CHAPTER 1

INTRODUCTION

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Introduction of Performance appraisal system

Every organization needs to have well performed, well trained and well
experienced people to perform the activities that have to be done. When the
current or potential job occupant cannot meet the requirements, it is
necessary to raise the skill level and increase the versatility and adaptability of
the employees.

Performance appraisal is a method of evaluating the behavior of employees in the

work spot, normally including both the quantitative and qualitative aspects of job
performance.

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A brief description of the cement industry…

Cement Industry-A present Scenario

Infrastructure is an important sector that is to be considered for a developing nation like

India and so cement industry is one of the main beneficiaries of this infrastructure boom.
The main sector of consumption continues to be housing, including commercial space,
occupying more than 60 per cent.

Irrigation, 23%

Housing
Defence
Roads, 5% Infrastructure
Housing, 53%
Roads
Irrigation
Infrastructure, 15%

Defence, 4%

The Indian Cement industry with a total capacity of 165 million tones is the second largest
after China. Right from laying concrete bricks of economy to waving the flyover, cement
industry has shown and shows great opportunities for business. The overall outlook for the
industry shows a significant growth on the back of robust demand from housing
construction, Phase-II of NHDP (National Highway Development Project) and other
infrastructure development projects. Domestic demand for cement has been increasing at a
fast pace in India which is forecasted to grow over 22% by 2009-10 from 2007-08. Due to
rising demand of cement the sales volume of cement companies are also increasing and
companies are reporting high outputs and along with it higher sales and higher profits.

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Cement Industry has contributed around 8% to the economic development of India. Foreign
players eyeing India as a major market to invest in form of either merger or FDI. Cement
industry has a long way to go as Indian economy is poised to grow because of being on
verge of development. As per the Working Group Report on Cement Industry for the
formulation of the 11th Plan, the cement demand is likely to grow at 11.5% per annum
during the 11th Plan and capacity by the end of the 11 th Plan are estimated to be 269 million
tones and 298 million tones respectively, with capacity utilization of 90%.
Despite the growth of Indian cement industry, India lags behind the per capita production.
Supply of cement is expected to remain tight which, in turn, push up the price of cement by
more than 50%.The most important factor for better prices is consolidation of the industry
as the market strategy says. More over cut in the import duty might help to cut cost and
make availability of cement.
The global slowdown has not speared this industry too. ACC, the country largest cement
company, also suffered a decline in sales by 2% during the time. The production fell by 5%.
To stand against the problematic situation, government as well as cement industry has
taken some steps. Companies are focusing on the cost of transportation. One of the strategy
is to decrease dependence on road and opt for sea logistics as that can cut transportation
cost by 30-50%. Some plants are adopting futuristic plan such as setting up captive power
plant, moving closer to customers by creating clicker, crushing, and capacity in key markets,
to be more customer centric to generate better revenue. Now the question arises to what
extent the prices of cement should be increased so that consumers can’t affect.
Cement Industry in India has also made tremendous strides in technological up-gradation
and assimilation of latest technology. Presently, 93% of the total capacity in the industry is
based on modern and environment-friendly dry process technology. The induction of
advance technology has helped the industry immensely to conserve energy and fuel and to
save materials substantially. Indian cement industry has also acquired technical capability to
produce different types of cement like Ordinary Portland Cement (OPC), Portland Pozzolana
Cement (PPC), Portland Blast Furnace Slag Cement (PBFS), Oil Well Cement, Rapid
Hardening Portland Cement, Sulphate Resisting Portland Cement, White Cement etc.

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CURRENT SCENARIO

The Indian Cement industry is the second largest producer of quality cement, which meets
global standards. The Cement Industry comprises 130 large cement plants and more than
300 mini cement plants. The industry’s capacity at the end of the year reached 188.97
million tons which was 166.73 million tones at the end of the year2006-07. Cement
production during April to March 2007-08 was 168.31 million tones as compared to 155.66
million tones during the same period for the year 2006-07 where as despaches were 167.67
million tones during April to march 2007-08 as compared to 155.26 during the previous
period. During April-March 2007-08, cement export was 3.65 million tones as compared to
5.89 million tones in the previous period which shows a fall.
At present, cement industry is going through a consolidation stage. Gujarat Ambuja taking a
stake of 14% in ACC, and taking over DLF cements and Modi Cements; ACC taking over
IDCOL; Indian Cement taking over Raasi Cement and Sri Vishnu Cement; and Grasim’s
acquisition of cement business of L&T, Indian Rayon’s Cement division, and Sri Digvijay
Cements.Foriegn Cement companies are also acquiring stakes in India’s big players in
cement industry. Swiss cement major Holcim has 14.8% of the promoters stake in Gujarat
Ambuja Cements(GACL). Holcim’s acquisition has led to the emergence of two groups in
Indian Cement industry, the Holcim-ACC-Gujarat Ambuja Cements combine and the Aditya
Birla group through Grasim Industries and Ultratech Cement. Lafarge, the French cement
has acquired a stake in K.K Birla promoted Zuari Industries cement plant in Andhra Pradesh,
and German cement company Heidelberg Cement has entered into an equal joint-venture
agreement with S P Lohia Group controlled Indo-Rama Cement.

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DEMEND & SUPPLY

The demend drivers for the cement sector continue to be housing, infrastructure and
commercial construction,etc. We expect the proportion of infrastructure in total demand to
improve further in future, as the thrust on infrastructure development is on rise. During
April-November 2007, cement demand grew by 10% year-on-year propelled by the growth
witnessed in end user segments such as housing, infrastructure etc. CRISIL Research expects
demand to remain strong and grow over 12% in next 2 years.
Earlier in 2006-07, the housing sector alone consumed 65% of the total domestic
consumption. With the launch of several infrastructure projects, the housing consumption
may come down to 55% as the infrastructure and other sectors are expected to move up to
45% from the present 35%. Still the main sector of consumption continues to be housing,
including commercial space, occupying more than 60%.The demand is expected to cross
17.5 million mark in view of irrigation and infrastructure projects taken up in the
states.Weaker section’s housing, construction of public toilets, schools in rural areas apart
from several private and public infrastructure projects will give a boost to the cement
consumption in the state.Most importantly, irrigation projects, worth nearly Rs ! lakh crore,
will trigger unprecedented demand for next 5-7 years. Cement consumption are as follows:

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 CHAPTER 2

RESEARCH DESIGN

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Statement of the Problem

Study of Performance appraisal system and its effectiveness in context to sales division in
cement industry.

Objectives.

 Aims at finding out the concept of performance appraisal effectiveness within the
organization.
 Find out the approaches towards measuring performance and examine the setting
up standards to measure performance.
 Understand the role of appraiser in the process of performance appraisal.
 Understand the role of appraise in the process of performance appraisal
 How targets are being set up for an individual that is to be achieved.
 Find out the strategic nature of the appraisal system
 Effectiveness of the appraisal system.

Need and importance of study:

Performance Appraisal as an important aspect for the organization as well as for the
employees is considered to be one of the inevitable parts of the concept of HRM.
Productivity is the measure of output of an organization. Productivity can be improved
through effective use of money, material and human resources. For harnessing human
potential becomes essential. An effective performance appraisal system is an important
tool for evaluating the potential and also to monitor the improvements. Human beings are
capable of extremely high performance levels it given the proper environment and
motivation. This aspect has given a new dimension of performance Appraisal system.
Sound performance appraisal system is therefore an unreliable asset in HRM. Performance
Appraisal system is the most important tool of management because it helps for succession
planning by identifying people with potential as also in determining promotions, pay

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increase, training and development programs, placement & Transfer. It serves as a guide to
the management for strengthening the strengths and eliminating the weakness of
employees, by formulating suitable training and development programs to them. It works as
a feedback and helps employees to know their performances. It works as a control device
as well it also propels healthy Competition among its group members. So it is very clear
that performance Appraisal system is necessary in organizations aiming high productivity
and prosperity.

Literature review:

Research Methodology:
Research methodology is a way to systematically solve the research problem. It may be
understood as a science of studying how research is done scientifically.
The study was qualitative as well as quantitative nature and based primarily on employees
opinion survey.
A modest attempt has been made to present the reports in a user-friendly manner by using
simple language, illustrations, tables and charts, which are easy to follow.

Types of research
The research selected depends on the need and the type of study. In this case descriptive
researches have been used.

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Sampling technique sampling design
The structured, multiple-choice type questions were administered to a sample size widely
accepted method because of its flexibility, relative speed and economy. The multiple type
questionnaires has been designed keeping in view the overall objective of the study and to
present respondents with a series of simple, easily understandable questions that follow a
logical sequence.

Sample description
Entire sample of workforce working at different organization have been taken as population
of the study. This complete survey involves great deal of time. As sufficient time was lacking
few members was selected, which constitutes a sample. Simple random sampling was
adopted in order to collect the information required for the study. This type of sampling is
known as probability sampling.

Sample size
Conceptually the sample must reflect the characteristics of the population, due to time
constraint a sample size of 50 was considered for the study.

Instrumental technique: questionnaire

Actual collection of data

Different websites helped me to collect the information about the organizational change.
Descriptive statistics
This study gives a summary of the basic concept of performance appraisal, why
organizations need it, how it acts as an effective instrument in the organizations.

Sources of data
Original data collected is inclusive of primary and secondary data. The primary data was
collected on “how performance appraisal is carried out and what is its effectiveness”
through questionnaire filled by employees at the workplace.

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Secondary data
The secondary data collected from websites, management books, various articles, various
other journals, reference books of Human resource management.

Tools for analysis

Standard techniques like graphs and percentage are employed to analyze and interpret the
raw data.
The study was conducted on 50 respondents. Though the survey supported in getting
successful results it faced with certain drawbacks.
1. Due to time constraint the sample size is restricted to 50 respondents.
2. Some employees were reluctant to provide sufficient information due to hectic
schedule.
3. As only 3 months were allotted thorough study was not possible.
4. Findings were drawn from the information based on the assumption that the
information provided were correct.

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 CHAPTER 3

Concept and impact of performance appraisal

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A review of Performance appraisal

Performance Appraisal as an important aspect for the organization as well as for the
employees is considered to be one of the inevitable parts of the concept of HRM.

Productivity is the measure of output of an organization. Productivity can be

improved through effective use of money, material and human resources. For harnessing
human potential becomes essential. An effective performance appraisal system is an
important tool for evaluating the potential and also to monitor the improvements.

Human beings are capable of extremely high performance levels it given the
proper environment and motivation. This aspect has given a new dimension of
performance Appraisal system. Sound performance appraisal system is therefore an
unreliable asset in HRM.

Performance Appraisal system is the most important tool of

management because it helps for succession planning by identifying people with potential
as also in determining promotions, pay increase, training and development programs,
placement & Transfer. It serves as a guide to the management for strengthening the
strengths and eliminating the weakness of employees, by formulating suitable training and
development programs to them. It works as a feedback and helps employees to know their
performances. It works as a control device as well it also propels healthy Competition
among its group members. So it is very clear that performance Appraisal system is
necessary in organizations aiming high productivity and prosperity.

In the past, the entrepreneurs and managers believed that their only duty towards their
employees was to pay fair salary. However the managements felt that the employees
require something more that is incentive treatment according to their potential, sincerity,

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capabilities and ability. Therefore, Performance Appraisal benefits not only employees but
also the management in the form of greater productive efficiency.

Performance appraisals are essential for the effective management and evaluation of staff.
Appraisals help develop individuals, improve organizational performance, and feed into
business planning. Formal performance appraisals are generally conducted monthly,
quarterly, half-yearly or annually for all staff in the organization. Each staff member is
appraised by a specialized HR consultant with the help of their line managers. (Depends on
the size and structure of the organization). Quarterly performance appraisals enable
management in monitoring of standards, reaching expectations and objectives, and
delegation of responsibilities and tasks. Staff performance appraisals also establish
individual training needs and enable organizational training needs analysis and planning.
Performance appraisals data feeds into organizational pay and grading reviews, and
coincides with the business planning for the next quarterly trading. Performance appraisals
generally review each individual's performance against objectives and standards for the set
standards, agreed at the previous appraisal meeting. Performance appraisals are also
essential for career and succession planning. Performance appraisals are important for staff
motivation, attitude and behavior development, communicating organizational aims, and
fostering positive relationships between management and staff. Performance appraisals
provide a formal, recorded, regular review of an individual's performance, and a plan for
future development. In short, performance and job appraisals are vital for managing the
performance of people and organizations.

Back ground of Performance Appraisal

Appraisals - in whatever form, and there are various - have been a mainstay of management
for decades, for good reasons.

Performance appraisals can achieve and contribute to the Management when they are
properly managed:

 Performance measurement - transparent, short, medium and long term.

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  Clarifying, defining, redefining priorities and objectives.
 Motivation through agreeing helpful aims and targets.
 Motivation though achievement and feedback.
 Training needs and learning desires - assessment and agreement.
 Identification of personal strengths and direction - including unused hidden
strengths.
 Career and succession planning - personal and organizational.
 Team roles clarification and team building.
 Organizational training needs assessment and analysis.
 Appraisee and manager mutual awareness, understanding and relationship.
 Resolving confusions and misunderstandings.
 Delegation, additional responsibilities, employee growth and development.
 Counseling and feedback.
 The list goes on...

There are various ways of conducting performance appraisals, and ideas change over time
as to what are the most effective appraisals methods and systems. Some people advocate
traditional appraisals and forms; others prefer 360-degree-type appraisals; others suggest
using little more than a combination of both

In fact performance appraisals of all types are effective if they are conducted properly, and
better still if the appraisal process is clearly explained to, agreed by, the people involved.

Well-prepared and well-conducted performance appraisals provide unique opportunities

to help appraisees and managers improve and develop, and thereby also the organizations
for whom they work.

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 Need for Performance Appraisal:

1. To rank the performance based on which, the decisions regarding salary fixation,
confirmation, promotion, demotion are taken.

2. To provide feedback information about the level of achievement.

3. To review the performance and to rectify the performance deficiencies and by this
to set new standards of work if necessary.

4. To provide the information which helps to counsel the employee.

5. To diagnose the deficiency in employee regarding skill, knowledge etc.

6. To determine the training and development needs and to prescribe for employee
growth.

7. To prevent grievances and indisciplinary activities.

8. Helps, in evaluating the training programm

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 Purpose of Performance Appraisal:

1. To create and to maintain a level of satisfactory level of performance.

2. To know the performance potential.

3. To have good internal communication.

4. To contribute to the employee development and growth.

5. To help senior to have a proper understanding about subordinates.

6. To guide to job changes with the help of continuous ranking.

7. To facilitate fair and equitable compensation based on performance.

8. To provide information for making decisions.

9. To ensure organizational effectiveness through correcting employee for standard

and improved performance and suggesting the change in employee behavior.

10. To control the unnecessary expense.

What is to be appraised?

Content to be appraised may be in the form of contribution to the organizational

objectives like production, cost saving, return on capital etc.
The contents appraised are,

 Regularity of attendance.
 Self-expression: written or oral.

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  Ability to work with others.
 Leadership style and abilities.
 Initiative.
 Technical skill.
 Technical ability / knowledge.
 Ability to grasp new things.
 Ability to reason.
 Originality and resourcefulness.
 Creative skills.
 Area of interest.
 Area of suitability.
 Judgment skill.
 Integrity.
 Capability of taking responsibility.
 Level of acceptance by subordinates.
 Honesty and sincerity.
 Thoroughness in job and organizational knowledge.
 Knowledge of systems and procedures.
 Quality of the suggestions offered for improvement etc.

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 Effective performance appraisals:

Apart from formal traditional performance appraisals, there are many different methods of
performance evaluation. The use of any of these methods depend on the purpose of the
evaluation, the individual, the assessor, and the environment.

The performance appraisal is generally the over-riding instrument which gathers together
and reviews all other performance data.

Appraisal Methods: (The methods of appaisal for appraising for Coherent employees are in
bold letters)

1. Graphic Rating Scales.

2. Ranking Method.
3. Paired Comparision Method.
4. Forced Distribution Method.
5. Checklist Method
 Simple Checklist.
 Weighted Checklist.
 Forced Choice.
6. Critical Incident Method.
7. Essay or free from Appraisal.
8. Group Appraisal.
9. Behaviorally Anchored Rating Scales.
10. Assessment Centre.
11. Human Resource Accounting.
12. Management By Objectives (also known as Appraisal by Objectives).

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WHO WILL APPRAISE?

 360degree appraisal - Performance appraisal done by Supervisors, Peers,

Subordinates, Employees themselves, users of service and Consultants.
 Supervisors - Supervisors include superiors of the employee, other superiors having
knowledge about the work of the employee and the Department Head or the
Manager
 Peers - Peer appraisal may be reliable if the work group is stable over a reasonably
long period of time and performs tasks that acquire interaction.
 Subordinates - The concept of having superiors rated by subordinates is being used
in most of the organizations today, especially in developed countries. Such a novel
method can be useful in other organizational settings too provided the relationships
between the supervisors and the subordinates are cordial. Subordinates ratings in
such cases can be quite useful in identifying competent superiors.
 Self-appraisal - If the individuals understand the objectives they are expected to
achieve and the standards by which they are to be evaluated, they are to a great
extent in the best position to appraise their own performance.

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