PERFORMANCE APPRAISAL SYSTEM IN INSURANCE

PERFORMANCE APPRAISAL SYSTEM IN TATA AIG LIFE INSURANCE

Introduction toPerformance Appraisal

The history of performance appraisal is quite brief.Its roots in the early 20th century. But this is not very helpful, for the same may be said about almost everything 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. Yet in a broader sense, the practice of appraisal is a very ancient art. In the scale of things historical, it might well lay claim to being the world's second oldest profession!

There is, says Dulewicz (1989), ".. a basic human tendency to make judgments about those one is working with, as well as about oneself." Appraisal, it seems, is both inevitable and universal. In the absence of a carefully structured system of appraisal, people will tend to judge the work performance of others, including subordinates, naturally, informally and arbitrarily.

The human inclination to judge can create serious motivational, ethical and legal problems in the workplace. Without a structured appraisal system, there is little chance of ensuring that the judgments made will be lawful, fair, defensible and accurate. Performance appraisal systems began as simple methods of income justification. That is, appraisal was used to decide whether or not the salary or wage of an individual employee was justified.

The process was firmly linked to material outcomes. If an employee's performance was found to be less than ideal, a cut in pay would follow. On the other hand, if their performance was better than the supervisor expected, a pay rise was in order. Little consideration, if any, was given to the developmental possibilities of appraisal. It was felt that a cut in pay, or a rise, should provide the only required impetus for an employee to either improve or continue to perform well. Sometimes this basic system succeeded in getting the results that were intended; but more often than not, it failed.

For example, early motivational researchers were aware that different people with roughly equal work abilities could be paid the same amount of money and yet have quite different levels of motivation and performance. These observations were confirmed in empirical studies. Pay rates were important, yes; but they were not the only element that had an impact on employee performance. It was found that other issues, such as morale and self-esteem, could also have a major influence.

As a result, the traditional emphasis on reward outcomes was progressively rejected. In the 1950s in the United States, the potential usefulness of appraisal as tool for motivation and development was gradually recognized. The general model of performance appraisal, as it is known today, began from that time.

Most persons share a desire to know the answer to the question, "How am I doing?" They want to know what is expected of them, how well they are meeting the expectations, how they can improve, and some want to know how they might qualify for higher responsibilities. The process of performance appraisal should provide the opportunity for discussion of these concerns. The process should also provide the basis for enhanced communication among college personnel.

The feedback is one of the most important tools provided by Human Resources to managers as the motivational tool. The feedback by Human Resources is organized usually in the process of the Performance Appraisal. When speaking with HRM Professionals, you can hear a lot about the performance management process and the forms used to formalize the whole process of the performance appraisals. Generally, the manager should give feedback and the quality of the feedback provides the performance appraisals to the individual employee. But as the HRM Function wants to have a control over the whole performance management process, the main stress is put on the formal record of the whole performance appraisal discussion.

The performance appraisals can have a huge impact on the future of the employee in the company. When the feedback is provided correctly and the manager makes a follow up of all the agreements done during the performance appraisal interview, the performance appraisals can work without any formal documents.As the HRM Function is responsible for the performance management process, it brings new and better performance appraisal forms every single year. And the result usually fails every year. The managers and the employees do not see the benefits of participating in the performance review process as they take it as an activity driven by Human Resources for Human Resources.

The HRM Function cannot promote the performance appraisals as the set of forms to be filled by the manager and confirmed by the employee. The HRM Function has to promote the consequences of the performance management process and the positive impact on the future of the employee in the organization.

Definition of Performance AppraisalAppraisal is a process that provides an analysis of a Persons overall capabilities and potential, allowing informed decisions to be made for particular purposes. An Important part of the process is assessment, whereby data on an individuals past and current work behavior and Performance are collected and reviewed.

Concepts

Typically, performance appraisal has been limited to a feedback process between employees and supervisors. However, with the increased focus on teamwork, employee development, and customer service, the emphasis has shifted to employee feedback from the full circle of sources depicted in the diagram below. This multiple-input approach to performance feedback is sometimes called 360-degree assessment to connote that full circle. There are no prohibitions in law or regulation against using a variety of rating sources, in addition to the employees supervisor, for assessing performance.

Research has shown assessment approaches with multiple rating sources provide more accurate, reliable, and credible information. For this reason, the U.S. Office of Personnel Management supports the use of multiple rating sources as an effective method of assessing performance for formal appraisal and other evaluative and developmental purposes. The circle, or perhaps more accurately the sphere, of feedback sources consists of supervisors, peers, subordinates, customers, and ones self. It is not necessary, or always appropriate, to include all of the feedback sources in a particular appraisal program.

The organizational culture and mission must be considered, and the purpose of feedback will differ with each source. For example, subordinate assessments of a supervisors Performance can provide valuable developmental guidance, peer feedback can be the heart of Excellence in teamwork, and customer service feedback focuses on the quality of the teams or agencys results. The objectives of performance appraisal and the particular aspects of performance that are to be assessed must be established before determining which sources are appropriate.

SUPERIORS

Evaluations by superiors are the most traditional source of employee feedback. This form of evaluation includes both the ratings of individuals by supervisors on elements in an employees performance plan and the evaluation of programs and teams by senior managers.

SELF-ASSESSMENT

This form of performance information is actually quite common but usually used only as an informal part of the supervisor-employee appraisal feedback session. Supervisors frequently open the discussion with: How do you feel you have performed? In a somewhat more formal approach, supervisors ask employees to identify the key accomplishments they feel best represent their performance in critical and non-critical performance elements. In a 360-degree approach, if self-ratings are going to be included, structured forms and formal procedures are recommended.

PEERS

With downsizing and reduced hierarchies in organizations, as well as the increasing use of teams and group accountability, peers are often the most relevant evaluators of their colleagues performance. Peers have a unique perspective on a co-workers job performance and employees are generally very receptive to the concept of rating each other. Peer ratings can be used when the employees expertise is known or the performance and results can be observed. There are both significant contributions and serious pitfalls that must be carefully considered before including this type of feedback in a multifaceted appraisal program.

SUBORDINATESAn upward-appraisal process or feedback survey (sometimes referred to as a SAM, for Subordinates Appraising Managers) is among the most significant and yet controversial features of a full circle performance evaluation program. Both managers being appraised and their own superiors agree that subordinates have a unique, often essential, perspective. The subordinate ratings provide particularly valuable data on performance elements concerning managerial and supervisory behaviors. However, there is usually great reluctance, even fear, concerning implementation of this rating dimension. On balance, the contributions can outweigh the concerns if the precautions noted below are addressed.

CUSTOMERSExecutive Order 12862, Setting Customer Service Standards, requires agencies to survey internal and external customers, publish customer service standards, and measure agency performance against these standards. Internal customers are defined as users of products or services supplied by another employee or group within the agency or organization. External customers are outside the organization and include, but are not limited to, the general public.

Basic PurposesEffective performance appraisal systems contain two basic systems operating in conjunction: an evaluation system and a feedback system.

The main aim of the evaluation system is to identify the performance gap (if any). This gap is the shortfall that occurs when performance does not meet the standard set by the organization as acceptable.

The main aim of the feedback system is to inform the employee about the quality of his or her performance. (However, the information flow is not exclusively one way. The appraiser also receives feedback from the employee about job problems, etc.)One of the best ways to appreciate the purposes of performance appraisal is to look at it from the different viewpoints of the main stakeholders: the employee and the organization.

EMPLOYEE VIEWPOINTFrom the employee viewpoint, the purpose of performance appraisal is four-fold:

(1) Tell me what you want me to do

(2) Tell me how well I have done it

(3) Help me improve my performance

(4) Reward me for doing well.

ORGANIZATIONAL VIEWPOINT

From the organization's viewpoint, one of the most important reasons for having a system of performance appraisal is to establish and uphold the principle of accountability.For decades it has been known to researchers that one of the chief causes of organizational failure is "non-alignment of responsibility and accountability." Non-alignment occurs where employees are given responsibilities and duties, but are not held accountable for the way in which those responsibilities and duties are performed. What typically happens is that several individuals or work units appear to have overlapping roles.

The overlap allows - indeed actively encourages - each individual or business unit to "pass the buck". This event, the principle of accountability breaks down completely. Organizational failure is the only possible outcome. In cases where the non-alignment is not so severe, the organization may continue to function, albeit inefficiently. Like a poorly made or badly tuned engine, the non-aligned organization may run, but it will be sluggish, costly and unreliable. One of the principal aims of performance appraisal is to make people accountable. The objective is to align responsibility and accountability at every organizational level.

ORGANISATION PROFILEINTRODUCTION ON TATA AIG

THE TATA GROUP

The Tata Group, easily India's most recognized business group, was founded by Jamsetji Tata and began with a textile mill in central India in the 1870s. From there, it has evolved into a truly diversified conglomerate spanning, among other sectors, Engineering, Energy, Chemicals, Consumer Products, and Communications & IT. The Tata Group is one of Indias best-known industrial groups with an estimated turnover of around US $14.25 billion (approximately 26% of Indias GDP). With more than 220,000 employees across 91 major companies, it is also Indias largest employer in the private sector.

The Tata Group pioneered several firsts in Indian industry firsts, including: India's first private sector steel mill, first private sector power utility, first luxury hotel chain and first international airline, amongst others. Recently, the Tata Group's pioneering spirit has been showcased by companies such as Tata Consultancy Services (TCS), Asia's largest software and services company, and Tata Motors, the first car maker in a developing country to design and produce a car from the ground up.

The Tata Group stable of brands also includes many national and some internationally renowned product and service brands, including:Motors (multi-utility cars)

Tata Motors, India's largest automobile company, manufactures two kinds of multi-utility vehicles: the well-appointed Tata Safari and practical Tata Sumo.Tata Motors (Passenger Cars)

Tata Motors has a pioneering presence in India's automobile industry, best illustrated by the path-breaking creation of the Indica, a hatchback that was the country's first indigenously designed and manufactured car. Since then the company has expanded its passenger cars portfolio, which now also boasts the Indigo, a sedan, and the Indigo Marina, a station wagon.The Taj Group of Hotels (Luxury, Business and Leisure)

Jamsetji Nusserwanji Tata, the founder of the Tata Group, incorporated the Indian Hotels Company on April 1, 1902, for the ownership and operation of the renowned Taj Mahal Palace and Tower, Mumbai. Indian Hotels and its subsidiaries are collectively known as Taj Hotels Resorts and Palaces and, together, form the largest hotel chain in IndiaTata Tea & Tetley

The Tata Group runs the world's second-largest branded tea operation. Tata Tea and Tata Tetley are the two companies that power the group's leadership drive in the worldwide tea industry.Tata Salt

Besides tea and coffee, Tata Group enterprises are also involved in the production of food additives and spices. Tata Salt is the No 1 food brand among India's most trusted brands. India's most preferred salt is one of the purest available in the country. Moreover, Tata Salt contains the right amount of iodine, vital for physical and mental growth and development.

Titan

Titan Industries is India's leading manufacturer of watches and the world's sixth largest manufacturer brand of watches. The company makes about 7 million watches and clocks every year and has a customer base of some 60 million. It enjoys over 50 per cent market share in India's organized watch segment.Tanishq

Tanishq, a division of Titan Industries, is India's largest jewellery brand. It has 74 boutiques in 55 cities across the countryWestside (Garment Retail Outlet)

Trent, the Tata Company that owns and operates the Westside chain of lifestyle stores, retails garments and household accessories. Set up in 1998, Westside is among the fastest-growing retail chains in India. It has a team of dedicated merchandisers, store staff and in-house designers, and its store portfolio comprises clothes and accompaniments for men, women and children. The chain also sells household accessories, cosmetics and perfumes. The other products and brands are: Tata Steelium, Tata Shaktee, Tata Tiscon, Tata Bearings and Voltas.

By combining ethical values with business acumen, globalization with national interests and core businesses with emerging ones, the Tata Group aims to be the largest and most respected global brand from India whilst fulfilling its long-standing commitment to improving the quality of life of its stakeholders.

THE AIG GROUP

American International Group, Inc. is the world's leading international insurance and financial services organization, with operations in more than 130 countries and jurisdictions. AIG member companies serve commercial, institutional and individual customers through the most extensive worldwide property-casualty and life insurance networks of any insurer. In the United States, AIG companies are the largest underwriters of commercial and industrial insurance and AIG American General is a top-ranked insurer. AIG's global businesses also include retirement services, financial services, and asset management.

AIG's financial services businesses include aircraft leasing, financial products, trading and market making. American General Finance leads AIGs growing global consumer finance business in the United States. AIG also has one of the largest U.S. retirement savings businesses through AIG SunAmerica and AIG VALIC, and is a leader in asset management for the individual and institutional markets, with specialized investment management capabilities in equities, fixed income, alternative investments and real estate. TATA AIG

Tata AIG Life Insurance Company Ltd. is a joint venture of the Tata Group and American International Group, Inc. (AIG). The Tata Group holds 74 per cent stake in the two insurance ventures while AIG holds the balance 26 per cent stake. Tata AIG General Insurance Company, which started its operations in India on January 22, 2001, offers the complete range of insurance for automobile, home, personal accident, travel, energy, marine, property and casualty, as well as several specialized financial lines. Tata AIG Life Insurance Company Ltd. is India's leading insurance company providing both Life and General Insurance. It represents the trust and integrity of TATA group combined with the international expertise and financial strength of AIG, Inc.

For individuals: motor, health, and accident and health n travel.

For Corporate: accident n health, travel, energy, property, marine n contingency. INSURANCE REGULATORY DEVELOPMENT AUTHORITY (IRDA)

ABOUT IRDA

IRDA is a government body that protects the interests of the policyholders, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto. The way RBI controls all the banks, in the same manner IRDA takes control of all the insurance companies. It includes registrations, licensing and laying down regulations for proper conduct of business.IRDA NORMS FOR TRAINING AS A FINANCIAL ADVISOR

A financial advisor must possess a license issued by IRDA.

The qualifications necessary before a license can be given are that the person must:

Be at least 18 years old

Have passed at least the 12th standard or equivalent examination

Have undergone practical training for at least 100 hrs in life or general insurance business

Have passed the pre-recruitment examination conducted by the IRDA.

DOCUMENTS REQUIRED

On the time of the registration, the candidate has to bring along a list of documents. These are:

6 photographs

Identification proof

Date of birth proof

Highest Education proof

Residence proof

Rs. 1000/- Demand Draft favoring Tata AIG Life Insurance company Ltd. Payable at New Delhi.

PRODUCT PROFILE OF TATA AIG

PRODUCTS

Tata AIG Life Insurance Company specializes in helping their customer in fulfilling their future financial goals and builds an extra security cover for their family and loved ones. The various products offered are: Invest assure- Unit Linked Insurance Plan: This highly flexible plan gives you full life cover AND high returns AND the flexibility of deciding the length of your life cover term, the amount of cover you receive & where the rest of your premium is invested.

Mahalife: This exceptional policy ensures that you have a steady income and insurance coverage for life! Premiums are payable only for the first 12 years. You can even use this to create a steady stream of post retirement income.

Educare: This first of its kind juvenile endowment policy is geared toward funding your childs education. You can choose between Assure Educare 18 and Assure Educare 21, depending on your childs needs.

Shubh Life: This plan provides you 100% life insurance protection and high returns on your investment but the premiums you pay are among the lowest of any similar endowment policy.

Money Saver Plan : This savings plan provides you with cash payments in the form of survival benefits at regular intervals to fund your childs needs at critical milestones or support your financial obligations. You get the dual benefits of life insurance coverage plus the flexibility of periodic payments.

Nirvana & Nirvana Plus: This is Indias first and only pension policy with a guaranteed addition of 10 percent of sum assured every 5 years. You can choose from three levels of cover, and also decide the age you want to retire.

Starkid: An exceptional endowment policy that ensures you can afford to give your child the very best for his career & marriage.

Health Protector: The average cost for a major surgery or treatment in hospital is between three to five lakh. Health Protector is the first product of its kind in India that offers you protection in case ANYONE in your family has an accident or falls ill.

MARKET SHARE OF TATA AIG TATA AIG Life Insurance Company has said that it aimed to be the number-two private player in the life insurance industry with a market share of 20 per cent by 2007.

Mr. Trevor Bull, Managing Director, Tata AIG, estimated that by 2007, private players would have about 40 per cent of the total life insurance market; currently dominated by the Life Insurance Corporation. Tata AIG Life Insurance Co. is expecting a 85-90% growth in its total premium income in 06-07.

Tata AIG has 85 offices in cities, and would be opening 20-25 new offices during 06-07 to cater to a larger customer base. Profit from General Insurance for 05-06 is estimated to be 13.6 crore. DEVELOPMENTAL PERFORMANCE APPRAISAL PURPOSES

The developmental approach to performance appraisal has been related to employees as individuals. This approach has been concerned with the use of performance appraisal as a contributor to employee motivation, development, and human resources planning. The development approach contained all of the traditional overall organizational performance appraisal purposes and the following additional purposes:

1. Provided employees the opportunity to formally indicate the direction and level of the employee's ambition

2. Show organizational interest in employee development, which was cited to help the enterprise retain ambitious, capable employees instead of losing the employees to competitors

3. Provided a structure for communications between employees and management to help clarify expectations of the employee by management and the employee

4. Provide satisfaction and encouragement to the employee who has been trying to perform well.

EXPECTATIONS OF A MANAGER IN DOING A PERFORMANCE APPRAISAL

The following is typically expected from company managers when doing performance appraisals:

i. Translate organizational goals into individual job objective.

ii. Communicate management's expectations regarding employee performance.

iii. Provide feedback to the employee about job performance in light of management's objectives.

iv. Coach the employee on how to achieve job objectives/requirements.

v. Diagnose the employee's strengths and weaknesses.

vi. Determine what kind of development activities might help the employee better utilize his or her skills improve performance on the current job.

Objectives of Performance AppraisalsPerformance appraisals seek to meet specific objectives. They include tell and sell, tell and listen, problem solving, and mixed model. Tell and sell is evaluative in nature. It is used for purely evaluative purposes. The supervisor coaches by telling the employee the evaluation and then persuading the employee to follow recommendations for improvement. Tell and listen is evaluative in nature.

The supervisor coaches by telling the employee the evaluation and then listens to the employee's reactions to the evaluation in a nonjudgmental manner. Problem solving is developmental in nature and involves counseling. It is used for employee development purposes. The supervisor does not offer evaluation but lets the employee decide his or her weak areas and works with the employee to develop an action plan for improvement. The mixed model combines coaching and counseling. It is used for both evaluative and development purposes. The supervisor begins the appraisal with a problem-solving session and concludes with a more directive tell and sell approach.

Data relating to performance assessment of employees are recorded , stored and use for several purposes. The main purposes of employee assessment are as follows:-1. To effect promotions based on competence and performance

2. To confirm the services of probationary employees upon their completing the probationary period satisfactory.

3. To assess the training and development needs of employees.

4. To decide upon the pay raise where regular pay scales have not been fixed.

5. To let the employees know where they stand in so far their performance is concerned and to assess them with constructive criticism and guidance for the purpose of their development.

6. To improve communication. Performance appraisal provides the format for dialogue between the superior and the subordinator, and improves understanding of personal growth and concerns. This can also have the effect of increasing the trust between rater and ratee.

7. Finally, performance appraisal can be used to determine whether HR programmes such as selection, training and transfers have been effective or not.

BROADLY, PERFORMANCE APPRAISAL SERVES FOUR OBJECTIVES:1. Development uses:

2. Administrative decision;

3. Organizational maintenance;

4. Documentation purposes

1. Pre-requisites for Effective & Successful Performance Appraisal

The essentials of an effective performance system are as follows:

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

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

Practical and simple format - The appraisal format should be simple, clear, fair and objective. Long and complicated formats are time consuming, difficult to understand, and do not elicit much useful information.

Evaluation technique An appropriate evaluation technique should be selected; the appraisal system should be performance based and uniform. The criteria for evaluation should be based on observable and measurable characteristics of the behavior of the employee.

Communication Communication is an indispensable part of the Performance appraisal process. The desired behavior or the expected results should be communicated to the employees as well as the evaluators. Communication also plays an important role in the review or feedback meeting. Open communication system motivates the employees to actively participate in the appraisal process.

Feedback The purpose of the feedback should be developmental rather than judgmental. To maintain its utility, timely feedback should be provided to the employees and the manner of giving feedback should be such that it should have a motivating effect on the employees future performance. Personal Bias Interpersonal relationships can influence the evaluation and the decisions in the performance appraisal process. Therefore, the evaluators should be trained to carry out the processes of appraisals without personal bias and effectively2. Benefits of AppraisalPerhaps the most significant benefit of appraisal is that, in the rush and bustle of daily working life, it offers a rare chance for a supervisor and subordinate to have "time out" for a one-on-one discussion of important work issues that might not otherwise be addressed.Almost universally, where performance appraisal is conducted properly, both supervisors and subordinates have reported the experience as beneficial and positive.

Appraisal offers a valuable opportunity to focus on work activities and goals, to identify and correct existing problems, and to encourage better future performance. Thus the performance of the whole organization is enhanced.

For many employees, an "official" appraisal interview may be the only time they get to have exclusive, uninterrupted access to their supervisor. Said one employee of a large organization after his first formal performance appraisal, "In twenty years of work, that's the first time anyone has ever bothered to sit down and tell me how I'm doing."

The value of this intense and purposeful interaction between a supervisors and subordinate should not be underestimated.

MOTIVATION AND SATISFACTION

Performance appraisal can have a profound effect on levels of employee motivation and satisfaction - for better as well as for worse. Performance appraisal provides employees with recognition for their work efforts. The power of social recognition as an incentive has been long noted. In fact, there is evidence that human beings will even prefer negative recognition in preference to no recognition at all.

If nothing else, the existence of an appraisal program indicates to an employee that the organization is genuinely interested in their individual performance and development. This alone can have a positive influence on the individual's sense of worth, commitment and belonging.

The strength and prevalence of this natural human desire for individual recognition should not be overlooked. Absenteeism and turnover rates in some organizations might be greatly reduced if more attention were paid to it. Regular performance appraisal, at least, is a good start.

TRAINING AND DEVELOPMENT

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

During the discussion of an employee's work performance, the presence or absence of work skills can become very obvious - even to those who habitually reject the idea of training for them!

Performance appraisal can make the need for training more pressing and relevant by linking it clearly to performance outcomes and future career aspirations. From the point of view of the organization as a whole, consolidated appraisal data can form a picture of the overall demand for training. This data may be analyzed by variables such as sex, department, etc. In this respect, performance appraisal can provide a regular and efficient training needs audit for the entire organization.

RECRUITMENT AND INDUCTION

Appraisal data can be used to monitor the success of the organization's recruitment and induction practices. For example, how well are the employees performing who were hired in the past two years?

Appraisal data can also be used to monitor the effectiveness of changes in recruitment strategies. By following the yearly data related to new hires (and given sufficient numbers on which to base the analysis) it is possible to assess whether the general quality of the workforce is improving, staying steady, or declining.

EMPLOYEE EVALUATION

Though often understated or even denied, evaluation is a legitimate and major objective of performance appraisal. But the need to evaluate (i.e., to judge) is also an ongoing source of tension, since evaluative and developmental priorities appear to frequently clash. Yet at its most basic level, performance appraisal is the process of examining and evaluating the performance of an individual.

Though organizations have a clear right - some would say a duty - to conduct such evaluations of performance, many still recoil from the idea. To them, the explicit process of judgment can be dehumanizing and demoralizing and a source of anxiety and distress to employees.

It is been said by some that appraisal cannot serve the needs of evaluation and development at the same time; it must be one or the other. But there may be an acceptable middle ground, where the need to evaluate employees objectively, and the need to encourage and develop them, can be balanced.

3. Five Rules for Performance Appraisals

Performance appraisals can be stressful for both the manager and the employee receiving the appraisal. The process of writing and delivering the appraisal can be eased, however, by following these five guidelines:A. Start the appraisal process at least two weeks prior to the appraisal meeting. Complete the appraisal form in advance. This will allow you time to adequately consider each of the areas of assessment and to think of examples that you can use in the assessment. Gather any documentation you might need (i.e., notes-to-file, attendance records, last years appraisal). Give the employee ample notice of the date and time of the appraisal meeting, this will allow the employee to begin his/her preparation too. B. Keep the examples observable and non-evaluative. Without explicitly linking an assessment to an observation, managers risk confusing, angering, or demoralizing their employees. The assessment, and the examples given in the assessment, should be non-judgmental, that is, they should be based on observable facts and not personal commentary. Wrong: Youre always late. You lack discipline.

C. Right: In the last month you have been late-to-work four times. In the above examples, the Wrong statement is a judgment (you lack discipline), it is accusatory, and it is generalized (always late). The Right statement references information that is observable and can be verified if necessary. The employee cannot contest the statement.

D. A word of caution: be aware of halos and horns. We tend to allow our personal feelings toward an individual to bias the way in which we assess their work performance. By basing your assessment on observable incidents and required job standards you lessen the chance of the employee accusing you of giving a poor appraisal because you, dont like me. Conversely, you will avoid giving a more favorable appraisal to someone simply because you like them as an individual. Everyone will be appraised, equally, based on their performance.

E. Evaluate the person against the standards of the job and against their prior years development goal(s), if applicable. Do not evaluate a persons work ability based on what a co-worker is capable of doing. If the job description states that a person must process 8 claims per hour, and they do, they are adequately meeting the standards of the job. The fact that their co-worker can process 10 claims per hour has no bearing on the first individuals assessment. If the appraisal is a yearly process, and part of that process is setting developmental goals, such as learning new software or taking on additional responsibilities, these goals should be reviewed and assessed in terms of completion and the quality of completion. If the goals have not been met, re-evaluate them and transfer them to this years assessment if still applicable.

F. When setting future goals, or correcting poor performance, tell the employees what the desired behavior looks like - tell them what you would like to see more of. Frequently the employee doesnt know what correct behavior to substitute for the incorrect behavior. Additionally, if you cannot envision what the desired performance is, neither can your worker.

G. Wrong: You need to work on handling customers better. Right: Speak more slowly when talking with customers. You and I know insurance inside and out, but remember that most of what we speak about is very foreign to our customers.The Wrong statement, above, is too vague. The Right statement addresses a particular issue and suggests a way to correct it.

H. Do not dominate the conversation. The appraisal isnt about you. You should speak approximately 40% of the time and let the employee speak 60% of the time. Build on his/her ideas and comments. Ask the employee how s/he feels s/he is doing in the job. Are there frustrations? Is there something new s/he would like to learn or additional responsibility s/he would like to take on? What can you do to make the job more enjoyable or more meaningful for the individual? Appraisals should be less about judging past accomplishments and more about planning for future development. People will happily work toward goals that they set, but rarely work happily toward goals that are set for them.

I. Close the appraisal meeting in a positive manner. Gain agreement with the employee regarding what was discussed and the goals that were set. Plan follow-up meetings if necessary. Ask the employee, Is there anything else we should discuss? S/he might have been waiting for the perfect opportunity to bring something up and sensing that the meeting is about to be over, will realize s/he should put it on the table now. Thank the employee for their time and tell them that you have great faith in their continued success with the company and the goals that were set.

TWO FINAL THOUGHTS:

If at all possible, it is wise to separate appraisals and pay increases. While one (appraisal) contributes to the other (pay increase), they are not dependent on each other. For example, if Janes appraisal score last year was a four (out of a possible 4) and her pay increase was 5%; and this year her appraisal is also a four, but the increase is 3%, how does one explain that to the employee? Perhaps the lower pay increase is attributable to an economic downturn or large capital investments that restrict the amount of available moneys.

By previously linking the appraisal score to a dollar amount, youve unnecessarily created a one-to-one correlation and set the employee up for disappointment this year.

Also, keep in mind that appraisals are legal documents. They are one of the first things looked at during legal investigations. The appraisal should be a record of information that has been communicated to the employee regarding performance and managements evaluation of that performance. This fact reinforces the need for objective, standards based, appraisals.

It is your responsibility as a manager to develop your employees. Not only does having a more talented staff make your life easier, but it reflects well on you

Evaluating Your Most Important Asset:

The Employee Performance Appraisal Process

The employee performance appraisal enables you to identify, evaluate and develop an individual's performance. It is a tool to encourage strong performers to maintain their high level of performance and to motivate poor performers to do better. OTHER IMPORTANT BENEFITS OF A FORMAL APPRAISAL PROCESS ARE:

i. validation of hiring practices are the right people in the right positions?

ii. provision of an objective measuring tool on which compensation decisions, and promotions can be based

iii. identification of training needs individually, departmentally and organizationally

iv. identification of employees who have the potential for advancement or who might be better suited in other areas of the organization

In short, it is critical that your organization appropriately evaluate its employees. Let's see how best to do it.

PERFORMANCE STANDARDSA key component of the performance appraisal process is the creation of specific performance criteria or competencies. These performance standards must be developed, defined and communicated to the incumbent with performance monitored against those standards throughout the year. Without equitable and objective standards, questions will continue to arise about how performance is measured and how compensation decisions are made.

The standards should be:

included in the job description

based on the position, not the present or former incumbent

reasonable, measurable and specific

subject to change as the position evolves

Once developed and communicated, the standards may need to be modified. In some cases, they are revised as a result of feedback from the incumbent. This is especially true in the case of a newly created position. In other instances, performance standards may need to be revised for particular business units or departments as the focus of the organization changes. In all instances, the performance standards should accurately reflect the skills, behaviors and goals that the organization values.

Here is an example of how standards might be modified. An organization's call center employees or sales staff will typically be evaluated on how well they service the external customer. However, many employees don't have the opportunity to "touch" the customer. If your organization believes that service is its true value proposition, then you must consider internal customer service. Doing so will ultimately enhance your external service. For instance, employees of your service departments (i.e. systems, human resources, finance) might best be evaluated utilizing a standard measuring how well they service other departments within the organization.

PREPARING THE EVALUATIONWhether the actual evaluation tool is numerically based, a narrative overview or some combination of both, the performance appraisal tool needs to be user friendly for the manager, and easily understood by the employee. If numerical rankings or categories such as "Above Average", "Below Average" and the like are used, a detailed definition should accompany each category so that the standard is clear to the reviewer and the employee.

The evaluation should be a comprehensive and detailed account of the employee's performance. Try to be specific. Use concrete examples whenever possible. Detail how the employee met surpassed or fell short of the previously established performance standards and goals.

There are at least three common mistakes to avoid. Too often, managers simply check off a numerical rating on an evaluation form and then try to write a narrative justifying the chosen rating. Actually, the process should be just the reverse. The reviewer should first thoughtfully detail the employee's performance in each relevant area. The resulting narrative will then allow you to naturally select the rating. Using this approach avoids the artificial task of justifying a rating which was selected before you actually evaluated the employee's performance.

A second common mistake is not making enough time available to complete the process. Employees are an organization's most important asset. This is especially so in our information based economy. You must take the appropriate time to properly complete the employee performance appraisal process or the quality of your most important asset will erode over time.

A third type of problem is presented by overrating the average performer or underrating the good one. A manager who avoids dealing with a poor performer and rates the employee inappropriately high places the organization at risk if corrective action is necessary in the future.

Finally, make sure that your performance appraisal tool is updated on a periodic basis to remain relevant to your employees and business objectives.

TWO PRIMARY APPROACHES: "DATE OF HIRE" AND "FOCAL" REVIEWS Some organizations use a " date of hire" or anniversary date evaluation review. Others use a focal review process that is tied to the organization's budget. There are advantages and disadvantages to both approaches.

"Date of hire" or anniversary reviews allow managers to stagger evaluations throughout the year. Some months there may not be any evaluations to complete. At other times during the year, many may be necessary. Most managers indicate that the employee evaluation process is less burdensome when the date of hire or anniversary date method is employed. However, there are disadvantages. A manager can easily overspend the salary increase portion of the budget in the beginning of the year leaving less money for good performers whose anniversary dates fall at the end of the year. Additionally, it is difficult to measure similarly tasked employees against each other when reviewing them at different times of the year.

The focal review process coordinates employee reviews and related compensation decisions with the company's budget process. All reviews are done at the same time. Performance is evaluated in a more comparative setting than when the date of hire or anniversary method is used. However, focal reviews place a heavy burden on managers who have numerous direct reports. Additionally, focal reviews place a strenuous burden on the payroll manager and have an immediate, substantial impact on cash flow because all of the related salary increases occur at the same time.

If you are thinking of converting from an anniversary date to a focal method of employee evaluations, make sure you speak to a colleague who has made the change to get her perspective.

DELIVERING THE PERFORMANCE APPRAISALThe best performance appraisal will be perceived by the employee as a disaster if it is not delivered effectively by the manager. "One-on-One" dialogue between the manager and the employee is critical. The review should be conducted in a private, quiet place with plenty of uninterrupted time set aside for a true dialogue, not a soliloquy by the manager.

Employees wait all year for this feedback even though there shouldn't be any surprises if you have followed the process throughout the year. Most employees want an opportunity to talk about how they think things are going. They want to be able to express their aspirations and comment generally on the organization. While a self-evaluation tool can provide this opportunity, uninterrupted discussion time with the manager shows employees that they are indeed the valued asset they truly are. This personal exchange can also be used to set goals for the following year and to confirm that the employee understands your expectations.

Whose job is this anyway?

Responsibility for the performance appraisal process resides with the organization's supervisors and managers, not simply the human resource department. In fact, senior management must support the process in order to create maximum value for the organization. The human resource department functions merely as the coach. All managers, including senior management, must take the field.

Think about it

The performance appraisal system should be equitable, accurate and timely. It should create a process whereby strong performers are acknowledged and rewarded, average performers are encouraged and poor performers are coached and counseled toward improvement or ultimately separated from the organization.

Performance appraisal training can help your organization avoid the problems described in this article by showing managers how to objectively measure performance, prepare an evaluation, communicate with the employee and follow up as appropriate. The cost of this training is minimal compared to the return you will receive on your investment. Remember, employees are your most important asset!Understanding Employee Performance

Accurately tracking and reporting employee performance can present a huge problem for even the smallest of companies, not to mention much larger corporations. The value of tracking employee performance is quite apparent. When all is said and done your business needs to be profitable. If employee performance is not closely watched the business will continue to allow underperforming employees to hurt the bottom line. The health of the business depends on understanding and making informed decisions based on employee performance research.

To this end a few business software technology companies have developed dashboard solutions to ease the burden of tracking and understanding employee performance data. Fittingly this dashboard software solution is commonly referred to as a performance dashboard.

The information displayed by the performance dashboard is based on the leading indicators of performance that your organization has identified. These leading indicators are also thought of as key performance indicators. A key performance indicator serves as a variable that helps quantify the level of performance any given employee is realizing.

For instance, in a sales environment one key performance indicator might be the level of sales dollars a particular representative brings in each month. Continuing with this example, as management examines the performance dashboard which displays the key performance indicators and their values for each employee surely they will want to know which employees are underperforming in terms of the amount of sales dollars they bring in each month.

Management will probably weight the key performance indicators as they see fit, then use the information displayed on the performance dashboard to rank the sales representatives from best to worst. In this manner they can objectively examine employee performance across the board and hopefully identify ways to improve the performance of underperforming employees.

The real value of a performance dashboard really lies in being able to bring all relevant information together in one spot and present it in such a way that the information is understandable and can be interpreted accurately. A performance dashboard enhances the decision making process as it relates to employee performance by saving managers valuable time and providing them with equally valuable information so they can make the right decision.

Any business that relies heavily on its employee workforce should seriously consider using a performance dashboard to analyze employee performance. A performance dashboard has proven its worth by helping countless managers get the most out of their employees by identifying the strengths and weaknesses of their workforce.

Weaknesses can be fortified once they are recognized but if you are lacking the ability to identify the key performance indicator that weighs in below average across the board then you will have a hard time righting the ship. A performance dashboard helps you determine which key performance indicator is a problem area and will require additional training to boost employee performance.

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Methods Of Performance Appraisal ASSESSMENT CENTRES An assessment centre typically involves the use of methods like social/informal events, tests and exercises, assignments being given to a group of employees to assess their competencies to take higher responsibilities in the future. Generally, employees are given an assignment similar to the job they would be expected to perform if promoted. The trained evaluators observe and evaluate employees as they perform the assigned jobs and are evaluated on job related characteristics.

The major competencies that are judged in assessment centers are interpersonal skills, intellectual capability, planning and organizing capabilities, motivation, career orientation etc. assessment centers are also an effective way to determine the training and development needs of the targeted employees.

BEHAVIORALLY ANCHORED RATING SCALESBehaviorally Anchored Rating Scales (BARS) is a relatively new technique which combines the graphic rating scale and critical incidents method. It consists of predetermined critical areas of job performance or sets of behavioral statements describing important job performance qualities as good or bad (for eg. the qualities like inter-personal relationships, adaptability and reliability, job knowledge etc). These statements are developed from critical incidents.

In this method, an employees actual job behavior is judged against the desired behavior by recording and comparing the behavior with BARS. Developing and practicing BARS requires expert knowledgePerformance Factor Rating Scale

Unacceptable(Marks = 0)

Performance below minimal acceptable standards; immediate improvement required.

Below Average (Marks = 1)

Performance sometimes meets requirements, but not consistently; improvement necessary.

Average (Marks = 2)

Performance fully meets job requirements on a consistent basis.

Good(Marks = 3)

Performance frequently exceeds requirements. Performs the task and /or function consistently in a timely manner; initiates and/or volunteers; performs the task and/or function at a very high quality level.

EXCELLENT(Marks = 4)

Performance consistently exceeds requirements; with minimum supervision and/or direction, achievements are well beyond those expected at this levPerformance Appraisal Percentage

Rating% of RatingIncrease

1 Excellent ( Rating = 4)80% - 100%20%

2 Good ( Rating = 3)60% - 80%15%

3 Average ( Rating = 2)40% - 60%10%

4 Below Average ( Rating = 1)20% - 40%5%

5 Unacceptable ( Rating = 0)0% - 20%0%

HUMAN RESOURCE ACCOUNTING METHOD

Human resources are valuable assets for every organization. Human resource accounting method tries to find the relative worth of these assets in the terms of money. In this method the Performance appraisal of the employees is judged in terms of cost and contribution of the employees.

The cost of employees include all the expenses incurred on them like their compensation, recruitment and selection costs, induction and training costs etc whereas their contribution includes the total value added (in monetary terms). The difference between the cost and the contribution will be the performance of the employees. Ideally, the contribution of the employees should be greater than the cost incurred on them.

360-DEGREE-PERFORMANCE-APPRAISAL METHOD

Performance appraisal is the process of obtaining, analyzing and recording information about the relative worth of an employee. The focus of the performance appraisal is measuring and improving the actual performance of the employee and also the future potential of the employee. Its aim is to measure what an employee does.

According to Flippo, a prominent personality in the field of Human resources, performance appraisal is the systematic, periodic and an impartial rating of an employees excellence in the matters pertaining to his present job and his potential for a better job."

Performance appraisal is a systematic way of reviewing and assessing the performance of an employee during a given period of time and planning for his future. It is a powerful tool to calibrate, refine and reward the performance of the employee.

It helps to analyze his achievements and evaluate his contribution towards the achievements of the overall organizational goals. By focusing the attention on performance, performance appraisal goes to the heart of personnel management and reflects the managements interest in the progress of the employees.

Techniques in Performance Appraisal

In a landmark study, Locher & Teel (1977) found that the three most common appraisal methods in general use are rating scales (56%), essay methods (25%) and results- oriented or MBO methods (13%).

Certain techniques in performance appraisal have been thoroughly investigated, and some have been found to yield better results than others.

ENCOURAGE DISCUSSION

Research studies show that employees are likely to feel more satisfied with their appraisal result if they have the chance to talk freely and discuss their performance. It is also more likely that such employees will be better able to meet future performance goals.

Employees are also more likely to feel that the appraisal process is fair if they are given a chance to talk about their performance. This especially so when they are permitted to challenge and appeal against their evaluation.

CONSTRUCTIVE INTENTION

It is very important that employees recognize that negative appraisal feedback is provided with a constructive intention, i.e., to help them overcome present difficulties and to improve their future performance. Employees will be less anxious about criticism, and more likely to find it useful, when they believe that the appraiser's intentions are helpful and constructive.

In contrast, other studies have reported that "destructive criticism" - which is vague, ill-informed, unfair or harshly presented - will lead to problems such as anger, resentment, tension and workplace conflict, as well as increased resistance to improvement, denial of problems, and poorer performance.

SET PERFORMANCE GOALS

It has been shown in numerous studies that goal-setting is an important element in employee motivation. Goals can stimulate employee effort, focus attention, increase persistence, and encourage employees to find new and better ways to work.

The useful of goals as a stimulus to human motivation is one of the best supported theories in management. It is also quite clear that goals which are "...specific, difficult and accepted by employees will lead to higher levels of performance than easy, vague goals (such as do your best) or no goals at all."

APPRAISER CREDIBILITY

It is important that the appraiser (usually the employee's supervisor) be well-informed and credible. Appraisers should feel comfortable with the techniques of appraisal, and should be knowledgeable about the employee's job and performance.

When these conditions exist, employees are more likely to view the appraisal process as accurate and fair. They also express more acceptance of the appraiser's feedback and a greater willingness to change.

Following are the different methods of Performance Appraisal. Each of these has its own combination of strengths and weaknesses, and none is able to achieve all the purposes for which management institutes performance appraisal systems.

Nor is any one technique able to evade all of the pitfalls. The best anyone can hope to do is to match an appropriate appraisal method to a particular performance appraisal goal.

ESSAY APPRAISAL

In its simplest form, this technique asks the rater to write a paragraph or more covering an individual's strengths, weaknesses, potential, and so on. In most selection situations, particularly those involving professional, sales, or managerial positions, essay appraisals from former employers, teachers, or associates carry significant weight. The assumption seems to be that an honest and informed statement -either by word of mouth or in writing- from someone who knows a man well, is fully as valid as more formal and more complicated methods.

The biggest drawback to essay appraisals is their variability in length and content. Moreover, since different essays touch on different aspects of a man's performance or personal qualifications, essay ratings are difficult to combine or compare. For comparability, some type of more formal method, like the graphic rating scale, is desirable.

FORCED-CHOICE RATING

Like the field review, this technique was developed to reduce bias and establish objective standards of comparison between individuals, but it does not involve the intervention of a third party. Although there are many variations of this method, the most common one asks raters to choose from among groups of statements those which best fit the individual being rated and those which least fit him.

The statements are then weighted or scored, very much the way a psychological test is scored. People with high scores are, by definition, the better employees; those with low scores are the poorer ones. Since the rater does not know what the scoring weights for each statement are, in theory at least, he cannot play favorites. He simply describes his people, and someone in the personnel department applies the scoring weights to determine who gets the best rating.

The rationale behind this technique is difficult to fault. It is the same rationale used in developing selection test batteries. In practice, however, the forced-choice method tends to irritate raters, who feel they are not being trusted. They want to say openly how they rate someone and not be second-guessed or tricked into making "honest" appraisals.

A few clever raters have even found ways to beat the system. When they want to give average employee Harry Smith a high rating, they simply describe the best employee they know. If the best employee is Elliott Jones, they describe Jones on Smith's forced-choice form. Thus, Smith gets a good rating and hopefully a raise.

An additional drawback is the difficulty and cost of developing forms. Consequently, the technique is usually limited to middle- and lower-management levels where the jobs are sufficiently similar to make standard or common forms feasible.

Finally, forced-choice forms tend to be of little value- and probably have a negative effect- when used in performance appraisal interviews.

CRITICAL INCIDENT APPRAISAL

The discussion of ratings with employees has, in many companies, proved to be a traumatic experience for supervisors. Some have learned from bitter experience what General Electric later documented; people who receive honest but negative feedback are typically not motivated to do better - and often do worse - after the appraisal interview. Consequently, supervisors tend to avoid such interviews, or if forced to hold them, avoid giving negative ratings when the ratings have to be shown to the employee.

One stumbling block has no doubt been the unsatisfactory rating form used. Typically, these are graphic scales that often include rather vague traits like initiative, cooperativeness, reliability, and even personality. Discussing these with an employee can be difficult. The critical incident technique looks like a natural to some people for performance review interviews, because it gives a supervisor actual, factual incidents to discuss with an employee. Supervisors are asked to keep a record, a "little black book," on each employee and to record actual incidents of positive or negative behavior. For example:

Bob Mitchell, who has been rated as somewhat unreliable, fails to meet several deadlines during the appraisal period. His supervisor makes a note of these incidents and is now prepared with hard, factual data:

"Bob, I rated you down on reliability because, on three different occasions over the last two months, you told me you would do something and you didn't do it. You remember six weeks ago when I. . ."

Instead of arguing over traits, the discussion now deals with actual behavior. Possibly, Bob has misunderstood the supervisor or has good reasons for his apparent "unreliability." If so, he now has an opportunity to respond. His performance, not his personality, is being criticized. He knows specifically how to perform differently if he wants to be rated higher the next time. Of course, Bob might feel the supervisor was using unfairly high standards in evaluating his performance. But at least he would know just what those standards are.

There are, however, several drawbacks to this approach. It requires that supervisors jot down incidents on a daily or, at the very least, a weekly basis. This can become a chore. Furthermore, the critical incident rating technique need not, but may, cause a supervisor to delay feedback to employees. And it is hardly desirable to wait six months or a year to confront an employee with a misdeed or mistake.

Finally, the supervisor sets the standards. If they seem unfair to a subordinate, might he not be more motivated if he at least has some say in setting, or at least agreeing to, the standards against which he is judged?

MANAGEMENT BY OBJECTIVES

To avoid, or to deal with, the feeling that they are being judged by unfairly high standards, employees in some organizations are being asked to set - or help set - their own performance goals. Within the past five or six years, MBO has become something of a fad and is so familiar to most managers that I will not dwell on it here.

It should be noted, however, that when MBO is applied at lower organizational levels, employees do not always want to be involved in their own goal setting. As Arthur N. Turner and Paul R. Lawrence discovered, many do not want self-direction or autonomy. As a result, more coercive variations of MBO are becoming increasingly common, and some critics see MBO drifting into a kind of manipulative form of management in which pseudo-participation substitutes for the real thing. Employees are consulted, but management ends up imposing its standards and its objectives.

Some organizations, therefore, are introducing a work-standards approach to goal setting in which the goals are openly set by management. In fact, there appears to be something of a vogue in the setting of such work standards in white-collar and service areas.

WORK-STANDARDS APPROACH

Instead of asking employees to set their own performance goals, many organizations set measured daily work standards. In short, the work standards technique establishes work and staffing targets aimed at improving productivity. When realistically used, it can make possible an objective and accurate appraisal of the work of employees and supervisors.

To be effective, the standards must be visible and fair. Hence a good deal of time is spent observing employees on the job, simplifying and improving the job where possible, and attempting to arrive at realistic output standards.

It is not clear, in every case, that work standards have been integrated with an organization's performance appraisal program. However, since the work-standards program provides each employee with a more or less complete set of his job duties, it would seem only natural that supervisors will eventually relate performance appraisal and interview comments to these duties. I would expect this to happen increasingly where work standards exist. The use of work standards should make performance interviews less threatening than the use of personal, more subjective standards alone.

The most serious drawback appears to be the problem of comparability. If people are evaluated on different standards, how can the ratings be brought together for comparison purposes when decisions have to be made on promotions or on salary increases? For these purposes some form of ranking is necessary.

RANKING METHODS

For comparative purposes, particularly when it is necessary to compare people who work for different supervisors, individual statements, ratings, or appraisal forms are not particularly useful. Instead, it is necessary to recognize that comparisons involve an overall subjective judgment to which a host of additional facts and impressions must somehow be added. There is no single form or way to do this.

Comparing people in different units for the purpose of, say, choosing a service supervisor or determining the relative size of salary increases for different supervisors, requires subjective judgment, not statistics. The best approach appears to be a ranking technique involving pooled judgment. The two most effective methods are alternation ranking and paired comparison ranking. Alternation ranking:

In this method, the names of employees are listed on the left-hand side of a sheet of paper - preferably in random order. If the rankings are for salary purposes, a supervisor is asked to choose the "most valuable" employee on the list, cross his name off, and put it at the top of the column on the right-hand side of the sheet. Next, he selects the "least valuable" employee on the list, crosses his name off, and puts it at the bottom of the right-hand column. The ranker then selects the "most valuable" person from the remaining list, crosses his name off and enters it below the top name on the right-hand list, and so on.

Paired-comparison ranking:

This technique is probably just as accurate as alternation ranking and might be more so. But with large numbers of employees it becomes extremely time consuming and cumbersome.

To illustrate the method, let us say we have five employees: Mr. Abbott, Mr. Barnes, Mr. Cox, Mr. Drew, and Mr. Eliot. We list their names on the left-hand side of the sheet. We compare Abbott with Barnes on whatever criterion we have chosen, say, present value to the organization.

If we feel Abbott is more valuable than Barnes, we put a tally beside Abbott's name. We then compare Abbott with Cox, with Drew, and with Eliot. The process is repeated for each individual. The man with the most tallies is the most valuable person, at least in the eyes of the rater; the man with no tallies at all is regarded as the least valuable person.

Both ranking techniques, particularly when combined with multiple rankings (i.e., when two or more people are asked to make independent rankings of the same work group and their lists are averaged), are among the best available for generating valid order-of-merit rankings for salary administration purposes.

Producing Premium Performance

Poor performance is often blamed on employees, but usually it is not purely their fault. To achieve premium performance you need an effective performance management framework. There are 7 elements to developing an effective performance management framework which combine together to result in premium employee performance. Find out why most performance appraisal processes don't work - and how to create a system to achieve premium performance.One of the major issues that arises in managing a small or medium size business is in the area of employee performance. Many business owners are frustrated with the poor performance of their team or some individuals within their team. No matter how hard they try, they dont seem to be able to create a sustainable improvement in performance. The tendency is to blame the employees for poor performance. However, more often than not, the problem stems from not establishing an effective performance management framework.

There are a number of elements that create a framework for producing premium performance.

The most important element is to establish a clear description of the required outcome of the job. This may be in terms of a position description if the job is broad and covers a number of responsibilities. Or it may simply be providing a sample or a picture of an article that should be produced by the work. When there is a clear understanding of the output required, it is much more likely that result will be produced.

The second element requires establishing a best practice approach to doing the work. Often there are many ways a job can be done, but usually only one way is the most efficient. A best practice approach involves determining the best way to do the job and then requiring everyone to do the job the same way to maximize efficiency.

The third element is to establish a timeframe or deadline for the completion of the work. The employee will know if they are on track if they know how long the job should take.

When you use a best practice approach and establish a timeframe for the work, you can also provide a target for output over time. In other words, if you work so many hours you should produce x amount of product. This allows us to establish a productivity target.

When an employee starts a new job, it is best to teach or train the person in how to do the work. This may involve showing the new employee what is done for the first time or two and then watching while the employee tries it a time or two, or until you are satisfied they can do it without help. This is one of the most frustrating parts of the delegation process. The time it takes to complete this element puts a lot of people off. They need to realize that some short term pain leads to much long term gain, rather than allow the loss of some short term productivity to keep them from ever delegating their difficult tasks.

A very important element that many forget in the delegation process is to establish a process to measure and monitor results. One of the greatest dangers in business growth is that of losing control because growth means we can no longer physically see everything that goes on. Losing control leads to poor productivity and quality and escalating costs, all of which will destroy your business if left unchecked. Control comes from knowing the results of particular actions and being able to provide feedback or make changes if the results are outside the parameters required.

The results achieved in a job over an extended period of time can be influenced positively by developing an appraisal process. The appraisal process should provide feedback to the employee about how they are performing in the job relative to expectations, how their performance affects the success of the organization and how they interact with the components of the organization around them.

The appraisal approach that gets best results is to adopt a coaching role with your employees, rather than an examiner role. Too often, performance appraisal meetings are set up for failure because the two parties come to the meeting with different objectives. The manager wants to highlight areas of poor performance and take steps to improve these areas, but the employee wants to be told how well they have done. This often occurs when appraisals are held annually or six monthly and conflict is created when the judgments are subjective. The result usually is disappointment and demotivation on the part of the employee and frustration from the manager. Both people hate the process and no effective outcome is achieved. It is much better to conduct appraisal meetings frequently, to compare actual results with targets, using objective rather than subjective measures. The coaching meetings then can be used as a discussion focused on performance improvement, instead of a confrontation about how the employee felt they had performed.

The final element of the performance management framework is the reward process. Every positive outcome should result in a reward for the employee. This can be tangible or intangible and dependent on the level of maturity and experience of the employee. For some positions, it is appropriate for rewards to be small, frequent and immediate, where for other positions, more long term and cumulative rewards are appropriate. However, this element is often a neglected or an ill thought out part of the process and as such, has the potential to undermine results.

A good reward process supports and enhances the management process and increases motivation for achieving premium performance.

The important lesson to learn is that results can be influenced through establishing an effective performance management framework which requires all elements to work together effectively. Poor performance often results if any elements are either missing from the process or are poorly designed and become a negative influence on performance. But a well designed and coordinated framework means that all elements work together systematically to produce premium performance.

Ten Tips for Creating a Employee Appraisal System

Face the facts: Creating a new employee performance appraisal system is a difficult undertaking. Its even more difficult if the organization doesnt have a logical, well-tested, step-by-step process to follow in developing their new procedure. One Get top management actively involved. Without top managements commitment and visible support, no program can succeed. Top management must establish strategic plans, identify values and core competencies, appoint an appropriate Implementation Team, demonstrate the importance of performance management by being active participants in the process, and use appraisal results in management decisions.

Two

Establish the criteria for an ideal system. Consider the needs of the four stakeholder groups of any appraisal system: Appraisers who must evaluate performance; Appraisees whose performance is being assessed; Human Resources professionals who must administer the system; and the Senior Management group that must lead the organization into the future. Identifying their expectations at the start helps assure their support once the system is finally designed. Ask each group: "What will it take for you to consider this system a smashing success?" Dont settle for less.

Three Appoint an Implementation Team. This task force should be a diagonal slice of both appraisers and appraises from different levels and functions in the organization. The implementation team is responsible for accomplishing the two major requirements for a successful system. First, developing appropriate appraisal forms, policies and procedures. Second (and the task too often overlooked) assuring a successful deployment.

Four

Design the form first. The appraisal form is a lightning rod that will attract everyones attention. Design the form early and get lots of feedback on it. Dont believe anybody who tells you that the form isnt important. Theyre wrong. If youre designing a new form internally, make sure it assesses both behaviors and results.

.

Five

Build your mission, vision, values, and core competencies into the form. Performance appraisal is a means, not an end. The real objective of any performance management system is to make sure that the companys strategic plan and vision and values are communicated and achieved. Core competencies expected of all organization members should be included, described and assessed. If your mission statement isnt clearly visible in the performance appraisal system, cynicism will likely result. Values become real only when people are held accountable for living up to them.

Six

Assure on-going communication. Circulate drafts and invite users to make recommendations. Keep the development process visible through announcements and regular updates. Use surveys, float trial balloons, request suggestions and remember the cardinal principle "People support what they help create."

Seven

Train all appraisers. Performance appraisal requires a multitude of skills behavioral observation and discrimination, goal-setting, developing people, confronting unacceptable performance, persuading, problem-solving, planning, etc. Unless appraiser training is universal and comprehensive, the program wont produce much. And dont ignore the most important requirement of all: the need for courage.

Eight

Orient all appraisees. The programs purposes and procedures must be explained in advance and explained enthusiastically to everyone who will be affected by it. Specific skills training should be provided if the new performance management procedure requires self-appraisal, multi-rater feed-back, upward appraisal, or individual development planning.

Nine

Use the results. If the results of the performance appraisal are not visibly used in making promotion, salary, development, transfer, training and termination decisions, people will realize that its merely an exercise

Ten

Monitor and revise the program. Audit the quality of appraisals, the extent to which the system is being used, and the extent to which the original objectives have been met. (One of the great advantages of an online performance appraisal system is that all of these data are available instantaneously.)

Provide feedback to management, appraisers and appraisees. Train new appraisers as they are appointed to supervisory positions. Actively seek and incorporate suggestions for improvement. A companys performance appraisal process is critically important. It answers the two questions that every member of an organization wants to know: 1) What do you expect of me? and 2) How am I doing at meeting your expectations? Using these ten tips will help you develop or select a system to will give accurate and complete answers to everyone.

Performance Appraisal for Employees at Different LevelsIN TATA AIG LIFE Performance appraisal is important for employees at all levels throughout the organization. The parameters, the characteristics and the standards for evaluation may be different, but the fundamentals of performance appraisal are the same. But as the level of the employees increases, performance appraisal is more effectively used as the tools of managing performance.

PERFORMANCE APPRAISAL OF MANAGERS:Appraising the performance of managers is very important, but at the same time, it is one of the most difficult tasks in the organization. It is difficult because most of the managerial work cannot be quantified i.e. it is qualitative in nature like leading his/her team, guiding, motivating, planning etc.

Therefore, the two things to be noted and evaluated for the purpose of appraisals are:

Performance in accomplishing goals, and

Performance as managers

PERFORMANCE IN ACCOMPLISHING GOALS

Managers are responsible for the performance of their teams as a whole. Performance in accomplishing goals would mean to look at the completion or achievement of the goals set for a team of employees which is being assigned to or working under a particular manager. The best measuring criteria for a manager are hi goals, his plans of course of action to achieve them and the extent of achievement of the goals.

PERFORMANCE AS MANAGERS

The responsibilities of managers include a series of activities which are concerned with planning, organizing, directing, leading, motivating and controlling. Managers can be rated on the above parameters or characteristics

Criteria for measuring performance at different levels:

The criteria for measuring performance changes as the levels of the employees and their roles and responsibilities change.

A few examples for each level are described below:

For top level management Degree of organizational growth and expansion

Extent of achievement of organizational goals

Contribution towards the society

Profitability and return on capital employed

For middle level managers Performance of the departments or teams

Co-ordination with other departments

Optimal use of resources

Costs Vs. revenues for a given period of time

The communication with superiors and subordinates

For front line supervisors Quantity of actual output against the targets

Quality of output against the targets

Number of accidents in a given period

Rate of employee absenteeismCurrent Global trends in Performance Appraisal Program

The performance appraisal process has become the heart of the human resource management system in the organizations. Performance appraisal defines and measures the performance of the employees and the organization as a whole. It is a tool for accessing the performance of the organization. The important issues and points concerning performance appraisal in the present world are:

The focus of the performance appraisals is turning towards career development relying on the dialogues and discussions with the superiors.

Performance measuring, rating and review systems have become more detailed, structured and person specific than before.

Performance related pay is being incorporated in the strategies used by the organizations.

Trend towards a 360-degree feedback system

The problems in the implementation of the performance appraisal processes are being anticipated and efforts are being made to overcome them.

In India, the performance appraisal processes are faced with a lot of obstacles, the most prominent being the lack of quantifiable indicators of the performance.

Global trendsThe emergence of following concepts and the following trends related to Performance appraisal can be seen in the global scenario:

360 DEGREE APPRAISAL360 degree feedback, also known as 'multi-rater feedback', is the most comprehensive appraisal where the feedback about the employees performance comes from all the sources that come in contact with the employee on his job. Organizations are increasingly using feedback from various sources such as peer input, customer feedback, and input from superiors. Different forms with different formats are being used to obtain the information regarding the employee performance.TEAM PERFORMANCE APPRAISALAccording to a wall street journal headline, Teams have become commonplace in U.S. Companies. Most of the performance appraisal techniques are formulated with individuals in mind i.e. to measure and rate the performance of the individual employee. Therefore, with the number of teams increasing in the organizations, it becomes difficult to measure and appraise the performance of the team. The question is how to separate the performance of the team from the performance of the employees. A solution to this problem that is being adopted by the companies is to measure both the individual and the team performance. Sometimes, team based objectives are also included in the individual performance plans.

RANK AND YANK STRATEGY

Also known as the Up or out policy, the rank and yank strategy refers to the performance appraisal model in which best-to-worst ranking methods are used to identify and separate the poor performers from the good performers. Then the action plans and the improvement opportunities of the poor performers are discussed and they are given to improve their performance in a given time period, after which the appropriate HR decisions are taken. Some of the organizations following this strategy are Ford, Microsoft and Sun Microsystems.

Why Do We Need Performance Appraisals?

Performance Appraisal is an objective system to judge the ability of an individual employee to perform his tasks. A good performance appraisal system should focus on the individual and his development, besides helping him to achieve the desired performance. This means that while the results are important the organization should also examine and prepare its human capital to achieve this result. This holds true even for new inductees.

There is a strong linkage between induction, training and appraisal. In a large number of firms worldwide, a new recruit is expected to discuss his schedule of work in achieving his induction objective. This schedule of work becomes a part of his job for the next few months.

RESEARCH AND SURVEY

TATA AIG LIFE

Statement of the Problem:

Performance appraisal is a process of assessing, summarizing 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. Low performance can push the organization back in todays tough competition scenario. The project is aimed at analyzing the performance appraisal in insurance companies.

Objective:

The various objectives of our research are as follows:

A. To examine why an appraisal system is important

B. To study existing appraisal system in TATA AIG across Insurance Industry

C. To find the expectation of appraiser and appraise To determine the satisfaction level of the appraisee

D. To reveal the various loopholes in the appraisal system if any

E. To find the consequences of an inappropriately conducted appraisal system

Research Methodology:The data source: Primary as well as Secondary.The research approach: Survey Method.The research instrument: Questionnaire.The respondents: The Managers & Employees of various organizations.The primary data was collected with the help of survey information. A concise questionna