Case: CHANGING OVER TO A NEW SYSTEM OF PERFORMANCE APPRAISAL

A Public Sector Enterprise, originally a Directorate of a Ministry, proposed to reorganize its

structure and activities along business lines. It was a service organisation with several regional
offices and branches spread all over India. Its main functions were the procurement, storage and
supply of certain essential commodities. Its new Chairman-cum-Managing Director, a dynamic
person was not happy with the dominant governmental culture of the organisation. The majority
of the employees were originally civil servants, who eventually opted for the service of the
undertaking when it was registered as a Company and offered them attractive terms. The newly
formed Company was naturally interested in retaining their services.
The Managing Director was particularly anxious to switch over to the system of performance
appraisal in the real sense of the term and to do away Government organisations. He believed in
the open system of communication in a business enterprise and for judging each individual on
the basis of his performance rather than on his length of service or stay on a particular job.
He was specifically aiming at bringing about two major changes viz. (a) appraisal of
performance, mainly through an appraisal interview with the immediate superior in relation to a
number of pre-determined tasks or targets of performance; and (b) mainly on the basis of such
appraisal to ensure that the more efficient persons got out-of-turn promotion, regardless of
seniority or were rewarded by the grant of advance increments.
Such promotions on the basis of performance assessed through open discussion were not,
latterly, proving popular though the idea had initially found favour with many. This sparked a lot
of discontentment. Formerly when the governmental C.C.R. forms were in force, any adverse
entry made had to be communicated in writing along with the substance of the report, and the
aggrieved persons had the right to make an appeal. But now because of the open nature of the
assessment, instead of formal adverse entries, the reports were told where and how they were
lacking and were given guidance of improving their work. Under this system, a careful rating
was done rather than any kind of qualitative evaluation bringing out specific failings. The
employees were graded on the basis of their performance as high, above average, satisfactory,
below average, and poor.
When quite a few cases occurred of senior men having been bypassed, there were representations
not only to the managing Director, but also to the controlling Ministry .Several questions were
asked in Parliament about nepotism, whimsical promotion policy, having blue-eyed boys, etc.
The Managing Director had, with the approval of the Board of Directors, issued a circular
informing every one that for the Class I level, the promotion in future would be only by selection
i.e., on the basis of merit rather than on length of service. He had also organised workshops,
reorientation programmes etc., so that every one understood the philosophy and procedure of the
new system. He had explained the whole thing to the Ministry. The Ministry, while
appreciating the fact that he had brought about considerable improvement in the working of the
organisation, also agreed with a resolution of the Board of Directors that after a period of one
year even the annual increment of Class I and II officers would not be automatic, but would
depend on their performance.
Finding that representation and allegations of nepotism were not producing the desired results, a
deputation of senior officers wanted to discuss their grievances with the Managing Director. The
main point made by them was that previously there were specific adverse entries, which could be
challenged on the basis of data or established in the same manner, but now there was a kind of
overall rating, which did not make it clear to the aggrieved party as to how his work and conduct
had been of a sub-standard nature. The Managing Director agreed to meet the deputation, as he
knew that some of the senior officers were really aggrieved and that some were labouring under
a misapprehension.
He was also aware of a move to form a separate association of senior officers to safeguard their
interests.
The Director (Personnel) of the company sat with the Managing Director in the course of the
discussion with the deputation. The deputation consisted of 4 persons. For our convenience, we
would call them A, B, C and D. They represented practically all the four major areas of
activities of the company, namely procurement, storage, supply, finance and accounts. The
discussion that took place is reproduced below, verbatim:-
Managing Director: Good Morning, gentlemen. Please sit down and make yourself
comfortable. I’ve sent for coffee, or would some of you like tea?
'A' (senior-most and a kind of unofficial spokesman of the group) and others responded to the
greeting and indicated that coffee would be all right and sat down.

M.D.: I have gone through the letter you sent me very carefully and I am glad to have this
opportunity of talking to you. As I understand your viewpoint, you feel that the
recently introduced promotion procedure based on a kind of merit rating is
causing injustice to a number of senior officers.
A: Well Sir, I cannot say everyone perceives what is happening as a kind of injustice;
perhaps everything is being done in good faith with a view to improving the
working of the organisation. But there are misapprehensions. Most of us here
have been in government employment and we know the governmental procedure.
If a man failed somewhere, it is noted with his C.C.R. and he was told about it.
He also has the opportunity of getting the matter rectified through the appeal if he
were on a firm footing. We should treat it much like this system to be revived so
that we know where we are.
Director (P) But you have every opportunity where you are as now the main part performance
appraisal is done in an appraisal your superior officer discusses all aspects of
your performance with you. This interview also enables you to put forward your
own assessment of your contributions and achievement and even to vindicate your
position if there is any unfounded criticism of your performance.
B: We are not, I am afraid, used to such discussions. We cannot speak freely.
M.D.: Why can't you?
B: We do not wish to annoy our superior officers. Can I speak here freely?
A: What he means is that you too are known to be fair-minded and very keen on improving
our efficiency. We also know that you believe in the open system of
communication. But a good many of our superiors are the same men who were
with us in the government, and are necessarily rank-conscious and not used to
such an open system.
M.D.: (smiles) Well, gentlemen, you can speak freely of whatever you like to here. As for your
superiors, I see the difficulty. But both Director (Personnel) and I have briefed
them on several occasions and I have an idea that most of them have a fair
understanding of the new process. However, I cannot guarantee that every one of
them has now become a believer in the open system.
B: Now this is the point. In our view quite a few of them do not share with us what they
really feel about us.
C: Not only that, Sir, I would go further. We are also under a great constraint and I cannot
tell my superior what I think of him. I mean about his style of transacting
business, aspects of his behaviour which makes me often nervous or tense or
anxious, or which hampers my work. After all, our performance is very much
there influenced by the performance and conduct of our superiors.
MD: That is a very good point and I fully agree with you. It is an intensively participative
process. But we make a beginning and gradually improve our skills at the
appraisal interview, may be through a process of trial and error. We have all to
make allowance for it.
D: But in the meantime a number of senior officers have been superseded.
M.D.: There is no question of suppression when we have clearly stated that this company's
policy is not to rely on the seniority criterion for Class I officers. Besides,
gentlemen, some of you must be knowing that the Departmental Promotion
Committee not only looks into the recent appraisal interview reports but also into
the earlier reports extending over a period of 5 years. Secondly, we also interview
each one within the range of promotion for a particular job. Only thing missing
now is that during the last two years we are not having the old adverse entries and
their formal communication, which, more often than not, only created a lot of
paper work and those so called adverse entries seldom stated the whole truth
about the man because of the requirement of communication. Now everything
can be discussed freely.
C: If I may be permitted to say so, we have been rather hasty in introducing the new system.
M.D.: But all of you have been participating in workshops and seminars organised by our
Director (Personnel) here for quite some time in order that every one understood
what we are trying to achieve.
C: It is true that such participation has taken place, yet an entire culture cannot be given up
simply because we've theoretical understanding of the new process.
M.D.: The pertinent point is that what you describe as ' an entire culture' was the civil service
culture which we could not afford to perpetuate, in the interests of our
organisation. The sooner we got rid of it, the better would we all be. One does
not nurture a disease simply because it has become chronic; one treats it and tries
to throw it out of the system as soon as possible.
A: We do not disagree in principle. But the fact remains that a number of your senior
officers are feeling frustrated today. They have rendered long periods of services
to the best of their ability, but now they see that younger men are having higher
emoluments and higher assignments.
Director: The moment it is understood that we insist on selecting the best, the length of
service itself cannot have a higher value than actual performance.
A: We suggest that we give some credit to length of service, a certain weightage as
Company X has done. For every 5 years' service in the Company, the
management gives to an employee some credit and then for every 3 years in his
present grade, some additional credit is given to him. Now junior colleagues who
are better performers can't naturally have the same quantum of credit on the score
 of years of service. So the competition between the junior men and senior men
becomes fairer.
B: Besides, senior men have been tested in different situations over a length of time, and the
records of some of them would necessarily be checked. Younger men not having
had any occasion to be so tried might score higher marks in appraisal interviews
under the new system. They have generally better academic and technical
qualifications on paper, and much is made of it.
M.D.: (smiles) I do not think you really believe that we are going by the paper qualifications.
A: Possibly not.
B: We do appreciate the arrangement made by you for offering training opportunities to all
of us. But older men always find it difficult to learn new concepts and ideas.
Director That's accepted. But if they develop the correct managerial attitude, their minds
remain receptive and alert. Changes are going on a big scale everywhere. We
should respond positively to the challenges of change.
M.D.: I should say, a manager can go on learning till the day he retires.
B: That's a rather hard standard of managerial excellence.
M.D.: But this is what we're aiming at. You know that the new system is supported by a novel
decision-which already our sister Company Z is practicing. Now we do not have a
rigidly fixed number of posts in any grade. It's not that some senior men are being
passed over because the vacancies available for promotion are just a few. That
concept is gone. Higher performers, whether they are senior or not, have a
reasonable chance of getting additional increments or of being placed in a higher
grade, at times even in situ, that is while on their present job. We've introduced a
real reward system in place of an automatic bonus for length of service.
D: Sir, we agree that all this is quite persuasive. But to go back to the specifics, adverse
assessment of a person's work and conduct should be precisely stated and
formally communicated. This is a necessary measure of security against
whimsical, arbitrary, or prejudiced assessment at an appraisal interview.
Director: But the appraisee's opinions, when he does not agree with his appraiser, are also
recorded.
D: What value is attached to them? Generally, those are thrust aside as a disgruntled man's
grouse.
M.D.: Some of it could be disgruntled man's grouse, don't you think?
D: Yes Sir, It could be so. But the appraiser could certainly be subjective or vindictive.
M.D.: I should hope not. Gentlemen, we have been having all these re-orientation programmes
for quite sometime. Surely the appraisers, that is, officers know what to do.
Besides in an open system, where the appraisal interview is not only occasion
when the immediate supervisor talks to the appraisee about his work and councils
him - why, we have introduced the critical incident technique also - there can
hardly be any room for mistakes or exercise or prejudice.
C: But their superiors and superiors. Not all of them can be hundred percent objective.
M.D.: I grant that, But what really is happening is that certain number of persons are not able to
adjust themselves to the change, that is moving over to the culture of a business
 enterprise from the culture of leisurely work of the civil service. But our work
now has to be result - oriented. We are an industry now.
A: We understand that fully. But our suggestions are three: One, the appraisal interview are
not really open and most of us find it difficult to conduct them; two, whenever a
man has been found to be markedly deficient, a precise statement of his defect
should be made in writing; and three, seniority must have a weightage for
promotion while we do not mind real high fliers being given advance increment in
their own scales now and then.
M.D.: I'm afraid, I should find it very difficult to reverse the policy of rewarding actual
performance, which our Board has adopted. Quite a few other public sector
enterprises are doing so, and sooner or later, all will be doing so.
A: Sir, we are pleading for human considerations.
M.D.: I'm not so sure these are really personal considerations. The organisation's objectives are
being ignored. But I do see that you gentlemen are perturbed. It is possible that
there has been a failure of communication on our part. All changes for the better
are painful, at least for some men in the organisation. Let me think it over and
discuss the problem with other Director. We shall meet again soon in a bigger
group to go over the whole situation. I can assure you that as long as the objective
of rewarding actual performance in the interest of the organisation is accepted, we
can always modify the procedure for achieving the objective.
Director: As far as I remember, the procedure now followed was enthusiastically accepted
by the vast majority of officers in various workshops, seminars, etc.
A: May be many of us didn’t understand the implications fully. We welcome the suggestion
that we should meet in a bigger group to discuss all the related issues. We thank
you too for listening to us, and appreciating our point of view.
M.D.: We thank you gentlemen for being frank. I soon call this meeting. Good bye.
The discussion ends

High Tech India is a manufacturing and a marketing company. The manufacturing unit of the
company is located in the State of Karnataka and has its marketing offices in metros in India.
During the past five years the company has been growing at a reasonable rate and currently has a
market share of nearly 10 %. In a recent meeting, the Board of Directors of the company took a
decision to diversify its products and expand its marketing network. Suggest the kind of human
resource planning the company should undertake and discuss the techniques, which will be
useful for the human resource planning of High Tech India.

Questions:
1. In the light of the discussion/ situation given in the case highlight the
issues a company can face in the process of transition from seniority to
performance based company policy.
2. Give your opinion about what should be done by the MD and Director
(P) now so that the new policy is implemented well and organizational
objective is achieved.
3. What is the Performance management policy and practices in
developing a positive work culture?