1. 1
EXECUTIVE SUMMARY
Performance management is the process of evaluating an employee’s performance during
the preceding years and deciding where does an individual stands as far as their peers in the
same band are concerned. It is a process that associates the firm’s strategies and aims to
individual and group performance so as to enhance the efficiency of organization. The
technique for performance management is a way through which an employer can maintain
and promote efficient employee performance. It can range from selecting employee
management philosophies to acquiring technical performance trailing tools to enact the
formal policies.
Nearly, every organization looks in to monitor performance of its employees through an
assessment system. Performance management program has acquired much more
significance over the past decade; the idea behind this program is to simply manage work of
employees. In order to accomplish performance management program effectively the target
and vision should be vividly defined in much advance. Performance management also
carries importance in the area of setting up effective communication channels between an
individual employee and superiors i.e. based on trust and understanding.
This system has become essential in banking industry, because in banks strive in to manage
risk, enhance its operations, design and execute more suitable promotional activities and
attract and retain more people to join with them. A performance management process designs
the platform to reward excellence by associating individual accomplishment of employees
with organizational vision and missions. This system enables people of a firm to appreciate
the importance of specific job in identifying results. The present research report has been
undertaken with an in depth wisdom about organizational performance management system
and its impact on the banking industry. In this regard an assessment is being undertaken in
the leading bank of HDFC BANK where in attention is mainly given to evaluate performance
management system of this bank and how does its impact on enhancement of workforce
efficiency.
2. 2
INTRODUCTION
INDUSTRY OVERVIEW
The tremendous growth of the Indian banking industry has changed its face with a decreasing
emphasis on human interventions. Many commercial and private banks are positioning
themselves as a single-stop shop of financial service provider with a fairly exhaustive range
of products, including deposit products, loans, credit cards, debit cards, depository services,
investment advice, bill payments, ATMs, phone banking, internet banking and mobile
banking and various transactional services. In addition, the banks have also entered into the
business of selling third-party products such as mutual funds and insurance to the retail
customers. These days improved technologies are being followed by the banks for upgrading
their work methods, work norms, technical and managerial skills, and employees‟ motivation
to face the fast emerging challenges, both in the manufacturing and service sectors.
Technology has become one of the biggest drivers of change as it has been transforming
today’s banking into 24 hours a day banking, all seven days in a week and a reality in
facilitating the highest service levels. Now, there is a shift from 'Brick and Mortar' branches
to 'Click and Portal' banking. And in order to provide their customers more flexible and
convenient services as well as to reduce servicing costs, banks have been investing huge
amounts to computerize their branches and installing new delivery channels. At the same
time, the banks are putting greater emphasis on the management of their human resources.
The need for sound and effective HRM policies and practices for the sake of organizations as
well as personal development is being felt strongly at every level.
HRM Policies and Practices in Banking Industry
Recruitment
Promotion
Retirement and Voluntary
Retirement
Motivation
Training Establishments
Mobility (Transfer and Rotation)
Remuneration and Reward
Mechanism
Staff Welfare
Organisational Development
3. 3
HDFC BANK Overview
The HDFC Bank was promoted by the Housing Development Finance Corporation, a
premier housing finance company of India (setup in 1977) with an initial share capital of Rs.
100 million. At present HDFC Bank has over 2500 branches and over 3000 ATMs in over
550 cities in India; and all branches of the bank are linked on an online real-time basis.
Initially, Housing Development Finance Corporation Limited or HDFC was founded in 1977
by Ravi Maurya and Hasmukhbhai Parekh. It is an Indian Non-Banking Finance Corporation
(NBFC) focusing on home mortgages. HDFC's distribution network spans 243 outlets that
include 49 offices of HDFC's distribution company, HDFC Sales Private Limited.
The HDFC bank believes in empowering its employees and constantly takes various
measures to achieve this. The HR of the bank aims to create a team of empowered
employees-oriented for the realization of bank's vision. During its life span, the key human
resource issues that were addressed related to learning and skill development, management
of performance, ensuring an enhanced work- life balance and attrition management. The
employee engagement initiatives of the bank are focused on providing opportunities to staff
to seek as operational roles through internal job postings and periodic job rotations, making
the compensation structure more competitive, streamlining the performance-linked rewards
and incentives, and generally sending a clear message of meritocracy.
The HDFC Bank's Performance Management System, where recognition is directly related to
performance and a 360 degree feedback process has been in use as a part of leadership
development process in the Bank. On the talent acquisition front, the Bank has emerged as a
strong employer brand in the financial services sector and especially on the campuses of the
premier business schools of the country. Through the fulfilment of its human resources, the
bank has been continuing to strive towards realisation of the ultimate goal of being the
preferred financial service provider excelling in customer delivery through insight,
empowered employees and smart use of the applied technology.
The HDFC Bank focuses on training of its employees on a continuous basis, both on the job
and through training programmes conducted by internal and external faculty. The Bank has
consistently believed that broader employee ownership of its share has a positive impact on
its performance and employee motivation.
4. 4
PROBLEM STATEMENT
To study the Performance Management System of HDFC BANK.
RATIONALE OF THE PROBLEM
The main aim of undertaking this study is to accomplish the following objective:
To determine contribution of the PMS as a strategic tool for an organization.
To study the parameters usually considered by HDFC BANK while conducting PMS.
To understand the difference between Performance Appraisal and Performance
Management System.
To understand the role of performance appraisal as one of the key factors for
enhancing organizational ability.
To check whether “Performance Appraisal” is providing feedback to employees on
improving future performance.
To study whether 14 characteristics are present in PMS of HDFC Bank.
To study to identify the comparison of HR manger and employees working in the
organization regarding the PMS.
To find out the areas where improvement needed in perception of HR manager and
employees of the organization.
LITERATURE REVIEW
The past research has been conducted in HDFC BANK-
The HR policy of HDFC BANK
Sustainability report published by HDFC BANK in their annual report every year
Sample HDFC BANK performance appraisal form used (360 degree feedback)
annually.
The performance management system in HDFC bank is conducted in this process:
5. 5
The MANAGEMENT BY OBJECTIVE (MBO) is designed and implemented in such a way
that the individual employee and the subordinate line manager planned the actual monthly
targets and outcomes to be achieved by each employee in a given time period.
MBO
Graphic Rating Scale
Monthly review meeting
Annual review meeting
6. 6
GRAPHIC RATING SCALE is a scale that allows the rater to indicate an employee’s
performance on variety of job behaviors.. Employee is rated on number of scales each related
to certain job or performance dimension such as on the basis of job knowledge, on work
ethic, quality of work, initiative and teamwork with a scale ranging from non-existent, below-
average, average, above-average and excellent.
PROS:
Easy to design and use.
Permits a statistical tabulation of scores of employees.
Allow employer to make quantitative comparisons.
Involve low usage cost.
Valuable for effective performance.
CONS:
Likely influenced by rating errors.
Arbitrary and Subjective in nature.
Below is an example of using graphic rating scale.
7. 7
In the monthly review meeting following stages are implemented to know the gap between
desired and actual performance level of individual employee. When the gap between the
desired and actual performance level is identified the required training is provided to the
employee, in order to help him to achieve the required benchmark of performance level
expected by their subordinate Line manager.
8. 8
In the annual review meeting 360 degree feedback process is implemented, which are as
follows:
METH
ODOLOGY
The methodology is used in this project is primary data and secondary data. The primary data
is collected in the form of structured questionnaire method which is designed for collecting
information and feedback from the HR Executive and other 10 employees of the HDFC
Bank. The secondary data information is provided and shared by the HDFC HR Executive.
FINDINGS
FINDINGS FROM HR QUESTIONNAIRE
PMS helps in combining individual’s goals to strategic, administrative and
informational organization’s goal.
STRATEGIC GOALS-
To make organizational level strategies, align the goals with individual goals.
ADMINISTRATIVE GOALS-
In administrative goals includes decision like salary, increment, retention, recognition
of individual performance, identification of poor performance and reward system is
discussed.
INFORMATION GOALS-
Through PMS communication gap can be removed. Top management has control
through PMS
Self Appraisal
by employee
Pre -appraisal
meeting
Appraisal by peers,
subordinate and HR/ Line
manager
Appraisal
Evaluation
Post -appraisal
meeting
9. 9
General Application Specific Purpose
Development Uses Identification of individual needs
Performance feedback
Determining transfer and job assignment
Identifying of individuals strengths and development
needs
Administrative Decisions Salary
Promotion
Retention or termination
Recognition of individual performance
Lay-offs
Identification of poor performers
Organizational HR Planning
Objectives Determining organizational training needs
Evaluation of organizational goal achievement
Information for goal identification
Evaluation of HR system
Reinforcement of organizational development needs
Documentation Criteria for validation research
Documentation for HR decisions
Helping to meet legal requirements
In HDFC bank performance management system is implemented successfully, which
is ongoing process but for the purpose of employee appraisal it is conducted on
annually basis.
PMS does not focus on contribution and improvement for employer and employee.
Employer contributes growth of employee through PMS and an employee creates
value for the organization.
PMS helps in identifying the effective and ineffective performer during the monthly
review meeting.
The performance appraisal is mainly done as per the graphic rating scale method.
The performance appraisal process is of 360 degree which includes self-appraisal,
peers, immediate supervisor and the line manager or the HR manager.
The parameter for performance appraisal is based upon the combination of both
competencies required for the job and behavioral traits.
The KRA’S are designed for each job position, which helps in designing and
evaluating the performance of each employee.
PMS in HDFC bank are related to all- retention of employees, recruitment system,
organizational culture, development of employees.
10. 10
FINDINGS FROM EMPLOYEES QUESTIONNAIRE
The PMS of HDFC bank is unbiased and transparent in setting objectives goals align
with the individual or departmental goals.
The PMS based upon the KRA’S, KPA’S; Competencies related to job and also the
behavioral traits are equally given importance.
Individual employees compulsorily have to do the self-appraisal as a part of 360
degree, which helps them to set their own performance level benchmark. Self
appraisal also helps them to evaluate their own performance against the desired
performance outcome expected by the line manager.
Employees find the PMS in HDFC bank is effective, practical and meaningful in the
career path of the job.
Employees also feels that the PMS in HDFC bank is standardized and good amount of
time is given to complete the performance appraisal.
Employees feel that in reward system effective and ineffective performance are taken
into the account.
Most of the employees do not feel or they are indifferent about the biasness in the
PMS in HDFC bank.
Overall employees were satisfied with PMS in HDFC bank.
CONCLUSION
Performance Appraisal usually reviews past behaviour and so provides an opportunity to
reflect on past performance of the bank employees. But to be successful they should also be
used as a basis for making development and improvement plans and reaching agreement
about what should be done in the future to enhance the bank’s effect and effectiveness.
Performance Appraisal is often the central pillar of performance management in the bank to
keep the motivation of the employees high.
An ideal PMS should include the following 14 characteristics:
1. Congruent with organizational strategy
2. Thorough
3. Practical
4. Meaningful
5. Specific
6. Identifies effective/ ineffective performance
7. Reliable
8. Valid
9. Acceptable and Fair
10. Inclusive
11. Open
12. Correctable
13. Standardized
14. Ethical
11. 11
Followings should keep in the mind for effective “Performance Appraisal” in a bank:
During effective Performance appraisal in banking sectors following steps should kept
in the mind:
1. Select what performance data to collect
2. Determine who conducts the appraisal
3. Decide on a rating philosophy
4. Overcome rating deficiencies
5. Create a rating instrument
6. Deliver useful information to employees
The “Performance Appraisal” or review is essentially an opportunity for the individual and
those concerned with their performance in the bank , most usually their line manager - to get
together to engage in a dialogue about the individual’s performance, development and the
support required from the manager. It should not be a top down process or an opportunity for
one person to ask questions and the other to reply. It should be a free flowing conversation in
which a range of views are exchanged.
RECOMMENDATIONS
HDFC bank should now shift from 360 degree feedback to 720 degree feedback, as it
provides frequent feedback to its employees from their customers also.
HDFC bank should innovate its PMS dashboard regularly, in order to current banking
changes.
Graphic Rating Scale should be abolished as it is obsolete method for the appraisal.
There should be transparency while designing a PMS and proper training should be
given to both appraiser and appraise before conducting PMS.
Appraiser should try to avoid different defects like stereotyping, central tendency,
halo and horn effect and many other related terms.
If an employee is not satisfied with his/her rating then grievenance handling session to
be conducted after the post performance appraisal.
In the performance review meeting should me in such a way of mentoring or
counseling by their superiors.
LIMITATIONS
The project study aimed to achieve the above mentioned objectives of this research, in full
earnest and accuracy; it was difficult position due to certain limitations. Some of the
limitations of this study are as follows:
1. The employees are observed and followed were as per the questions asked.
2. The structured questionnaire method used is not the only way method to be most
effective under all situations.
3. Due to time constraints, telephonic interview was conducted to the HR.
4. The sample size of employees is too small, which may not provide the reliable data,
for further research.
12. 12
Survey on Performance Management System
We are the students of Jaipuria Institute of Management, Lucknow (JIML). We would like to study the
parameters of designing the performance management system. The questionnaire given below is a part of a H.R.
research project and is restricted to the city of Lucknow. Please provide us with your views w.r.t. your
preference and help us make our project a success.
Questionnaire
Dear Sir/Ma’am,
Please kindly provide us with the following information for our analysis. We assure you that your information
will be kept confidential and will be used for research purpose only.
Please rate the following statements on the scale provided from 1 to 5 as shown in table below):
1 2 3 4 5
Strongly Disagree Disagree Indifferent Agree Strongly Agree
Sno Parameters Ratings Your Comments
a My supervisor jointly sets performance
objectives with me alignment with my career
aspirations.
(Congruent with organisational strategy)
1 2 3 4 5
b Your final ratings are based not only on your
competencies and KRA’s but also on several
other factors like corporate image and
interpersonal relations with others etc.
(Thorough)
1 2 3 4 5
c Do you think PMS is useful in your
performance evaluation, especially in
promotion.
(Practical)
1 2 3 4 5
d Do you feel PMS helps you to achieve set and
measurable goals.
(Meaningful)
1 2 3 4 5
e As a appraise, do you face any problem while
selecting KRA’s.
(Specific)
1 2 3 4 5
f Do the PMS of your organisation distinguish
between high potential employees, moderate
potential employees and low potential
employees.
(Effective / Ineffective performers)
1 2 3 4 5
g Do the PMS of your organisation measure the
performance which is consistent and
unbiased.
(Reliable)
1 2 3 4 5
h Do you think the present PMS is effective or
better than the previous appraisal system.
(Valid)
1 2 3 4 5
i My appraiser followed the appropriate and 1 2 3 4 5
13. 13
fair PMS process, according to weightages
given against each job activities.
(appropriate & fair)
j The goals set for performance evaluation are
mutually decided goals between appraisers
and appraises.
(inclusive)
1 2 3 4 5
k The PMS is used mainly for improving the
future performance along with reviewing the
present performance.
(Open)
1 2 3 4 5
l The PMS is transparent and standardised in
your organisation.
(Standardised)
1 2 3 4 5
m The timeliness set to complete and submit the
performance documents are sufficient.
(Timeliness)
1 2 3 4 5
n Do you feel free to express to your appraiser,
your disagreement regarding appraisal results.
(Correctable)
1 2 3 4 5
o Do you feel that PMS administrator is
effective in his task without showing any
biasness.
(Ethical)
1 2 3 4 5
p Are you happy and satisfied with the overall
PMS of your organisation.
(Overall)
1 2 3 4 5
NAME:........................................................................................
DESIGNATION:.........................................................................
DEPARTMENT:.........................................................................
GENDER: Male Female
AGE: 25-35 36-45 46+
WORKING EXPERIENCE: Less than 1 year 2-4 years 5-7 years
7+ years
Thank You for your time
14. 14
Survey on Performance Management System
We are the students of Jaipuria Institute of Management, Lucknow (JIML). We would like to study the
parameters of designing the performance management system. The questionnaire given below is a part of a H.R.
research project and is restricted to the city of Lucknow. Please provide us with your views w.r.t. your
preference and help us make our project a success.
Questionnaire
Dear Sir/Ma’am,
Please kindly provide us with the following information for our analysis. We assure you that your information
will be kept confidential and will be used for research purpose only.
1) What are the objectives and relevance of PMS in the your Industry?
2) Is it a “simple appraisal” or “performance management system in your organisation”?
3) How much PMS focus on “contribution and improvement” for employer and
employee?
4) What is an ideal time to conduct PMS in your organisation:
Monthly Ongoing Quarterly Yearly
5) Who are involved in appraising the performance of an employee:
Self Supervisor Peer H.R.
6) What appraisal parameters are use to measure the performance:
Competencies Behavioural Traits Combination of both
7) Does KRA’s are designed for each job position. If yes, please quote with the example.
8) How PMS works in your organisation:
The step by step process of PMS
Which method of performance appraisal is used
Which approach of PMS is used
What measures are taken to overcome the unbiasness and errors
9) PMS of your organisation is related to
Retention of employees
Recruitment system
Organisational culture
Development of employees
All the above
NAME:........................................................................................
DESIGNATION:.........................................................................
DEPARTMENT:.........................................................................
GENDER: Male Female
AGE: 25-35 36-45 46+
