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All about Performance Management System in Banks
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April 2007
Declaration
We declare that the project entitled, “Performance Management System in Banking
Sector”, has been composed by us and it has not previously formed the basis for the award
of any degree, diploma or similar titles.
Date: 23 April 2007
Amey Kantak
Acknowledgement
We wish to thank a few people without whose cooperation and help our project would not
have been possible.
We would like to thank and express our deepest gratitude to our professor of Human
Resource Management, Mr. Kishore shah whose excellent guidance and invaluable advice
has facilitated the successful completion of the project. We also thank Mr. Pradeep
Sheldenkar, HR Head (HDFC, Panaji – Goa), Ms. Nalini Prabhugaunkar, Branch manager
(Women’s Cooperative Bank, Panaji – Goa), Mr. P N Shanbagh, Assistant manager
(Canara Bank, Fatorda – Goa), Mrs. Nita Salelkar, Officer (Canara bank, Fatorda – Goa),
Mr. Chari, Manager (Bank of India, Aquem Goa), Mr. Kadwalkar, Officer (Bank of India,
Aquem – Goa),Mr. Pedalkar (SBI ) for their immense help and constant encouragement .
Last but not the least we would like to express our deep gratitude to Dr. Dilip Kare, Mr.
Rammohan Menon and Mr. Leonard Fernandes for their help and cooperation extended
during our study.
Methodology
Primary Data: Collected through personal visits to the banks and by interviewingManagers and Officers.The following banks were visited:
HDFC Bank, Margao Bank of India, Aquem State Bank of India, Loutilim Canara Bank, Fatorda Yes Bank, Margao Women’s Cooperative Bank, Panjim
The Manager and Officer scale I, II and III level employees were interviewed in the
following two methods
Face to face meetings(refer appendix 1) A survey form with open ended questions(refer appendix 2) Secondary Data: Collected from the internet.
Introduction
The Indian banking industry is undergoing a sea of change. Gone are the days where over
staffed public sector banks did not believe in performance. Privatization of the banking
sector has today lead to an increasing thrust on superior performance of employees on
one hand and slimming of the banks employee structure on the other.
Performance is a measure of results achieved. Performance efficiency is the ratio between
effort expended and results achieved. The history of performance appraisal is quite brief.
Its roots in the early 20th century can be traced to Taylor's pioneering Time and Motion
studies. “There is,” says Dulewicz (1989), "... a basic human tendency to make judgments
about those one is working with, as well as about oneself." Appraisal, it seems, is both
inevitable and universal.
Profile of the banks covered
Name Sector/Type
Establishment year
Number of Branches*
No. of Employees*
HDFC Bank Ltd. Private August 1994 583 14878
Bank of India Public 7th September 1906
2678(93 specialized branches)
41808
SBI Public 2nd June 1906 9241 198774
Canara Bank Public 1906 2513 46893
Yes Bank Private 2005 6 627
WomensCooperative Bank
Corporative
1972 2 22
*All values are as of 200506 (Source RBI)
Performance management system
Performance management eliminates the performance appraisal or annual review as the
focus and concentrates on the entire spectrum of performance management and
development issues. Employee performance development, training, cross training, the
provision of challenging assignments and regular performance feedback are included in an
effective performance management system.
What Is Performance Management Supposed To Accomplish?
The literature regarding MBO and performance management suggests a plethora of
benefits and purposes that are designed to make organizations more effective. We can
summarize them as follows:
Provides a system where feedback can be given to employees on a more objectivebasis, and not on management's subjective criterion.
Identify employee training needs. Document criteria used to allocate organizational rewards. Form a basis for personnel decisionssalary (merit) increases, measure pay scale,
promotions, disciplinary actions, etc. Motivates employees by allowing them input into and ownership of their objectives
and standards of performance. Provide the opportunity for organizational diagnosis and development and Increases
management ability to identify or "redflag" problems early. Increases management control over work and results. Enhances communication by ensuring there is clear understanding of management
expectations about results. Provides a centralized record of performance for eachemployee, usually kept in the personnel office.
Links employee objectives and functions to overall organization objectives, therebycreating a sense of contribution for the employee.
Validate selection techniques and human resource policies to meet federal EqualEmployment Opportunity requirements.
Supports remedial action or disciplinary action because a breach of standards canbe defined objectively and in a measurable way.
SECTION 1 PLANNING & GOAL SETTING
In an effective organization, work is planned. This includes setting performance
expectations and goals for individuals in order to channel efforts toward achieving
organizational objectives. Involving employees in the planning process is essential to their
understanding of the goals of the organization, what needs to be done, why it needs to be
done, and expectations for accomplishing goals.
Defining Organizational and employee objectives
One of the first steps in developing an effective performance management system is Goal
setting. In the banks, surveyed goals are normally set based on targets specified by higher
authorities, generally the head office. These goals are then translated into departmental
and then individual position objectives via filtration through the control hierarchy1 of the
respective bank.
Selfgoal setting is being done in HDFC bank where each officer sets his/her own goals,
which are then reviewed by their immediate superiors (Higher scale officer). This enables
alignment of the officers own goals to that of the organization.
Bank > SBI HDFC BOI Canara Women'scoop bank
YesBank
Goalsetting
Whodecides the level of performancerequired for each
branch Topmanagement
Regionalmanager
Zonalmanager
Centralnegotiation team at circle level
Branchmanager
Headoffice
officer branchmanager
branchmanager
branchmanager
branchmanager
branchmanager
branchmanager
SECTION 2 – MONITORING
Effective and timely feedback during the performance appraisal period, addressing
employee performance on elements and standards, is an essential component of a
successful performance management program. Employees need to know in a timely
manner how well they are performing. They need to be told what they are doing well and if
there are areas needing improvement. Feedback can come from many different sources:
observation by managers and rating officials, measurement systems, feedback from
peers, and input from customers, just to name a few.
SECTION 3 –DEVELOPING EMPLOYEES
The process of performance management provides an excellent opportunity to identify
developmental needs. During planning and monitoring of work, deficiencies in
performance become evident and can be addressed. Areas for improving good
performance also stand out, and action can be taken to help successful employees
improve even further.
Bank > SBI HDFC BOI Canara Women'scoop bank
YesBank
Performance
Best age group Experienced
Averageexperienced
Experienced staff
Experienced staff
Nodifference
Threshold levelwhere employeeis given aadverse rating
< = 40% < = 40% < = 40% < = 40% NA
Mainperformanceparameter
targetbased
targetbased
targetbased
targetbased
targetbased
targetbased
SECTION 4 – RATING
Within the context of formal performance appraisal requirements, rating means evaluating
employee performance against the elements and standards in an employee's performance
appraisal plan and assigning a rating of record.
In most of the banks, graphic rating scale is used for performance evaluation of the
employees. Graphic rating is a scale that lists a number of traits and a range of
performance for each that is used to identify the score that best describes an employee’s
level of performance for each trait.
For women’s cooperative bank there are no ratings done. Only the adverse performance of
officers is discussed only the manager to the Board of Directors.
For YES Bank, performance of each employee is based on the output.
PERFORMANCE APPRAISAL SYSTEM
Bank > SBI HDFC BOI CanaraBank
Women'scoopbank
YesBank
PMS FORM
changes in form No change Minorchangesdone
minorchangesdone
Formatchangedto OPAS
NA NA
When form was last updated
2000 1995 1999 2004 NA NA
Is the same form given to all officers( Scale 1,scale 2,scale 3)
Yes No separate forms for senior and junior officers
Yes Yes NA NA
Is same form being given to allemployees(clerks, officers ,etc)
No No No No NA NA
Who revises the form
Topmanagement
HR manager of each circle
Headoffice HR
HRmangerof circle
NA NA
Levels of Appraisal
3 tier system
single level face to face
3 tier 3 tier NA singlelevel
Frequency of appraisal
annual Biannual annual annual NA annual
highest level to which form reaches and is stored
Regional Head office Zonaloffice
Circle NA NA
Does rating Yes Yes Yes Yes NA NA
given in PMS form affect promotion
Developing an appraisal system that accurately reflects employee performance is a difficult
task. Performance appraisal systems are not generic or easily passed from one company
to another; their design and administration must be tailormade to match employee and
organizational characteristics and qualities
So what is the point of performance appraisals? The most important purpose or goal of the
appraisal is to improve performance in the future, and not just for the employee. Managers
can get valuable information from employees to help them make employee's jobs more
productive. Work units and organizations can identify problems that interfere with
everyone's work.
Measurement system:
The following aspects need to be defined in an effective Performance Management
System
What to measure? Work output (quality and quantity) Personal competencies Goal (objective) achievement
How to measure? Graphic rating scales: A scale that lists a number of traits and a range of
performance for each that is used to identify the score that best describes anemployee’s level of performance for each trait.
MBO: Management by Objectives (MBO) is a process of agreeing uponobjectives within an organization so that management and employees agree tothe objectives and understand what they are.
MBO is often achieved using set targets. It involves setting specific measurable
goals with each employee and then periodically reviewing the progress made.
Set the organization’s goals. Set departmental goals. Discuss departmental goals. Define expected results (set individual goals). Performance reviews.
Provide feedbackMBO introduced the SMART criteria
SMART goals are:
Specific, and clearly state the desired results. Measurable in answering “how much.” Attainable, and not too tough or too easy. Relevant to what has to be achieved. Timely in reflecting deadlines and milestones.
Frequency of appraisal
Employee reviews should be performed on a frequent and ongoing basis. The actual time
period may vary in different organizations and with different aims but a typical frequency
would be bimonthly or quarterly. By conducting reviews frequently, two situations are
eliminated:
(1) Selective memory by the supervisor or the employee; and
(2) Surprises at an annual review.
People generally tend to remember what happened within the last month or high pro file
situations (good or bad). Frequent reviews help eliminate the effects of this, generally
unconscious, selective memory. Eliminating surprises in the appraisal process is also
important. Both the supervisor and employee need to know that there is a performance
problem prior to any major annual review. The longer a problem is allowed to continue, the
more difficult it is to take corrective action. Frequent performance appraisals should
eliminate the surprise element and help to modify performance prior to any annual review.
Maintaining records
Another key to ensuring the effective use of a performance appraisal scheme is keeping
and maintaining accurate records of employee’s performance. Carefully maintained, they
establish patterns in an employee’s behavior that may be difficult to spot by typical
incident byincident supervision. Careful review of the records helps avoid the selective
memory mentioned earlier and helps plot appropriate actions. Of course, wellmaintained
records are essential if the need arises to discipline, demote or dismiss an employee. It is
particularly helpful if employees are themselves responsible for part of the process of
recordkeeping: this helps reinforce the fact that a major part of the process is devoted to
employee development – and that employees have a responsibility for their own
development. Such an approach to dual documentation also helps in the elimination of
surprises.
Measurement system
The actual measurement or grading system used to rate employee’s performance needs to
be designed carefully. A performance appraisal system, which ranks employees according
to a numerical rating, tends to lead to a great deal of average performers. For example, if a
15 scale is used, five being best, a majority of employees will be rated a three. While this
may be reflective of their actual performance, few people take gratification in being called
average. Another problem arises.
Bank > SBI
HDFC
BOI
Canara
Women'scoop bank
Yes Bank
Ranking
Is paired comparison been done
No
No No
No No No
Is forced comparison being done
No
No No
No No No
Is alternation ranking occurring No
yes No
No No No
Why performance appraisals are universally disliked and don't work,
Managers cite performance appraisals or annual reviews as one of their mostdisliked tasks.
Halo Effect
The halo effect is the tendency to rate someone high or low in all categories because he or
she is high or low in one or two areas. Results in appraisals that do not help develop
employees, because they are two general or inaccurate as to specifics. Evaluating
someone lower is sometimes also called the "devil effect".
Standards of Evaluation
If you are using categories such as fair, good, excellent, etc, be aware that the meanings of
these words will differ from person to person. In any event, the use of these categories is
not recommended because they do not provide sufficient information to help employees
develop.
Forgetting appraisal is about improvement, not blame.
We do appraisal to improve performance, not find a donkey to pin a tail on or blame.
Managers who forget this end up developing staff that do not trust them, or even cannot
stand them. That is because the blaming process if pointless, and does not help anyone. If
there is to be a point to performance appraisal it should be getting manager and employee
working together to have everyone get better.
Section 5 – feedback
One of the most essential steps in a performance appraisal is providing positive/ negative
feedbacks to employees about their performance. Feedback is essential to facilitate
performance improvement. Feedback allows people to utilize their strengths to their
advantage. It informs employees which actions create problems for others and to know
what changes may be needed.
As Public Sector Banks are trying to compete with Private Sector Banks in India today,
there is an exponential increase in the need to become more customers centric. However,
this is not seen yet. Even during our visit to these banks, we saw that customers had to wait
in long queues for service. This is an example of how naïve these Public Banks are on how
to improve their strategies to attain successful outputs. For the same there is a need for
360degree feedback.
Bank > SBI
HDFC BOI Canara Women'scoopbank
YesBank
Feedback
Isfeedbackoccurring
No Yes (Open feedback) Only adverse feedback
No feedback No Yes(Openfeedback)
Conflictresolution
No Handled at branch level
Zonal No committee resolution
No Headofficelevel
Strengths and weakness
Strengths and Weaknesses of the Performance Management System in Banks:
Bank Strengths Weaknesses
StateBank of India
1. reflects the achievement ofbusiness parameters ofcustomer service, quality ofadvances/recovery, for theannum
2. self appraisal allows theindividual to compare theirperformance to his priorperformance
3. biasness can be eliminated dueto multiple levels of appraisal
1. In PMS system the report is submitted tohigher authorities .sometime the higherauthority may or may not agree with theperformance and he may not give 100%marks .
2. no commitment towards the form3. no feedback
HDFC 1. Increase in motivation is seen2. Instant feedback is given3. Positive impact on performance4. self appraisal allows the
individual to compare theirperformance to his priorperformance
5. biasness can be eliminated dueto multiple levels of appraisal
1. the PMS is a very complex2. Biasness is seen
Bank of India
1. multiple levels of evaluation givesa platform for verification
2. self appraisal allows theindividual to compare theirperformance to his priorperformance
3. biasness can be eliminated dueto multiple levels of appraisal
1. depends on appraisee to provide properdetails which then needs to be verified bythe appraiser
2. biasness3. there is no feedback, hence lack of
motivation4. no relationship between promotions and
appraisal/performance system is seen5. no incentive to improve since the pay
scale rise from officer lever 1 to 2 doesn’tbring a proportionate increase in thesalary
6. no commitment towards the form7. no feedback
CanaraBank
1. Rewards are present where intop performers are given chancesto go abroad
2. Employees are asked to providedetails about his/her activitiesthroughout the year
1. bad design2. feedback process has been stopped after
20043. self boasting4. employees are hesitant to fill the form
however they do so because they must5. writing the form is cumbersome
Women’sCooperative Bank
1. feedback is given which caninculcate motivation
1. negative feedback results into conflicts2. there are no forms
Yes Bank 1. appraisal is done face to face2. since appraisal is done
departmental wise, it may turnout to be a better method ofconducting it
3. self appraisal allows theindividual to compare theirperformance to his priorperformance
1. biasness may be seen2. not formalized since it is a new bank
Suggestions and conclusion
In order to keep each individual employee motivated and committed to performing athis/her best, some objectives need to be customized to allow for continued growth.
Feedback needs to be done on a continuous base rather than at the ned of the year Self goal setting practiced in HDFC must be implemented across all banks so that
employees can be better motivated Goals are being set upfront as of now but the parameters on which officers are being
evaluated and graded vary from branch to branch depending on the assessor. 360Degree feedback needs to be implemented : Unlike, the traditional
toptodown appraisal where a supervisor appraises the performance of theirsubordinate, 360Degree feedback incorporates multiple perspectives by usingfeedback from a variety of sources. These sources include peers, subordinates,customers, self, and supervisor. It is also called multisource feedback, multiraterfeedback, multilevel feedback, upward appraisal, peer review.
Developing an effective performance appraisal system requires strong commitment from
top management: if the system does not provide the linkage between employee
performance and organizational goals, it is bound to be less than completely effective.
To build linkages employees must have individualized objectives and performance criteria,
which allow them to relate directly to the organization. Objectives should be developed
jointly between the supervisor and the employee. Once the objectives are determined,
appraisals should be performed frequently to help build the direct communication link. Both
the employee and supervisor in order for the appraisal process to be conducted in a
productive manner should maintain support documentation for performance.
Organizations operating in this time of continual change and global competition cannot
afford unmotivated and uncommitted employees. An effective system of performance
appraisal is a major component of an organization that allows every employee to feel that
his/her contribution has contributed to the success of the organization and a desire to add
to that success.
Appendix 1
Sample Questionnaire form
Appendix 2
Feedback form
Appendix 3
State Bank Of India PMS form
Appendix 4
Canara Bank PMS formCANARA BANK
Ongoing Performance Appraisal System for Officers
Name Scale Year of joining
Reporting Authority
Appraiser
ReviewingAuthority
Part 1: Bio – Data Personal data Previous assignments Training & Development in the post Specify areas where officers needs to undergo training.
Part 2:
Position at end of previousyears
Position at end of
Part 3: KRA Settings
Part 4: Additional information/ Accomplishments.
Part 5: Managerial dimensions.Trait:1. Leadership abilityTeam orientationInfluencing skillsDecisivenessExample, vision & result orientation
2. Effective time managementPunctuality & Discipline,
3. Interpersonal Relationship:Empathy; Endearing quality; Fira but fair; Sharing information; openness & receptivity.4. Development of SubordinatesCounselling grooming, mentoring & coaching; spotting & harnessing talents.
5. Communication ability/ SkillsA good listener; clarity of thoughts & expression; command over written & spoken words.
6. InitiativeProactiveness; positive & vibrant; convincing ability.
7. Innovativeness/ CreativityLateral thinking; idea generation; harnessing creativity in others.
8. Social skillsRapport, mixing, people orientation.
9. Cost consciousnessProfit orientation, Calculative/ analytical, Cost benefit outlook
10. Emotional strengthAdaptability, Withstanding stress, Balance in appraisal, self control.
Part 6: A. Potential review by appraiser & reviewing authority.
Views of appraiser Views of reviewing authority
KRAs
B. Final Assessment
Marks awarded
Key responsibility areas including accomplishments/ outstandingachievements
70
Managerial dimensions 30
Total 100
Marks awarded shall not exceed 90% of the total marks under each part.
1. Outstanding – over 81 upto 902. Good – over 66 upto 813. Average – over 46 upto 664. Below average – 46 & below
Appendix 5
Bank Of India PMS form
Bibliography
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1 Board to regional manager to branch manger to officer