Human Resource management - Performance Appraisal

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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

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.

2.1 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
                               •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

3.1 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

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.
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
                                                      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.
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.

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.

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