation. This has not only helped in improving the health of slum children, but also created awareness of cleanliness and personal hygiene in the children and their parents residing in this area.

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Unnati Imparted basic Computer Training to 3000 students studying in 8th/9th & 10th standards in 9 schools in Visakhapatnam through NIIT. These students come from the poor families and their parents could not afford to buy computer or send their children for paid computer training.

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Nanhi Kali Sponsored 500 girl students from the various Govt. Schools in the Mehboobnagar and Paderu Districts in Andhra Pradesh. Under this sponsorship, Corporation provides books, Notebooks, Uniforms including Footware and applicable fees till they complete their education upto SSC / Graduation. Apart from giving help to girls, their health check-up is carried out after certain intervals. These girl students and their parents are also counseled that the students attend the school regularly.

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Muskan Transforming the lives of 100 street/orphan children. These children are housed in a NGO shelter home at Tughlakabad and Jahangirpuri at Delhi and their shelter, food, education, clothes, health care, vocational training, etc are being sponsored, making a distinct difference in their lives .

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Global Warming Conducted awareness camps for educating school children from the city of Mumbai, Goa & Delhi on causes of Global Warming, its effects in future and how to prevent the situation. The idea is to create awareness among the society towards Global Warming and take preventive steps to avoid its consequences and spreading of the diseases.

Recognition and Awards

HPCL has won several awards in the year 2009-10. A brief account of the achievements in 2009-10 follows.

Awards / Recognitions 2009

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HPCL Wins CIO 100 Award for the fourth Time in a Row

Hindustan Petroleum Corporation Ltd. has been awarded the ³CIO 100´ Award for the Fourth Consecutive Year. The Award was presented to HPCL¶s ED-Information Systems, Ms Nishi Vasudeva, by renowned IT visionary Mr. Kiran Karnik at a grand awards ceremony held on 4th Sept 2009 at Goa. In recognition of winning the CIO 100 award for four consecutive years, Ms Nishi Vasudeva was inducted into ³The CIO 100 Hall of Fame´ which was instituted to honor exceptional and continuous contribution by CIOs to their organizations. The annual award program recognizes organizations that exemplify the highest level of operational and strategic excellence in information technology (IT). This year's award theme was "The Ingenious 100", which recognizes those CIOs and organizations who in tough global conditions found ingenious solutions to take business forward through the use of Information Technology. ³CIO 100´ award of IDG is one of the most prestigious recognitions in the IT Industry worldwide. Over the years a CIO 100 award has come to be considered the equivalent of the Oscars of the IT Industry across the world. HPCL received the award for development & implementation of a business application that has automated the entire Capital budgeting process. This has made the budgeting process totally integrated and transparent with

ready access to facts & figures. The system provides for on-line routing / approvals and consolidation of budgets at multiple levels. Proposals are converted online to appropriation requests. A high level of discipline & adherence to timelines in the budgeting process, have been made possible with the online system. HPCL`s commitment to continuously enhance stakeholder satisfaction by providing value added services, with technology as an enabler, has been recognized by IDG India by conferring the coveted CIO award fourth year in a row.
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Indira Gandhi Rajbhasha Puraskar

HPCL has been conferred with the Indira Gandhi Rajbhasha Puraskar [Third Prize] by Govt. of India, Ministry of Home Affairs - Rajbhasha Vibhag for the year 2007-08 under PSU category for excellent performance in ³B´ Region.
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Enterprise Connect Award 2009

HPCL has received the Enterprise Connect Award 2009 which recognizes and rewards excellence among CIOs . The awards are instituted by CIOL (Cybermedia India Online Ltd., which is India's leading & first IT portal addressing the information needs of the IT community) in association with Dataquest magazine. The project entry of HPCL was µCustomer Connect¶ that encompasses a host of initiatives developed to make the life simple for our dealers & direct

customers. This includes Implementation of the Indent Management System, integration of IMS with JD Edwards ERP System , Retail automation, vehicle tracking, e-collection & access to information available to our various stake holders through web portals.
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SAIL HR Excellence Award

HPCL has bagged the SAIL HR Excellence Award under the ³Large Scale Organisation´ category (Manpower strength above 5000). The Hon¶ble Union Minister for Steel, Shri Virbhadra Singh handed over the trophy to Director-HR Shri V.Vizia Saradhi and GM-HR (M), Shri P.K.Joshi at a ceremony held recently at New Delhi. The award comprises of Rs.1,00,000/- cash prize along with the citation and trophy. SAIL in its 50th year of production has instituted ³SAIL HR Excellence Awards´ for path breaking contributions in the field of People Management processes for the Indian Manufacturing industries in collaboration with IIMAhmedabad.

Reader¶s Digest µTrusted Brand Gold Award 2009¶ HPCL has bagged the Reader¶s Digest ³Trusted Brand ´ Gold Award 2009 in Petrol Station Category. The coveted Trusted Brand Awards by the reputed publication, Reader¶s Digest are based on extensive market research carried out by Nielsen Research. The research is based on six qualitative criteria of Trustworthiness, Credible Image, Quality, Value, Understanding of Customer

Needs, and Innovation. The award reflects the consumers¶ choice of most trusted and favourite brands in each category.

This is the fourth year in succession that HPCL has bagged the trusted brand award

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Golden Peacock Corporate Governance Award 2008 The Award is conferred by µWorld Council for Corporate Governance¶ (WCFCG), UK and Institute of Directors, India. The Award was presented at the 9th International Conference on Corporate Governance held at London. This annual award is conferred to companies which demonstrate benchmark standards and excellence in Corporate Governance The winners were selected through an elaborate multilevel and transparent assessment process.

This is the fourth time that HPCL has won the Golden Peacock Award for Corporate Governance. We have won it in 2003, 2006 & 2007. Winning the prestigious Award underlines the high value that HPCL places on Corporate Governance. The Golden Peacock Award for Excellence in Corporate Governance is a re-affirmation of the level of disclosure and transparency at HPCL.
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CIO 100 Award 2008 HPCL has been awarded the CIO 100 Award for the Third Consecutive

Year. The Annual Award Program recognizes Organizations that exemplify the highest level of operational and strategic excellence in Information Technology (IT). This year¶s award theme µThe Bold 100¶ recognizes those Executives and Organizations who embrace great risk for the sake of great reward. These organizations are playing not just to survive, but to win. ³CIO 100´ award of IDG (International Data Group) is one of the most prestigious recognitions in the IT Industry worldwide. Over the years a CIO 100 award has come to be considered the equivalent of the Oscars of the IT Industry across the world.

HPCL received the award for its ³Project Parivartan´ Integrated Indent Management System and also for providing enhanced service to HPCL stakeholders extending the benefits of the ERP system to its various stakeholders through deployment of information portals for customers, vendors & transporters and also enabling e-payments.
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India Star 2008 The Corporation has been conferred with India Star 2008, a National Award (the highest recognition) for excellence in Packaging in India in Consumer Pack Category for marketing Lubricant Oil in PET bottle. HPCL is selected for this Innovation Award in Packaging from a list of 357 entries received. The jury consisted of eminent persons from Institutions, Government Bodies, Consumer Forum, BIS and experts from the Industry.

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OISD Safety Award HPCL bagged 2 Safety Awards from Oil Industry Safety Directorate (OISD) as the µBest Performer¶ for the year 2007 ± 08, one under the category of µLPG Marketing Organizations¶ and the other amongst µLube Oil Blending Organizations¶. OISD safety awards are instituted in order to inculcate competitiveness among oil companies to improve their safety performance.

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National Award For Excellence In Cost Management

HPCL was conferred with the National Award for Excellence in Cost Management from the Institute of Cost Accountants of India (ICWAI). HPCL has won the Second Award in the Public Sector ± Manufacturing (Organization) ± Turnover more than Rs. 1000 Crores category of National Award for Excellence in Cost Management.

Pursuant to Government directive for conducting audit of Cost Accounts, the Cost Audit was conducted for the first time in respect of various manufacturing facilities of Corporation for the year ending March 31, 2007.
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Greentech

Environment

Excellence

Award

2008

HPCL¶s has been awarded 15 µGreentech Environment Excellence Award¶ for the year 2008 at the 9th Annual Global Environment

Conference held recently at Goa. HPCL¶s Mumbai & Visakh Refineries were awarded the Greentech µGold¶ Award in Petroleum Refining Sector. While Hassan POL Terminal bagged the Greentech µGold¶ Award, Mangalore POL Terminal & Irumpanam POL Terminal were awarded the Greentech µSilver¶ Award. Besides, 10 of our LPG Plants have won the Greentech Environment Excellence Award 2008.

Greentech Foundation¶s Environment Excellence Awards are presented to Organizations & Individuals as a mark of recognition for the significant contribution made towards protection, preservation & improvement of environment. These awards certainly reflect HPCL¶s commitment to environment protection and enhance our Eco-Friendly image.
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Best HR Practices in µPeople Management¶ Awarded by Amity International Business School for HPCL¶s comprehensive HR practices. HPCL bagged the award among several other organisations that were researched for best HR practices.

OVERVIEW OF PERFORMANCE APPRAISAL

Performance appraisals are a systematic way of evaluating the standard of an employee¶s performance. Steps for developing a systematic performance appraisal. 1. Identify key performance criteria Development of key performance criteria should be based on a comprehensive job description and undertaken in consultation with employees. 2. Develop appraisal measures In order to obtain accurate and valid performance appraisals, appraisal measures should be tailored to the specific job or ³job family´ (i.e., groups of similar jobs). An evaluation of factors in the work environment which help or hinder performance is also recommended. This ensures that realistic expectations are set for employee¶s performance, and is also likely to increase the perceived fairness and acceptability of performance appraisals. 3. Collect performance information from different sources Traditionally, it has been the sole responsibility of managers / supervisors to assess performance. However, other organisational members (e.g., clients, coworkers, subordinates) can be a valuable source of information as they are likely to have exposure to different aspects of an employee¶s performance. Collecting information from multiple sources can increase the accuracy of performance evaluation (i.e., reduce bias), and increase employee¶s perceptions of fairness. 4. Conduct an appraisal interview The two central purposes of the appraisal interview are to:

1. Reflect on past performances to identify major achievements, areas for further improvement, and barriers / facilitators to effective performance 2. Identify goals and strategies for future work practice. The appraisal interview should be a constructive, two-way exchange between the supervisor and employee, with preparation for the interview done by both parties beforehand. 5. Evaluate the appraisal process The performance appraisal process should undergo regular review and improvement. For example, focus groups or surveys could be conducted to gauge employee¶s perceptions of the appraisal process. A successful performance appraisal process should demonstrate a change in both the ratings of employee¶s performance and aspects of the work environment that impact upon work performance. Best practice in performance appraisal In essence, best practice in performance appraisals involves: ? Integrating performance appraisal into a formal goal setting system ? Basing appraisals on accurate and current job descriptions ? Offering adequate support and assistance to employees to improve their performance (e.g., professional development opportunities) ? Ensuring that appraisers have adequate knowledge and direct experience of the employee¶s performance ? Conducting appraisals on a regular basis. MEANING AND DEFINITION OF PERFORMANCE APPRAISAL

Performance appraisal is a formal system that evaluates the quality of a emplo yee¶s performance. An appraisal should not be viewed as an end in itself, but rather as an important process within a broader performance management system that links: ? Organisational objectives ? Day-to-day performance ? Professional development ? Rewards and incentives In simple terms, appraisal may be understood as the assessment of an individual¶s performance in a systematic way, the performance being measured against such factors as job knowledge, quality, and quantity of output, initiative, leadership abilities, supervision, dependability, cooperation, judgment, versatility, health, and the like. Assessment should not be confined to past performance alone. Potentials of the employee for future performance must also be assessed. A formal definition of performance appraisal is: ³It is the systematic evaluation of the individual with respect to his or her performance on the job and his or her potential for development.´ A more comprehensive definition is: ³Performance appraisal is a formal, structured system of measuring and evaluating an employee¶s job related behaviors and outcomes to discover how and why the employee is presently performing on the job and how the employee can perform more effectively in the future so that the employee, organization, and society all benefit.´

TRADITIONAL PERFORMANCE APPRAISAL The history of performance appraisal is quite brief. Its roots in the early 20th century can be traced to Taylor's pioneering Time and Motion studies. But this is not very helpful, for the same may be said about almost everything in the field of modern human resources management. During the First World War, appraisals concept was adopted by US army which was in the form of merit rating. It was man-to-man rating system for evaluation of military personnel. From the army this concept entered the business field and was restricted to hourly-paid workers. During 1920s, relational wage structures for hourly- paid workers were adopted in industrial units and each worker was used to be rated in comparison to other for determining wages rates. This system was called merit rating.

The process was firmly linked to material outcomes. If an employee's performance was found to be less than ideal, a cut in pay would follow. On the other hand, if their performance was better than the supervisor expected, a pay rise was in order. Little consideration, if any, was given to the developmental possibilities of appraisal. If was felt that a cut in pay, or a rise, should provide the only required impetus for an employee to either improve or continue to perform well. Sometimes this basic system succeeded in getting the results that were intended; but more often than not, it failed. For example, early motivational researchers were aware that different people with roughly equal work abilities could be paid the same amount of money and yet have quite different levels of motivation and performance.

These observations were confirmed in empirical studies. Pay rates were important, yes; but they were not the only element that had an impact on employee performance. It was found that other issues, such as morale and self-esteem, could also have a major influence. As a result, the traditional emphasis on reward outcomes was progressively rejected. In the 1950s in the United States, the potential usefulness of appraisal as tool for motivation and development was gradually recognized. The general model of performance appraisal, as it is known today, began from that time.

MODERN APPRAISAL Performance appraisal may be defined as a structured formal interaction between a subordinate and supervisor, that usually takes the form of a periodic interview (annual or semi-annual), in which the work performance of the subordinate is examined and discussed, with a view to identifying weaknesses and strengths as well as opportunities for improvement and skills development. In many organizations - but not all - appraisal results are used, either directly or indirectly, to help determine reward outcomes. That is, the appraisal results are used to identify the better performing employees who should get the majority of available merit pay increases, bonuses, and promotions. By the same token, appraisal results are used to identify the poorer performers who may require some form of counseling, or in extreme cases,

demotion, dismissal or decreases in pay. (Organizations need to be aware of laws in their country that might restrict their capacity to dismiss employees or decrease pay.)Whether this is an appropriate use of performance appraisal the assignment and justification of rewards and penalties - is a very uncertain and contentious matter. OBJECTIVES OF PERFORMANCE APPRAISAL :

Salary Increase

Performance appraisal plays a role in making decision about salary increase. Normally salary increase of an employee depends upon on how he is performing his job. There is continuous evaluation of his performance either formally or informally. This may disclose how well an employee is performing and how much he should be compensated by way of salary increase.

Promotion Performance appraisal plays significant role where promotion is based on merit and seniority. Performance appraisal discloses how an employee is working in his present job and what are his strong and weak points. In the light of these, it can be decided whether he can be promoted to the next higher position. Training and Development

Performance appraisal tries to identify the strengths and weakness of an employee on his present job. This information can be used for devising training and development programmes appropriate for overcoming weaknesses of employees. Feedback Performance appraisal provides feedback to employees about their performance. A person works better when he knows how he is working. This works in two ways, firstly, the person gets feedback about his performance. Secondly, when the person gets feedback about his performance, he can relate his work to the orgaisational objectives. Pressure on Employees Performance appraisal puts a sort of pressure on employees for better performance. If the employees are conscious that they are being appraised in respect of certain factors and their future largely depends on such appraisal. Others

a) Identifying systemic factors that are barriers to, or facilitators of, effective performance. b) To confirm the services of probationary employees upon their completing the probationary period satisfactorily. c) To improve communication. Performance appraisal provides a format for dialogue between the superior and the subordinate, and improves understanding of personal goals and concerns. This can also have the effect of increasing the trust between the rater and the ratee.

d) To determine whether HR programmes such as selection, training, and transfer have been effective or not.

HOW TO CONDUCT A PERFORMANCE APPRAISAL PROCESS

The following five-step approach to conducting a systematic performance appraisal is recommended: 1) Identify key performance criteria 2) Develop appraisal measures 3) Collect performance information from different sources 4) Conduct an appraisal interview 5) Evaluate the appraisal process. STEP 1: IDENTIFY KEY PERFORMANCE CRITERIA Perhaps one of the most challenging aspects of setting up a performance appraisal is deciding what to assess. In essence, four key dimensions of performance should be considered in a performance appraisal. To ensure that the performance criteria are relevant to work practice and acceptable to appraisers and employees: i) Base the performance criteria on an up-to-date job description ii) Develop criteria in consultation with appraisers and employees.

i) Base the performance criteria on an up-to-date job description:

Clear and explicit links between performance appraisal and a job description will ensure the relevance of the appraisal. If a detailed job description is not available or is out-of-date, it is strongly recommended that an accurate job description be developed prior to conducting a performance appraisal. ii) Develop criteria in consultation with appraisers and employee: Linking performance appraisals with job descriptions can help to focus the appraisal process on the key competencies, behaviours and outcomes associated with a particular role or position. It can also be useful to consult with employees to:

y Ensure that key aspects of a role / position are represented in the job description, for example: Conduct assessments Plan interventions Manage cases Liaise with and refer to other providers Keep up-to-date service records and case notes Write reports

y Develop a clear understanding of the relative importance of various competencies, y Behaviours and outcomes y Identify how these key competencies, behaviours and outcomes can be fairly and accurately assessed.

Employees are more likely to accept and be satisfied with the appraisal system if they participate in the development of appraisal criteria and measures, and in the process of conducting appraisals.

Strategies for facilitating employee¶s participation include:

y Engagement in formal meetings or informal discussions with supervisors to seek input and / or feedback on appraisal measures and criteria y Representation on groups / committees involved in the design and implementation of performance appraisals

y Inclusion of self appraisals in the appraisal process y Providing opportunities for employees to contribute to the performance appraisal of coworkers and managers / supervisors. It is also important that employees perceive the appraisal system to be equitable and fair. STEP 2: DEVELOP APPRAISAL MEASURES Once clear and specific performance criteria have been developed, the next step is to decide how to assess employee¶s performance. It is recommended that a structured and systematic approach is taken to assessing performance.

Problems that arise when an unstructured ³blank sheet´ approach is used include:

y Increased chance of appraiser errors (i.e., reduced accuracy) y Knowledge, skills and abilities most critical to job performance may be overlooked (i.e., feedback may have limited impact on performance effectiveness)

y Reduced consistency between appraisers (i.e., evaluations may reflect differences between appraisers rather than actual differences in a employee¶s performance)

y Perceptions of ³subjectivity´ in evaluations, which may in turn, reduce employee¶s satisfaction with, and acceptance of appraisals.

There are three important considerations in the design of appraisal measures: i) Generic versus individually tailored measures ii) Objective versus subjective assessments iii) Assessing the impact of the work environment on performance.

i) Generic versus individually tailored measures

Many workplaces use a generic rating form for all employees irrespective of their role or position within the organisation. Although this approach can save time and minimise cost, the accuracy and relevance of appraisals may be significantly diminished. The ³one size fits all´ approach of generic measures may overlook important performance criteria that are relevant to particular jobs, and may also include criteria that are irrelevant to others. Where time and other resources permit, it is more appropriate to construct appraisal formats tailored to specific jobs or ³families´ of jobs. If the development of job-specific (i.e., individually tailored) appraisal formats is beyond the resource capacity of the organisation, an alternative would be to develop two groups of criteria: 1) Core competencies that have applicability to the performance appraisal of all employees within the organisation 2) Additional competencies applicable only to some jobs and included in the performance appraisal if relevant.

ii) Objective versus subjective assessments A basic distinction between different types of appraisal measures concerns the use of objective or subjective criteria. Objective assessments of work performance Objective measures of job performance involve counts of various workrelated behaviours. Some common objective job performance measures include

y Absenteeism (number of days absent) y Accidents (number of accidents) y Incidents at work (number of incidents / assaults / altercations) y Lateness (days late) y Meeting deadlines. Objective measures can be relatively quick and easy to obtain (given good organisational record-keeping). However, it can be unwise to place too much emphasis on these types of objective measures. An exclusive focus on results / outcomes may mask factors that impact on employee¶s performance that are beyond their control (e.g., client workload). Subjective assessments of work performance Subjective measures rely on the judgment of an appraiser (self, coworkers, or supervisor). Subjective assessments are commonly used in performance appraisals and often involve the use of rating scales. Subjective assessments are more likely to provide accurate performance appraisals when:

The behaviours and outcomes being assessed are stated in clear behavioural terms The employee understands the measures (e.g., rating scales) being used to evaluate their performance, and agree that the measures are fair and supposed to)

accurate (i.e., measures what it is

Measurement is as brief as possible whilst addressing essential behaviours and outcomes (frustration with long and unwieldy

questionnaires may introduce error in responses). iii) Assessing the impact of the work environment on performance The goal of a performance appraisal is to support and improve employee¶s performance and effectiveness. Therefore, it makes sense for an appraisal to include an assessment of factors in the work environment that help or hinder a employee¶s capacity to perform effectively. Explicit assessment of environmental factors is also likely to increase the perceived fairness and acceptability of performance appraisals.

For example, an employee¶s capacity to provide effective treatment interventions is influenced by factors such as: y Access to private, soundproofed, adequately sized rooms for counselling y Availability of validated, user-friendly assessment tools y Availability of reliable and approachable management / administration STEP 3: COLLECT PERFORMANCE INFORMATION FROM DIFFERENT SOURCES Once the appraisal measures are developed, the next step involves collection of accurate performance information. A common trap is to begin noting observations of employees just before conducting appraisals. This is likely to give an inaccurate picture of a employee¶s performance. Ideally, employee¶s performance should be observed in a systematic way over time (e.g., in a

diary). This method ensures the accuracy of information about their performances. Many employees in the organisation operate with a relatively high degree of autonomy. This combined with the heavy workload of most managers / supervisors, may limit opportunities to conduct regular observation of employee¶s performance. In addition, perceptions of ongoing monitoring may foster a sense of surveillance which can damage staff morale. A more suitable approach may be to keep critical incident reports that note specific examples of both excellent and unsatisfactory performances. Supervisors can also encourage employees to keep track of their own performance records such as emails or letters that commend them on their achievements. Traditionally, it has been the sole responsibility of managers / supervisors to assess performance. However, other organisational members can be a valuable source of information as they are likely to have exposure to different aspects of a employee¶s performance. This approach is known as 360-degree feedback. For instance, coworkers can provide valuable information on teamwork skills, and subordinates can provide useful information on leadership style. There are many advantages to obtaining feedback on performance from sources other than supervisors or managers. Key benefits include: Accuracy and reduced bias (incorrect information from one source can be corrected from another)

Increased likelihood that employees will perceive the performance appraisal system to be a fair and accurate reflection of their performance (compared to relying on supervisor ratings alone). If time and resources are limited, it is recommended that supervisor appraisals be conducted in conjunction with self-assessment. Including selfassessments as part of the appraisal process is likely to enhance employee¶s commitment to, and satisfaction with, the appraisal process. It also provides employees with an opportunity to identify barriers and facilitators to effective performance in their work environment.

Five different sources of performance appraisal information are considered here: i) Manager / supervisor appraisals ii) Self appraisals iii) Coworker appraisals iv) Subordinate appraisals v) Client appraisals. i) Manager / supervisor appraisals: Managers / supervisors play a central role in the appraisal process, and should always be included as one of the main appraisers. In essence, managers and supervisors have two roles in performance appraisal 1. ³Judge´: assessing performance 2. ³Coach´: providing constructive feedback and identifying areas for improvement.

Performing both roles simultaneously can be difficult. Employees may be reluctant to admit areas for improvement if performance assessment is linked with desired outcomes such as pay, promotion or opportunities to work in desired areas. One solution is to separate the judge and coach roles by conducting separate appraisal meetings.

ii) Self-appraisals: The process of evaluating one¶s own performance can help to increase employee¶s commitment to the appraisal process, perceptions of appraisal fairness, and satisfaction with the appraisal process. Self-appraisal can also be useful for identifying areas for development. Not surprisingly, selfappraisals are usually biased towards leniency.

Strategies to increase the accuracy of self appraisals include: a.Using clear definitions of performance criteria linked to specific, observable behaviours b. Informing employees that their ratings will be checked and compared to other sources of appraisal (i.e., for accuracy) c. Ensuring employees receive regular feedback on their performance. It is recommended that self appraisals are used for professional development purposes, rather than for making administrative decisions (i.e., pay increases, promotion).

iii) Coworker appraisals:

Coworkers can provide valuable feedback on performance, particularly where teamwork occurs. Coworkers are often aware of different aspects of a employee¶s performance that managers /supervisors may not have the opportunity to observe. In addition, as there is usually more than one coworker who rates a worker¶s performance, their evaluations tend to be more reliable. Coworker evaluations, however, may be biased towards those individuals most well liked in an organisation (i.e., friendship bias). Furthermore, coworker appraisals may have a negative impact on teamwork and cooperation if employees are competing with one another for organizational incentives and rewards. It is recommended that coworker appraisals are used for professional development rather than administrative decisions.

iv) Subordinate appraisals: Subordinates are a valuable source of information regarding particular aspects of a supervisor or leader¶s performance such as communication, team building or delegation. Subordinates can provide feedback to help managers / supervisors develop their skills in these areas. The focus should be on aspects of managerial performance that subordinates are able to comment upon. This source of appraisal may only be appropriate in larger organisations where there are sufficient subordinates to allow anonymity.

iv) Client appraisals: Clients may also offer a different perspective on a employee¶s performance, particularly for jobs that require a high degree of interaction with people. For

example, client appraisals can be a valuable source of feedback regarding the quality of service provision (e.g., the quality of interaction, degree of empathy, level of support, degree of professionalism). Organisations often have performance contracts that specify goals and deliverables for client outcomes. Whilst it is important that organisational goals and deliverables are reflected in the appraisal criteria for individuals and teams, it is recommended that particular care be taken if incorporating client outcomes. Relying on client outcomes as an indicator of performance can have undesirable effects due to the complex and sensitive nature of work. A range of factors may influence client outcomes, many of which are outside the control of an individual employee. It is rare for a successful (or otherwise) outcome to be the sole result of one person¶s efforts. This makes client outcomes a poor reflection of the quality of treatment provided by the employee. For example, ³good´ employee performance will not always bring about client improvements, and client relapses may not be due to ³poor´ employee performance. In addition to considering client outcomes, it may also be beneficial to focus on employee¶s skills and abilities in providing services per se (i.e., independent of client outcomes). Strategies to support appraisers and enhance appraisal accuracy Rating another person¶s performance is not an easy task, particularly with complex jobs or performance criteria. Strategies to support appraisers and increase the likelihood of accurate assessments include:

y Providing practical training in rating techniques, which includes opportunities to practice appraising performance and providing feedback

y Limiting the assessment to performance criteria that an appraiser has observed / experienced in regard to the employee

Providing structured assessment tools with clear explanations regarding the criteria to be assessed, and performance standards.

STEP 4: CONDUCT AN APPRAISAL INTERVIEW The next step in a performance appraisal is to conduct the appraisal interview. The two central purposes of the appraisal interview are to:

y Reflect on past performance to identify major achievements, areas that require further development, and barriers / facilitators to effective performance

y Identify goals and strategies for future work practice.

Before the interview

y Help employees to become familiar and comfortable with talking about their performance by engaging in regular, informal communication on work progress, potential obstacles and issues, possible solutions and assistance y Encourage employees to prepare ± employees should be encouraged to review their own performance before the interview

y Do your own preparation ± plan ahead. Draft a list of the issues that you want to address with the employee (i.e., strengths and weaknesses of performance, strategies to improve performance). Give specific examples of the employee¶s performances that you want to highlight. During the interview

y Encourage employee participation ± start by inviting the employee to share their views about their performance

y Begin with positive feedback to put the employee at ease y Make it a two-way discussion y Set goals mutually ± ensure employees participate in determining specific, challenging but attainable goals for future work performance

y Ensure that there is a clear agreement on performance objectives and the evaluation criteria for the next year

y Keep written records of the appraisal interview on which both parties have ³signed off´. After the interview

y Coach employees regularly ± provide frequent feedback to help employees improve their performance

y Assess progress towards goals frequently ± periodic reviewing of progress towards goals helps keep behaviour on track and enhances commitment to effective performance.

y Relate rewards to performance ± by linking appraisal results to employment decisions such as promotions and salaries, employees are more likely to prepare for, participate in, and be satisfied with the appraisal system. STEP 5: EVALUATE THE APPRAISAL PROCESS As with any organisational system, the performance appraisal process should undergo regular review and improvement. For example, the process of performance appraisal could be evaluated by conducting focus groups or surveys with employees to gauge their satisfaction with the appraisal process (and suggestions for improvements). It may also be useful to monitor the types of issues raised by supervisors and employees over time. A successful performance appraisal process should demonstrate a change in both the

ratings of employee¶s performance (i.e., ideally performance ratings should improve, or at least remain at a satisfactorily stable level over time) and the work environment (i.e., evidence that significant barriers to work practice are being addressed by the organisation).

METHODS OF PERFORMANCE APPRAISAL A) Past-oriented methods 1) Rating Scales: The rating scale method offers a high degree of structure for appraisals. Each employee trait or characteristic is rated on a bipolar scale that usually has several points ranging from ³poor´ to ³excellent´ (or some similar arrangement). The traits assessed on these scales include employee attributes such as cooperation, communications ability, initiative, punctuality and technical (work skills) competence. The nature and scope of the traits selected for inclusion is limited only by the imagination of the scale¶s designer, or by the organization¶s need to know. The one major provision in selecting traits is that they should be in some way relevant to the appraisee¶s job.

Advantages

The greatest advantage of rating scales is that they are structured and standardised. This allows ratings to be easily compared and contrasted - even for entire workforces.

Each employee is subjected to the same basic appraisal process and rating criteria, with the same range of responses. This encourages equality in treatment for all appraisees and imposes standard measures of performance across all parts of the organization. Rating scale methods are easy to use and understand. The concept of the rating scale makes obvious sense; both appraisers and appraisees have an intuitive appreciation for the simple and efficient logic of the bipolar scale. The result is widespread acceptance and popularity for this approach.

Disadvantages

Trait Relevance Are the selected rating-scale traits clearly relevant to the jobs of all the appraisees? It is inevitable that with a standardised and fixed system of appraisal that certain traits will have a greater relevance in some jobs than in others. For example, the trait ³initiative´ might not be very important in a job that is tightly defined and rigidly structured. In such cases, a low appraisal rating for initiative may not mean that an employee lacks initiative. Rather, it may reflect that fact that an employee has few opportunities to use and display that particular trait. The relevance of rating scales is therefore said to be contextsensitive. Job and workplace circumstances must be taken into account.

Systemic Disadvantage

Rating scales, and the traits they purport to measure, generally attempt to encapsulate all the relevant indicators of employee performance. There is an assumption that all the true and best indicators of performance are included, and all false and irrelevant indicators are excluded. This is an assumption very difficult to prove in practice. It is possible that an employee¶s performance may depend on factors that have not been included in the selected traits. Such employees may end up with ratings that do not truly or fairly reflect their effort or value to the organization. Employees in this class are systemically disadvantaged by the rating scale method.

Perceptual Errors This includes various well-known problems of selective perception (such as the horns and halos effect) as well as problems of perceived meaning. Selective perception is the human tendency to make private and highly subjective assessments of what a person is ³really like´, and then seek evidence to support that view (while ignoring or downplaying evidence that might contradict it). This is a common and normal psychological phenomenon. All human beings are affected by it. In other words, we see in others what we want to see in them. An example is the supervisor who believes that an employee is inherently good (halo effect) and so ignores evidence that might suggest otherwise.

Instead of correcting the slackening employee, the supervisor covers for them and may even offer excuses for their declining performance. On the other hand, a supervisor may have formed the impression that an employee is bad (horns effect). The supervisor becomes unreasonably harsh in their assessment of the employee, and always ready to criticize and undermine them. The horns and halo effect is rarely seen in its extreme and obvious forms. But in its more subtle manifestations, it can be a significant threat to the effectiveness and credibility of performance appraisal.

Perceived Meaning

Problems of perceived meaning occur when appraisers do not share the same opinion about the meaning of the selected traits and the language used on the rating scales. For example, to one appraiser, an employee may demonstrate the trait of initiative by reporting work problems to a supervisor. To another appraiser, this might suggest an excessive dependence on supervisory assistance - and thus a lack of initiative. As well, the language and terms used to construct a scale - such as ³Performance exceeds expectations´ or ³Below average skill´ - may mean different things to different appraisers.

Rating Errors

The problem here is not so much errors in perception as errors in appraiser judgement and motive. Unlike perceptual errors, these errors may be (at times) deliberate. The most common rating error is central tendency. Busy appraisers, or those wary of confrontations and repercussions, may be tempted to dole out too many passive, middle-of-the- road ratings (e.g., ³satisfactory´ or ³adequate´), regardless of the actual performance of a subordinate. Thus the spread of ratings tends to clump excessively around the middle of the scale. This problem is worsened in organizations where the appraisal process does not enjoy strong management support, or where the appraisers do not feel confident with the task of appraisal.

2) Check-list Method: Under this method, checklist of ³Statements of Traits´ of employee in the form of Yes or No based questions is prepared. Here, the rater only does the reporting or checking and HR department does the actual evaluation. The rater concerned has to tick appropriate answers relevant to the appraisees. When the check-list is completed, it is sent to HR department for further processing. Various questions in the check list may have either equal weightage or more weightage may be given to those questions which are more important. The HR department then calculates the total scores which show the appraisal result of an employee. ?Advantage s ± economy, ease of administration, limited training required, standardization.

?Disadvantages ± Rater¶s biases, use of improper weights by HR Dept, does not allow rater to give relative ratings. 3) Force Choice Method: A series of statements arranged in the blocks of two or more are given and the rater indicates which statement is true or false. The rater is forced to make a choice. HR department does actual assessment. ?Advantage s ± Absence of personal biases because of forced choice. ?Disadvantages ± Statements may not be correctly framed. 4) Force Distribution Method: One of the problems faced in large organizations is relative assessment tendencies of raters. Some are too lenient and others too severe. This method overcomes that problem. It forces every one to do a comparative rating of all the employees on a predetermined distribution pattern of good to bad. Say 10% employees in Excellent Grade, 20% in Good Grade, 40% in Average Grade, 20% in Below Average Grade and 10% in Unsatisfied grade. The real problem of this method occurs in organizations where there is a tendency to pack certain key departments with all good employees and some other departments with discards and laggards. Relatively good employees of key departments get poor rating and relatively poor employees of laggards¶ departments get good rating. 5) Critical Incident Method: In this method, only critical incidents and behavior associated with these incidents are taken for evaluation. This method involves three steps. A test of noteworthy on the job behavior is prepared. A group of experts then assigns scale values to them depending on the degree of desirability for the job. Finally, a checklist of incidents which define good and bad employees is prepared.

? Advantages---This method is very useful for discovering potential of employees who can be useful in critical situation. ? Disadvantages --- a) Negative incidents are, generally, more noticeable than positive ones. b) The recording of incidents is a core to the superior and may be put off and easily forgotten. c) Overly close supervision may result. 6) Essay Method: In the essay method approach, the appraiser prepares a written statement about the employee being appraised. The statement usually concentrates on describing specific strengths and weaknesses in job performance. It also suggests courses of action to remedy the identified problem areas. The statement may be written and edited by the appraiser alone, or it be composed in collaboration with the appraisee. Advantages The essay method is far less structured and confining than the rating scale method. It permits the appraiser to examine almost any relevant issue or attribute of performance. This contrasts sharply with methods where the appraisal criteria are rigidly defined. Appraisers may place whatever degree of emphasis on issues or attributes that they feel appropriate. Thus the process is open-ended and very flexible. The appraiser is not locked into an appraisal system the limits expression or assumes that employee traits can be neatly dissected and scaled. Disadvantages

Essay methods are time-consuming and difficult to administer. Appraisers often find the essay technique more demanding than methods such as rating scales. The techniques greatest advantage - freedom of expression - is also its greatest handicap. The varying writing skills of appraisers can upset and distort the whole process. The process is subjective and, in consequence, it is difficult to compare and contrast the results of individuals or to draw any broad conclusions about organizational needs 7) Grading: In this method, certain categories of abilities of performance are defined well in advance and person are put in particular category depending on their traits and characteristics. Such categories may be definitional like outstanding, good, average, poor, very poor or may be in terms of letter like A, B, C, D etc with A indicating the best and D indicating the worst. This method, however, suffers from one basic limitation that the rater may rate most of the employees at higher grades. 8) Performance Tests & Observations: This is based on the test of knowledge or skills. The tests may be written or an actual presentation of skills. Tests must be reliable and validated to be useful. ?Advantage ± Tests only measure potential and not attitude. Actual performance is more a function of attitude of person than potential. ?Disadvantages ± Some times costs of test development or administration are high. 9) Confidential Reports : Though popular with government departments, its application in industry is not ruled out. Here the report is given in the form of Annual Confidentiality Report (ACR). The system is highly secretive and

confidential. Feedback to the assessee is given only in case of an adverse entry. Disadvantage is that it is highly prone to biases and recency effect and ratings can be manipulated because the evaluations are linked to future rewards like promotions, good postings, etc. 10) Comparative Evaluation Method (Ranking & Paired Comparisons): These are collection of different methods that compare performance with that of other co-workers. The usual techniques used may be ranking methods and paired comparison method.

y Ranking Method : Superior ranks his worker based on merit, from best to worst. However how best and why best are not elaborated in this method. It is easy to administer.

y Paired Comparison Method :In this method each employee is paired with every other employee in the same cadre and then comparative rating done in pairs so formed. The number of comparisons may be calculated with the help of a formula ± N x (N-1) / 2. The method is too tedious for large departments and often such exact details are not available with rater.

B) Future-Oriented Methods 1) MBO (Appraisal By Results) : The use of management objectives was first widely advocated in the 1950s by the noted management theorist Peter

Drucker. MBO (management by objectives) methods of performance appraisal are results-oriented. That is, they seek to measure employee performance by examining the extent to which predetermined work objectives have been met.Usually the objectives are established jointly by the supervisor and subordinate. Once an objective is agreed, the employee is usually expected to self-audit; that is, to identify the skills needed to achieve the objective. Typically they do not rely on others to locate and specify their strengths and weaknesses. They are expected to monitor their own development and progress. Advantages The MBO approach overcomes some of the problems that arise as a result of assuming that the employee traits needed for job success can be reliably identified and measured. Instead of assuming traits, the MBO method concentrates on actual outcomes. If the employee meets or exceeds the set objectives, then he or she has demonstrated an acceptable level of job performance. Employees are judged according to real outcomes, and not on their potential for success, or on someone¶s subjective opinion of their abilities. The guiding principle of the MBO approach is that direct results can be observed, whereas the traits and attributes of employees (which may or may not contribute to performance) must be guessed at or inferred. The MBO method recognizes the fact that it is difficult to neatly dissect all the complex and varied elements that go to make up employee performance. MBO advocates claim that the performance of employees cannot be broken up into so many constituent parts - as one might take apart an engine to study

it. But put all the parts together and the performance may be directly observed and measured. Disadvantages MBO methods of performance appraisal can give employees a satisfying sense of autonomy and achievement. But on the downside, they can lead to unrealistic expectations about what can and cannot be reasonably accomplished. Supervisors and subordinates must have very good ³reality checking´ skills to use MBO appraisal methods. They will need these skills during the initial stage of objective setting, and for the purposes of selfauditing and self-monitoring. Unfortunately, research studies have shown repeatedly that human beings tend to lack the skills needed to do their own ³reality checking´. Nor are these skills easily conveyed by training. Reality itself is an intensely personal experience, prone to all forms of perceptual bias. One of the strengths of the MBO method is the clarity of purpose that flows from a set of well-articulated objectives. But this can be a source of weakness also. It has become very apparent that the modern organization must be flexible to survive. Objectives, by their very nature, tend to impose a certain rigidity. Of course, the obvious answer is to make the objectives more fluid and yielding. But the penalty for fluidity is loss of clarity. Variable objectives may cause employee confusion. It is also possible that fluid objectives may be distorted to disguise or justify failures in performance. 2) Assessment Center Method : This technique was first developed in USA and UK in 1943. An assessment centre is a central location where managers

may come together to have their participation in job related exercises evaluated by trained observers. It is more focused on observation of behaviours across a series of select exercises or work samples. Assesses are requested to participate in in-basket exercises, work groups, computer simulations, role playing and other similar activities which require same attributes for successful performance in actual job. ?Advantages ± Well-conducted assessment centre can achieve better forecasts of future performance and progress than other methods of appraisals. Also reliability, content validity and predictive ability are said to be high in Assessment Centres. The tests also make sure that the wrong people are not hired or promoted. Finally, it clearly defines the criteria for selection and promotion. ?Disadvantages ± Concentrates on future performance potential. No assessment of past performance. Costs of employees travelling and lodging, psychologists. Ratings strongly influenced by assessee¶s inter-personal skills. Solid performers may feel suffocated in simulated situations.

3)

360o

Appraisal:

It

is

a

technique

in

which

performance

data/feedback/rating is collected from all sections of people employee interacts in the course of his job like immediate supervisors, team members, customers, peers, subordinates and self with different weightage to each group of raters. This technique has been found to be extremely useful and effective. It is especially useful to measure inter-personal skills, customer satisfaction and team building skills. One of the biggest advantages of this system is that assesssees cannot afford to neglect any constituency and has to

show all-round performance. However, on the negative side, receiving feedback from multiple sources can be intimidating, threatening, expensive and time consuming.

4) Psychological Appraisals: These appraisals are more directed to assess employees potential for future performance rather than the past one. It is done in the form of in-depth interviews, psychological tests, and discussion with supervisors and review of other evaluations. It is more focused on employees emotional, intellectual, and motivational and other personal characteristics affecting his performance. This approach is slow and costly and may be useful for bright young members who may have considerable potential. However quality of these appraisals largely depends upon the skills of psychologists who perform the evaluation.

ESSENTIALS FOR A SUCCESSFUL PERFORMANCE APPRAISAL SYSTEM

Basing appraisals on accurate and current job descriptions Ensuring that appraisers have adequate knowledge and direct experience of the employee¶s performance Providing ratings via aggregated

anonymous feedback when multiple sources of information are used Incorporating performance appraisals into a formal goal setting system Offering adequate support and assistance to employees such as professional performance development opportunities in order to improve their

Conducting appraisals on a regular basis (at least two times a year) rather than annually. If resource constraints do not permit frequent formal appraisals, consider conducting one formal appraisal annually, with a review of progress in the mid-year and ongoing review in regular supervision meetings

USING PERFORMANCE APPRAISAL TO ADDRESS WORKFORCE

DEVELOPMENT CHALLENGES

Regular performance appraisals provide a useful opportunity to conduct a ³check-up´ on various workforce development issues that may impact on employee¶s effectiveness and well being. Performance appraisals can be used to: ? Recognise, reward and support effective performance ? Develop and reward effective teamwork ? Identify and manage issues likely to impact on retention ? Monitor and support employee¶s well being.

Recognise , reward and support effective performance Ensuring employees receive adequate rewards and recognition is a key workforce development issue for the performance. Performance appraisals provide a good opportunity to formally recognise employee¶s achievements and contributions to the organisation, and to ensure a clear link is maintained between performance and rewards. The appraisal interview can also be used

as a vehicle to demonstrate supervisory and organisational support for employees by discussing barriers and supports to effective performance, and strategies to address problems or difficulties. Develop and reward effective teamwork The appraisal interview is also a useful vehicle for recognising and rewarding employee¶s contributions to various teams in the organisation, especially if appraisal information is gained from team members. An appraisal of the team as a whole can also be a useful strategy to recognise and reward team performance, and to identify strategies to improve team functioning.

Identify and manage issues likely to impact on retention Open and constructive performance appraisals can be useful to identify issues that are likely to impact on employee¶s willingness to stay with the organisation in the longer-term. Key factors associated with retention include salary and remuneration, professional development opportunities, and workrelated demands and stress. The appraisal interview provides a good opportunity for a ³check-up´ regarding employee¶s satisfaction with their working conditions and environment, and a discussion of strategies to address any problems or issues.

Monitor and support employee¶s well being

Performance appraisal interviews are a good opportunity to discuss employee¶s health and well being in the workplace, particularly in regard to factors that contribute to feelings of stress and experiences that promote satisfaction with their work.



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[sunandaC1]

appraisals are really tough for both actually