SAJMMR: - Indian Journals

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SAJMMR Volume 3, Issue 4 (April, 2013) ISSN 2249-877X

South Asian Academic Research Journals http://www.saarj.com

38

Published by: South As ian Academic Research Journals

SAJMMR:

S o u t h A s i a n J o u r n a l o f

M a r k e t i n g & M a n a g e m e n t

R e s e a r c h

PERFORMANCE APPRAISAL SYSTEM IN INDIAN PUBLIC SECTOR

BANKS

Prof. I.K. Kilam*; Dr. NC Wadhwa**

*Research Scholar,

MRIU.

Head,

Faculty of Engineering & Technology,

Department of Humanities & Management,

Manav Rachna International University,

Faridabad, Delhi NCR, India.

**IAS, Retd.

Vice Chancellor,

Manav Rachna International University,

Faridabad, Delhi NCR, India.

ABSTRACT

Performance Appraisal System (PAS) is a very vital component of the overall HRD

system in any organization. There is a need to have utmost faith in this HRD sub-

system within the organization & its people at all levels, a perfect planning & system

design, flawless implementation and a constant periodic review. Indian Public

Sector Banks (PSBs) are mammoth public sector organizations spread all over India

providing banking & financial services to a vast majority of customers. These

organizations are highly people - dependent to ensure quality and delivery of

multiple financial services.

The author (Prof. IK Kilam) has worked in one of the largest public sector banks

(PNB) in India for over 34 years & has had the opportunity to experience the

Performance Appraisal System as in use in PNB, in multiple capacities as an

appraisee, as an appraiser & a reviewer for a number of years. He also had good

opportunities to interact with fellow bankers from different Public Sector Banks

during various training sessions, conferences and informal & formal meetings.

During his banking career, he also had an opportunity to conduct a few special

research based studies on HRD and Career Planning Systems in Public Sector

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Banks, which also covered areas related to PAS. This paper is an attempt to bring

out the need for a review of the PAS in PSBs.

KEYWORDS: Appraisals, Career, Development, Financial, Goals, Growth,

Promotion.

____________________________________________________________________________

INTRODUCTION

Performance appraisal is one of the most important human resource (HR) practice, administered

in organizations by which supervisors evaluate the performance of subordinates. Organizations

use appraisal ratings to take decisions regarding pay and promotion, identify training and

development needs and motivate employees. Performance appraisal is one of the most widely

researched topics in industrial /organizational psychology. However, in spite of the attention and

resources paid to the practice, it continues to generate extreme dissatisfaction among employees

and employers alike and is often viewed as inaccurate, unfair, biased and political.

A sound financial system is indispensable for the growth of a healthy and vibrant economy. The

banking sector, being a crucial constituent of financial system is the lifeline of any modern

economy. It is one of the important financial pillars of the financial system which plays a vital

role in the success / failure of an economy. Banks are one of the oldest financial intermediaries in

the financial system. They play an important role in the mobilization of deposits and

disbursement of credit to various sectors of the economy. The banking system is the fuel

injection system which spurs economic efficiency by mobilizing savings and allocating them to

high return investment. Research confirms that countries with a well developed banking system

grow faster than those with a weaker one.

Employee performance appraisal is an indispensable part of every organization including banks

in India. Indian banking sector is one of the oldest, biggest, and fastest growing financial service

sectors which have seen tremendous progress. Arrival of new banks, vigorous growth of

domestic economy, rapid growth of the Indian corporate sector, technological developments and

deployments, and rising household incomes are some of the factors contributing to its growth.

Making international presence, attracting and retaining talents, and overhaul of HR practices are

some of the challenges being faced by banks in India. In India, banking system can be broadly

categorized into scheduled and non-scheduled commercial banks. Scheduled commercial banks

can be further classified into public and private sector banks (old and new) and foreign banks.

Over a period of time, differences have been observed between public and private sector banks

on various parameters.

DEFINITION AND CONCEPT

PERFORMANCE APPRAISAL: The term performance appraisal has been called by many

names, including performance review, performance evaluation, personnel rating, merit rating,

employee appraisal or employee evaluation. A performance appraisal has been defined as any

personnel decision that affects the status of employees regarding their retention, termination,

promotion, transfer, salary increase or decrease, or admission into a training program.

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The focus of the performance appraisal is measuring and improving the actual performance of

the employee and also the future potential of the employee. Its aim is to measure what an

employee does. Thus, we can define the term Performance Appraisal as, ―Performance appraisal

is a systematic way of reviewing and assessing the performance of an employee during a given

period of time and planning for his future.‖

Thus, from the above definition we can say that;

i) Performance appraisal is a powerful tool to calibrate, refine and reward the performance

of the employee.

ii) It helps to analyze employee achievements and

iii) Evaluate employee contribution towards the achievements of the overall organizational

goals.

Therefore, by focusing the attention on performance, performance appraisal goes to the heart of

personnel management and sets out different objectives which are directly responsible for the

Career development of employees and continued growth and development of the organizations.

OBJECTIVES OF PERFORMANCE APPRAISAL SYSTEM

To judge the gap between the actual and the desired performance.

To review the performance of the employees over a given period of time.

To diagnose the strengths and weaknesses of the individuals so as to identify the training

and development needs of the future.

To help the management in exercising organizational control.

To strengthen the relationship and communication between superiors – subordinates and

management – employees.

To provide feedback to the employees regarding their past performance.

To provide clarity of the expectations and responsibilities of the functions to be

performed by the employees.

To judge the effectiveness of the other human resource functions of the organization such

as recruitment, selection, training and development.

PROCESS OF PERFORMANCE APPRAISAL SYSTEM

I) 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

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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.

II) COMMUNICATING THE STANDARDS

It is the responsibility of the management to communicate the standards of performance to all the

employees of the organization. The employees should be informed and the standards should be

clearly explained to them. This will help them to better 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.

III) MEASURING THE ACTUAL PERFORMANCE

The most difficult part of the Performance Appraisal process is measuring the actual

performance of the employees i.e., the work done by the employees during the specified period

of time.

Measuring performance is a continuous process which involves monitoring the performance

throughout the year. This stage requires 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 employees‘ work and development plans.

IV) COMPARING THE ACTUAL WITH THE DESIRED PERFORMANCE

The actual performance is compared with the desired or the standard performance. The

comparison spells out the deviations in the performance of the 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.

V) 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,

keeping future in mind and motivate the employees to perform better.

VI) DECISION MAKING

The last step in 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

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like rewards, promotions, demotions, transfers, incentives, training & development program

inputs, etc.

LITERATURE REVIEW

PERFORMANCE APPRAISAL SYSTEM IN GENERAL

Mert, Ibrahim Sani (2011), investigates the employees' perception of the outcomes and

detriments of an effective performance appraisal system. According to the findings of the study,

the perceptions of employees towards the performance appraisal system have an effect on their

thoughts of their own appraisals. Besides, it was determined that women perceive the

performance appraisal system as more effective than men and the employees who work as

managers have a more sensitive perception towards the detriments of performance appraisal

systems than who do not.

Banu, C. Vijaya, Umamaheswari, P.

(2009), discusses the capabilities and execution with regard

to business acumen, customer focus, values and ethics, vision and purpose, bias for action,

commitment, teamwork, innovation, developing people performance and decision making.

Youngcourt, Leiva and Jones (2007) suggest that the common purpose of performance appraisal

tends to be aimed at the measurement of individuals, and consider that this focus is insufficient.

Dhiman, Amit Singh, Manjari

(2007), say that politics is a bane of administrative systems such as

performance appraisals. It not only debilitates the system's credibility in the eyes of various

stakeholders, but also adversely affects the employees' morale and the organizational

effectiveness. It also focuses on the assessors' perspective and conceptualizes their perceptions of

politics in appraisals (PAPS). It has been argued that PAPS constitutes the assessors' perception

about political behaviors of other stakeholders--reviewers, assesses, and fellow appraisers--and

shapes their own perceptions. These perceptions will be influenced by certain contextual factors

in which appraisals are conducted. Focus has also been on four such factors: ambiguity about

policies, procedures, performance standards, criteria, etc., assessors' accountability with respect

to appraisals, assessors' and assesses' instrumentality linked to appraisal and organizational

support in terms of assessors' training to conduct better appraisals. Paper also Contributes to

appraisal literature and informs managers about mitigating appraisal politics.

Fletcher (2006) takes a more balanced view, suggesting that for performance appraisal to be

constructive and useful there needs to be something in it for appraiser and appraisee.

Carney (1999), states that the performance management process provides an opportunity for the

employees and performance manager to discuss development goals and jointly create a plan for

achieving those goals. Development plans should contribute to organizational goals and the

professional growth of the employees.

Kleiner (1997) suggests the overall purpose of performance appraisal is to let an employee know

how his or her performance compares with the manager‘s expectations.

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Steel, Robert P. Ovalle, Nestor K.(1994) talk about the Self-appraisals of job performance that

have been historically proven to be weakly related to appraisals conducted by supervisory

personnel. Feedback Based Self-Appraisals (FBSA) exhibited significantly smaller leniency

error, greater total rating variance, and more agreement with superior ratings than conventional

self-appraisals. FBSAs produced small improvements over conventional self-appraisals in

predicting objective criteria of managerial job performance.

PERFORMANCE APPRAISAL SYSTEM IN BANKING

St-Onge, Morin, Bellehumeur and Dupuis (2009) draw together a number of surveys showing

worldwide dissatisfaction with appraisal, in particular citing research of 50,000 respondents that

reveals only 13% of employees and 6% of Executives consider their firm‘s appraisal process

useful.

Beck and Levine (2004). The banking system reflects the economic health of the country. The

strength of economy of any country basically hinges on the strength and efficiency of the

financial system, which, in turn, depends upon a sound and solvent banking system. A sound

banking system efficiently deploys mobilized savings in productive sectors and a solvent

banking system ensures that the bank is capable of meeting its obligation to the depositors.

Fase and Abma (2003) argued that the expansion of the financial system could have a positive

repercussion on economic growth of a country.

Bisht et al. (2002) studied the impact of liberalization on the Indian banking sector. They

established the fact that the present banking structure is the outcome of a process of expansion,

re-organization and consolidation which have been going on for many years and passed through

three important phases—Pre-nationalisation, Post-nationalisation and Post-liberalisation. With

the advent of internet, one can distinctly perceive the arrival of fourth phase which led to mass

structural changes in banking by replacing brick and mortar branches with the electronic delivery

channels to provide more options to the customers. Traditional banking has become a thing of

the past; and technology has changed the rule of the game.

Rao and Datta (1998) conducted a study based on CAMEL to assess the performance of all

nationalized banks for the year 1998. The study found that Corporation Bank has the best rating

followed by Oriental Bank of Commerce, Bank of Baroda, Dena Bank, Punjab National Bank,

etc. And the worst rating was found to be of Indian Bank preceded by UCO Bank, United Bank

of India, Syndicate Bank and Vijaya Bank.

Ramamurthy (1998), in his technical paper on the profitability and productivity in Indian

banking stated that the banking structure and profitability structure of the banking system across

the country have a bearing on the profitability of the banks. When banks are considered as

groups in terms of big, medium and small, bigger banks have greater scope for economies of

scale. The author opined that one of the main determinants of banks‘ profitability is the network

of branches, frequently termed as franchise strength. The researcher concluded that Indian banks

have-

Higher interest spreads than banks abroad;

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Higher operating costs than banks abroad; and

Higher risk provision level.

As far as the impact of liberalization is concerned, the author stated that productivity as

measured in terms of per employee business for the banking system as a whole went up from

Rs. 45.33 crore to Rs.73.40 crore during the post-reform period of 1992-96.

Prasantha (1997), in his doctoral dissertation titled, ―Performance of Public Sector Commercial

Banks: A Case Study of State Bank of Hyderabad‖, has evaluated the performance of SBH by

selecting certain parameters like deposit mobilisation, analysis of advances, credit deposit ratios,

interest spreads, employee productivity, customer services, profit as a percentage of working

funds etc. One major conclusion drawn by the researcher is that the profits of SBH showed an

increasing trend, indicating a more than a proportionate increase in spread, than in burden. It has

been brought out that there is a gradual increase in the percentage of profit on the working funds

over the study period. According to the study, there is decline in operating costs, responsiveness

of the SBH during the study period which is a clear symptom of cost effectiveness/ productivity

which has resulted in a profit though many banks were in red during the years 1992-93 and

1993-94 due to introduction of banking sector reforms.

Krishna (1996), in his article titled, ―Profitability Analysis: An Overview‖, has defined the

profitability analysis in detail. According to the researcher, it is a rate expressing profit as a

percentage of total aspects or sales or any other variable to represent assets or sales. What should

be used in the numerator and the denominator to compute the profit rate depends upon the

objective for which it is being measured.

Patrick (1996) opined that financial sector acts as supply leading to transfer of resources from

traditional, low growth sector to high growth sector and to promote and stimulate an

entrepreneurship response in the high growth sector. Role of banking is very significant in the

economy in capital formation and banks need to be more closely watched than any other type of

economic unit. A sound banking system proves to be one of the pillars of economic, social and

industrial growth of a country. In the recent past, the bank regulators have introduced a number

of measures to link the regulation of commercial banks to the level of risk and financial liability

of these banks. The regulators have recommended bank supervision through CAMEL (capital

adequacy, asset quality, management quality, earnings and liquidity) rating model to assess the

performance of banks. This supervisory system to assess the performance has brought about

substantial and considerable improvement over the earlier systems in terms of economic,

administrative and recovery mechanism efficiency.

In India Padmanabhan Working Group (1995) suggested two supervisory rating models named

CAMELS (Capital Adequacy, Assets Quality, Management, Earning, Liquidity, Systems and

Controls) and CACS (Capital Adequacy, Assets Quality, Compliance, Systems and Controls) for

rating of Indian commercial banks and foreign banks operating in India.

Saleem (1995) studied the strategic reforms of banking sector and revealed that Indian financial

system is characterized by predominance of public sector units and high degree of regulations,

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motivated mainly by socio-economic considerations. As a result of liberalization, the existing

institutional arrangement of banking system has become deficient in various ways. The major

issues related to international competitiveness consist of financial soundness, operational

efficiency, viability and profitability. The main rationale behind the banking sector reforms was

to improve the operational and allocation efficiency of the system. According to the researcher,

the remedial measures are required to mitigate the indigenous factors, which affect the

performance of banking sector adversely. Last but not the least; political interference should be

reduced to have better productivity and profitability.

Singh (1990), in his research study titled, ―Productivity in Indian Banking Industry‖, discussed

the trends and changes in the productivity with particular attention on employee and branch

productivity in the Indian banking industry. The researcher used seventeen indicators to analyze

productivity trends. Banking being service industry, greater attention has been paid to employee

productivity. He has made cross-sectional and inter-temporal analysis on the basis of these

indicators and these have been divided into three categories:

Per employee indicators (Labour productivity)

Per branch indicators (Branch productivity)

Financial ratios measuring productivity.

The study period (1969-85) was divided into four sub periods. In addition to the comparison of

growth rates of various indicators, assessment of relative positions performance has been made

on the basis of average T-scores and ranking based on it.

Vashisht (1987), in his doctoral work titled, ―Performance Appraisal of Commercial Banks in

India‖, evaluated the performance of public sector banks with regard to six indicators, viz.

branch expansion, deposit, credit, priority sector advances, DRI advances, and net profit over the

period 1971-83. The researcher has used composite weighted growth index to rank the banks as

excellent, good, fair and poor. In order to improve the performance, he has suggested developing

marketing strategies for deposit mobilisation, profit planning and SWOT analysis.

PERFORMANCE APPRAISAL SYSTEM IN PUBLIC SECTOR BANKS

Anil, K. Khandelwal (2005), observed; "though the system of employee appraisal has been in

vogue in banks, it has not helped in developing an organization wide performance culture in

PSBs‖. The system often fails to differentiate performers from non performers, average

performers from high performers. Reforming the performance appraisal system by making it

more objective and linked to corporate business objectives is the need of the hour. Key

performance indicators need to be scientifically assessed and objectively linked with

organizational goals so that the performance of the employees can be assessed on critical

parameters".

According to Mohan Deshmukh, (2004) "a system for objective measurement of individual

performance is not established‖. Hence, the performance evaluation of each individual on

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objective basis is not possible. Linkages of performance and rewards/incentives are not

established.

Ram Mohan (2002) evaluated the performance of public sector banks (PSBs) since deregulation

in both absolute and relative terms and also highlighted the reason underlying the improved

performance of PSBs. The author mentioned that the banking system has neither collapsed nor

there has been any banking crisis. One important point that advocates the improved performance

of PSBs is the improvement in declining spreads of PSBs. The author measured performance of

PSBs during the period 1991-92 to 1999-00 on the basis of key performance indicators like

interest spread, intermediation cost, non-performing assets, provision and contingencies and net

profits as percentage to total assets. But in the relative performance he makes a comparison

between public sector banks, private sector and foreign banks from 1994-95 to 1999-00. In this

category he also made comparison of the performance of PSBs and old private sector banks

during the same period. The author concluded that partly due to regulatory norms, the

government owned banks have had minimal exposure to risky assets such as real estate and stock

market. Another reason for survival of banks in the deregulation era was that the government

wisely stayed away from the move towards full-blown capital convertibility. In his article, the

author also talked of recapitalisation requirement of PSBs. Not the least, government ownership

facilitates recapitalisation of banks at outset of reforms and this has arguably precipitated costlier

bailouts down the road.

Malhotra (1999) in her study, ―Banking Sector Reforms: Experience of PSBs‖, has analyzed the

performance of PSBs as a result of banking sector reforms. The study is divided into two parts.

In the first part, a brief review of banking reforms has been made. The major reforms being

deregulation of lending/deposit rates, deregulation of entry, revamping of branch licensing

policy, measures to improve the financial health, measures to improve the operating efficiency

and reserve preemption. In the second part, the researcher has discussed the impact of banking

sector reforms on PSBs, after dividing the reform period of 1992-98 into two phases. Phase-I

pertains to the period 1992-93 to 1995-96, and Phase-II to the period thereafter. The profitability

of the banks became negative from 0.28 per cent in 1991-92 to -0.99 percent in 1992-93 and

further 1.15 per cent in 1993-94. The situation started improving in 1994-95 but the negative

trend continued again in 1995-96 (-0.07 per cent), however, the profitability has improved during

1996-97 and 1997-98. The study brought that there has been a positive effect of reforms on the

profitability performance of the banks.

Amandeep (1991), in her thesis titled, ―Profits and Profitability of Indian Nationalised Banks‖

opined that the banks have become an instrument to meet effectively the needs of the

development of the economy to effect the total socioeconomic transformation. It has adversely

affected the profitability of the bank operations. According to the researcher, the profitability of a

bank is determined and affected mainly by two factors: spread and burden. The other factors

determining bank‘s profitability are credit policy, priority sector lending, massive geographical

expansion, increasing establishment expenses, low non-fund income, deposit composition etc.

She has chosen 11 factors affecting a bank‘s profitability to identify the most significant variable

affecting its profitability. The study recommended the banks to focus their attention on the

management of spread, burden, establishment expenses, non-fund income and deposit

composition. The banks need to adequately charge for various non-fund services (like merchant

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banking, consultancy, and factoring services) with proper cost benefit analysis, to have

maximum profitability.

RESEARCH METHODOLOGY

A quick study was undertaken recently to assess as to if there was a need for a comprehensive

study on Performance Appraisal system in Public Sector Banks. The questions that were posed to

a select sample of senior bankers are given below:

1. Is there a scope of studying the performance appraisal system in Indian Public Sector Banks?

Yes / No

2. Have any major studies been carried out by Bankers / Academicians on this subject in the

recent past? Yes / No / Can‘t Say

3. If the answer to the above question is ―Yes‖, can you please indicate the details of such

studies carried out.

4. Do you think it would be meaningful to carry out such a study? Yes / No / Can‘t Say

5. Is the performance appraisal system uniformly implemented in all public sector banks or

differently in different banks? Uniformly / Differently /Can‘t Say

6. Any useful lead / hint / feedback that you may like to give to initiate this study?

SURVEY FINDINGS

The study revealed the following

1. All 100% respondents stated that there is indeed a scope for studying the subject titled,

―Performance Appraisal System in Indian Public Sector Banks‖.

2. As many as 50% respondents stated that they were not aware about any major studies having

been carried out by Bankers / Academicians in the recent past & can‘t say anything on the

subject. At the same time, 14.28% respondents stated that some studies have been carried out,

while 35.71% stated that no such studies have been carried out.

3. All 100% respondents preferred to say ―can‘t say‖ as their response to this question. However,

a few respondents did mention about some studies having been carried out by banks like SBI &

PNB either exclusively or through engagement of some consultants like BCG & others. It was

also mentioned that IBA an association of Indian Bankers & / or NIBM a premier training

agency for bankers would have carried out some or the other study on the subject matter.

Mention was made of the Anil Khandelwal Committee on HRD in Indian PSBs which has also

have deliberated on the subject.

4. All 100% respondents stated that it would be meaningful to carry out such a study. However,

it was also mentioned by a few respondents that it would largely depend upon the overall

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objectives of the study. It was suggested in their response that the study could cover a few

Private Sector Banks as well to draw a meaningful comparison. Respondents have observed that

the study could generate interest among bankers and academicians for further studies and

research. A few respondents have suggested involving IBA with the study at some stage.

5. As many as 78.57% respondents stated that the Performance Appraisal System is implemented

differently in different banks, while 14.28% respondents stated that they can‘t say anything on

this subject. Only 7.14% respondents stated that the system was moving towards uniform

implementation.

6. Following views have emerged in response to this question.

It will be a good subject to study. The other one could be ―Succession Planning and

Leadership‖.

The PAS continues to be more subjective rather than objective and no serious thought is

given to this exercise while evaluating people. The opportunity of review is never given

and the shortcomings are not frankly discussed with the subject.

The system may be studied in some of the leading banks, including SBI, PNB, BOB,

Union Bank, HDFC Bank, etc after some discussions with concerned officials in IBA,

NIBM, IIBF, etc.

It is indeed very meaningful to carry out such a study, especially in view of the

paramount need for banks to hire & retain the talent. This assumes further significance in

view of the variable pay for employees as recommended by a panel headed by Dr. AK

Khandelwal, former CMD Bank of Baroda.

There is a book by Sh. TV Rao, ―Performance Management and Appraisal System‖

which is quite meaningful on this vital HRD sub-system. There are certain references on

appraisal practices in Indian Banks mentioned in this book. Mr. TV Rao is also a member

of the panel headed by Dr. AK Khandelwal. He has also written on HRD practices in

Malaysian Banks. Useful inputs can be taken from this book fot the study on PAS in

PSBs.

This study is indeed the need of the hour & a good idea which will help the banking

industry in times to come. But some involvement of and consultations with IBA at some

stage would make the study more meaningful.

It was suggested to contact some of the eminent bankers (serving & retired) who could

throw a very useful light on the subject & share their experiences and views on this

subject.

The performance appraisal should be rather self-made and ratified by the immediate

higher ups with their comments, and a copy be handed over to the person concerned for

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his / her future records and not kept as a secret document known to everyone but not the

concerned.

Performance appraisal should be carried out across all cadres, including award staff,

technical officers and others.

Performance Appraisal is a rather neglected subject in Banks. A well carried out appraisal

can be used to evolve, guide and mould personalities.

This HRD tool should be used for entire staff in banks and annual graded increments

could be linked with it. All promotions, movements and special postings must be linked

with the regular appraisals.

In nearly all banks, there is lot of scope for making the appraisal process more objective

than subjective. While some portion of subjective element may be there, the same should

be of a miniscule proportion and more of an exception than the rule.

The PAS is still very subjective in nature, especially for those working in administrative

offices in banks.

PAS must be used as a powerful development tool and must be carried out across the

organization for all cadres of employees, with mutually arrived KRAs fixed in advance

for the next business year.

In course of yet another HRD related study, it was found that ―Performance Appraisal System‖ is

perceived to be one of the important sub-systems within overall HRD system in Public Sector

Banks. The study specifically revealed the following in respect of the Performance Appraisal

System as in vogue in these banks.

1. Performance appraisal and review and potential appraisal were perceived to be one of the most

important sub-systems of the overall HRD systems in Public Sector Banks.

2. There must be uniform, impartial and balanced ―employee performance review system‖. This

system, in fact, needs a total review.

3. The review / appraisal process of employees should be computerized to ensure unbiased /

honest appraisals.

4. ACRs should be viewed as a tool of development, not just an appraisal mechanism.

5. Banks should have a performance appraisal system, whereby the training needs of employees

are identified and are duly fulfilled at every stage of career growth.

6. There should be premium on good performance in the matter of promotions / placements and

the performance appraisal system should aid in this process.

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7. The whole appraisal system should be changed right from messenger level employees to

managers, executives and top management officials. It should not only be made transparent but

also responsive to the present day needs.

8. There should be special R&D wings in HRD departments for ongoing in-house and external

research, development, review and implementation of HRD policies, including the performance

appraisal system.

Ministry of Finance, Govt. of India has recently suggested uniform Performance Appraisal

Formats for officials of all Public Sector Banks and this is indeed a major change that is now

under implementation in most of the PSBs. If implemented earnestly and monitored seriously,

the PAS will surely contribute better towards individual and organizational goal integration in

Indian Public Sector Banks. A major study on the implementation aspect is, of course, surely

called for.

CONCLUSIONS

It is fair to conclude that a more comprehensive study of the PAS in PSBs is required to be

undertaken to bring out the changes that are necessary in the system itself and its

implementation. The Performance Appraisal System in Public Sector Banks surely needs a

comprehensive study, inter-bank comparison and overall review in order to make it more

acceptable, truly successful & more importantly, people-development-oriented and overall

business-development-oriented. And a better administered PAS will surely bring about overall

better PMS within banking organizations.

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