APPRAISING & REWARDING PERFORMANCE CASE STUDIES

Performance appraisal may be defined as a structured formal

interaction between a subordinate and supervisor, that usually takes the
form of a periodic interview (annual or semi-annual), in which the work
performance of the subordinate is examined and discussed, with a view to
identifying weaknesses and strengths as well as opportunities for
improvement and skills development. Performance appraisal is evaluating an
employees current and/or past performance relative to his or her
performance standard. For most people performance appraisal brings to
mind appraisal tools. However, forms are only part of the appraisal process.
Performance appraisal also assumes that the employee knew what the
performance standards were, and achieved the feedback required to remove
any performance deficiencies. The aim should always be to improve the
employees, and, thereby, the companys performance (Garry Dessler, 1999).
Most organizations maintain their formal evaluation system because
they consider performance evaluation to be fundamental to organizational
effectiveness. It is better to maintain the visibility of a formal program
because; it may help to improve systematically the fairness, validity,
usefulness and reliability of the appraisal process (Schuler 1981). The
purpose of performance appraisal processes are to: (a) control the employee
performance focusing on the past performance, and (b) develop employee to
be an effective performer focusing on the importance of future performance.
Performance appraisal is important from the viewpoints of both the
employee and the organization.
From the employee point of view performance appraisal is important,
because: (a) employee can modify his work behavior to become a more
effective performer, and (b) it increases the likelihood of receiving increase
compensation and/or recognition. From the organizational point of view it is
important, because: (a) it is used to provide a basis for making decisions on
promotion, transfer, demotion, and termination, (b) it is used as a criterion
for validating selection devices and training programs, (c) it is used to
allocate rewards to employees, and (d) it is used to justify feedback to
individuals to aid their personal and career development and accordingly to
help assure organizational effectiveness (Kane and Lawler 1979).

I.

Performance Appraisal Process of Oil and Gas Companies in

Oman: A Case Study on Oman National Oil Company
Recently lots of oil and gas companies in Oman have lost many of their
employees to their competitors. A shortage of labor skills has emerged in the
oil and gas industry. As a consequence of this shortage retaining top
performance employees is becoming a major concern for many oil and gas
companies. Retention cannot be achieved without motivation. This case
addresses the question of what motivates employees in the oil and gas
industry? A premium Oman based Oil Company as a case study is
investigated. Results show that main factors that motivate employees in this
company are good performance appraisal, recognition, empowerment and
good supervision style. This study concludes that although money is
important in a competitive market environment; however non-monetary
factors also play a major role in motivating oil and gas employees than
monetary factors.
In order to understand why performance appraisal is becoming an
issue in the oil and gas companies in Oman, there is a need to understand
the recent changes in this industry. A critical analysis shows that there are
many external factors that lead to this issue, first, few years back there used
to be only one large oil company which is the National Oil Company. There
was no competition in the market, however with the new government
initiative to increase production, now there are many local and international
oil and gas companies and a number of related industries entering the
Omani market. As the level of competition increased, employees started
leaving national companies and even Government employment to these new
companies. It is important to indicate that national companies have
restrictions on salary increases and cannot compete easily with private and
international companies. Second, the increased number of local and
international oil companies entering the Omani market, meant that shortage
of labor skills in the Omani market became more critical. This phenomenon is
not only excluded to the Omani market but it is a worldwide phenomena.
Third, the cost of hiring an Omani with an experience of 10 years is
approximately half of that recruiting an expatriate; this increased the
demand for the Omani in the local market. All these factors combined have
led many employees leaving their employers and hence the issue of
motivation and retention has emerged.

A sample of employees was chosen for one of the oil and gas
companies in the country. The design of the survey was divided into sections
with each section focusing on one aspects of appraisal.
The first section focuses on what motivates employees in the work
place. The objective was to see which factors really motivate individuals in
the oil and gas industry and their ranking of importance. Is it really money?
And what other factors that might contribute to the appraisal of employees
in the work place?
The second section concentrates on the role of supervisors; it asks the
engineers questions of wither their supervisors understood their needs and if
supervisors were a factor in their appraisal. Most engineers are impacted by
their immediate supervisors and the role of supervisors is essential in
motivating them.
The third section investigates performance appraisal and whether
engineers feel that the appraisal performance is fair and looks at the
effectiveness of feedback mechanisms. This is an important element in
employees career progression and retention. If employees do not feel that
they were appraised fairly and did not get the promotion they deserve, this
will ultimately create the feeling of undervalued and hence employees
ending up leaving the company.
The forth section focuses on empowerment and investigates if
engineers were empowered and involved in making key decisions in the
organization. An important message a manager need to know is that to loose
an employee, you only need to make him feel unwelcome or unwanted. The
feeling of isolation creates the need to look somewhere else even if the pay
in the company is high. Another dimension to motivate employees is to
empower them and make them feel as part of the decision making process
and responsible for the decisions made in the organization.
The fifth section focuses on training and development. It assesses the
usefulness of the training courses, the importance of continues learning and
development and the opportunities this can open for career progression in a
company.
The study focused on which situations where the employees were
highly motivated. These situations were then grouped into categories such
as achievement or salary and benefit packages. Results show that 25 % of
respondents rate recognition both formal and informal as the first element

that leads to their motivation as shown. The second element is salary and
benefit packages with 15 %, with career progression, interesting and
challenging job with equal percentage of 9 % and achievement with 7 % as
being third, fourth and fifth accordingly. Other important factors are also
included such as learning and development, empowerment, working
condition, job security, good work life balance, transparency and respect
from superior. It is very interesting to witness that recognition has exceeded
salary and benefit packages with a significant 10 % point difference. This
result is very powerful in showing that managers should not always assume
to know what their employees needs, instead they should ask their
employees and conducting a survey is one of the ways to find out these
needs. In addition, these results show that non-monetary factors matter
much more to employees than monetary factors. Factors such as interesting
and challenging job, empowerment, good work life balance and respect
requires no investment. Managers need to switch their focus on to these
factors as tools to motivate their employees.

Figure 1: Profile of respondents including departments, education level,

gender and years of experience
Source: http://www.ogbus.ru/eng

Recognition is important; however the form of recognition matters.

Company need to know that it is not enough to recognize employees but how
you recognize them makes a big difference. The next question aimed at
finding what forms of recognition that are preferred by employees. Results
shows that 15 % of respondents prefer money as a way of recognition as
their first ranking followed by job promotion with 14 %, professional
development with 12 %, benefit such as housing loan as 11 % and
Excellence awards with 8 %. It is interesting to note that even though
monetary forms of recognition are important, however this cannot be
generalized to all individuals in the company. Many firms clearly fail to see
these forms and only fall in the trap of assuming that it is only money that
employees want. Many would aim for non-monetary gains such as Excellence
Awards, professional development, public praise, thank you notes and
increased responsibility.

Figure 1: Recognition Forms

Source: http://www.ogbus.ru/eng

Also another interesting feature that appears from the result is that
many oil companies focus on the recognition forms such as service award
and employee of the month, while ignoring a form such as public praise and
simple thank you notes. Results show that thanking and acknowledging
employees has more value than handing service awards for completing
certain number of years. Many of the current practices as author witnessed

still focus on the service award, employee of the month and ignore the
importance of public praise and thank you note.

II.

Performance Appraisal Process of Oil and Gas Companies in

Norway: A Case Study on 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 Statoil offers a reward concept that includes both
intangible benefits such as professional development and more tangible
rewards such as a employment benefits dependent upon position, role and in
some cases, geographic location. Appraisals of individual performance are
based not only on specific delivery, but also on social behaviour. As a part of
the corporate management system, People@Statoil is the process
designed to manage people, performance, development and deployment.
This process is common to the whole organisation, and runs on an annual
cycle. Goals relating to individual 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. The scope
of our study is to investigate factors behind perceptions regarding
performance appraisal and career opportunities.
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 strict links to observables or measurable phenomena. Second,
the design of this statement is not appropriate for independent assessments
of individual or group performance. 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 shed light on potential explanatory factors
behind the implied degree of acceptance and contentment with Statoils
system of reward and recognition in a broader context.

Figure 2: Average scores from Statoils Global People Survey 2006

Source: StatOil Hydro

III.

Performance Appraisal Process of Pharmaceutical Companies in

Bangladesh: A Case Study on GlaxoSmithKline Bangladesh
Limited
There is greater recognition that distinctive competencies are obtained
through highly developed employee skills, distinctive organizational cultures,
management processes and systems. To attain such recognitions human
resource plays a key role and one of the important aspects of the human
resource process affiliated with the above objective is performance appraisal
process. In this study an attempt has been made to understand the
performance appraisal process of pharmaceutical companies in Bangladesh
and GlaxoSmithKline (GSK) Bangladesh Ltd.; a subsidiary of GlaxoSmithKline
plc. has been taken as a case study in this regard. The repercussion of this
study reveals the performance appraisal process and eventually concludes
with some implications for pharmaceutical companies of Bangladesh to make
the present performance appraisal process more effective and objective
oriented. In todays intensely competitive and global marketplace,
competitive advantage lies not just in differentiating a product or service or
in becoming the low cost leader but in also being able to tap the companys
special skills or core competencies. Thereby skilled and efficient employees
of a company are now considered as one of the core competencies of the
company. Especially for pharmaceutical industry skilled and efficient
employees are must as it requires specialized, technical and, scientific
knowledge and expertise and there is zero tolerance in terms of developing
quality products & services. To attain such objectives, the human resource
plays a vital role and one of the most used tools by human resource in order
to ensure skilled and efficient employees is performance appraisal.
From the employee point of view performance appraisal is important,
because: (a) employee can modify his work behavior to become a more
effective performer, and (b) it increases the likelihood of receiving increase
compensation and/or recognition. From the organizational point of view it is
important, because: (a) it is used to provide a basis for making decisions on
promotion, transfer, demotion, and termination, (b) it is used as a criterion
for validating selection devices and training programs, (c) it is used to
allocate rewards to employees, and (d) it is used to justify feedback to
individuals to aid their personal and career development and accordingly to
help assure organizational effectiveness (Kane and Lawler 1979).

For directors and managers appraisal process, GSK Bangladesh Ltd.

used a standard performance appraisal form that is known as Performance
and Development Plan (PDP) followed & practiced by all GSK International
affiliates. Apart from that for top executives they followed the talent review
or successor planning process through this appraisal process. Overall they
followed the overall process of Management by Objectives (MBO) method.
Performance and Development Planning (PDP) is an important step in the
global effort to engage and enable employees to deliver their contribution to
GSK's business success. Equally as important, PDP serves to enable
employees to identify
The following guidelines have been enforced throughout GSK for using
and storing the data of PDP:
It allows the employee to monitor and track their progress against their
yearly objectives and development plan.
The annual review portion of the form will feed into GSK's compensation
process as a variable for both bonus and salary increases.
The information form may be used in the talent review process to provide
feedback to the employee on their career development and to allow GSK
Management to forecast the future talent needs of the corporation.
These criteria are there to ensure what the employee wants to do, by
when and at what level of quality. Also it determines what to do in order to
exceed his or her manager's expectations. Talent Review is another form of
appraises the performance of top-level i.e. executive employee. The purpose
of Talent Review is to focus on the development of leaders to meet future
business challenges and to make key talent more visible across GSK. The
process also ensures that organizational changes are anticipated and
successors identified. Both PDP & Talent Review are designed to help retain
key talent. In world class organizations, top performers are motivated by
challenging work that is aligned with corporate objectives, opportunities to
learn and develop, and compensation packages that reflect their
performance.