1 INTRODUCTION This individual assignment is for the Postgraduate Institute of Management, University of Sri Jayewardenepura. The purpose of this report is to critically examine and discuss on how the core Human Resource Process “Conduction of appraisals” is implemented in the company named Ceylon Business Appliances (Pvt.) Ltd. In this effort, the assignment provides the introduction in conducting performance appraisals and the existing state related to the key factors affecting the human resource process of a business. The assignment also analyzes and highlights the key issues that are deterring the improvements of the business and provides the necessary recommendations with the relevant outputs and outcomes 1.1 Overview of the organization 1.1.1 Company brief Ceylon Business Appliance (Pvt.) Ltd. is established in March 1970, and now CBA has a well established reputation as the number one quality supplier of office equipment to the Sri Lankan market (CBA). The company started as a small family business, initially marketing a few banking machines. Today, the company's reputation is very strong in the high value and high profile banking sector in Sri Lanka. Today, CBA blessed with a solid and ever increasing customer base due to its dedication and responsibility towards fulfilling the requirements of its valued customers. CBA has three main divisions namely technical, operations and finance which oversee by three executive directors. The technical division further divided in to two divisions namely, Engineering & Manufacturing Division (EMD) and Technical Services Division (TSD) which are overlooked by engineering and technical mangers respectively. EMD deals with manufacturing products such as office machinery and furniture. The TSD is responsible to installing and maintaining all technical products that CBA sells. 1.1.2 Vision To be the No. 1 supplier and service provider of Office Automation in Sri Lanka 1.1.3 Mission Maintaining and further nurturing our solidarity with our valued customers and providing highly personalized and customized service in a customer friendly atmosphere with total dedication and commitment with a sense of responsibility in achieving all set objectives of the both partners in business. 1.1.4 Product and Services With the experience of 42 years in the Sri Lankan Market, CBA has a wide variety of products to meet various customer requirements. CBA enjoys a well-deserved reputation in Sri Lanka as a leading Manufacturer / Supplier of a broad range of products and services including Office Machines, Office and School Furniture, Plastic Identity cards, prepaid cards and Electronic assembly for export. The company’s reputation is especially strong in the high end Banking sector. CBA has a renowned reputation in products and services involved high security. Some of them are credit card manufacturing and printing, Credit/Debit POS terminals, Automatic Teller machines, mobile phone recharge cards printing. 1.1.5 Human Resource Development Division CBA has a Human Resource Development division that overlook the HR activities in all divisions of CBA namely, Head office, Technical Services Division, Sales division and Engineering Manufacturing division. Each division has a personal manager who is responsible of handling HR activities in each section. Chairman and the board of directors directly supervise the HR department. 2 APPRAISE EMPLOYEES 2.1 Performance Management System A Performance Management system is a continuous strategic and an integrated approach to delivering sustained success to organizations. It is a process of establishing a shared understanding about; what has to be achieved, how it should be achieved and why it should be achieved. It concentrates on aligning organizational, divisional and individual objectives in order to achieve sustainable improvements in the organizational performance. A Performance Management system contemplates on managing the performance in state time so that the performance can reach the projected level. Figure 2-1 - The Human Resource Cycle Source: The Human Resource Cycle; Reproduced from Devanna et al. (1984) 2.2 Performance Appraisal In addition to that, a performance appraisal is a limited function that concentrates only on the evaluation of the past performances relative to his or her performance standards (Dessler & Varkkey, 2011); 318. In other words it can be said that performance appraisal is all about distinct staff activity. According to figure 2.1 an appraisal of performance is identified as a vital part of the HR cycle. Most appraisal systems should provide the individual with valuable feedback on their performance and focus on future activities. In small organizations formal systems of performance appraisals are doubtful to exist as judgments about performance which will be made on the basis of experience and personal observation. Regardless of the organization, judgments are fed back to employees on a regular basis which is a key responsibility of a good manager. Most schemes rely on annual meetings between employee (appraise) and his or her appraiser. 2.2.1 Purpose of Appraising The purpose of appraising could be categorized under four key sub sections, namely: developmental, administrative, managerial and informative purposes. The categorization of purposes of appraising is as follows: Figure 2-2 - Purpose of Appraising •Aiding technical, professional and management development •Allowing a systematic folloup of the results of staff development activities DEVELOPMENTAL •Identifying good prospects for promotions and transfer •Developiing psychological dependance on the manager •Helping to achieve organisational and individual objectives ADMINISTRATIVE •Increasing performance •A mechanism to set objectives for the next period •A source of Motivation MANAGERIAL •Enabling the achievement of rewards (such as promotions) •Feeding in to a wider reward system •Fostering an open atmosphere INFORMATIVE •Developping relationships •Enhancing corporate cultural norms Source: Author To achieve these key purposes, planning work and setting expectations, continuously monitoring performance while developing a capacity to perform and periodically rating performance in summary fashion and rewarding performance is rather important. 2.2.2 Effective Appraisal system Several factors existing in an effective appraisal systems includes: Figure 2-3 - Factors in an effective appraisal systems - Broadly understanding the purpose and the objectives of the system through careful planning - Proficiency in conducting the appraisal interview - Selection of the most suitable technique of appraisal - Establishing challenging targets which can be influenced by the appraisee - Implementing a bottom-up approach that allows the appraisee to have meaningful contribution to the system Source: Author A performance appraisal scheme should be consistent with the company’s reward and other schemes, otherwise discrepancies may occur and major issues will be brought up if one set of behaviors are identified by development activities whilst others are rewarded in practice. Different approaches will be used to provide judgments and a basis for discussions in appraisal interviews as: Trait oriented ratings; of which evaluate the employees against standards of personal qualities and their work profile. It attempts to be current rather than considering past experiences. These personal traits may include the analytical skill, capability to get along with people, leadership and creativity. E.g. for a salesperson: creativity Results-Oriented or Performance appraisal measure the results produced by the employee. E.g. for a salesperson: Amount of sales (RS.) during the past month A certain blend of both approaches is used in practical situations. Below Table 2-1 illustrated the considerations that an appraiser should focus conducting performance appraises. By adhering to the guidelines the appraiser can develop an appraisal system that will evaluate the appraisal comprehensively. Table 2-1 - Comprehensive considerations that an appraiser should focus Talk over about the issues of the principle with top management/with the department of HR Allow enough time while being properly organized Make sure that there are no disruptions Design the sequence of the questions to be asked Trace probable causes for deviations performance. Ascertain contrivances to address specific training needs Identify the possible rewards for high performances Project the information needed to meet probable questions from the appraise Organize questions to be inquired Focus on prospects for job enrichment or indirect development moves Source: Author Below Table 2-2 illustrated the guidelines for an effective performance appraisal. The purposes of these guidelines are to create a smooth and friendly atmosphere where both appraisee and appraiser will benefit. Table 2-2 - Guidelines for effective performance appraisals Clearly identify the job description of the individual and his main result areas Assessing validity of what’s being measured: are we measuring the right thing? Pick the most important key areas from the result areas/ outcomes when and which are performed well; make sure that essential objectives are being achieved Set the standards against the key tasks (Standards must be valid, fair, challenging and realistic) Standards should be clearly defined in order to minimized vagueness and doubt Ensuring openness (everyone must be given a chance to participate) Safeguarding consistency of the measurements; being reliable and free from biasness Rewards must be given soon after performance, it must be attractive. Ensuring practicality where the benefits should outweigh the costs of developing & using it; it should be relatively easy to use and should be accepted by the managers Source: Author In a performance appraisal setting the objectives is crucial part; it involves agreements on SMART objectives. (Specific, measurable, attainable, reliable and time bound) It is rather obliging if employees are participants of setting their own objectives which is known as a system of ‘Management by objectives’ (MBO). There is a risk of the performance appraisal collapsing if the standards are inappropriately set; which would give rise to potentially damaging consequences for the organization. The gravity of the issue increases when the performance appraisal is linked to pay (PRP). Many of the drawbacks associated with the selection interviews may also apply in appraisals including; lack of preparation on either side which may cause inefficiencies in conducting performance appraisals. Also an appraiser talking more than the appraisee, and asking leading questions to which the answer is obvious and important aspects may be left unexplored. Furthermore appraisers being just as nervous as the appraisees or little or no appraiser training can be major drawbacks in this instance. 2.3 Different types of appraisals exist in an organization: Performance can be measured in three different approaches namely Objective measures of performance (OMP), Subjective measures of performance (SMP) and Management by Objectives (MBO). (Murphy & Cleveland, 1995); 5. OMP measures an employee’s job performance in terms of things that can see with no use of opinion. Example would be Performance tests that evaluate work samples or simulations under standardized conditions, production measures, sales measures etc. SMP measures an employee’s job performance using human judgment. This method includes Graphic rating scale, paired comparisons, forced distribution, Behaviorally Anchored Rating Scale (BARS) etc. MBO refers to the comprehensive and formal organization wide goal-setting and appraisal program that subordinates jointly set goals and periodically provide feedback (Dessler & Varkkey, 2011); 330. MBO can be both subjective and objective. Below Figure 2-4 shows the evaluation of performance appraisal methods. Figure 2-4 - Evolution of Performance Appraisal Methods Source: Kevin R. Murphy, Jeanette Cleveland; 1995 3 PERFORMANCE APPRAISAL OF CBA 3.1 HR Policy of CBA The human resource department of CBA has a HR policy where the job description is emphasized as the source for performance appraisals (Ceylon Business Appliances, 2010). It also stimulates the need for training throughout while providing on going feedback. Figure 3-1 HR circle of CBA Source: HR Policy of CBA As illustrated in the Figure 3-1 the performance appraisals in CBA is in line with the job description in such a way that different appraisal criteria is defined for different jobs. Ceylon Business Appliances has a staff comprising of several disciplines namely administration, technical, sales, manufacturing etc. Therefore CBA is using two types of appraisal methods to evaluate the entire employee base. CBA use an objective approach of performance tests to evaluate its technical and manufacturing employee base and a subjective approach of graphical rating scale to evaluate all employees. Depending on the result of the appraisal the employee is then subjected to positive and negative consequences. E.g. increments, promotions, bonuses or training programs and warnings. 3.2 Appraisal methods at CBA With the diversity of CBA staff a single appraisal method will not address the criteria necessary to evaluate each of them. Therefore there are two methods being used as mentioned in the above section 3.1 3.2.1 Performance Tests The technical and production staff cannot be rated using subjective measures. It is vital to test their theoretical knowledge and the application of them to the practical scenarios. Therefore an objective approach of performance tests is being used to evaluate such employees. The tests are designed to meet each job category. For example trainee technicians, technicians, senior technicians and assistant engineers will get different types of performance tests. Level of difficulty is changed for each job level to check the depth of understanding. Every technical and manufacturing employee must sit for the test and the marks they obtained will then use to decide on their increments, promotions and need for training. The test will be conducted annually. Technical, engineering managers and divisional engineers are responsible for conducting the evaluation. Each test contains compulsory theoretical questions to analyze the understanding of technical principles and questions related to their field of work to test their knowledge on practical application. A sample test paper is attached in the annexure 1. 3.2.2 Graphical Rating Scale Apart from the above mentioned objective measures CBA adopts a subjective approach as well to evaluate all the employees including those who are evaluated under the appraisal described in the section 3.2.1. The evaluation is conducted by the appraisal committee assigned by the chairman and the board of directors. This committee consists of the chairman, board of directors and administrative staff representing each division. Figure 3-2 - Performance rating system for all staff of CBA Source: Author A detailed description of the above criteria defined for each division is attached under annexure 02. As illustrated in Figure 2-1 the reason for having a common appraisal method is to bring entire staff of the CBA to a common evaluation criterion and ranking system. The aspects of job performance considering the results and behaviors are clearly defined with their respective rating scales. The appraisal will conduct in every 4 months. The rating system is as follows; Figure 3-3 - Rating criteria Exceptional >91% Exceeds Expectation 76% < 90% Meet Expectation 51% < 75% Below Expectations <50% Source: CBA HR Policy (2012) As illustrated in Figure 3-3 all employees are given a percentage and a color code on their performance level. These levels have a direct influence on the increments, promotions, bonuses and training requirements of the respective employee. 4 RECOMMENDATIONS Table 4-1 Recommendations to improve performance appraisals of CBA Issue Recommendation Output Outcome The appraisal results HR department to provide Employees believe Motivated employees are not transparent to more details on how the in the appraisal resulting better employees. appraisal conducted for an system and will customer service. individual employee and have chance to discuss the shortcomings improve their with them. shortcomings Autocratic Introduce policies to the Employees will be Customer satisfaction management top management not to motivated by the energetic overrules appraisals overrule decisions employees. Identified training HR department must Employee skill Better quality of opportunities are not implement guidelines to level will be service for customers. properly delegated to ensure that right person is improved and they the correct person. selected from the will be motivated. performance evaluation. Well detailed HR HR department must HR process will be Employees will be policy document is properly document the HR transparent and motivated increasing not available. policy with guidelines to opportunity for the productivity. performance appraisals, any unnecessary rewards, increments and persuasion can be training. minimized. The annual Employee’s performance Ease of assessing Proper feedback could performance must be assessed over the potential and be given to the appraisal stands multiple years. identify patterns or employees and alone where it does trends of required not interlink with the performance. improvements could past and the future. be made effectively. Issue Recommendation Output Outcome Corporate culture Minimize the amount of Risk of subjective Employees will be issues within the cultural norms and values appraisals happy and motivated organization that influence restricting cultural while their morale is performance appraisals change in CBA being enhanced. Ease could be to face uncertainty in minimized the environment. No appeal process Employees who disagree Involvement of Motivated employees with regard to the with the appraisal should employees would resulting better performance be given the opportunity establish the customer service and appraisals to challenge the results acceptability and minimization of with a neutral party. transparency of the conflicts performance appraisal scheme in the organization Inconsistency across The gap among some HR process will be Loyalty of employees the appraisers in the managers who are fair opportunity for will increased while organization naturally “easy raters” and any unnecessary they improve their those who are not must be influencing can be efficiency reduced. Proper training minimized on conducting appraisals should be provided. 5 CONCLUSION This assignment has evaluated he performance appraisal procedures that Ceylon Business Appliances (Pvt.) Ltd., follows in order to provide their employees with increments, promotions, bonuses or training programs and warnings. Performance appraisal is a necessity for organizations to evaluate their current status of their employees and decide on their future. CBA follows two appraisal methods to evaluate their staff. Performance test which is an objective approach is used to evaluate their employees in technical and manufacturing divisions. These tests examine their practical and theoretical knowledge. In addition to the performance test subjective approach of Graphical Rating Scale is used to evaluate the entire CBA staff including technical and manufacturing staff. The report identified the positives and negatives of the performance appraisal system in CBA and provided recommendations to improve them with their respective output and outcome. 6 REFERENCE Ceylon Business Appliances. (2010). HR policy. Colombo: CBA. Dessler, G., & Varkkey, B. (2011). Human Resource Management. New Delhi: Pearson. Murphy, K. R., & Cleveland, J. (1995). nderstanding Performance Appraisal: Social, Organizational, and Goal-Based Perspectives. California: SAGE.