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Project Report


Performance Appraisal
System of
SAIL Employees

Prepared By :-

We would like to thank Prof. Mukul Mitra for giving us the

project which has helped us enhance our knowledge in the internal
working environment of a company . We would also thank him for
giving his valuable time and patience which has made this project


The history of performance appraisal is quite brief. Its roots in the

early 20th century can be traced to Taylor's pioneering Time and Motion
studies. But this is not ver y helpful, for the same may be said about
almost ever ything in the field of modern human resources management. As
a distinct and formal management procedure used in the evaluation of
work performance, appraisal really dates from the time of the Second
World War - not more than 60 years ago.

In many organizations - but not all - appraisal results are used,

either directly or directly, to help determine reward outcomes. That is, the
appraisal results are used to identif y the better performing employees who
should get the majority of available merit pay increases, bonuses and

B y the same token, appraisal results are used to identify the poorer
performers who may require some form of counseling, or in extreme cases,
demotion, dismissal or decreases in pay. (Organizations need to be aware
of laws in their country that might restrict their capacity to dismiss
employees or decrease pay.)

The purpose of this study has been to determine whether the

performance appraisal was used for employee development and whether
the appraisal was emphasized as an important part of the performance
appraisal process. Also whether the performance appraisal helps in
increasing company’s profitability.

Our study suggested that the performance appraisal has helped in

increasing the profitability of SAIL which was clearly shown by their
performance on BSE Sensex. Certain loop holes has been determined and
suggestions were made.

Almost every organization in one way or another goes through a
periodic ritual, formally or informally, known as performance appraisal.
Performance appraisal has been called many things. The formal
performance appraisal has been called a tool of management, a control
process, an activity and a critical element in human resources allocation.
Uses for performance appraisal have included equal employment
opportunity considerations, promotions, transfer and salary increases.
Primarily performance appraisal has been considered an overall system for
controlling an organization. Performance appraisal has also been called an
audit function of an organization regarding the performance of
individuals, groups and entire divisions.

Performance appraisal may be defined as a structured formal

interaction between a subordinate and supervisor, that usually takes the
form of a periodic interview (annual or semi-annual), in which the work
performance of the subordinate is examined and discussed, with a view to
identif ying weaknesses and strengths as well as opportunities for
improvement and skills development.

Almost every organization in one way or another goes through a

periodic ritual, formally or informally, known as performance appraisal.
Performance appraisal has been called many things. The formal
performance appraisal has been called a tool of management, a control
process, an activity and a critical element in human resources allocation.
Uses for performance appraisal have included equal employment
opportunity considerations, promotions, transfer and salary increases.
Primarily performance appraisal has been considered an overall system for
controlling an organization. Performance appraisal has also been called an
audit function of an organization regarding the performance of
individuals, groups and entire divisions.


Employees would like to know from a performance appraisal system:

· concrete and tangible particulars about their work; and

· assessment of their performance.

This would include how they:

· did;

· could do better in future;

· could obtain a larger share of rewards; and

· could achieve their life goals through their position.

Therefore an employee would desire that the appraisal system should aim at:

· their personal development;

· their work satisfaction; and

· their involvement in the organization.

From the point of view of the organization, performance appraisal serves the purpose

· providing information about human resources and their development;

· measuring the efficiency with which human resources are being used and
improved ;

· providing compensation packages to employees; and

· maintaining organizational control.

Performance appraisal should also aim at the mutual goals of the employees and the
organization. This is essential because employees can develop only when the
organization’s interests are fulfilled. The organization’s main resources are its employees,
and their interest cannot be neglected. Mutual goals simultaneously provide for growth
and development of the organization as well as of the human resources. They increase
harmony and enhance effectiveness of human resources in the organization.


• To help each employee understand more about their role and become clear about their
• to be instrumental in helping employees to better understand their strengths and
weaknesses with respect to their role and functions in the organization;

• to help in identifying the developmental needs of employees, given their role and

• to increase mutuality between employees and their supervisors so that every

employee feels happy to work with their supervisor and thereby contributes their
maximum to the organization;

• to act as a mechanism for increasing communication between employees and their

supervisors. In this way, each employee gets to know the expectations of their
superior, and each superior also gets to know the difficulties of their subordinates and
can try to solve them. Together, they can thus better accomplish their tasks;

• to provide an opportunity to each employee for self-reflection and individual goal-

setting, so that individually planned and monitored development takes place;

• to help employees internalize the culture, norms and values of the organization, thus
developing an identity and commitment throughout the organization;

• to help prepare employees for higher responsibilities in the future by continuously

reinforcing the development of the behavior and qualities required for higher-level
positions in the organization;

• to be instrumental in creating a positive and healthy climate in the organization that

drives employees to give their best while enjoying doing so; and

• to assist in a variety of personnel decisions by periodically generating data regarding

each employee.

One of the biggest problems with performance appraisal is the fact that most people are not accurate
raters of others’ performance . When an employee’s performance rating does not reflect their true or
actual performance , we say a rater error has occurred . The most common rater errors are:-

• Halo / Horn Effect

• Central Tendency
• Recency
• Leniency
• Bias


Manoj’s outstanding writing
Inappropriate generalizations from
ability caused his supervisor to
one aspect of an individual’s
Halo/horns effect rate him highly in unrelated
performance to all areas of that
areas where his performance was
person’s performance
actually mediocre.

Because Rahul had a concern

The inclination to rate people in that he would not be able to deal
Central tendency the middle scale even when their with confrontation during an
performance clearly warrants a appraisal session, he rated
substantially higher or lower rating all of his employees as
“Meets Expectations.”

Sudha kept no records of

critical incidents. When she
The tendency of minor events that began writing the appraisals for
have happened recently to have her employees she discovered
Recency effect
more influence on the rating than that she could only recall
major events of many months ago examples of either positive or
negative performance for
the last two months.

The tendency to attribute Reema , attributes the successes

performance failings to factors of her work group to the quality
Attribution bias under the control of the individual of her leadership and the failings
and performance successes to to their bad attitudes and
external causes inherent laziness.

Basically there are two types of performance appraisal done on the basis of post of the
SAIL’s employee. They are:

1. Executive performance appraisal system

2. Non-executive performance appraisal system


This system is for performance appraisal for executives of the level E-0 to E-4 . The
various steps involved are:

A) Self Appraisal Performance Review & Planning

I. Appraisee write his view over the actual achievement for the Key performance
area / Task and Target assigned to him for the year.
II. Comments on fulfillment of KPA / Task and Target are written by the Reporting
Officer , taking account of time frame also.
III. Special Jobs other than tasks given and normal routine work are written by

B) Performance Review Discussion

I. Both appraisee and reporting officer sit together.

II. Comment over Strengths and weaknesses and areas for development are written
which is undersigned by both .
III. Appraisee can help the reporting officer by giving examples which shows his
strength or weakness. He also tell what training he want to undergo .

C) Performance Assessment

I. Rating between 1 to5 are given to the appraisee by the Reporting Officer
and Reviewing Officer individually on the basis of Performance Factors and
Potential Factors.

Performance Factors :Quantity of output

Quality of output
Cost control
Job Knowledge and Skill
Team spirit and Lateral
Development & Quality of assessing subordinates
Special Relevant factor

Potential Factors : Communication

Commitment and sense of Responsibility
Problem Analysis and Decision making
Planning and Organizing
Management of Human resources

II. Different weightage are given to each factor

III. Final scores are calculated by multiplying rating and weightage .By adding
these Total Factor Score is calculated.
IV. Comments on Overall Performance And Potential are written by both
Reporting and Reviewing Officers individually.

D) Suggestions for Job Rotation and Job Enrichment

I. Both reporting and reviewing officers write their suggestions whether the
appraisee should be transferred to other department. Either a good employee is
transferred so that he can acquire knowledge of all the departments, or a worst
performing employee is transferred so as to improve his performance.

II. In some exceptional case Head of department give his comments on overall
performance & potential of the employee.

E) Final Assessment

I. Total Factor Score by both Reporting and Reviewing officers is written and
average is calculated.
II. Final Grading between O / A / B / C is given .
III. If Final Grade is C , indicate whether to promote or not to promote the appraisee.
IV. If not to promote give reasons.
V. Meeting with non-promotable appraisee.


I. Rating are given by both Reporting and Reviewing officers on the basis of
performance of the appraisee depending upon factors: Performance on the Job
Job Knowledge & skill
Multi-skill Utilization
Conduct & behavior
Punctuality & availability on job
Cost & Quality Consciousness
Initiative & Capacity to assume higher
Housekeeping & safety consciousness

II. Weightage are given to various factors .

III. Scores out of 100 are calculated by multiplying rating with weightage .

IV. O / A / B / C / C- Grades are given according to scores and attendance of the appraisee.

V. If grade is C- , then appraisee is interviewed by the Head of Department.


Ranking. - The term ranking has been used to describe an alternative method of
performance appraisal where the supervisor has been asked to order his or her employees
in terms of performance from highest to lowest.

Forced Choice Method. - This appraisal method has been developed to prevent evaluators
from rating employees to high. Using this method, the evaluator has to select from a set
of descriptive statements, statements that apply to the employee. The statements have
been weighted and summed to at, effectiveness index.

Forced Distribution. - The term used to describe an appraisal system similar to grading
on a curve. The evaluator had been asked to rate employees in some fixed distribution of
categories. One way to do this has been to type the name of each employee on a card and
ask the evaluators to sort the cards into piles corresponding to rating.

Paired Comparison. - The term used to describe an appraisal method for ranking
employees. First, the names of the employees to be evaluated have been placed on
separate sheets in a pre-determined order, so that each person has been compared with all
other employees to be evaluated. The evaluator then checks the person he or she felt had
been the better of the two on the criterion for each comparison. Typically the criterion has
been the employees over all ability to do the present job. The number of times a person
has been preferred is tallied, and the tally developed is an index of the number of
preferences compared to the number being evaluated.

Graphic Rating Scale. - The term used to define the oldest and most widely used
performance appraisal method. The evaluators are given a graph and asked to rate the
employees on each of the characteristics. The number of characteristics can vary from
one to one hundred. The rating can be a matrix of boxes for the evaluator to check off or
a bar graph where the evaluator checked off a location relative to the evaluators rating.

Checklists. - The term used to define a set of adjectives or descriptive statements. If the
rater believed the employee possessed a trait listed, the rater checked the item; if not, the
rater left the item blank. rating score from the checklist equaled the number of checks.

Behavioral Anchored Rating Scales. - The term used to describe a performance rating that
focused on specific behaviors or sets as indicators of effective or ineffective performance,
rather than on broadly stated adjectives such as "average, above average, or below
average". Other variations were:

Behavioral observation scales

Behavioral expectations scales
Numerically anchored rating scales

Critical Incident Technique. - The term used to describe a method of performance

appraisal that made lists of statements of very effective and very ineffective behavior for
employees. The lists have been combined into categories, which vary with the job. Once
the categories had been developed and statements of effective and ineffective behavior
had been provided, the evaluator prepared a log for each employee. During the evaluation
period, the evaluator recorded examples of critical behaviors in each of the categories,
and the log has been use to evaluate the employee at the end of the evaluation period.

Management by Objectives. - The management by objectives performance appraisal

method has the supervisor and employee get together to set objectives in quantifiable
terms. The appraisal method has worked to eliminate communication problems by the
establishment of regular meetings, emphasizing results, and by being an ongoing process
where new objectives have been established and old objectives had been modified as
necessary in light of changed conditions.

• SAIL wins 'India's Employers of Choice Award-2007' in the Public Sector
• SAIL's Q4 net profit Rs.1902 crore – up 72%
• President Kalam presents prestigious Corporate Social Responsibility award
• SAIL has been a pioneer in promulgating a firm policy
• on safety in the workplace.
• SAIL has been an active participant in the National RCH programme across
all since 1995. All SAIL hospitals have participated in the National RCH
• In all SAIL Plants, Mahila Samities have been formed since inception. The
members of the Samities are spouses of the employees. Spouses of MDs, EDs
etc are also a member of Mahila Samities . A lot of work is being done for
the society by these Samities.

All these facts shows that SAIL is constantly increasing and

becoming famous in public sector .This implies employees are working
efficiently which is possible when employees are happy with company’s
performance appraisal system.

In the present performance appraisal system of SAIL we found the
following loop holes:

If the appraisee has good terms with the reviewing officer and does not
have a smooth relationship with the reporting officer , in such case the
reporting officer is sometimes forced by the reviewing officer to give
better score to the appraisee.


• The reporting officer should keep the performance data of each


• The reporting officer should give monthly feedback to the subordinates

regarding their performances and thereby giving suggestions to

Websites :- www.sailindia.co.in

Books :-
i. Personnel – Human Resource Mgmt
By David A Decenzo
ii. Human Resource Mgmt
By Gary Dessler