Project on

PERFORMANCE APPRAISAL
IN ICICI BANK
In partial fulfilment of requirement for the
Award of Degree of M.Com
Subject:
HUMAN RESOURCES MANAGEMENT
Submitted By:
Miss. SEEMA TALREJA
Roll No. 36
M.Com. Part I, Semester
Under the Guidance of:
Prof. MANISHA.GUR

SMT. CHANDIBAI HIMATHMAL MANSUKHANI COLLEGE

ULHASNAGAR 421003
UNIVERSITY OF MUMBAI
2015 2016

Department of Commerce

Certificate
Thisistocertifythat,Ms.SEEMA.M.TALREJAofM.Com.I,Sem.I(Roll
No.36), has successfully completed the project titled PERFORMANCE
APPRAISALINICICIBANKundermyguidancefortheAcademicYear
201516.Theinformationsubmittedistrueandoriginalaspermyknowledge.

Prof.MANISHA.GUR
(ProjectGuide)

Prof.GopiShamnani Dr.PadmaV.Deshmukh
(Coordinator,M.ComCourse)
(I/CPrincipal)

ExternalExaminer

DECLARATION
I Seema.M.Talreja, studying in Smt. Chandibai Himatmal Mansukhani college of
Arts,science, Commerce, Ulhasnanagr 421003, Student of M.Com Part 1, Hereby declare
that I have completed my project on PERFORMANCE APPRAISAL IN ICICI BANK
in the academic year 2015-2016.
The information submitted by me is true and original to the best of my knowledge.

_____________
Seema.M.Talreja

ACKNOWLEGEMENT
To list who all have helped me is difficult because they are so
numerous and the depth is so enormous.
I would like to acknowledge the following as being idealistic channels
and fresh dimensions in the completion of this project
I take this opportunity to thank the University of Mumbai forgiving
me chance to do this project.
I would like thank my Principal, Dr.Padma.V.Deshmukh for
providing the necessary facilities required for completion of this
project.
I would also like to express my sincere gratitude towards my project
guide Prof. Mrs. MANISHA.GUR whose guidance and care made
the project successful.
I would like to thank my college library, for having provided various
reference books and magazines related to my project.
Last but not the least, I would like to thank almighty God, my
parents, and my friends who helped me gather these data and
have sat with me for hours discussing about the project.

0bjective of the Study

To understand the concept of HR in special reference of Performance Appraisal
To understand the application of Performance Appraisal in banking sector
To understand the practical aspect of Performance Appraisal in banking scenario
To understand the modern trends emerging in Performance Appraisal
To understand the management approach towards Performance Appraisal
To understand the banking scenario of banks
To gain the knowledge of the practical process of the Performance Appraisal
To view the aspect of Performance Appraisal from managerial perspective
To highlight the effectiveness of Performance Appraisal in banking sector

Scope of the study

A brief overview of the nature of the subject
An introduction to the HR as a managerial function in special reference with
Performance Appraisal
New dimensions, techniques, approaches and thoughts in Performance Appraisal.
Practical aspect of Performance Appraisal in ICICI bank
Modern techniques emerging in Performance Appraisal.
Need and importance of Performance Appraisal in banking industry
Brief introduction of Indian banking industry
Introduction to ICICI bank
Role of Performance Appraisal as managerial decision in banking sector in policy
making and organizational success

Methodology of study
Data for the project is obtained in two ways primary source and secondary
source
.
Primary sourceThe primary data by preparing questionnaire and interviewed manager,
staff and customer of ICICI bank Ulhasnagar.

Secondary sourceSecondary data was used for this study as the research design is
descriptive in nature so we tried to collect the data available through
other sources on the subject. Sometimes, primary data is also collected
through observation method to facilitate the research work.
Sources of data
The following sources are used for collecting the data for this study:
Books
internet
Journals
News papers
Personal sources

SR.N
O

TOPICS

PG.N
O

INTRODUCTION-PERFORMANCE APPRASAIL

12

'P.A-A SYSTEMATIC APPROACH

13

PURSPOSE OF PERFORMANCE APPRAISAL

14

USES OF PERFOMANCE APPRAISAL

16

ADVANTAGES & DISADVANTAGES OF ''P.A''

17

Process OF Performance Appraisal

18

Approaches And Methods In Performance Appraisal

21

Effective Appraisal System

26

Challenges Of Performance Appraisal

27

10

Legal Issues With Performance Appraisal

28

11

Performance Appraisal In Banking Sector

32

12

Needs and Importance For Performance Appraisal in Banking

33

13

ICICI BANK company profile

35

14

Reasons for Performance Appraisal in ICICI

38

15

ICICI HR Philosophy on P.A

41

16

Forms Used By the Bank for Performance Appraisal

42

17

Suggestion And Recommendation

43

18

Conclusion

45

19

Bibliography

47

EXECUTIVE SUMMARY
The study, Performance Appraisal in Banking Sector, highlights the importance of
Performance Appraisal in special reference of banking industry. As we know the banking
sector is one of the fastest growing sectors of our country, the study highlights the perspective
of HR in banking sector.
In this study I strive to find out the need of Performance Appraisal for banks, and try to
understand how the Performance Appraisal is done in banking sector. In this study we take
the case of one of the leading bank, ICICI bank, as our sample and try to find out their
techniques used for Performance Appraisal.
This study refers to the need of Performance Appraisal for banking industry, importance
and emerging trends in the field of Performance Appraisal. For easy understanding of the
study we have divided the entire study in to several chapters that gives the specific nature of
the subject in question.
The study is manly conducted on the basis of secondary data rather than the primary data. We
managed to collect the secondary data from ICICI bank and got the information about the HR
policy and process of the bank. In MY study we highlighted the process of ICICI bank
Performance Appraisal mechanism and the manner in which Performance Appraisal
takes place in ICICI bank
In special cases like the practical example of ICICI bank, the study highlights:
a) Techniques,
b) Approach,
c) Forms,
d) Managerial approach,
e) Employees feedback,
9

f) Process and other real aspect of the Performance Appraisal

that provides the realistic view of the Performance Appraisal process that is carried out by
the bank in actual work environment .

The study is conducted is a simple manner and most of the data is collected through various
sources. This study refers the Performance Appraisal technique as an effective managerial
tool to enhance the efficiency and effectiveness to achieve the organizational and individual
goals. This study provides the theoretical knowledge about the Performance Appraisals on
the issue like a)need , b)importance , c)features , d)techniques , e)approaches , f)model ,
g)trends and other issues related to the banking industry . This study refers to the role of
Performance Appraisal in a wide and in a systematic manner that takes place in a sequential
way and covers almost all the aspect of the appraisal from employees to organization under
the universal approach called Performance Management

10

Chapter 1

11

INTRODUCTION

12

PERFORMANCE APPRAISAL IS A FORMAL, STRUCTURED SYSTEM OF

MEASURING AND EVALUATING AN EMPLOYEES JOB, RELATED BEHAVIORS
AND OUTCOMES TO DISCOVER HOW AND WHY THE EMPLOYEE IS PRESENTLY
PERFORMING ON THE JOB AND HOW THE EMPLOYEE CAN PERFORM MORE
EFFECTIVELY IN THE FUTURE SO THAT THE EMPLOYEE, ORGANIZATION, AND
SOCIETY ALL BENEFIT.
Performance appraisal is a process of summarizing, assessing and developing the work
performance of an employee. In order to be effective and constructive, the performance
manager should make every effort to obtain as much objective information about the
employee's performance as possible.
Performance Appraisal is a review and discussion of an employee's performance of assigned
duties and responsibilities based on results obtained by the employee in their job, not on the
employee's personality characteristics. Personality should be considered only when it relates
to performance of assigned duties and responsibilities.
It is 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 identifying weaknesses and
strengths as well as opportunities for improvement and skills development.
In many organizations - but not all - appraisal results are used, either directly or indirectly, to
help determine reward outcomes. That is, the appraisal results are used to identify the better
performing employees who should get the majority of available merit pay increases, bonuses,
and promotions.
By the same token, appraisal results are used to identify poorer performers, who may require
some form of counseling, or in extreme cases, demotion, dismissal or decreases in pay.

Performance Appraisal A Systematic Approach

13

Performance Appraisals are regular reviews of employee performance within organizations.

Generally, the aims of a Performance Appraisal are to:
1. Give feedback on performance to employees.
2. Identify employee training needs.
3. Document criteria used to allocate organizational rewards.
4. Form a basis for personnel decisions: salary increases,promotions disciplinary actions,etc.
5. Provide the opportunity for organizational diagnosis and development.
6. Facilitate communication between employee and administration
7. Validate selection techniques and human resource policies to meet federal Equal
Employment Opportunity requirements.
Performance Appraisal is a management tool which is helpful in motivating and effectively
utilizing human resources. Assessment of human potential is difficult, no matter how well
designed and appropriates the performance planning and appraisal system is, the
Performance Appraisal system should:

be correlated with the organizational mission, philosophies and value system;

cover assessment of performance as well as potential for development;

take care of organizational as well as individual needs; and

help in creating a clean environment by

- Linking

rewards

with

achievements,

- generating information for the growth of the employee as well as of the organization,
- and suggesting appropriate person-task matching and career plans.
Feedback is an important component of Performance Appraisal. While positive feedback is
easily accepted, negative feedback often meets with resistance unless it is objective, based on
a credible source and given in a skilful manner.

Purpose Of Performance Appraisals

14

Performance appraisals are probably the most misused and abused management tool in
history. When asked, the majority of human resource managers will swear blind that it is their
most important device for reviewing members of the team. The reality is that, on the whole,
managers, supervisors, and employees hate the thoughts of them and they rarely get done.
Human resource professionals spend a lot of time whipping people into doing them, while
managers look for a variety of reasons to delay the process.
The reason for this is that it's often an uncomfortable practice to carry out, people undertake
performance appraisal for the wrong reasons and from the wrong perspective. This can end
up putting the manager and the employee on different "sides". Appraisals are used for
determining pay increases, who gets let go, who gets promoted. Most commonly, they are
used to focus on what people have done wrong.
So what is the real point of performance appraisals? Generally, the aim of the practice is to:

Give feedback on performance to employees.

Identify employee training needs.

Document criteria used to allocate organizational rewards.

Form a basis for personnel decisions: salary increases, promotions, disciplinary

actions, etc.

Provide the opportunity for organizational diagnosis and development.

Facilitate communication between employee and administrator.

Validate selection techniques and human resource policies to meet federal Equal
Employment Opportunity requirements

The most important purpose or goal of the appraisal is to improve performance in the future,
in both employees and team leaders. Managers can get valuable information from staff to
help them make their jobs more productive. Through feedback given in performance
appraisals work units can identify problems that interfere with everyone's, and take steps to
rectify them. If there is a shift from affixing blame to identifying barriers to performance the
fear and dread associated with appraisals will be removed.
15

When managers put away the "blaming stick" in appraisals and move to a cooperative,
dialogue approach, the whole process can become more comfortable and effective. Because,
it puts the manager and employee on the same side, and working towards the same goals,
getting better and better.
Performance appraisals are always awkward for everyone. While managers make an effort to
be as objective as possible, there are always concerns about specific performance appraisals,
and their accuracy. When you're evaluating your staff it's wise to be aware of factors that may
affect your assessments. Here are a few factors you should be aware of, so that you can
examine your own assessment processes to ensure that they are as free from bias as possible.

Uses Of Performance Appraisals

A properly designed performance appraisal system can

help each employee understand more about their role and become clear about their
functions;

16

be instrumental in helping employees to better understand their strengths and

weaknesses with respect to their role and functions in the organization;

help in identifying the developmental needs of employees, given their role and
function;

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;

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;

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

so that individually planned and monitored development takes place;

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

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;

Be instrumental in creating a positive and healthy climate in the organization that

drives employees to give their best while enjoying doing so.

17

Advantages of performance appraisals:

They provide a document of employee performance over a specific period of time.

They provide a structure where a manager can meet and discuss performance with an
employee.

They allow a manager the opportunity to provide the employee with feedback about
their performance and discuss how well the employee goals were accomplished.

They provide a structured process for an employee to clarify expectations and discuss
issues with their manager.

They provide a structure for thinking through and planning the upcoming year and
developing employee goals.

They can motivate employees if supported by a good merit increase and compensation
system.

Disadvantages of performance appraisals:

If not done right, they can create a negative experience.
Performance appraisals are very time consuming and can be overwhelming to
managers with many employees.
They are based on human assessment and are subject to ratter errors and biases.
Can be a waste of time if not done appropriately.
They can create a very stressful environment for everyone involved.
Finally, performance appraisals are only as good as the performance management system it
operates within. Organizations that only do performance appraisals for the sake of doing
them are wasting their time.
But organizations that incorporate performance appraisals into a comprehensive performance
management system and use them to implement business goals have an advantage for
accomplishing their goals and ultimately their strategic plan.

18

The Process OF Performance Appraisal

Performance appraisal involves an evaluation of actual against desired performance. It also
helps in reviewing various factors which influence performance. Managers should plan
performance development strategies in a structured manner for each employee. In doing so,
they should keep the goals of the organization in mind and aim at optimal utilization of all
available resources, including financial. Performance appraisal is a multistage process in
which communication plays an important role.

Eight-stage performance appraisal process:

(i)

Establishing standards and measures

The first step is to identify and establish measures which would differentiate between
successful and unsuccessful performances. These measures should be under the control of the
employees being appraised. The methods for assessing performance should be decided next.
Basically, management wants to:

know the behaviour and personal characteristics of each employee; and

Assess their performance and achievement in the job.

There are various methods available for assessing results, behaviour and personal
characteristics of an employee. These methods can be used according to the particular
circumstances and requirements.

19

(ii) Communicating job expectations

The second step in the appraisal process is communicating to employees the measures and
standards which will be used in the appraisal process. Such communication should clarify
expectations and create a feeling of involvement

(iii) Planning
In this stage, the manager plans for the realization of performance expectations, arranging for
the resources to be available which are required for attaining the goals set. This is an enabling
role.

(iv) Monitoring performance

Performance appraisal is a continuous process, involving ongoing feedback. Even though
performance is appraised annually, it has to be managed 'each day, all year long.' Monitoring
is a key part of the performance appraisal process. It should involve providing assistance as
necessary and removing obstacles rather than interfering. The best way to effectively monitor
is to walk around, thus creating continuous contacts, providing first-hand information, and
identifying problems, which can then be solved promptly.

(v) Appraising
This stage involves documenting performance through observing, recalling, evaluating,
written communication, judgment and analysis of data. This is like putting together an
appraisal record.

(vi) Feedback
After the formal appraisal stage, a feedback session is desirable. This session should involve
verbal communication, listening, problem solving, negotiating, compromising, conflict
resolution and reaching consensus.

20

(vii) Decision making

On the basis of appraisal and feedback results, various decisions can be made about giving
rewards (e.g., promotion, incentives, etc.) and punishments (e.g., demotion). The outcome of
an appraisal system should also be used for career development.

(viii) Development of performance

The last stage of performance appraisal is 'development of performance,' or professional
development, by providing opportunities for upgrading skills and professional interactions.
This can be done by supporting participation in professional conferences or by providing
opportunities for further study. Such opportunities can also act as incentives or rewards to
employees.

21

Approaches And Methods In Performance Appraisal

Performance appraisal is a multistage process involving several activities, which
can be administered using a variety of approaches.

Intuitive Approach: In this approach, a supervisor or manager judges the employee

based on their perception of the employee's behaviour.

Self-appraisal Approach: Employees evaluate their own performance using a

common format.

Group approach: The employee is evaluated by a group of persons.

Trait approach: This is the conventional approach. The manager or supervisor

evaluates the employee on the basis of observable dimensions of personality, such
as integrity, honesty, dependability, punctuality, etc.

22

Appraisal based on achieved results: In this type of approach, appraisal is based

on concrete, measurable, work achievements judged against fixed targets or goals
set mutually by the subject and the assessor.

APPRAISAL METHODS
Essay appraisal method:
The assessor writes a brief essay providing an assessment of the strengths, weaknesses
and potential of the subject. In order to do so objectively, it is necessary that the assessor
knows the subject well and should have interacted with them. Since the length and
contents of the essay vary between assessors, essay ratings are difficult to compare.

Graphic rating scale:

A graphic scale 'assesses a person on the quality of his or her work (average; above average;
outstanding; or unsatisfactory).' Assessment could also be trait centred and cover observable
traits, such as reliability, adaptability, communication skills, etc. Although graphic scales
seem simplistic in construction, they have application in a wide variety of job responsibilities
and are more consistent and reliable in comparison with essay appraisal. The utility of this
technique can be enhanced by using it in conjunction with the essay appraisal technique.

Field review method:

Since individual assessors differ in their standards, they inadvertently introduce bias in their
ratings. To overcome this assessor-related bias, essay and graphic rating techniques can be
combined in a systematic review process. In the field review method, 'a member of the HRM
staff meets a small group of assessors from the supervisory units to discuss each rating,
systematically identifying areas of inter-assessor disagreement.' It can then be a mechanism
to help each assessor to perceive the standards uniformly and thus match the other assessors.
Although field review assessment is considered valid and reliable, it is very time consuming.

Critical incident appraisal method:

23

In this method, a supervisor describes critical incidents, giving details of both positive and
negative behaviour of the employee. These are then discussed with the employee. The
discussion focuses on actual behaviour rather than on traits. While this technique is well
suited for performance review interviews, it has the drawback that the supervisor has to note
down the critical incidents as and when they occur. That may be impractical, and may delay
feedback to employees. It makes little sense to wait six months or a year to discuss a
misdeed, a mistake or good display of initiative.

Forced-choice rating method

Unlike the field review method, the forced-choice rating method does not involve discussion
with supervisors. Although this technique has several variations, the most common method is
to force the assessor to choose the best and worst fit statements from a group of statements.
These statements are weighted or scored in advance to assess the employee. The scores or
weights assigned to the individual statements are not revealed to the assessor so that she or he
cannot favour any individual. In this way, the assessor bias is largely eliminated and
comparable standards of performance evolved for an objective. However, this technique is of
little value wherever performance appraisal interviews are conducted.

Management by objectives

The employees are asked to set or help set their own performance goals. This avoids the
feeling among employees that they are being judged by unfairly high standards. This method
is currently widely used, but not always in its true spirit. Even though the employees are
consulted, in many cases management ends up by imposing its standards and objectives. In
some cases employees may not like 'self-direction or authority.' To avoid such problems, the
work standard approach is used.

Work standard approach

In this technique, management establishes the goals openly and sets targets against realistic
output standards. These standards are incorporated into the organizational performance
appraisal system. Thus each employee has a clear understanding of their duties and knows
well what is expected of them. Performance appraisal and interview comments are related to
these duties. This makes the appraisal process objective and more accurate. However, it is
difficult to compare individual ratings because standards for work may differ from job to job
24

and from employee to employee. This limitation can be overcome by some form of ranking
using pooled judgment.

Ranking methods:

There are various methods in ranking, which are explained below:

(a) Alteration ranking method: The individual with the best performance is chosen as the
ideal employee. Other employees are then ranked against this employee in descending order
of comparative performance on a scale of best to worst performance. The alteration ranking
method usually involves rating by more than one assessor. The ranks assigned by each
assessor are then averaged and a relative ranking of each member in the group is determined.
While this is a simple method, it is impractical for large groups. In addition, there may be
wide variations in ability between ranks for different positions.
(b) Paired comparison: The paired comparison method systematizes ranking and enables
better comparison among individuals to be rated. Every individual in the group is compared
with all others in the group. The evaluations received by each person in the group are counted
and turned into percentage scores. The scores provide a fair idea as to how each individual in
the group is judged by the assessor.
(c) Person-to-person rating: In the person-to-person rating scales, the names of the actual
individuals known to all the assessors are used as a series of standards. These standards may
be defined as lowest, low, middle, high and highest performers. Individual employees in the
group are then compared with the individuals used as the standards, and rated for a standard
where they match the best. The advantage of this rating scale is that the standards are
concrete and are in terms of real individuals. The disadvantage is that the standards set by
different assessors may not be consistent. Each assessor constructs their own person-toperson scale which makes comparison of different ratings difficult.

25

(d) Checklist method: The assessor is furnished with a checklist of pre-scaled descriptions
of behavior, which are then used to evaluate the personnel being rated (Monga, 1983). The
scale values of the behavior items are unknown to the assessor, who has to check as many
items as she or he believes describe the worker being assessed. A final rating is obtained by
averaging the scale values of the items that have been marked.

(e) Behaviorally anchored rating scales (BARS): This is a relatively new technique. It
consists of sets of behavioral statements describing good or bad performance with respect to
important qualities. These qualities may refer to inter-personal relationships, planning and
organizing abilities, adaptability and reliability. These statements are developed from critical
incidents collected both from the assessor and the subject.
(f) Assessment centers: This technique is used to predict future performance of employees
were they to be promoted. The individual whose potential is to be assessed has to work on
individual as well as group assignments similar to those they would be required to handle
were they promoted. The judgment of observers is pooled, and paired comparison or
alteration ranking is sometimes used to arrive at a final assessment. The final assessment
helps in making an order-of-merit ranking for each employee. It also involves subjective
judgment by observers
A performance appraisal system could be designed based on intuition, self-analysis,
personality traits, behavioral methods and result-based techniques. Different approaches and
techniques could be blended, depending on the goals of performance appraisal in the
organization and the type of review. For example, management by objectives, goal-setting
and work standard methods are effective for objective coaching, counseling and motivational
purposes. Critical incident appraisal is best suited when supervisor's personal assessment and
criticism are essential. A carefully developed and validated forced-choice rating can provide
valuable analysis of the individual when considering possible promotion to supervisory
positions. Combined graphic and essay form is simple, effective in identifying training and
development needs, and facilitates other management decisions.

26

Most Essential Characteristics of an Effective Appraisal System

Performance appraisal system should be effective as a number of crucial decisions are made
on the basis of score or rating given by the appraiser:
All organizations use performance appraisal for purposes such as salary increase, determining
training needs, motivating employees or establishing a basis for future personnel decisions.
The ideal approach to performance evaluation is that in which the evaluator is free from
personal biases and prejudices.
This is because when an evaluator is objective, it minimizes the potential dysfunctional
behavior of the evaluator, which may be detrimental to the achievement of the organizational
goals.

27

Given that all appraisals entail judgments and given that judgment may not always be fair, a
variety of techniques to make appraisal more objective have been introduced. For an
appraisal system to be effective it should possess the following essential characteristics

Reliability and Validity:

Appraisal system should provide consistent, reliable and valid information and data, which
can be used to defend the organisation even in legal challenges.
However, a single foolproof evaluation method is not available. Inequities in evaluation often
destroy the usefulness of the performance system resulting in inaccurate, invalid appraisals,
which are unfair too.
If two appraisers are equally qualified and competent to appraise an employee with the help
of same appraisal technique, their ratings should agree with each other. Then the technique
satisfies the conditions of inter-rater reliability.

An Atmosphere of Confidence and Trust:

The existence of an atmosphere of confidence and trust is necessary to discuss matters

frankly and offer suggestions for the improvement of the employee so that the organization as
well as employees stands to benefit.

Immediate Superior as Appraiser:

The immediate superior of the apraisee must make the ratings, but the personnel department
can assume the responsibility of monitoring the system. The superior should try to analyse
the strengths and weaknesses of an employee and advice him on correcting the weakness.

Less Time Consuming and Economical:

28

The appraisal programme should be less time-consuming and economical. Appraisal forms,
procedures, administration of techniques, ratings etc., should be standardised. An appraisal
programme should bring maximum benefit.

Open Communication:
The results of the appraisal, particularly when they are negative, should be immediately
communicated to the employees, so that they may try to improve their performance.
A good appraisal system provides the needed feedback on a continuing basis. The appraisal
interviews should permit both parties to learn about the gaps and prepare themselves for
future.

Post Appraisal Interview:

A post-appraisal interview should be arranged so that employees may be supplied with
feedback and the organisation may know the difficulties under which employees work, so
that their training needs may be discovered.
Permitting employees to review the results of their appraisal allows them to detect any errors
that may have been made. If they disagree with the evaluation, they can even challenge the
same through normal channels.

Job Relatedness:
Suggestions for improvement should be directed towards the objective facts of the job. Plans
for the future must be developed after consultation with subordinates. The individual as a
person should never be criticized.

29

CHALLENGES OF PERFORMANCE APPRAISAL

With the increased significance of performance appraisal, challenges confronting the system
are mounting. One serious challenge facing the performance appraisal system relates to
assessment of self-managed teams. Popularly called empowered teams, the self-managed
teams create special challenges for performance appraisal-empowered teams perform without
supervisors. Historically, if one recalls, it is the supervisor who assesses the performance of
his or her subordinates. Another challenge is that, individual and team performance, need to
be measured. A suitable device needs to be developed to assess the performance of
empowered teams because more and more firm suse such teams to enhance productivity.
The Following table contains challenges of Performance Appraisal

Create a culture of excellence that inspires every employee to improve and lend
himself or herself to be assessed

Align organizational objectives to individual aspirations

Clear growth paths for talented individuals

Provide new challenges to rejuvenate careers that have reached the plateau stage

Forge a partnership with people for managing their careers

Empower employees to make decisions without the fear of failing

Embed teamwork in all operational processes

30

LEGAL ISSUES ASSOCIATED WITH PERFORMANCE APPRAISAL

Performance appraisal data as stated earlier, are used to make many important HR decisions
(e.g. Pay, promotion, training, transfer and termination). The appraisal system is a common
target of legal disputes by employees involving charges of unfairness and bias. An employee
may seek the legal recourse to obtain relief from a discriminatory performance appraisal. One
such case goes back to 1980s. In 1981, three junior employees of Williamsons Magor were
promoted superseding 15 of their senior workmen. The basis for promotion was
recommendations of the departmental heads and other authorities. The 15 workmen
challenged the promotion to the three workmen in the Supreme Court and the court upheld
the contention of the petitioners on the ground that he said recommendations of departmental
heads and authorities were arbitrary and could not be the main basis for effecting promotions.
There are several recommendations 10 assist employees in conducting fair performance
appraisal and avoiding legal suits. Gleaned from case laws, these recommendations are
intended to be prescriptive measures that employers should take to develop fair and legally
defensible performance appraisal systems.

1. Legally Defensible Appraisal Procedures

All personnel decisions should be based on a formal standardized performance appraisal
system. Any performance appraisal process should be uniform for all employees within a job
group, and decisions based on those performance appraisals should be monitored for
differences according o race, sex. National origin. Religion or age of the employees. While
obtained differences as a function of these variables are not necessarily illegal. An
organization will have more difficulty defending an appraisal system with ratings related to
these variables.
All specific performance standards should be formally communicated to employees.
All employees should be able to review their appraisal results.
There should be a formal appeal process for the rate to re but rate judgments.
All ratters should be provided with written instructions and training on how to conduct
appraisals properly to facilitate systematic, unbiased appraisals.
All personnel decision-makers should be well informed of anti-discrimination laws. They
should be made aware of the fine distinctions between legal and illegal activities regarding
decisions based on appraisals.

31

2. Legally Defensible Appraisal Content

Any performance appraisal content should be based on a job analysis.Appraisals based on
traits should be avoided. Objectively verifiable performance data (e.g. sales, productivity, not
ratings)should be used whenever possible.
Constraints on an employee's performance that are beyond the employee's control should be
prevented from influencing the appraisal to ensure that the employee has an equal
opportunity to achieve any given performance level.
Specific job-related performance dimensions should be used rather than global measures or
single overall measures.
The performance dimensions should be assigned weights to reflect their relative importance
in calculating the composite performance score.

3. Legally Defensible Documentation of Appraisal Results

A thoroughly written record of evidence leading to termination decisions should be
maintained (e.g. performance appraisal and performance counseling to advise employees of
performance deficit, and to assist poor performers in making needed improvements)
Written documentation (e.g. specific behavioural examples) for extreme ratings should he
required and they must be consistent with the numerical ratings.
Documentation requirements should he consistent among the ratters

4. Legally Defensive Ratters

The ratters should be trained in how to use an appraisal system
The ratters must have the opportunity to observe the ratee first hand or to review important
rate performance products
Use of more than ratter is desirable in order to lessen the amount of influence of any one
ratter and to reduce the effects of biases. Peers, subordinates, customers, and clients are
possible sources.

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Performance Appraisal In Banking Sector

Performance Appraisal is a vehicle to:
(1) Validate and refine organizational actions (e.g. selection, training); and
(2) Provide feedback to employees with an eye on improving future performance.
Validating and refining organizational action or banks action
Employee selection, training and just about any cultural or management practicesuch as the
introduction of a new pruning method or an incentive pay programmay be evaluated in part
by obtaining worker performance data.
The evaluation may provide ideas for refining established practices or instituting new ones.
For instance, appraisal data may show that a farm supervisor has had a number of
interpersonal conflicts with other managers and employees. Some options include
(1) Paying more attention to interpersonal skills when selecting new supervisors,
(2) Encouraging present supervisors to attend communication or conflict management
Classes at the local community college, or
(3) Providing the supervisor one-on-one counselling.
Data from Performance Appraisals can also help farmers
(1) Plan for long-term staffing and worker development,
(2) give pay raises or other rewards,
(3) Set up an employee counselling session, or
(4) Institute discipline or discharge procedures.
For validation purposes, it is easier to evaluate performance data when large numbers of
workers are involved such as in banks. Useful performance data may still be collected when
employees are evaluated singly, but it may take years to obtain significant data trends.

33

Needs and Importance For Performance Appraisal in Banking

The butt of many a corporate joke, these hard working professionals are often relegated to
small back offices where their activities, viewed as little more than administrative functions,
are carried out without much recognition. But in an increasingly aggressive corporate world,
where every competitive edge counts, leading organisations would do well to recognise the
human potential that can be unleashed by adopting effective human resource management
strategies that realise the potential of employees and earn their respect and loyalty.
Dealing with the mundane personal matters of corporate life has traditionally been seen as the
sole purpose of the HR department. From hiring workers and providing transportation and
meals services, to processing housing, medical and insurance benefits, the functions of HR
professionals have been recognised as essential, but have not always inspired respect for
those involved in executing them.
Essentially, people remain the strongest and most competitive assets of a business.
This should, and is, changing. In a region where business growth is rapid, and organisations
are competing to secure talent from the same pool, investing in and revering effective HR
departments to find, train and help retain this talent is increasingly important. Testament to
the fact many banks in the region are now recognising the value of developing their human
resources, Abu Dhabi recently hosted the Middle East Human Resource Summit - the annual
conference and exhibition for industry professionals. But can everyone be persuaded to take
real action in developing their HR departments

Banking industry is facing a cut throat completion in present banking scenario where the
motivation of the employee can be a competitive advantage to retain its customer.

34

PERFORMANCE APPRAISAL IN

35

ICICI BANK company profile

Overview
ICICI Bank is India's second-largest bank with total assets of Rs. 3,744.10 billion (US$ 77
billion) at December 31, 2008 and profit after tax Rs. 30.14 billion for the nine months ended
December 31, 2008. The Bank has a network of 1,438 branches and about 4,644 ATMs in
India and presence in 18 countries. ICICI Bank offers a wide range of banking products and
financial services to corporate and retail customers through a variety of delivery channels and
through its specialized subsidiaries and affiliates in the areas of investment banking, life and
non-life insurance, venture capital and asset management. The Bank currently has
subsidiaries in the United Kingdom, Russia and Canada, branches in United States,
Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International Finance Centre
and representative offices in United Arab Emirates, China, South Africa, Bangladesh,
Thailand, Malaysia and Indonesia. Our UK subsidiary has established branches in Belgium
and Germany.
ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the National
Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on
the New York Stock Exchange (NYSE).

History
ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial
institution, and was its wholly-owned subsidiary. ICICI's shareholding in ICICI Bank was
reduced to 46% through a public offering of shares in India in fiscal 1998, an equity offering
in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Bank's acquisition of Bank of
Madura Limited in an all-stock amalgamation in fiscal 2001, and secondary market sales by
ICICI to institutional investors in fiscal 2001 and fiscal 2002. ICICI was formed in 1955 at
the initiative of the World Bank, the Government of India and representatives of Indian
industry. The principal objective was to create a development financial institution for
providing medium-term and long-term project financing to Indian businesses. In the 1990s,
ICICI transformed its business from a development financial institution offering only project
finance to a diversified financial services group offering a wide variety of products and
services, both directly and through a number of subsidiaries and affiliates like ICICI Bank. In

36

1999, ICICI become the first Indian company and the first bank or financial institution from
non-Japan Asia to be listed on the NYSE.
After consideration of various corporate structuring alternatives in the context of the
emerging competitive scenario in the Indian banking industry, and the move towards
universal banking, the managements of ICICI and ICICI Bank formed the view that the
merger of ICICI with ICICI Bank would be the optimal strategic alternative for both entities,
and would create the optimal legal structure for the ICICI group's universal banking strategy.
The merger would enhance value for ICICI shareholders through the merged entity's access to
low-cost deposits, greater opportunities for earning fee-based income and the ability to
participate in the payments system and provide transaction-banking services. The merger
would enhance value for ICICI Bank shareholders through a large capital base and scale of
operations, seamless access to ICICI's strong corporate relationships built up over five
decades, entry into new business segments, higher market share in various business segments,
particularly fee-based services, and access to the vast talent pool of ICICI and its subsidiaries.
In October 2001, the Boards of Directors of ICICI and ICICI Bank approved the merger of
ICICI and two of its wholly-owned retail finance subsidiaries, ICICI Personal Financial
Services Limited and ICICI Capital Services Limited, with ICICI Bank. The merger was
approved by shareholders of ICICI and ICICI Bank in January 2002, by the High Court of
Gujarat at Ahmadabad in March 2002, and by the High Court of Judicature at Mumbai and
the Reserve Bank of India in April 2002. Consequent to the merger, the ICICI group's
financing and banking operations, both wholesale and retail, have been integrated in a single
entity.

37

Performance Appraisal And Performance Management In ICICI Bank

The facilitation of high achievement by employees. Performance management involves
enabling people to perform their work to the best of their ability, meeting and perhaps
exceeding targets and standards. Performance management can be coordinated by an
interrelated framework between manager and employee. Key areas of the framework to be
agreed are objectives, human resource management, standards and performance indicators,
and means of reward. For successful performance management in ICICI , a culture of
collective and individual responsibility for the continuing improvement of business processes
needs to be established, and individual skills and contributions need to be encouraged and
nurtured as the bank deals in service sector where the employees are the main factor of
making the difference . One tool for monitoring performance management is Performance
Appraisal that the banks use for rewarding its employees. For the bank, performance
management is usually known as company performance and is monitored through business
appraisal.

38

Reasons for Performance Appraisal in ICICI

Increase motivation to perform effectively
Increase staff self-esteem
Gain new insight into staff and supervisors
Better clarify and define job functions and responsibilities
Develop valuable communication among appraisal participants
Encourage increased self-understanding among staff as well as insight into the kind of
development activities that are of value
Distribute rewards on a fair and credible basis
Clarify organizational goals so they can be more readily accepted
Improve institutional/departmental manpower planning, test validation, and
development of training programs

ICICI BANK PEFORMENCE APPRAISAL ENVIRONMENT

39

The bank is using the Management by Objectives (MBO) method. In this method the
subordinate in consultation with the supervisor chalks out short term objectives followed by
specific actions that he has to carry out. The goals are finally set and are action oriented. The
goals set are specific, measurable, achievable, review able and time bound and most
importantly they use to be aligned with the goal of the organization. At the end of a specified
time period, the activities are jointly reviewed by both the subordinate and his supervisor.
Depending on the performance of the subordinate, the goals are modified or redesigned for
the next period of time.
The MBO is thus a performance oriented system. A well thought out MBO system provides
multiple benefits. It establishes a link between the performance of the individual and the bank
It is easy to implement because those who carry out the plan also participates in setting it up.
Each employee becomes aware of the task he has to perform in the bank. This leads to better
utilization of capacity and talent. It promotes better communication and information sharing.
It provides guidelines for self evaluation as well as evaluation by the superior against set
tasks and goals. It facilitates guidance and counseling.

The Effective Components of ICICI P .A System

Performance Planning (includes employee goal setting / objective setting)

40

Ongoing Performance Communication

Data Gathering, Observation and Documentation

Performance Appraisal Meetings

Performance Diagnosis and Coaching

An effective Performance Appraisal system in ICICI bank emphasizes individual

objectives, Bank objectives and also mutual objectives. From the viewpoint of individual
objective the Performance Appraisal talks about
a)

What

task

the

individual

is

expected

b)

How

well

the

individual

has

done

c)

How

can

his

performance

be

to
the

further

do?
task?

improved?

d) His reward for doing well.

From the bank view point a Performance Appraisal should generate manpower information,
improve efficiency and effectiveness serve as a mechanism of control and provide a rational
compensation structure. In short the appraisal system establishes and upholds the principle of
accountability in the absence of which bank failure is the only possible outcome.
Finally, talking about mutual goals, the emphasis is on growth and development, harmony,
effectiveness and profitability of the bank

ICICI HR Philosophy on P.A

Performance Appraisal is one such method that allows for the optimisation of employees.
In a broad sense , it is a formal structure that allows for the continued measuring and
evaluation of individual behavior and performance, whilst influencing an employees job
41

related attributes through such factors as increased job satisfaction and recognition (with the
use of promotional aids such as better equipment, duties, and salaries). The purpose of any
such system, is not only to measure the performance of human resources but also to find
areas of skill deficit for further development (through employee feedback), identify excess
potential that could be better utilized, and communicate objectives more accurately to
workers . By doing so, businesses move one step closer to the achievement of their set goals
and objectives. Included here is also one other factor that is not a direct objective of
appraisals, but becomes a valuable asset within itself. This simply is the provision for
maintaining records of workers that are legally viable, that can protect the business when
dealing in cases of dismissals and demotions. This is especially important in todays society
because of the "increasing legislation and regulation dealing with victimization and
discrimination" making bank liable for all their actions.
The annual Performance Appraisal is usually done in two steps. First, the employees and
their manager complete the Performance Appraisal form - doing a self assessment. Often
the bank also uses a 60 degree feedback process, asking for input from peers. Secondly, the
bank employees and manager participate in a formal Performance Appraisal interview. The
appraisal form, used in the first step, consists of performance standards and criteria that are
used to judge evaluate your performance. The items comprising your job description are
usually the performance standards that are used in employees annual appraisal .The
performance standards are derived from a job analysis, which is a detailed list of all of the
skills involved in performing a task. For example, what are the skills necessary to perform a
complete blood count? The criteria are used to determine the level of performance, which can
be excellent, average, or poor (or alternatively meets, exceeds or does not meet standards).
Once appraisal is complete, score is averaged and merit raise (if applicable)

Forms Used By the Bank for Performance Appraisal

1. General Performance Appraisal Form I
Six-page form includes evaluation sections for three categories: a) objectives from last review

42

period; b) current job duties (which are customizable), and c) organization core values (e.g.,
maturity, vision).
2. General Performance Appraisal Form II
Four-page form has three sections: a) overall performance, b) communication skills, and c)
people/self development skills.
3. General Performance Appraisal Form III
Two-page "short form" has numerical rankings for two sections: a) general work attributes
and b) managerial attributes. Includes a weighted average calculation.
4. 360-Degree Performance Appraisal Form I
Two-page form for peers, outside suppliers and customers to fill out. Also can be used for
"upwards feedback about managers.
5. 360-Degree Performance Appraisal Form II
Two-page form for peers and outsiders - all open-ended questions, without numerical
rankings.
6. Manager Performance Appraisal Form
Six-page form with all sections related to managerial skills. Also includes a section for listing
future objectives.

7. Administrative/Technical Performance Appraisal Form

Four-page form perfect for administrative, technical and customer service workers.
8. Sales Performance Appraisal Form
Five-page form focused on sales personnel. Includes four sections: a) actual vs. plan
performance, b) lead generation, c) selling skills and d) account maintenance.
9. Project Evaluation Review Form
Four-page form geared towards specific projects, and an individuals' role on a given project.

43

10. Employee Self-Assessment Form

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

Suggestion and Recommendation

Though it is the basic rule of the report writing that suggestion and recommendation should
not be given until its asked for but to keeping in the mind the academic nature of the report
we would like to recommend the followings
Management and employees should see Performance Appraisal as a positive tools to
determine the organizational efficiency and effectiveness
44

Banks should use a well communicative method of Performance Appraisal to avoid any
resistance from the employees
The outcome of the Performance Appraisal should be shared with the concerned employees
and corrective action should be taken in the light of the outcome
Performance Appraisal should be treated as an integral part of the organizational
development not just the formality
If the external agency is hired for Performance Appraisal , it will be appreciated to remove
the possibility of biasness
Performance Appraisal should be done on both basis qualitative an quantitative
There should be a cost and benefit study of Performance Appraisal process

Conclusion
To summarize our discussion we can say that the Performance Appraisal is an integral part
of performance management and has become the important component of the HRM.
Performance management includes activities to ensure that goals are consistently being met
in an effective and efficient manner. Performance management can focus on performance of
the organization, banks, a department, processes to build a product or service, employees, etc

45

Performance management reminds us that being busy is not the same as producing results. It
reminds us that training, strong commitment and lots of hard works alone are not results. The
major contribution of performance management is its focus on achieving results -- useful
products and services for customers inside and outside the bank and organization.
Performance management redirects our efforts away from busyness toward effectiveness.
Recently, organizations have been faced with challenges like never before. Increasing
competition from businesses across the world has meant that all businesses must be much
more careful about the choice of strategies to remain competitive. Everyone (and everything)
in the organization must be doing what they're supposed to be doing to ensure strategies are
implemented effectively.
This situation has put more focus on effectiveness, that systems and processes in the
organization be applied in the right way to the right things: to achieve results. All of the
results across the organization must continue to be aligned to achieve the overall results
desired by the organization for it to survive and thrive. Only then it be said that the
organization and its various parts are really performing.
We can say that
Performance management should be:
Strategic - it is about broader issues and longer-term goals
Integrated - it should link various aspects of the business, people management, and
individuals and teams.

A well designed Performance Appraisal system helps an organization, bank

know and understand what is expected of them

have the skills and ability to deliver on these expectations

are supported by the organization to develop the capacity to meet these expectations
are given feedback on their performance

46

have the opportunity to discuss and contribute to individual and team aims and
objectives.

On going banking scenario has changed the scope of the performance management system
as the competition is extensive and to retain the employees has become the challenging
task for the management. With the help of Performance Appraisal the bank can
recognize its true personnel inventory and formulate the strategy for man power planning
and career development. Performance Appraisal directly affects the other sub system of
HRM such as manpower planning, selection, career development, potential development,
recruitment, compensation etc.
To wind up our discussion we can say that Performance Appraisal is an integrated and
widen approach to guide the employees in the right direction to achieve organizational as
well as individual objectives mainly in banking sector because of the dominancy of
personal skill and service level to interact with the customers

Bibliography
Books and journals
Internal report of bank

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Internet and banks website

Personal sources

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