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Chapter 1 INTRODUCTION

CHAPTER 1

INTRODUCTION
In todays fast paced world the competition is getting more complex and fierce day by day. Every industry all around the world, in its quest to reach the top and gain the highest profit margin is fighting with its competitors for all kinds of resources which are obviously less than what the needs are. In such a race to get the maximum quantity and the best quality of resources the major problem is to get the required human resource. There are price wars for service people fueled by the competition for good talent. Not only is it difficult to recruit skilled workers, but also to retain them. In the past, companies expected job loyalty, but today, we hear stories of employees accepting other job offers only weeks after being hired. We have to wonder if a person have changed or is it that employers are not able to satisfy employees. To win the battle for workforce share, companies must rethink their strategies to effectively recruit, motivate, and retain committed employees. If we analyze the most important tool which helps in motivating the employees so that the employee benefits the company and the nation as a whole is the performance management system because of a number of reasons. Performance management is the only part of human resource which enlightens the employee and gives him/her a chance to learn and to improve his/her performance. It is the basic human nature that we want to get a feedback for whatever we do. Whether that is positive or negative is regardless as long as we know that whatever we do is noticed by others. Ignorance is worse than negative feedback. The topic under consideration in this thesis is Performance Appraisal and Employee Motivation: A Case Study of the Banking Sector of Pakistan, in which the importance of a well established performance appraisal system is studied and how it is affecting the motivation of employees and the contribution to the betterment of the banking industry in Pakistan.

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1.1

ACADEMIC AND PRACTICAL IMPORTANCE OF THE TOPIC

Whatever that I have learnt in my academics related to the performance appraisal systems and how the employees can be motivated to perform their job can be applied to the topic e.g. what are the methods the banks can use to prevent employees being demotivated and how the performance appraisal forms can be customized to meet the demands of the employees so as to motivate them. This topic has also its practical implications because human resource has recently started to come into limelight and the shift from the administration to the human resources is taking place. Among that as well I think that performance appraisals are the most important and the most complex part which is not getting the importance that it should be getting. Apart from that most of the people are just working for the sake of doing a job and are not really satisfied and motivated to do what they are doing. This aspect can also be improved by the proper use of the performance appraisal systems if an effort is made in that direction. Banking sector is one of the ever-changing sectors in Pakistan and it is an issue for them as well. This study would help them analyze their position among the other banks and it would help them motivate their employees by effectively using the performance appraisal system.

1.2 NEED FOR PERFORMANCE MANAGEMENT SYSTEM


Performance management is the process of creating a work environment or setting in which people are enabled to perform to the best of their abilities. Performance management is a whole work system that begins when a job is defined as needed. It ends when an employee leaves your organization. Managers cite performance appraisals or annual reviews as one of their most disliked tasks. Performance management eliminates the performance appraisal or annual review as the focus and concentrates on the entire spectrum of performance management and development issues. Employee performance development, training, cross-training, the provision of challenging assignments and regular

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performance feedback are included in an effective performance management system. Performance management system should be thought of in a broader manner. A performance management system includes the following actions. Develop clear job descriptions. Select appropriate people with an appropriate selection process. Negotiate requirements and accomplishment-based performance standards, outcomes, and measures. Provide effective orientation, education, and training. Provide on-going coaching and feedback. Conduct quarterly performance development discussions. Design effective compensation and recognition systems that reward people for their contributions. Provide promotional/career development opportunities for staff. Assist with exit interviews to understand WHY valued employees leave the organization.

1.3

BENEFITS OF THE MANAGEMENT SYSTEM

PERFORMANCE

An effective PMS should provide the following benefits: Increase in employee involvement and motivation Fair measurement of performance and potential Provision of a career development framework Equitable reward and compensation

With the attainment of the above mentioned benefits, PMS can also act as a tool which can retain and motivate the employees for the organization.

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1.4

STRATEGIC SHIFT

Until recently, performance appraisals had initiated moderate to little interest in most of the organizations. The issues related to performance appraisals were more a matter of routine personnel department records and reports than boardroom strategizing. Typically, statistical information was dutifully recorded, studied, then filed. This is no longer the case anymore. Performance appraisals are now into a position of priority on executive team and boardroom planning schedules. There is an increasing need for HR to become more proactive in its participation with top management to develop a comprehensive performance appraisal system which can cater to the needs of the employees at all levels. Another issue is that of the motivation of employees. Most of the senior employees in the banking sector probably were demotivated about their jobs from the very initial stages but no importance was given to this problem by the authorities. The shift took place only recently when the lack of motivation on the part of the employees started affecting the profit margins of the bank. This scenario is more prevalent and commonly seen at the older banks whose workforce comprise majority of the older employees. The linkage between the performance appraisal system and the motivation of employees must be viewed as a strategic business issue. The only approach that has the possibility of a successful outcome is a systemic one. It requires full commitment of management in addition to full alliance with the Human Resource Department. Motivation of employees will require a comprehensive process that aligns appropriate employee wants and needs with the performance appraisal system. The internal and external situations that cause the employees to be demotivated are vast and complex. Organizations can do little to control the country's economy or an employee's preference for mobility. An enterprise can, however, design internal culture, structures, strategies, programs and above all an effective performance appraisal system that motivate employees.

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To accomplish this task it is necessary to determine the major issues which cause the employees demotivation for the banking industry. Motivation issues are the result of very complex and multifaceted phenomenon. There is not just one strategy, methodology or program that is the definitive answer to motivate employees. But the problems can be reduced to some extent by having a comprehensive performance appraisal system which is aligned with the needs of the employees.

1.5

SCOPE OF THE STUDY

There are twenty-four private banks in Pakistan while some other are government banks but three have been taken as a sample size among them for detailed study about their employees. Some other banks are also studied broadly and their features have been highlighted. The banks that are chosen for the research are: Bank Alfalah Limited Habib Bank Limited Allied Bank Limited

1.6 OBJECTIVES OF THE STUDY


The objective of the study is to find the impact of performance appraisals on the motivation of employees in today's organizations in general and in the banking sector of Pakistan in particular. To find about the problems that they face and how they can focus their energy in a proactive manner to motivate them. Motivating good employees in the banks requires more than just thinking. For banks to remain competitive, it has to be a reality and for that reality to be implemented the linkage of the performance appraisal with the motivation of the employees is essential. A huge industrialist once commented, Take away my factories, my plants; take away my railroads, my ships, my transportation, take away my money; strip me of all of these but leave me my key people (who are motivated), and in two or three years, I will have them all again.

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The aim of the thesis is to find ways and methods to motivate employees in the banking sector primarily by improving and designing better performance appraisal systems.

1.7

LIMITATIONS OF THE RESEARCH

The research has some limitations as well which should be highlighted here for better understanding of the whole content. Firstly, the sample is relatively small, which limits the significance of the results. Although maximum efforts were made to get a large number of responses from each bank but the average size were about 25 participants from each bank. Secondly, the biggest problem in the research regarding performance appraisals was the honestly and integrity of the participants in filling out the forms. As the research is dependent on questionnaire, so individual concerns in filling out questionnaire honestly is a limitation. Apart from that in the older banks where majority of the employees are senior employees were not willing to fill out the questionnaires and some of them who even did fill were not very interested and did not take the process very seriously. Finally, this thesis focused on a fairly broad aspect of motivation. Although a number of aspects have been defined to find out how motivated an employee is e.g. learning from the job, communication with the peers, subordinates and superiors, the level of satisfaction with the whole appraisal process, work environment and job content etc, but still all the aspects of motivation could not be taken into consideration. For that reason it is reasonable to believe that there might be additional moderators operating here that would be worthy of future investigation

1.8

HYPOTHESIS

Some of the hypothesis which were kept in mind while conducting the research are as follows: 1. 2. Higher objectivity in questions lead to higher job satisfaction Awareness of the appraiser lead to higher motivation

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3. 4. 5. More time spent at a bank leads to higher motivation Frequent promotions lead to higher motivation of employees Perception of unfairness of the appraisal forms lead to dissatisfaction of the employees

1.9

RESEARCH QUESTIONS

Some of the key research questions that would be highlighted and studied in this thesis are as under: How frequently are the appraisals being carried out at the bank? What are the major issues which lead to the demotivation of the employees? Why is the level of job satisfaction and the motivation due to the performance appraisal system more in the new banks as compared to the older banks? Is there a linkage between the performance appraisal system and the promotion of employees? Are any steps being taken to improve the whole process? Is there an effective orientation program which gives the employees a clear insight into why and how the appraisal process takes place? Is performance being overseen? Are the employees being offered any development program in accordance to the performance appraisal process? Are the banks meeting individual needs?

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Chapter 1 INTRODUCTION Figure 1: Theoretical framework flow

Communication Awareness of the appraiser Work Environment Objectivity appraisal forms Motivation of employees Job Content Frequent promotions

Perception of unfairness

Satisfaction of employees
Independent Variables Dependent Variables

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1.10 DATA COLLECTION INSTRUMENTS


Questionnaires were the primary data collection instrument; it is appropriate to discuss here that other quantitative technique have also been used. In addition to questionnaires, the banks provided various written information, such as corporate annual statements, co-worker magazines, and brochures and leaflets describing corporate policies and philosophies. 1.10a Employees Surveys (Questionnaire) Most of the data that was received about the performance appraisals and the motivation of employees at the banks was through the questionnaires. It was helpful in getting large amount of information in a more quantitative manner. On the average a sample size of 25 to 30 employees were questioned in each bank to have a reliable database about the issues related to the motivation of employees. 1.10b Interviews Interviews help in getting the information that cannot be gathered through the questionnaires, therefore some of the top executives from each bank are interviewed as well, to have a two-way communication and to resolve some untapped areas. 1.10c Secondary Data As a part of this thesis a detailed literature review is carried out to gather existing information and research studies about the issue and to analyze the issues through certain best practices through out the world. Theories, articles and some surveys are used and highlighted as to gather information about employee satisfaction and retention rate. 1.10d Extensive On-line Search Internet is used to gather information and literature review as well as to gather information about how to solve the issue.

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LITERATURE

CHAPTER 2

LITERATURE REVIEW
MOTIVATIONAL PRESPECTIVES AND THEORIES 2.1 EMPLOYEE PERSPECTIVES ABOUT PERFORMANCE APPRAISALS

The concept of performance management is a very broad concept with a number of terms constituting it. One of the major constituents of the performance management process is the performance appraisal system. These two terms are often used interchangeably but in reality they are two entirely different processes. Performance management system is a whole whereas performance appraisal system just deals with the measurement of the performance of the people. Not just the meaning, the concept of performance appraisal systems has different perceptions for the employees and organizations which is where the major problem lies. 2.1a Definitions

Before going into the details of the concept, some of the definitions of the performance appraisal process are given below:

Performance appraisal is a method of acquiring and processing the information


needed to improve an individual employees performance and accomplishments. (Douglass)

It is the process of evaluating the performance of employees, sharing that


information with them and searching for ways to improve their performance. (Newstorm)

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. (Thomas F. Patterson (1987)

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Chapter 2 LITERATURE REVIEW A face-to-face discussion in which one employee's work is discussed,
reviewed, and appraised by another, using an agreed and understood framework. Usually, line managers conduct the appraisals of their staff, although peers can appraise each other, and line managers can themselves be appraised by their staff through 360 degree appraisal. The appraisal process focuses on behaviors and outcomes, and strives to improve motivation, growth, and performance of the appraisee. Performance appraisals should be conducted at least once a year.(Business definition for performance appraisal by the BNET Dictionary) 2.1b Employee Perspective

Performance appraisal system is prevalent in each and every organization whether they want it or not. Clearly, for better or for worse, most governmental (and nongovernmental) organizations employ some type of performance appraisal system. Although the reasons, the outcomes and the ways in which the performance appraisal systems are implemented in the organizations may vary, the basic system lies intact. 2.1c Reasons for Performance Appraisal

According to an article by Archer North mere individual recognition, that is to say appraising performance, can lead to higher job satisfaction and reduced absenteeism and turnover rates. In fact, there is evidence that human beings will even prefer negative recognition in preference to no recognition at all. It gives a certain direction to the employees and they get to know clearly what is expected of them and their job and how they can do their work in the best possible manner. 2.1d Problems in the Process

In one of the articles Abolishing performance appraisals by Tom Coens and Mary Jenkins, Performance appraisals impede genuine feedback, and theres no solid evidence that it motivates people or lead to meaningful improvement. In fact it usually produces distorted and unreliable data about the contribution of employees. This isnt just an opinion. A survey by the Society for Human Resources Management found that more than 90% of appraisal systems are not

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successful. inadequacies of performance appraisals.

LITERATURE

Hundreds of other studies and surveys also support the gross

Some of the reasons for the problems prevalent in the performance appraisal systems include for example, the lack of skills or training of the rater, the lack of expertise in designing the performance appraisal, the lack of communication of the reasons of the appraisal system to the employees etc. In another article Effects of Performance Appraisal on Employee Attitudes the author says that One can find opinions varying from performance appraisal being so inherently flawed that it may be impossible to perfect it, to the most crucial aspect of organizational life. To show effects of performance appraisal on employee attitudes, a study by Gabris and Mitchell, made in an organization with a quarterly performance appraisal system, which focused on Matthew effect, will be used. Matthew effect is said to occur where employees tend to keep receiving the same appraisal results, year in and year out. Also the article which appeared in the May-June 1997 issue of Corporate University Review cited that performance appraisals instigated negative emotional states: worrying, depression, stress, and anguish (on the part of those giving as well as those receiving appraisals). After first acknowledging the "hard" costs of performance appraisals, Harry Heflin, an engineer with Intersys who is also chairman of the IEEE Engineering Management Society in Boston, wrote, "But I think the real cost is the emotional anguish as everyone anticipates, prepares for, and works the process." According to an article Performance Appraisal Tips by Dexter Hansen,one negative aspect of traditional individual performance appraisals is that they can make employees compete against one another. How can this be done? If the ratings are known (or assumed, based on the employees rating given by the manager and their perceptions of where they stand relative to others), it can create discord in the work group. TQM is based on teamwork, however, if an employee asks for help, they can be penalized on their appraisals. When trying to encourage

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teamwork (i.e. rated between teams instead of individuals).

LITERATURE

a TQM environment, the performance ratings should contain elements relating to

Finally according to the article which appeared in the May-June 1997 issue of Corporate University Review, performance appraisal systems could be eliminated with no harm done and with great economic and emotional benefit. Consequently, change-minded executives should not listen to pleas to redesign their companys performance appraisal system but should instead give serious thought to scrapping it because of the extensive costs of the system mentioned in the article. Although different authors approached performance appraisals differently, their research came up with the following comments and findings of the employees regarding the whole system.

In an article Perspectives on enduring and emerging issues in performance


appraisal by Gary E. Roberts, a quotation from a personnel manager interviewed for a project was mentioned which stated that In our organization everyone hates the entire appraisal process. The employee that gets a good performance appraisal thinks that the system is wonderful; the employee that gets a bad one thinks that the system is unfair. In a research paper An expert witness perspective on performance appraisal in universities and colleges conducted an analysis which proved that the involvement of the staff in the performance appraisal process should be increased. Another paper on "Performance Appraisal Survey Analysis" and similar term paper topics indicates that the process is not considered fair by over half of employees.

2.2

MANAGERIAL PERSPECTIVE

If we look at the performance appraisal process from the eyes of the management, they have a much positive approach and views about it as compared to that of the employees. Some of the benefits of the performance appraisal process according

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LITERATURE

to the article which appeared in the May-June 1997 issue of Corporate University Review, the viewpoint of senior executives, performance appraisal systems are generally regarded as a necessary part of the organizations management system. This condition seems to exist because of the widely accepted, generally unquestioned benefits of performance appraisal systems. If asked, a typical executive might indicate the following benefits: The system provides employees with an opportunity to receive feedback regarding their performance, usually at least once a year and often on an interim basis during the year. This leads to reduced error and waste, increased productivity, improved quality and service for customers, as well as enhanced employee motivation, commitment, and a sense of ownership. The system provides an opportunity for performance related discussions that include the following aims: setting work objectives for the employee, aligning individual and organizational goals, identifying training and development needs, and discussing career progression opportunities. The system standardizes performance appraisals and makes them objective by providing uniform processes and criteria. This further results in a fair, valid, and legally defensible basis for rewarding and recognizing individual performance. Perhaps the most significant benefit of appraisal is that, in the rush and bustle of daily working life, it offers a rare chance for a supervisor and subordinate to have "time out" for a one-on-one discussion of important work issues that might not otherwise be addressed. Appraisal offers a valuable opportunity to focus on work activities and goals, to identify and correct existing problems, and to encourage better future performance. Thus the performance of the whole organization is enhanced. For many employees, an "official" appraisal interview may be the only time they get to have exclusive, uninterrupted access to their supervisor. Said one employee of a large organization after his first formal performance

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bothered to sit down and tell me how I'm doing."

LITERATURE

appraisal, "In twenty years of work, that's the first time anyone has ever

Performance appraisal can have a profound effect on levels of employee motivation and satisfaction - for better as well as for worse.

Performance appraisal offers an excellent opportunity - perhaps the best that will ever occur - for a supervisor and subordinate to recognize and agree upon individual training and development needs.

Appraisal data can be used to monitor the success of the organization's recruitment and induction practices.

Though often understated or even denied, evaluation is a legitimate and major objective of performance appraisal.

The system affords the corporation legal protection against employee lawsuits for discrimination and wrongful termination.

A perhaps less typical but more candid executive might add a final benefit: the formal performance appraisal system shores up an organizations hierarchical authority system. It gives the supervising manager control over the carrots and sticks in what is essentially a carrot-and-stick management system. The list of benefits above, with the exception of the last one, represents an idealized view of performance appraisal systems, a view that is espoused by many but achieved by few, if any.

2.3 MOTIVATIONAL THEORIES


There are several early and contemporary motivational theories that are discussed below. They give an idea about different perspectives and views about motivation and satisfaction of employees. 2.3a Early Motivation Theories

Management needs to be able to make decisions concerning the employees or people working under them. Many of these are purely how to get the fullest efforts from the employees and this is where motivation plays an important role. There

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classic ones: 2.3a-1 Theory 'X' Douglas McGregor

LITERATURE

are many theories that have been written about motivation and these are some

According to Douglas McGregor theory X suggests that people are lazy; they hate work to the extent that they avoid it; they have no ambition, take no initiative and avoid taking any responsibility; all they want is security, and to get them to do any work, they must be rewarded, coerced, intimidated and punished. To get work done they have to police their staff and monitoring is necessary for them. 2.3a-2 Theory 'Y' Douglas McGregor This is in sharp contrast to theory 'X'. McGregor believed that people want to learn and that work is their natural activity to the extent that they develop selfdiscipline and self-development. The leader no longer have to use power, he or she lets people develop freely, and may even enjoy watching the development and actualizations of people by themselves. Everyone most of all the organization, gains as a result. 2.3a-3 Maslow's Hierarchy of Needs - Abraham Maslow Maslow's central theme revolves around the meaning and significance of human work. Maslow's theory of human motivation is the basis of McGregor's theory 'Y' briefly described above. Maslow in 1970 is known for establishing the theory of a hierarchy of needs, writing that human beings are motivated by unsatisfied needs. A persons behavior is seen as dominated by his/her unsatisfied needs and when one need is satisfied he/she aspires for the next higher one. According to Maslow, there are general types of needs (physiological, safety, love, and esteem) that must be satisfied before a person can act unselfishly. He called these needs "deficiency needs." As long as we are motivated to satisfy these cravings, we are moving towards growth, toward self-actualization. The five basic human needs, according to Maslow, are: (1) Physiological: hunger, thirst, bodily comforts, etc.; (2) Safety/security: be out of danger; (3) Belonginess and Love: affiliate with others, be accepted; (4) Esteem: to achieve, be competent,

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and realize one's potential.

LITERATURE

gain approval and recognition and (5) Self-actualization: to find self-fulfillment

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LITERATURE

2.3a-4 Motivation Hygiene Theory - Frederick Herzberg According to this theory the intrinsic factors are related to job satisfaction and motivation while the extrinsic factors are related to the job dissatisfaction. Herzberg suggests that people's needs are of two types: animal needs (hygiene factors) and human needs (motivators). Hygiene factors are those which are the basic needs and when they are absent an employee is dissatisfied and demotivated while when they are present there is no motivation neither there is any dissatisfaction. While on the other hand the factors which motivated employees were motivators. Herzbergs theory was widely accepted during 1960s till 1980s but it faced certain criticism after that but it is still considered when designing jobs.

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2.3b Contemporary Motivational Theories

LITERATURE

The theories that would be discussed now represent the current status of motivation. Although they are not as famous as the early theories but they hare based on extensive research. 2.3b-1 Three needs theory - David McClelland McClelland (1968) argues that there are three needs that are essential factors to get motivation. These needs are achievement, affiliation and power. The need of affiliation is the desire for close and friendly interpersonal relationships at the workplace. While the need of power is the need to make people behave in the manner which they would not have behaved otherwise Need of achievement can be described as setting up goals or objectives, and working with them until you get the desirable outcome even if it takes a long time and some risks to achieve that, but this makes people even more determined to accomplish the goal. Achievement-motivated people are concerned more with their personal achievement rather than the rewards of success. They do not reject the rewards but they are not as essential as the accomplishment itself. Money for them is a means to measure their performance and compare their achievement with those of other people, and they dont seek money for status or economic security. The need of achievement has been researched more extensively while other were also researched upon but less extensively. 2.3b-2 Goal setting theory This theory states that specific goals tend to increase the performance and difficult goals when accepted results in higher performance than do easy goals. Research has proved that specific and hard goals are a motivating factor and they tend to give a specific direction. Here there seems to be a contradiction between the need for achievement in the three need theory and the goal setting theory. According to the need of

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LITERATURE

achievement motivation is done by moderately challenging goals while the goals setting theory depicts that motivation is maximized by difficult goals. Here the explanation is that the need of achievement differs from economy to economy; in the developed countries it is high but very low in the under developed countries. While the goal setting theory is applied to people in general. There are certain contingencies in the goal setting theory and that is it presumes that specific goals will give good performance. There are other factors to it as well, which supports good performance; they include feedback to the employees on the achievement of the goal, goal commitment, self efficacy (the belief of a person that he/she is capable of performing a task), and national culture. The shortcoming of this theory is that it presumes that every culture supports the achievement of hard and specific goals but it only applies to the developed countries. The employees in the under developed countries do not necessarily are motivated by hard goals. Figure 3: Goal Setting Theory

2.3b-3 Reinforcement Theory The theory states that behavior is the function of its consequences. It proposes that behavior is externally caused. The key to the theory is that it ignores factors such as goals, expectations and needs, instead it focuses solely on what happens to the person when he / she takes some action. Rein forcers shape behavior and help people to learn but the theory is also widely believed to help motivation. According to BF.Skinner the reinforcement theory can be explained as follows:

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LITERATURE

People will most likely engage in a behavior if they are rewarded for doing so; these rewards are most effective if they are immediately followed by a desired behavior, and the behavior that is not rewarded or is punished is less likely to be repeated. There are three types of reinforcement Positive reinforcement Negative reinforcement Non - reinforcement

Following reinforcement theory, managers can influence employees behavior reinforcing actions that are desirable. The emphasis should always be on the positive reinforcement and not punishment. Even though punishment eliminated undesired behaviors more quickly than non-reinforcement, its effect is often very temporary and may have long term negative effects on the employees. It may increase the turnover rate and the employee absenteeism. Research has shown that reinforcement is an important influence on the work behavior. But reinforcement is not the only motivator, goals, levels of motivation, needs of affiliation, achievement and power also effect motivation. 2.3b-4 Job characteristic model As managers are interested in motivating the employees as to increase the productivity, there they need to design jobs in such a way as to motivate employees. Job deign refers to the way tasks are designed to complete a job. Some of the ways of designing job are job rotation, job enrichment and job enlargement. Job characteristic model (JCM) is a framework for analyzing and designing jobs that identifies five primary job characteristics, their interrelationships and their impact on outcomes.

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dimensions defined as follows: Skill Variety

LITERATURE

According to the JCM, any job can be described in terms of the five core

The degree to which a job require a variety of activities so that an employees can use a number of skills and talents.

Task Identity

The degree to which a job requires completion of a whole and identifiable piece of work. Task Significance

The degree to which a job has a substantial impact on the lives or work of the other people. Autonomy

The degree to which a job provides substantial freedom, independence and discretion to the individual in scheduling the work and determining the procedures to be used in carrying it out. Feedback

The degree to which carrying out work activities required by a job results in the individuals obtaining direct and clear information about the effectiveness of his/her performance. The figure explains the five dimensions. It shows how the first three dimensions combine to create meaningful work. It means that these three things in a job increase the importance of the job. The autonomy gives the employees a feeling of responsibility while the feedback provides how the employee is working and performing. Figure 4: Job characteristic model

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LITERATURE

Source: JR. Hackman and J.L. Suttle (eds) in improving life at work

From a motivational standpoint the model suggests that internal rewards are obtained when an employee is given feedback (feedback) and he/she has personally performed well (autonomy) on the task about which he/ she cares (experienced meaningfulness of the work). The more of theses three conditions are present the more motivational the job is and the employees satisfied. 2.3b-5 Equity Theory It is human beings tendency that they compare themselves with each other all the time. This theory developed by J. Stacey Adams, proposes that an employee compare his/her jobs input / outcomes ratio with that of relevant others and then correct any inequity. If an employee perceives his/her input and output to be equal to others the state of equity remains. However if the ratio is not perceived to be equal and the inequity exists then the employee views himself /her self as over or under rewarded. There are certain expected outcomes and behaviors that are displayed by the employees when they perceive that they are treated unequally as compared to others. Change their input and effort Change others input or outputs Choose a different person and start comparing themselves with them

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Increase absenteeism Quit the job

LITERATURE

Equity theory is not without its flaws as well. There is the problem that how to define inputs and outputs, how they change over a period of time, and how do people choose others to whom, they compare themselves. 2.3b-5-1Equity Theory and Employee Motivation Is there a relationship between how hard an employee works and how fairly they have been treated? Some noted economists believe that there is.

In business, the Equity Theory of employee motivation describes the relationship between how fairly an employee perceives he is treated and how hard he is motivated to work. Peter Drucker, an author who specialized in economics, first proposed the link between Equity Theory and employee motivation. The basic idea behind the Equity Theory is that workers, in an attempt to balance what they put in to their jobs and what they get from them, will unconsciously assign values to each of his various contributions. In addition to their time, workers contribute their experience, their qualifications, and their capability in addition to their personal strengths such as acumen and ambition. Money, of course, is the primary motivating outcome for an employee, but it is not the only, and in some cases not even the most important, factor. Power and status are also prime motivators, as are flexibility, perquisites and variety. According to the Equity Theory, the most highly motivated employee is the one who perceives his rewards are equal to his contributions. If he feels that he is working and being rewarded at about the same rate as his peers, then he will judge that he is being treated fairly. This doesnt mean that every manager should treat every employee identically, because every worker does not measure his contributions in the same way. For example, flexible working hours might motivate a working mother even more than

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a pay raise. Conversely, though an across-the-board wage increase may delight most employees, the highest producers may become less motivated if they perceive that they are not being rewarded for their ambition. Research on Equity Theory and employee motivation has shown that, in general, over-rewarded employees will produce more and of a higher quality than will under-rewarded, less motivated employees. 2.3b-6 Expectancy Theory - Victor Vroom According to Vroom's expectancy theory, it states that an individual tends to act in a certain manner based on the expectations that the act will be followed by a given outcome and on the attractiveness of that outcome to the individual. It includes three variables that are as under: Expectancy or the Effort Performance Linkage The expectations of an individual that a certain level of effort put in to accomplish a job will give a certain level of performance. Instrumentality or the Performance - Reward Linkage

The degree to which a certain performance will help attain a certain reward. Valence or the Attractiveness of the Reward

Valence is the degree to which the reward has value to the individual performing the job. The answer lies in understanding their inner motives and then providing them with appropriate rewards. This theory contributes an insight into the study of motivation by explaining how individual goals influence individual performance. Figure 5: Expectancy Theory

To sum up, the theories discussed above show that people have inner motives, needs and desires that drive them. Different authors have different approaches, some believe in monetary rewards while others suggest non-monetary rewards.

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2.4

EMPLOYEE MOTIVATION: THEORY AND PRACTICE

The job of a manager in the workplace is to get things done through employees. To do this the manager should be able to motivate employees. But that's easier said than done! Motivation practice and theory are difficult subjects, touching on several disciplines. In spite of enormous research, basic as well as applied, the subject of motivation is not clearly understood and more often than not poorly practiced. To understand motivation one must understand human nature itself. Human nature can be very simple, yet very complex too. An understanding and appreciation of this is a prerequisite to effective employee motivation in the workplace and therefore effective management and leadership. 2.4a Why Study and Apply Employee Motivation Principles? Quite apart from the benefit and moral value of an altruistic approach to treating colleagues as human beings and respecting human dignity in all its forms, research and observations show that well motivated employees are more productive and creative. The inverse also holds true. The schematic below indicates the potential contribution the practical application of the principles this paper has on reducing work content in the organization. 2.4a-1 Motivation is the Key to Performance Improvement There is an old saying you can take a horse to the water but you cannot force it to drink; it will drink only if it's thirsty - so with people. They will do what they want to do or otherwise motivated to do. Whether it is to excel on the workshop floor or in the 'ivory tower' they must be motivated or driven to it, either by themselves or through external stimulus. Are they born with the self-motivation or drive? Yes and no. If no, they can be motivated, for motivation is a skill which can and must be learnt. This is essential for any business to survive and succeed. Performance is considered to be a function of ability and motivation, thus: Job Performance = f (Ability)(Motivation)

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Ability in turn depends on education, experience and training and its improvement is a slow and long process. On the other hand motivation can be improved quickly. There are many options and an uninitiated manager may not even know where to start. As a guideline, there are broadly seven strategies for motivation. Positive reinforcement Effective discipline and punishment Treating people fairly Satisfying employees needs Setting work related goals Restructuring jobs Base rewards on job performance

These are the basic strategies, though the mix in the final 'recipe' will vary from workplace situation to situation. Essentially, there is a gap between an individuals actual state and some desired state and the manager tries to reduce this gap. Motivation is, in effect, a means to reduce and manipulate this gap. It is inducing others in a specific way towards goals specifically stated by the motivator. Naturally, these goals as also the motivation system must conform to the corporate policy of the organization. The motivational system must be tailored to the situation and to the organization. In one of the most elaborate studies on employee motivation, involving 31,000 men and 13,000 women, the Minneapolis Gas Company sought to determine what their potential employees desire most from a job. This study was carried out during a 20 year period from 1945 to 1965 and was quite revealing. The ratings for the various factors differed only slightly between men and women, but both groups considered security as the highest rated factor. The next three factors were; advancement type of work company - proud to work for

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Surprisingly, factors such as pay, benefits and working conditions were given a low rating by both groups. So after all, and contrary to common belief, money is not the prime motivator. (Though this should not be regarded as a signal to reward employees poorly or unfairly.) 2.4b Application of Employee Motivation Theory to the Workplace

Management literature is replete with actual case histories of what does and what does not motivate people. Presented here is a tentative initial broad selection of the various practices that have been tried in order to draw lessons for the future.

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2.4b-1'Stick' or 'Carrot' Approach

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The traditional Victorian style of strict discipline and punishment has not only failed to deliver the goods, but it has also left a mood of discontent amongst the "working class". Punishment appears to have produced negative rather than positive results and has increased the hostility between 'them' (the management) and 'us' (the workers). In contrast to this, the 'carrot' approach, involving approval, praise and recognition of effort has markedly improved the work atmosphere, leading to more productive work places and giving workers greater job satisfaction. 2.4b-2 Manager's Motivation 'Toolkit' The manager's main task is to develop a productive work place, with and through those he or she is in charge of. The manager should motivate his or her team, both individually and collectively so that a productive work place is maintained and developed and at the same time employees derive satisfaction from their jobs. This may appear somewhat contradictory, but it seems to work. The main tools in the manager's kitbag for motivating the team are: approval, praise and recognition trust, respect and high expectations loyalty, given that it may be received removing organizational barriers that stand in the way of individual and group performance job enrichment good communications financial incentives

These are arranged in order of importance and it is interesting to note that cash is way down the ladder of motivators. Given below are some of the examples taken from real life situations. The Swedish shipbuilding company, Kockums, turned a 15 million dollar loss into a 100 million dollar profit in the course of ten years due entirely to a changed perception of the workforce brought about by better motivation. At Western

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managers started taking greater interest in their employees. 2.4b-3 Don't Coerce - Persuade

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Electric there was a dramatic improvement in output after the supervisors and

Persuasion is far more powerful than coercion, just as the pen is mightier than the sword. Managers have a much better chance of success if they use persuasion rather than coercion. The former builds morale, initiative and motivation, whilst the latter quite effectively kills such qualities. The three basic components in persuasion are: suggest; play on the person's sentiments; and appeal to logic.

Once convinced, the person is so motivated as to deliver the 'goods'. The manager will have achieved the goal quietly, gently and with the minimum of effort. It is, in effect, an effortless achievement.

2.5

MOTIVATION

Motivation is the reason why employees want to work hard and effectively for the business. People work for a variety of reasons, some want to earn money while other do it to fulfill their inner needs. There is a wide range of motivators to motivate people and they differ from individual to individual. Highly motivated employees increase the productivity level and thus the profits are increased and vice versa. Figure 6: Motivation and Profit

There is always a chance that the output is increased due to new technology and improved external conditions but the quality of the output always relies on how well motivated the employees are and how satisfied they are with their job.

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2.6

SOURCES OF MOTIVATION

When an employee is satisfied he/she is motivated to work and thus he/she is retained There can be number of motivating factors as shown in the figure which can be put into main sources of motivation which are:

Monetary Non-monetary

Therefore, they can be termed as rewards given to employees that may result in their satisfaction and retention. They are as under: Intrinsic rewards these rewards are related to the internal satisfaction of the employee e.g. it includes recognition, awards, moral satisfaction etc. Extrinsic rewards- theses rewards are related to the external factors of satisfaction of the employee e.g. bonuses, promotion, benefits etc. Figure 7: Motivating Factors

2.7

DETERMINANTS OF PERFORMANCE

Employees are the most important assets of any organization. The success of any organization depends on the achievements and the performance of its employees. If they are not enthusiastic about their jobs and are not achieving the performance benchmarks, then the success of the organization itself is at stake. One major challenge that is faced by the employers is how to improve the performance of its employees which makes it mandatory for them to take into account the determinants of performance some of which are as follows:

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Do the employees have a clear understanding of their job roles

One of the most important determinants of the performance of the employees in any organization is the job description and the job design. It determines the level of knowledge and awareness that the employee has regarding his/her job. If they are not aware of what is expected of them, how will they ever achieve the performance levels and the performance benchmarks that have been set for them? How routine are the tasks performed

Another very vital determinant of performance is the frequency of the task or the job being done. If the job is conducted very frequently on a daily basis, the employees would know their job better and would lead to very good performance but on the other hand if the job is done once a year or very rarely, then the employees themselves would be uncertain about what to do and would eventually lead to average or below average results or outcomes. Self perception

If a persons perception about him/her is accurate that would lead to a positive performance and has been found out to be the most critical factor in determining performance. The Experience of the Employee

The experience of the employee also plays a very important role in determining their performance. If an employee is more experienced and has more know how about the proceedings of the job, he would be able to reach higher performance standards while on the other hand if an employee is doing a certain task which requires a lot of expertise which he/she does not possess, it would make it difficult for him to reach the performance benchmarks that has been set. Culture of the Organization

The culture of the organization also affects the performance of the individuals working in it. Some of the organizations have the concept of a very open culture in which the structure is relatively flatter and no hierarchical levels from top to bottom. This approach makes the employees more comfortable and their performance is affected and influenced in a positive way. On the other hand in

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highly beurucratic organizations very tall structures and lack of openness between the employees lead to lack of flexibility and rigidness which has an adverse affect on their performance. Supervisor feedback and acknowledgements

The feedback that the employees receive from their employees also adds to their positive performance and determines their performance. Organizations should have informal sessions with the employees behind closed doors not in front of the whole crowd about their performance and general work habits. This is a determinant of their performance and leads to positive work ethics. Psychographics

The working condition of the employees also is a determinant of their performance. If not on the obvious conscious level, on the subconscious level, the physical comforts that an employee has contributes a lot to his/her performance otherwise ten people would have been stuffed inside one room. If we take the example of Microsoft, it gives each and every employee a fully enclose 9 x 12 office with a door so that they have the solitude and the privacy to sit and think. They were even given the leverage to decorate their offices according to their own will and desire so that they have a feeling that they are in a place which is according to them and have full comfort. All the determinants and many others like the intelligence quotient, emotional quotient, motivation, willingness to work and job satisfaction etc have a collective influence on the overall performance of the employees and should be thoroughly taken into account for the better working of the employee and the organization as a whole.

2.8

APPRAISAL AS A MOTIVATING MECHANISM

Keeping in mind the growing attrition rates and the employee dissatisfaction among the employees, the HR professionals are approaching and using the performance appraisal as a fuel to motivate employees. The latest trend being followed by the HR professionals is to use the performance appraisal and review

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relationship between performance review, pay and motivation.

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process as a motivating mechanism. Various surveys and studies have testified the

Other than the traditional goal of accessing the performance of the employees, Performance appraisals and reviews can be used as a tool to reinforce the desired behaviour and competent performance of the employees. One of the most motivating factors for the employees, in the Performance appraisal processes is to receive a fair an accurate assessment of their performance. Inaccurate evaluation is one reason because of which most employees dread going through performance appraisals. An employee always expects his appraiser to recognize and appreciate his achievements, support him to overcome the problems and failures. The discrepancies and the inaccuracies in the performance review can demotivate the employees, even if there has been an increase in the salary. Such inaccuracies can kill the innovating and risk taking enthusiasm and spirit in the employees. Similarly, inaccurate reviews with no hike in compensation can increase the attrition rate in the organization, forcing the employees to look out for other options. An employee prefers an accurate performance review with no increase in the salary over inaccurate performance review with an increase in salary. Employees, who receive both accuracy and a pay increase during their performance review, are likely to be the most motivated. Therefore, performance appraisal (review and its consequence in the form of compensation adjustments) has the potential of motivating employees and increasing their job satisfaction.

2.9

SURVEYS AND RESEARCHES

There are certain important surveys carried out which are related to performance appraisals and motivation of employees. The statistical information gives a certain direction about the topic.

Understanding Employee Motivation


James R. Lindner Research and Extension Associate The Ohio State University

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Piketon Research and Extension Center Piketon, Ohio

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2.9-a Introduction to Motivation

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At one time, employees were considered just another input into the production of goods and services. What perhaps changed this way of thinking about employees was research, referred to as the Hawthorne Studies, conducted by Elton Mayo from 1924 to 1932 (Dickson, 1973). This study found employees are not motivated solely by money and employee behavior is linked to their attitudes (Dickson, 1973). The Hawthorne Studies began the human relations approach to management, whereby the needs and motivation of employees become the primary focus of managers (Bedeian, 1993). 2.9-b Motivation Theories Understanding what motivated employees and how they were motivated was the focus of many researchers following the publication of the Hawthorne Study results (Terpstra, 1979). Five major approaches that have led to our understanding of motivation are Maslow's need-hierarchy theory, Herzberg's two- factor theory, Vroom's expectancy theory, Adams' equity theory, and Skinner's reinforcement theory. According to Maslow, employees have five levels of needs (Maslow, 1943): physiological, safety, social, ego, and self- actualizing. Maslow argued that lower level needs had to be satisfied before the next higher level need would motivate employees. Herzberg's work categorized motivation into two factors: motivators and hygienes (Herzberg, Mausner, & Snyderman, 1959). Motivator or intrinsic factors, such as achievement and recognition, produce job satisfaction. Hygiene or extrinsic factors, such as pay and job security, produce job dissatisfaction. Vroom's theory is based on the belief that employee effort will lead to performance and performance will lead to rewards (Vroom, 1964). Rewards may be either positive or negative. The more positive the reward the more likely the employee will be highly motivated. Conversely, the more negative the reward the less likely the employee will be motivated.

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Adams' theory states that employees strive for equity between themselves and other workers. Equity is achieved when the ratio of employee outcomes over inputs is equal to other employee outcomes over inputs (Adams, 1965). Skinner's theory simply states those employees' behaviors that lead to positive outcomes will be repeated and behaviors that lead to negative outcomes will not be repeated (Skinner, 1953). Managers should positively reinforce employee behaviors that lead to positive outcomes. Managers should negatively reinforce employee behavior that leads to negative outcomes. 2.9-c Motivation Defined Many contemporary authors have also defined the concept of motivation. Motivation has been defined as: the psychological process that gives behavior purpose and direction (Kreitner, 1995); a predisposition to behave in a purposive manner to achieve specific, unmet needs (Buford, Bedeian, & Lindner, 1995); an internal drive to satisfy an unsatisfied need (Higgins, 1994); and the will to achieve (Bedeian, 1993). For this paper, motivation is operationally defined as the inner force that drives individuals to accomplish personal and organizational goals. 2.9- d The Role of Motivation Why do we need motivated employees? The answer is survival (Smith, 1994). Motivated employees are needed in our rapidly changing workplaces. Motivated employees help organizations survive. Motivated employees are more productive. To be effective, managers need to understand what motivates employees within the context of the roles they perform. Of all the functions a manager performs, motivating employees is arguably the most complex. This is due, in part, to the fact that what motivates employees changes constantly (Bowen & Radhakrishna, 1991). For example, research suggests that as employees' income increases, money becomes less of a motivator (Kovach, 1987). Also, as employees get older, interesting work becomes more of a motivator. 2.9-e Purpose

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The purpose of this study was to describe the importance of certain factors in motivating employees at the Piketon Research and Extension Center and Enterprise Center. Specifically, the study sought to describe the ranked importance of the following ten motivating factors: (a) job security, (b) sympathetic help with personal problems, (c) personal loyalty to employees, (d) interesting work, (e) good working conditions, (f) tactful discipline, (g) good wages, (h) promotions and growth in the organization, (i) feeling of being in on things, and (j) full appreciation of work done. A secondary purpose of the study was to compare the results of this study with the study results from other populations. 2.9-f Methodology The research design for this study employed a descriptive survey method. The target population of this study included employees at the Piketon Research and Extension Center and Enterprise Center (centers). The sample size included all 25 employees of the target population. Twenty-three of the 25 employees participated in the survey for a participation rate of 92%. The centers are in Piketon, Ohio. The mission of the Enterprise Center is to facilitate individual and community leader awareness and provide assistance in preparing and accessing economic opportunities in southern Ohio. The Enterprise Center has three programs: alternatives in agriculture, small business development, and women's business development. The mission of the Piketon Research and Extension Center is to conduct research and educational programs designed to enhance economic development in southern Ohio. The Piketon Research and Extension Center has five programs: aquaculture, community economic development, horticulture, forestry, and soil and water resources. From a review of literature, a survey questionnaire was developed to collect data for the study (Bowen & Radhakrishna, 1991; Harpaz, 1990; Kovach, 1987). Data was collected through use of a written questionnaire hand-delivered to participants. Questionnaires were filled out by participants and returned to an intra-departmental mailbox. The questionnaire asked participants to rank the importance of ten factors that motivated them in doing their work: 1=most

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important . . . 10=least important. Face and content validity for the instrument were established using two administrative and professional employees at The Ohio State University. The instrument was pilot tested with three similarly situated employees within the university. As a result of the pilot test, minor changes in word selection and instructions were made to the questionnaire. 2.9-g Results and Discussion The ranked order of motivating factors were: (a) interesting work, (b) good wages, (c) full appreciation of work done, (d) job security, (e) good working conditions, (f) promotions and growth in the organization, (g) feeling of being in on things, (h) personal loyalty to employees, (i) tactful discipline, and (j) sympathetic help with personal problems. A comparison of these results to Maslow's need-hierarchy theory provides some interesting insight into employee motivation. The number one ranked motivator, interesting work, is a self-actualizing factor. The number two ranked motivator, good wages, is a physiological factor. The number three ranked motivator, full appreciation of work done, is an esteem factor. The number four ranked motivator, job security, is a safety factor. Therefore, according to Maslow (1943), if managers wish to address the most important motivational factor of Centers' employees, interesting work, physiological, safety, social, and esteem factors must first be satisfied. If managers wished to address the second most important motivational factor of centers' employees, good pay, increased pay would suffice. Contrary to what Maslow's theory suggests, the range of motivational factors are mixed in this study. Maslow's conclusions that lower level motivational factors must be met before ascending to the next level were not confirmed by this study. The following example compares the highest ranked motivational factor (interesting work) to Vroom's expectancy theory. Assume that a Centers employee just attended a staff meeting where he/she learned a major emphasis would be placed on seeking additional external program funds. Additionally, employees who are successful in securing funds will be given more opportunities to explore their own research and extension interests (interesting work). Employees who do not secure additional funds will be required to work on research and extension

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programs identified by the director. The employee realizes that the more research he/she does regarding funding sources and the more proposals he/she writes, the greater the likelihood he/she will receive external funding. Because the state legislature has not increased appropriations to the centers for the next two years (funds for independent research and extension projects will be scaled back), the employee sees a direct relationship between performance (obtaining external funds) and rewards (independent research and Extension projects). Further, the employee went to work for the centers, in part, because of the opportunity to conduct independent research and extension projects. The employee will be motivated if he/she is successful in obtaining external funds and given the opportunity to conduct independent research and extension projects. On the other hand, motivation will be diminished if the employee is successful in obtaining external funds and the director denies the request to conduct independent research and Extension projects. The following example compares the third highest ranked motivational factor (full appreciation of work done) to Adams's equity theory. If an employee at the centers feels that there is a lack of appreciation for work done, as being too low relative to another employee, an inequity may exist and the employee will be dismotivated. Further, if all the employees at the centers feel that there is a lack of appreciation for work done, inequity may exist. Adams (1965) stated employees will attempt to restore equity through various means, some of which may be counter- productive to organizational goals and objectives. For instance, employees who feel their work is not being appreciated may work less or undervalue the work of other employees. This final example compares the two highest motivational factors to Herzberg's two-factor theory. The highest ranked motivator, interesting work, is a motivator factor. The second ranked motivator, good wages is a hygiene factor. Herzberg, Mausner, & Snyderman (1959) stated that to the degree that motivators are present in a job, motivation will occur. The absence of motivators does not lead to dissatisfaction. Further, they stated that to the degree that hygienes are absent from a job, dissatisfaction will occur. When present, hygienes prevent

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dissatisfaction, but do not lead to satisfaction. In our example, the lack of interesting work (motivator) for the centers' employees would not lead to dissatisfaction. Paying centers' employees lower wages (hygiene) than what they believe to be fair may lead to job dissatisfaction. Conversely, employees will be motivated when they are doing interesting work and but will not necessarily be motivated by higher pay. The discussion above, about the ranked importance of motivational factors as related to motivational theory, is only part of the picture. The other part is how these rankings compare with related research. A study of industrial employees, conducted by Kovach (1987), yielded the following ranked order of motivational factors: (a) interesting work, (b) full appreciation of work done, and (c) feeling of being in on things. Another study of employees, conducted by Harpaz (1990), yielded the following ranked order of motivational factors: (a) interesting work, (b) good wages, and (c) job security. In this study and the two cited above, interesting work ranked as the most important motivational factor. Pay was not ranked as one of the most important motivational factors by Kovach (1987), but was ranked second in this research and by Harpaz (1990). Full appreciation of work done was not ranked as one of the most important motivational factors by Harpaz (1990), but was ranked second in this research and by Kovach (1987). The discrepancies in these research findings supports the idea that what motivates employees differs given the context in which the employee works. What is clear, however, is that employees rank interesting work as the most important motivational factor. 2.9-h Implications for Centers and Extension The ranked importance of motivational factors of employees at the centers provides useful information for the centers' director and employees. Knowing how to use this information in motivating centers' employees is complex. The strategy for motivating centers' employees depends on which motivation theories are used as a reference point. If Hertzberg's theory is followed, management should begin by focusing on pay and job security (hygiene factors) before focusing on interesting work and full appreciation of work done (motivator factors). If Adams'

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equity theory is followed, management should begin by focusing on areas where there may be perceived inequities (pay and full appreciation of work done) before focusing on interesting work and job security. If Vroom's theory is followed, management should begin by focusing on rewarding (pay and interesting work) employee effort in achieving organizational goals and objectives. Regardless of which theory is followed, interesting work and employee pay appear to be important links to higher motivation of centers' employees. Options such as job enlargement, job enrichment, promotions, internal and external stipends, monetary, and non-monetary compensation should be considered. Job enlargement can be used (by managers) to make work more interesting (for employees) by increasing the number and variety of activities performed. Job enrichment can used to make work more interesting and increase pay by adding higher level responsibilities to a job and providing monetary compensation (raise or stipend) to employees for accepting this responsibility. These are just two examples of an infinite number of methods to increase motivation of employees at the centers. The key to motivating centers' employees is to know what motivates them and designing a motivation program based on those needs. The results presented in this paper also have implications for the entire Cooperative Extension Sysyem. The effectiveness of Extension is dependent upon the motivation of its employees (Chesney, 1992; Buford, 1990; Smith, 1990). Knowing what motivates employees and incorporating this knowledge into the reward system will help Extension identify, recruit, employ, train, and retain a productive workforce. Motivating Extension employees requires both managers and employees working together (Buford, 1993). Extension employees must be willing to let managers know what motivates them, and managers must be willing to design reward systems that motivate employees. Survey results, like those presented here, are useful in helping Extension managers determine what motivates employees (Bowen & Radhakrishna, 1991). If properly designed reward systems are not implemented, however, employees will not be motivated.

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2.10 APPLICATION OF EMPLOYEE THEORY TO THE WORKPLACE


Job satisfaction - is there a trend?

MOTIVATION

This is the title of a study carried out by the US Department of Labor among 1500 workers, who were asked to rate the job factors, from a list of 23, which they considered important starting from the most important factor. Their findings (Sanzotta (1977)) are contained in the table below.

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Job Satisfaction findings White collar workers A. Interesting Work B. opportunities for development C. Good information D. Enough Authority E. Enough help and resources F. Friendly, helpful coworkers G. See results of own efforts H. Competent supervision Blue collar workers A. Good pay

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B. Enough help and resources C. Job security D. Enough information E. Interesting Work F. Friendly, helpful coworkers G. Clearly defined responsibilities H. See results of own efforts

It is interesting that out of the 23 job factors listed for the survey, yet with the exception of two items (white-collar workers' choice (B) and blue-collar workers' choice (C)) groups selected the same top ten factors, although with different rankings. It is significant that good pay was considered as the most important factor by the blue-collar workers, but it ranked as the least important for whitecollar workers. 2.10-a Individualize motivation policies It is well known that individual behavior is intensely personal and unique, yet companies seek to use the same policies to motivate everyone. This is mainly for convenience and ease compared to catering for individual oddities (Lindstone (1978)). 'Tailoring' the policy to the needs of each individual is difficult but is far more effective and can pay handsome dividends. Fairness, decisiveness, giving praise and constructive criticism can be more effective than money in the matter of motivation. Leadership is considered synonymous (Tack (1979)) with motivation, and the best form of leadership is designated as SAL, situation adaptable leadership. In this style of leadership, one is never surprised or shocked, leadership must begin with the chief executive and it is more a matter of adaptation than of imparting

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company through team building and motivating its people. 2.10-b 'The one-minute manager'

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knowledge. Ultimately, it is the leadership quality which leads to the success of a

A contemporary bestseller (Blanchard & Johnson (1983)) aimed at managers who seek to make star performers of their subordinates. To start with, the manager sets a goal, e.g. one page read in one minute, and it is seen to be achieved by 'one minute' of praising or reprimand as the case may be. But to be effective, these must be given (a) promptly, (b) in specific terms, and the behavior, rather than the person, should be praised or reprimanded. The concept is basic and it makes sense, although the book seeks to 'dramatize' it. 'One minute' praising is seen to be the motivating force. Everyone is considered a winner, though some people are disguised as losers, and the manager is extolled not to be fooled by such appearances. 2.10-c 'Lessons from America's Best-run Companies' Another bestseller, In Search of Excellence (Peters & Waterman (1982)). Several criteria, including analysis of annual reports and in-depth interviews, were used to pick 14 'model excellent companies' out of an initial sample of 62 companies. As expected, most of the action in high-performing companies revolved around its people, their success being ascribed to: productivity through people; extraordinary performance from ordinary employees; treating people decently.

Personnel function and in particular leadership were considered the most critical components. If the leaders in an organization can create and sustain an environment in which all employees are motivated, the overall performance is bound to be good. The three essentials for creating such an environment are: fairness; job security; and involvement.

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Of all the resources available, the human resource is clearly the most significant, but also the most difficult to manage. Excellence can only be achieved through excellent performance of every person, rather than by the high-pitched performance of a few individuals. And motivation is, undoubtedly, the crux. 2.10-d Conclusion There is no simple answer to the question of how to motivate people. Can money motivate? Yes, but money alone is not enough, though it does help. We have discussed some of the pertinent theories bearing on human motivation and this is balanced by some of the practical factors which can lead to excellence. Human resource remains the focal point and leadership the critical component, and motivation has to be 'tailored' to each individual.

2.11 PERFORMANCE APPRAISAL ANGUISH


There is probably no workplace process that troubles both supervisors and subordinates more than giving and receiving periodic performance appraisals. Those responsible for giving performance appraisals often lack the necessary training to administer effective and constructive appraisals, hate to be put in the position of judge, jury, and executioner, and often find excuses to delay the delivery of "bad" news. Those on the receiving end of the appraisal process often become defensive and question the validity and fairness of the process. For example, a recent work life survey of 2,600 working people by Mercer Human Resource Consulting revealed that only 33 percent of survey respondents had been given a performance appraisal in the past year and only 29 percent felt they had been rewarded for good performance. The survey also found that 42 percent of survey respondents reported being given regular feedback on their performance, 29 percent reported that poor performers were properly managed, and only 26 percent said they worked for managers who coached them on how to improve their performance. These skeptics are not alone! Dr. W. Edwards Deming, the late American quality guru credited with being responsible for the "miracle" of Japan following World War II and a vocal critic of performance appraisals, once wrote, "In practice,

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annual ratings are a disease, annihilating long-term planning, demobilizing teamwork, nourishing rivalry and politics, leaving people bitter, crushed, bruised, battered, desolate, despondent, unfit for work for weeks after receipt of rating, unable to comprehend why they are inferior..." Asked what could possibly replace performance appraisals, Dr. Deming said, "leadership!" Despite the fact that those responsible for giving performance appraisals, and those of the receiving end of performance appraisals, suspect that the process is flawed, juries hearing wrongful discharge suits aren't so sure! According to Columbia Southern University's Certified Employment Law Specialist (CELS) study guide, "Jury studies have found that the most significant factor in a juror's determination of an employee's performance is past performance evaluations." Without being armed with documents that attest to the appropriateness of a contested employment action, defending that action before a jury of the plaintiff's peers is difficult or impossible. As a result of legal and functional concerns, corporate America continues to be wedded to the idea that periodic performance appraisals are a necessary part of the employee evaluation process that determines retention, compensation, and career advancement. So, if we're stuck with the process, evaluators, as well as those being evaluated, should take every opportunity to ensure that the process accomplishes what it's supposed to accomplish. But before continuing, here's a true story of a performance appraisal process failure. At a company I was doing some work for, a senior budget manager, who reported to the company's chief executive officer, informed me that he was disappointed because a salary increase popped up in his paycheck without the benefit of a performance appraisal. I was also disappointed because I had helped the company develop and implement what the human resources vice president and I thought was an ironclad performance appraisal process that guaranteed constructive, fair, accurate, and timely appraisals combined with employee feedback opportunities. Unfortunately, the company's most senior executive had seemingly sidestepped the procedure.

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We solved the problem by telling the CEO that a "routine" audit of the performance appraisal process revealed his sin of omission and politely reminded him that he should probably be the one most committed to the newly established performance appraisal procedure. Embarrassed by our "discovery," the CEO quickly gave the manager a favorable performance appraisal justifying the salary increase, indicated performance areas that could use some improvement, gave the manager a couple of suggestions on ways to advance his career, and asked for some thoughtful feedback on the appraisal. Nevertheless, the budget manager later told me privately that he thought the entire process was an abject failure and that it would be sometime before he took anything coming out of the company's human resources department at face value. The biggest problem with periodic, especially annual, performance appraisals may be that the results often come as a surprise to the individual subjected to the performance appraisal. Consciously or unconsciously, managers and supervisors often hold back constructive criticism and/or compliments during the performance period and suddenly reveal the bad news, good news, or combination thereof, during an annual performance appraisal session. Confused, those being evaluated often leave the session thinking, "Wow! I didn't know I was doing that badly!" or "Wow! I didn't know he/she appreciated my work so much!" In both cases, the process failed the evaluator, the individual being evaluated, and the organization for which they both work. In the perfect performance appraisal world, working people know from day to day how the people to whom they report view their performance. During each performance cycle, evaluators continually offer guidance, constructive criticism, and support to those they are responsible for supervising. As a result, the annual performance appraisal session is simply a review and confirmation of prior performance issues and an opportunity for both sides to discuss and establish future performance goals. So, when leaving the session, the individual being appraised knows where he/she has been, where he/she is now, and what is expected of him/her in the future.

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Unfortunately, most people responsible for evaluating performance lack the training necessary to complete the process successfully and subordinates continue to dread the prospect of coming face to face with their real or imagined shortcomings. And, like most of those put in the position of both judge and jury, performance evaluators are often too lenient, too strict, or influenced by individual biases. Other errors committed by performance evaluators include recency error (giving greater weight to recent events rather than performance during the entire performance period), central tendency (appraising all subordinates within a narrow range), halo/horn effect (rating individuals on one activity rather than overall performance), and contrast error (rating individuals based on how their performance compares to other employees rather than how it compares to organizational performance standards). Regardless of performance evaluator reluctance or incompetence, those being evaluated should shoulder some of the responsibility for making the process a success. If supervisory feedback is not forthcoming during the performance cycle, individuals should periodically inquire on how their performance is measuring up against established standards and what they should do to meet or exceed those standards. In addition, individuals subject to the performance appraisal process should document all the good/great and bad/lousy things they did during the performance cycle and attach that list to a letter or memo that says something like: Dear Boss: In preparation for our upcoming performance discussion, I looked back at my performance over the past year and came up with a list of the areas that I believe I met or exceeded expectations. I also came up with a list of the areas I feel need improvement. I value you contributions and look forward to the opportunity to discuss your opinion of my overall performance and the steps I need to take to improve future performance. This type of communication does three things. First, it puts the boss on notice that the subordinate is expecting a performance appraisal in the near future. Second, it reminds him/her of the positive contributions made during the performance cycle. Third, it contains an admission that the person being evaluated doesn't consider himself/herself perfect and is always on the lookout for ways to improve his/her

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performance. Three good things that will eliminate much of the performance appraisal anguish facing both sides of the performance appraisal equation.

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CHAPTER 3

REVIEW OF CASES
BANKS PROFILE Out of the many banks that have been analyzed, three have been studied in-depth. The profile of the banks that are analyzed in this thesis, are given below:

3.1

BANK ALFALAH LIMITED

It is one of the upcoming and new banks that is considered to be gathering its customers as well as its employees. Among the new banks, Bank Alfalah Limited is well known and its practices are contemporary as well. Since the inception of Bank Alfalah Limited, it has moved rapidly in expanding its branch network and deposit base, along with making profitable advances and increasing the range of products and services. Historical Overview Bank Alfalah Limited was incorporated on June 21st, 1997 as a public limited company under the Companies Ordinance 1984. Its banking operations commenced from November 1st, 1997. The bank is engaged in commercial banking and related services. The Bank is currently operating through 195 branches in 74 cities. Strengthened with the banking of the Abu Dhabi Group and driven by the strategic goals set out by its board of management, the Bank has invested in revolutionary technology to have an extensive range of products and services. This facilitates the commitment of the bank to a culture of innovation and seeks out synergies with clients and service providers to ensure uninterrupted services to its customers. During the past five years, Bank Alfalah Limited has emerged as one of the foremost financial institution in the region endeavoring to meet the needs of the customers.

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Vision

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To be the premier organization operating locally & internationality that provides the complete range of financial services to all segments under one roof. Mission To develop & deliver the most innovative products, manage customer experience, deliver quality services that contributes to brand strength, establishes a competitive advantage and enhances profitability, thus providing value to the stakeholders of the bank. Training & Development Centers The manner through which it handles its Human Resource practices is up to date and aligned. The trainings that it gives to its employees and the development centers are worthwhile. From the beginning, Bank Alfalah Limited has been focused on providing skills and tools to their officers at all levels enabling them to assume key functions and management positions within the Bank. Bank Alfalah Limiteds Training & Developing Centers (TDCs) at Karachi and Lahore, are better equipped to train the influx of both newly acquired as well as existing human resource. On its part, State Bank of Pakistan has time and again emphasized the need for all banks to ensure the availability of high quality training courses to their employees. Last year, Bank Alfalahs TDC broke its previous records by offering 80 plus short courses to Bank Alfalahs employees in areas such as operations, trade finance, and credits. Today, BALs total staff strength is over 3,500, spread in thirteen areas, six product divisions / departments and a number of Head Office Divisions. To cater for training needs of this large population, TDCs have made elaborate plans to offer around 120 short courses on a variety of subjects. The key focus areas covered by these courses are operations, trade, finance, and credit. Additionally, a number of courses are being be offered to enhance professional

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skills in marketing, selling, and customer service. TDCs have also planned to offer a number of courses in areas of leadership and management skills development. Management Development The key challenges in senior-level assignments relate to satisfying the expectations of a number of diverse stakeholders. In order to help senior colleagues meet these challenges, Training and Development Centers occasionally invites seasoned trainers and consultants from abroad and from within Pakistan to offer training in leadership and management skills. All the Senior Executives including the CEO, Executives incharge, Area Managers, Chief Managers, and Branch Managers, attend the workshops.

3.2

HABIB BANK LIMITED

Habib Bank Limited is one of the oldest banks of Pakistan. Throughout the decades, HBL has held the mantle of a dynamic leader, by adding value to the lives of its customers. It was HBL that introduced products such as Credit Cards, ATMs, Traveler cheques etc to the Pakistani market. HBL has more than 1,425 branches all over Pakistan and presence in 26 countries across five continents. With a revamped customer oriented philosophy, they are pursuing new avenues of leadership through innovation, as they gear up to face the challenges of the new banks. Historical Overview HBL established operations in Pakistan in 1947 and moved its head office to Karachi. Their first international branch was established in Colombo, Sri Lanka in 1951 and Habib Bank Plaza was built in 1972 to commemorate the banks 25th Anniversary. International operations were expanded to include the USA, Singapore, Oman, Belgium, Seychelles and Maldives and the Netherlands. On June 13, 2002 Pakistan's Privatization Commission announced that the Government of Pakistan had formally granted the Aga Khan Fund for Economic Development (AKFED) rights to 51% of the shareholding in HBL, against an

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investment of PKR. On February 26, 2004, management control was handed over to AKFED. The Board of Directors was reconstituted to have four AKFED nominees, including the Chairman and the President/CEO and three Government of Pakistan nominees. Vision To enable people to advance with confidence and success. Mission To make our customers prosper, our staff excel and create value for shareholders. Values HBL is firmly grounded with a corporate philosophy that incorporates five solid values which each individual associated with the bank abides by.

Humility

They encourage a culture of mutual respect and treat both the team members and customers with humility and care.

Integrity

Integrity means a synergic approach towards abiding their core values. United with the force of shared values and integrity, they form a network of a wellintegrated team.

Meritocracy

At every level, from selection to advancement, they have designed a consistent system of human resource practices, based on objective criteria throughout all the layers of the organization. They are, therefore, able to achieve a specific level of performance at every layer of the organization.

Team Work

Their team strives to become a cohesive and unified force, to offer the customer, a level of service beyond their expectations. This force is derived from participative

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the strength to face failures together.

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and collective endeavors, a common set of goals and a spirit to share the glory and

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Culture of Innovation

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They aim to be proactively responsive to new ideas, and to respect and reward the agents, leaders and creators of change.

3.3

ALLIED BANK LIMITED

Allied Bank Limited was established in Lahore in 1942 before independence, Allied Bank Limited is one of the largest banks in Pakistan with more than 700 branches located in over 300 cities and towns. The Bank has the largest data communication network with all its branches offering real-time online banking. The Bank offers a full range of retail, commercial and corporate banking services with a focus on service delivery through technology. Historical Overview Allied Bank Limited is the first Muslim bank, to have been established on the territory that became Pakistan. Established in December 1942 as the Australasia Bank at Lahore with a paid-up share capital of Rs. 0.12 million under the Chairmanship of Khawaja Bashir Bux, the Bank had attracted deposits, equivalent to Rs. 0.431 million in its first eighteen months of business and was growing rapidly after that. The Allied Bank's story is one of dedication, commitment to professionalism, adaptation to changing environmental challenges resulting into all round growth and stability. Vision To become a dynamic and efficient bank providing integrated solutions in order to be the first choice bank for the customers. Mission To provide value-added services to our customers To provide high-tech innovative solutions to meet customers requirements To create sustainable value through growth, efficiency and diversity for all stakeholders To provide a challenging work environment and reward dedicated team members according to their abilities and performance

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To play a proactive role in contributing towards the society

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FINDINGS AND

CHAPTER 4

FINDINGS & ANALYSIS


The process of collecting data was carried out by conducting mostly employees survey through questionnaires (Annex # 1) and interviews, mainly in the three banks. Three banks were analyzed and studied for this purpose in detail while some other banks were also studied. The three banks are Bank Alfalah Limited, Habib Bank Limited and Allied Bank Limited. The major findings are concluded and analyzed below. It gives an idea about the condition of the banks and the level of employees satisfaction in different banks. It shows the difference between different banks in Pakistan and their problems related to the performance appraisal system and how it is effecting the motivation of employees.

4.1

BANK ALFALAH LIMITED

Recent studies regarding motivational patterns in their influence and employee efficiency have shown a light degree of positive correlation. Low efficiency coupled with high frustration among bank employees reflects in adequacy of motivational force and paucity of financial incentives and reward system for high performance as a result their attitude towards work and behavior with colleagues has a negative effect in job performance and service standard. The management of Bank Alfalah Limited uses deficient measures for the motivation and evaluation of the performance of their workers. The performance methods are: Performance Report

This is one of the procedures used by the management to know about the performance of the individual. At Bank Alfalah Limited different aspects are counted to make the performance report. For example, language, dress, attendance, behavior with customers, behavior with colleagues, behavior among boss and sub-ordinates, attainment of targets of deposits etc which has been

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extracted from the appraisal form of Bank Alfalah Limited. Marks are assigned to each aspect to get aggregate measurement of performance in shape of a numerical value. Inspection

Inspection teams are often sent to the branches. These inspections come from other branches as well as from head office. The members of these teams are often contacting the customers of the bank to know about the inconvenience by bank personnel and their services. This is a kind of internal audit. Audit Report

This report is prepared by auditors, who are sent from the head office for auditing. This audit emphasize on business transaction, managerial functions and operative functions. This audit report indicate and point out the mistakes made by workers in routine work. All the work done by workers is signed by the worker and his officer, incharge; therefore it is easy to catch that person by whom the mistake is made. 4.1a Performance appraisal approaches at Bank Alfalah Limited

At Bank Alfalah Limited, two kinds of approaches are used regarding the performance appraisal system which is explained below: a. Traditional Approach

The traditional approach is primarily concerned with the overall organization and its past performance. At Bank Alfalah Limited, the overall performance is reviews at the branch level. Each branch is liable to show its performance in a positive direction according to set goals. b. Development Approach

This approach views the employees as individuals and has been forward looking through the use of goal setting. All the employees in each of the branches are given a performa. Every employee working in the bank is assigned targets. Usually their targets are in the form of amount. The performances of all the branches are reviewed at the end of December.

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4.1b Performance Appraisal Process

FINDINGS AND

The performance appraisal process at Bank Alfalah Limited consists of four interrelated steps: i. Establish a common understanding between the manager and the employee regarding work expectations, mainly the work to be accomplished and how this work is to be evaluated. ii. Establish ongoing assessment of performance and the progress against work expectation. iii. Formal documentation of the performance through the completion of a performance and development appraisal form appropriate to the job family. iv. The formal performance and development appraisal discussion, based on the completed appraisal form and ending in the construction of a development plan. 4.1c Present Performance Appraisal Form

The present performance appraisal form at Bank Alfalah Limited is very detailed and has nine sections in all each one catering to a different aspect of the employees performance. Section A of the appraisal form has details regarding the personal data of the employee like name, employee number, level of employment and salary etc. Section B of the appraisal form requires the details of the job responsibilities of the employee. Section C of the appraisal form has details about the goal specification and achievements of the employee. It includes aspects like budget reviews, reviews of branch expenses, survey of locations of new branches, promotional activities, advertisements and trainings etc. at the end of this section the total score is calculated as a cumulative total of all the aspects of this specific section. Section D of the appraisal form gauges and measures the personal attributes of the employee. It includes aspects like dress, grooming, integrity, honesty, initiative,

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learning ability, productivity, interpersonal communication, team spirit and customer service attitude etc. The employee rates himself or herself on a rate from 1 to 5. 1 stands for fair and 5 stands for outstanding. Section E measures the overall performance of the employee and sums out all the points achieved in the previous sections. Section F highlights training needs of the employee and caters for the succession planning in the bank. It also tries to find out what are the training needs of the employee from the view point of the appraiser and the appraisee both. Section G has an area where the appraisee can give his or her comments about the whole appraisal process whereas Section H has the comments of the appraiser. Lastly Section I requires the human resource division to give its comments regarding the whole appraisal process. 4.1d Findings of the Survey The survey was conducted in the main branch of Bank Alfalah Limited in Peshawar. According to the interviews with the different employees of the bank and the data that was collected by the questionnaires, it was found that the performance appraisal process is carried out at the bank once a year. Twenty five questionnaires were distributed in the bank and the results of this survey are as represented below: Survey Results

Sample Size
Sample size: 25 No. Of senior employees: 4 / 25 = 16 % No. Of younger employees: 21 /25 = 84 % Job Satisfaction 88% of the employees are satisfied with their job 4% of the employees are NOT satisfied with their job 8% have moderate feelings about job satisfaction

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Motivation of employees due to the performance appraisal system 64% of the employees are motivated due to the performance appraisal system 28% of the employees are NOT motivated due to the performance appraisal system 11 % had no feelings whatsoever regarding the performance appraisal process. How long have they been in the bank and when was their last promotion? Sample size 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Time spend in the bank 1 year and 8 months 1 month 2 years 3 years 1 year 6 years 1 year and 2 months 4 years 1 year and 2 months 3 years 11 months 2 years 3 months 1 year 5 years 1 years and 8 months 4 years 5 years 4 years 3 years 2 years 2 years 6 months 2 months I year Time since last promotion 0 promotion 0 promotion 1 year ago 2 years ago 2 months ago 2 years ago 0 promotion 2 years ago 2 months ago 1 year ago 0 promotion 7 months ago 0 promotion 1 month ago 3 month ago 6 months ago 1 year ago 8 months ago 1 year ago 3 months ago 10 months ago 11 months ago 0 promotion 0 promotion 1 month ago

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Major Problem Areas Problem area Little attention is paid to the process once the forms have been filled Appraisal process seen as unfair by the employees Inflated appraisal ratings making the process ineffective Percentages 72% 32% 36%

4.2

HABIB BANK LIMITED PAKISTAN

The performance appraisal process at Habib Bank Limited has evolved through a lot of stages and the detail of its evolution is given as follows: 4.2a Evolution of PMS 4.2a-1 Pre-1997 Scenario Being a government organization, around 45% of the countrys economy was supported by HBL. Till 1997, before the arrival of Mr. Shaukat Tareen, the PMS of HBL was in a very depressing situation. The PMS was highly subjective, nonquantitative, biased and had no relationship to the job description of an employee. The Appraisal system was based on annual ACRs (Annual Confidential report) which was popularly called among the employees Annual Confidential Revenge. Few of the characteristics of the pre-1997 appraisal form are: 4.2a-2 Appraisal Form It was a behavior based appraisal form The form was highly subjective and had no link to the job of a person. No objectives and standards were given due to which the performance of any person could not be quantified. There was no system of constant supervision over the employee and no regular feedback was given to him/her about the performance.

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and so there was Recency Error.

FINDINGS AND

The performance of a person was usually looked at, at the end of the year

The supervisor had full autonomy over the employees rating so there was a high tendency of biasness. Due to the biasness, there was a culture of having strong relationships with superiors. People were judged not on the basis of their capability or performance but on the basis of their relationship with the supervisor.

Although there were columns for measuring the strengths and weaknesses and for suggestion of developmental needs. The development of employees was still not directed and was practically non-existent.

The appraisal was linked to the compensation in a way that annual salary increases were based on the final rating of the employee.

4.2a-3 Post-1997 Scenario During the mid 90s, economic conditions of Pakistan became highly instable and the Banking system was almost completely eroded. The decision making was highly politicized especially in a government owned organization like HBL, top managements existence was primarily attributed to the presence of the government. Once the government changed, the top management of HBL had to be replaced as well. It was at this time that the then government brought in Mr. Shaukat Tareen as the new CEO of the bank. He was for the first time given full authority over the hiring and firing of the HBL employees. He had responsibility with authority. On 8th Oct 1997. Mr. Shaukat Tareen took charge and fired thousands of employees immediately. Top management of HBL was completely revamped and there was a massive downsizing through voluntary schemes like golden handshakes etc. Shaukat Tareen was a dynamic leader and believed in quality of work. He also believed that proper compensation of employees is necessary to get the best out of them. He believed that For peanuts, you get Monkeys. He increased the remuneration of employees by 100%. He also instituted the concept of Pay-for Performance.

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It was at this time that the formal appraisal system was designed and implemented. The PMS designed for HBL tried to remove the discrepancies of the previous system. The characteristics of the new appraisal form were:

4.2a-4 Appraisal form 1997 This was a quarterly appraisal system The ranking was done on a scale of four which was:

A..Excellent .. 50% above target B..Very good..20% above target C..Good.All targets met D..Below average..Targets not met

The objectives were set at the beginning of the year. These objectives cascaded down form the headquarters.

The employee was given regular feedback on the performance. The new appraisal form was both behavior and result-based. The forms measurement part had two parts:

ABO (Appraisal by Objectives) ABA (Appraisal by Abilities) ABA was given 30 % weight age and included several attributes like punctuality, dress code, Interpersonal communication, Customer-service, leadership qualities etc. ABO was given 70% weight age. ABO included several job related objectives which were set by the supervisor at the start of the year. The broader objectives came from the head office which were narrowed down and specified to the individuals level.

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The final rating was then given by combining the weight ages of both the parts. The next part was final rating and for this purpose, a forced ranking system was implemented in the company. According to this system, 10% of the employees had to be in category A, like wise 20% in B, 60% in C, and 10% in D.

At the end of the year, the appraisal was discussed with the employees and their feedback and reservations were taken. After the employee has given feedback, the final rating of the employee is given.

4.2a-5 Present Performance Appraisal Form


The present performance appraisal form at Habib Bank Limited has five sections in all. The performance appraisal form is highly subjective with no statistical figures and numbers whatsoever. Section 1 of the appraisal form requires the general information about the employee like the name, place of posting and designation etc. Section 2 of the appraisal form requires the appraiser to give an overall weighted score to the employee from 1 to 3 (3 being the higher end). Section 3 has a blank area which requires details about the development plans of the employee. Section 4 has a blank area requiring the comments of the employees and also whether the employee agrees or not with the appraisal that he/she got. Section 5 is a separate section which has been named as the performance evaluation form. It has a specific number of key performance indicators like leadership skills, compliance and adherence to rules and regulations, quality of service and workforce development etc. basically the whole performance evaluation form is subdivided in 3 parts which are business results, the viewpoint of the customer and the employee respectively. Lastly at the end of Section 5, the overall sum of all the aspects in the form have been totaled to get a final score.

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4.2b Findings of the survey

FINDINGS AND

For the purpose of finding the effect of performance appraisal system on the motivation of employees, interviews were carried out in seven branches of Habib Bank in Islamabad form around 31 people. From the interviews with the employees at the bank and the data that was collected by the questionnaires it has been found that the performance appraisal process is carried out twice a year at Habib Bank Limited. The results of this survey are as represented below:

Survey Results Sample Size


Sample size: 31 No. Of senior employees: 26 / 31= 84 % No. Of younger employees: 5 / 31 = 16 % Job Satisfaction 25.80 % of the senior employees are satisfied with their job 54.83 % of the senior employees are NOT satisfied with their job 19.35 % of the senior employees have moderate feelings of satisfaction Motivation of employees due to the performance appraisal system 13 % of the employees are motivated due to the performance appraisal system 77.41 % of the employees are NOT motivated due to the performance appraisal system 9.6% of the employees have no feelings about the performance appraisal process How long have they been in the bank and when was their last promotion? Sample size 1 2 3 4 5 6 Time spend in the bank 2 years 3 years 1 year 3 years 10 years 10 years Time since last promotion 0 promotion 0 promotion 0 promotion 3 months ago 3 years ago 4 years ago

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7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 Major Problem Areas Problem area Little Importance given to the process once the forms have been filled Lack of post evaluation sessions with the appraisee Inflated appraisal ratings making the process ineffective 5 years 3 years 3 years 12 years 13 years 18 years 19 years 20 years 24 years 24 years 27 years 27 years 27 years 28 years 28 years 28 years 29 years 29 years 30 years 30 years 1.5 years 6 months 3 months 2 months 2 years

FINDINGS AND
1 year ago 1 year ago 0 promotion 7 years ago 0 promotion 14 years ago 5 years ago 12 years ago 2 years ago 12 years ago 7 years ago 12 years ago 13 years ago 12 years ago 14 years ago 7 years ago 1 years ago 17 years ago 11 years ago 4 years ago 5 months ago 0 promotion 0 promotion 0 promotion 0 promotion

Percentages 96.77% 83.87% 88%

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Process seen as unfair by the employees Ineffective linkage of the performance appraisal process with the promotion of the employees Force used to fill out the forms Lack of communication of change Awareness of the person who carries out the appraisal

FINDINGS AND
80.64% 76% 48.38% 41% 29%

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4.3

ALLIED BANK LIMITED

4.3a Present Performance Appraisal Form The present performance appraisal form at Allied Bank Limited has 5 sections in all each one catering to a different aspect of the performance of the employee. Section 1 of the appraisal form requires the general information related to the employee like the name, designation, year of employment etc. After that the same section has a detailed part of the employees competence assessment. This section requires the appraiser or the reviewer to give marks between 0 to 100 against the different assessment areas that are mentioned here like punctuality, attitude and behavior, communication skills, interpersonal skills, general appearance, job commitment, job knowledge, work efficiency and initiative etc. one appraiser and three reviewers mark the appraise against all these assessment areas from 0 to 100. Section 2 of the appraisal form requires details about the special assignments other than the routine work. One part of this section requires the details of the special assignment and then the other part requires the weightage given to each assignment in the form of percentages. Section 3 of the appraisal form requires details of the growth potential of the employee. It has a blank area which requires the identification of particular performance expectations, knowledge of other banking areas or the skills upon which the employee should focus in order to reinforce his/her success and contribution to the bank. Section 4 requires details regarding the different requirements of the employee with respect to future trainings and development. Finally the last section requires a blank area where recommendations are given on the basis of which increment, bonus or promotion is given to the employee. 4.3b Findings of the Survey For this purpose, interviews were carried out in seven branches of Allied Bank Limited in Islamabad from around 20 people. From the interviews that were carried out with the employees at the bank and the data that was collected by the questionnaires, it was found that the performance appraisal process is carried out

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once a year and in some cases it can even be carried out twice a year as well for reasons like promotions etc. The results of sthis survey are as represented below: Survey Results Sample Size Sample size: 20 No. Of senior employees: 16 / 20= 80 % No. Of younger employees: 4 / 20 = 20 % Job Satisfaction 50 % of the senior employees are satisfied with their job 30 % of the senior employees are NOT satisfied with their job 20 % of the senior employees have moderate feelings of satisfaction Motivation of employees due to the performance appraisal system 30 % of the employees are motivated due to the performance appraisal system 65 % of the employees are NOT motivated due to the performance appraisal system 5% of the employees have neutral feelings about the performance appraisal system How long have they been in the bank and when was their last promotion? Sample size 1 2 3 4 5 6 7 8 9 Time spend in the bank 11 years 7 years 15 years 30 years 2 years 1 year and 10 months 3 years 1 year 26 years Time since last promotion 6 years ago 4 years ago 0 promotion 10 years ago 1 year ago 10 months ago 0 promotion 0 promotion 11 years ago

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10 11 12 13 14 15 16 17 18 19 20 Major Problem Areas Problem area Ineffective linkage of the performance appraisal process with the promotion of the employees Little Importance given to the process once the forms have been filled Process seen as unfair by the employees 25 years 3 years 18 years 19 years 20 years 4 years 8 years 19 years 24 years 24 years 13 years

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15 years ago 3 months ago 14 years ago 5 years ago 12 years ago 2 years ago 4 years ago 2 years ago 12 years ago 12 years ago 10 years ago

Percentages 93% 80% 75%

4.4

BANK ALFALAHS ANALYSIS

The results that were concluded from the banks survey were relatively positive as compared to the survey results from Habib Bank and Allied Bank Limited. The percentage of employees who were satisfied with their jobs (88%) was the highest at Bank Alfalah Limited. The reason being that most of the employees get a chance to learn and are given authority to do whatever they want to do as long as it is working for the benefit of the bank. As far as the motivation of the employees due to the performance appraisal system is concerned, only 28% of the employees are not motivated due to the performance appraisal system. Most of the reasons are because of the very nature of the performance appraisal process. Some of the employees who do not get good appraisals are year end think that the ratings are inflated or the process is unfair.

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sessions with the employees. Major Issues The major issues concluded from the survey are as follows:

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This problem basically arises due to the less frequently conducted discussion

The problem of the appraisal ratings being inflated which makes the process ineffective was marked positively by 36% of the employees. This again is related to the first point which is the low frequency of post evaluation discussions with the appraisees. Employees do not get a clear picture of why they were evaluated good or bad and so they cannot work on its improvement. In such a case when a certain employee gets a bad appraisal and another employee gets a good appraisal, the one who gets a bad one would say that the ratings are inflated or that the appraiser wasnt good enough to carry out the appraisal.

Appraisal process seen as unfair by the employees is one of the major issues experienced at Bank Alfalah Limited. 32% of the employees voted in the favor of this problem. Although it is an accepted fact the basic nature of the performance appraisal system is very biased and most of the people would see it as unfair because all the aspects of the performance of the employee cannot be quantified in an absolute way.

Thirdly 72% of the employees said that little attention is paid to the process once the forms have been filled. This is again a very serious problem if we analyze it in depth. As mentioned previously, performance appraisal process is a continuous process which should be carried throughout the year. But at Bank Alfalah Limited it is carried once a year and so people forget the performance of the employees all year round.

All the problems revolve around one single point and that is to communicate the whole process with the results to the employees on a regular basis so that they are well aware of the way and how they are evaluated.

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Positive Aspects of the Bank

FINDINGS AND

Some of the positive aspects of the banks appraisal process are discussed below:

The most positive aspect of Bank Alfalah Limited which was not found in any of the other banks is that discussions are carried on with the employees at the beginning of the year. Objectives are set between the manage and the employee at the very beginning and at the year end the employees performance is evaluated on the basis of the same objectives that were set before. This gives a clear direction to the employee from the very first day and should be adopted at the other banks as well.

Awareness of job description is a very important part of the performance appraisal process. 96% of the employees said that they are clearly aware of their job description and the job content that the have to perform. Job description is very important for the effective working of the appraisal process because if an employee is not aware of what work he has to do or what targets he has to meet, then it is impossible for him to know how his performance is going to be evaluated.

Awareness of person who carries out appraisal is yet another important aspect which was positively rated by 100% of the employees at Bank Alfalah Limited. Every employee from the very first day is aware of the person who is going to carry out his appraisal whether he or she be the boss of the appraisee, the subordinate or the peer etc. this is helpful for the employee because he/she can directly go to his/her appraiser in case the evaluation is not good or very good so as to find out the reasons. Apart from that the appraisee can also get a fair idea about how the appraiser is going to evaluate him/her.

Use of force to fill forms is a very serious problem which is not experienced by the employees at Bank Alfalah Limited. In some of the banks the authorities have to force the employees to fill out the forms.

There is a positive correlation of the appraisal form with the promotions of the employees at Bank Alfalah Limited which again is a very positive

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aspect. As can be seen in the table of the previous section, promotions are more frequent at Bank Alfalah Limited than any of the other banks and has a positive effect on the motivation of the employees. 4.4a Analysis of the appraisal form If we analyze the appraisal form of Bank Alfalah Limited, we can see that it is somewhat better than the appraisal forms of the other two banks the reason being that it is comparatively less subjective. If we look at Section A of the form we can see that it requires the name of the employee as well. One thing which is negative about this is that names should not be mentioned in the appraisal form. This gives a reason to the employee to be reluctant in giving the honest feedback regarding his or her performance. On the other hand if instead of the name only the designation of the employee is mentioned, the employee would feel much more comfortable in filling out the form. Section B of the form requires the employee to mention his or her job responsibilities in detail. This is a very positive aspect of the form which is not present in any of the other banks. The reason why this is a positive thing is because, it shows the understanding of the employee about his/her job. Otherwise in most of the banks the employee is not even sure what he/she has to do in the particular position that he/she is holding in the organization. Section C of the form has details about the goal specifications and achievements which are given by the employee himself. This is a very positive aspect because it gives a chance to the employee to rate his or her performance himself and then it can be discussed with the appraiser whether it is right or not. Section D requires details about the personal attributes of the employee on a scale of 1 to 5. The different aspects are rated with a complete understanding of what 1 means and what 5 means which is mentioned at the top of this section. In most of the forms only numbers are mentioned with no details of what the numbers actually stand for which is not the case here. In Section E the overall score of the employee based on the previous sections is specified very beautifully because there is no single number for a certain score

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and above and so on.

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infact there is a range e.g. outstanding performance is a range from a score of 85

Section F requires the details about the training and development needs. One problem in this section is that the makes of the form should have included the reasons as to why a certain form of training is required by a certain employee. This would have given a clear picture to the employee as well as to where he/she is lacking. Another very positive aspect of Section F is the mentioning of the contingency planning which is not a part of any of the forms at any other bank. Finally at the end of the form detailed comments by the appraiser, appraise and the HR division is mentioned which again is a very positive thing.

4.4b Correlational analysis


Another part of the analysis is the correlational analysis of the different aspects of the appraisal form and the motivation of employees due to the performance appraisal forms. Some of the figures in this regard are as follows: Factors of the Motivation of employees due to the performance appraisal form Factors of the appraisal form 1. Objectivity in questions 2. Awareness of the appraiser 3. Frequency of promotions Motivation of employees due to the performance appraisal form 0.997975 0.987541 0.877713

If we analyze the figures above we can see that the greater the objectivity in the questionnaire the higher is the correlation which is approximately equal to one. The positive correlation shows that as the objectivity in the questionnaire increases so does the motivation of the employees due to the performance appraisal form. Secondly if we look at the aspect of awareness of the appraiser, again the correlation is positive and at the very high end. This shows that as the awareness of the appraiser increases in the mind of the employees, they eventually get more motivated in doing their jobs.

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Thirdly the correlation between frequency of promotions at Bank Alfalah Limited and the motivation of employees due to the performance appraisal form is 0.877713. this figure is high as well but lower that the other two banks. The reason for this is that at Bank Alfalah Limited, the employees thought that other aspects like job content, environment and communication etc also plays a very major role in the motivation of employees rather than the frequency of promotions.

4.5

HABIB BANKS ANALYSIS

The results that were concluded from the banks survey were relatively negative as compared to the survey results from Bank Alfalah and Allied Bank Limited. The percentage of employees who were satisfied with their jobs (26%) was the lowest at Habib Bank Limited. The reason being that majority of the employees at Habib Bank are senior employees. As the trend is shifting towards the selection fresh graduates with a new perspective to the issues in the banking industry, their importance is going down. Most of the banks specially what was seen at Habib Bank, are making efforts to hire new and fresh employees paying them higher than the existing senior employees at the bank. Thus the problem of pay compression comes into play which causes the most damage to the senior employees who on the average have been working for the bank for the past 10 to 20 years. Apart from that some of the other reasons which cause the employees to be dissatisfied according to the survey include, no future prospects, boring work environment, work load and also the monotonous less challenging work. As far as the motivation of the employees due to the performance appraisal system is concerned, about 78% of the employees are not motivated due to the performance appraisal system which is a very high percentage. There are a number of reasons for that including the subjective nature of the appraisal form which will be analyzed in detail in the next part.

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Apart from that the lack of discussions with the appraisee after the evaluation, inflated appraisal ratings, ineffective linkage of the performance appraisal with the promotion of the employees causes a lot of problems in motivating the employees. If we analyze the promotions are more frequently visible in case of the younger employees of the bank in comparison to the senior employees. Further on the use of force to fill out the appraisal forms and the lack of communication of change to the employees are major issues as well. Major Issues

One of the major problems was the lack of importance given to the appraisal process once the forms have been filled. This was ranked positively by 97% of the employees at the bank. The reason why this is a very major issue and that effects the motivation of the employees because appraisal should be an ongoing process and should take place very frequently. For example if an employee did something good or bad at the beginning of the year, most of the times it happens that the behavior is forgotten by the appraiser at the end of the year when the actual evaluation takes place. This causes dissatisfaction and demotivation on the part of the employee.

Another problem which was observed at Habib Bank similar to what was observed at Bank Alfalah Limited is the lack of post evaluation sessions with the appraisee. From the survey 84% of the employees said that no sessions are conducted and about 17% of the employees reported that some sort of a session is conducted between the appraiser and the appraisee but most of them were not very satisfied with the sessions and considered it just a formality. From these percentages it is obvious that even the employees at different levels are not sure about the post evaluation sessions because of the inconsistencies in their replies.

Thirdly 88% of the senior employees thought that the appraisal ratings are inflated making the process ineffective. This is again due to the fact that majority of the employees at Habib Bank are senior employees who believe that the younger employees get more favorable appraisals than they do.

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unfair again due to the same reason that is mentioned above.

The problem of ineffective linkage of the performance appraisal process with the promotion of the employees was ranked positively by 76% of the senior employees. By analyzing the frequency of promotions, it is obvious that the younger employees receive promotions more frequently than the senior employees. That is why juniors think that the performance appraisal system is effectively linked with the promotion of the employees contrary to what the senior employees think. The main issue is that the development and career progression is still not linked to the PMS in an effective manner. There is an absence of promotion policy and people fail to see a clear gun sight ahead of them. This has brought about a lot of frustration and confusion for the employees.

One alarming problem that was found from the survey at Habib Bank is that the HR department actually has to force employees in some cases to fill out the forms. About 48% of the employees think that force is used which infact should be 100% no force. This is because of the fact that filling out forms lies at the very basic level of the appraisal process

Among all the three banks which were taken up for the research of this thesis, Habib Bank is the only bank which had a change in the appraisal process in the past 5 years but the problem that they had in this case was the lack of communication of change. 41% of the employees are not aware of the reasons why and how the change took place which is a very negative thing. Some of the reasons by the employees are privatization, transparency, change to motivate employees which according to them is not working at all and lastly the change in strategic direction. The real reason however is the privatization of the bank which was known only by 10% of the people who knew about the change.

Lastly the awareness of the person who carries out the appraisal again lies at the very basic level of the appraisal process. Every employees should

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be aware of the his/her appraiser on the very first day. It helps the employee know where he is lagging or leading and how he/she can improve his/her performance. At Habib Bank 29% of the employees are not aware of the person who carries out their appraisal. All the above mentioned problems regarding the lack of motivation of the employees due to the performance appraisal system revolves around two main reasons. One is the lack of communication between the employees and the authorities and the employees and the second is the disparity between the attitude and the treatment with the senior and the junior employees. Positive Aspects of the Bank Some of the positive aspects of the bank concerned with the performance appraisal system are discussed below:

Awareness of job description makes the foundation of a good appraisal system and 93.54% of the employees favored this aspect. Only if an employee is aware of his/her job description can he/she know what he/she is being rated against and how he/she can work towards the improvement of their performance.

Another very positive aspect of Habib Bank which was not found in any of the other banks was the change in the appraisal process in the past 5 years. This shows that work is being done in this regard to improve the process and efforts are also being made.

Thirdly appraisals are being done at Habib Bank twice a year which is a positive aspect as compared to the once a year appraisals are Bank Alfalah Limited.

4.5a Analysis of the appraisal form If we analyze the appraisal form of Habib Bank Limited, we can see that it is highly subjective and has a number of very basic and major flaws the details of which are mentioned below. If we look at Section 1 of the form we can see that it requires the name of the employee. One thing which is negative about this is that

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names should not be mentioned in the appraisal form. This gives a reason to the employee to be reluctant in giving the honest feedback regarding his or her performance. On the other hand if instead of the name only the designation of the employee is mentioned, the employee would feel much more comfortable in filling out the form. Section 2 of the form requires the overall weighted performance score of the employee. Here it is mentioned that 3 is the score which is at the higher end and specific reasons should be given if an employee is rated more than 3. Now the problem that arises here is that there are no aspects mentioned on which the employee can be rated. There is a great deal of ambiguity in knowing what aspects the employee should be rated against in order to get a score of 3 or higher. Section 3 requires details about the development plans of the employee which is a very positive aspect but it also has the same problem as was seen in the case of Bank Alfalah Limited which is that no reasons are given as to why certain training is required by a certain employee. If this had been mentioned, the employee would have had a much clear picture as to where he/she is lacking and what is required in order to improve. Section 4 requires the comments of the employee in a blank area. This is a very vague thing which cannot be quantified at all. Instead it would have been wiser if a session was conducted with the employee after the filling of the form in order to know his/her views regarding the whole appraisal process. At the end of this section there is a question whether the employee agrees with the appraisal or not. It should have been accompanied by another part of the same section which required reasons why the employee did not agree with the appraisal that he/she was given. Section 5 of the form has a concept which is very different and very good only if BARS had been use instead of the rating from 1 to 5. The aspect of this section requires a lot of detail which could have been understood in a much better way with the help of BARS. The concept is right and very different but the implementation is flawed.

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4.5b Correlational Analysis

FINDINGS AND

Another part of the analysis is the correlational analysis of the different aspects of the appraisal form and the motivation of employees due to the performance appraisal forms. Some of the figures in this regard are as follows:

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Factors of the appraisal form 1. Objectivity in questions 2. Awareness of the appraiser 3. Frequency of promotions

Motivation of employees due to the performance appraisal form 0.952353 0.897913 0.919799

If we analyze the figures above we can see that the greater the objectivity in the questionnaire the higher is the correlation which is somewhat closer to one. The positive correlation shows that as the objectivity in the questionnaire increases so does the motivation of the employees due to the performance appraisal form. Secondly if we look at the aspect of awareness of the appraiser, again the correlation is positive but not at the very high end as compared to the correlation in case of Bank Alfalah Limited. This shows that as the awareness of the appraiser increases in the mind of the employees, they eventually get more motivated in doing their jobs. Thirdly the correlation between frequency of promotions at Habib Bank Limited and the motivation of employees due to the performance appraisal form is 0.919799. This figure is higher than the correlation in case of Bank Alfalah. The reason for this is because the employees at Habib Bank Limited are not promoted at a very frequent rate. That is why they feel that the motivation of the employees is dependent on the frequency of their promotions.

4.6

ALLIED BANKS ANALYSIS

The results that are concluded from the banks survey are somewhere in between the results of Habib Bank and Bank Alfalah Limited. The percentage of employees who were satisfied with their jobs (50%) was lower than the 88% job satisfaction at Bank Alfalah Limited but less than the 26% job satisfaction at Habib Bank Limited. The reason being that again like Habib Bank, Allied Bank too comprises of a lot of employees who are senior with an average experience of about 15 to 20 years. The same problems of insecurities on the part of the senior

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up the ladder.

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employees with pay compression causes the percentage of job dissatisfaction to go

As far as the motivation of the employees due to the performance appraisal system is concerned, 65% of the employees are not motivated due to the performance appraisal system. There are a number of reasons for that including the subjective nature of the appraisal form which will be analyzed in detail in the next part. Apart from that the ineffective linkage of the performance appraisal with the promotion of the employees is also a negative aspect which can be seen in table of the previous section. Also the lack of importance given to the appraisal process throughout the year and the process being seen as unfair adds to the problems. Some of the points which make the level of motivation due to the performance appraisals at Allied Bank Limited higher than Habib Bank is because some sort of post evaluation discussions are carried out between the appraiser and the appraisee. Although some of the employees say that the discussions are not very fruitful and they do not cause any improvement, but still an effort is being made and has some benefit for the employees and the bank as a whole. Major Issues Some of the major issues concerned with the performance appraisal process at Allied Bank Limited are discussed as follows:

The same problem of the ineffective linkage of the performance appraisal process with the promotion of the employees is experienced by the employees at Allied Bank as well. 93% of the senior employees reported in the survey that the younger employees are given promotions more frequently as compared to the senior employees which can be seen from table in the previous section as well. The main issue again is that the development and career progression is still not linked to the PMS in an effective manner. There is an absence of promotion policy and people fail to see what is expected of them to go up the ladder. This has brought about a lot of frustration and confusion for the employees.

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Limited and Habib Bank Limited is the lack of importance given to the appraisal process once the forms have been filled. 80% of the employees think that most of their good work that they have done at the initial part of the year is gone into waste just because of the fact that appraisals are carried out not very frequently. Although the appraisals at Allied Bank Limited are more frequent than the other two banks but still the frequency should be increased even more to reap the benefits.

Another problem is that the appraisals are normally carried out once a year and in rare cases they might be even carried out twice a year.

Lastly because of the very nature of the performance appraisal process and the problem of the senior and the junior employees, 75% of the senior employees think that the process is unfair and the ranking for the junior employees is different from that of thee senior employees.

Most of the problems in case of Allied bank Limited are because of the disparity as senior and junior employees at the bank. Positive Aspects of the Bank Some of the positive aspects of the bank concerned with the performance appraisal are as follows:

Again the same aspect of awareness of the job description by the majority of the employees is another very positive point. The reason being that job descriptions make the foundation of the appraisal process because the appraisal form cannot be designed until and unless the job descriptions are known. In case of Allied Bank 95% of the employees are clearly aware of their job descriptions.

Secondly 90% of the employees at Allied Bank Limited are aware of the person who carries out their appraisal. This is a very positive thing and lies at the base of a good appraisal system because until and unless an

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he/she can take steps to improve it even further.

FINDINGS AND

employee knows who is evaluating their performance, he cannot know how

Discussions are carried out between the employee and the appraiser after the evaluation. Some of the employees think that it is just a formality with no benefits to the employee whatsoever, but on the contrary some of the employees think that in depth discussions are carried out with their appraiser. May be it varies from appraiser to appraiser. But at least some sort of effort is made in this direction.

No force is used to make the employees fill out the forms. The employees are well aware of the fact that the appraisals are carried out for their own benefit and so they fill them out at their own will.

4.6a Analysis of the Appraisal Form If we analyze the appraisal form of Allied Bank Limited, we can see that it is a combination of objective and subjective questions. It is less subjective than the form of Habib Bank Limited and more subjective than that of Alfalah Bank Limited. If we look at Section 1 of the form we can see that it requires the name of the employee. One thing which is negative about this is that names should not be mentioned in the appraisal form. This gives a reason to the employee to be reluctant in giving the honest feedback regarding his or her performance. On the other hand if instead of the name only the designation of the employee is mentioned, the employee would feel much more comfortable in filling out the form. One positive thing about the general information in this form is the mentioning of the highest academic qualification of the employee which is a very important aspect not mentioned in the forms of any other bank. Another part of Section 1 requires the rating of the different assessment areas on a scale of 0 to 100 which is a very broad range and makes the rating useless and vague. Also in such a broad range it becomes very difficult to mention what each aspect means. Instead the BARS should have been used here in order to make this part more effective.

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Section 2 has the details about the special assignments which are again rated on a percentage which makes it very broad and vague. Here the quantity or the frequency should have mentioned like monthly, yearly or quarterly basis. Section 3 specifies the growth potential of the employee. Here the occurrence of the recency effect is very evident and there is a probability that the recency effect would occur more frequently in this case. The reason for this is because the appraisals are carried on a yearly basis and no one would remember what positive or negative behavior the employee had at the beginning of the year. Section 4 has the same problem as with the previous forms, that is the reasons should have been mentioned as to why the employee requires a certain training. 4.6b Correlational analysis Another part of the analysis is the correlational analysis of the different aspects of the appraisal form and the motivation of employees due to the performance appraisal forms. Some of the figures in this regard are as follows: Factors of the appraisal form 1. Objectivity in questions 2. Awareness of the appraiser 3. Frequency of promotions Motivation of employees due to the performance appraisal form 0.978426 0.941371 0.924211

If we analyze the figures above we can see that the greater the objectivity in the questionnaire the higher is the correlation which is somewhat closer to one. The positive correlation shows that as the objectivity in the questionnaire increases so does the motivation of the employees due to the performance appraisal form. Secondly if we look at the aspect of awareness of the appraiser, again the correlation is positive but not at the very high end as compared to the correlation in case of Bank Alfalah Limited. This shows that as the awareness of the appraiser increases in the mind of the employees, they eventually get more motivated in doing their jobs. Thirdly the correlation between frequency of promotions at Habib Bank Limited and the motivation of employees due to the performance appraisal form is

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0.924211. This figure is higher than the correlation in case of Bank Alfalah. The reason for this is because the employees at Allied Bank Limited like Habib Bank Limited are not promoted at a very frequent rate. That is why they feel that the motivation of the employees is dependent on the frequency of their promotions.

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4.7

HYPOTHESIS

From the above findings of the research we can now prove by statistics and figures whether the hypothesis were proved right or wrong in the case of the three banks. 1. Higher objectivity in questions lead to higher job satisfaction

The level of job satisfaction was the highest at Bank Alfalah Limited (88%). If we look at the performance appraisal form of the bank we can see that majority of the questions in the form are very clear and objective. If an aspect of the performance has to measure at a level which is excellent, there is clear indication of what excellent means and what kind of performances does it encompass. While on the other hand the level of job satisfaction was lowest at Habib Bank Limited (26%). Now if we look at the performance appraisal form of Habib Bank Limited it has almost no objective questions whatsoever. The form is very subjective in which most of the responses are to be given in the form of paragraphs written by the respondents. It makes it very difficult to quantify all the responses and employees do not know how they really performed. The same is true for Allied Bank Limited as well. With a larger number of objective questions in the form, the employees are clearly aware of why they are being rated as excellent or bad and so it leads to a higher job satisfaction. There are different aspects of job satisfaction as well but in this case the aspects which were specifically questioned from the employees included learning from the job, communication with the peers, subordinates and superiors, the level of satisfaction with the whole appraisal process, work environment and job content etc. Results from the survey and responses from the questionnaire strongly support this argument because all the aspects of a satisfied employee mentioned above are catered to by the objectivity in the appraisal form. 2. Awareness of the appraiser lead to higher motivation

The awareness of the appraiser is a very fundamental part of the whole performance appraisal process and it should be made a regular part of the

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induction process. This is important because until and unless an employee is aware of who is going to evaluate his or her performance, he/she would not know who to refer to in case of any kind of problem with the appraisal and evaluation. Apart from that knowledge of the appraiser gives a direction to the employee for better performance on the job. At Bank Alfalah Limited 100% of the employees are aware of their appraiser which is a very positive aspect and lays a firm basis to the whole performance appraisal process and also leads to higher motivation of the employees. If we analyze among all the three banks, Bank Alfalah has the highest level of job satisfaction and also it is the only bank in which 100% of the employees are aware of their appraisers. Looking at the findings of Habib Bank Limited, we can see that 29% of the employees are not aware of the person who appraises them. And in case of Allied Bank Limited the percentage is 10%. The lack of awareness in case of Habib Bank Limited is slightly more than that of Allied Bank and consequently the level of job satisfaction at Allied Bank is also slightly more than that of Habib Bank Limited. Results from the survey and responses from the questionnaire strongly support this argument because in the banks having a higher percentage of awareness of the appraiser has a higher percentage of satisfied and motivated employees and vice versa. 3. More time spent at a bank leads to higher motivation

If we analyze and look at the findings of the three banks we can see that the longer span of time that the employee spends with the bank does not necessarily lead to higher motivation of the employees. The level of motivation of employees is highest at Bank Alfalah Limited (64%), but majority of the employees are relatively new and the average number of years that an employee has spent at Bank Alfalah is about 6 to 7 years. Looking at the older banks like Habib Bank Limited and Allied Bank Limited, we can see that the average number of years that an employee has spent at these

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FINDINGS AND

banks is about 20 to 25 years. But the level of satisfaction and motivation of employees is lower (13% and 30% respectively) than that of Bank Alfalah Limited. Results from the survey and responses from the questionnaire does not support this argument because in the banks having a higher percentage of motivated employees, the span of time spent is lower while in the banks having a lower percentage of motivated employees the span of years spent by the employees is higher. 4. Frequent promotions lead to higher motivation of employees

If we analyze the relationship of the promotions and the motivation of employees we can see that the promotions are more frequent at Bank Alfalah than any of the other two banks. The average number of years after which an employee is promoted is about 1 year. While on the other hand if we look at Habib Bank Limited and Allied Bank Limited, the average number of years after which an employee is promoted varies for the older and the relatively younger employees. As majority of the employees in these older banks are the older employees, they are not getting the promotions as frequently as the newly hired ones. Results from the survey and responses from the questionnaire strongly support this argument because the frequency of promotions is highest at Bank Alfalah Limited and so is the level of motivation in the employees followed by Allied Bank Limited and Habib Bank Limited respectively. 5. Perception of unfairness of the appraisal forms lead to dissatisfaction of the employees

If we analyze the performance appraisal process has some aspect of unfairness in its very nature. The reason being that no matter how hard one tries to make it completely quantifiable, some aspects of it remain subjective. But efforts can be made to make the process less subjective so as to satisfy the needs and wants of the employees. Looking at the figures from Bank Alfalah Limited, we can see that only 32% of the participants think that the process is unfair while on the other hand the

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FINDINGS AND

percentages in the case of Habib Bank Limited and Allied Bank Limited are 80% and 75% respectively. In the very same way the level of satisfied employees is highest at Bank Alfalah Limited followed by Allied Bank and Habib Bank. Results from the survey and responses from the questionnaire strongly support this argument because in the bank where the perception of unfairness of the appraisal forms is highest has the highest number of dissatisfied employees and vice versa.

4.8 OVERALL COMPARISON


The three banks were analyzed in detail and a major difference was seen between the new and the older banks. If they are to be ranked in a descending order, on the basis of how satisfied their employees are and how the performance appraisal process affects the motivation of employees, the findings show that: 1. Bank Alfalah Limited 2. Allied Bank Limited 3. Habib Bank Limited The satisfaction level of the employees in Bank Alfalah Limited was outstanding as compared to the employees in the Habib Bank and Allied Bank Limited. Also the level of motivation of the employees due to the performance appraisal process is highest at Bank Alfalah Limited. The basic reason for which is the learning environment at the bank and the fact that majority of the employees are relatively younger and at the same level which is not the case at HBL and ABL. The condition at HBL and ABL is unsatisfactory mainly because of the reason that the workforce in those two banks is divided into the senior and the junior employees who think that the appraisal system does not treat them at an equal level. One other reason why Bank Alfalah Limited is better than the other two banks is because, the basic aspects of the appraisal process are fulfilled. No force is used like in case of HBL and everything is communicated to the employees which was lacking in the case of HBL which changed its performance appraisal system, but

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Chapter 4 ANALYSIS
employees.

FINDINGS AND

the reason why the change took place was not known by majority of the

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Chapter 5 PROPOSAL

CHAPTER 5

PROPOSAL
5.1 MAKING PERFORMANCE MOTIVATION TOOL MANAGEMENT A

This training shows managers and supervisors how to make appraisals and coaching work as an effective part of the performance management process to motivate employees and improve performance. management and appraisal system. This onsite performance management seminar is customized to work effectively with your performance

5.2

MAKE PERFORMANCE APPRAISALS FAIR AND MEANINGFUL

Most managers and supervisors are uncomfortable conducting performance appraisal discussions. Only a few, feel confident in their ability to accurately assess the performance of their employees. This course helps managers effectively deal with the most commonand most difficultchallenges in using the performance appraisal system. Knowing how to give honest performance feedback and use the appraisal system as a communication and motivational performance management tool will improve employee performance.

5.3

KEEP APPRAISALS LEGAL

Using the techniques developed in this program, managers will enhance their coaching skills and practice methods to effectively document and support any rating. They learn how to avoid evaluation mistakes that can lead to feeling of unfairness, arguments, decreased morale, and even lawsuits. This program shows managers how to deliver even the most difficult performance reviews and appraisals effectively.

5.4

SAVE TIME WITH EFFECTIVE PERFORMANCE MANAGEMENT PROCESSES

This training reveals the best practices to reduce the time spent in preparing meaningful and productive employee appraisals.

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5.5

KEEP PERFORMANCE MANAGEMENT FUTURE FOCUSED

Performance management is an ongoing process, but it begins with employee involvement in setting specific expectations and measurable goals. Coaching through the performance period helps employees achieve success and document performancegood and bad. The process also provides data to streamline the process of writing the appraisal and sets the stage for a positive appraisal session with no surprises. In this session, managers and supervisors learn how to make the performance management process an ongoing process of helping employees build to higher levels of performance. Who should attend? Executives, managers, and supervisors who need to know how to use employee performance evaluations as a positive tool in developing better job performance and employee morale. Training Benefits Establish the fundamentals for an effective performance management process Increase the confidence and comfort level of managers and supervisors Increase employee performance through coaching and goal setting Increase morale through better feedback Avoid potential adverse legal action due to subjective ratings Generate better performance expectations and standards Avoid arguments and bad feelings over appraisal ratings Sidestep the most common evaluation pitfalls and problems Build and maintain the credibility of the evaluation process

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Chapter 5 PROPOSAL
Overview of Concepts and Deliverables Provided Understand the real value of the performance discussions both formal and informal Learn to use performance discussions to stimulate better communication Determine how to make the appraisal form work for you, not against you Know how to streamline the assessment process to save time and improve performance Attain the skills to use ongoing performance management communication as a motivator Learn the steps for effective coaching Know how to initiate and follow through with performance discussions when performance is below expectations Learn the rules for positive and negative feedback meaningful How to set better goals and expectations to motivate higher performance Know how to make the performance setting and discussion more positive and productive How to best prepare for the performance discussion Avoid overly-subjective performance appraisal ratings Make performance discussions more interactive How to handle evaluations that become emotional How to handle defensiveness and challenges to performance ratings Determine what to do to motivate the employee on the no-reason-tochange-plateau How to handle the person who says, Why should I improve when Im doing just fine now?

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Chapter 5 PROPOSAL
Keys to develop and maintain the validity of the performance management process.

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Chapter 6 CONCLUSION

RECOMMENDATIONS

AND

CHAPTER 6

RECOMMENDATIONS & CONCLUSION


After the detailed literature review, research and findings by the interviews and the data collected from all the three banks, following are some of the recommendations which have been given in order to eliminate of reduce the problems faced by the banks to some extent. Although the recommendations provided here may not be able to make the performance appraisal system perfect, neither can they be implemented in a day or two. But the effort here is to give the banks awareness about the problems and some steps to improve them which if appeals to them can be implemented slowly and gradually over a period of time.

6.1

RECOMMENDATIONS LIMITED

FOR

BANK

ALFALAH

Some of the recommendations for Bank Alfalah Limited are as follows:

The most important thing that should be adopted by Bank Alfalah Limited in order to have a positive correlation between the performance appraisal system and the motivation of employees is to have post evaluation sessions more frequently with the appraisers. This gives a chance to the employee to know where he is leading or lagging in order to improve his/her performance on the whole. Although at the moment Bank Alfalah Limited carries out detailed sessions with the employees at year end but informal sessions should be conducted (if possible) on a monthly basis.

Another aspect is that the appraisal process seen as unfair by the employees which can be eliminated by the communication of the employees with the HR and other authorities so that they know why and how the appraisals take place. In that way, the transparency of the process would give them a clear direction and they would not be in a situation to complain about the unfair or inflated evaluations.

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Chapter 6 RECOMMENDATIONS AND CONCLUSION Although at Bank Alfalah Limited most of the basic requirements regarding
the performance appraisal system are fulfilled, but the motivation of the employees can reach sky high ranking only if they try and carry out the process more frequently. Currently the appraisals are being done once a year. If that is increased to a less formal session between the subordinate and the supervisor on a monthly basis, it would come up with benefits for the employer and would effect the motivation of the employee as well. The reason being that both the supervisor and the employee would know ultimately what is being done right or wrong.

6.2

RECOMMENDATIONS FOR HABIB BANK LIMITED

Some of the recommendations for Habib Bank Limited are as follows:

Customized and SMART objectives at individual and branch level in accordance to that branchs location and business environment. These should further be aligned with the corporate strategy of the organization. (Standardization for HBL not possible)

Pre and post Appraisal interviews should be included in the system in order to increase the engagement level of employees and to motivate them. According to the previous performance appraisal system of 1997, the employee was given regular feedback on his/her performance but now it has just become a formality and should be revived back.

Previously performance appraisals were carried out on a quarterly basis but now they are carried out twice a year. The frequency of the appraisals should be increased so that the employers and the employees can know in a much better way how they are performing.

The objectives of the performance appraisal should be decided between the appraiser and the appraisee at the beginning of the year like was done previously in the PMS of 1997. At Mobilink the objectives of the employees job are decided by the employee him or herself at the very beginning of the year. They are then agreed upon with the supervisor. In

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RECOMMENDATIONS

AND

this way the employee is well aware of what he/she has to do and at year end he/she is evaluated against those very objectives.

In the orientation and the induction process the employee should be made aware of the appraiser or the person who would carry his/her appraisal so that proper direction is given from the very first day.

Constant communication of why the appraisal system is carried on, how it benefits the employee and also the communication of why a certain employee is rated good or bad with specific reasons is essential. If this is done the HR would not face the problem of actually forcing the employees to fill out the appraisals.

Communication of change in the appraisal system is also very essential. Basic salary increments should uniformly be given to all the employee at a particular level and only bonuses (both monetary and non-monetary) should be linked with the appraisal form. This would eliminate the problem of pay compression which comes with the presence of senior and junior employees at the bank.

At present mainly vertical promotion is the basic problem for HBL to focus upon and to a limited extent also upon cross functional horizontal movement as many employees have been serving for quite a long period of time at the same post in the same branch. Therefore, if not promoted vertically, at least there should be job rotations to cater to their developmental needs.

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RECOMMENDATIONS

AND

Figure 8: Three Dimensional Model of an Organization

Rank Sales Production Marketing Function

Etc.

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Chapter 6 CONCLUSION
Promotion Architecture

RECOMMENDATIONS

AND

Promotion Policy comprises of a number of interrelated and interdependent components, such as follows: Levels The number of levels up the ladder and career path for each employee at every level should be specifically and clearly stated. In case of HBL, each individual should know exactly up till which level he can advance in his career and within which time period. Requirements The essentials for advancement into the next level in hierarchy should be made clear to the employees from the very starting. These requirements may include, minimum job tenure of four years on a particular post (which shall vary at different levels), minimal qualifications, experience, etc, which may differ from one level to another. Accelerated Promotion for High Potential Employees High potential employees should have the benefit of accelerated promotion policy and following are the conditions: Accelerated promotion shall be for all grades. There should be a minimum of two years (which shall vary according to different posts) of service to be considered for accelerated promotion. Last two appraisals of the eligible employee should have the minimum overall rating of commendable. Cases will be brought forward before the promotion committee for consideration. The final verdict shall however lie with the senior authority. Evaluation Criteria Once the requirements have been specified to the individual he/she should also know the relevant weightage of each requirement for a specific post. These weightages can also differ from post to post and a sample is given below:

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AND

The promotion criterion has four basic components with relative weightages given to them as under: Component 1. Annual appraisal report 2. Experience 3. Qualifications 4. Interviews Marks ____________ 30% 20% 20% 30% 100% The marks given to the employee would be on the basis of the final rating. e.g. if an employee scores A in final rating he may get full 30 marks out of the 100 marks of the promotion criteria. Similarly for B, 24 marks out of the 30 would be given. Minimum requirement for consideration of a person for promotion would be 60% marks out of the 100 marks for promotion. The details of the components have been given as under: 1. Annual Appraisal Report

The appraisal reports of last three years would be specified by the appraiser shall be considered for the promotion. 2. Experience

A percentage of 20% is given to the experience of the candidate. 3. Qualifications

Percentage of 20 % would be given to the qualifications. 4 Interviews

Structured interviews would be organized in order to evaluate the appraisees. 5. Validation of Promotional Decision

Unlike the present system where the fate of an employee lies in the hands of his supervisor a proper promotion committee should be assembled for better

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RECOMMENDATIONS

AND

validation of the promotion decision. This way personal bias would also be finished. Composition of the committee would be according to the post.

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Chapter 6 CONCLUSION

RECOMMENDATIONS

AND

Procedure to be adopted by the Promotion Committee Promotion committee will interview the candidate considering the result of the promotion evaluation according to the criteria mentioned above. Should the promotion committee approve the case for accelerated promotion it will then be sent to the competent authority for the final approval. In case there is no vacant position, the committee can further recommend the creation of post to accommodate the talented officer. If the promotion committee turns down the case with consensus, the officer concerned will have no right to appeal in the matter as stated above.

6.3

RECOMMENDATIONS FOR ALLIED BANK LIMITED

Some of the recommendations for Allied Bank Limited are as follows:


The biggest problem which is similar in both Habib Bank Limited and Allied Bank Limited is the ineffective linkage of the performance appraisal process with the promotion of the employees. The high rate of demotivation among the majority of the employees at the bank (senior employees) is due to the fact that the promotions are more frequent in case of the younger employees as compared to the senior employees. This can be eliminated by following the same promotion policy which is mentioned in the recommendations for HBL as well.

Secondly the problem of less frequent appraisals which was found in all the three banks can be catered to by ideally making the appraisals a part of the daily or the weekly schedule of the employee. Forms should be replaced by diaries filled by the employees on a daily basis. No formal process is necessary because it is these formalities which lead to the process taken as a burden and not being done properly. Along with it the formal appraisals should be carried out like they are being done at the moment once or twice a year.

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Chapter 6 RECOMMENDATIONS AND CONCLUSION Communication and detailed post evaluation interviews especially with the
senior employees should be undertaken so that they do not think the process as unfair or inflated.

The problem of pay compression should also be taken into consideration and should be catered for slowly and gradually. Initially the senior employees should be taken into confidence and should be given more authority so that they dont feel left out and the bank does not lose their valued experienced employees. Obviously the change to juniors is necessary but the shift should be slow and gradual.

6.4

CONCLUSION

From the in depth study and analysis of the data from the banking sector of Pakistan it can be concluded that banking industry can be divided into the older banks like Habib Bank Limited and Allied Bank Limited and the relatively newer banks like Bank Alfalah Limited and NIB Bank etc. The difference between the two types regarding the effects of motivation on the performance appraisal system is that the newer banks have a much developed HR system which is in accordance with the needs of the new day. One other advantage that the new banks have is that the employees are young and can be easily molded to perform what the HR wants them to do which is very difficult in case of the senior employees who are very rigid and are not easily adaptable. If the banking sector of Pakistan realize the problems that they are having related to the performance appraisal process which is adversely affecting the motivation of employees, and if they follow the detailed recommendation given above they can have a much motivated workforce which can flourish the business of the bank and add to the economy of the nation as a whole.

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REFERENCES AND BIBLIOGRAPHY

REFERENCES

8 Basics About Employee Motivation (Including Steps You Can Take) Written by Carter McNamara, MBA, PhD, Authenticity Consulting, LLC. Adapted from the Field Guide to Leadership and Supervision.

Poor Performance Reward and Recognition by Chris Herrmann Why Your Employees Are Losing Motivation by David Sirota, Louis A. Mischkind, and Michael Irwin Meltzer

How Management Demotivates (Reprinted with permission from "Stop Demotivating Your Employees!" Harvard Management Update, Vol. 11, No. 1, January 2006.) by David Sirota, Louis A. Mischkind, and Michael Irwin Meltzer

10 Ten Tips for Creating a Terrific Employee Appraisal System by Dick Grote

Business Studies by Karen Borrington & Peter Stimpson, 2nd Edition Strategic Human Resource Management: Corporate Rhetoric and Human Reality by Lynda Gratton, Veronica Hope Hailey, Philip Stiles, Catherine Truss.

Human Resource Management by Raymond

A.

Noe,

John

R.

Hollenbeck, Berry Gerhart & Patrick M. Wright, 4th edition

Management by Robbins &Coulter, 7th Edition Human Resource Management by Schuler & Jackson, 6th Edition Promotion and Optimal Retirement by Steven Stern Concepts In Strategic Management And Business Policy by Thomas L. Wheelen & David Hunger 9th edition

Abolishing performance appraisals by Tom Coens and Mary Jenkins

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REFERENCES AND BIBLIOGRAPHY


Article in the May-June 1997 issue of Corporate University Review UCSF Supervisory Certification Program including "Setting Performance Expectations", and "Coaching for Performance"

http://www.businesslink.gov.uk http://www.allbusiness.com/human-resources/careers-job-training/5370871.html

http://findarticles.com/p/articles/mi_qa5292 www.businessballs.com wiki.answers.com www.streetdirectory.com www.chrmglobal.com www.joe.org employeemotivationonline.com

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