A

RESEARCH REPORT

ON

“PERFORMANCE APPRAISAL” IN BANKING SECTOR

Submitted for the fulfillment for the award of MASTER OF BUSINESS ADMINISTRATION (Sikkim Manipal University)

(SESSION: 2009-2010)

Submitted By:Ekta Bhatia

MBA IV SemesterRoll No. 510919106

Submitted To: Under the Guidance of:Mr. Pankaj UpadhyayLecturerSikkim Manipal University

Mr. Pankaj UpadhyayLecturerSikkim Manipal University

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DECLARATION

I, Ekta Bhatia, hereby declare that the project titled

““PERFORMANCE APPRAISAL” IN BANKING SECTOR” is my

own work and efforts which is completed under the supervision of

Mr. Pankaj Upadhyay, senior lecturer of IIMT Management

College, Meerut

The Research report has been submitted to Sikkim Manipal

University, Centre 2017, New Delhi for the purpose of Research

Report under the compliance of fulfillment of Master of Business

Administration (M.B.A.).

Date: Ekta Bhatia

Place: MBA-4th Sem.

Roll No.: 510919106

2

List of contents

Preface

Acknowledgement

Objective Of The Study

About The Study

Scope Of The Study

Research Methodology

Introduction To Banking

Sector

HRM Approach

“Performance Appraisal”

– A Systematic Approach

ICICI Bank – Company Profile

Needs And Importance Of

“Performance Appraisal” In

Banking

3

“Performance Appraisal”

And Performance Management

In ICICI Bank

Banner Corporation Banks

On Halogen For Talent And

Learning And Performance

Management (For Practical

Understanding)

Conclusion

Suggestion And

Recommendation

Bibliography

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Preface

This study is done for fulfillment of the requirement of Sikkim Manipal

University to obtain the degree of Master of business management. In

this study, we strive to find out the implication of “Performance

Appraisal” in banking sector.

Banking sector is one of the emerging sectors of India; we strive to

find out what is the importance of HR in banking industry in specific

with “Performance Appraisal”.

In this report we discuss the banking industry, HR overview, need of

“Performance Appraisal” in banks, Indian banking scenario, techniques

and approaches of “Performance Appraisal” pertaining to the banking

industry. As we know that in present scenario of cut throat competition

in banking industry only the service is the factor that can make sense

in banking industry, we try to explore the importance of the

“Performance Appraisal” in banking to uplift the standard of

organization, individual and both as a mutual entity

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Acknowledgement

I would like to thank Mr.Pankaj Upadhyay for his guidance & support

with his valuable inputs & knowledge.

I would like to thank my colleagues, friends, and family members for

their support, guidance and active contribution that helped me a lot to

collect secondary data and preparing this report

Once again thanks to all for providing me your direct and indirect

support for my research work and help in writing the report

EKTA BHATIA

0bjective of the Study

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To understand the concept of HR in special reference of

“Performance Appraisal”

To understand the application of “Performance Appraisal” in

banking sector

To understand the practical aspect of “Performance Appraisal” in

banking scenario

To understand the modern trends emerging in “Performance

Appraisal”

To understand the management approach towards “Performance

Appraisal”

To understand the banking scenario of India

To gain the knowledge of the practical process of the

“Performance Appraisal”

To view the aspect of “Performance Appraisal” from managerial

perspective

To highlight the effectiveness of “Performance Appraisal” in

banking sector

To understand the need of “Performance Appraisal” for banking

industry

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About the study

8

The study, ““Performance Appraisal” in Banking Sector”, highlights the

importance of “Performance Appraisal” in special reference of banking

industry. As we know the banking sector is one of the fastest growing

sectors of our country, the study highlights the perspective of HR in

banking sector.

In this study we strive to find out the need of “Performance Appraisal”

for banks, and try to understand how the “Performance Appraisal” is

done in banking sector. In this study we take the case of one of the

leading bank, ICICI bank, as our sample and try to find out their

techniques used for “Performance Appraisal”.

This study refers to the need of “Performance Appraisal” for banking

industry, importance and emerging trends in the field of “Performance

Appraisal”. For easy understanding of the study we have divided the

entire study in to several chapters that gives the specific nature of the

subject in question.

We have highlighted several trends of banking industry, growth and

prospect of banking in India, history of Indian banking, Role of RBI as

regulatory bank and the industrial importance bank as an institute to

march the nation in economic growth.

Further we highlighted the role of HR, its need and importance and

“Performance Appraisal” as its one of the major tools. It signifies the

role of HR in organizational perspective and highlight the rationale of

active HR polices in an organization , this reports takes the HR as

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managerial function rather than the staff activities . In this report we

try to make the role and concept of HRM understood for our readers.

The study is manly conducted on the basis of secondary data rather

than the primary data. We managed to collect the secondary data from

ICICI bank and got the information about the HR policy and process of

the bank. In our study we highlighted the process of ICICI bank

“Performance Appraisal” mechanism and the manner in which

“Performance Appraisal” takes place in ICICI bank

In special cases like the practical example of ICICI bank ,the study

highlights:

a) techniques ,

b) approach,

c) forms,

d) managerial approach,

e) employees feedback,

f) process and other real aspect of the “Performance Appraisal”

that provides the realistic view of the “Performance Appraisal” process

that is carried out by the bank in actual work environment .

The study is conducted is a simple manner and most of the data is

collected through various sources. This study refers the “Performance

Appraisal” technique as an effective managerial tool to enhance the

efficiency and effectiveness to achieve the organizational and

individual goals. This study provides the theoretical knowledge about

the “Performance Appraisal”s on the issue like a)need , b)importance ,

c)features , d)techniques , e)approaches , f)model , g)trends and

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other issues related to the banking industry . This study refers to the

role of “Performance Appraisal” in a wide and in a systematic manner

that takes place in a sequential way and covers almost all the aspect

of the appraisal from employees to organization under the universal

approach called “Performance Management”

Scope of the study

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Following aspects are covered under this study:

A brief overview of the nature of the subject

An introduction to the HR as a managerial function in special

reference with ““Performance Appraisal””

New dimensions, techniques, approaches and thoughts in

““Performance Appraisal””.

Practical aspect of ““Performance Appraisal”” in ICICI bank

Modern techniques emerging in ““Performance Appraisal””.

Need and importance of “Performance Appraisal” in banking

industry

brief introduction of Indian banking industry

Introduction to ICICI bank

Role of “Performance Appraisal” as managerial decision in

banking sector in policy making and organizational success

Practical challenges, opportunities in banking sector to

implement the effective performance management system

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Research Methodology

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The study seems to be the observation and a description of the

project where we try to find out the hidden aspect or bring out the

concept for further explanation, but some scientific method and

techniques classified it as the research, that’s why the following

research methods, techniques and components are used to facilitate

the study

Research Design- Descriptive research design

Descriptive research design is a scientific method that is used in this

study which helps in observing and describing the behavior of a

subject without influencing it in any way to obtain a general overview

of the subject.

This design allows observation without affecting normal behavior. It is

also useful because it is not possible to test and measure the large

number of samples needed for more quantitative types of

experimentation

These types of experiments are often used by anthropologists,

psychologists and social scientists to observe natural behaviors without

affecting them in any way. It is also used by market researchers to

judge the habits of customers, or by companies wishing to judge the

morale of staff.

Though the results from a descriptive research can in no way be used

as a definitive answer or to disapprove a hypothesis but, if the

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limitations are understood, they can still be a useful tool in many areas

of scientific and normal study research such as this project.

Type of data – secondary data

Secondary data was used for this study as the research design is

descriptive in nature so we tried to collect the data available through

other sources on the subject. Some times, primary data is also

collected through observation method to facilitate the research work

Sources of data

The following sources are used for collecting the data for this study:

Books

internet

Journals

News papers

Personal sources

Sampling – judgmental sampling

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Judgment sampling is a common no probability method. This

sampling is selected on the judgment. This is usually and extension of

convenience sampling. We have decided to draw the entire sample

from one "representative" bank even though the population includes

all banks. When using this method, we try to ensure that the chosen

sample is truly representative of the entire population.

Introduction to Banking Sector

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Banking can be defined in various ways as the definition of the bank

varies from country to country and keeps on changing on the basis of

the activities carried out by the banks. In present dynamic business

scenario, banking can be defined as the activities carried out with the

bank on individual or corporate level. We can understand the concept

of the banking by looking into the activities of the bank.

A bank is a well regularized and licensed financial institute to assist the

individual and corporate customer in their financial needs. Normally

banks provide the following services to its retail (individual) and

corporate clients:

• Transactional services,

• Services related to monetary transaction through current and

saving account,

• Investment services,

• Fixed deposit ,

• Letter of credit ,

• Treasury services ,

• Bill of exchange ,

• Foreign exchange ,

• Assisting in trade through Letter of credit,

• Letter of guarantee,

• Performance bond ,

• Project financing ,

• Personal loan ,

• Credit card ,

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• Home loan etc.

Banking sector In India

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Banking in India originated in the last decades of the 18th century.

The oldest bank in existence in India is the ‘State Bank of India’, a

government-owned bank that traces its origins back to June 1806 and

that is the largest commercial bank in the country. Central banking is

the responsibility of the Reserve Bank of India, which in 1935 formally

took over these responsibilities from the then Imperial Bank of India,

relegating it to commercial banking functions. After India's

independence in 1947, the Reserve Bank was nationalized and given

broader powers. In 1969 the government nationalized the 14 largest

commercial banks; the government nationalized the six next largest in

1980.

Currently, India has 88 scheduled commercial banks (SCBs) - 27

public sector banks (that is with the Government of India holding a

stake), 31 private banks (these do not have government stake; they

may be publicly listed and traded on stock exchanges) and 38 foreign

banks. They have a combined network of over 53,000 branches and

17,000 ATMs. According to a report by ICRA Limited, a rating agency,

the public sector banks hold over 75 percent of total assets of the

banking industry, with the private and foreign banks holding 18.2%

and 6.5% respectively.

The banking industry in India seems to be unaffected from the global

financial crises which started from U.S in the last quarter of 2008.

Despite the fallout and nationalization of banks across developed

economies, banks in India seems to be on the strong fundamental

base and seems to be well insulated from the financial turbulence

emerging from the western economies. The Indian banking industry is

well placed as compare to their banking industries western

counterparts which are depending upon government bailout and

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stimulus packages.

The strong economic growth in the past, low defaulter ratio, absence

of complex financial products, regular intervention by central bank,

proactive adjustment of monetary policy and so called close banking

culture has favored the banking industry in India in recent global

financial turmoil.

Although there will be no impact on the Indian banking system similar

to that in west but the banks in India will adopt for more of defensive

approach in credit disbursal in coming period. In order to safe guard

their interest; banks will follow stringent norms for credit disbursal.

There will be more focus on analyzing borrower’s financial health

rather than capability.

The report “Indian Banking Sector Forecast to 2012” contains

comprehensive research and rational analysis on various segments,

like assets size, income level and number of cardholders, in the Indian

banking industry. It also analyzes the current performance and key

market trends, and helps clients to understand various products

available in the market and their future scope.

The forecast given in this report is not based on a complex economic

model but is intended as a rough guide to the direction in which the

market is likely to move. The future projection is done on the basis of

the current market scenario, past trends, and rules and regulations

laid by the regulator and supervisor of the financial system,

Reserve Bank of India (RBI).

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The Economic Liberalization process has increasingly exposed the

Banking Sector to international competition. The role of Banking in the

process of financial intermediation has been undergoing a profound

transformation, owing to changes in the global financial system.

Consequently, the revolution in information technology has brought

about sea changes in the way banking transaction are carried out

Almost 80% of the businesses are still controlled by Public Sector

Banks (PSBs). PSBs are still dominating the commercial banking

system. Shares of the leading PSBs are already listed on the stock

exchanges.

The RBI has given licenses to new private sector banks as part of the

liberalization process. The RBI has also been granting licensees to

industrial houses. Many banks are successfully running in the retail

and consumer segments but are yet to deliver services to industrial

finance, retail trade, small business and agricultural finance.

The PSBs will play an important role in the industry due to its number

of branches and foreign banks facing the constraint of limited number

of branches. Hence, in order to achieve an efficient banking system,

the onus is on the Government to encourage the PSBs to be run on

professional lines.

To promote banking sector in India, Govt. has taken many steps and

formed several committee to review the banking needs and the

prospect the current scenario along with the safeguarding the interest

of the customers

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Reserve bank of India

Economists and Planners consider monetary stability in an economy as

the most important function of a Central Bank. The Prime function of a

Central Bank is to ensure and secure monetary stability i.e. to ensure

that the growth rate of money supply is consistent with the growth

rate of output of goods and services. In an open economy framework

however the Central Banks is additionally entrusted with the

responsibility of managing the exchange rate. Since the inception of

the economic reforms when the Indian Economy embarked on a

programme of liberalization and exchange rate flexibility, the Reserve

Bank of India is managing its twin responsibilities of monetary stability

and exchange rate stability. The economy follows a managed float

system with RBI intervening in the event of violent fluctuations in

exchange rate. In an open economy framework with lesser restrictions

on capital flows, managing the monetary stability and exchange rate

stability pose a challenge for the Central Bank. Managing the twin

functions simultaneously is accompanied by trade-offs and conflicts.

The central bank of the country is the Reserve Bank of India (RBI). It

was established in April 1935 with a share capital of Rs. 5 crores on

the basis of the recommendations of the Hilton Young Commission.

The share capital was divided into shares of Rs. 100 each fully paid

which was entirely owned by private shareholders in the beginning.

The Government held shares of nominal value of Rs. 2, 20,000.

Reserve Bank of India was nationalized in the year 1949. The general

superintendence and direction of the Bank is entrusted to Central

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Board of Directors of 20 members, the Governor and four Deputy

Governors, one Government official from the Ministry of Finance, ten

nominated Directors by the Government to give representation to

important elements in the economic life of the country, and four

nominated Directors by the Central Government to represent the four

local Boards with the headquarters at Mumbai, Kolkata, Chennai and

New Delhi. Local Boards consist of five members each Central

Government appointed for a term of four years to represent territorial

and economic interests and the interests of co-operative and

indigenous banks.

The Reserve Bank of India Act, 1934 was commenced on April 1,

1935. The Act, 1934 (II of 1934) provides the statutory basis of the

function of the bank.

The Bank was constituted for the need of following:

To regulate the issue of banknotes

To maintain reserves with a view to securing monetary stability and

To operate the credit and currency system of the country to its

advantage.

Major Banks in India

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Public sector banks

• State Bank of India

• State Bank of Bikaner & Jaipur

• State Bank of Hyderabad

• State Bank of Indore

• State Bank of Mysore

• State Bank of Patiala

• State Bank of Saurashtra

• State Bank of Travancore

• Dena Bank

• IDBI Bank

• Indian Bank

• Indian Overseas Bank

• Oriental Bank of Commerce

• Punjab & Sind Bank

• Punjab National Bank

• Syndicate Bank

• UCO Bank

• Union Bank of India

• United Bank of India

• Vijaya Bank

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Private sector banks

• Bank of Rajasthan

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• Bharat Overseas Bank

• Catholic Syrian Bank

• Centurion Bank of Punjab (Merged with HDFC bank)

• City Union Bank

• Development Credit Bank

• Dhanalakshmi Bank

• Federal Bank

• HDFC Bank

• ICICI Bank

• IndusInd Bank

• ING Vysya Bank

• Jammu & Kashmir Bank

• Karnataka Bank

• Karur Vysya Bank

• Kotak Mahindra Bank

• Lakshmi Vilas Bank

• Lord Krishna Bank ( now Centurion Bank of Punjab)

• Nainital Bank

• Nedungadi Bank (now Punjab National Bank)

• Ratnakar Bank

• Rupee Bank

• Saraswat Bank

• SBI Commercial and International Bank

• South Indian Bank

• Tamil Nadu Mercantile Bank

• Thane Janata Sahakari Bank

• Bassein Catholic Bank

• United Western Bank ( now IDBI Bank)

• YES Bank

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Foreign Banks

• ABN Amro bank

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• Abu Dhabi Commercial Bank Ltd

• American Express Bank

• Antwerp Diamond Bank

• Arab Bangladesh Bank

• Bank International Indonesia

• Bank of America

• Bank of Bahrain & Kuwait

• Bank of Ceylon

• Bank of Nova Scotia

• Bank of Tokyo Mitsubishi UFJ

• Barclays Bank

• BNP Paribas

• Calyon Bank

• ChinaTrust Commercial Bank

• Citibank

• DBS Bank

• Deutsche Bank

• HSBC (Hongkong & Shanghai Banking Corporation)

• JPMorgan Chase Bank

• Krung Thai Bank

• Mashreq Bank

• Mizuho Corporate Bank

• Oman International Bank

• Shinhan Bank

• Société Générale

• Sonali Bank

• Standard Chartered Bank

• State Bank of Mauritius

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Banks with Representative Offices in India :

American Banks

• The Bank of New York

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• Wachovia Bank

Australian Banks

• Commonwealth Bank

• National Bank Australia

• Westpac Banking Corporation

Austrian Banks

• Raiffeisen Zentral Bank Osterreich

Belgian Banks

• Fortis Bank

• K.B.C. Bank N.V.

Canadian Banks

• Royal bank of Canada

UAE Banks

• Emirates Bank International

French Banks

• Credit Industriel et Commercial

• Natixis

German Banks

• Bayerische Hypo und Vereinsbank

• Commerzbank

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• Dresdner Bank

• DZ Bank AG Deutsche Zentral – Genossenschafts Bank

• HSH Nordbank

• Landesbank Baden – Wurttemberg

Irish Banks

• DEPFA Bank

Italian Banks

• Banc Intesa Banca Commerciale Italiana

• Banca di Roma

• Banca Populare Di Verona E Novara

• Banca Popolare di Vicenza

• BPU Banca –Banche Popolari Unite

• Monte Dei Paschi Di Sienna

• Sanpaolo IMI Bank

• Uni Credito Italiano

Nepalese Banks

• Everest Bank

Portuguese Banks

• Caixa Geral de Depositos

Russian Banks

• Vnesheconombank

• VTB India

• Promsvyazbank

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South African B anks

• First Rand Bank

South Korean Banks

• Wori Bank

Spanish Banks

• Banco de Sabadell

• Banco Bilbao Vizcaya Argentaria

SriLankan Banks

• Hatton National Bank

Swiss Banks

• UBS

• Zurcher Kantonalbank

Rural Banks

• Adhiyaman Grama Bank

• Alaknanda Gramin Bank ( Now Uttranchal Gramin Bank)

• Andhra Pragathi Grameena Bank

• Avadh Gramin Bank

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• Aryavart Gramin Bank

• Balasore Gramya Bank

• Ballia Kshetriya Gramin Bank

• Banaskantha Mehsana Gramin Bank

• Bangiya Grameen Vikash Bank

• Bareilly Kshetriya Gramin Bank

• Baroda Uttar Pradesh Gramin Bank

• Bijapur Grameena Bank

• Bilaspur-Raipur Kshetriya Gramin Bank

• Bolangir Anchalik Gramya Bank

• Bundelkhand Kshetriya Gramin Bank

• Bundi Chittorgarh Kshetriya Gramin Bank

• Cauvery Grameena Bank

• Chaitanya Godavari Grameena Bank

• Chambal Kshetriya Gramin Bank

• Champaran Kshetriya Gramin Bank

• Chhatrasal Gramin Bank

• Chhindwara Seoni Kshetriya Gramin Bank

• Chitradurga Gramin Bank

• Cuttack Gramya Bank

• Damoh Panna Sagar Kshetriya Gramin Bank

• Devipatan Kshetriya Gramin Bank

• Dhenkanal Gramya Bank

• Dungarpur Banswara Kshetriya Gramin Bank

• Ellaquai Dehati Bank

• Farrukhabad Gramin Bank

• Gaur Gramin Bank

• Gurgaon Gramin Bank

• Hadoti Kshetriya Gramin Bank

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• Himachal Gramin Bank

• Hissar-Sirsa Kshetriya Gramin Bank

• Indore Ujjain Kshetriya Gramin Bank

• Jaipur Nagaur Aanchalik Gramin Bank

• Jamnagar Rajkot Gramin Bank

• Jamuna Gramin Bank

• Jhabua-Dhar Kshetriya Gramin Bank

• Jharkhand Gramin Bank

• Kakathiya Grameena Bank

• Kalpatharu Grameena Bank

• Kamraz Rural Bank

• Kanpur Kshetriya Gramin Bank

• Kapurthala Ferozpur Kshetriya Gramin Bank

• Kashi Gomti Samyut Gramin Bank

• Kisan Gramin Bank,Budaun

• Kolar Gramin Bank

• Krishna Grameena Bank

• Kshetriya Gramin Bank,Hoshangabad

• Kutch Grameen Bank

• Malaprabha Grameena Bank

• Mandla Balaghat Kshetriya Gramin Bank

• Manjira Grameena Bank

• Marwar Ganganagar Bikaner Gramin Bank (Previously : Marwar

Gramin Bank)

• Mewar Aanchalik Gramin Bank

• Nagarjuna Grameena Bank

• Netravati Grameena Bank

• Nimar Kshetriya Gramin Bank

• North Malabar Gramin Bank

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• Panchmahal Vadodara Gramin Bank

• Pandyan Grama Bank

• Pinakini Grameena Bank (merged to form Andhra Pragathi

Grameena Bank)

• Pragjyotish Gaonlia Bank

• Prathama Bank

• Raigarh Kshetriya Gramin Bank

• Rani Lakshmi Bai Kshetriya Gramin Bank

• Ratlam Mandsaur Kshetriya Gramin Bank

• Rayalaseema Grameena Bank (merged to form Andhra Pragathi

Grameena Bank)

• Rewa-Sidhi Gramin Bank

• Sahyadri Gramin Bank

• Samyut Kshetriya Gramin Bank

• Sangameshwara Grameena Bank

• Shahjahanpur Kshetriya Gramin Bank

• Shreyas Gramin Bank (Aligarh,Etah,Agra,Mathura,Firozabad)

• Shivpuri Guna Kshetriya Gramin Bank

• South Malabar Gramin Bank

• Sree Anantha Grameena Bank (merged to form Andhra Pragathi

Grameena Bank)

• Sri Saraswati Grameena Bank

• Sri Visakha Grameena Bank

• Surat Bharuch Gramin Bank

• Thar Aanchalik Gramin Bank

• Tripura Gramin Bank

• Tungabhadra Gramin Bank

• Vidur Gramin Bank

• MCB

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• Madhya Bharat Gramin Bank

Human Resources Management Approach

(H.R M Approach)

36

“Human resource management's objective is to maximize the return

on investment from the organization's human capital and minimize

financial risk. It is the responsibility of human resource managers in a

corporate context to conduct these activities in an effective, legal, fair,

and consistent manner”

The Human Resources (HR) function provides significant support and

advice to line management. The attraction, preservation and

development of high caliber people are a source of competitive

advantage for our business, and are the responsibility of HR.

H.R can be well understood as a model of personnel management that

focuses on the individual rather than taking a collective approach.

Responsibility for human resource management is often devolved to

line management. It is characterized by an emphasis on strategic

integration, employee commitment, workforce flexibility, and quality of

goods and services.

Human resource is an increasingly prominent field that is taking shape

throughout industries and workplaces world wide. Recognizing the fact

that people are a company’s greatest asset, business leaders across

the globe are coming to rely more and more upon an effective

management policy that applies specifically to the area of human

resources.

With a rapid increase – a boom, in fact – of professionals, generalists

and specialists in the area of human relations, there has also been a

major rise in the amount of knowledge and innovation pertaining to

the most efficient and productive methods of streamlining workforce

management policy. When applied, there are already a great number

37

of proven techniques which result in the actual increases of profit

margins.

But what, exactly, is the definition of human resources? Essentially, HR

applies to the workforce managed by any employer. A business of any

size needs employees in order for it to run. As an important – the most

important – asset for any business leader, employees need to be

properly managed in order for optimal efficacy to be achieved.

Now, properly managing a workforce is a lot more complicated than,

say, the maintenance of a company’s material capital such as

machinery, computer systems, etc. Indeed, the mechanistic approach

to employee relations has often failed. Fortunately, this failure has

prompted close study into how to effectively see that human capital is

treated right and is able to reach its full potential.

That’s why the application of human resources management focuses

largely on a more sensitive and human analysis to determine what

really works with employees. One of the major aspects of HR

maintenance involves employee recruitment, training and development

as a function of human capital management.

Making sure that employees’ abilities are correctly and optimally

nurtured is essential to seeing a worthwhile return on investment

come from their contribution to the company, once their training

period is over. Along with employee training, human resources

departments also delve into the area of applicant tracking. How to find

the best talent available on the global labor market place is often a

problem that the human resources department will strive to tackle.

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In addition, human resources departments take care of a variety of

concerns such as labor relations – the crucial and highly sensitive

negotiations between employees and management – the production of

job descriptions, the monitoring of interplay between workers in order

to design a more efficient employee management system, the

compilation of benefits packages as well as a variety of other vital

functions that relate directly to the employee workforce

Organizational Psychology holds that successful organizations do not

owe their success solely to market realities and sustainable

competitive advantages. Actually, there is a lot more. Successful

companies are those that consider their human capital as their most

important asset. Facts and figures are the quantitative elements of

successful management, yet the qualitative, i.e. the cognitive aspects,

are those that actually make or break an organization.

Human Resources Management (HRM) is the strategic management of

the employees, who individually and collectively contribute to the

achievement of the strategic objectives of the organization. Assuming

that the employees of an organization are individuals with own mental

maps and perceptions, own goals and own personalities and as such

they cannot be perceived as a whole, HRM holds that the organization

should be able to employ both individual and group psychology in

order to commit employees to the achievement of organizational

goals.

Aiming to enable the organization to achieve its strategic goals by

attracting, retaining and developing employees, HRM functions as the

39

link between the organization and the employees. A company should

first become aware of the needs of its employees, and at a later stage,

understand and evaluate these needs in order to make its employees

perceive their job as a part of their personal life, and not as a routine

obligation. To that end, HRM is very crucial for the whole function of

an organization because it assists the organization to create loyal

employees, who are ready to offer their best.

The HRM activities in modern organizations are typically performed in

communication with the General Management in an effort to provide a

variety of views when a decision must be taken. In that way, decision

making is not subject to the individual perceptions of the HR or the

General Manager, but it becomes the outcome of strategic consensus.

The main goals / responsibilities of HRM are:

• To retain low employee turnover rate by inspiring people to work for

the company

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• To attract new employees

• To contribute to employee development

To achieve these goals, Human Resources Management trains and

motivates the employees by communicating ethical policies and

socially responsible behavior to them. In doing so, it plays a significant

role in clarifying the organization's problems and providing solutions,

while making employees working more efficiently.

On the other hand, challenges do not cease for the HRM. Modern

organizations can survive in the dynamic, competitive environment of

today only if they capitalize on the full potential of each employee.

Unfortunately, many companies have not understood the importance

of the human capital in successful operations. The recruitment and

selection of the best employees is a very difficult obligation. Even

companies that are voted in the top-ten places to work at, often

endure long periods of hard work to realize that human element is all

an organization should care about.

New challenges arise even now for the organization, and it is certain

that new challenges will never cease to emerge. Therefore, the use of

proper Human Resources techniques is a really powerful way for

organizations to overcome these challenges, and to improve not only

their quantitative goals but also their organizational culture, and their

qualitative, cognitive aspects.

41

Current trends in HR

Human resource management is a process of bringing people and

organizations together so that the goals of each other are met. The

42

role of HR manager is shifting from that of a protector and screener to

the role of a planner and change agent. Personnel directors are the

new corporate heroes. The name of the game today in business is

personnel. Nowadays it is not possible to show a good financial or

operating report unless your personnel relations are in order.

Over the years, highly skilled and knowledge based jobs are increasing

while low skilled jobs are decreasing. This calls for future skill mapping

through proper HRM initiatives.

Indian organizations are also witnessing a change in systems,

management cultures and philosophy due to the global alignment of

Indian organizations. There is a need for multi skill development. Role

of HRM is becoming all the more important.

Functions of H. R

1. Recruitment & Selection

2. Training and Development (People & Organization)

3. Performance Evaluation and Management

43

4. Promotions

5. Redundancy

6. Industrial and Employee Relations

7. Record keeping of all personal data.

8. Compensation, pensions, bonuses etc in liaison with Payroll

9. Confidential advice to internal 'customers' in relation to problems

at work

10. Career development

“Performance Appraisal” – A Systematic

Approach

44

“Performance Appraisal”, also known as employee appraisal, is a

method by which the job performance of an employee is evaluated

(generally in terms of quality, quantity, cost and time).

“Performance Appraisal” is a part of career development.

“Performance Appraisal”s are regular reviews of employee

performance within organizations.

Generally, the aims of a “Performance Appraisal” are to:

1. Give feedback on performance to employees.

2. Identify employee training needs.

3. Document criteria used to allocate organizational rewards.

4. Form a basis for personnel decisions: salary increases, promotions,

disciplinary actions, etc.

5. Provide the opportunity for organizational diagnosis and

development.

6. Facilitate communication between employee and administration

7. Validate selection techniques and human resource policies to meet

federal Equal Employment Opportunity requirements.

“Performance Appraisal” is a management tool which is helpful in

motivating and effectively utilizing human resources. Assessment of

human potential is difficult, no matter how well designed and

appropriates the performance planning and appraisal system is, the

“Performance Appraisal” system should:

45

be correlated with the organizational mission, philosophies and

value system;

cover assessment of performance as well as potential for

development;

take care of organizational as well as individual needs; and

help in creating a clean environment by

- Linking rewards with achievements,

- generating information for the growth of the employee as well as of

the organization,

- suggesting appropriate person-task matching and career plans.

Feedback is an important component of “Performance Appraisal”.

While positive feedback is easily accepted, negative feedback often

meets with resistance unless it is objective, based on a credible source

and given in a skilful manner.

THE PROCESS OF PERFORMANCE APPRAISAL

46

(a) “Performance Appraisal” System: The Process

“Performance Appraisal” involves an evaluation of actual against

desired performance. It also helps in reviewing various factors which

influence performance. Managers should plan performance

47

development strategies in a structured manner for each employee. In

doing so, they should keep the goals of the organization in mind and

aim at optimal utilization of all available resources, including financial.

“Performance Appraisal” is a multistage process in which

communication plays an important role.

Craig, Beatty and Baird (1986) suggested an eight-stage “Performance

Appraisal” process:

(i) Establishing Standards and Measures

The first step is to identify and establish measures which would

differentiate between successful and unsuccessful performances. These

measures should be under the control of the employees being

appraised. The methods for assessing performance should be decided

next. Basically, management wants to:

know the behavior and personal characteristics of each employee;

and

assess their performance and achievement in the job.

There are various methods available for assessing results, behavior

and personal characteristics of an employee. These methods can be

used according to the particular circumstances and requirements.

(ii) Communicating Job Expectations

48

The second step in the appraisal process is communicating to

employees the measures and standards which will be used in the

appraisal process. Such communication should clarify expectations and

create a feeling of involvement.

(iii) Planning

In this stage, the manager plans for the realization of performance

expectations, arranging for the resources to be available which are

required for attaining the goals set. This is an enabling role.

(iv) Monitoring Performance

“Performance Appraisal” is a continuous process, involving ongoing

feedback. Even though performance is appraised annually, it has to be

managed 'each day, all year long.' Monitoring is a key part of the

“Performance Appraisal” process. It should involve providing

assistance as necessary and removing obstacles rather than

interfering. The best way to effectively monitor is to walk around, thus

creating continuous contacts, providing first-hand information, and

identifying problems, which can then be solved promptly.

(v) Appraising

This stage involves documenting performance through observing,

recalling, evaluating, written communication, judgment and analysis of

data. This is like putting together an appraisal record.

(vi) Feedback

49

After the formal appraisal stage, a feedback session is desirable. This

session should involve verbal communication, listening, problem

solving, negotiating, compromising, conflict resolution and reaching

consensus.

(vii) Decision Making

On the basis of appraisal and feedback results, various decisions can

be made about giving rewards (e.g., promotion, incentives, etc.) and

punishments (e.g., demotion). The outcome of an appraisal system

should also be used for career development.

(viii) Development of performance

The last stage of “Performance Appraisal” is 'development of

performance,' or professional development, by providing opportunities

for upgrading skills and professional interactions. This can be done by

supporting participation in professional conferences or by providing

opportunities for further study. Such opportunities can also act as

incentives or rewards to employees.

The ESSENTIALS of an effective performance system are as follows:

50

Documentation – means continuous noting and documenting the performance. It also helps the evaluators to give a proof and the basis of their ratings.

Standards / Goals – the standards set should be clear, easy to understand, achievable, motivating, time bound and measurable.

Practical and simple format - The appraisal format should be

simple, clear, fair and objective. Long and complicated formats are

time consuming, difficult to understand, and do not elicit much useful

information.

WHAT SHOULD A PERFORMANCE SYSTEM BE?

51

Correlated with the organization's philosophies and mission

Cover assessment of performance as well as potential for

development

Look after the needs of both the individual and the organization

Help create a clean environment

Rewards linked to achievements

Generate information for personnel development and career

planning

suggesting appropriate person-task matching

HOW CAN THE “PERFORMANCE APPRAISAL” SYSTEM HELP?

Promote better understanding of an employee's role and clarity

about his or her functions

52

Give a better understanding of personal strengths and

weaknesses in relation to expected roles and functions

Identify development needs of an employee

Establish common ground between the employee and the

supervisor

Increase communication

Provide an employee with the opportunity for self-reflection and

individual goal setting

Help an employee internalize the culture, norms and values of

the organization. This helps develop an identity with and

commitment to the organization and prepares an employee for

higher-level positions in the hierarchy

Assist in a variety of personnel decisions

APPROACHES IN “PERFORMANCE APPRAISAL”

Intuitive

Self-appraisal

Group

53

Trait

Achievement of results

TECHNIQUES OF “PERFORMANCE APPRAISAL”

Easy appraisal method

Graphic rating scales

54

Field review method

Forced choice rating method

Critical incident appraisal method

Management by objectives

Work standard approach

Ranking methods

methods

Alteration ranking

- Paired comparison

- Person-to-person rating

- Checklist

- Behaviorally anchored rating scales

- Assessment centers

“PERFORMANCE APPRAISAL” SYSTEMS

55

PROBLEMS

Measurement Judgement Policy Organization

Deciding what to

evaluate

Appraising

performance

Using the results

of the appraisal

Recognizing how

managers work

and the

organization

culture

SYMPTOMS

Ambiguity in

roles and

responsibilities of

each job

Job

performance is

difficult to

quantify

No clear

statement of

overall objectives

of units or the

organization

Appraisal

contains only

numerical indices

Disagreement

on ratings

Official review

changes ratings

Appeals,

grievances,

accusations of

bias,

discrimination

Top

management fails

to reward

managers who

are excellent in

staff assessment

and development

Marginal

performers

receive

promotions or

salary increases

Appraisal forms

not completed

Managers com

plain about time

needed

System seen

as belonging to

the designers, not

the users

Personnel/HR

specialists take

enforcer not

adviser role

system revised

frequently

POTENTIAL CURES

Job analysis

and credible job

description

Observable,

behaviorally

Top

management

actually uses

Implement

“Performance

Appraisal” using

56

Outcomes of

each job

identified

Overall goals

set for units and

the organization

Train

managers to

make

documented

judgements

based criteria

Performance

documented over

time

rater training

and practice

Effective

communication

of performance

expectations

“Performance

Appraisal” itself

Polices for

“Performance

Appraisal”

consistently

applied

performance-

contingent

reward system

operates

the Performance

Management (PM)

ICICI BANK – company profile

Overview

ICICI Bank is India's second-largest bank with total assets of Rs.

3,744.10 billion (US$ 77 billion) at December 31, 2008 and profit after

tax Rs. 30.14 billion for the nine months ended December 31, 2008.

57

The Bank has a network of 1,438 branches and about 4,644 ATMs in

India and presence in 18 countries. ICICI Bank offers a wide range of

banking products and financial services to corporate and retail

customers through a variety of delivery channels and through its

specialized subsidiaries and affiliates in the areas of investment

banking, life and non-life insurance, venture capital and asset

management. The Bank currently has subsidiaries in the United

Kingdom, Russia and Canada, branches in United States, Singapore,

Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International Finance

Centre and representative offices in United Arab Emirates, China,

South Africa, Bangladesh, Thailand, Malaysia and Indonesia. Our UK

subsidiary has established branches in Belgium and Germany.

ICICI Bank's equity shares are listed in India on Bombay Stock

Exchange and the National Stock Exchange of India Limited and its

American Depositary Receipts (ADRs) are listed on the New York Stock

Exchange (NYSE).

History

ICICI Bank was originally promoted in 1994 by ICICI Limited, an

Indian financial institution, and was its wholly-owned subsidiary.

ICICI's shareholding in ICICI Bank was reduced to 46% through a

public offering of shares in India in fiscal 1998, an equity offering in

the form of ADRs listed on the NYSE in fiscal 2000, ICICI Bank's

58

acquisition of Bank of Madura Limited in an all-stock amalgamation in

fiscal 2001, and secondary market sales by ICICI to institutional

investors in fiscal 2001 and fiscal 2002. ICICI was formed in 1955 at

the initiative of the World Bank, the Government of India and

representatives of Indian industry. The principal objective was to

create a development financial institution for providing medium-term

and long-term project financing to Indian businesses. In the 1990s,

ICICI transformed its business from a development financial institution

offering only project finance to a diversified financial services group

offering a wide variety of products and services, both directly and

through a number of subsidiaries and affiliates like ICICI Bank. In

1999, ICICI become the first Indian company and the first bank or

financial institution from non-Japan Asia to be listed on the NYSE.

After consideration of various corporate structuring alternatives in the

context of the emerging competitive scenario in the Indian banking

industry, and the move towards universal banking, the managements

of ICICI and ICICI Bank formed the view that the merger of ICICI with

ICICI Bank would be the optimal strategic alternative for both entities,

and would create the optimal legal structure for the ICICI group's

universal banking strategy. The merger would enhance value for

ICICI shareholders through the merged entity's access to low-cost

deposits, greater opportunities for earning fee-based income and the

ability to participate in the payments system and provide transaction-

banking services. The merger would enhance value for ICICI Bank

shareholders through a large capital base and scale of operations,

seamless access to ICICI's strong corporate relationships built up over

59

five decades, entry into new business segments, higher market share

in various business segments, particularly fee-based services, and

access to the vast talent pool of ICICI and its subsidiaries. In October

2001, the Boards of Directors of ICICI and ICICI Bank approved the

merger of ICICI and two of its wholly-owned retail finance subsidiaries,

ICICI Personal Financial Services Limited and ICICI Capital Services

Limited, with ICICI Bank. The merger was approved by shareholders of

ICICI and ICICI Bank in January 2002, by the High Court of Gujarat at

Ahmedabad in March 2002, and by the High Court of Judicature at

Mumbai and the Reserve Bank of India in April 2002. Consequent to

the merger, the ICICI group's financing and banking operations, both

wholesale and retail, have been integrated in a single entity.

Board Members

Mr. K. V. Kamath, Chairman

Mr. Sridar Iyengar Mr. Lakshmi N. Mittal

Mr. Narendra Murkumbi

Dr. Anup K. Pujari

Mr. Anupam Puri

Mr. M.S. Ramachandran

60

Mr. M.K. Sharma

Mr. P.M. Sinha

Prof. Marti G. Subrahmanyam

Mr. T.S. Vijayan Mr. V. Prem Watsa

Ms. Chanda Kochhar, Managing Director & CEO

Mr. Sandeep Bakhshi, Executive Director

Mr. Sonjoy Chatterjee, Executive Director

Mr. K. Ramkumar, Executive Director

Mr. N. S. Kannan, Executive Director & CFO

Board Committees

Audit Committee Board Governance &

Remuneration Committee

Mr. Sridar Iyengar

Mr. Narendra Murkumbi

Mr. M. K. Sharma

Mr. M. K. Sharma

Mr. K. V. Kamath

Mr. Anupam Puri

Mr. P. M. Sinha

Prof. Marti G. Subrahmanyam

Customer Service

Committee Credit Committee

Mr. K. V. Kamath

Mr. Narendra Murkumbi

Mr. M.K. Sharma

Mr. P.M. Sinha

Ms. Chanda Kochhar

Mr. K. V. Kamath

Mr. Narendra Murkumbi

Mr. M .K. Sharma

Mr. P. M. Sinha

Ms. Chanda Kochhar

61

Fraud Monitoring

CommitteeRisk Committee

Mr. M. K. Sharma

Mr. K. V. Kamath

Mr. Narendra Murkumbi

Ms. Chanda Kochhar

Mr. Sandeep Bakhshi

Mr. K. V. Kamath

Mr. Sridar Iyengar

Prof. Marti G. Subrahmanyam

Mr. V. Prem Watsa

Ms. Chanda Kochhar

Share Transfer &

Shareholders'/ Investors'

Grievance Committee

Committee of Directors

Mr. M. K. Sharma

Mr. Narendra Murkumbi

Mr. N. S. Kannan

Ms. Chanda Kochhar

Mr. Sandeep Bakhshi

Mr. Sonjoy Chatterjee

Mr. K. Ramkumar

Mr. N. S. Kannan

62

Extra Mile for ICICI bank

ICICI Bank 2009

ICICI Bank bags the “Best bank in SME financing (Private Sector)” at

the Dun & Bradstreet Banking awards 2009.

ICICI Bank NRI services win the “Excellence in Business Model

Innovation Award” in the eighth Asian Banker Excellence in Retail

Financial Services Awards Programme.

ICICI Bank's Rural Micro Banking and Agri-Business Group win WOW

Event & Experiential Marketing Award in two categories - “Rural

Marketing programme of the year” and “Small Budget On Ground

Promotion of the Year”. These awards were given for Cattle Loan

'Kamdhenu Campaign' and 'Talkies on the move campaign'

respectively.

ICICI Bank's Germany Branch has been certified by “Stiftung

63

Warrentest”. ICICI Bank is ranked 2nd amongst 57 savings products

across 19 banks

ICICI Bank Germany won the yearly banking test of the investor

magazine €uro in the “call money”category.

The ICICI Bank was awarded the runner's up position in Gartner

Business Intelligence and Excellence Award for Asia Pacific for its

Business Intelligence functions.

ICICI Bank's Organizational Excellence Group was recently awarded

ISO 9001:2008 certification by TUV Nord. The scope of certification

comprised processes around consulting and capability building on

methods of quality & improvements.

ICICI Bank has been awarded the following titles under The Asset

Triple A Country Awards for 2009:

• Best Transaction Bank in India

• Best Trade Finance Bank in India

• Best Cash Management Bank in India

• Best Domestic Custodian in India

ICICI Bank has bagged the Best Cash Management Bank in India

award for the second year in a row. The other awards have been

bagged for the third year in a row.

ICICI Bank Canada received the prestigious Canadian Helen Keller

Award at the Canadian Helen Keller Centre's Fifth Annual Luncheon

in Toronto. The award was given to ICICI Bank its long-standing

support to this unique training centre for people who are deaf-blind.

64

Needs and Importance For “Performance

Appraisal” in Banking

The butt of many a corporate joke, these hard working professionals

are often relegated to small back offices where their activities, viewed

as little more than administrative functions, are carried out without

much recognition. But in an increasingly aggressive corporate world,

where every competitive edge counts, leading organisations would do

well to recognise the human potential that can be unleashed by

adopting effective human resource management strategies that realise

the potential of employees and earn their respect and loyalty.

Dealing with the mundane personal matters of corporate life has

traditionally been seen as the sole purpose of the HR department.

From hiring workers and providing transportation and meals services,

to processing housing, medical and insurance benefits, the functions of

HR professionals have been recognised as essential, but have not

always inspired respect for those involved in executing them.

Essentially, people remain the strongest and most competitive

assets of a business.

This should, and is, changing. In a region where business growth is

rapid, and organisations are competing to secure talent from the same

pool, investing in and revering effective HR departments to find, train

65

and help retain this talent is increasingly important. Testament to the

fact many banks in the region are now recognising the value of

developing their human resources, Abu Dhabi recently hosted the

Middle East Human Resource Summit - the annual conference and

exhibition for industry professionals. But can everyone be persuaded

to take real action in developing their HR departments

Banking industry is facing a cut throat completion in present banking

scenario where the motivation of the employee can be a competitive

advantage to retain its customer.

66

“Performance Appraisal” In Banking

Sector

“Performance Appraisal” is a vehicle to (1) validate and refine

organizational actions (e.g. selection, training); and (2) provide

feedback to employees with an eye on improving future performance.

Validating and refining organizational action or banks action

Employee selection, training and just about any cultural or

management practice—such as the introduction of a new pruning

method or an incentive pay program—may be evaluated in part by

obtaining worker performance data.

The evaluation may provide ideas for refining established practices or

instituting new ones. For instance, appraisal data may show that a

farm supervisor has had a number of interpersonal conflicts with other

managers and employees. Some options include

(1) Paying more attention to interpersonal skills when

selecting new supervisors,

(2) Encouraging present supervisors to attend communication

or conflict management

Classes at the local community college, or

(3) Providing the supervisor one-on-one counseling.

Data from “Performance Appraisal”s can also help farmers

67

(1) Plan for long-term staffing and worker development,

(2) give pay raises or other rewards,

(3) Set up an employee counseling session, or

(4) Institute discipline or discharge procedures.

For validation purposes, it is easier to evaluate performance data when

large numbers of workers are involved such as in banks. Useful

performance data may still be collected when employees are evaluated

singly, but it may take years to obtain significant data trends.

Employee need for feedback

68

Although employees vary in their desire for improvement, generally

workers want to know how well they are performing. A successful

farmer recalled with sadness how as a youth he had worked very hard,

along with his immigrant family, for a farmer who never seemed to

notice the effort. Years later he met the former employer and asked

why he had never made any positive comments about their work. The

response from the former boss was, "I feared you would stop working

as hard."

People need positive feedback and validation on a regular basis. Once

an employee has been selected, few management actions can have as

positive an effect on worker performance as encouraging affirmation.

These are, in effect, good-will deposits, without which withdrawals

cannot be made. This does not mean you should gloss over areas

needing improvement. When presented in a constructive fashion,

workers will often be grateful for information on how to improve

shortcomings. Such constructive feedback, however, "can happen only

within the context of listening to and caring about the person." In

general, supervisors who tend to look for worker’s positive behaviors—

and do so in a sincere, non-manipulative way—will have less difficulty

giving constructive feedback or suggestions. Furthermore, in the

negotiated approach, the burden for performance analysis does not fall

on the supervisor alone, but requires introspection on the part of the

individual being evaluated.

Feedback may be qualitative or quantitative. Qualitative comments are

descriptive, such as telling the shop mechanic you appreciate the

timeliness and quality of her repairs. In contrast, quantitative feedback

is based on numerical figures, such as the percentage of plant grafts

69

that have taken. Some researchers feel feedback is particularly useful

when workers have an achievement objective

By focusing the attention on performance, performance appraisal goes

to the heart of personnel management and reflects the

management's interest in the progress of the employees.

Objectives Of Performance appraisal:

70

• To review the performance of the employees over a given period of time.

• To judge the gap between the actual and the desired performance.

• To help the management in exercising organizational control.

• Helps to strengthen the relationship and communication between superior – subordinates and management – employees.

• To diagnose the strengths and weaknesses of the individuals so as to identify the training and development needs of the future.

• To provide feedback to the employees regarding their past performance.

• Provide information to assist in the other personal decisions in the organization.

• Provide clarity of the expectations and responsibilities of the functions to be performed by the employees.

• To judge the effectiveness of the other human resource functions of the organization such as recruitment, selection, training and development.

• To reduce the grievances of the employees.

71

Followings should kept in the mind for effective “Performance

Appraisal” in a bank

Select what performance data to collect

Determine who conducts the appraisal

Decide on a rating philosophy

Overcome rating deficiencies

Create a rating instrument

Deliver useful information to employees

The “Performance Appraisal” or review is essentially an opportunity for

the individual and those concerned with their performance in the

bank , most usually their line manager - to get together to engage in a

dialogue about the individual’s performance, development and the

support required from the manager. It should not be a top down

process or an opportunity for one person to ask questions and the

other to reply. It should be a free flowing conversation in which a

range of views are exchanged.

“Performance Appraisal”s usually review past behavior and so provide

an opportunity to reflect on past performance of the bank employees.

But to be successful they should also be used as a basis for making

development and improvement plans and reaching agreement about

what should be done in the future to enhance the bank’s effect and

effectiveness.

72

The “Performance Appraisal” is often the central pillar of performance

management in the bank to keep the motivation of the employees

high.

73

“Performance Appraisal” And

Performance Management In ICICI Bank

• The facilitation of high achievement by employees. Performance

management involves enabling people to perform their work to

the best of their ability, meeting and perhaps exceeding targets

and standards. Performance management can be coordinated by

an interrelated framework between manager and employee. Key

areas of the framework to be agreed are objectives, human

resource management, standards and performance indicators,

and means of reward. For successful performance management

in ICICI , a culture of collective and individual responsibility for

the continuing improvement of business processes needs to be

established, and individual skills and contributions need to be

encouraged and nurtured as the bank deals in service sector

where the employees are the main factor of making the

difference . One tool for monitoring performance management is

“Performance Appraisal” that the banks use for rewarding its

employees. For the bank, performance management is usually

known as company performance and is monitored through

business appraisal.

74

75

Reasons for “Performance Appraisal” in ICICI

Increase motivation to perform effectively

Increase staff self-esteem

Gain new insight into staff and supervisors

Better clarify and define job functions and responsibilities

Develop valuable communication among appraisal participants

Encourage increased self-understanding among staff as well as

insight into the kind of development activities that are of value

Distribute rewards on a fair and credible basis

Clarify organizational goals so they can be more readily accepted

Improve institutional/departmental manpower planning, test

validation, and development of training programs

76

Modern Trends In Banks for P.A

A growing number of front running banks like ICICI, and others have

adopted a “Performance Appraisal” model in which best-to-worst

ranking methods are used to identify poor performers. The identified

poor performers are then given a time period during which they have

to show an improvement in their performance.

In cases where the employee fails to improve his performance he is

asked to leave the organization gracefully and a severance package is

offered to him. If the employee refuses to leave then his service is

terminated and no compensation is offered. This system is called “rank

and yank strategy”. Advocates of this system feel that it continually

motivates employees to better their performance since nobody would

like to be included in the poor performance band. But the flip side of

this strategy is that employees become too competitive and team spirit

is not nurtured.

Effective banks are not build merely on investment and returns but

more on the quality of the workforce, its commitment to the

organizational goals and investments made to attract train and retain

superior human capital. An integrated Performance Management

system is essential to get the best out of its people. Employee

performance is linked to the bank’s performance. This helps in

achieving the organizational goal and creates a performance culture in

77

the bank. Invention, creativity, diversity of perspectives is fostered.

Employees act as one bank one brand.

78

ICICI BANK PEFORMENCE APPRAISAL ENVIRONMENT

The bank is using the Management by Objectives (MBO) method. In

this method the subordinate in consultation with the supervisor chalks

out short term objectives followed by specific actions that he has to

carry out. The goals are finally set and are action oriented. The goals

set are specific, measurable, achievable, review able and time bound

and most importantly they use to be aligned with the goal of the

organization. At the end of a specified time period, the activities are

jointly reviewed by both the subordinate and his supervisor.

Depending on the performance of the subordinate, the goals are

modified or redesigned for the next period of time.

The MBO is thus a performance oriented system. A well thought out

MBO system provides multiple benefits. It establishes a link between

the performance of the individual and the bank

It is easy to implement because those who carry out the plan also

participates in setting it up. Each employee becomes aware of the task

he has to perform in the bank. This leads to better utilization of

capacity and talent. It promotes better communication and information

sharing. It provides guidelines for self evaluation as well as evaluation

by the superior against set tasks and goals. It facilitates guidance and

counseling.

79

The Effective Components of ICICI P .A System

Performance Planning (includes employee goal setting / objective

setting)

Ongoing Performance Communication

Data Gathering, Observation and Documentation

“Performance Appraisal” Meetings

Performance Diagnosis and Coaching

An effective “Performance Appraisal” system in ICICI bank emphasizes

individual objectives, Bank objectives and also mutual objectives.

From the viewpoint of individual objective the “Performance Appraisal”

talks about

a) What task the individual is expected to do?

b) How well the individual has done the task?

c) How can his performance be further improved?

d) His reward for doing well.

From the bank view point a “Performance Appraisal” should generate

manpower information, improve efficiency and effectiveness serve as a

mechanism of control and provide a rational compensation structure.

In short the appraisal system establishes and upholds the principle of

accountability in the absence of which bank failure is the only possible

outcome.

80

Finally, talking about mutual goals, the emphasis is on growth and

development, harmony, effectiveness and profitability of the bank

81

ICICI HR Philosophy on P.A

“Performance Appraisal” is one such method that allows for the

optimisation of employees. In a broad sense , it is a formal structure

that allows for the continued measuring and evaluation of individual

behavior and performance, whilst influencing an employees job related

attributes through such factors as increased job satisfaction and

recognition (with the use of promotional aids such as better

equipment, duties, and salaries). The purpose of any such system, is

not only to measure the performance of human resources but also to

find areas of skill deficit for further development (through employee

feedback), identify excess potential that could be better utilized, and

communicate objectives more accurately to workers . By doing so,

businesses move one step closer to the achievement of their set goals

and objectives. Included here is also one other factor that is not a

direct objective of appraisals, but becomes a valuable asset within

itself. This simply is the provision for maintaining records of workers

that are legally viable, that can protect the business when dealing in

cases of dismissals and demotions. This is especially important in

today’s society because of the "increasing legislation and regulation

dealing with victimization and discrimination" making bank liable for all

their actions.

The annual “Performance Appraisal” is usually done in two steps. First,

the employees and their manager complete the “Performance

Appraisal” form - doing a self assessment. Often the bank also uses a

60 degree feedback process, asking for input from peers. Secondly,

82

the bank employees and manager participate in a formal “Performance

Appraisal” interview. The appraisal form, used in the first step,

consists of performance standards and criteria that are used to judge

evaluate your performance. The items comprising your job description

are usually the performance standards that are used in employees

annual appraisal .The performance standards are derived from a job

analysis, which is a detailed list of all of the skills involved in

performing a task. For example, what are the skills necessary to

perform a complete blood count? The criteria are used to determine

the level of performance, which can be excellent, average, or poor (or

alternatively meets, exceeds or does not meet standards). Once

appraisal is complete, score is averaged and merit raise (if applicable)

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Forms Used By The Bank For P.A

1. General “Performance Appraisal” Form I

Six-page form includes evaluation sections for three categories: a) objectives from last review period; b) current job duties (which are customizable), and c) organization core values (e.g., maturity, vision).

2. General “Performance Appraisal” Form II

Four-page form has three sections: a) overall performance, b) communication skills, and c) people/self development skills.

3. General “Performance Appraisal” Form III

Two-page "short form" has numerical rankings for two sections: a) general work attributes and b) managerial attributes. Includes a weighted average calculation.

4. 360-Degree “Performance Appraisal” Form I

Two-page form for peers, outside suppliers and customers to fill out. Also can be used for "upwards" feedback about managers.

5. 360-Degree “Performance Appraisal” Form II

Two-page form for peers and outsiders - all open-ended questions, without numerical rankings.

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6. Manager “Performance Appraisal” Form

Six-page form with all sections related to managerial skills. Also includes a section for listing future objectives.

7. Administrative/Technical “Performance Appraisal” Form

Four-page form perfect for administrative, technical and customer service workers.

8. Sales “Performance Appraisal” Form

Five-page form focused on sales personnel. Includes four sections: a) actual vs. plan performance, b) lead generation, c) selling skills and d) account maintenance.

9. Project Evaluation Review Form

Four-page form geared towards specific projects, and an individuals' role on a given project.

10. Employee Self-Assessment Form

Two-page open-ended form for an employee to fill-out before his or her own review. Sections include: a) success in meeting goals from last review, b) accomplishments and c) areas for improvement.

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Approaches And Techniques In “Performance Appraisal” Used

By The Bank

“Performance Appraisal” is a multistage process involving several

activities, which can be administered using a variety of approaches.

Some of these approaches are being used by the banks for

“Performance Appraisal”

Intuitive Approach: In this approach, a supervisor or manager

judges the employee based on their perception of the employee's

behavior.

Self-Appraisal Approach: Employees evaluate their own

performance using a common format.

Group Approach: The employee is evaluated by a group of

persons.

Trait Approach: This is the conventional approach. The manager

or supervisor evaluates the employee on the basis of observable

dimensions of personality, such as integrity, honesty, dependability,

punctuality, etc.

Appraisal Based On Achieved Results: In this type of approach,

appraisal is based on concrete, measurable, work achievements

judged against fixed targets or goals set mutually by the subject and

the assessor.

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Behavioral Method: This method focuses on observed behavior

and observable critical incidents.

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Appraisal techniques

There are several techniques of “Performance Appraisal”, each with

some strong points as well as limitations. Oberg (1972) has

summarized some of the commonly used “Performance Appraisal”

techniques.

(i) Essay Appraisal Method:

The assessor writes a brief essay providing an assessment of the

strengths, weaknesses and potential of the subject. In order to do so

objectively, it is necessary that the assessor knows the subject well

and should have interacted with them. Since the length and contents

of the essay vary between assessors, essay ratings are difficult to

compare.

(ii) Graphic Rating Scale

A graphic scale 'assesses a person on the quality of his or her work

(average; above average; outstanding; or unsatisfactory).'

Assessment could also be trait centered and cover observable traits,

such as reliability, adaptability, communication skills, etc. Although

graphic scales seem simplistic in construction, they have application in

a wide variety of job responsibilities and are more consistent and

reliable in comparison with essay appraisal. The utility of this

technique can be enhanced by using it in conjunction with the essay

appraisal technique.

(iii) Field Review Method

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Since individual assessors differ in their standards, they inadvertently

introduce bias in their ratings. To overcome this assessor-related bias,

essay and graphic rating techniques can be combined in a systematic

review process. In the field review method, 'a member of the HRM

staff meets a small group of assessors from the supervisory units to

discuss each rating, systematically identifying areas of inter-assessor

disagreement.' It can then be a mechanism to help each assessor to

perceive the standards uniformly and thus match the other assessors.

Although field review assessment is considered valid and reliable, it is

very time consuming.

(iv) Forced-Choice Rating Method

Unlike the field review method, the forced-choice rating method does

not involve discussion with supervisors. Although this technique has

several variations, the most common method is to force the assessor

to choose the best and worst fit statements from a group of

statements. These statements are weighted or scored in advance to

assess the employee. The scores or weights assigned to the individual

statements are not revealed to the assessor so that she or he cannot

favor any individual. In this way, the assessor bias is largely

eliminated and comparable standards of performance evolved for an

objective. However, this technique is of little value wherever

“Performance Appraisal” interviews are conducted.

(v) Critical Incident Appraisal Method

In this method, a supervisor describes critical incidents, giving details

of both positive and negative behavior of the employee. These are

then discussed with the employee. The discussion focuses on actual

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behavior rather than on traits. While this technique is well suited for

performance review interviews, it has the drawback that the

supervisor has to note down the critical incidents as and when they

occur. That may be impractical, and may delay feedback to

employees. It makes little sense to wait six months or a year to

discuss a misdeed, a mistake or good display of initiative.

(vi) Management By Objectives

The employees are asked to set or help set their own performance

goals. This avoids the feeling among employees that they are being

judged by unfairly high standards. This method is currently widely

used, but not always in its true spirit. Even though the employees are

consulted, in many cases management ends up by imposing its

standards and objectives. In some cases employees may not like 'self-

direction or authority.' To avoid such problems, the work standard

approach is used.

(vii) Work Standard Approach

In this technique, management establishes the goals openly and sets

targets against realistic output standards. These standards are

incorporated into the organizational “Performance Appraisal” system.

Thus each employee has a clear understanding of their duties and

knows well what is expected of them. “Performance Appraisal” and

interview comments are related to these duties. This makes the

appraisal process objective and more accurate. However, it is difficult

to compare individual ratings because standards for work may differ

from job to job and from employee to employee. This limitation can be

overcome by some form of ranking using pooled judgment.

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(viii) Ranking Methods:

Some of the important forms of ranking for “Performance Appraisal”

are given below, based on Oberg, 1972; and Monga, 1983:

(a) Alteration Ranking Method

The Individual With The Best performance is chosen as the ideal

employee. Other employees are then ranked against this employee in

descending order of comparative performance on a scale of best to

worst performance. The alteration ranking method usually involves

rating by more than one assessor. The ranks assigned by each

assessor are then averaged and a relative ranking of each member in

the group is determined. While this is a simple method, it is

impractical for large groups. In addition, there may be wide variations

in ability between ranks for different positions.

(b) Paired Comparison: The paired comparison method

systematizes ranking and enables better comparison among

individuals to be rated. Every individual in the group is compared with

all others in the group. The evaluations received by each person in the

group are counted and turned into percentage scores. The scores

provide a fair idea as to how each individual in the group is judged by

the assessor.

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(c) Person-to-Person Rating: In the person-to-person rating

scales, the names of the actual individuals known to all the assessors

are used as a series of standards. These standards may be defined as

lowest, low, middle, high and highest performers. Individual

employees in the group are then compared with the individuals used

as the standards, and rated for a standard where they match the best.

The advantage of this rating scale is that the standards are concrete

and are in terms of real individuals. The disadvantage is that the

standards set by different assessors may not be consistent. Each

assessor constructs their own person-to-person scale which makes

comparison of different ratings difficult.

(d) Checklist Method: The assessor is furnished with a checklist of

pre-scaled descriptions of behavior, which are then used to evaluate

the personnel being rated (Monga, 1983). The scale values of the

behavior items are unknown to the assessor, who has to check as

many items as she or he believes describe the worker being assessed.

A final rating is obtained by averaging the scale values of the items

that have been marked.

(e) Behaviorally Anchored Rating Scales (BARS): This is a

relatively new technique. It consists of sets of behavioral statements

describing good or bad performance with respect to important

qualities. These qualities may refer to inter-personal relationships,

planning and organizing abilities, adaptability and reliability. These

statements are developed from critical incidents collected both from

the assessor and the subject.

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(f) Assessment centers: This technique is used to predict future

performance of employees were they to be promoted. The individual

whose potential is to be assessed has to work on individual as well as

group assignments similar to those they would be required to handle

were they promoted. The judgment of observers is pooled and paired

comparison or alteration ranking is sometimes used to arrive at a final

assessment. The final assessment helps in making an order-of-merit

ranking for each employee. It also involves subjective judgment by

observers.

A “Performance Appraisal” system could be designed based on

intuition, self-analysis, personality traits, behavioral methods and

result-based techniques. Different approaches and techniques could be

blended, depending on the goals of “Performance Appraisal” in the

organization and the type of review. For example, management by

objectives, goal-setting and work standard methods are effective for

objective coaching, counseling and motivational purposes. Critical

incident appraisal is best suited when supervisor's personal

assessment and criticism are essential. A carefully developed and

validated forced-choice rating can provide valuable analysis of the

individual when considering possible promotion to supervisory

positions. Combined graphic and essay form is simple, effective in

identifying training and development needs, and facilitates other

management decisions.

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Banner Corporation Banks on Halogen for

Talent and Learning and performance

Management (For Practical

Understanding)

Northwest U.S. based Banner Corporation has selected Halogen

Software for a Web-based talent management system to streamline

the employee “Performance Appraisal” process and tightly integrate

learning into its talent management process. Banner Corporation,

which operates commercial banks in Washington, Oregon and Idaho, is

focused on creating a tightly integrated talent management program,

to ensure its 1,200 employees are executing on the bank's strategic

vision and delivering outstanding customer service. Halogen was

selected following a review of more than 20 talent and learning

management vendors.

"Our number one priority was to improve our learning management

processes, and we quickly realized that for this to work, it was critical

that we establish a tight link between employee performance, talent

management and learning functions," explained Mimi Ellis, SVP Talent

Management, Banner Corporation. "We really did our homework and

selected Halogen based on the fact that it would meet all of our

current and future talent management needs."

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The new Web-based system will enable Banner Corporation to

automate the employee appraisal process driving consistency across

the organization. Learning functions, such as compliance training, will

be tied into the appraisal process, and information from appraisals will

be used for succession planning purposes, thereby creating a complete

talent management strategy across all its locations in the Northwest.

Banner Corporation is starting with a deployment of Halogen

eAppraisal Financial Services and Multi-Rater for employee

performance management and plans to build on the implementation

with fully integrated Halogen eSuccession and eLMS modules.

"The Halogen system is straightforward and easy to use, and everyone

we've worked with at the company has been wonderful," added Ellis.

"We are looking forward to continuing to work with Halogen and

reaping the benefits of our new approach to talent management."

Banner Corporation joins financial services institutions across North

America relying on Halogen, including AGF, International Finance

Corporation, People's Bank and United Bank and Trust.

About Halogen Software

A recognized industry leader with over 1000 customers worldwide,

Halogen Software makes powerful, simple-to-use and affordable

employee performance and talent management applications. The

company offers a complete suite of web-based products that

automate, simplify and integrate employee “Performance Appraisal”s,

360 degree feedback, compensation management (pay for

performance), succession planning and learning management.

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Halogen's offering makes HR best-practices accessible to companies of

all sizes and its healthcare, financial services and professional services

specific suites meet the unique needs of these industries. Halogen is

consistently recognized by the industry and its customers for its

exceptional implementation and support services, and has won

multiple awards for its corporate leadership and product innovation,

including HR Technology Product of the Year. For more information,

visit www.halogensoftware.com .

About Banner Corporation

Banner Corporation is the parent company of Banner Bank, a

commercial bank that operates a total of 86 branch offices and 12 loan

offices in 29 counties in Washington, Oregon and Idaho. It is also the

parent of Islanders Bank which operates three branch offices in

Washington's San Juan Islands. Banner serves the Pacific Northwest

region with a full range of deposit services and business, commercial

real estate, construction, residential, agricultural and consumer loans.

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Conclusion

To summarize our discussion we can say that the “Performance

Appraisal” is an integral part of performance management and has

become the important component of the HRM. Performance

management includes activities to ensure that goals are consistently

being met in an effective and efficient manner. Performance

management can focus on performance of the organization, banks, a

department, processes to build a product or service, employees, etc

Performance management reminds us that being busy is not the same

as producing results. It reminds us that training, strong commitment

and lots of hard works alone are not results. The major contribution of

performance management is its focus on achieving results -- useful

products and services for customers inside and outside the bank and

organization. Performance management redirects our efforts away

from busyness toward effectiveness.

Recently, organizations have been faced with challenges like never

before. Increasing competition from businesses across the world has

meant that all businesses must be much more careful about the

choice of strategies to remain competitive. Everyone (and everything)

in the organization must be doing what they're supposed to be doing

to ensure strategies are implemented effectively.

This situation has put more focus on effectiveness, that systems and

processes in the organization be applied in the right way to the right

things: to achieve results. All of the results across the organization

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must continue to be aligned to achieve the overall results desired by

the organization for it to survive and thrive. Only then it be said that

the organization and its various parts are really performing.

We can say that

Performance management should be:

• Strategic - it is about broader issues and longer-

term goals

• Integrated - it should link various aspects of the

business, people management, and individuals and

teams.

A well designed “Performance Appraisal” system helps an

organization, bank

• know and understand what is expected of them

• have the skills and ability to deliver on these

expectations

• are supported by the organization to develop the

capacity to meet these expectations are given feedback

on their performance

• have the opportunity to discuss and contribute to

individual and team aims and objectives.

On going banking scenario has changed the scope of the

performance management system as the competition is extensive

and to retain the employees has become the challenging task for the

management. With the help of “Performance Appraisal” the bank

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can recognize its true personnel inventory and formulate the

strategy for man power planning and career development.

“Performance Appraisal” directly affects the other sub system of

HRM such as manpower planning, selection, career development,

potential development, recruitment, compensation etc.

To wind up our discussion we can say that “Performance Appraisal”

is an integrated and widen approach to guide the employees in the

right direction to achieve organizational as well as individual

objectives mainly in banking sector because of the dominancy of

personal skill and service level to interact with the customers

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Suggestion and recommendation

Though it is the basic rule of the report writing that suggestion and

recommendation should not be given until it’s asked for but to keeping

in the mind the academic nature of the report we would like to

recommend the followings

o Management and employees should see “Performance

Appraisal” as a positive tools to determine the

organizational efficiency and effectiveness

o Banks should use a well communicative method of

“Performance Appraisal” to avoid any resistance from the

employees

o The outcome of the “Performance Appraisal” should be

shared with the concerned employees and corrective action

should be taken in the light of the outcome

o “Performance Appraisal” should be treated as an integral

part of the organizational development not just the

formality

o If the external agency is hired for “Performance

Appraisal” , it will be appreciated to remove the possibility

of biasness

o “Performance Appraisal” should be done on both basis

qualitative an quantitative

o There should be a cost and benefit study of “Performance

Appraisal” process

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Bibliography

1- Books and journals

2- Internal report of banks

3- Corporate bulletin and finance magazine

4- Internet and bank’s website

5- Personal sources

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