Project

On
Performance appraisal in Infowiz Company

Submitted towards the partial fulfillment of the requirement for the degree of
MASTERS OF BUSINESS ADMINISTRATION
MBA Batch 2013-2015
Submitted to

Submitted by
Jagandeep Singh

SCHOOL OF MANAGEMENT STUDIES

PUNJABI TECHENICAL UNIVERSITYJALANDHAR

ACKNOWLEDGEMENT
Endeavours have borne fruit and as I prepare to get ahead I stop for a moment in the track to
acknowledge my sincere gratitude for the assistance, efforts and patronage I have received in
course of completing the project report.
I would gracefully acknowledge the inspiration, encouragement and valuable suggestions that I
had got from my project guide MS. SUNANDHA SHARMA for completing our research.
My overriding debt is to my parents who provided me with the time and financial assistance and
inspiration needed to prepare this project report in congenial manner. Last but not the least I
would like to thank the almighty that gave me the courage and endurance to complete the
endeavour.

JAGANDEEP SINGH

DECLARATION
I am Jagandeep Singh hereby declare that this project titled Performance appraisal is based
on study conducted by me under the guidance of Miss Shrdha shree this project has not been
submitted earlier for the award of any other degree/diploma to any other institute or university.

Jagandeep Singh

Preface
Managing human resource in todays environment is becoming more and more complex as well
as important. Recognition of people as a valuable resource in the organisation has led to
increased trend in employee maintenance, job security, etc.
My research project deals with Performance appraisal as carried out at Infowiz. In this
report, I have studied and evaluated the performance appraisal process as it is carried out in the
company.
The first section of my report deals with the introduction of my topic and the detailed company
profile. It includes the companys activities and operations, organisational structure, etc. This

section attempts to give detailed information about the company and the nature of its
functioning.
The second section deals with the performance appraisal. In this section, I have given brief
conceptual explanation to performance appraisal. It contains the definition, process and
significance of performance appraisal.
In the third section of my report, I have conducted a research study to evaluate the process of
performance appraisal at Infowiz. This section also contains my findings, conclusions,
suggestions and feedback.
The fourth and final section of this report consists of extra information that I related to the main
contents of the report. These annexure include some graphs and diagrams relating to the
company, graphs relating to the research study and important documents on which the project is
based.

Contents

S.No.

TITLE NAME

PAGE No.

Introduction
Company profile
Scope of the study
Review of literature
Objective of study
Research methodology
Findings
Suggestions
Conclusion
Annexure
Bibliography

Introduction
5

Introduction to HR
Human resource management has been traditionally viewed as an inherent part of management
which is concerned with the human resource of an organisation.
Human Resource Management is an art of managing people at work in such a manner
that they give their best to the organization. In simple words, human resource
management refers to the quantitative aspects of employees working in an organization.
Human Resource Management is also a management function concerned with hiring, motivating
and maintaining people in an organization. It focuses on people in organization.
Organizations are not mere bricks, mortar, machineries or inventories. They are people who
manages organizations.HRM involves the application of management functions and principles.
The functions and principles are applied to acquisitioning, developing, maintain, and
remunerating employees in organizations.
Decisions relating to employees must be integrated. Decision on different aspect of employees
must be consistent with other human resource decisions. Decision made must influence the
effectiveness of organization. Effectiveness of an organization must result in betterment of
services to customers in the form of high-quality product supplied at reasonable costs.
HRM function is not confined to business establishment only. They are applicable to nonbusiness organizations, too such as education, health care, recreation etc. The scope of HRM is
indeed vast. All major activities in the working life of his or her entry into an organization until
he or she leaves-come under the previews of HRM specifically, the activities included are HR
planning, job analysis, recruitment and selection, orientation and placement, training and
development, performance appraisal and job evaluation, employee and executive remuneration,
motivation and communication, welfare, safety and health, industrial relations and the like. HRM
is a broad concept. Personnel management and human resource development is a part of HRM.
Human resource management plays an important role in the development process of
modern economy. In fact it is said that all the development comes from the human mind.

 Human Resource Management is a process of producing development, maintaining and

controlling human resources for effective achievement of organization goals.
According to Edwin B. Flippo,Human Resource Management is the planning, organising,
directing and controlling of the procurement, development, compensation, integration,
maintenance and separation of human resources to the end that individual and societal objectives
are accomplished.

Functions of human resource management:

Following are the various functions of Human Resource Management that are essential for the
effective functioning of the organisation:
Recruitment
Selection
Induction
Performance appraisal
Training and Development

Recruitment
The process of recruitment begins after manpower requirements are determined in terms of
quality through job analysis and quantity through forecasting and planning.

Selection
The selection is the process of ascertaining whether or not candidates possess the requisite
qualifications, training and experience required.

Induction
Induction is the technique by which a new employee is rehabilitated into the changed
Surroundings and introduced to the practices, policies and purposes of the organization.

Introduction to Performance Appraisal

Once the employee has been selected, trained and motivated, he is then appraised for his
performance. Performance Appraisal is the step where the Management finds out how effective it
7

has been at hiring and placing employees. If any problems are identified, steps are taken to
communicate with the employee and remedy them.
Performance appraisal, also referred to as a performance review, performance evaluation or
employee appraisal is a method by which the job performance of an employee is documented
and evaluated. Performance appraisals are employed to determine who needs what training, and
who will be promoted, demoted, retained or fired
Performance Appraisal is a process of evaluating an employees performance in terms of its
requirements.
Performance Appraisal can also be defined as the process of evaluating the performance and
qualifications of the employees in terms of the requirements of the job for which he is employed,
for purposes of administration including placement, selection for promotions, providing financial
rewards and other actions which require differential treatment among the members of a group as
distinguished from actions affecting all members equally.
According to Flippo, Performance appraisal is the systematic, periodic and impartial rating of
an employees excellence in matters pertaining to his present job and his potential for better job.

Characteristics of performance appraisal

Performance appraisal is a process.
It is the systematic examination of the strength and weakness of an employee in terms of his job.
It is scientific and objective study. Formal procedures are used in the study.
It is an ongoing and continuous process wherein the evaluations are arranged periodically according to a
definite plan.
The main purpose of performance appraisal is to secure information necessary for making objective and
correct decision for an employee.

Importance and Purpose

Performance Appraisal has been considered as the most significant an indispensable tool for an
organization, for an organization, for the information it provides is highly useful in making
8

decisions regarding various personnel aspects such as promotion and merit increases.
Performance measures also link information gathering and decision making processes which
provide a basis for judging the effectiveness of personnel sub-divisions such as recruiting,
selection, training and compensation. Accurate information plays a vital role in the organization
as a whole. They help in finding out the weaknesses in the primary areas.
Formal Performance Appraisal plans are designed to meet three needs, one of the organization
and the other two of the individual namely:
They provide systematic judgments to back up salary increases, transfers, demotions or terminations.
They are the means of telling a subordinate how he is doing and suggesting needed changes in his
behavior, attitudes, skills or job knowledge. They let him

know where he stands with the Boss.

Superior uses them as a base for coaching and counseling the individual.

On the basis of merit rating or appraisal procedures, the main objectives of Employee Appraisal
are: To enable an organization to maintain an inventory of the number and quality of all managers and to
identify and meet their training needs and aspirations.
To determine increment rewards and to provide reliable index for promotions and transfers to

positions of greater responsibility.

To suggest ways of improving the employee s performance when he is not found to
be up to the mark during the review period.
To identify training and development needs and to evaluate effectiveness of training
and development programmes.
To plan career development, human resource planning based potentials.

COMPANYS PROFILE
INFOWIZ
9

INFOWIZ is leading strategic IT Company offering integrated IT solution. INFOWIZ is having

rich experience managing global clients across various business verticals and align IT strategies
to achieve business goals. The various accreditations that we achieved for every service, we offer
reflect our commitment towards the quality assurance.
INFOWIZ is a 7 years young organization with an ISO Certification & a member of
Confederation of Indian Industry (CII membership number N4654P). We also provide the off
shore companies of US, UK, France, Ireland, Canada and Australia with quality and timely Web
and SEO services.
INFOWIZ is an organization which is established in the field of Web Development (PHP &
.NET), JAVA (Core as well as Advance), I-phone & Android Applications, Embedded systems
(AVR, PIC & ARM), ROBOTICS and Networking (MCSE, CCNA & RHSE), Mechanical
Engineering (CRDI, CATIA, VVT, VCR, ABS, CRUISE CONTROL, PRO-E, SOLID
WORKS).Civil Engineering (AUTO CAD, STAAD-PRO, REVIT), Finance, HR-Marketing.
Our skilled team of professionals make sure that the product is developed as per the customers
needs and keeping the customer informed about the development of their project from time to
time. We do not only emphasize on formulating an attractive solution to our clients but also
believe in providing a workable solution. INFOWIZ offers research based Search Engine
Marketing products that help achieve greater insights to customers online business. Our
Research & Development arm offers SEO tools for SEM professionals.
INFOWIZ also provides Technical Support & Consultancy to Software Companies like JIA
Group, New Zealand, Sagi tech solutions Panchkula, Jarc info tech Mohali, Info net Solution
Delhi, web it solutions, Speed info rays etc.

Our team
A Ship is as good as the crew who sail her.
10

Our Technical team of professionals handing, designing & delivering of projects has a strong
presence in the North India & the US. Our engineers are already working on the latest
technologies like I-Phone & Android Applications, Robotics, VLSI-VHDL, Embedded
System, Networking and Cloud computing.
1)

Dr. Seema (Managing Director)

She is the backbone of INFOWIZ and a woman with more than 9 year rich practical experience
who believes in taking up new ventures and projects.
2)

Mr. Rajeev Nayya (General Manager)

A man who strongly feel that Nothing is Impossible. A very committed team leader who has
been professionally attached with Multinational companies for more than 18 years and has lead
the marketing teams in all states of North India.
3) Mr. Deepak Kashyap (Technical Manager & Branch Manager)
A man who strongly feels Team work leads to success. He strives to achieve his goals with full
dedication and devotion towards the organization. He has more than 7 years experience in IT
sector.
4) Ms. Urvashi (Dean Academics)
A woman who believes Challenges are what make life interesting and overcoming them is what
makes life meaningful. She has more than 10 years experience in business development.
5)

Er. Vishal Goyal (Head & Technical Advisor at US Branch)

More than 10 years industrial experience in US and smooth handling of the entire US business.

Courses Offered
For CSE/IT/MCA Professionals:-

11

Web Development in PHP with LIVE Projects

Web Development in .NET with LIVE Projects
JAVA (Core as well as Advance) with LIVE Projects
Android Applications with LIVE Projects
Web Designing (Photoshop, Coral Draw)
C#, Console Applications, VB.NET, ASP.NET
MySQL, SQL, ORACLE
Networking (MCSE, CCNA, RHSE)
SEO (Search Engine Optimization)
For ECE/EE/EIE Professionals:Robotics with Live Project
VLSI-VHDL with Live Project
Embedded System Design with Live Project
Microcontroller with Live Project
Microprocessor with Live Project
PCB Designing
AVR & PIC Family
PCB and layout designing
AUTOMATION with Live Project
12

Project development with ARM processors

For ME/ECE Professionals:CRDi Technology
ABS, CRUISE CONTROL.
MPFi & EFi Technology
CATIA
PRO-E
AUTOCAD/CAM
SOLIDWORKS
Our core strength is our timely, technically and cost effective project delivery. We also provide
customers with designs as per their demands. INFOWIZ also provide Industrial Training of 6
Months & 6 Weeks in ME / IT & Electronics to B.Tech, MCA students. We help students in
building their career.

Scope of study
The research was carried out to define how the IT industry should evaluate the performance of its
employees and which factors are affecting its employees performance. A proper procedure is to
be followed to evaluate the performance and this evaluation is further considered to take
promotion and demotion decisions. For conducting the study help of certain tools were taken
such as interviews, filling up of questionnaire, group discussion and also by observing the
employees of Infowiz. The information so collected is used by the company for taking
organisational decisions.

Literature review
13

The following literature review was compiled from magazine articles, journals, published books,
and written standards found at the Learning Resource Center of the National Emergency Training
Center, Emmetsburg, MD and the library of the South Trail Fire Department. The purpose of this
literature review is to establish a foundation based in theory for this study. The findings of the
literature review examined different aspects of performance appraisals. Some of the goals and
objectives were looked at as well as the advantages and disadvantages of performance appraisal
systems.

Goals and objectives of performance appraisal

Performance appraisals have played a part in the fire service. Many departments
nationwide have used performance appraisals, although the type of appraisal used has varied.
Most of the literature suggests that performance appraisals are important in some form to fire
service organizations. Performance appraisals are management tools that may be used to direct
and control employee behavior, distribute organizational rewards, improve employee work
performance, or develop employee capabilities (Tompkins, 1995, p.250). It is clear from 12

14

Reviewing the literature that when a proper system is in place, a performance appraisal can assist
an organization in controlling employees. In his article Performance Appraisal-Lets Quit
Appraising and Begin Reviewing, Baches (1988) states, the sole intent of every performance
appraisal system should be to improve performance, to provide feedback on quality of
performance and then review progress on the desired improvement of performance (p.204).
Other authors have stated that in general, conducting formal evaluations is one way of laying
down a line of communications between employees and supervisors. If conducted properly the
organization benefits from this performance appraisal exchange.
The literature suggests that performance appraisals should have clear goals set forth for
its use. In his book, Essentials of Organizational Behavior, Stephen P.Robbins (1994) states,
Performance appraisals serve a number of purposes in organizations. First, management uses
appraisals for general personnel decisions such as promotions, rewards, transfers, and
terminations. Second, appraisals identify training and development needs, not only for individual
employees, but also the organization as a whole. Third, performance appraisals can be used to
validate selection and development programs. Fourth, appraisals provide feedback to the
employees on how the organization views their performance. Most organizations must use the
best standards that apply to them. The organizational needs must be clearly stated so that the
appraisal program can be designed to meet the needs. The two primary objectives of a well
functioning performance appraisal system should be: To formally measure the performance of
the individual employee and to provide information on how well the system is designed and
working. The formal measures of performance are used as feedback to the employee and used by
others in management for making personnel decisions such as promotions and work assignments.
The information provided by the performance reviews of many subordinates should be used 13

15

collectively to modify the inputs of the performance appraisal system in an attempt to improve
its efficiency (Baker, 1988, p.26).
Goals and objectives are methods by which job expectations can be measured. Managers
must be able to clearly explain the differences between goals and standards to their employees so
that both parties know how they will be used during the appraisal process (Maddux, 1987,
p.169). A goal is a statement of expected results in the performance appraisal process.
Goals can describe: (1) conditions that will exist at the end of a period, (2) the time
frame required for the desired results and (3) the resources required achieving the results. Goals
should be established with employee participation and designed to reflect their abilities and
training(Maddux, 1987, p.170). This setting of goals and objectives is important because
employees may not understand that their current behavior is not producing desired results. In
establishing goals with employees it is important to remember that the goals must be obtainable
by the employee. The performance appraisal can be the most powerful tool a manager has to
enhance a subordinates productivity. Conversely, the performance appraisal system can stir
strong feeling and conflict in the work place (Baker, 1988, p.59).

Advantages and Disadvantages of Performance Appraisals

In reviewing the literature there was considerable articles that encouraged the use of
performance appraisals. Most authors felt that the leadership of the fire service needs to embrace
the concept of employee evaluations. The difference of opinion was to the exact method of how
to accomplish the appraisal.
In his article Succession Planning, Coleman (1988) states, The performance evaluation
system utilized by a firefighting agency should include an assessment of a candidates potential
for promotion (p.24). This feeling was common among the articles reviewed. Another 14

16

Sentiment expressed was the commitment to the department and its employees. Good leaders
have strong interest in personal and professional development of their people. They encourage
their personnel to push beyond their limitations and give their personal best (Reynolds, 1999,
p.10). You must consciously study your coworkers and get a feel for where they are coming
from. Are they shy and retiring or are they brash and bold? Each will require a slightly different
supervisory style(Carter, 1988, p.19). This theme of obligation to the organization was one that
was consistent in the literature review.
Most authors felt that the benefits of even a week performance appraisal system would
outweigh the disadvantages. The most effective managerial tool that can be employed by the
fire officer to increase discipline is not punitive action, but counseling and training (Coleman,
1989, p.20). In his article the bottom-up performance appraisal, Hymes (1996) states Four skill
areas are required for effective organizational performance: motivation, time management,
decision-making and communications. The first three cannot be accomplished without good
communication skills (p.109). This theme of coaching was common and strongly recommended
by most authors. The setting up of an appraisal system that allows for employee feedback and
interaction was desirable. A healthy organization would assist gifted personnel to find their way
to a function that enables them to contribute to an organization (Thorp, 1999, p.7).
Some of the problems with performance appraisals that were pointed out involved lack of
standards and clear direction. Without knowledge of the standards and a proper assessment
program, employees are likely to perceive unfairness, subjectivity and bias in the evaluation
(Carter, 1988, p.19). One way to avoid rater bias is to use a rating system based on a specific
observable behavior and scored using symbols rather than numbers (Booth, 1983, p.38). In
addition, to these areas of concern in his book Appraising managers as managers, Koontz (1971)

17

Writes, It has been widely held by scholars of management and practicing managers that
appraisal should be separated from considerations of compensation(p.174). The feeling here is
that bias would affect the pay of employees and if a particular supervisor holds a grudge against
an individual, the employee could be harmed. In addition, some supervisors may gloss over the
process because they feel that it would be too difficult to decide to take away or deny an
employee additional pay. One thing for sure is that most authors felt that clear guidelines should
be followed when institutionalizing a performance appraisal system. The previous appraisal
system used ambiguous words such as good, poor, and inadequate, without performance
definitions to clarify the distinctions between the levels. Each of us would define these terms
differently (Paulsgrove, 1990, p.58). The previous quote summarized the feelings of authors in
many of the articles. Many fire departments have abandoned the appraisal system because they
found that the appraisals were too subjective.
In summary, the majority of articles felt that most of these problems could be overcome
by using a consensus process between management and the unions prior to implementing a
performance appraisal system. We strongly encourage the use of goal-oriented performance
appraisal systems. These systems have the manager and subordinate agree on objectives at the
beginning of the appraisal period, and then evaluate progress towards meeting these objectives
throughout the period (Joseph & Susan Berk, 1991, p.75). The fact that most programs fail is
usually due to two problems: 1. The lack of training in rating employees and 2. Inappropriate
criteria and methods for evaluating have been implemented. Supervisors should be trained in
performance management, then prepare their employees for the process .
The research provided a clear understanding of the problems associated with starting an appraisal
system that would be beneficial to both the employees and the organization. The literature
reviewed pointed out the good and the bad aspects of performance appraisals. Most authors felt
that with leadership and perseverance these issues could be worked out. The important issue is
that for an organization to flourish and help its employees grow. Sound performance appraisal
systems are another tool for the toolbox. Goals and objectives were keys in developing a good
performance appraisal program. Employees need well-defined standards that can be met and
understood. The literature showed that many programs fail when there is no clear set of standards
in place. In addition, a strong training program should be used to help support the performance
appraisal process and its understanding.
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Objectives of study
Primary objectives
An in depth study about the performance appraisal of the employees of Infowiz.

Secondary objectives
To identify various techniques to be used for performance appraisal.
To find the accurate procedure for undergoing performance appraisal.
To study the various factors that can affect the performance of the employees of
Infowiz.
To take feedback of the employees.
To enhance the welfare of employees.
To conduct a study on social behavior.

Process
The process of performance appraisal:
1.

Establishing performance standards

2.

Communicating the Standards

3. Measuring Performance
4. Comparing the actual with the standards
5. Discussing the appraisal
6. Taking Corrective Action

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Limitations
1.

Errors in Rating

2.

Lack of reliability

3.

Negative approach

4.

Multiple objectives

5. Lack of knowledge

Performance Appraisal Methods

Traditional and Modern Methods
Each method of performance appraisal has its strengths and weaknesses may be suitable for one
organisation and non-suitable for another one. As such, there is no single appraisal method
accepted and used by all organizations to measure their employees performance.
All the methods of appraisal devised so far have been classified differently by different authors.
While DeCenzo and Robbins^ have classified appraisal methods into three categories: absolute
methods, relative methods and objective methods; Aswathappa has classified these into two
categories past-oriented and future-oriented.
Michael R Carrel et. Al. have classified all appraisal methods into as many as six categories:
rating scales, comparative methods, critical incidents, 6ssay, MBO and combination methods.
Rock and Levis have classified the methods into two broad categories: narrow interpretation
and broad interpretation. Beatty and Schneider have categorised various methods of appraisal
into four groups: comparative methods, absolute methods, goal setting, and direct indices.
A more widely used classification of appraisal methods into two categories, viz., traditional
methods and modem methods, is given by Strauss and Sayles. While traditional methods lay
emphasis on the rating of the individuals personality traits, such as initiative, dependability,
20

drive creativity, integrity, intelligence, leadership potential, etc.; the modem methods, on the
other hand, place more emphasis on the evaluation of work results, i.e., job achievements than
the personal traits! Modem methods tend to be more objective and worthwhile. The various
methods included in each of the two categories are listed in Table 28.4.

In the discussion that follows, each method under both categories will be described briefly.

Traditional Methods
Ranking Method:
It is the oldest and simplest formal systematic method of performance appraisal in which
employee is compared with all others for the purpose of placing order of worth. The employees
are ranked from the highest to the lowest or from the best to the worst.
In doing this the employee who is the highest on the characteristic being measured and also the
one who is L lowest, are indicated. Then, the next highest and the next lowest between next
highest and lowest until all the employees to be rated have been ranked. Thus, if there are ten
employees to be appraised, there will be ten ranks from 1 to 10.

21

However, the greatest limitations of this appraisal method are that

(i) It does not tell that how much better or worse one is than another,
(ii) The task of ranking individuals is difficult when a large number of employees are rated, and
(iii) It is very difficult to compare one individual with others having varying behavioural traits.
To remedy these defects, the paired comparison method of performance appraisal has been
evolved.

Paired Comparison:
In this method, each employee is compared with other employees on one- on one basis, usually
based on one trait only. The rater is provided with a bunch of slips each coining pair of names,
the rater puts a tick mark against the employee whom he insiders the better of the two. The
number of times this employee is compared as better with others determines his or her final
ranking.

The number of possible pairs for a given number of employees is ascertained

by the following formula:
N (N-1)/2
Where N = the total number of employees to be evaluated. Let this be exemplified with an
imaginary example.
If the following five teachers have to be evaluated by the Vice Chanceller of a University:
(K), Mohapatra (M Raul (R), Venkat (V), and Barman (B), the above formula gives 5 (5 -1) / 2 or
10 pairs.

22

These are:

Thus, the pairs so ascertained give the maximum possible permutations and combinations. The
number of times a worker is considered better makes his/her score. Such scores are determined
for each worker and he/she is ranked according to his/her score. One obvious disadvantage of
this method is that the method can become unwieldy when large numbers of employees are being
compared.

Grading Method
In this method, certain categories of worth are established in advance and carefully defined.
There can be three categories established for employees: outstanding, satisfactory and
unsatisfactory. There can be more than three grades. Employee performance is compared with
grade definitions. The employee is, then, allocated to the grade that best describes his or her
performance.
Such type of grading is done is Semester pattern of examinations and in the selection of a
candidate in the public service sector. One of the major drawbacks of this method is that the rater
may rate most of the employees on the higher side of their performance.

Forced Distribution Method

This method was evolved by Tiffin to eliminate the central tendency of rating most of the
employees at a higher end of the scale. The method assumes that employees performance level
confirms to a normal statistical distribution i.e., 10,20,40,20 and 10 per cent. This is useful for
rating a large number of employees job performance and promo ability. It tends to eliminate or
reduce bias.

23

It is also highly simple to understand and easy to apply in appraising the performance of
employees in organisations. It suffer from the drawback that improve similarly, no single grade
would rise in a ratings.

Forced-Choice Method
The forced-choice method is developed by J. P. Guilford. It contains a series of groups of
statements, and rater rates how effectively a statement describes each individual being evaluated.
Common method of forced-choice method contains two statements, both positive and negative.
Examples of positive statements are:
1. Gives good and clear instructions to the subordinates.
2. Can be depended upon to complete any job assigned.
A pair of negative statements may be as follows:
1. Makes promises beyond his limit to keep these.
2. Inclines to favour some employees.
Each statement carries a score or weight, which is not made known to the rater. The human
resource section does rating for all sets of statements both positive and negative. The final
rating is done on the basis of all sets of statements. Thus, employee rating in this manner makes
the method more objective. The only problem associated with this method is that the actual
constructing of several evaluative statements also called forced-choice scales, takes a lot of
time and effort.

Check-List Method
The basic purpose of utilizing check-list method is to ease the evaluation burden upon the rater.
In this method, a series of statements, i.e., questions with their answers in yes or no are
prepared by the HR department (see Figure 28-2). The check-list is, then, presented to the rater to

24

tick appropriate answers relevant to the appraise. Each question carries a weight-age in
relationship to their importance.

When the check-list is completed, it is sent to the HR department to prepare the final scores for
all appraises based on all questions. While preparing questions an attempt is made to determine
the degree of consistency of the rater by asking the same question twice but in a different manner
(see, numbers 3 and 6 in Figure 28-2).
However, one of the disadvantages of the check-list method is that it is difficult to assemble,
analyse and weigh a number of statements about employee characteristics and contributions
From a cost stand point also, this method may be inefficient particularly if there are a number of
job categories in the organisation, because a check-list of questions must be prepared for each
category of job. It will involve a lot of money, time and efforts.

Critical Incidents Method

In this method, the rater focuses his or her attention on those key or critical behaviours that make
the difference between performing a job in a noteworthy manner (effectively or ineffectively).
There are three steps involved in appraising employees using this method.
First, a list of noteworthy (good or bad) on-the-job behaviour of specific incidents is prepared.
Second, a group of experts then assigns weightage or score to these incidents, depending upon
their degree of desirability to perform a job. Third, finally a check-list indicating incidents that
describe workers as good or bad is constructed. Then, the check-list is given to the rater for
evaluating the workers.
25

The basic idea behind this rating is to apprise the workers who can perform their jobs effectively
in critical situations. This is so because most people work alike in normal situation. The strength
of critical incident method is that it focuses on behaviours and, thus, judges performance rather
than personalities.
Its drawbacks are to regularly write down the critical incidents which become time-consuming
and burdensome for evaluators, i.e., managers. Generally, negative incidents are positive ones. It
is raters inference that determines which incidents are critical to job performance. Hence, the
method is subject to all the limitations relating to subjective judgments.

Graphic Rating Scale Method

The graphic rating scale is one of the most popular and simplest techniques for appraising
performance. It is also known as linear rating scale. In this method, the printed appraisal form is
used to appraise each employee.
The form lists traits (such as quality and reliability) and a range of job performance
characteristics (from unsatisfactory to outstanding) for each trait. The rating is done on the basis
of points on the continuum. The common practice is to follow five points scale.
The rater rates each appraise by checking the score that best describes his or her performance for
each trait all assigned values for the traits are then totaled. Figure 28-3 shows a typical graphic
rating scale.

26

This method is good for measuring various job behaviours of an employee. However, it is also
subjected to raters bias while rating employees behaviour at job. Occurrence of ambiguity in
design- mg the graphic scale results in bias in appraising employees performance.
27

Essay Method
Essay method is the simplest one among various appraisal methods available. In this method, the
rater writes a narrative description on an employees strengths, weaknesses, past performance,
potential and suggestions for improvement. Its positive point is that it is simple in use. It does not
require complex formats and extensive/specific training to complete it.
However, essay method, like other methods, is not free from drawbacks. In the absence of any
prescribed structure, the essays are likely to vary widely in terms of length and content. And, of
course, the quality of appraisal depends more upon raters writing skill than the appraisers actual
level of performance.
Moreover, because the essays are descriptive, the method provides only qualitative information
about the employee. In the absence of quantitative data, the evaluation suffers from subjectivity
problem. Nonetheless, the essay method is a good start and is beneficial also if used in
conjunction with other appraisal methods.

Field Review Method

When there is a reason to suspect raters biasedness or his or her rating appears to be quite higher
than others, these are neutralised with the help of a review process. The review process is usually
conducted by the personnel officer in the HR department.
The review process involves the following activities
(a) Identify areas of inter-rater disagreement.
(b) Help the group arrive at a consensus.
(c) Ensure that each rater conceives of the standard similarity.
However, the process is a time-consuming one. The supervisors generally resent what they
consider the staff interference. Hence, the method is not widely used.

Confidential Report
28

It is the traditional way of appraising employees mainly in the Government Departments.

Evaluation is made by the immediate boss or supervisor for giving effect to promotion and
transfer. Usually a structured format is devised to collect information on employees strength
weakness, intelligence, attitude, character, attendance, discipline, etc. report.

Modern Methods
Management by Objectives (MBO)
Most of the traditional methods of performance appraisal are subject to the antagonistic
judgments of the raters. It was to overcome this problem; Peter F. Drucker propounded a new
concept, namely, management by objectives (MBO) way back in 1954 in his book.
The Practice of management. The concept of MBO as was conceived by Drucker, can be
described as a process whereby the superior and subordinate managers of an organization
jointly identify its common goals, define each individuals major areas of responsibility in terms
of results expected of him and use these measures as guides for operating the unit and assessing
the contribution of each its members.
In other words, stripped to its essentials, MBO requires the manager to goals with each employee
and then periodically discuss his or her progress toward these goals.
In fact, MBO is not only a method of performance evaluation. It is viewed by the Practicing
managers and pedagogues as a philosophy of managerial practice because .t .s a method by
wh.ch managers and subordinates plan, organise, communicate, control and debate.
An MBO programme consists of four main steps: goal setting, performance standard, comparison, and periodic review. In goal-setting, goals are set which each individual, s to attain. The
superior and subordinate jointly establish these goals. The goals refer to the desired outcome to
be achieved by each individual employee.
In performance standards, the standards are set for the employees as per the previously arranged
time period. When the employees start performing their jobs, they come to know what is to be
done, what has been done, and what remains to be done.
29

In the third step the actual level of goals attained are compared with the goals agreed upon. This
enables the evaluator to find out the reasons variation between the actual and standard
performance of the employees. Such a comparison helps devise training needs for increasing
employees performance it can also explore the conditions having their bearings on employees
performance but over which the employees have no control.
Finally, in the periodic review step, corrective measure is initiated when actual performance
deviates from the slandered established in the first step-goal-setting stage. Consistent with the
MBO philosophy periodic progress reviews are conducted in a constructive rather than punitive
manner.
The purpose of conducting reviews is not to degrade the performer but to aid in his/her future
performance. From a motivational point of view, this would be representative of McGregors
theories.

Limitation of MBO
MBO is not a panacea, cure for all organisational problems.
As with other methods, it also suffers from some limitations as catalogued below:

(i) Setting Un-measurable Objectives

One of the problems MBO suffers from is unclear and un-measurable objectives set for
attainment. An objective such as will do a better job of training is useless as it is unmeasurable. Instead, well have four subordinates promoted during the year is a clear and
measurable objective.

(ii) Time-consuming
The activities involved in an MBO programme such as setting goals, measuring progress, and
providing feedback can take a great deal of time.

30

(iii) Tug of War

Setting objectives with the subordinates sometimes turns into a tug of war in the sense that the
manager pushes for higher quotas and the subordinates push for lower ones. As such, goals so set
are likely to be unrealistic.

(iv)Lack of Trust
MBO is likely to be ineffective in an environment where management has little trust in its
employees. Or say, management makes decisions autocratically and relies heavily on external
controls.

Behaviourally Anchored Rating Scales (BARS)

The problem of judgmental performance evaluation inherent in the traditional methods of
performance evaluation led to some organisations to go for objective evaluation by developing a
technique known as Behaviourally Anchored Rating Scales (BARS) around 1960s. BARS are
descriptions of various degrees of behaviour with regard to a specific performance dimension.
It combines the benefits of narratives, critical incidents, and quantified ratings by anchoring a
quantified scale with specific behavioural examples of good or poor performance. The
proponents of BARS claim that it offers better and more equitable appraisals than do the other
techniques of performance appraisal we discussed so far.

Developing BARS typically involves five steps:

1. Generating Critical Incidents
Critical incidents (or say, behaviours) are those which are essential for the performance of the job
effectively Persons who are knowledgeable of the job in question (jobholders and/or supervisors)
are asked to describe specific critical incidents of effective and ineffective performance. These
critical incidents may be described in a few short sentences or phrases using the terminology.

2. Developing Performance Dimensions

31

The critical incidents are then clustered into a smaller set of performance dimensions, usually
five to ten. Each cluster, or say, dimension is then defined.

3. Reallocating Incidents
Various critical incidents are reallocated dimensions by another group of people who also know
the job in question. Various critical incidents so reallocated to original dimensions are clustered
into various categories, with each cluster showing similar critical incidents. Those critical
incidents are retained which meet 50 to 80% of agreement with the cluster as classified in step 2.

4. Scaling Incidents
The same second group as in step 3 rates the behaviour described in each incident in terms of
effectiveness or ineffectiveness on the appropriate dimension by using seven to nine points scale.
Then, average effectiveness ratings for each incident are determined to decide which incidents
will be included in the final anchored scales.

5. Developing Final BARS Instrument

A subset of the incidents (usually six or seven per cluster) is used as a behavioural anchor for the
final performance dimensions. Finally, a BARS instrument with vertical scales is drawn to be
used for performance appraisal.
BARS method of performance appraisal is considered better than the traditional ones because it
provides advantages like a more accurate gauge, clearer standards, better feedback, and
consistency in evaluation. However, BARS is not free from limitations.
The research on BARS indicates that it too suffers from distortions inherent in most rating scales.
The research study concluded that it is clear that research on BARS to date does not support the
high promise regarding scale independence In short, while BARS may outperform conventional
rating techniques, it is clear that they are not a panacea for obtaining high interrater reliability

Assessment Centres
32

The introduction of the concept of assessment centres as a method of performance method is

traced back in 1930s in the Germany used to appraise its army officers. The concept gradually
spread to the US and the UK in 1940s and to the Britain in 1960s.
The concept, then, traversed from the army to business arena during 1960s. The concept of
assessment centre is, of course, of a recent origin in India. In India, Crompton Greaves, Eicher,
Hindustan Lever and Modi Xerox have adopted this technique of performance evaluation.
In business field, assessment centres are mainly used for evaluating executive or supervisory
potential. By definition, an assessment centre is a central location where managers come together
to participate in well-designed simulated exercises. They are assessed by senior managers
supplemented by the psychologists and the HR specialists for 2-3 days.
Assessee is asked to participate in in-basket exercises, work groups, simulations, and role
playing which are essential for successful performance of actual job. Having recorded the
assessees behaviour the raters meet to discuss their pooled information and observations and,
based on it, they give their assessment about the assesses. At the end of the process, feedback in
terms of strengths and weaknesses is also provided to the assesses.
The distinct advantages the assessment centres provide include more accurate evaluation, minimum biasedness, right selection and promotion of executives, and so on. Nonetheless, the
technique of assessment centres is also plagued by certain limitations and problems. The
technique is relatively costly and time consuming, causes suffocation to the solid performers,
discourages to the poor performers (rejected), breeds unhealthy competition among the assesses,
and bears adverse effects on those not selected for assessment.

360 Degree Appraisal

Yet another method used to appraise the employees performance is 360 degree appraisal. This
method was first developed and formally used by General Electric Company of USA in 1992.
Then, it travelled to other countries including India. In India, companies like Reliance Industries,
Wipro Corporation, Infosys Technologies, Thermax, Thomas Cook etc., have been using this
method for appraising the performance of their employees. This feedback based method is
33

generally used for ascertaining training and development requirements, rather than for pay
increases.
Under 360 degree appraisal, performance information such as employees skills, abilities and
behaviours, is collected all around an employee, i.e., from his/her supervisors, subordinates,
peers and even customers and clients.
In other worlds, in 360-degree feedback appraisal system, an employee is appraised by his
supervisor, subordinates, peers, and customers with whom he interacts in the course of his job
performance. All these appraisers provide information or feedback on an employee by
completing survey questionnaires designed for this purpose.
All information so gathered is then compiled through the computerized system to prepare
individualized reports. These reports are presented to me employees being rated. They then meet
me appraiserbe it ones superior, subordinates or peersand share the information they feel as
pertinent and useful for developing a self-improvement plan.
In 360 degree feedback, performance appraisal being based on feedback all around, an employee is likely to be more correct and realistic. Nonetheless, like other traditional methods, this
method is also subject to suffer from the subjectivity on the part of the appraiser. For example,
while supervisor may penalise the employee by providing negative feedback, a peer, being
influenced by give and take feeling may give a rave review on his/her colleague.

Cost Accounting Method

This method evaluates an employees performance from the monetary benefits the employee
yields to his/her organisation. This is ascertained by establishing a relationship between the costs
involved in retaining the employee, and the benefits an organisation derives from Him/her.
While evaluating an employees performance under this method, the following factors are
also taken into consideration:
1. Unit wise average value of production or service.

34

2. Quality of product produced or service rendered.

3. Overhead cost incurred.
4. Accidents, damages, errors, spoilage, wastage caused through unusual wear and tear.
5. Human relationship with others.
6. Cost of the time supervisor spent in appraising the employee.

Benefits of Performance Appraisals

Measures an employees performance.
Helps in clarifying, defining, redefining priorities and objectives.
Motivates the employee through achievement and feedback.
Facilitates assessment and agreement of training needs.
Helps in identification of personal strengths and weaknesses.
Plays an important role in Personal career and succession planning.
Clarifies team roles and facilitates team building.
Plays major role in organizational training needs assessment and analysis.
Improves understanding and relationship between the employee and the reporting manager and
also helps in resolving confusions and misunderstandings.
Plays an important tool for communicating the organizations philosophies, values, aims,
strategies, priorities, etc among its employees.
Helps in counseling and feedback.

35

Rating Errors in Performance Appraisals

Performance appraisals are subject to a wide variety of inaccuracies and biases referred to as
'rating errors'. These errors can seriously affect assessment results. Some of the most common
rating errors are: -

Leniency or severity: - Leniency or severity on the part of the rater makes the assessment
subjective. Subjective assessment defeats the very purpose of performance appraisal. Ratings are
lenient for the following reasons:
a)

The rater may feel that anyone under his or her jurisdiction who is rated unfavorably will

reflect poorly on his or her own worthiness.

b) He/She may feel that a derogatory rating will be revealed to the rate to detriment the
relations between the rater and the ratee.
c) He/She may rate leniently in order to win promotions for the subordinates and therefore,
indirectly increase his/her hold over him.

Central tendency: - This occurs when employees are incorrectly rated near the average or
middle of the scale. The attitude of the rater is to play safe. This safe playing attitude stems from
certain doubts and anxieties, which the raters have been assessing the rates.

Halo error: - A halo error takes place when one aspect of an individual's performance
influences the evaluation of the entire performance of the individual. The halo error occurs when
an employee who works late constantly might be rated high on productivity and quality of output
as well ax on motivation. Similarly, an attractive or popular personality might be given a high
overall rating. Rating employees separately on each of the performance measures and
encouraging raters to guard against the halo effect are the two ways to reduce the halo effect.

Rater effect: -This includes favoritism, stereotyping, and hostility. Extensively high or low
score are given only to certain individuals or groups based on the rater's attitude towards them
and not on actual outcomes or behaviors; sex, age, race and friendship biases are examples of
this type of error.

36

Primacy and Regency effects: - The rater's rating is heavily influenced either by behavior
exhibited by the ratee during his early stage of the review period (primacy) or by the outcomes,
or behavior exhibited by the ratee near the end of the review period (regency). For example, if a
salesperson captures an important contract/sale just before the completion of the appraisal, the
timing of the incident may inflate his or her standing, even though the overall performance of the
sales person may not have been encouraging. One way of guarding against such an error is to ask
the rater to consider the composite performance of the rate and not to be influenced by one
incident or an achievement.

Performance dimension order: - Two or more dimensions on a performance instrument

follow each other and both describe or rotate to a similar quality. The rater rates the first
dimensions accurately and then rates the second dimension to the first because of the proximity.
If the dimensions had been arranged in a significantly different order, the ratings might have
been different.

Spillover effect: - This refers lo allowing past performance appraisal rating lo unjustifiably
influence current ratings. Past ratings, good or bad, result in similar rating for current period
although the demonstrated behavior docs not deserve the rating, good or bad.

Roles in the performance appraisal process

a) Reporting Manager

Provide feedback to the reviewer / HOD on the employees behavioral traits indicated in

the PMS Policy Manual

Ensures that employee is aware of the normalization / performance appraisal process

Address employee concerns / queries on performance rating, in consultation with the

reviewer

37

b) Reviewer (Reporting Managers reporting Manager)

Discuss with the reporting managers on the behavioral traits of all the employees for whom

he / she is the reviewer

Where required, independently assess employees for the said behavioral traits; such

assessments might require collecting data directly from other relevant employees

c)

HOD (In some cases, a reviewer may not be a HOD)

Presents the proposed Performance Rating for every employee of his / her function to the

Normalization committee.

HOD also plays the role of a normalization committee member

Owns the performance rating of every employee in the department

d) HR Head

Secretary to the normalization committee

Assists HODs / Reporting Managers in communicating the performance rating of all the

employees

e) Normalization Committee

Decides on the final bell curve for each function in the respective Business Unit / Circle

Reviews the performance ratings proposed by the HODs, specifically on the upward /

downward shift in ratings, to ensure an unbiased relative ranking of employees on overall

performance, and thus finalize the performance rating of each employee.

Key concepts in performance management system

In order to understand the Performance Management System at Infowiz Company, some
concepts need to be explained which play a very important role in using the PMS successfully.

38

They are:

KRAS (Key Result Areas): The performance of an employee is largely dependent on

the KRA score achieved by the employee during that particular year. Thus, it is necessary to
answer a few basic questions i.e.
o

What are the guidelines for setting the KRAs for an employee?

How does an employee write down his KRAs for a particular financial year?

KRAs: The Four Perspectives.

How is the KRA score calculated for an employee on the basis of the targets sets and

targets achieved?

Behavioral Traits: Some of the qualitative aspects of an employees performance

combined with the general behavioral traits displayed by the employee during a year constitutes
his behavior traits. An employee is assigned the rating on the basis of the intensity of the
behavior displayed by him. They play a very important role in the deciding the final performance
rating for an employee as is even capable of shifting the rating one level upwards/downwards.

Bharti 2010 Leadership Competency Framework: This competency framework

is a simple and structured way to describe the elements of behaviors required to perform a role
effectively. This framework also tries to assess the performance of an employee objectively.

The Performance Rating Process: The rating process tries to explain the four

different types of rating that an employee can achieve i.e. EC, SC, C and PC. It also explains
the criteria, which is considered for awarding any of these ratings to the employee.
Promotion And Rating Distribution Guidelines: The promotion and normal
distribution guidelines provide the framework within which the performance appraisal process
has to work. It is very important that the HR department pays due attention to these guidelines
while preparing the bell curves for various functions and the consolidated bell curve for all the
functions. These guidelines also help in deciding upon the promotion cases in a year.

39

Performance Rating Process

EXCEPTIONAL CONTRIBUTOR (EC)

SIGNIFICANT CONTRIBUTOR (SC)

Performs consistently and substantially

above expectations in all areas

Performs above expectations in all

areas

Achieves a final score greater than or equal Achieves final score between 100-114%
to 115%
Versatile in his/ her area of operation

Consistently delivers on stretch targets

Develops creative solutions and require

Is proactive

Spots

little / minimal supervision

and

anticipates

problems, Sets examples for others

implements solutions
Take ownership of own development

Sees and exploits opportunities

Coaches others

Delivers ahead of time

Demonstrates business initiative

Sees the wider picture-impacts across

Is self motivated

business
Focuses on whats good for the business

Leads own team very effectively

Seen as role model by others

Recognized

as

exceptional

Supportive team player

by

functions as well

other

Demonstrate functional initiative

Motivates others to solve problems

Develops others

40

 Provides open and honest feedback

Able to establish and lead cross-functional

teams

Performance Appraisal in Infowiz Company

Infowiz Company Ideologies
Vision
To be the world class corporate constantly furthering the interest of all stakeholder.

HR Vision
Lead and Facilitate continuous change towards organizational excellence ; create a learning and
vibrant organization with high sense of pride amongst its members

Appraisal & Reward appraisal

New Appraisal System based on KRAs & Targets

Review of Targets at regular Intervals

People Development an important KRA

Reward

Promotions based on Performance

Productivity & Profit-linked Incentive Schemes

41

Training including Long-term Term

Career Design
Performance & Potential based Appraisals
Fast Track Option for High-performers
Promotions after Managers Vacancy based
Interviews for promotions above Managers
Selection of Supervisors: Performance / Attendance / Discipline
Record Written Test & Interview
Job Rotation - including Inter-functional

Retention & Employee Welfare

Residential Colonies for Employees

Hospitalization Reimbursement on actual without Ceiling

Vehicle Loans

Household Equipment Loans

House Building Advance

Annual Advance

42

PF Trust for better Mgt., Service & speedy redress

Proposed MUL Pension Scheme

Suggestion Scheme & Quality Circles

For better quality and productivity

Through involvement of all employees and teamwork

Criteria

Idea

Efforts

Result : Cost reduction / Q Improvement / Productivity Improvement

HR Initiatives
Realigning organisation culture based on new vision & values
Objectives performance management & development system
Performance linked reward and recognition system
Career planning & promotion policy
Revised recruitment policy
Competency mapping

43

Strong focus on training initiatives-build a learning organisation- continuous value addition to

professional skill- customised training training to the personnel of business partners
Internal communication
Union alignment
Employee involvement & participation

Infowiz Company Appraisal System

A detailed discussion with HR head Mrs. Urvashi Mehta of Infowiz Company, gave us the
insight in the performance appraisal system followed in the company. The appraisal model
which is followed on annual basis starting from the month of April till March has been extremely
effective for the employees of Infowiz Company.
Half yearly appraisal system was started a year ago. This activity was started keeping in mind the
dynamic behavior of the industry. With a half yearly appraisal system, the employee gets
feedback twice a year, which gives him/her a chance to re-look at his/her approach of working.
Necessary steps are also undertaken for employees who deviate from their goals. They have
introduced a comprehensive system of quarterly appraisals where an employee selects his/her
own goals or Key Result Area (KRAs) every quarter and him/her self assesses his/her own
performance against these parameters. At Spice jet while formally the process is annual, for
several of the frontline employees, there are performance related quarterly payouts designed to
reward them with incentives for their performance. This has resulted in quarterly assessments
which are aligned overall to annual KRAs.
Infowiz Company has a midterm review for all those who have been performers, thereby
creating an expectation amongst the employees of an increase in salary twice a year if they
perform well. They used to have annual appraisals earlier, but then they felt that the incentives
are not enough to motivation the sales department, which generates major revenues or the
organization.

44

They do give monetary increments and designation hikes, according to the performance. If the
employee deserves both, they give him/her both the advantages otherwise at least one of them.
Designation hikes are given annually. These are proportional to effort of the individual, team and
the department. Designation changes are given keeping in mind the immense responsibility one
has to shoulder in a high rank. Monetary increments are primarily incentives that are given either
in cash or kind for example they give them travel package within India or outside. Also, they
have an accumulating incentive scheme in which employees can accumulate incentives and get
them annually with interest.
To meet the new demands of the business and to motivate the employees for higher performance,
they have started linking a part of the salary increase to individual performance measures as
variable pay. At present, between 6 to 8 percent of the compensation is variable pay, which they
are planning to increase over a period of time. Executives are categorized in levels based on their
performances in a relative ranking and based on outcome performance-linked pay is awarded.

Goal-Setting Model
A goal setting program in an organization requires careful planning. As shown in the figure,
the first three

factors in goal

setting process are establishing the goal, achieving goal commitment, and overcoming
resistance to goal acceptance.

Goals can be established in

variety

of ways. Best way isto set by joint participation between theemployee and the supervisor. This
method often leads to employee commitment, a crucial ingredient in effective goal setting.

Goal Setting
S.M.A.R.T.* Goals
Specific precise and detailed
Measurable with criteria for determining progress and success
Achievable attainable and action-oriented
Realistic relevant and aligned
Time-related grounded within a time-frame

45

For this purpose, an online template is circulated in the organization. Superiors fill out that form
keeping in view the performance of their subordinate over the year. This feedback becomes the
basis of the promotion of the employees.
Superior is responsible for categorizing the employees in four category, namely
A
B
C
D
This categorization is done both on the basis of performance and the goals they were given.
This whole system is commonly known as
90 degree appraisal system also called 2 tiers.

Research methodology
Research:
Research is a scientific and systematic search for pertinent information on a specific topic. In
fact, research is an art of scientific investigation.

Abstract
Infowiz Company is Indias One of the most successful software solution company. It currently
Employees 30 personnel who are constantly evaluated and appraised. This gives us the
opportunity to study the performance appraisal method by the company and its efficiency
towards employees as well as Organization.

Objective of the Study

To carry out the study at Infowiz Company, we framed the following objectives
1. Identification of the technique of performance appraisal followed in Infowiz Company .
2. Employee attitude towards the present appraisal system.
3. Review of the current appraisal system in order to
1. Enhance productivity
46

2. Attain global standards

4. To provide suggestions & recommendations from the study conducted.

Hypotheses of the Study

1. Performance Appraisal is not having positive effect on Infowiz Company employee.
2. Performance Appraisal Is having positive effect on Infowiz Company Employees.

Research Design:
Research design refers to the framework or plan for a study that guides the collection and
analysis of data.
A research design calls for developing the most efficient plan of gathering the needed
information. The design of a research study is based on the purpose of the study. A research
design is the specification of methods and procedures for acquiring the information needed. It is
the overall pattern or framework of the project that stipulates what information is to be collected
from which source and by what procedures. A typical research design of a company basically
tries to resolve the following issues:
Determining Data Collection Design
Determining Data Methods
Determining Data Sources
Determining Primary Data Collection Methods
Developing Questionnaire
Determining Sampling Plan

Types of Research Design

1) Explorative Research Design:

47

Explorative studies are undertaken with a view to know more about the problem. These
studies help in a proper definition of the problem and development of specific hypothesis is
to be tested later by more conclusive research designs. Its basic purpose is to identify the
factors underlying a problem and to determine which one of them need to be further
researched by using rigorous conclusive research designs.

2) Conclusive Research Design:

Conclusive Research Studies are more formal in nature and are conducted with a view to
eliciting more precise information for purpose of making marketing decisions.
These studies can be either:
Descriptive or
Experimental
Thus, it was mix of both the tools of Research Design that is, Explorative as well as Conclusive.
The Study is primarily based on the Primary data Collected through Questionnaire from
Infowiz Company Employees.

Sampling:
An integral component of a research design is the sampling plan. Specifically, it addresses three
questions
Whom to survey (The Sample Unit)
How many to Survey (The Sample Size)
How to select them (The Sampling Procedure)
Making a census study of the whole universe will be impossible on the account of limitations of
time. Hence sampling becomes inevitable. A sample is only a portion of the total employee
strength. According to Yule, a famous statistician, the object of sampling is to get maximum
information about the parent population with minimum effort.

Methods of Sampling
1) Probability sampling:
Probability Sampling is also known as random sampling or chance sampling. Under this
sampling design every individual in the organization has an equal chance, or probability,
48

of being chosen as a sample. This implies that the section of sample items is independent
of the persons making the study that is , the sampling operation is controlled objectively
so that the items will be chosen strictly at random.

2) Non Probability Sampling:

Non Probability Sampling is also known as deliberate sampling, purposeful and
judgmental sampling. Non-Probability Sampling is that which does not provide every
individual in the Organization with a known chance of being included in the sample.

Data Collection Technique

Collection of data is the first step in statistics. The data collection process follows the
formulation for research design including the sample plan. The data can be secondary or primary.
Collection of Primary Data during the course of the study or research can be

through

observations or through direct communication with respondents on one form or another or

through personal interviews. I have collected primary data by the means of a Questionnaire. The
Questionnaire was formulated keeping in mind the objectives of the research study.
Secondary data means data that is already available i.e., they refer to data, which has already
been collected and analyzed by someone else. When a secondary data is used, the researcher has
to look into various sources from where he can obtain data. This includes information from
various books, periodicals, magazines etc.
Contact Method
Personal Interaction

Research Methodology Adopted

Research Design

: Descriptive research

Research Instrument: Structured Questionnaire

49

Sampling Plan
a. Sample Size = 50 Employees
b. Sample Area = Chandigarh
c. Duration = 6 weeks.

Sampling Design
Convenience Sampling, as the name implies, is based on the convenience of the researcher who
is to select a sample. Respondents in the sample are included in it merely on account of their
being available on the spot where the survey was in progress.

Source of Data
a) Primary Data

: Structured Questionnaire

b) Secondary Data

: Journals, Booklets, Company Data, etc.

Limitations of study
The following are the limitations faced by me during the course of the study:
The sample consisted only of employees in the day shift. Employees of the night shift were not
considered for the purpose of study.
There is no concrete basis to prove the response given is a true measure of the opinion of all the
employees as a whole.
Convenient sampling was used as the mode of conducting the research.
The questionnaire contained mostly multiple-choice questions; therefore many respondents may
not have given a proper thought before answering the questions.

50

The response of the respondents may not be accurate thinking that the management might misuse
the data.
Sensitive company information cannot be displayed in the project report.
Most respondents might be influenced by their peers in answering the questions.
Due to the fact that most of the respondents were young, the questions might not have been
answered with due sincerity.

Analysis and Interpretation

Q1-

how long you work in this organization?

year of service

10%

0-2 year

20%

2-4 year
20%

4-6 year
more than 6 year

50%

51

InterpretationFrom the above pie chart we conclude that the maximum year of service of the employees of
Infowiz Company is maximum between 2-4years(i.e 50%) and minimum in more than 6 year
time period (i.e 10%).
Q2-Are you aware about technique of performance appraisal?

Awareness of technique of Performance Appraisal

28%
No
Yes

72%

Options

No. of Responses

Yes

36

No

14

InterpretationFrom the above pie chart we conclude that maximum employees are aware of their performance
appraisal technique (i.e 72%) and the employees not aware of it is minimum (i.e 28%)
52

Q3-what is your opinion about present performance appraisal system followed in this organization?

Employees opinion as to the present appraisal system

2%

24%

30%

Fully satisfied
satisfied
cant say
Dissatisfied

44%

Options

No. of Responses

Fully Satisfied

12

Satisfied

22

Cant Say

15

Dissatisfied

InterpretationFrom the above pie chart we conclude that maximum employees are satisfied with the present
appraisal system (i.e. 44%) and minimum (i.e. 2%) are dissatisfied.

53

Q4- Whats your perception regarding the frequency of appraisal?

Employee perception as to the frequency of appraisal

Once during the

service period

6% 2%

Continuous
Never
Cant Say
92%

Options
Once

No. of Responses
During

The 1

Service Period
Continuous

46

Never

Cant Say

InterpretationFrom the above pie chart we find that the maximum (i.e 92%) of the employees think that the
frequency of appraisal must be continuous whereas minimum (i.e 0%) none of the employees
feel that Infowiz Company should not appraise.

54

Q5-If

continuous appraisal what should be the gap between two appraisal period

20%
36%
Quaterly
Half-Yearly
44%

Options

Yearly

No. of Responses

Quarterly

10

Half Yearly

22

Yearly

18

InterpretationFrom the above pie chart we conclude that maximum (i.e 44%) of the employees want to
consider performance appraisal half yearly whereas minimum (i.e 20%) of them want it
quarterly.
Q6-

How Performance Appraisal affects the productivity of the employees

55

Motivated

Indifferent

Demotivated

38

12

12

10

28

24

21

+ Feedback

- Feedback

Neutral

Interpretation

From the above chart we conclude that the affect of performance appraisal with a
positive feedback and motivated results lead to maximum productivity of employees(i.e
76%) whereas none of the employees are demotivated.

Giving negative feedback with demotivating results leads to minimum productivity of

employees
(i.e 56%) whereas minimum number of employees would be indifferent towards it.

Giving a neutral feedback with motivating results leads to average productivity of

employees (i.e 48%) whereas only a few lead to low productivity with demotivating
results (i.e 10%)
Q7- Who should do the appraisal?

56

Who should do the appraisal?

Superior
16%

48%

Peer
24%
8%
4%

Subordinate
Self appraisal
Consultant
All of the Above
Superior+Peer

Options

No. of Responses

Superior

12

Peer

Subordinate

Self Appraisal

Consultant

All of the above

24

Superior + Peer

Interpretation- From the above pie chart we conclude that the maximum employees (i.e
24%) want to get the appraisal through superior, self appraisal, consultant. Whereas none of them
want to get it done from their peers and subordinates.
Q8- Does appraisal help in performance area?

57

16%
Yes

10%

No
Somewhat
74%

Options

No. of Responses

Yes

37

No

Somewhat

InterpretationIf the process of appraisal does not lead to the improvement of the skills and proficiency of the
employees, the very purpose of appraisal becomes illogical. In the survey conducted it was
observed that nearly 74 % of the respondents agree that Performance Appraisal does leads to
polishing the skills of the employees. Nearly 10 % of the respondents view that it does not serve
this purpose and around 16 % were not able to respond as to whether it serve any such purposes
or not.

Q9-Does personal bias creeps in while appraising an employee?

58

18%
Yes
No
82%

Options

No. of Responses

Yes

41

No

InterpretationIn the process of appraising, both the parties are human being, that is, the one who is being
apprised and the other who is appraising. Thus, there bound to be subjectivity involved, be it an
objective way of appraising. Thus, when asked from among the sample size of 50 respondents, as
huge as 82 % respondents that personal bias do creep in while appraising an individual. Hence, it
is inevitable to say that personal likings do not come in the process of appraisal. It is the extent to
which the appraiser manages it so that it does not become very partial and bias.

Q10 If a given chance would employees like to review the current appraisal technique?
59

24%

32%
Yes
No
44%

Cant Say

Options

No. of Responses

Yes

16

No

22

Cant Say

12

InterpretationFrom the above pie chart we conclude that the maximum employees (i.e 32%) do not want to
review the performance appraisal system whereas minimum (i.e 24%) cant comment about the
same.

Q11- What is the appropriate method of conducting the performance appraisal?

60

Appropriate method of conducting the performance appraisal

Ranking method
12%

6%
20%

58%

paired comparison
critical Incidents
MBO
Assessment Centre

4%

360 degree

Options

No. of Responses

Ranking Method

Paired Comparison

Critical Incidents

MBO

10

Assessment Centre

360 degree

29

InterpretationFrom the above pie chart we conclude that the maximum (i.e 58%) of the employees prefer the
360 degree technique of performance appraisal whereas the minimum (i.e 0%) want paired
comparison technique.

Q12- Does performance appraisal leads to identification of hidden potential?

61

Does performance appraisal leads to identification of hidden potential

4%
Yes
No
96%

Options

No. of Responses

Yes

48

No

InterpretationFrom the above pie chart we interpret that maximum (i.e 96%) of the employees feel that
performance appraisal leads to identification of hidden potential whereas minimum (i.e 4%)
disagree with the same.

62

Suggestions and Conclusion

After having analyzed the data, it was observed that practically there was no appraisal in the
organization. To be an effective tool, it has to be on the continuous basis. This is the thing that
has been mentioned time and again in the report, as, in the absence of continuity, it becomes a
redundant exercise. Before actually deciding drafting what should be the kind of appraisal the
following things should be taken care of:
1. The very concept of performance appraisal should be marketed throughout the organization.
Unless this is done, people would not accept it, be it how important to the organization.
2. To market such a concept, it should not start at bottom, instead it should be started by the
initiative of the top management. This would help in percolating down the concept to the
advantage of all, which includes the top management as well as those below them. This
means that the top management has to take a welcoming and positive approach towards the
change that is intended to be brought.
3. Further, at the time of confirmation also, the appraisal form should not lead to duplication
of any information. Instead, detailed appraisal of the employees work must be done
which must incorporates both the work related as well as the other personal attributes that
are important for work performance.
4. It should be noted that the appraisal form for each job position should be different as each
job has different knowledge and skill requirements. There should not be a common
appraisal form for every job position in the organization.
5. The job and role expected from the employees should be decided well in advance and that
too with the consensus with them.
6. A neutral panel of people should do the appraisal and to avoid subjectivity to a marked
extent, objective methods should be employed having quantifiable data.
7. The time period for conducting the appraisal should be revised, so that the exercise
becomes a continuous phenomenon.

63

8. Transparency into the system should be ensured through the discussion about the
employees performance with the employee concerned and trying to find out the grey areas
so that training can be implemented to improve on that.
Ideally in the present day scenario, appraisal should be done, taking the views of all the
concerned parties who have some bearing on the employee. But, since a change in the
system is required, it cannot be a drastic one. It ought to be gradual and a change in the
mindset of both the employees and the head is required.
a) Fully Satisfied
c) Cant Say
6.

b) Satisfied
d) Dissatisfied

Should the appraisal process be:

a) Once during the service period
c) Never

7.

b) Continuous
d) Cant Say

What in your opinion should be the time period of conducting continuous

a) Quarterly

b) Half Yearly

Appraisal?

c) Yearly

Any specific reason

8. Does Performance Appraisal helps in improving the productivity of the employees?
Motivated

Indifferent

+ Feedback
- Feedback
Neutral

9.

Who in your opinion should appraise the employee?

64

Demotivated

a) Superior

10.

b) Peer

c) Subordinates

d) Self Appraisal

e) Consultant

f) All of the above

Does the appraisal system helps in polishing the skills or performance area?
a) Yes

11.

c) Somewhat

Do you think personal bias creeps in while appraising an individual?

a) Yes
12.

b) No

b) No

If given a chance or an opportunity would you like that the current appraisal procedure
should be reviewed?
a) Yes

13.

b) No

c) Cant Say

What according to you should be the appropriate method for conducting performance
appraisal?
a) Rating the employee on number of traits along with the range of performance for each
by the supervisor.
b) For every trait, each subordinate is paired with and compared to every other
Subordinate.
c) Reviewing employees on the basis of identified specific examples of good Or poor
performance.
d) Setting specific measurable goals with each employee and periodically reviewing the
progress made.
e) Reviewing performance through case studies, presentations, role playing, etc. for
future performance.

65

f)

Receiving feedback from people whose views are considered helpful and relevant
including the appraise himself.

14.

Does Performance Appraisal leads to identification of hidden potential of the employees?

a) Yes

b) No

15. Suggestions and views...............................

Thank you,

Date --/--/--

Case study
Performance appraisal and career
Opportunities: A case study
Introduction
The role of human capital, competence and people issues is ascending on the strategic agenda of
both public and private enterprise. On the back of a period with heavy focus on capital
efficiency, asset values and shareholder returns, managers of private corporations and public
organizations now seem to augment their approach through an upgrade of issues relating to
human capital management. The path-breaking development of new technologies is no longer
limited to the technology, media and telecom industries. Rather, new innovations have made their
way into virtually all sectors of the modern economy. People and competence are crucial for the
66

productivity of these technologies, and therefore also for the performance of public enterprise,
and for the competitiveness of private companies. Strong economic growth has also led to
capacity pressures in large parts of the OECD area, not least in the labour market. High skill
labour is an increasingly scarce input for competitive firms and organizations. Consequently,
strategic issues of human capital management have gained strength throughout the economy.
Performance appraisal has become increasingly important in this respect. The key idea is to
establish a reward system that optimizes the efforts and contribution of leaders and employees to
the general performance of their organisation. As noted by Cleveland, Murphy, and William
(1989), the propagation of performance appraisal systems is motivated by a broad range of
concerns, including promotions, terminations, salary administration, and the development of
adequate competence and expertise. Performance appraisal may be useful both in the crosssectional dimension (for comparison between individuals) and for the time dimension (for
comparison of individual performance over time). There is a large body of research on
performance appraisal systems. The early literature was dominated by psychologists, and focused
on the psychometric properties of appraisal, in particular the role of supervisors and the precision
on their performance evaluation (see Milkovich and Wigor, 1991, for a survey) Recent
psychological literature has put more emphasis on worker reaction to appraisals, and the social
context in which appraisal occurs (see Keeping and Levy, 2000; Levy and Williams, 2004).
Issues of employee satisfaction with performance appraisal systems are explored by Boswell and
Benson (2000) and Brown and Benson (2003), both arguing that individual involvement and
development opportunities play an important role for the success ratio of performance appraisal
systems. Kuvaas (2006) investigates the relationships between performance appraisal on the one
hand, and employee outcomes in terms of performance, organisational commitment and turnover
intention on the other. He finds that motivational issues play an important role for the efficiency
of performance appraisal systems. The role of trust for the acceptance of performance appraisal
has also caught extensive attention in recent research (e.g., Zaheer, McEvily and Perrone, 1998;
Reinke, 2003; Kickul, Gundry, and Posig, 2005). Results from these studies clearly suggest that
the level of trust between employee and leader is an important predictor for the general
acceptance and advancement of performance appraisal systems.
Economists started to gain a theoretical interest in performance appraisal in the 1970s when
economics of incentives and asymmetric information made its way into the theoretical literature.
67

However, it is not until recently that economists have begun to investigate performance appraisal
empirically. Some studies focus on the productivity-effect of performance pay (see e.g. Lazear
2000), while other recent papers study the individual and job based determinants of performance
appraisals. Key findings from this literature indicate a wider dispersion of labour income due to
performance appraisal, both within each firm (Barth et al., 2008), and for society as a whole
(Lemieux, MacLeod, and Parent, 2007). Grund and Sliwka (2007) argue that the prevalence of
performance appraisal correlates negatively with risk aversion, which again is an increasing
function of age, and which is more pronounced among women. Consequently, performance
appraisal systems are most common among young and middle-aged men. Yet, there is still a
surprisingly little empirical research on the link between performance appraisal and this kind of
background variables.
Based on a unique and powerful set of survey data from a large international oil company, we
explore perceptions of performance appraisal and career opportunities among leaders and their
employees. Our measure of performance appraisal includes elements of reward and recognition,
and might be seen as a backward-looking indicator. On the other hand, individual perceptions
and judgments regarding career opportunities may be seen as a forward-looking measure of
performance appraisal (e.g., Prendergast, 1999). Accordingly, we estimate and present
econometric models for both these perspectives.
We present a case study, rather than a broad economy-wide cross-sectional assessment (e.g.,
Grund and Sliwka, 2007). One advantage with case studies is that we to some extent control for
sorting effects, since the employees of our data set to a large extent are exposed to common
organizational changes and business cycles (e.g. Lazear, 1998; Marsden, 2004). We combine
knowledge of the formal appraisal system that the employees are exposed to, with their
subjective perception of performance appraisal. The employees are asked to what extent
performance forms the basis for recognition and reward, and the answers on this question is our
dependent variables in the econometric analysis. This is important since formal appraisal systems
such as bonus contracts, commissions and piece rates are just a small part of total performance
appraisal. Performance-related reward, for instance, is often based on supervisors subjective
evaluation (see MacLeod, 2003 for analysis), and these evaluations are not captured in empirical
studies of formal incentive systems.

68

Our main results are as follows: First, the perceived alignment of efforts and rewards is more
pronounced among women than for men. This result is in contrast to findings in cross-sectional
studies where women sort into jobs with lower degree of performance appraisal (e.g. Barth et
al. 2008; Grund and Sliwka, 2007). An implication may be that women have a steeper wage
curve than men in this particular company, but to our knowledge, there is no systematic
favouring of women. A more plausible explanation is that women have different references and
information bases than men (e.g., Hind and Baruch, 1997). A given relationship between
performance and reward may thus be perceived as gratifying among women, but not necessarily
among men.
Second, we find that the connection between perceived achievement and appreciation is
strengthened by time of service for leaders, but not for employees in non-managerial positions.
The longer an employee has worked in the company, the weaker relationship he/she finds
between performance and recognition/reward. This is in line with previous studies, arguing that
employees are more likely to be evaluated and appraised in the beginning of their career (Brown
and Heywood, 2005). A theoretical explanation for this finding is that evaluation and monitoring
is more important early in a workers career for the purposes of determining ability and job
assignment (Jovanovic, 1979; Lazear, 1990). Moreover, senior workers are more likely to have
developed firm specific human capital, which reduces the need for monitoring since the chance
that other firms will pay them more is smaller (Lazear, 1998). For leaders, on the other hand, we
find that the balance between perceived achievement and appreciation is improving with length
of service. A likely explanation is that leaders (more often then regular employees) are exposed
to formal incentive schemes based on individual performance, and that these schemes are not
affected by seniority. Moreover, seniority may increase the indispensability of the leaders human
capital, and as shown by Kvaly and Olsen (2007), indispensable human capital calls for
individual performance pay, since employees can threaten to walk away if they are not paid a
fair share of their value-added.
Third, we find that perceived performance appraisal and career opportunities are linked to
characteristics of the local work environment. Our results suggest that efforts and rewards are
more balanced in parts of the organisation characterised by high willingness and capability to
change, attributes which correlate negatively with risk aversion. On the other hand, perceived
career opportunities seem to be dampened by change capability both for leaders and their
69

employees. Units and departments focusing on active management of skills and expertise are
associated with higher scores for both performance appraisal and career opportunities. Not
surprisingly, we also find that trust and identity plays an important role for perceptions of
performance appraisal and career opportunities. Finally, concerns for health, safety and
environmental (HSE) issues exert a negative influence on the balance between efforts and
rewards, whereas perceived career opportunities are positively influenced by local HSE
concerns.
Any imbalance between perceived individual efforts on the one hand, and reward and
recognition may be seen as a breach of procedural fairness (e.g., Konovsky, 2000; Brown and
Benson, 2003), and will act as a potential disturbance for both job motivation and individual
performance (e.g., Winstanley and Smith, 1996). The interest of managers should therefore be to
secure alignment of expectations and realisations, and management resources should be allocated
accordingly. Our results provide useful input to this important balancing act. First, this study
suggests that the alignment of performance and rewards may be somewhat more of a challenge
among men then among women. Our results are supportive of systematic gender variation in
perceptions on performance appraisal both among leaders and employees in non managerial
positions. Second, senior people report a larger gap between individual efforts and rewards than
young and newly employed people, especially for employees in non-managerial positions. Third,
the perceived balance of the performance appraisal system is clearly influenced by characteristics
and properties in the local work environment, like change capability, competency focus, trust and
identity issues. This kind of results could be applied to rank the requirements of various parts of
the organisation with respect to management attention and corrective measures.
Finally, our results demonstrate that the mechanics of backward-looking performance appraisal
(reward and recognition) is not necessarily identical to the formation of expectations with respect
to future performance appraisal (career opportunities). As an example, this study demonstrates
that an agile working environment, with capacity and capabilities for change, is usually
accompanied by gratifying systems in terms of backward-looking performance appraisal. On the
other hand, exactly the same properties correlate negatively with perceptions regarding career
opportunities among the leaders of our study.
The paper is organized as follows. Section 2 gives a brief overview of the processes of
performance appraisal in the company which forms the subject of our case study. The data set is
70

presented and variables are defined and discussed in Section 3. An econometric model is outlined
and estimated in Section 4, with subsequent discussion of key results. Concluding remarks are
offered in Section 5.
2. Performance appraisal in Statoil
Statoil is an international oil and gas company with 25,000 employees and business activities in
34 countries. As the former national oil company of Norway, Statoil was established in 1972 to
take part in the development of oil and gas resources on the Norwegian Continental Shelf. Over
the years, gradual commercialization, deregulation and internationalization culminated with the
partial privatization and listing of the company in June 2001. Statoil merged with Hydros oil and
gas activities in October 2007, and currently ranks among the 10 largest international oil and gas
companies in the OECD area. As a former national oil company in a Nordic social democracy,
Statoils policies of reward and remuneration seek to balance a broad range of objectives and
concerns.
This is reflected in the following statement by the Board of Governors: It is a matter of
principle for Statoil to be competitive in the labour market without being a pacesetter on pay. The
group wants to reward and recognise equally results achieved and how they are achieved. It must
also ensure that a link exists between performance and pay, and a balance between immediate
and long-term contributions and results. Opportunities for increased remuneration must be
accompanied by higher performance requirements along all these axes. An important goal for
Statoils remuneration system is to develop the community of interest between the groups
employees and its owners. This is also taken care of by setting clear limits to the rewards which
the

various

schemes

can

provide.(Press

release,

15

November

2006;

http://www.statoilhydro.com.)
Statoil advertise a reward concept that includes both intangible benefits such as professional
development and more tangible rewards such as a employment benefits dependant upon position,
role and in some cases, geographic location. Appraisals of individual performance are claimed to
be based not only on specific delivery, but also on social behaviour. As a part of the corporate
management system, a designated process (People@Statoil) is run on an annual cycle to
manage people, performance, development and deployment. Goals relating to individual

71

performance and behaviour are linked to strategic objectives, which also set the direction for
personal development and career plans.
Reward packages are designed to be competitive in relevant market segments and regions where
the company operates, and include bonus and share savings schemes in addition to base salary
and other compensations. In their recruitment documents, the company also puts weight on
welfare, wellbeing, continuous competence upgrades, and a large internal job market.
Pension plans and insurance arrangements, sick leave, flexible work arrangements and paid
holiday may also be seen as parts of the reward system.
For leaders as well as employees, individual fixed salaries are claimed to reflect responsibilities,
experience and competence. Fixed salaries are evaluated in a yearly process of performance
appraisal, with follow-up meetings between superiors and subordinates throughout the year. In
this process, equal weight is put on individual deliveries and personal behaviour.
All employees are included in a corporate group bonus programme, with a bonus opportunity
limited to 5 per cent of the annual fixed salary (2006). The corporate bonus is calculated yearly,
based on financial performance relative to other large international oil and gas companies.
A selection of executives in key specialist and administrative positions are included in an annual
variable pay scheme, as well as a long-term incentive scheme, whereby bonus entitlements are
accumulated on a rolling 3-year basis. Leaders are subject to a yearly 360 degree evaluation
process, with inputs and assessments also from colleagues in other parts of the company (e.g.,
supplying units and client units).
3. Data and variables
Our data source is the annual survey of the work environment and organisational issues in
Statoil. This so-called Global People Survey was undertaken in the period 15 September to 27
October 2006, and was sent out to 16,000 leaders and employees in 14 European countries. 3
With a response rate of 83 per cent, more than 13,000 forms were retrieved from the survey. Our
sample is the 2006 survey, with just above 12,000 responses for the variables we will study.
Statoils Global People Survey 2006 requested the evaluation of 60 questions and statements on a
measurement scale ranging from 1 to 6. Subjects covered a wide range of topical areas, including
(but not limited to) performance culture, change capability, competence and expertise, trust and
identity, and HSE issues. Moreover, the response forms offer data for background information on
72

gender, age, seniority, leader/non leader position, country of work and organisational belonging,
offering information for a wide range of empirical assessments.
The scope of our study is to investigate factors behind perceptions regarding performance
appraisal and career opportunities. As our performance appraisal variable (PA), we therefore
select the response given to the following statement:
In my entity, performance forms the basis for recognition and reward.
On a scale from 1 to 6, respondents are asked to assess the justification for this statement based
on his or her personal experience. Observe first that the statement invites a genuinely subjective
evaluation, without any rigid link to observables or measurable phenomena.
Neither is it suitable for inference on recognition and reward. Rather, the statement addresses the
relation between performance on the one hand, and recognition and reward on the other.
The information which is gained from this approach provides insight on the perceived
connection between efforts and reward. The objective of our statistical analysis is therefore to
explore factors that may influence the perceived alignment of performance and payoff as implied
by Statoils system of reward and recognition.
Observe that Statoils Global People Survey 2006 was designed and conducted by the company
itself, without our influence or interaction. Our point of departure is formed by the questionnaire
and the individual responses.
As noted by Prendergast (1999), career opportunities may be seen as an option to renegotiate the
employment contract based on previous performance. This forward-looking perspective on
performance appraisal may also be addressed in our data set. Consequently, the point of
departure for our second dependent variable is therefore a statement concerning individual career
opportunities (CO). The statement in question reads:
I am satisfied with my career opportunities in Statoil.
The perceived correctness of this statement is also ranked on a scale from 1 to 6. Observe again
that the question is subject to a strictly subjective evaluation and that no specific measures are
included or implied, neither for career opportunities nor for the degree of content. As such, the
statement simply evaluates the sentiment in each respondent, to produce a simple indicator of
general complacency with respect to career opportunities.
Figure 1. Average scores from Statoils Global People Survey 2006
73

Performance Appraisal
(Perception)
3.0
3.5
4.0
4.5
5.0
All Women Men
Full sample Leaders Employees
Career opportunities
(Perception)
3.0
3.5
4.0
4.5
5.0
All Women Men
Full sample Leaders Employees
Source: Statoil Hydro.
Average scores for the variables we will explain are illustrated in Figure 1. Ratings among
leaders are somewhat higher than among employees for both variables. The same is true for
women. For the system of performance appraisal, the gap between leaders and employees is
significant. Appraisal systems in terms of individual performance pay and bonuses are more
advanced for leaders than for employees, whose economic reward is largely restricted to their
annual wage negotiations (in addition to social recognition and career opportunities).
As we see from the right-hand panel of Figure 1, a similar pattern is reproduced for the
individual perception of career opportunities. However, the difference between leaders and
employees is less pronounced for this variable, and so is the difference between women and men.
For more details on average scores, see Appendix 1.
Our scope of research involves regressions for the two indicators of performance appraisal and
career opportunities against relevant background variables. Moreover, we will seek to establish
74

robust relations between our two dependent variables on the one hand, and other elements of
Statoils Global People Survey on the other. Our data set allows a split between men and women,
and we will therefore test whether perceptions of performance appraisal and career opportunities
vary systematically across gender. Further, respondents are asked for information on seniority.
More specifically, they tick one of three boxes to indicate the length of service with the firm (less
than 3 years, 3-10 years or more than 10 years). In our statistical analyses, we apply dummy
variables to test for the role of seniority for the perception of performance appraisal and career
opportunities.
Our data offer lots of additional information that could shed additional light on perceptions of
performance appraisal and career opportunities. Due to mechanisms of self-selection (e.g.
Lazear, 1998; Marsden, 2004), we should expect employees in a performance-oriented working
environment to be more pleased with the system of performance appraisal than employees in
units where performance and merit is of lesser importance. For example, employees within
corporate finance and commodity trading units should be more inclined to give a high score for
performance appraisal than employees in blue-collar operational units with high degree of
collective bargaining (see also Grund and Sliwka, 2006).4 Moreover, employees and
organisational units marked by general distrust and an unsound working environment would
think differently about performance appraisal and career opportunities than people with
trustworthy leaders in a healthy part of the organisation (e.g., Zaheer, McEvily and Perrone,
1998; Reinke, 2003; Kickul, Gundry, and Posig, 2005).
In a theoretical model, Brouwer (2005) also argues that self-selection is a potential source for
this kind of systematic difference between entrepreneurial and beuraucratic firms, whereby
assertive and bold individuals (risk-lovers) seek opportunities with entrepreneurial firms,
whereas mindful and unsure individuals (risk-haters) tend to pursue a career with more
beuraucratic firms or organisations.
Table 1. Validation of index variables
Factor analysis obtained with Stata 9.0
Items, index variables, and key statistics 1
) C b)
Change capability (CHNG; EV1 = 2.68; EV2 = 0.01; Cronbachs = 0.86)
CHNG1: In my entity, we have a culture which stimulates new ideas and creativity 0.79 0.62
75

CHNG2: In my entity, we systematically follow up on feedback from customers

and clients 0.69 0.48
CHNG3: In my entity, we are good at exchanging experiences with other entities
in Statoil 0.72 0.52
CHNG4: In my entity, suggestions for improvements are quickly put into practice 0.78 0.61
CHNG5: My superior is good at implementing improvements 0.68 0.47
Expertise (EXPT; EV1 = 3.27; EV2 = 0.06; Cronbachs =0.88 )
EXPT1: I am able to utilise my expertise and abilities in my daily work 0.67 0.47
EXPT2: Conditions are favourable for me to continue my personal development
in a systematic manner 0.84 0.71
EXPT3: I receive the training required to do a good job 0.73 0.55
EXPT4: I take the initiative and actively seek to develop my skills 0.65 0.45
EXPT5: In my entity, we are good at making use of each others expertise
and experience 0.80 0.65
EXPT6: My leader creates favourable conditions for the development of each
employee 0.73 0.54
Trust and identity (TRID; EV1 = 3.53; EV2 = 0.37; Cronbachs = 0.87)
TRID1: I have confidence in the management of my business unit 0.81 0.68
TRID2: I have confidence in the corporate executive committee 0.75 0.63
TRID3: I speak of Statoil to my friends as a good company to work for 0.66 0.47
TRID4: In my entity, we respect the individual 0.68 0.59
TRID5: In my entity, we may challenge accepted truths 0.69 0.60
TRID6: Cooperation between management and the trade unions in my business unit is good
0.72 0.55
TRID7: I am confident that Statoil contributes to sustainable development and displays social
responsibility wherever it has operations 0.65 0.48
HSE consciousness (HSEC; EV1 = 2.27 ; EV2 = 0.15; Cronbachs = 0.81)
HSEC1: In my entity, the zero mindset (zero accidents, harm and losses) forms the basis for
planning and implementing our work 0.66 0.48
HSEC2: In my entity, we are good at exploiting diversity (of backgrounds, age, gender, and
abilities) 0.71 0.53
76

HSEC3: In my entity, tasks which could entail risk are always performed
According to established procedures 0.66 0.48
HSEC4: I get support from my colleagues if I find difficulties in solving my tasks 0.63 0.40
HSEC5: Tasks in my workplace are organised in accordance with the capabilities of the
individual employee 0.71 0.53
a) Factor loadings. b) Communality. Data source: StatoilHydro, Global People Survey 2006.
To grasp this variation in properties and characteristics of the local working environment, we
design four index variables, based on factor analysis of relevant groups of items (see Pett,
Lackey, and Sullivan, 2003). An overview of retained items, index variables and key statistics is
presented in Table 1. We report eigenvalues for two potential principal components, EV1 and
EV2. A substantial drop is observed between EV1 and EV2 for all index variables. With a
maximum for the second eigenvalue of 0.37 (TRID), this suggest that our preferred indexvariables represent a reliable clustering of items. The clustering of items is backed up by high
factor loadings (
1), indicating a specific underlying dimension for all our index variables. Moreover, the
reliability of our index-variables is also supported by high internal consistency, as measured by
Cronbachs (Cronbach, 1951). Finally, values above 0.45 for all communality measures (C)
indicate a low degree of specific variance, implying that each of our index variables is quite well
explained by one single factor.
The first index variable (CHNG) relates to change capacity in the local work place, including
items concerning creativity, internal and external follow-up and feedback, and implementation of
improvement efforts. The underlying hypothesis is that an agile working environment, with
capacity and capabilities for change, should also affect the balance between expectations and
fulfilment in terms of performance appraisal (e.g., Offstein et al., 2005).
The second index variable (EXPT) evolves around competence and expertise, and represents a
synthesis of items related to human capacity utilization, development and exchange of
competence. These qualities of the local work place may be seen as a reflection of active HR
management (e.g., Lado and Wilson, 1994; Svetlik and Stavrou-Costea, 2007), which is
potentially important both for the job motivation of the individual employee, and for the
performance of the organisation. Responders who would emphasize the connection between
competence and performance should tend to cluster in organisational units where this relation is
77

appreciated. The role of our EXPT variable is therefore to test if these leaders and employees also
feel that their inclination for competence and expertise is appropriately rewarded.
Issues of trust have become increasingly important in the literature on organizational culture and
performance in general (e.g., Kickul et al., 2005), and specifically for the acceptance of
performance appraisal systems (e.g., Reinke, 2003; Kuvaas, 2006).
The third index variable represents a proxy for trust and identity (TRID), based on questions and
items concerned with confidence in management, as well as issues of strategy, collaboration and
reputation. As this variable captures trust both in the immediate leader as well as corporate
management, it covers both the relationship13 based as well as the character-based perspective
of trust (e.g., Dirks and Ferrin, 2002).
The last index variable (HSEC) accounts for the prevalence and importance of concerns for
health, environment and safety issues in the local organisation of the surveyed persons. As
evident from the definition presented in Table 1, this variable is largely based on internal welfare
and safety issues, rather than corporate environmental concerns. In contrast with the other index
variables, the HSEC variable is expected to exert a negative influence on the performance
appraisal variable, but not necessarily for the perception of career opportunities.
Finally, there is good reason to believe that all the above mechanisms will vary significantly
between leaders and non-leaders. For example, long experience with the firm may be positive for
the acceptance of performance appraisal systems among leaders, as leaders belong to a group
which is systematically rewarded for performance. On the other hand, the group of people with
long experience with the firm as an employee will include persons who never have succeeded in
becoming leaders. For this group, seniority might disturb the perceived balance between
achievements and appreciation. Accordingly, we estimate our model in three versions: one for
the full sample of respondents, one for the sub-sample of leaders, and one for the subsample of
employees. Descriptive statistics for these three samples are presented in Table 2.
Table 2. Descriptive statistics for data sample
Full sample
( N = 12366 )
Leaders
( N = 1950 )
78

Employees
( N = 10416 )
Mean St. dev. Mean St. dev. Mean St. dev.
PA 4.057 1.220 4.511 1.073 3.973 1.227
CO 4.444 1.172 4.774 1.061 4.384 1.182
CHNG 4.186 0.871 4.505 0.747 4.128 0.880
EXPT 4.326 0.856 4.641 0.736 4.269 0.864
TRID 4.667 0.784 5.017 0.626 4.603 0.842
HSEC 4.693 0.727 4.923 0.607 4.651 0.739
Data source: StatoilHydro, Global People Survey 2006.
4. Econometric model and estimation results
Our econometric is specified to account for the special properties of our data, which is based on a
set of ordinal information from Statoils Global People Survey. Specifically, our dependent
variables may take any value on an ordinal scale from 1 to 6, whereas the dummy variables for
gender and seniority take either 0 or 1 as their value. We know that five is a better response than
four, and this information should be acknowledged and exploited in our econometric estimation.
However, we are not in a position to say that the difference between three and four is half the
importance of the difference between one and three. On the other hand, aggregation has
transformed the ordinal scale of the constituent variables to a continuous scale for the five index
variables. Still, the variation of the index variables is restricted to the interval [1, 6]. Based on
these special properties of our data, we apply a generalisation of the probit model for categorical
choice, the so-called ordered probit model (Zavoina and McElvey, 1975; Greene, 2003). At the
core of our model is an underlying linear relationship between a latent variable (y*), and a set of
explanatory variables (x, z):
y* = x + z + e, [1] where x represents the vector of dummy variables for gender and seniority, z
is the vector of index variables, and represent the set of coefficients to be estimated, and e is
an error term with the standard white-noise properties. What we observe, however, is not y*, but
its ordered approximation (y), with discrete values in the interval [1, 6]. With
1,
2,
79

3,
4, as the relevant set of threshold parameters (or cut points), the observed variable is now
assumed to satisfy the following definition:
5
*
2
*
1
1
*
6
2
1

=>
=<
=
y if y
y if y
y if y
M
[2]
15
The probability of observing y* at a specific value for the recorded response may now be stated
as:
(6|,)(|,)
(2|,)(|,)
( 1| , ) ( | , )
5
80

12
1
pyxzpxzexz
pyxzpxzexz
pyxzpxzexz

==++>
==++<
==++
M
[3]
Maximum-likelihood procedures are now applied to estimate the coefficient vectors and of
Equation [2], along with the threshold parameters
1, . .,
5. The estimated coefficients and measure the change in the average score for the dependent
variable in response to a one-unit change in dummy variables and explanatory variables,
respectively.
Estimation results for perceptions of performance appraisal and career opportunities are
presented in Tables 3 and 4, respectively.6 The full sample consists of approx. 12,500
observations in both cases. The sample split between leaders and non-leaders leave some 1,950
observations (16 per cent) for the population of leaders, and around 10,500 observations (84 per
cent) for the population of employee respondents. The statistical properties of all econometric
models are satisfactory. Estimated parameters take signs according to expectations, and most of
them pass the tests of statistical significance at the 1 per cent level.7 Moreover, all tests for joint
significance strongly indicate that our explanatory variables are highly valid. Statistical fit, in
terms of pseudo R2, suggest that our variables capture 18-21 per cent of the variation in the data
set.
5 Observe, however, that the direction of the effect of a change in x (z) is unambiguously
determined by the sign of ( ) only for the probabilities of the worst score ( p( y = 1 | x, z )) and
81

the top score ( p( y = 6 | x, z )). For intermediate scores (2, 3, 4, and 5), the sign of partial effects
is not uniquely determined by the sign of the coefficients. However, the model can be applied for
prediction, whereby the role of exogenous variables is explored for each outcome by
comparative analyses. Specifically, estimates of expected outcomes can be compared for various
levels of the explanatory variables to obtain partial effects for each of the outcomes.
6 For comparison, OLS estimates are presented in Appendix 2. Some coefficients show minor
variation when compared to the ordered probit model, but all signs and overall results are the
same. We take this as an indication of robustness of our econometric analysis.
7 To test for the influence of intragroup correlation, preliminary estimations were run with
clustered standard errors for a range of background variables. However, the significance of our
estimated effects shows robustness to these alternative estimation procedures. To keep things
simple, we therefore stick to the simple version of standard errors in our presented calculation of
p-values.
8 This pseudo R2 measure is computed because there is no direct equivalent of a traditional
R222 (from OLS regression) in non-linear models like the ordered probit model. Compared to
standard econometric on time series data, our pseudo R2 estimates may seem to indicate weak
statistical fit. However, this level of our estimated model for the perception of performance
appraisal produces a positive coefficient for our female gender dummy, indicating that women
feel that efforts and rewards are more aligned than the perception would suggest for men. The
estimated gender difference is also exactly twice as large for leaders as for the population of
employees. This result is in contrast with previous findings for cross-sectional data of economywide survey information (e.g., Grund and Sliwka, 2007), whereby PA systems are found to be
more attractive for men than for women. This difference in results may be due to the difference
in data types, as economy-wide data is more sensitive to selection bias. An alternative
interpretation is based on Sweeney and McFarlin (1997),9 who argue that women are less
concerned with distributive justice than men. Finally, the systematic discrepancy between
women and men in their evaluation of the PA system could also reflect different information sets
and gender-specific references (Hind and Baruch, 1997; Donohue and Heywood, 2004).
Table 3. Estimated perception of performance appraisal (PA model)
Ordered probit estimates obtained with Stata 9.0
82

Full sample Leaders Employees

Estimated coefficients a)
Female 0.108***
(0.000)
0.205***
(0.001)
0.110***
(0.000)
Seniority 1 (3-10 yrs) -0.032
(0.276)
0.243**
(0.021)
-0.079***
(0.013)
Seniority 2 (> 10 yrs) -0.076***
(0.007)
0.107
(0.269)
-0.128***
(0.000)
CHNG 0.542***
(0.000)
0.436***
(0.000)
0.561***
(0.000)
EXPT 0.418***
(0.000)
0.442***
(0.000)
0.408***
83

(0.000)
TRID 0.320***
(0.000)
0.405***
(0.000)
0.290***
(0.000)
HSEC -0.074***
(0.001)
-0.007
(0.911)
-0.079***
(0.000)
Model diagnostics
2 ( ) 7238.68***
(0.000)
887.32***
(0.000)
6082.17***
(0.000)
Pseudo R2 0.19 0.16 0.19
Obs (#) 12368 1950 10418
*) Significant at 90, **) 95 and ***) 99 per cent confidence level, respectively.
a) p-values in brackets. statistical fit is not uncommon for non-linear models of discrete choice in
cross-sectional data. As noted by Wooldridge (2003), goodness of fit is not as important as
statistical and economic significance of the variables in this class of models.
9 On the other hand, Sweeney and McFarlin (1997) also argue that women are more concerned
with procedural justice than men.
For the full sample, our results suggest that the perceived balance between achievements and
acknowledgement is skewed by length of service with the company. Both dummy variables for
seniority are negative and statistically significant. The coefficient for Seniority 1 suggests that
84

the perception among people who have stayed with the company for 3-10 years is that efforts and
rewards are less balanced than the perception would suggest among people who have been with
the company for a shorter period of time. Moreover, the higher value for
Seniority 2 than for Seniority 1 suggests that people who have stayed with the company for more
than 10 years feel that the link between performance and recognition is even weaker than for
people with intermediate length of service. This result is consistent with previous empirical
findings which imply that preferences for merit-based pay are negatively related to years of
service (e.g., Koys, Keaveny, and Allen, 1989). At the same time, these results are clearly driven
by attitudes among employees in non-managerial positions, who represent 84 per cent of the full
sample. The negative relation between performance appraisal acceptance and length of service is
not reproduced for the sub-sample of leaders. In line with findings by Taylor, Masterson, Renard,
and Tracy (1998), our estimated model for the sub-sample of leaders suggests that the perceived
connection between achievements and appreciation is stronger for managers and employees who
benefit most from the prevailing PA system.
Our results suggest that the perceived balance between individual achievement and
acknowledgements is higher in parts of the organisation characterised by high willingness and
capability to change. We therefore find support for the hypothesis that an agile working
environment, with focus on competitiveness and change is normally associated with a more
direct link between individual performance and rewards than what is typical for more lenient and
sheltered parts of the organisation (e.g., Offstein et al., 2005).
As we would expect, units and departments focusing on active management of skills and
expertise (EXPT) are also associated with higher scores for the approval with performance
appraisal systems. In this respect, there is only a slight difference between leaders and
employees. Individuals who are especially concerned with the kind of qualities represented by
the EXPT variable, may seek job opportunities on that account. With this interpretation, our
results suggest that they feel that their qualities and interests are appreciated by the system of
performance appraisal. In a general context our EXPT variable may be associated with the local
prevalence of active human resource (HR) management, whereby competence and training may
be seen as an integrated part of the compensation scheme (e.g., Lado and Wilson, 1994). At this
point our results therefore suggest that individual achievements and rewards are balanced by a

85

competency-based view on HR management, as evident through high scores for the EXPT
variable.
However, just as important as attributes relating to competence and expertise are issues of
organisational and leadership confidence, according to our results. The index variable for trust
and identity (TRID) takes a positive, sizeable and precisely estimated coefficient.
Interestingly, this coefficient does not show significant variation between leaders and employees,
suggesting that the role of trust and identity issues represents a general mechanism. Our results at
this point are in line with previous studies (e.g., Gebris and Ihrke, 2000; Reinke, 2003; Kuvaas,
2006), who also find that the level of trust between employees and their leaders is an important
predictor for the acceptance of performance appraisal systems.
Finally, our estimated model for performance appraisal perception approval is supportive of the
hypothesis that extensive HSE concerns tend to suppress the acceptance of prevailing systems of
performance appraisal. One possible explanation is that merit-oriented leaders and employees see
HSE regulations as an impediment to their pursuit of performance, creating a wedge between
their performance appraisal and their personal undisturbed potential. A complementary
explanation is that HSE concerns are especially far-reaching for industrial, blue-collar workers,
for example in offshore oil and gas activities. These parts of the organisation are also
characterised by a high degree of collective bargaining, leaving less room for individual
performance appraisal. This interpretation is supported by the fact that the negative relationship
can not be re-produced for our sub-sample of leaders.
In a wider context, career opportunities may be seen as a part of an expanded system of
performance appraisal, with a more forward-looking allusion (Prendergast, 1999). We therefore
re-estimate the same model as presented for performance appraisal acceptance, but now with
perceived career opportunities (COP) as the dependent variable. Results are presented in Table 4.
There is a gender difference also in this model, but not among leaders.
Female employees, on the other hand, report a somewhat higher degree of satisfaction with their
career opportunities than men. However, whether this is a reflection of differences in ambitions
or differences in real opportunities can not be determined by our results. Not surprisingly,
personal fulfilment in terms of career opportunities is negatively influenced by length of service
with the company. Note that the effect of seniority is smaller among leaders than for employees.
Moreover, the significant difference for employees occurs when they pass three years of
86

experience, with only a small additional effect for the old-timers. For leaders, the effect of
passing the 3-year threshold is smaller than for employees, and there is also a somewhat larger
additional effect for the old-timers in our sub-sample of leaders.
Table 4. Estimated perception of career opportunities (CO model)
Ordered probit estimates obtained with Stata 9.0
Full sample Leaders Employees
Estimated coefficients a)
Gender (F) 0.076***
(0.001)
0.034
(0.581)
0.091***
(0.000)
Seniority 1 -0.313***
(0.000)
-0.121
(0.273)
-0.345***
(0.000)
Seniority 2 -0.347***
(0.000)
-0.193*
(0.062)
-0.389***
(0.000)
CHNG -0.254***
(0.000)
-0.291***
(0.000)
-0.250***
(0.000)
87

EXPT 0.886***
(0.000)
0.938***
(0.000)
0.876***
(0.000)
TRID 0.410***
(0.000)
0.536***
(0.000)
0.386***
(0.000)
HSEC 0.223***
(0.000)
0.322***
(0.000)
0.215***
(0.000)
Model diagnostics
2 ( ) 7742.19***
(0.000)
1103.54***
(0.000)
6483.85***
(0.000)
Pseudo R2 0.21 0.21 0.21
Obs (#) 12623 1957 10666
*) Significant at 90, **) 95 and ***) 99 per cent confidence level, respectively.
a) p-values in brackets.
Interestingly, we see that the CHNG variable takes a significantly negative coefficient, both for
leaders and for employers in non-managerial positions. This is also an indication that for the
88

parts of the organisation characterised by restructuring and rapid change, potential rewards in
terms of career opportunities tend to be dominated by personal non-economic costs relating to
job-insecurity and challenges and stress (King, 2000).10
As for the PA model, the dimensions of expertise (EXPT) and trust (TRID) also exert a clearly
positive influence on perceived career opportunities (COP). All parameters are highly significant
in statistical terms. In terms of magnitude, the estimated coefficients for expertise and
competence (EXPT) are nearly twice the size of the coefficients for trust.
Observe also that the concept of career success may vary between leaders and employees in non
managerial positions (Hennequin, 2007) identity (TRID). The role of expertise is robust across
leaders and employees. Through internal self-selection, individuals who the relation between
competence and performance should tend to bunch up in business units and departments that
accommodate this inclination. As emphasized by previous studies of the impact of active HR
management (e.g., Lado and Wilson, 1994), our results clearly suggest that a predilection for
proficiency has a reward in terms of career opportunities, not only among leaders, but also for
their employees.
Trust and identity (TRID) is also important for perceptions of career opportunities, according to
our results. Again, the estimated coefficients are positive, sizeable, and highly significant in
statistical terms. Recall that this variable captures trust both in the immediate leader as well as
corporate management. In principle, it therefore covers both relationship-based trust and the
character-based perspective of trust, which is especially relevant for more distant leaders than
ones immediate superior (Dirks and Ferrin, 2002). However, there is reason to believe that the
relationship-based perspective is dominating in the evaluation of career opportunities, and our
results should be interpreted accordingly. The estimated model clearly suggests that perceived
career opportunities among leaders and employees are strongly influenced by leadership qualities
associated with trust.
Finally, it might seem somewhat puzzling that the impact of HSE concerns (HSEC) actually
changes sign between our two model specifications for performance appraisal. A HSE oriented
work environment is negative for the content with performance appraisal systems (PA), at least
for employees. On the other hand, the same variable exerts a positive influence on perceived
career opportunities. This positive effect is especially strong for leaders, and we take this as a
reflection of the inclusion of HSE results in the performance contracts of leaders in Statoil.
89

Along the same lines of thought, we may see the positive connection between HSE awareness
and career opportunities for employees as a manifestation of the stated objective that health,
safety and environmental should be an important part of the mindset of anyone who wants to
make her career with Statoil.
5. Concluding remarks
The interest in human capital management has increased over the last 10 years, reflecting both
shortages and increased value-creating potential for human resources, skills and competence.
Important reasons behind this development include strong employment growth in the OECD
area, especially in skill-intensive industries. To attract and develop talents for key positions and
leadership, individual incentive schemes and performance-based remuneration has become
increasing popular throughout private industries, and recently also in public enterprise.
Based on a powerful and unique set of survey data, this study provides robust empirical
explanations for perceptions regarding performance appraisal and career opportunities among
leaders and employees in an international oil and gas company in Western Europe.
An econometric model for categorical choice is specified and estimated, with historical and
forward-looking performance appraisal as dependent variables. The models are estimated for the
full sample of responders, with supplementary model versions for sub-samples of leaders and
employees without leadership responsibilities, respectively.
In terms of results, we find a significant gender effect in perceived performance appraisal, as
men generally tend to report a larger gap between efforts and rewards than women. We also find
that the perceived gap between efforts and rewards to increase with time of service, especially
for people without leadership responsibilities. Moreover, we find that various properties and
characteristics of the local working environment are decisive for perceptions of performance
appraisal and career opportunities, both for leaders and their employees.
Parts of the organisation with exposure to competitive markets, agility and performance
pressures report a somewhat higher alignment of efforts and rewards than more sheltered parts of
the organisation. The same alignment is more prevalent in organisational units characterised by a
significant pace of change than in stable and stagnant part of the organisation. On the other hand,
career opportunities seem to be negatively affected by restructuring and change, especially
among leaders. In line with previous literature, we find the functioning of performance appraisal
90

systems to depend positively on trust and identity issues, whereas high HSE concerns in the local
working environment seem to increase the perceived gap between efforts and rewards.
In terms of strategy and policy implications, our results may prove useful in several aspects.
A reasonable assumption is that an objective of human resource management would be to
minimise the gap between expected and realised rewards, and to align the balance between
individual performance and personal appraisal Our results suggest that such imbalances are a
larger problem among men than among women. Moreover, perceived gratification seems to fall
with time of service, especially among employees without management responsibilities.
In a similar fashion, the estimated influence of various characteristics of the local working
environment also provides indications for how to allocate management resources across the
organisation. As an example, the perceived gap between efforts and rewards is higher in
sheltered parts of the organisation than in organisational units marked by competitive
performance.
The present study has identified some important drivers for the perception of performance
appraisal systems. At the same time, certain shortcomings are still implied by limitations of our
data and scope of research. First, the data set of our study is purely cross-sectional. A potential
route for further sophistication would be to study survey data over several years, ideally speaking
with time series for each individual. This would allow the study of how perceptions of
performance appraisal may change over time, due to changes in explanatory variables and other
exogenous shocks at the individual, organisational, company or industry level. Second, our
investigation is limited to perceptions regarding the gap between efforts and rewards. Data for
actual outcomes in terms of efforts and performance appraisal at the individual level would allow
us to study the variation between perceived and actual performance appraisal. These are issues
left for future research.
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94

pp. 500-509.
Appendix 1. Average scores for dependent variables
Performance Appraisal Perception (PAP)
Seniority 1
( < 3 years )
Seniority 2
( 3-10 years )
Seniority 3
( > 10 years ) Total
Full sample (N = 12,368)
Men 4.198 3.989 3.963 4.007
Women 4.434 4.203 4.101 4.192
All 4.268 4.051 3.998 4.057
Leaders
Men 4.473 4.496 4.471 4.477
Women 4.529 4.763 4.601 4.635
All 4.493 4.557 4.497 4.511
Employees
Men 4.179 3.909 3.821 3.911
Women 4.424 4.142 4.009 4.129
All 4.251 3.979 3.873 3.973
Career opportunities (COP)
Seniority 1
( < 3 years )
Seniority 2
( 3-10 years )
Seniority 3
( > 10 years ) Total
Full sample (N = 12,623)
Men 4.809 4.367 4.329 4.416
95

Women 4.870 4.494 4.398 4.518

All 4.828 4.404 4.347 4.444
Leaders
Men 4.955 4.725 4.771 4.769
Women 4.694 4.838 4.783 4.787
All 4.861 4.751 4.773 4.774
Employees
Men 4.800 4.311 4.206 4.344
Women 4.884 4.458 4.328 4.482
All 4.826 4.355 4.239 4.384
26
Appendix 2. Estimated perception of performance appraisal
OLS estimates obtained with Stata 9.0
Full sample Leaders Employees
Estimated coefficients a)
Intercept -0.383***
(0.000)
-0.501**
(0.031)
-0.302***
(0.000)
Female 0.092***
(0.000)
0.160***
(0.001)
0.091***
(0.000)
Seniority 1 ( 3 - 10 yrs) -0.018
(0.465)
0.229***
(0.005)
96

-0.056**
(0.037)
Seniority 2 (> 10 yrs) -0.051***
(0.029)
0.131*
(0.084)
-0.093***
(0.000)
CHNG 0.462***
(0.000)
0.322***
(0.000)
0.483***
(0.000)
EXPT 0.368***
(0.000)
0.371***
(0.000)
0.361***
(0.000)
TRID 0.286***
(0.000)
0.371***
(0.000)
0.260***
(0.000)
HSEC -0.087***
(0.000)
-0.061**
(0.234)
-0.089***
97

(0.000)
Model diagnostics
F ( ) 1451.66***
(0.000)
162.47***
(0.000)
1215.11***
(0.000)
R2 0.45 0.37 0.45
RMSE 0.90 0.85 0.91
Obs (#) 12368 1950 10418
*) Significant at 90, **) 95 and ***) 99 per cent confidence level, respectively.
a) p-values in brackets.
27
Appendix 3. Estimated perception of career opportunities
OLS estimates obtained with Stata 9.0
Full sample Leaders Employees
Estimated coefficients a)
Intercept -0.011
(0.844)
-0.489***
(0.004)
0.096***
(0.122)
Female 0.066***
(0.000)
0.030
(0.493)
0.076***
(0.000)
Seniority 1 ( 3 - 10 yrs) -0.194***
98

(0.000)
-0.037
(0.631)
-0.214***
(0.000)
Seniority 2 (> 10 yrs) -0.217***
(0.000)
-0.062
(0.387)
-0.243***
(0.000)
CHNG -0.214***
(0.000)
-0.244***
(0.000)
-0.210***
(0.000)
EXPT 0.738***
(0.000)
0.723***
(0.000)
0.738***
(0.000)
TRID 0.339***
(0.000)
0.422***
(0.000)
0.324***
(0.000)
HSEC 0.151***
(0.000)
99

0.190***
(0.000)
0.146***
(0.000)
Model diagnostics
F()1

100