PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

CHAPTER 1
INTRODUCTION
Performance appraisal is term used to describe the set by an organization ensure to
all employee are aware of the level of performance expect of in that role, as well as
individual objective they will need to achieve. To achieve over all organization
objective appraisal is a continues process and done annually as a formal exercise
before the completion of a financial year. appraisal has tremendous motivation
impact on people through meaningful is a powerful tool of recognition .This
project explain performance and system tries to find out how efficiently to the
performance appraisal is conducted and if performance is doesnt meet its
objective them, what are the factors causing failure. Performance appraisal gives
the employee opportunity to have one to one time with their manager to discuss
their the a performance, training need and future prospectus.
The main objective of performance appraisal is system provide to the
employee with clear feedback about overall performance in the duties there are
employee to which may be linked to the overall business objectives. The
performance appraisal should never contain any surprise for the employee
regarding their performance, as performance management should be done with a
continues observation approach of the manage, highlighting any deficiencies the
employee has a soon as possible and providing appropriate training. Error of poor
employee performance should not be stored up for the monthly or six monthly
meeting.
Generally the employees line manager will conduct the performance appraisal, as
they generally known the staff better as individual and are responsible for their
performance in most organization, a senior manager assesses and approves the
1

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

appraisal outcome to ensure operational fairness, especially there a remuneration or

performance bonus linked from the discussion, the employee and manager should
be able to formulate and agree on a plan of training and development for the
employee participate in this commonly known as a Personal Development
Plan(PDP).These PDPs are particularly useful documents to have your manager
using especially if you are dealing with employee who have poor performance
issues which could lead to potential disciplinary action.

CHAPTER 2
2

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

OBJECTIVES OF PERFORMANCE APPRAISAL

Performance Appraisal can be done with following objectives in mind:
1. To maintain records in order to determine compensation packages, wage
structure, salaries raises, etc.
2. To identify the strengths and weaknesses of employees to place right men on
right job.
3. To maintain and assess the potential present in a person for further growth
and development.
4. To provide a feedback to employees regarding their performance and related
status.
5. To provide a feedback to employees regarding their performance and related
status.
6. It serves as a basis for influencing working habits of the employees.
7. To review and retain the promotional and other training programmes.

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

CHAPTER 3
BENEFITS OF APPRAISAL
One of the most significant benefits of performance 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.

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

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 IN PUBLIC SECTOR BANK

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 analysed 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.

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

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 judgement can be dehumanizing and demoralizing and a source of
anxiety and distress to employees.
It is said by some that performance 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.

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

CHAPTER 4
ADVANTAGES OF PERFORMANCE APPRAISAL
It is said that performance appraisal is an investment for the company which can be
justified by following advantages:
1. Promotion: Performance Appraisal helps the supervisors to chalk out the
promotion programmes for efficient employees. In this regards, inefficient
workers can be dismissed or demoted in case.
2. Compensation: Performance Appraisal helps in chalking out compensation
packages for employees. Merit rating is possible through performance
appraisal. Performance Appraisal tries to give worth to a performance.
Compensation packages which includes bonus, high salary rates, extra
benefits, allowances and pre-requisites are dependent on performance
appraisal. The criteria should be merit rather than seniority.
3. Employees Development: The systematic procedure of performance
appraisal helps the supervisors to frame training policies and programmes. It
helps to analyse strengths and weaknesses of employees so that new jobs can
be designed for efficient employees. It also helps in framing future
development programmes.
4. Selection Validation: Performance Appraisal helps the supervisors to
understand the validity and importance of the selection procedure. The
supervisors come to know the validity and thereby the strengths and

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

weaknesses of selection procedure. Future changes in selection methods can

be made in this regard.
5. Communication: For an organization, effective communication between
employees and employers is very important. Through performance appraisal,
communication can be sought for in the following ways:
a. Through performance appraisal, the employers can understand and
accept skills of subordinates.
b. The subordinates can also understand and create a trust and
confidence in superiors.
c. It also helps in maintaining cordial and congenial labour management
relationship.
d. It develops the spirit of work and boosts the morale of employees.
All the above factors ensure effective communication.
6. Motivation: Performance appraisal serves as a motivation tool. Through
evaluating performance of employees, a persons efficiency can be
determined if the targets are achieved. This very well motivates a person for
better job and helps him to improve his performance in the future.

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

Disadvantages of Performance Appraisal:

1. The Halo effect:

Halo effect is defined as the influence of a raters general impression on ratings of
specific rate qualities. It tends to occur when an evaluation rates an employee high
on all jobs criteria, even if he has performed well only in one area.
2. Contrast error:
The rating is always based on performance standards. The contrast error occurs
when employee is rated without taking into account the performance standard. This
can also occur if a rater compares an employees present performance with their
past performance.
3. Rater bias:
The raters prejudices and biasness can also influence rating. For example, a
supervisor can underrate an employee based on race, sex, religion, appearance and
favouritism.
4. Central tendency error:

10

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

When the supervisor rates all the employees within a narrow range, thinking all
employees are of average level, this type of error occurs.
5. Leniency or severity:
Performance appraisal demands that the rater should objectively draw a conclusion
about employees performance.

6. Sampling error:
If the rater uses a very small sample of the employees work, it may be subject to
sampling error.
7. Primary and regency errors:
Behaviour of an employee at the initial stage of rating and at the end of appraisal
can affect the rating. For example, a salesmans performance may be very low for
some part of the year.

11

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

CHAPTER 5
THE BANKING REFORMS
In 1991, the Indian economy went through a process of economic liberalization,
which was followed up by the initiation of fundamental reforms in the banking
sector in 1992. The banking reform package was based on the recommendations
proposed by the Narasimham Committee Report (1991) that advocated a move to a
more market oriented banking system, which would operate in an environment of
prudential regulation and transparent accounting. One of the primary motives
behind this drive was to introduce an element of market discipline into the
regulatory process that would reinforce the supervisory effort of the Reserve Bank
of India (RBI). Market discipline, especially in the financial liberalization phase,
reinforces regulatory and supervisory efforts and provides a strong incentive to
banks to conduct their business in a prudent and efficient manner and to maintain
adequate capital as a cushion against risk exposures. Recognizing that the success
12

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

of economic reforms was contingent on the success of financial sector reform as

well, the government initiated a fundamental banking sector reform package in
1992.
Banking sector, the world over, is known for the adoption of
multidimensional strategies from time to time with varying degrees of success.
Banks are very important for the smooth functioning of financial markets as they
serve as repositories of vital financial information and can potentially alleviate the
problems created by information asymmetries. From a central banks perspective,
such high-quality disclosures help the early detection of problems faced by banks
in the market and reduce the severity of market disruptions. Consequently, the RBI
as part and parcel of the financial sector deregulation, attempted to enhance the
transparency of the annual reports of Indian banks by, among other things,
introducing stricter income recognition and asset classification rules, enhancing the
capital adequacy norms, and by requiring a number of additional disclosures
sought by investors to make better cash flow and risk assessments. During the pre
economic reforms period, commercial banks & development financial institutions
were functioning distinctly, the former specializing in short & medium term
financing, while the latter on long term lending & project financing. Commercial
banks were accessing short term low cost funds thru savings investments like
current accounts, savings bank accounts & short duration fixed deposits, besides
collection float. Development Financial Institutions (DFIs) on the other hand, were
essentially depending on budget allocations for long term lending at a
concessionary rate of interest. The scenario has changed radically during the post
reforms period, with the resolve of the government not to fund the DFIs through
budget allocations. DFIs like IDBI, IFCI & ICICI had posted dismal financial
results. Infect, their very viability has become a question mark. Now, they have
13

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

taken the route of reverse merger with IDBI bank & ICICI bank thus converting
them into the universal banking system.
BASEL - II ACCORD
Bank capital framework sponsored by the world's central banks designed to
promote uniformity, make regulatory capital more risk sensitive, and promote
enhanced risk management among large, internationally active banking
organizations. The International Capital Accord, as it is called, will be fully
effective by January 2008 for banks active in international markets. Other banks
can choose to "opt in," or they can continue to follow the minimum capital
guidelines in the original Basel Accord, finalized in 1988. The revised accord
(Basel II) completely overhauls the 1988 Basel Accord and is based on three
mutually supporting concepts, or "pillars," of capital adequacy. The first of these
pillars is an explicitly defined regulatory capital requirement, a minimum capitalto-asset ratio equal to at least 8% of risk-weighted assets. Second, bank
supervisory agencies, such as the Comptroller of the Currency, have authority to
adjust capital levels for individual banks above the 9% minimum when necessary.
The third supporting pillar calls upon market discipline to supplement reviews by
banking agencies. Basel II is the second of the Basel Accords, which are
recommendations on banking laws and regulations issued by the Basel Committee
on Banking Supervision. The purpose of Basel II, which was initially published in
June 2004, is to create an international standard that banking regulators can use
when creating regulations about how much capital banks need to put aside to guard
against the types of financial and operational risks banks face.

14

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

Advocates of Basel II believe that such an international standard can help

protect the international financial system from the types of problems that might
arise should a major bank or a series of banks collapse. In practice, Basel II
attempts to accomplish this by setting up rigorous risk and capital management
requirements designed to ensure that a bank holds capital reserves appropriate to
the risk the bank exposes itself to through its lending and investment practices.
Generally speaking, these rules mean that the greater risk to which the bank is
exposed, the greater the amount of capital the bank needs to hold to safeguard its
solvency and overall economic stability.
The final version aims at:
1. Ensuring that capital allocation is more risk sensitive;
2. Separating operational risk from credit risk, and quantifying both;
3. Attempting to align economic and regulatory capital more closely to reduce the
scope for regulatory arbitrage. While the final accord has largely addressed the
regulatory arbitrage issue, there are still areas where regulatory capital
requirements will diverge from the economic. Basel II has largely left unchanged
the question of how to actually define bank capital, which diverges from
accounting equity in important respects. The Basel I definition, as modified up to
the present, remains in place.
The Accord in operation
Basel II uses a "three pillars" concept
(1) Minimum capital requirements (addressing risk),
(2) Supervisory review and
(3) Market discipline to promote greater stability in the financial system.

15

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

The Basel I accord dealt with only parts of each of these pillars. For example: with
respect to the first Basel II pillar, only one risk, credit risk, was dealt with in a
simple manner while market risk was an afterthought; operational risk was not
dealt with at all.

1. The First Pillar

The first pillar deals with maintenance of regulatory capital calculated for
three major components of risk that a bank faces: credit risk, operational risk and
market risk. Other risks are not considered fully quantifiable at this stage. The
credit risk component can be calculated in three different ways of varying degree
of sophistication, namely standardized approach, Foundation IRB and Advanced
IRB. IRB stands for "Internal Rating-Based Approach". For operational risk, there
are three different approaches - basic indicator approach, standardized approach
and advanced measurement approach. For market risk the preferred approach is
VaR (value at risk). As the Basel II recommendations are phased in by the banking
industry it will move from standardized requirements to more refined and specific
requirements that have been developed for each risk category by each individual
bank. The upside for banks that do develop their own bespoke risk measurement
16

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

systems is that they will be rewarded with potentially lower risk capital
requirements. In future there will be closer links between the concepts of economic
profit and regulatory capital. Credit Risk can be calculated by using:1. Standardized Approach
2. Foundation IRB (Internal Ratings Based) Approach
3. Advanced IRB Approach
The standardized approach sets out specific risk weights for certain types of
credit risk. The standard risk weight categories are used under Basel 1 and are 0%
for short term government bonds, 20% for exposures to OECD Banks, 50% for
residential mortgages and 100% weighting on commercial loans. A new 150%
rating comes in for borrowers with poor credit ratings. The minimum capital
requirement (the percentage of risk weighted assets to be held as capital) has
remains at 8%.
For those Banks that decide to adopt the standardized ratings approach they
will be forced to rely on the ratings generated by external agencies. Certain Banks
are developing the IRB approach as a result.
2. The Second Pillar
The second pillar deals with the regulatory response to the first pillar, giving
regulators much improved 'tools' over those available to them under Basel I. It also
provides a framework for dealing with all the other risks a bank may face, such as
systemic risk, pension risk, concentration risk, strategic risk, reputation risk,
liquidity risk and legal risk, which the accord combines under the title of residual
risk. It gives banks a power to review their risk management system.
17

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

3. The Third Pillar

The third pillar greatly increases the disclosures that the bank must make.
This is designed to allow the market to have a better picture of the overall risk
position of the bank and to allow the counterparties of the bank to price and deal
appropriately. The new Basel Accord has its foundation on three mutually
reinforcing pillars that allow banks and bank supervisors to evaluate properly the
various risks that banks face and realign regulatory capital more closely with
underlying risks. The first pillar is compatible with the credit risk, market risk and
operational risk. The regulatory capital will be focused on these three risks. The
second pillar gives the bank responsibility to exercise the best ways to manage the
risk specific to that bank. Concurrently, it also casts responsibility on the
supervisors to review and validate banks risk measurement models. The third
pillar on market discipline is used to leverage the influence that other market
players can bring. This is aimed at improving the transparency in banks and
improves reporting.

18

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

CHAPTER 6
STATE BANK OF INDIA
The State Bank of India, the countrys oldest Bank and a premier in terms of
balance sheet size, number of branches, market capitalization and profits is today
going through a momentous phase of Change and Transformation the two
hundred year old Public sector behemoth is today stirring out of its Public Sector
legacy and moving with an ability to give the Private and Foreign Banks a run for
their money.
The bank is entering into many new businesses with strategic tie ups
Pension Funds, General Insurance, Custodial Services, Private Equity, Mobile
Banking, Point of Sale Merchant Acquisition, Advisory Services, structured
products etc each one of these initiatives having a huge potential for growth.
19

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

The Bank is forging ahead with cutting edge technology and innovative new
banking models, to expand its Rural Banking base, looking at the vast untapped
potential in the hinterland and proposes to cover 100,000 villages in the next two
years.
It is also focusing at the top end of the market, on whole sale banking
capabilities to provide Indias growing mid / large Corporate with a complete array
of products and services. It is consolidating its global treasury operations and
entering into structured products and derivative instruments. Today, the Bank is the
largest provider of infrastructure debt and the largest arranger of external
commercial borrowings in the country. It is the only Indian bank to feature in the
Fortune 500 list.
The Bank is changing outdated front and back end processes to modern
customer friendly processes to help improve the total customer experience. With
about 8500 of its own 10000 branches and another 5100 branches of its Associate
Banks already networked, today it offers the largest banking network to the Indian
customer. The Bank is also in the process of providing complete payment solution
to its clientele with its over 21000 ATMs, and other electronic channels such as
Internet banking, debit cards, mobile banking, etc.
With four national level Apex Training Colleges and 54 learning Centres
spread all over the country the Bank is continuously engaged in skill enhancement
of its employees. Some of the training programes are attended by bankers from
banks in other countries.

20

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

The bank is also looking at opportunities to grow in size in India as well as

Internationally. It presently has 82 foreign offices in 32 countries across the globe.
It has also 7 Subsidiaries in India SBI Capital Markets, SBICAP Securities, SBI
DFHI, SBI Factors, SBI Life and SBI Cards - forming a formidable group in the
Indian Banking scenario. It is in the process of raising capital for its growth and
also consolidating its various holdings.
Throughout all this change, the Bank is also attempting to change old
mindsets, attitudes and take all employees together on this exciting road to
Transformation. In a recently concluded mass internal communication programme
termed Parivartan the Bank rolled out over 3300 two day workshops across the
country and covered over 130,000 employees in a period of 100 days using about
400 Trainers, to drive home the message of Change and inclusiveness. The
workshops fired the imagination of the employees with some other banks
in India as well as other Public Sector Organizations seeking to emulate the
programme.
The CNN IBN, Network 18 recognized this momentous transformation
journey, the State Bank of India is undertaking, and has awarded the prestigious
Indian of the Year Business, to its Chairman, Mr. O. P. Bhatt in January 2008.
The elephant has indeed started to dance.

The origin of the State Bank of India goes back to the first decade of the
nineteenth century with the establishment of the Bank of Calcutta in Calcutta on 2
June 1806. Three years later the bank received its charter and was re-designed as
the Bank of Bengal (2 January 1809 ). A unique institution, it was the first joint21

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

stock bank of British India sponsored by the Government of Bengal. The Bank of
Bombay (15 April 1840) and the Bank of Madras (1 July 1843) followed the Bank
of Bengal. These three banks remained at the apex of modern banking in India till
their amalgamation as the Imperial Bank of India on 27 January 1921.
Primarily Anglo-Indian creations, the three presidency banks came into
existence either as a result of the compulsions of imperial finance or by the felt
needs of local European commerce and were not imposed from outside in an
arbitrary manner to modernise India's economy. Their evolution was, however,
shaped by ideas culled from similar developments in Europe and England, and was
influenced by changes occurring in the structure of both the local trading
environment and those in the relations of the Indian economy to the economy of
Europe and the global economic framework.

22

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

CHAPTER 7
SWOT ANALYSIS

STRENGTHS:-

It is the largest bank of India in terms of market share, revenue & asset.
As per recent data the bank has more than outlets & ATM centers.
It has its presence in 32 countries engaging currency trade all over the world.
The bank has merged with Stata Bank of Saurashtra, State Bank of Indore
and the bank is planning to go further acquisition in current FY-2012
It has the first mover advantage in commercial banking services
23

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

SBI has recently Changed its vision & mission statement showing sign up
inclination towards new age banking services
It has a powerful brand name over the country & overseas. It became the
synonymous for banking in rural area.
SBI has a portfolio of product and services. It succeeded in cross selling of
its product and services.
All the branches of SBI has core banking which enable the customer to bank
anywhere same as local bank.

Weakness: Lack of proper technology driven services when compared to private banks.
Employees show reluctance to solve issues quickly due to higher job
security and customers waiting period is long when compared to private
banks.
The banks spends a huge amount on its rented buildings.
SBI has the largest number of employees in banking sector, hence the bank
spends a considerable amount of its income in employees salary
compensation.
In spite of modernization, the bank still carries the perception of traditional
bank to new age customers.
24

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

SBI fails to attract salary accounts of corporate and many government sector
employees salary accounts are also shifted to private bank for ease of
operations unlike before.
It is fully computerized but lack of computer efficiency made the banking
very slow.
NPA in credit card is more.
Resistance from employees and trade union against merger of associate
bank.
Opportunities: SBIs merger with five more banks namely State Bank of Hydrabad, State
bank of Patiala, State bank of Bikaner and Jaipur, State of bank of
Travancore and State bank of Mysore are in approval stage
Mergers will result in expansion of market share to defend its number one
position
SBI is planning to expand and invest in international operations due to good
inflow of money from Asian Market
Since the bank is yet to modernize few of its banking operations, there is a
better scope of using advanced technologies and software to improve
customer relations
Young and talented pool of graduates and B schools are in rise to open new
horizon to so called old government bank
25

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

Threats: Net profit of the year has decline from 9166.05 in the year FY 2010 to 7,370.35
in the year FY2011
This shows the reduce in market share to its close competitor ICICI
Other private banks like HDFC, AXIS bank etc
FDIs allowed in banking sector is increased to 49% , this is a major threat to
SBI as people tend to switch to foreign banks for better facilities and
technologies in banking service
Other government banks like PNB, Andhra, Allahabad bank and Indian bank
are showing
Customer prefer to switch to private banks and financial service providers for
loans and mortgages, as SBI involves stringent verification procedures and take
long time for processing

PERFORMANCE INTERVIEW
26

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

Performance interview is another step in the appraisal process. Once appraisal

has been made of employees, the raters should discuss and review the performance
with the rates, so that they will receive feedback about where they stand in the eyes
of superior. Feedback is necessary to effect improvement in performance,
especially when it is inadequate. Specifically, performance interview has three
goals: (i) to change behaviour of employees whose performance does not meet
organizational requirements or their own personal goals. (ii) To maintain the
behaviour of employees who perform in an acceptable manner and (iii) to
recognize superior performance behaviours so that they will be continued.
Raters offer feedback to the rates through several methods-tell and sell, tell and
listen, problem solving and mixed. In tell and sell, also called directive interview,
the interviewer let assesses know how well they are doing and sells them on the
merits of setting specific goals for improvement, if needed. The tell and listen
interview provides the subordinates with chances to participate and establish a
dialogue with their superiors. Its purpose is to communicate the rater's perceptions
about the rate's strength and weaknesses and let the subordinates respond to these
perceptions. In the problem -solving or participative interview, an active and open
dialogue is established between the superior and the subordinate. Not only are
perceptions shared, but also solutions to problems are presented, discussed, and
sought. Mixed interview is a combination of tell and sell and problem solving
interviews.
Whatever be the approach followed, the emphasis in the interview should be on
counseling and development and not on criticism, witch-hunting and buck passing.
27

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

Because of the significance of appraisal interview, every effort must be made to

make it effective. Guidelines given in Table below will help make the interview
successful.

GUIDELINES FOR EFFECTIVE APPRAISAL INTERVIEW

28

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

Select a good time

Minimize interruptions

Welcome, set at ease

Start with something positive

Ask open ended questions to encourage discussion

Listen

Manage eye contact and body language

Be specific

Rate behaviour, not personality

Layout development plan

Encourage subordinate participation

Complete form

Set mutually agreeable goals for improvement

End in a positive, encouraging note

Set time for any follow up meetings

29

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

USE OF APPRAISAL DATA

The final step in the evaluation process is the use of evaluation data. The data
and information generated through performance evaluation must be used by the
HR department.
It may be recollected that the most significant rewards employers offer to
employees are:
1. Money to purchase goods and services required not only for current and future
survival, but also for the luxuries modern life has to offer.
2. The opportunity to use innate and learned skills and talents in a productive
manner that the individual and his or her managers and co-workers recognize as
valuable.
3. Opportunities to interact with other people in a favorable working environment.
4. Opportunities to learn, grow, and make full use of their potential.
5. A sense of performance and stability through the continuing existence of the
organization and the job.
6. The opportunity to perform work assignments within an environment that not
only protects. But promotes physiological, emotional and psychological health.
In one way or another, data and information outputs of a performance-appraisal
programme can critically influence these coveted employer-employee reward
opportunities. Specifically, the data and information will be useful in the following
areas of HRM:
I. Remuneration administration
2. Validation of selection programmes
30

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

3. Employee training and development programmes

4. Promotion, transfer and lay-off decisions
5. Grievance and discipline programmes

CHAPTER 8
31

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

APPRAISAL PROCESS

Figure below outlines the performance- appraisal process. Each step in the process
is crucial and is arranged logically. The process as shown in Fig. Below is
somewhat idea1ised. Many organizations make every effort to approximate the
ideal process, resulting in first-rate appraisal systems. Unfortunately, many others
fail to consider one or more of the steps and, therefore, have less-effective
appraisal system.

Objectives of
Appraisal

Establish job
Expectation

Design an appraisal
performance

Performance
interview

32

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

Use appraisal data for

appropriate purposes

1. Objectives of Appraisal
Objectives of appraisal as stated above include effecting promotions
and transfers, assessing training needs, awarding pay increases, and the like. The
emphasis in all these is to correct problems. Theses objectives are appropriate as
long as the approach in appraisal is individual. Appraisal in future, would assume
systems orientations. In the systems approach, the objectives of appraisal stretch
beyond the traditional ones.
In the systems approach, appraisal aims at improving the performance, instead of
merely assessing it. Towards this end, an appraisal system seeks to evaluate
opportunity factors. Opportunity factors include the physical environment such as
noise, ventilation and lightings, available resources such as human and computer
assistance and social processes such as leadership effectiveness. These opportunity
variables are more important than individual abilities in determining work
performance.
In the systems approach the emphasis is not on individual assessment and rewards
or punishments. But it is on how the work systems affect an individuals
performance. In order to use a systems approach, managers must learn to
appreciate the impact that systems levels factors have on individual performance
and subordinates must adjust to lack of competition among individuals. Thus, if a
systems approach is going to be successful, the employee must believe that by
working towards shared goals, everyone will benefit.
33

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

Not that the role of the individual is undermined. The individual is responsible for
a large percentage of his or her work performance. Employees should not be
encouraged to seek organizational reasons for his failures. The identifications of
systems obstacles should be used to facilitate development and motivation, not as
an excuse to poor performance. The following table displays some of the
differences between the traditional approach and the systems-oriented one.

PERFORMANCE APPRISAL SYSTEM

Guiding value
Primary roles

Traditional

Modern

Attribution to
individual

Attribution to systems

Control, documentation

Development, problem
solving

Leadership practices

Directional, evaluative

Facilitative, coaching

Appraisal frequency

Occasional

Frequent

Degree of formality

High

Low

Reward practices

Individual orientation

Group orientation

2. Establish Job Expectations

34

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

The second step in the appraisal process is to establish job expectations.

This includes informing the employee what is expected of him or her on the job.
Normally, a discussion is held with his or her superior to review the major duties
contained in the job place of formal performance evaluation.
3. Design Appraisal Programme
Designing an appraisal programme poses several questions which we need
to answers. They are: 1. Formals versus informal appraisal
2. Whose performance is to be assessed?
3. Who are the raters?
4. What problems are encountered?
5. How to solve the problems?
6. What should be evaluated?
7. When to evaluate?
8. What methods of appraisal are to be used?

CHAPTER 9
35

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

METHODS OF APPRAISAL
The last to be addressed in the process of designing an appraisal programme is to
determine methods of evaluation. Numerous methods have been devised to
measure the quantity and quality of employees job performance. Each of the
methods discussed could be effective for some purposes, for some organizations.
None should be dismissed or accepted as appropriate except as they relate to the
particular needs of the organization or of a particular type of employees. Broadly,
all the approaches to appraisal can be identified into (i) past-oriented methods, and
(ii) future-oriented methods. Each group has several techniques as shown in the
figure below:

Appraisal Methods

Err
or: Reference source not found
36

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

Past-Oriented Methods
Rating Scales:
This is the simplest and most popular technique for appraising employee
performance; the typical rating-scale system consists of several numerical scales,
each representing a job-related performance criterion such as dependability,
initiative, output, attendance, attitude, co-operation, and the like. Each scale ranges
from excellent to poor. The rater checks the appropriate performance level on each
criterion, and then computes the employees total numerical score. The number of
points scored may be linked to salary increases, whereby so many points equal a
rise of some percentage.

37

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

RATING SCALE
Instructions: For the following performances factors, please indicate on the
rating
Scale your evaluation of the employee named below:

Employees Name:

Department

Raters Name

Date.
Excellent

Good

Acceptable
3

Fair

Poor

1.

Dependability

------

------

------

-----

-----

2.

Initiative

------

------

------

-----

-----

3.

Overall Output

------

------

------

-----

-----

4.

Attendance

------

------

------

-----

-----

5.

Attitude

------

------

------

-----

-----

6.

Co-Operation

------

------

------

-----

-----

20. Quality of Work

TOTAL

------

------

------

-----

-----

------

------

------

-----

-----

------

------

------

-----

-----

------

------

------

-----

TOTAL SCORE

38

-----

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

Rating scales offer the advantages of adaptability, relatively easy use and low cost.
Nearly every type of job can be evaluated in a short time, and the rater does not
need any training to use the scale.
The disadvantages of this method are several. The raters biases are likely to
influence evaluation, and the biases are particularly pronounced on subjective
criteria such as co-operation, attitude and initiative. Furthermore, numerical
scoring gives an illusion of precision that is really unfounded.
Checklist:
Under this method a checklist of statements on the traits of the employee and
his or her job is prepared in 2 columns viz., a Yes column and a No column.
All that the rater (immediate superior) should is tick the Yes column if the answer
to the statement is positive and in column No if the answer is negative. A typical
checklist is given in the table below. After ticking off against each item, the rater
forwards the list to the HR department. The HR department assigns certain points
to each Yes ticked. Depending upon the number of Yes the total score is arrived
at. When points are allotted to the checklist, the technique becomes a weighted
checklist. The advantages of as checklist are economy, ease of administration,
limited training of rater, and standardization. The disadvantages include
susceptibility to raters biases (especially the halo effect), use of personality criteria
instead of performance criteria, misinterpretation of checklist items, and the use of
improper weights by the HR department. Another disadvantage of this approach is
that it does not allow the rater to give up relative ratings.

39

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

Table: - Checklist for Operators

SR. NO.

QUESTIONS

YES

NO

1.

Is the employee really interested in the job?

2.

Does he or she possess adequate knowledge about the job

3.

Is his or her attendance satisfactory?

4.

Does he/she maintain his/her equipment in good condition?

5.

Does he/she co-operate with co-workers?

6.

Does he/she keep his/her temper?

7.

Does he/she obey orders?

8.

Does he/she observe safety precautions?

9.

Does he/she complete what he/she commences?

10.

Does he/she evade responsibility?

Forced Choice Method:

In this, the rater is given a series of statements about an employee. These
statements are arranged in blocks of 2 or more, and the rater indicates which
statement is most or least descriptive of the employee. Typical statements are :
1. Learns fast _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ works hard
2. Work is reliable_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ performance is a good example for
3. Absents often_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ others usually tardy.
As in the checklist method, the rater is simply expected to select the statements that
describe the rate. Actual assessment is done by the HR Department.
This approach is known as the forced choice method because the rater is forced to
select statements, which are readymade. The advantage of this method is the

40

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

absence of personal bias in rating. The disadvantage is that the statements may not
be properly framed they may not be precisely descriptive of the ratees traits.
Forced Distribution Method:
One of the errors in rating is leniency clustering a large number of
employees around a high point on a rating scale. The forced distribution method
seeks to overcome the problem by compelling the rater to distribute the ratees on
all points on the rating scale.
The method operates under an assumption that the employee performance level
conforms to a normal statistical distribution. Generally, it is assumed that employee
performance levels conform to a bell shaped curve. For example, the following
distribution might be assumed to exist excellent 10 %, good 20 %, average 40 %,
below average 20 %, and unsatisfactory 10 %.
The major weakness of the forced distribution method lies in the assumption
that the employee performance levels always conform to a normal distribution. In
organizations that have done a good job of selecting and retaining only the good
performers, the use of forced distribution approach would be unrealistic, as well as
possibly destructive to the employee morale.
The error of central tendency may also occur, as the rater resists from placing
an employee in the lowest or in the highest group. Difficulties also arise for the
rater to explain to the rate why he or she has been placed in a particular group. One
merit of this approach is that it seeks to eliminate the error of leniency. However,
the forced choice method is not acceptable to raters and ratees, especially, in small
groups or when group members are of high ability.
Critical Incidents Method:

41

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

The critical incidents method of employee assessment has generated a lot of

interest these days. The approach focuses on certain critical behaviors of an
employee that make all the difference between effective and non-effective
performance of a job. The supervisors as and when they occur record such
CONTINUING DUTIES

TARGETS

CRITICAL INCIDENTS

Schedule Production for

Plant

Full Utilization of
personnel and
machinery in the
plant, order
delivered on time

Instituted new production

scheduling system;
decreased late orders by
10% last month;

Supervise procurement of
raw materials and inventory
control

increased machine
utilization in plant by20%
last month

Minimize inventory Let inventory storage

costs while keeping costs rise 15% last month;
adequate supplies on
Over Ordered parts A
hand
and B by 20%;
Under Ordered part C

Supervise machinery
maintenance

No shutdowns due
to faulty machinery

Instituted new preventive

maintenance system for
plant;
Prevented a machine
breakdown by
discovering faulty part.

incidents.
One of the advantages of the critical incidents methods is that the
evaluation is based on actual job behavior. Further, the approach has descriptions
in support of particular ratings of an employee. Giving job-related feedback to the
ratee is also easy. It also reduces the personal biases, if raters record incidents
42

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

throughout the rating period. Finally, this approach can increase the chances that
the subordinates will improve because they learn more precisely what is expected
of them. The method however has significant limitations. These include:
1. Negative incidents are generally more noticeable that positive ones.
2. The recording of incidents is a chore to the supervisor and may be put off an easily
forgotten.
3. Overly close supervision may result.
4. Managers may unload a series of complaints about incidents during an annual
performance review session. The feedback may be too much at one time and thus
appearing as a punishment to the rate. More appropriately, the management should
use incidents of poor performance as opportunities for immediate training and
counseling.
Behaviorally Anchored Rating Scales:
Behaviorally Anchored Scales, sometimes called behavioral expectation
scales, are rating scales whose scale points are determined by statements of
effective and ineffective behaviors. They are said to be behaviorally anchored in
that the scales represent a range of descriptive statements of behavior varying from
the least to the most effective. A rater must indicate which behavior on each scale
best describes an employees performance.
Behaviorally anchored rating scales (BARS) have the following features:
1. Areas of performance to be evaluated are identified and defined by people who
will use the scales.

43

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

2. The scales are anchored by descriptions of actual job behavior that, supervisors
agree, represent specific levels of performance. The result is a set of rating scales
in which both dimensions and anchors are precisely defined.
3. All dimensions of performance to be evaluated are based on observable behaviors
and are relevant to the job being evaluated since BARS are tailor-made for the job.
4. Since the raters who will actually use the scales are actively involved in the
development process. They are more likely to be committed to the final product.
BARS were developed to provide results which subordinates could use to improve
performance.
Superiors would feel comfortable to give feedback to the rates. Further, BARS help
overcome rating errors. Unfortunately, this method too suffers from distortion
inherent in most rating techniques.
Field Review Method
This is an appraisal by someone outside the, assessors own department. Usually
someone from the corporate office or the HR department. The outsider reviews
Employee records and holds interviews with the ratee and his or her superior.
This method is primarily used for making promotional decision at the managerial
level. Field reviews are also useful when comparable information is needed from
employees in different units or locations.

CHAPTER 10
360-DEGREE FEEDBACK

44

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

As stated earlier, where multiple raters are involved in evaluating performance,

the technique is called 360 degree appraisal. The 360 degree technique is
understood as systematic collection of performance data on an individual or group,
derived from a number of stakeholders--the stakeholders being the immediate
supervisors. team members, customers, peers, and self. In fact, anyone who has
useful information on how an employee does the job may be one of the appraisers.
The 360-degree appraisal provides a broader perspective about an employee's
performance. In addition, the technique facilitates greater self-development of the
employees. For one's development, multi-source feedback is highly useful. It
enables an employee to compare his or her perceptions about self with perceptions
of others. Besides, the 360-dcgree appraisal provides formalized communication
links between an employee and his or her customers. It makes the employee feel
much more accountable to his or her internal or external customers. The technique
is particularly helpful in assessing soft skills possessed by employees. By design,
the 360-degree appraisal is effective in identifying and measuring interpersonal
skill, customer satisfaction, and team-building skills.
However, there are drawbacks associated with the 360-degree feedback.
Receiving feedback on performance from multiple sources can be intimidating. It
is essential that the organization create a non - threatening environment by
emphasizing the positive impact of the technique on an employee's performance
and development. Further, firms that use the technique take a long time on
selecting the rater, designing questionnaires, and analyzing the data. In addition;
multiple raters are less adept at providing a balanced and objective feedback than
the supervisors who are sought to be replaced. Raters can have enormous problems
separating honest observations from personal differences and
45

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

biases.
APPRAISE THE PERFORMANCE

The next step in the appraisal process is to measure the performance. We revert
to the moral of the story narrated in the beginning of this chapter. The moral taught
us that we need to measure the performance and not mere activities.
What then is performance? Performance is essentially what an employee does or
does not do.
Employee performance common to most jobs include the following elements:

Quantity of output

Quality of output

Timeliness of output

Presence at work

Cooperativeness
In addition to these, other elements that deserve assessment are job knowledge,
leadership abilities, judgement, supervision, versatility and health. Assessment
should also include one's potential to perform and not just actual performance.
Performance measurement needs to be based on the benchmarks listed above.
These benchmarks vary from job to job. The job of a professor needs to be
assessed against parameters that are different to those used to evaluate the
performance of a sales representative.
46

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

LEGAL ISSUES ASSOCIATED WITH PERFORMANCE APPRAISAL

Performance appraisal data as stated earlier, are used to make many
important HR decisions (e.g. Pay, promotion, training, transfer and termination).
The appraisal system is a common target of legal disputes by employees involving
47

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

charges of unfairness and bias. An employee may seek the legal recourse to obtain
relief from a discriminatory performance appraisal. One such case goes back to
1980s. In 1981, three junior employees of Williamsons Magor were promoted
superseding 15 of their senior workmen. The basis for promotion was
recommendations of the departmental heads and other authorities. The 15
workmen challenged the promotion to the three workmen in the Supreme Court
and the court upheld the contention of the petitioners on the ground that he said
recommendations of departmental heads and authorities were arbitrary and could
not be the main basis for effecting promotions.
There are several recommendations 10 assist employees in conducting fair
performance appraisal and avoiding legal suits. Gleaned from case laws, these
recommendations are intended to be prescriptive measures that employers should
take to develop fair and legally defensible performance appraisal systems.
1.

Legally Defensible Appraisal Procedures

All personnel decisions should be based on a formal standardized
performance appraisal system.
Any performance appraisal process should be uniform for all employees
within a job group, and decisions based on those performance appraisals
should he monitored for differences according o race, sex. national origin.
Religion or age of the employees. While obtained differences as a function
of these variables are not necessarily illegal.
All specific performance standards should be formally communicated to
employees.
48

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

All employees should be able to review their appraisal results.

There should be a formal appeal process for the rate to rebut rater
judgments.
All raters should be provided with written instructions and training on how
to conduct appraisals properly to facilitate systematic, unbiased appraisals.
All personnel decision-makers should be well informed of antidiscrimination laws. They should be made aware of the fine distinctions
between legal and illegal activities regarding decisions based on appraisals.
2. Legally Defensible Appraisal Content
Any performance appraisal content should be based on a job analysis.
Appraisals based on traits should be avoided.
Objectively verifiable performance data (e.g. sales, productivity, not ratings)
should be used whenever possible.
Constraints on an employee's performance that are beyond the employee's
control should be prevented from influencing the appraisal to ensure that the
employee has an equal opportunity to achieve any given performance level.

Specific job-related performance dimensions should be used rather than

global measures or single overall measures.

The performance dimensions should be assigned weights to reflect their

relative importance in calculating the composite performance score.

3. Legally Defensible Documentation of Appraisal Results

49

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

A thoroughly written record of evidence leading to termination decisions

should be maintained(e.g. performance appraisal and performance
counseling to advise employees of performance deficit, and to assist poor
performers in making needed improvements)
Written documentation (e.g. specific behavioural examples) for extreme
ratings should he required and they must be consistent with the numerical
ratings.
Documentation requirements should he consistent among the raters.
4. Legally Defensive Raters
The raters should be trained in how to use an appraisal system
The raters must have the opportunity to observe the rate`s first hand or to
review important rate`s performance products
Use of more than rater is desirable in order to lessen the amount of influence
of any one rater and to reduce the effects of biases. Peers, subordinates,
customers, and clients are possible sources.

CHALLENGES OF PERFORMANCE APPRAISAL

With the increased significance of performance appraisal, challenges
confronting the system are mounting. One serious challenge facing the
performance appraisal system relates to assessment of self-managed teams.
Popularly called empowered teams, these self-managed teams create special
50

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

challenges for performance appraisal-empowered teams perform without

supervisors. Historically, if one recalls, it is the supervisor who assesses the
performance of his or her subordinates. Another challenge is that both, individual
and team performance, need to be measured. A suitable device needs to be
developed to assess the performance of empowered teams because more and more
firms use such teams to enhance productivity. Figure below contains a typical
model of team appraisal.

tangible
Identify
targets
KRAs critical
for eachtoKRA.
business
Determine
Incorporate
during
intangible
stretch
the year
parameters
elements for
(like
each
initiative),
target. Fix
which
the minimum
indicate pockets
acceptable
of individu
target

aluate performance of the teamCommunicate

against predetermined
Measure
the results
the performance
targets
to ensure transparency
of the team (actual versus targets) every m

Error: Reference
source
not found
Discount subjective
factors by
including
assessors from outside the team to identify outstanding individuals.

The Following table contains challenges of Performance Appraisal Challenges of Appraisal:

Create a culture of excellence that inspires every employee to improve and
lend himself or herself to be assessed
Align organizational objectives to individual aspirations
Clear growth paths for talented individuals
51

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

Provide new challenges to rejuvenate careers that have reached the plateau
stage
Forge a partnership with people for managing their careers
Empower employees to make decisions without the fear of failing
Embed teamwork in all operational processes
Debureaucratise the organization structure for ease of flow of information.

CHAPTER 11
CONCLUSION
State bank is the one largest public sector bank. It has shown tremendous
growth over the past 5 years. State bank of India has been able to withstand the
52

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

acid test of CAMELS model. However it should not rest on its laurels. SBI will
also open its branches outside India. NAP of SBI has also decreased from previous
year. Its CASA deposits is more than any other banks.SBI is also giving more
focus on retail banking sector. It should also gear up for BASEL-III norms which
are imminent in the near future. It should also strive for disruptive innovative
banking practices to beat other stronger competitors, both in the domestic as well
as international arena. All in all, State bank is a bank with sound fundamentals
which is growing at a really fast pace but there are so many challenges which it
must prepare itself for to sustain and succeed.

CHAPTER 12
WEBILOGRAPHY
http://books.google.co.in/book?id
53

PERFORMANCE APPRAISAL IN PUBLIC SECTOR BANK

http://www.sbi.co.in
http://books.co.in
www.ukessays.com/challenges/business.in

54