Objective of the Study:

The main objective is to study the concept of HR in special reference of “Performance Appraisal” narrowing it down to study its application in the banking sector. The study is undertaken to understand the practical application of the appraisal system in the emerging and ever growing banking sector.

The study also aims to highlight the new trends in the performance appraisal system and also highlights the views / approach of the management and employees. The study also aims to explore the next level of performance appraisal systems , also known as Performance Management.

About the Study:

Keeping the objective of the study in mind, the approach adopted is to study the application of performance appraisal system via two case studies. The study is thus conducted by studying the appraisal system adopted by a private bank HSBC and a public sector bank Bank of Baroda. This is mainly a secondary research by studying its policies and HR systems. It highlights the techniques , approaches, forms, processes followed / used by both the banks. It also highlights the difference in the approach adopted by private sector and public sector banks.

1 | P a g e

Performance Appraisal in General

Nearly all organizations seek to monitor job performance of their members through an evaluation system. Employees who perform their jobs well are usually rewarded; those who do not may be penalized. There is perhaps no single issue in personnel administration that is more important to an employee that an impartial and accurate appraisal of his contribution to the organization.

Although most organizations have adopted methods for personnel appraisal, their effectiveness is still a matter of dispute. A major part of the controversy holds that some appraisals reflect the personal preference and prejudices of the evaluator instead of the performance of the individual being rated. Another principal shortcoming is that although the evaluator may be unbiased, he looks more at the behaviour of the ratee than at his contribution to organizational effectiveness. Behaviour and performance may, of course, be related to one another, but focusing exclusively on behaviour can cloud the ratee’s true performance achievement.

Performance appraisal is a systematic evaluation of an individual employee with respect to his performance on the job and his potential for development. Performance is carrying out the work entrusted by the employer directly or through his agents. The management expects all the employees to perform the specified task for the payment it makes. Once the work is entrusted to the employee, it is necessary to measure the performance to see whether the employee has done the work entrusted to him in the way it was expected. Whether there is any wastage in time, money, energy and skill.

Despite persistent attempts to refine and improve traditional performance appraisal procedures, the supervisors or subordinates do not enthusiastically approve most current programmes. On the contrary , they are widely disliked as a time consuming nuisance, a source of friction and employee resentment, and a barrier to the fulfilment of the organizational goals. In short, appraisals frequently fail to deliver a dependable measure of the value and contribution of employees who are assessed.

Many appraisal systems examine performance on traits Example of such traits might be oral communication, leadership, awareness of social environment, initiative, organization and planning. Review of performance on trait criteria can

2 | P a g e

be justified if the traits relate to the individual's job. However, trait appraisal can cause misunderstanding and disagreement between the manager and his subordinates. If a manager tells his subordinate that he needs to demonstrate more leadership qualities and show more initiative on projects, it is not much helpful because it does not focus on exactly how the individual has been deficient and specifically what can be done by him to improve his performance.

PAS is traditionally used as a mechanism of controlling employee through salary administration, reward administration, promotion, and disciplinary actions. Another feature of traditional PAS is its confidentiality. This traditional PAS results in unawareness of employees of their strengths and weaknesses in relation to their capabilities in different positions in the organization throughout their career. The traditional PAS fails to identify the potentialities of employees in performing the new roles in new positions. This is basically because of the confidential nature of the appraisal. Due to these drawbacks, traditional PAS fail to develop employees and organizations.

3 | P a g e

Models of Performance Appraisal

In performance appraisal, a model is a guide that indicates how best competencies could be fit into a Performance Appraisal Process. There are one-dimensional models, mixed models and three-dimensional models. One-dimensional model or the traditional model is based on the single factor of performance and the entire focus is on what to be achieved. The 'How' factor of achievement is not looked into in this type of model and is perhaps not fit for today's world of business where short term survival and long term survival is equally important.

One Dimensional Model

In one-dimensional model people are not aware whether an achievement is one time and situational. Employees can adopt practices that can boost their performance in the short run making colossal losses for the future. There are enough examples of the loopholes of the one-dimensional model. The following is a one-dimensional model where the key stress is on what is to be performed.

Mixed model

A performance appraisal process that combines planning, managing and reviewing both results and competencies is called a mixed model. Mixed model or the competency based performance models for their added advantage are becoming the performance management model of the future. These mixed

4 | P a g e

The JobDefine what results have

to be achieved

Accountabilities

Define a set of key objectives against the

accountabilities

Review performance against the key objectives

ONE DIMENTIONAL MODEL

models assess and reward both results and competencies demonstrated on the job. It shows what the employees achieved and how they have achieved it.

The mixed model represents a more powerful and long lasting approach to performance management than what one-dimensional objective-based approach. A 'competency based' approach brings a different perspective to performance management. It employs a wider, a more comprehensive tool to describe the performance expected from an individual. Here, performance is defined not only in terms of what is to be achieved but how it is to be achieved and what competencies must be utilized as is depicted in the following model.

Three Dimensional Model

The next model takes another dimension besides objectives and competencies. The most important dimension - customer - fits in this model. The customer is involved in setting the performance contract and on giving feedback to the performance review.

When the whole banking industry is going for CBS, its time to make PAS IT enabled in such a way that once submitted on-line, there will be no provision of editing or rectification after the date of submission. The objective portion of the PAS should generate immediate feedback and the system should be so oriented that within a specified time of say, seven days the entire feedback should reach

5 | P a g e

The Job

Define what results have to be achieved

Performance Contract

Define how results have to be achieved

Accountability Define a set of key objectives

Key competencies i.e inputs

Define a set of behavioural objectives against key

competencies

Review performance against key objectives and key competenciesMIXED MODEL

the appraisee for developing weak (opportunity) areas. This will reduce the criticism of bias or alteration of opinion by the reviewer in subsequent period.

Besides, the raters (appraiser and reviewer) should be adequately trained so that they are capable to overcome gender bias, personality bias and other sort of biases. They should focus more on performance and less on personality. The leniency error and the 'hallo' effect (a good perception in one area leads to rating good in all areas) and thorn effect (a biased perception in one area leading to bad rating in all areas) in appraisal system can be corrected only through appropriate training of the rater. Appraisees may also be trained suitably for providing accurate rating in their self appraisal.

6 | P a g e

The Job Define what results have to be achieved

Performance Contract

Key Objectives

Key Competencies

Customer Expectation

Review Performance Feedback against key

objectives and key competencies

Customer

Define how results have to

be achieved

THREE DIMENSIONAL MODEL

The Importance of Performance Appraisals

The most challenging aspect of a performance appraisal is measuring the actual performance of the employee. Since the performance is measured by tasks performed, there is a continuous process that must be administered in order to monitor the performances throughout the appraisal cycle.

Thus, it’s very important to choose the correct measuring techniques. It’s also important to focus on a desired performance (standardized performance) and then compare the desired performance to the actual performance of the employee.

All of the planning that goes into the performance appraisal is for the purpose of evaluating employees, providing employees with valuable feedback and creating a positive effect on future performance. Although the process may be tedious, the end result is one of great importance. Some of the positive results of performance appraisals are:

It encourages employees to perform better in the future

It presents an opportunity for employees to leverage positive performance for an increase in salary or promotion

During the appraisal, employees can discuss strengths and weaknesses with a supervisor, in effect, allowing employees to discuss personal concerns

It provides communication between a supervisor and employee on a regular basis to discuss job duties and issues with work performance

It allows employees to identify what skills may be lacking and need to be acquired or improved upon. There are instances when education provided by the company is a necessity to advance success overall

It holds employees accountable for their job performance, and since the employee knows that an appraisal is coming, the employee has the opportunity to prepare in advance

It provides the opportunity for managers to explain organizational goals and the ways in which employees can participate in the achievement of those goals

7 | P a g e

Process of Performance Appraisal

Establishing performance standards

The first step in the process of performance appraisal is the setting up of the standards which will be used to as the base to compare the actual performance of the employees. This step requires setting the criteria to judge the performance of the employees as successful or unsuccessful and the degrees of their contribution to the organizational goals and objectives. The standards set should be clear, easily understandable and in measurable terms. In case the performance of the employee cannot be measured, great care should be taken to describe the standards.

Communicating the standards

Once set, it is the responsibility of the management to communicate the standards to all the employees of the organization.

The employees should be informed and the standards should be clearly explained to the. This will help them to understand their roles and to know what exactly is expected from them. The standards should also be communicated to the appraisers or the evaluators and if required, the standards can also be modified at this stage itself according to the relevant feedback from the employees or the evaluators.

Measuring the actual performance

The most difficult part of the Performance appraisal process is measuring the actual performance of the employees that is the work done by the employees during the specified period of time. It is a continuous process which involves monitoring the performance throughout the year. This stage requires the careful selection of the appropriate techniques of measurement, taking care that personal bias does not affect the outcome of the process and providing assistance rather than interfering in an employees work.

Comparing the actual with the desired performance

The actual performance is compared with the desired or the standard performance. The comparison tells the deviations in the performance of the 8 | P a g e

employees from the standards set. The result can show the actual performance being more than the desired performance or, the actual performance being less than the desired performance depicting a negative deviation in the organizational performance. It includes recalling, evaluating and analysis of data related to the employees’ performance.

Discussing results

The result of the appraisal is communicated and discussed with the employees on one-to-one basis. The focus of this discussion is on communication and listening. The results, the problems and the possible solutions are discussed with the aim of problem solving and reaching consensus. The feedback should be given with a positive attitude as this can have an effect on the employees’ future performance. The purpose of the meeting should be to solve the problems faced and motivate the employees to perform better.

Decision making

The last step of the process is to take decisions which can be taken either to improve the performance of the employees, take the required corrective actions, or the related HR decisions like rewards, promotion s, demotions, transfers etc.

9 | P a g e

Prerequisites of 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 behaviour of the employee.

• Communication – Communication is an indispensable part of the Performance appraisal process. The desired behaviour 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 effectively.

10 | P a g e

Challenges of Performance Appraisal

In order to make a performance appraisal system effective and successful, an organization comes across various challenges and problems. The main challenges involved in the performance appraisal process are:

• Determining the evaluation criteria

Identification of the appraisal criteria is one of the biggest problems faced by the top management. The performance data to be considered for evaluation should be carefully selected. For the purpose of evaluation, the criteria selected should be in quantifiable or measurable terms

• Create a rating instrument

The purpose of the Performance appraisal process is to judge the performance of the employees rather than the employee. The focus of the system should be on the development of the employees of the organization.

• Lack of competence

Top management should choose the raters or the evaluators carefully. They should have the required expertise and the knowledge to decide the criteria accurately. They should have the experience and the necessary training to carry out the appraisal process objectively.

• Errors in rating and evaluation

Many errors based on the personal bias like stereotyping, halo effect (i.e. one trait influencing the evaluator’s rating for all other traits) etc. may creep in the appraisal process. Therefore the rater should exercise objectivity and fairness in evaluating and rating the performance of the employees

• Resistance

The appraisal process may face resistance from the employees and the trade unions for the fear of negative ratings. Therefore, the employees should be communicated and clearly explained the purpose as well the process of

11 | P a g e

appraisal. The standards should be clearly communicated and every employee should be made aware that what exactly is expected from him/her.

Methods and Techniques of Performance Appraisal

TRADITIONAL APPROACH

1. ESSAY APPRAISAL METHOD

This traditional form of appraisal, also known as “Free Form method” involves a description of the performance of an employee by his superior. The description is an evaluation of the performance of any individual based on the facts and often includes examples and evidences to support the information. A major drawback of the method is the inseparability of the bias of the evaluator.

2. STRAIGHT RANKING METHOD

This is one of the oldest and simplest techniques of performance appraisal. In this method, the appraiser ranks the employees from the best to the poorest on the basis of their overall performance. It is quite useful for a comparative evaluation.

3. PAIRED COMPARISON

A better technique of comparison than the straight ranking method, this method compares each employee with all others in the group, one at a time. After all the comparisons on the basis of the overall comparisons, the employees are given the final rankings.

4. CRITICAL INCIDENTS METHODS

In this method of Performance appraisal, the evaluator rates the employee on the basis of critical events and how the employee behaved during those incidents. It includes both negative and positive points. The drawback of this method is that the supervisor has to note down the critical incidents and the employee behaviour as and when they occur.

5. FIELD REVIEW

In this method, a senior member of the HR department or a training officer discusses and interviews the supervisors to evaluate and rate their respective

12 | P a g e

subordinates. A major drawback of this method is that it is a very time consuming method. But this method helps to reduce the superiors’ personal bias.

6. CHECKLIST METHOD

The rater is given a checklist of the descriptions of the behaviour of the employees on job. The checklist contains a list of statements on the basis of which the rater describes the on the job performance of the employees.

7. GRAPHIC RATING SCALE

In this method, an employee’s quality and quantity of work is assessed in a graphic scale indicating different degrees of a particular trait. The factors taken into consideration include both the personal characteristics and characteristics related to the on-the-job performance of the employees. For example a trait like Job Knowledge may be judged on the range of average, above average, outstanding or unsatisfactory.

8. FORCED DISTRIBUTION

To eliminate the element of bias from the rater’s ratings, the evaluator is asked to distribute the employees in some fixed categories of ratings like on a normal distribution curve. The rater chooses the appropriate fit for the categories on his own discretion.

MODERN APPROACH

1. 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 centres are interpersonal skills, intellectual capability, planning and organizing capabilities, motivation, career orientation etc. assessment centres are also an effective way to determine the training and development needs of the targeted employees.

2. BEHAVIORALLY ANCHORED RATING SCALES

13 | P a g e

Behaviourally 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 e.g. the qualities like inter-personal relationships, adaptability and reliability, job knowledge etc). These statements are developed from critical incidents.

In this method, an employee’s actual job behaviour is judged against the desired behaviour by recording and comparing the behaviour with BARS. Developing and practicing BARS requires expert knowledge.

3. 360 PERFORMANCE APPRAISAL

It is 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.

360 degree respondents for an employee can be his/her peers, managers (i.e. superior), subordinates, team members, customers, suppliers/ vendors - anyone who comes into contact with the employee and can provide valuable insights and information or feedback regarding the “on-the-job” performance of the employee.

360 degree appraisal has four integral components:

A. Self appraisal

B. Superior’s appraisal

C. Subordinate’s appraisal

D. Peer appraisal.

Self appraisal gives a chance to the employee to look at his/her strengths and weaknesses, his achievements, and judge his own performance.

Superior’s appraisal forms the traditional part of the 360 degree appraisal where the employees’ responsibilities and actual performance is rated by the superior.

Subordinates appraisal gives a chance to judge the employee on the parameters like communication and motivating abilities, superior’s ability to delegate the work, leadership qualities etc.

14 | P a g e

Also known as internal customers, the correct feedback given by peers can help to find employees’ abilities to work in a team, co-operation and sensitivity towards others.

4. Management by Objectives

The concept of ‘Management by Objectives’ (MBO) was first given by Peter Ducker in 1954. It can be defined as a process whereby the employees and the superiors come together to identify common goals, the employees set their goals to be achieved, the standards to be taken as the criteria for measurement of their performance and contribution and deciding the course of action to be followed.

The essence of MBO is participative goal setting, choosing course of actions and decision making. An important part of the MBO is the measurement and the comparison of the employee’s actual performance with the standards set. Ideally, when employees themselves have been involved with the goal setting and the choosing the course of action to be followed by them, they are more likely to fulfill their responsibilities.

While most of these theoretical approaches very much make sense and can be applied in reality, very organizations literally go by the theory.

15 | P a g e

Performance Management vs. Performance Appraisal

The terms 'performance management' and 'performance appraisal' are sometimes used synonymously, but they are different. Performance management is a comprehensive, continuous and flexible approach to the management of organisations, teams and individuals which involves the maximum amount of dialogue between those concerned. Performance appraisal is a more limited approach which involves managers making top-down assessments and rating the performance of their subordinates at an annual performance appraisal meeting.

Comparing performance appraisal vs performance management, performance appraisal sets job standards and evaluates past performance based on such set standards whereas performance management aims at managing performance real-time to ensure performance reaches the desired levels. Performance appraisal and performance management are two employee performance evaluation methods.

Performance management is the traditional approach to evaluating the performance of an employee. The increased competitive nature of the economy and rapid changes in the external environment has forced many organizations to shift from reactive performance appraisals to the proactive performance management to boost productivity and improve organizational performance.

Scope

The basic difference between performance appraisal vs performance management lies in the scope.

16 | P a g e

Both performance appraisals and performance management entail setting performance targets, reviewing the achievement of targets, and devising ways to enable employees to meet targets. Both these systems establish clear expectations on what an employee is expected to do, set the guidelines on what constitutes successful job performance, and strive to identify barriers to effective performance.

Performance appraisal is, however, a limited and reactive function of evaluating past performance, undertaken once or twice a year. It is a distinct staff activity with no direct intervention to the employee’s day-to-day work.

Performance management is a continuous and on-going proactive mechanism to manage the performance of an employee and ensure that the employee achieves the set targets on a real-time basis, without reviews or corrective actions at some point in the future. It is a line activity and remains ingrained in the employee’s day-to-day work.

In some organizations performance appraisal becomes part of an overall performance management system. The appraisal takes place at periodic intervals and becomes the basis to make corrective actions and set further targets.

Approach

In performance management, the manager of the supervisor assumes the role of a coach or mentor whereas in performance appraisal, the supervisor acts as a judge. Some performance appraisal techniques such as Management by Objectives (MBO) allow for joint setting of targets, by the supervisor and the employee, with frequent reviews, and thereby come close to performance management. Such methods, however, still fall short of the real-time management and monitoring of targets offered by performance management.

Methodology

The performance appraisal tends to be more formal and structured. Although most performance appraisal systems allow customization of key performance areas or what constitutes performance based on the employee, the system nevertheless remains rigid with laid down procedures and rating parameters binding on all employees equally.

Performance management is a comparatively more casual and flexible method of evaluating an employee's performance. Like performance appraisals, it

17 | P a g e

establishes guidelines on what constitutes optimal performance, but since the application is real-time, it allows for considerable relaxation or changes to such guidelines depending on the specific job situation and circumstances of the time.

Performance management remains customized for the individual employee’s actual work, whereas performance appraisal is usually standardized based on the employee's designation, or at best on the employee’s job description rather than on the employee’s actual work exigencies.

Merits and Demerits

Performance Appraisal vs Performance Management Comparing performance appraisal vs performance management, both lead to an increase in organizational productivity, though performance management allows for real-time changes to boost productivity.

The real-time monitoring and correcting of performance in performance management help improve employee performance much better compared to the traditional performance appraisal system.

Performance management allows for linkage of performance to both long-term and short-term corporate goals. For instance, if the organization has a short-term aim to increase margins by ten percent during the season, such a linkage comes only in the next year’s performance appraisal, or the linkage might not come at all. Employees tend to receive favorable reviews and bonuses even when the organization fails to achieve such short-term goals.

Performance management that focuses on actual results and on-the-job performance promotes team work. Most performance appraisal systems focus on individual achievements and focus on results rather than methods, prompting employees to place individual goals over team goals.

Performance management helps in the successful implementation of initiatives such as Total Quality Management.

Performance management eliminates rater bias, a major shortcoming of performance appraisals. In a performance appraisal the employee’s future depends not just on performance, but also on the goodwill of the supervisor.

Performance management focuses on actual performance instead of memories of past performance. As such it removes from the evaluation

18 | P a g e

distortions that could have either helped with performing the job better or special circumstances impeding performance.

Performance management eliminates stress arising from the impending appraisals.

Performance management concentrates on the immediate and most relevant concerns, whereas performance appraisal forces looking into the past, which in many causes would remain irrelevant and force time away from pressing concerns.

The apparent advantages of performance management notwithstanding, performance appraisal also has its uses and advocates. Performance management and performance appraisal reflect the notions of ‘hard’ and ‘soft’ HRM. Performance Management entails controlling the employee’s activity, and is a “hard” and “top-down” approach which might not go down well with highly skilled and achievement-oriented employees who value autonomy. Performance appraisals allow for such autonomy, indicating a “soft” approach.

Performance Appraisal Systems in Indian Banks

Banking sector is a fast growing sector of India. With swift expansion in the number of branches and the new functions assigned to them, banks are beginning to feel a new pressure on their organizational abilities i.e. the processes of recruitment, placement, training, promotion and appraisal, in order to ensure that the right number of staff with the right capacities are available at the right time and for the right places. Appraisal is one of the key factors of organizational ability which is also the focus of this study. In simple words we can say that performance appraisal is an analysis of employee’s recent successes and failures, personal strengths and weaknesses, and suitability for promotion or further training.

Banking services is one sector where a great degree of attention is being paid to Performance Appraisal Systems. Several of the public sector banks (PSBs) have changed their PAS or are in the process of changing them. State Bank of India has recently adopted an open system of appraisal. Its associate banks are likely to follow the same after detailed experiences of State Bank of India are available. Several banks also have self-appraisal as a part of performance appraisal, although mostly such self-appraisal is more of a communication of achievements.

19 | P a g e

Allahabad Bank has introduced a system that aims in helping officers to identify their strengths and weaknesses and encourage improvement of performance on the job. Indian Overseas Bank has a system in which a branch manager gives a self-appraisal on business growth, customer service, internal administration and training requirements in great detail. Union Bank of India has an appraisal system in which the reporting officer is required to assess each of his appraisee officers on technical skills, human skills and conceptual skills. All these are defined for different categories of roles and the assessment has to be made on a five-point scale. Corporation Bank, UCO Bank, Central Bank of India, Dena Bank and Bank of Baroda has introduced similar self-appraisal formats. Punjab National Bank has, primarily, a development-oriented appraisal form. There are ten different formats available for ten different categories of employees. The bank started the system with a self-appraisal by the appraisee.

Studies of the operating system of the successful organizations, in general, reveal that a good PAS is the corner stone to navigate an organization successfully in this globalized environment of uncertainty and continuous change. They have, therefore, developed and employed such system and harnessing maximum benefits. But, like many fields of organizational development, the PSBs are lagging behind in this area too. Most of the PSBs have an Annual Appraisal System that is historic in nature and documents the past activities. It is a one time annual affair only. Study of the format of annual appraisal of many of the PSBs reveal that they are basically uniform in character with emphasis in historical events and little or no importance for future growth. In comparison with the new generation banks and progressive organizations, the appraisal system in PSBs, thus, is basically dysfunctional. The PAS, as an important component of Performance Management System, is yet to be conceived and made operational. But developing and implementing a PAS seems overdue and vitally important.

20 | P a g e

Case Study: Performance Appraisal in HSBC

HSBC - An equal opportunities employer

HSBC is an equal opportunities employer. They do not discriminate on grounds of age, gender, colour, race, ethnicity, language, caste, creed, economic or social status or disability. Being the world’s local bank, they value the diversity of the markets in which they operate. Diversity is central to HSBC’s brand image and is an integral part of their “managing for growth” and people strategies. They recognize that having a workforce that broadly reflects the composition of the local communities in which they operate places them in a unique position to understand and respond to the needs of our customers. They thus use diversity as a competitive differentiator, both in employment and in customer markets.

HSBC India has signed the Confederation of Indian Industry’s and ASSOCHAM’s Code of Conduct for Affirmative Action, which comprises of the following guiding principles:

21 | P a g e

The Company affirms the recognition that its competitiveness is interlinked with the well being of all sections of the Indian society.

The Company believes that equal opportunity in employment for all sections of society is a component of its growth and competitiveness. It further believes that inclusive growth is a component of growth and development of the country.

The Company affirms the recognition that diversity to reflect socially disadvantaged sections of the society in the workplace has a positive impact on business.

The Company will not practice nor support conscious discrimination in any form.

The Company does not bias employment away from applicants belonging to disadvantaged sections of society if such applicants possess competitive skills and job credentials as made public.

The Company's selection of business partners is not based on any considerations other than normal business parameters. In case of equal business offers, the Company will select a business partner belonging to a socially disadvantaged section of society.

The Company has / will have a written policy statement on Affirmative Action in the workplace.

The Company has / will have an employment policy that is in the public domain. It may place such policies and employment opportunities on its website to encourage applications from socially disadvantaged sections of society.

The Company makes / will make all efforts for up-skilling and continual training of employees from socially disadvantaged sections of society in order to enhance their capabilities, and competitive skills.

The Company has / will have a partnership programme with educational institution/s to support and aid students from socially disadvantaged sections of society.

The Company has / will have a senior executive accountable to the CEO to oversee and promote its Affirmative Action policies and programmes. The senior executive presents / will present a biannual report to the Board of the Company about such policies and programmes.

22 | P a g e

The Company makes available its learning and experiences as a good corporate citizen in Affirmative Action to other companies desiring to incorporate such policies in their own business.

Appraisal Process:

The appraisal process adopted by HSBC is rather simple and not too complicated. They have an open-ended approach where they encourage self appraisal.

The process is broken down to team levels, where the first step involves employees self appraisal. This is done by way of filling the semi open ended appraisal form. Once the employee has self assessed himself / his achievements, he together with his immediate line manager will sit for a discussion where in the line manager will give his inputs / comments on the self appraisal of the employee. He will also in front of the employee rate the employee on various parameters defined on the form. Once the line manager has conducted appraisals for his entire team in the fashion described above, he / she hands over the completed and duly signed forms to the HR department.

On receipt of the completed forms, the designated HR official goes through each and every form to make relevant notes. He/ she then sends across a spreadsheet

23 | P a g e

to the line manager to give the rating of his employees. The rating is defined as follows:

A Start Performer Cant do without him / her

B Good Performer Good but can be replaced

C Poor Performer Can do without him/her

F Very Poor Performer Want to lose this employee

While there is no limit on how many people fall under any of the categories, there is a restriction on the A category. Depending on the size of the team the number of people falling in the A category are restricted. Eg: If it is a 5 member team, then only one person can be chosen as a star performer.

This rating system helps in deciding how the available budget has to be allocated and what percent increase in salary is to be given to which employee. The line manager along with the grades also needs to inform the HR if he / she wants to recommend any employee for a promotion.

The focus is on performance and hence a person does not automatically become due for a promotion after a particular number of years. A person if good can be promoted every year or may stay on the same level for years together. The next section gives the sample of the appraisal form used by the bank.

HSBC

Performance Discussion & Feedback

Year: 2013 - 2014

Please provide the following information before starting the discussion:

Name:

Job Title:

Department:

Appraiser:

24 | P a g e

Contents: Self-Assessment & Discussion Form pages 2 - 4Competency Feedback Form page 5Objectives for 2014 - 15 page 6

Discussion Date: ______________________________ (please fill in)

Please fill in this information once the feedback discussion is complete.

Appraisee’s Feedback:

I am satisfied with the discussion YES / NO

Appraisee’s Signature:

Appraiser’s Signature:

Completed forms to be returned to HR.

Self-Assessment & Discussion FormDirections for use: the Appraisee fills up the self-assessment section in preparation and then on the appointed date / time the Appraisee and Appraiser have a discussion on the same. Discussion points should be documented in the section provided.

A. Your Current Role

1. What do you feel are the main objectives / responsibilities of your role?Appraisee Self-Assessment Discussion Comments

25 | P a g e

2. How well do you feel you are doing overall and what have been your achievements in the last 12 months?

Appraisee Self-Assessment Discussion Comments

3. What areas of your role have given you the most satisfaction? Why?

Appraisee Self-Assessment Discussion Comments

26 | P a g e

4. What areas of your role have you found the least satisfying? Why? Any improvements you can suggest?

Appraisee Self-Assessment Discussion Comments

B. Other Issues

Document other issues (if any) that came up during the discussion between the Appraiser and

27 | P a g e

Appraisee.

C. Training Requirements

Document training requirements (if any) that came up during the discussion between the Appraiser and Appraisee. Please be as specific as possible.

Competency Feedback FormDirections for use: To be completed by the Appraiser after discussion / providing feedback to the Appraisee. Check only those competencies that are relevant to the Appraisee’s position. Rate each item using the five point scale (given below), by circling a number to the right of it.

28 | P a g e

Rating Key

1 Minimal Application Application is not at the level to meet the job requirements2 Developing Some development required3 Competent Application Adequately applies this competency to meet the job requirements4 Advanced Application of competency is continually superior5 Exceptional Applies this competency to maximum effect - exemplary

Competencies

Please rate a minimum of 5 competencies

a. Initiative & Commitment to Achieve – Seizes opportunities and does significantly more than is required; attitude towards work and willingness to take on responsibility

1 2 3 4 5

b. Attention to Detail & Quality – The ability to produce error-free output; maintain quality

1 2 3 4 5

c. Leadership – Generates commitment and builds team cohesiveness by allocating work in line with individual capabilities and the needs of the business, providing constructive feedback to enhance performance and setting a clear vision

1 2 3 4 5

d. Team Orientation – The ability to work with and support others as part of a team and understand the need to work together to create an environment of cooperation and mutual responsibility

1 2 3 4 5

e. Organizing for Results – Translates objectives and ideas into practical and achievable actions by prioritizing, planning, coordinating and managing resources to deliver results in a quality, timely and cost – effective manner

1 2 3 4 5

f. Creativity – Is able to conceive original, imaginative and valuable ideas to improve brands, solve problems and improve processes

1 2 3 4 5

g. Interpersonal Ability – Establishes and maintains productive working relationships with all levels of people

1 2 3 4 5

h. Influence & Negotiation – Uses appropriate personal style to gain acceptance or agreement to an idea or plan; change others’ opinions by effective persuasion

1 2 3 4 5

i. Professional Knowledge – Possesses a wide understanding of professional issues related to their specific function: thereby adding value to work output

1 2 3 4 5

THIS PAGE SHOULD BE COMPLETED BY THE APPRAISER IN THE PRESENCE OF THE APPRAISEE.

Objectives for Year 2014 - 2015Directions for use: The Appraiser and Appraisee should discuss and agree objectives before documenting them on this page. Objectives should be SMART (Specific, Measurable, Achievable, Realistic and Time Related). Feel free to use additional pages if required.

29 | P a g e

Objective Target Date1.

2.

3.

4.

5.

6.

7.

Comments / Findings

While tendency is to expect a huge complex appraisal process and the belief that something simple can never work / be accurate. The simple approach by HSBC

30 | P a g e

has been of great benefit to the company. The main benefits of this approach adopted by HSBC are:

1. It gives a platform to the employees to themselves highlight their achievements which possibly would be missed by their line managers unless highlighted.

2. It gives them a platform to give a feedback of any role which is not satisfactory.

3. It gives an opportunity for both employee and line manager to come together and have a discussion on the employees performance, expectations, etc.

4. There is a clear approach of joint goal setting for the next year to ensure both the manager and the subordinate are on the same page with clearly defined objectives.

5. The approach to ensure the employee is rated on the various parameters listed in the form, in front of the employee is a very good way to give feedback and highlight areas of improvement.

While there are no major negatives / loopholes visible for the system adopted by HSBC, what lacks is that it reviews performance only once in a year. Since banks are dynamic organizations with lot of changes happening on a routine basis with respect to the roles assigned to the employees, they need to review the performance / objectives on a quarterly basis or at least half yearly basis.

There is also a need to possibly have the HR representative present for the appraisal discussion so that he can have a judgement of his / her own about the discussion and the fairness of the evaluation.

Case Study: Performance Appraisal in Bank of Baroda

31 | P a g e

Bank of Baroda – A performance driven organization

An old and successful player in the Public Sector of India with a wide presence all over the world, Bank of Baroda over the years has made a paradigm shift of focus to its human resources. Well defined and integrated HR policies, objectives and processes make it an attractive organization for job seekers.

BOB’s HR Objectives

To initiate & institutionalise globally competitive HR practices in the Bank in our pursuit to become a Bank of international standards and to become an employer of preferred choice;

To put in place relevant HRD strategies and use modern methodologies to undertake organizational renewal; identify and nurture talent, bring about marked changes in the mindset of employees at all levels so as to enhance HR Quality;

To create a performance-driven culture and an exciting workplace for the employees

To create a pool of entrepreneurial managers and business leaders for future;

To inculcate a strong and effective sales and service culture across levels in the organization in order to generate strong stakeholder affiliation;

To create a learning organization for employees’ intellectual growth and creativity; and to re-skill the workforce to operate in digitally enabled modern core banking environment.

HR Business Model

The Strategic HR Business Model adopted by Bank of Baroda incorporates its HR Mission and Philosophy and is focused towards attainment of long-term organizational goals.

A very strong Organizational Leadership at different levels forms the key link in the Model. These are;

32 | P a g e

Strategic Leadership - Corporate level

Business Leadership - Zonal & Regional level

Operational Leadership - Business unit level i.e. branch

The two vital Human Resource sub-systems i.e. HR Planning & Management Sub-System & Competency Based HRD Sub-System shape the very crucial Performance Environment within the Bank which facilitates development of enabling capabilities of people.

Through proper developmental inputs, Positive Attitude & Right Mindset is created among people.

Through proper Communication Medium and an Organizational Culture of sharing, openness, collaboration & confrontation, autonomy etc., people in the organization are facilitated to give their best output (performance).

The Model is adequately supported by a suitable Learning Platform, which imparts proper Knowledge and enhances Learning among people (functional, behavioural etc) so that their Competence increases and their potential could be properly leveraged for greater Individual and Organizational Effectiveness.

33 | P a g e

These create proper Employee Motivation, which ultimately facilitates Goal Achievement.

HR Initiatives

People oriented Deployment, Promotion and selection policies

Bank has formulated and put in place well documented and comprehensive deployment, promotion and selection policies oriented towards identifying the best talent and providing opportunities for fast-track growth and development. Some of the prominent HR policies put in place are

HR Resourcing policy

Promotion policy for officers

Transfer policy for officers

Promotion policies for clerical and subordinate cadre

Overseas selection policy

Talent identification & Grooming programmes

Various programmes are being run by the Bank for grooming of officers in specialised areas of Credit, Forex, Treasury / Dealing, Wealth Management, for grooming of Branch heads, etc.

Customised Leadership development programmes

PROJECT LEAP: Bank has been a forerunner in initiating customised and focussed leadership development programmes for its operational and strategic leaders. Project-LEAP (Leadership enhancement and appreciation programme) was initiated by the Bank for grooming 300 leaders of the Bank and was implemented during the period 2007-2009. It involved systematic development of identified leadership competencies after running of an individualized assessment and gap analysis on those competencies for each participant.

PROJECT UDAAN: This is a comprehensive leadership development programme initiated by the Bank covering almost 300 AGMs / DGMs and almost 1200 Branch Heads of Urban and Metro Branches.

34 | P a g e

The design of each module encompasses a field and forum approach wherein the participants are required to attend classroom sessions on various aspects of leadership and apply the acquired learning to real business situations. The classroom sessions are also designed to be very experiential with role-plays, activities, etc. reinforcing various leadership concepts in an off-site location coupled with coaching sessions in between. .

HRNes (Human Resource Network for Employee Services)

"HRNes" covers the entire gamut of human resources management function in the Bank currently being performed and also includes many new sub-functions. It comprises of four broad modules encompassing different functions:

Oracle Core HR Module, covering all current HR processes in the Bank;

Fluous Payroll Module, - centralised payroll, payments of various benefits, perks, welfare schemes, terminal benefits, etc.;

Employee Self-Service Module.

Oracle Learning Management Module which includes training administration & e-learning; Various E-Learning modules are gradually being put on the system for employees to avail of and undergo these courses.

Employee performance management system

A new Performance Management system has been formulated and implemented for all officers w.e.f. 2009-10 onwards. The new system enables a holistic approach to the issue of managing performance and does not limit to only an appraisal. It starts from performance planning and Goal-setting and takes it forward into performance review discussions, feedback and development. The new system is business-linked, highly objective and fully transparent, with individuals owning and managing their own performance themselves.

Baroda Sujhav and ideaonline@bankofbaroda.com

35 | P a g e

Idea channels for eliciting new ideas from employees with structured rewards provisions for the best ideas.

Streamlined Induction schedule for all new Joinees

Bank has put in place a well-defined and properly structured induction programme, phase-wise for different batches of directly recruited officers, campus recruitees and newly recruited clerks, which is imparted through a mix of classroom and on-the-job training.

Role-change programmes and executive development programmes

Executive Development programmes are being regularly conducted for newly promoted senior and top management people in conjunction with leading Business schools like ISB, Hyderabad, MDl, Gurgaon, National Institute of Bank Management, Pune, etc.

Role change programmes are being conducted for newly promoted employees at Bank's internal training establishments which give them inputs on behavioural issues, soft skills, team work, leadership, etc. besides ways on how to cope with the challenges of the new role better.

Grooming and etiquettes programmes

Grooming and etiquettes programmes are being conducted for front-line employees and also for employees selected for overseas posting in order to improve their service levels and qualitative interaction with customers and various stakeholders better.

SEED (Self efficiency and effectiveness development) programme being run for frontline staff of the Bank in order to improve their service skills and servicing efficiency.

Comments / Findings

36 | P a g e

Though being a public sector bank, they were not in a position to share detailed procedure / form of appraisal process. However their well documented PMS system as seen above, clearly shows that the bank has a very performance driven approach and it has a system to constantly nurture their talent resource.

Unlike a private bank most of its policies even related to promotions is very much documented. Their pay scales unlike in private are not customized as per individual and are rather standardized as per grades. Their approach though less flexible is very holistic and thus gives a fair output.

Their well integrated Performance Management system helps an individual manage / track his performance and be benefited not only from individual performance but also overall performance of the company. Their procedures are clearly defined and highly transparent and thus keeps the employee fears at bay.

Project Conclusion

37 | P a g e

There is no right or wrong approach when it comes to performance appraisal process to be followed. What is important is that the approach has to be fair, transparent and should give the desired output.

While performance appraisal is a practice followed in all organisations it has its own unique feature when applied to the banking sector. The wide / global network of banks today has led to an increase in the human resources strength of each bank. This has in turn made it a must to have an integrated performance management system to be able to identify the key potential employees who can be nurtured to make future leaders.

Both the banks studied in this project have vast difference in their approach but the approaches are unique to their organization and gives them the desired outcome. While the public sector is more defined and process oriented, the private sector follows a more flexible approach.

38 | P a g e