Performance Appraisal Of HBL Commerce Essay

Performance Appraisal means to evaluate employees present performance and according to the standards given.At HBL performance appraisal is formal interaction between supervisor/ Manager and employees in an organized way. At HBL performance Appraisal conducted annually for all the employees. Appraisal is conducted by line manager and directors are appraised by CEO which further appraised by the chairman of the bank. If we look towards the branches of banks located in different areas, each branch manager evaluate the performance of their employees of their particular branch by keep on connecting with line manager which evaluate employees who conducted these performance evaluation. Line manager forward to regional office where he sends to human resource department where all appraisals are finalized and issued.

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HBL use KPI’s or targets which they give annually to employees as a criteria such as business results, customers and employees) to appraise their employees and measure their employee performance by observation the achieved targets out of 100% which is standard or a benchmark that is quality of work, team work, goal fulfillments, performance, customer services, behavior with colleagues and supervisors/managers and growth.
HBL process of performance appraisal system is they define their expectations, and then they measure or evaluate and provide feedback and hence their performance recorded. They judge their employee on achieving the annual targets which have provided them to achieve, even manager’s evaluate the performance of employee by behavior of employees and punctuality and how productive they are, how knowledgeable employees are or are they satisfying their employees by giving time to them and the way they dress up.
HBL has assigned different weight ages out of 100, employee doing more than 100 or achieving target more than the benchmark that is an excellent job employee performing but if employee performing average discussion takes place between manager and its subordinate if employee becomes defensive, manager could easily sort out through his managerial skills.
HR is responsible for training of supervisors to improve their appraisal skills.
HBL use GRAPHICAL RATING SCALE METHOD or RANKING METHOD for appraising performance of an employee. HBL’s Graphic Rating Scale method appraisal form contains three sheets; one is FORM B1, FORM B2, and FORM B3.
Form B1: contains information about employees or the criteria through which employee should appraise.
Form B2: contains two points through which they evaluate performance, i.e., FACTORS through which they determine if employee is productive or how the job is performing or the employee knows how to use technology he is being assessed and to see how responsive is an employee towards customers and motivated or dedicated to work and even employees are appraised through the factor of their own personality, i.e., how punctual employee is, behavior, personal hygiene. Even another criteria is determined on the B2 Form is the level of achievement s points being 4 the highest or 1 the least in form of grading A the highest which is 4 and D the lowest consider 1.
FORM B3: This form contains the supervisor comments or evaluate the overall performance by given the grading(A,B,C,D) and appraise the comments in the form of agree/disagree then after evaluation is finalized in form signatures take by supervisor who conducted and send to the Hr department.
HBL even use Ranking method to appraise their employees in which ranks employee from best to worst on the characteristics and skills. It is the most popular method, in which firstly, list all subordinates to be rated and in this method those names are not included which are well enough to rank. In ranking form indicates the employee measures on highest and lowest, then, choose the next highest and the next lowest.
HBL also use Forced Distribution Method is also call bell curved. In this method you place given percentages of ratees into different performance categories. By forced distribution method as demonstrated by manager for example that manager must rate its employees under him according to following distribution: 10% low, 20% below average, 40%average, 20% above average, 10%high.. It reflects the normal curve, a small percentage of group is to be placed on (best and worst performers) larger percentages of ratees are placed toward the middle of the performance distribution. It is used for high executive level – Vice president and above him in HBL.A separate bell curve is developed according to function/branch category/division and group.
MBO (Management By Objectives) also used by HBL in which objectives are told to the management and employees what targets they have to achieve. This method is easy to evaluate the performance of employees according to the goals and objectives have been told to them and how much they achieved. HBL use MBO to increase performance. MBO includes tracking and feedback in the process to reach objectives and also for pay for performance.
Steps of MBO:
STEP1: Review organizational objectives
HBL’s objective is to make customer satisfy and to create value for them.
STEP2: Set Objectives
To earn profit for the organization
STEP3: Monitor progress
•Less complaints
•Timely service is provided
•Monthly revenue and cost
STEP4: Evaluate performance
How efficiently or effectively employee achieve his goals and targets Then his/ her appraised with the goals allocated as benchmark to achieve
 STEP5: Give rewards
•Special salary increase
•Cash price
Problems HBL goes through while making performance appraisal are the employee participation, feedback-seeking and unclear goals and standards, regency effects. Promotable or UN -promotable appraisal interviews both conducted in HBL.
Performance management is the process to identify, measure, and develop the performance of the employees in an organization. Basically we are trying to figure out how well employees perform and then to ultimately improve that performance level. When used correctly, performance management is a systematic analysis and measurement of worker performance (including communication of that assessment to the individual) that we use to improve performance over time.
Performance management at HBL is a forward looking process for setting goals and regularly checking progress towards achieving those goals. At HBL it is a continual feedback process whereby the observed outputs are measured and compared with the desired goals. Performance management ensures that goals are consistently being met. Performance management at HBL is to evaluate employees to reach their goals and through which company performs better .In HBL’s performance management model employees are given opportunities to work on harder projects, paired less-skilled employees with expert employees and employees can direct and make decisions. At HBL growth does not matter but performance does.
Tools used by HBL for performance management are:
Developmental goal setting
Ongoing performance monitoring
Ongoing feedback
Coaching and support
Performance appraisal
Rewards, recognition, and compensation
At HBL if employee performing good he gets an increment of 10% annually. They monthly evaluate the performance which is effective for the employees to work best. Managers and Supervisors keep on giving their constructive feedback to increase employee’s performance.
HBL performance management system covers all employees under the function sales, operational, finance, Hr, administration.
Purpose of Performance Management System
To access the performance
Basis for reward (Increment Bonus)
Basis for promotion Placement
Ascertain training and development needs
The results of process measured by with the will help in measuring the performance, based on balanced measure approach and to standardize format across the organization, which is the ranking method or graphical rating method, it depends on employee performance on average, below average, low or good.
HR performance Management System helps in increasing profit and Reducing Hr turnover.HR measured their satisfaction level through exit interview which can be good, excellent or poor. There is no involvement of stakeholders in ensuring performance management system.
There are some flaws in the appraisal system of the bank. In appraisal form of the bank the supervisor enjoy great powers. No body can check his evaluation. The
Appraise and appraiser does not sit before each other when supervisor evaluates the performance of the employees.
An employee does not have the right to appeal against the supervisor on how he had been marked.
The appraisal form should be based according to the Relevance material, Reliability Acceptability.
The employees should have right to appeal against the supervisor if he thinks that he is wrongly evaluated.

Performance appraisal in business

Why do firms undertake performance appraisal? What are the implications of orthodox and radical critiques of performance appraisal for the effective design of performance appraisal systems?
Every organisation has some goals and to achieve those goals organisation hire people who can perform as per their standards to enable the organisation achieve its mission and vision. So performance is the key to achieve organisational goals. But to keep records and to analyse the performance, organisation needs to follow a specific processes which is known as “Performance Appraisal”. The important aspect for an organisation is not just to recruit good employees but also to retain them. Good working environment, promotions, career growth, rewards and recognition in return of their good performance will automatically retain the employees with the organisation. It is essential for an organisation to undertake different activities so that their employees feel motivated and give their best to the organisation. To increase employees’ morale and performance resulting in better productivity, organisations should undertake performance appraisal system.
”Performance appraisal systems are formal methods of planning and evaluating employee’s performance which involve employee interviewing.”(Strategy and human resource management, Peter Boxall and john John Purcell, palgrave Palgrave macmillanMacmillan)
Performance management is one, which links organisations, individual and departmental goals together. It performs many functions like deciding upon incentives and rewards to the employees on the basis of their performance and establishing good relations between the employees and the organisation. Performance appraisal is a part of performance management. It organises the working environment in such a manner so that the best results can be obtained.(performance management handout gvn in class) Another The objectives of performance appraisal are is to encourage the employees for open communication so that they can directly communicate with the each other and the management. It helps in providing feedback and recognition for their performance. The process of Performance appraisal also provides them the knowledge understanding of the skills required for the particular job which is assigned to them, i.ei.e. the basic requirements for the job and expectations of the organisation. It also helps in determining the need of training for the employees for developing their skills and working environment. Performance appraisal identifies the problem areas for improvement, then providing adequate solutions for the same and also set goals to be achieved in the coming year.

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Performance appraisal can be done with the help of formal meetings between manager and employee. In that meeting manager shares feedback, set their goals for the coming year and decide how to achieve them by meeting deadlines. There are more methods of measuring the performance of the employees which will serves as a basis for the rewards, recognitions, benefits and also the pay hikes. Then there are radical critique and orthodox critique of performance appraisal and we will focus on the implications of these critiques on the design of performance appraisal system.
“ The performance appraisal is often the central pillar of performance management and our a performance management survey carried out in 2004 found that 65 per cent of organisations used individual annual appraisal, 27 per cent used twice-yearly appraisals and 10 percent used rolling appraisals”. (
How firms conduct performance appraisal:
Most of the organisations conduct the performance appraisal by taking into account the key elements like Measurement, Feedback, Positive reinforcement, exchange of views and agreement. Measurement means that the performance of an individual is measured against the specified goals and objectives. Feedback includes positive and negative aspects of the employee’s performance. In positive reinforcement acknowledgement is given to worker about the work they did well and the areas of improvement. Manager also exchange his views openly with the employee s so that they can feel motivated and can improve their performance. Agreement is also a key element in which all the persons are agreed on the same topic and jointly solve the problems. (
Techniques of performance appraisal:
Following are the different techniques for performance appraisal: Graphic rating scale, Straight ranking method, management by objective, field review, critical incidents, essay appraisal methods and 360 degree appraisal .(
The first one is Graphic rating scale this methods involves measuring the performance of an employee on the scale of yes, no or outstanding to un – satisfactory level. In this we measure performance on the basis of the rating scale.
Straight ranking method is used to compare the performance of one employee with the other employees. Ranking is given one by one after making comparison with the other employees , after this the final ranking is given on the basis of overall comparison.( Management by objective is that method which helps a manager and employee to agree on the same objectives an d then employee work on the towards the same. They need to show regular performance to the manager and on the basis of that performance the managers give s ranking to the employee by comparing the performance with the agreed objectives.(
Field review is a method in which , head of the department ask s from their supervisors that give the feedback of their subordinates and rate their performance. (naukihub) Critical incidents methods are those in which the analysis of an employee’s performance is done on the basis of their behaviour in a critical situation , then the negative or positive feedback is given on the basis of their reactions.
The other method of doing the performance appraisal is 360 degree method , this method is widely used by managers and employees in every organisations. In this method views of customers, colleagues, and subordinates are taken for the performance appraisal process and then a 360 degree review is prepared. After this a final opinion of manager is taken to complete the employees feedback. This method is used globally for the performance appraisal .(
Reasons to conduct performance appraisal:
According to the work place employee relationship survey(WERS), it was noted that formal performance appraisal were conducted in 79 percent of workplaces, with appraisal being slightly common in public sector (83percent)than the private sector (77 percent). Armstrong and baron (2004) survey showed that 87 percent of the respondents operated a formal performance management process, 65 percent are were planning to introduced this system in over next two years.
” According to IRS survey, the main visible reasons of adopting the performance appraisal vary but ultimate aim being continued organisational growth. As per the study, that the 87 percent of the organisation has adopted it for identifying the needs of training and development where as 82 percent used to evaluate the performance of an individual employee, 32 percent to ensure that the communication between supervisors and employees is good and 19 percent used that for taking desiciondecision regarding the performance rewards. After Studying the survey we can see that performance appraisal serves multiple objectives for the employers. (Stephen bach Bach managing human resources)
On the basis of the above survey following are the reasons to conduct performance appraisal :
Performance appraisal helps in deciding the percentage of increment in the salaries of the employees. By performance appraisal evaluation of performance is done for the whole year and then on the basis of that evaluation, management decides the percentage of hike provided to the employees.
Basis of promotions, ie.i.e., by the process of performance appraisal, management do analysis and then decides to whom the promotion should be given .Those employees who have shown the outstanding performance in the whole year will may be rewarded with the promotion . It is also used in providing the fair and reliable judgement on the performance of the various employees so employees that they can rely on that judgement and receives benefits according to that.
Another reason is that it helps an organisation in setting the goals and objectives for the coming year. Performance appraisal helps in assigning the task, roles, authorities and responsibility to the employees for the coming year on the basis of their previous year performance. It also helps the organisation in enhancing the performance of the employees and motivating them to work and achieve new targets and goals.
Another important reason for performance appraisal is Other reasons i s to let the employees know that where they are standing on the expectations of the organisations. In other words, employees become aware of the expectation of the organisation and whether they are meeting the expectation of management or not.
Another reason is to provide feedback to the employees, so that employees they can improve their performance in future and will get to know about their strength and weaknesses, is equally important role of the appraisal process. Performance appraisalIt also helps in identifying the need of training to the employees for their personal development and for their good performance. (ppt saved)
How firms conduct performance appraisal:
Most of the organisations conduct the performance appraisal by taking into account the key elements like Measurement, Feedback, Positive reinforcement, exchange of views and agreement. ‘Measurement’ means that the performance of an individual is measured against the specified goals and objectives. ‘ Feedback ‘ includes positive and negative aspects of the employee’s performance. In ‘Positive R einforcement ‘ acknowledgement is given to worker about the work they did well and the areas of improvement. Manager also ‘exchanges his views ” openly with the employees so that they can feel motivated and can improve their performance. ‘Agreement’ is also a key element in which all the persons are agreed on the same topic and jointly solve the problems. (
Techniques of performance appraisal:
Following are some of the techniques for performance appraisal : Graphic rating scale, Straight ranking method, management by objective, field review, critical incidents, essay appraisal methods and 360 degree appraisal .(
The first one is Graphic rating scale this methods involves measuring the performance of an employee on the scale of yes, no or outstanding to un-satisfactory level. It measure s employee’s performance on the basis of the rating scale.
Straight ranking method is used to compare the performance of one employee with the other employees. Ranking is given one by one after making comparison with the other employees, after this the final ranking is given on the basis of overall comparison. (
Management by objective is that method which helps a manager and employee s to agree on the same objectives and then employee work towards the same. They need to show regular performance to the manager and on the basis of that performance the manager gives ranking to the employee by comparing the performance with the agreed objectives. (
Field review is a method in which, head of the department asks from their supervisors to give feedback of their subordinates and rate their performance. (naukihub)
Critical incidents methods are those in which the analysis of an employee’s performance is done on the basis of their behaviour in a critical situation, and then the negative or positive feedback is given on the basis of their reactions.
The other method of doing the performance appraisal is 360 degree method . T his method is widely used by managers and employees in organisations. In this method views of customers, colleagues, and subordinates are taken for the performance appraisal process and then a 360 degree review is prepared. After this a final opinion of manager is taken to complete the employe r’ s feedback. This method is used globally for the performance appraisal. (
the 360 degree feedback is based on important implications this is that with the help of different feedbacks an employee can know that where their performance is lacking it helps in increasing the self awareness of an employee, and with the self awareness an employee can easily increase his/her performance.
There are so many reasons of doing the 360 degree appraisal. This appraisal is important because it increases the moral of an employee and gives them the courage of continuous improvement in their work. Another is feedback from the different persons helps in easily accepting for the because it is more valid. the information gathered through this appraisal method is used to do further planning in the organisations.
It also helps in giving the efficient framework for assessment and with the help of this framework employees can improve their further performance. It also helps in directly communications between the employee and with colleagues, customers, managers by giving and receiving the feedback. This type of appraisal system is best specially for customer oriented organisations so that the customers feedback is also taken while doing the appraisal of an employee.
Effect of performance appraisal on employeesemployees’ attitude:
Employees Employees’ attitude plays a very important role in every organisations. When the attitude of employees it is positive is positive then they will be satisfied with their job and if their attitude is negative than they will not be satisfiedthey may create unhealthy environment in the peer group. Employees attitude depend on various factors like pay, promotion opportunities, aspirations, instrumental benefits, needs, working conditions ,co-workers and supervisors .
N ow we discuss that how performance appraisal affect the behaviour of an employee’s so that they can work effectively for the organisations as well as to satisfying their personal needs.
Research studies show that employees are likely to feel more satisfied with their appraisal result if they have the chance to talk freely and discuss their performance. It is also more likely that such employees will be better able to meet future performance goals.(Nemoroff, journal of occupational psychology,Vol-52,25-34).
Studies by researchers shows that if freedom is given to an employee to talk and discuss the performance than they will be more satisfied with their appraisals because they don’t have any doubt in their minds regarding their appraisal and it also leads to improvement in employees future performance for the organisational goals. (Nemoroff, journal of occupational psychology,Vol-52,25-34)
As per Bannister notes, it is important that the appraiser be well-informed and credible. If it is so, employees are more likely to view the appraisal process as accurate and fair. They also express more higher acceptance of the appraiser’s feedback and a greater willingness to change.
According to Bannister ,an appraisal should be reliable and open in front of the employee, so that they came to know that the appraisal is correct and reasonable and also they will accept with more belief. it is very important to include an employee in their performance appraisal so that they can gain more trust on the appraisal process conducted by the organisation.
Orthodox and radical critiques of performance appraisal:
Performance appraisal process is increasingly being used by organisations. Every organisation uses the performance appraisal as tool to motivate their employees and to achieve organisational goals. This process is used in the both public and private sector organisations. But the said assessment process or Performance Appraisal process faces another question – whether the outcome should be allowed to be driven by the characteristics of the appraiser or quantifiable checks and processes should drive it?But on one hand performance appraisal is gaining the popularity on the other hand there are some critiques, who are raising question on the design of “performance appraisal system “.These are two diverse approaches are the Orthodox critiques and Radical critiques.
The orthodox Orthodox cCritique
Orthodox critique says that there are imperfections in the design of performance appraisal and the implementation of performance appraisal is also not favourable for employees as well as for organisation . organisation. Orthodox frame work of management is based on subjectivity, ie.i.e., we can say that this process is more over a subjective process of qualitative thus lacking on the actual quantification through the assessment. When management is evaluating the performance of an employee and judging on his/her own perceptions rather than following a process or a set of rules then it will result in a subjective decision. So, orthodox critique can results in a bias decision. (class notes)
Sometime manager is the only individual who has to perform many tasks such as performance evaluation, providing feedback, trainings, etc. So as he/she is facing administrative difficulties, this can may result in skewed outcome of the affect performance appraisal process.(class notes)
The halo effect assessment in orthodox critiqu e means i Individual’s impression can impact on the his performance assessment is termed as “halo effect assessment”. This means that if a manager has some positive impression about an employee just because of one instance then he will rate that employee high on performance rating scale, whether he deserves it or not. Same can happen if manager has some negative impression for an employee then he will assign a negative score on performance rating scale whether this employee is good on other things.(class notes)
In orthodox critiques we find doppelganger effect, which means that when we go through the whole performance appraisal data, we find similarities in various aspects between the manager who is doing performance appraisal and the employee who’s appraisal is done. So, here we find that the manager wants to promote or praise only those employees who’swhose attitude and behaviours matches his own attitude and behaviour. So, we can say that sometimes manager give rewards and recognition only to those employees who are alike him and score them high on performance appraisal scale.(class notes)
Sometime we find that supervisors are showing favouritism to few subordinates just because of their personal relation. This favouritism and personal relation is not related to performance, capability or qualification of the employee and will results in cronyism. Crony effect can affect the performance of the other employees as they know that manager is doing favour to an employee and this will ultimately affect the organisation. If an performance appraisal is done by orthodox critiques then the appraisal will result in de motivation of employees, misuse of data, issues of trust, complexity in working processes, etc. (
The radical critique
Radical critique is totally different from orthodox critiques. In radical critiques there is no place for subjectivity. In radical critiques the manager who is doing performance appraisal always follows rules and regulations of the performance appraisal cycle. In this the performance appraisal is done by management without concerning about that individual employee, what concerns to them is performance, qualification, and capability of the employee.
In radical critiques performance appraisal is more paper based process, in other words we can say that while doing performance appraisal manager scores the employee on the basis of data which he has in records about his performance. (class notes)
As employees knows that their management is based on radical approach, they always obey to the rules and regulations of the organisation. Under this type of performance appraisal employees become more disciplined, active, capable, efficient and always try to initiate new approaches in the organisation. (class notes)
Performance appraisal is based upon facts and figures which makes working environment more transparent. Data which is used for performance appraisal is timely updated so that whatever employees are delivering would be recorded without any discrepancy or delay. More reliability is there in radical critiques. Feedbacks which are provided by the manager to the employees are acceptable and reliable thus results in an open discussion between manager and employee. Open discussion after the feedback always motivate employees to improve themselves and work efficiently to achieve his goals as well as organisational goals.(class notes)
Chances of bias decision are less. Manager can not show any favouritism to any employee as he has to support his decision with data. Because performance analysis is totally based on practicality there is a full control of management over employees behaviour and working patterns which will provide employees a standardise working platform and thus reduce employees conflicts , struggle or opposition.(class notes)
Individualism is observed in radical critiques as all the decisions are taken by an individual. All the rules , patterns, working conditions, goals, etc in performance appraisal cycle are framed by individual for group of employees .(ortho & redcl pdf)Mutual benefit also become doubtful sometimes, that is whether the performance appraisal process is beneficial for both manager and employee or not. Because the evaluating pattern and assessment methods are decided by individual.(orthdx & red pdf)
There is a assumption In radical critiques that there should be a consistent reaction of both the manager and employee towards scores of appraisal ratings. It is assumed because the whole performance appraisal process is based on data and facts which are there in records.(class notes)
From the above discussion it is become clear that meaning of performance appraisal is an integral part for the continued growth strategy of the organisation. Visible , how organisation conduct performance appraisal with the help of different techniques and methods of performance appraisal. There are so many rreasons to for conducting performance appraisal like range from salary increments, promotionsemployee satisfaction (through increments, promotions, etc.), initiatives required to increase productivity (through trainings and skill enhancement) to better communication (360o feedback). etc. and pPerformance appraisal also affect employees attitude towards the work and organisation. Orthodox and radical critiques of performance appraisal and implications of Orthodox and radical critiques in different organisations.
When performance appraisals are done well, then they will result in a motivating the employees to thus resulting in improvede their performance. When the performance assessment feedback is provided by the manager to the employee it will provide a chance for an open communication between them. Because of performance appraisal process employees got to know about their areas of improvement, strengths and weaknesses. Performance appraisal provide an opportunity to the manager to know his subordinates more closely and to find whether subordinates need any training for their development. Employees got to know that what organisation expects from them and where they stand. Performance appraisal helps in setting goals for the employees as well as for the organisations for coming year and helps in framing strategies about how to achieve those goals.
And Conversely, if performanceif performance appraisals are done poorly then they will may result in negative enviornment. When employees are not satisfied with the performance appraisal and the feedback provided by their supervisors are is not satisfactory and reliable then they will may react in a provocative way. They may become de-motivated, start thinking negatively and waste their time in correcting the management and policies. It can also results in conflicts as employees may raise questions on management’s work, their approach, policies, attitude and working strategies. Importance of both quantitative as well as qualitative approaches (Orthodox & Radical critique) can not be ignored. Proportionate mix for the two may differ based on the field / sector / segment of the organisation. For example, a completely process driven organisation may want to have higher allocation to quantitative approach. Whereas, a sales organisation might want a mix of the two, as personal preferences of the supervisor will have direct impact on the sales productivity.
So it is necessary for an organisation to do performance appraisals in a right manner to achieve organisational goals and employees retention and satisfaction.

Boxall, P., Jhon, P.,(2003) Strategy and Human Resource Management. New York : PALGRAVE MACMILLAN
Bach, S., (2005) ‘Managing Human Resources’,(5th edn). Australia: BLACKWELL PUBLISHING
Marchington, M., Wilkinson, A.,(2008) ‘Human Resource Management At Work’,(4th edn). LONDON : Chartered Institute Of Personnel Development.,2009. CIPD.Performance Appraisal. Accessed on 3rd December 2009. of Performance Appraisal.Accessed on 5th December 2009. of Performance Appraisal.Accessed on 5th December2009.
Khatri,N.,E.W.K.,Tsang.2003. Antecedents and Consequences of Cronyism in Organizations.Journal of business ethics.Vol 43., N0 4,6th December 2009.289-303.
Forde,J.,2009.Performance Appraisal and Performance Management,Lecture notes distributed in LUBS 5330M.Human Resource Management, University Of leeds Business school,9 November
Napier.A., Garwood,S.,2009.Performance Appraisals for Professional Staff.Unpublished Effects of Performance Appraisal on Employees Attitude. accessed on 7th december


The importance of investment appraisal

Investment appraisal helps the investors or the financial institutes to identify the attractiveness of any investment proposal among different available methods, for instance IRR (Internal Rate of Return), NPV (Net Present Value), Payback period etc. Investment Appraisal is a fundamental body of Capital Budgeting which is also applicable in the areas where the return may not be quantifiable. Investment Appraisal is important as because it shows the investors to calculate the outcome of the investment. Furthermore, with the help of Investment Appraisal the investors can easily identify the best or most profitable option among the available alternatives. (Investment Appraisal, [n.d.]).

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(b) What is the payback period of each project? If AP Ltd imposes a 3 year maximum payback period which of these projects should be accepted?
The payback period is the time frame required to recover the invested amount. In the case of the cash flows with an annuity (same amount in each year), then payback period can be easily calculated by dividing the cost by the annual cash flow. Otherwise we subtract the cash flows from the cost until the remainder is zero. For any sort of investment firms prefer short payback period as the investment can be used somewhere else. Generally, firms maintain some maximum allowable payback period against which all investments are compared. It is a popular method as is quick and easy to calculate and importantly it gives a measure of the liquidity of the project. (Timothy R. Mayes, [n.d.])
Payback Period for Project A:
Cash Flow
Cumulative Cash Flow
The payback period for Project A= 2+ (115000-80000)/48000= 2+ 0.73= 2.73 years
Payback Period for Project B:
As this is a constant stream of cash flow, the payback period for Project B
= 115000/43000= 2.67 years
Both the projects can be accepted, If AP Ltd imposes a 3 year maximum payback. But between these two projects, B will be preferred over A.
(c) What are the problems of the payback period?
Though the payback method provides real usefulness by providing information on how long funds will be engaged in the project it suffers from two primary problems:
Payback Period does not consider the time value of money: In this calculation, Cash Flows are simply added without discounting. This violates the most basic principle of financial analysis which stipulates that cash flows occurring at different points can be considered only after suitable compounding/ discounting. (V S RAMA RAO, 2008)
This measure does not consider a project’s profitability. It is just a measure of a project’s capital recovery.
Though it measures a project’s liquidity, it does not indicate the liquidity position of the firm as a whole. (V S RAMA RAO, 2008)
The payback period method leads to ignore projects generating substantial cash inflows in later years. (Sarma, Deepak, nd)
(d) Determine the NPV for each of these projects? Should they be accepted – explain why?
Project A:
Cash Flow
Discount Factor
Net Present Value
So, Profit = Total Inflow- Initial Investment
= 175,459.16-115,000.00
= 60459.17
As the NPV of Project A seems a profitable one (Project’s NPV is bigger than the Initial Investment) it can be accepted.
Project B:
Cash Flow
Discount Factor
Net Present Value
So, Profit = Total Inflow- Initial Investment
= 156944.74- 115000
= 41944.74
As the NPV of Project B seems a profitable one (Project’s NPV is bigger than the Initial Investment), it can be accepted.
(e) Describe the logic behind the NPV approach.
The net present value (NPV) is the difference between the present value of the cash flows (the benefit) and the cost of the investment (IO):
In other words, this is the projected increase in wealth that the shareholders will receive out of any accepted project. All projects with NPV greater than or equal to zero should be accepted. A project with positive Net Present Value means the IRR is greater than the Weighted Average Cost of Capital (WACC).
NPV, Net Present Value, allows you to value a company’s assets at their correct current value when the accounts are prepared. The calculation of NPV takes into account the assets original cost, less all accumulated depreciation allowed against that asset in previous tax computations.
“The NPV method is based on a logical approach. An NPV of zero signifies that the project’s cash flows are exactly sufficient to repay the invested capital and to provide the required rate of return on that capital.” If NPV > 0, then the project is generating a larger amount of cash that required to service debt and to allow a return to shareholders. So if the firm takes on projects that have positive net present values (NPV) then the wealth of shareholders will increase, enticing them to increase their investment in the firm”.
The NPV method of capital budgeting dictates that all independent projects that have positive NPV should accepted. The rationale that is behind that assertion arises from the idea that all such projects add wealth, and that should be the overall goal of the manager in all respects. If strictly using the NPV method to evaluate two mutually exclusive projects, you would want to accept the project that adds the most value (i.e. the project with the higher NPV).
“Net present value is defined as a way to improve the effectiveness of project evaluations through the use of discounted cash flow techniques. To find the present value of a project, you must first find the present value of each cash flow discounted at the cost of capital. Then, sum the discounted cash flows. If the NPV is positive, accept the project. If NPV is negative, reject the project. It is important to remember that if two projects are mutually exclusive, the project that has the higher NPV should be selected”.
Net present value is defined as a way to improve the effectiveness of project evaluations through the use of discounted cash flow techniques. To find the present value of a project, you must first find the present value of each cash flow discounted at the cost of capital. Then, sum the discounted cash flows. If the NPV is positive, accept the project. If NPV is negative, reject the project. It is important to remember that if two projects are mutually exclusive, the project that has the higher NPV should be selected”
(f) Discuss the relationship between NPV and cost of capital.
NPV has a direct impact on the capital budgeting decision. These two factors are directly inter-related.
NPV NPV = 0 implies IRR = Cost of Capital: Provides the minimum return. Probably reject from the cash flow perspective. Others factors could be important.
NPV > 0 implies IRR > Cost of Capital: Screen in for further analysis. Other investments may provide better returns and capital should be rationed, i.e., go to the most profitable projects. Others factors could be important.
(g) Calculate the IRR for each project. Should they be accepted?
IRR of Project A:
NPV at 25%
Cash Flow
Discount Factor
Initial Investment
Net Present Value at 25%
NPV at 30%
Cash Flow
Discount Factor
Initial Investment
Net Present Value at 30%
So, IRR For Project A = 25%+ {10.2736/(10.2736+2.7097)} x (30%-25%)
As the IRR of Project A is a positive one, it can be accepted, considering the remaining factors constant.
IRR of Project B:
Net Present Value at 25%:
Discount Factor
Initial Investment
Net Present Value at 25%
Discount Factor
Initial Investment
Net Present Value at 30%
So, IRR For Project A = 25%+ {6390/(6390+102705)} x (30%-25%)
= 25% +0.29%
As the IRR of Project B is a positive one, it can be accepted, considering the remaining factors constant.
(h) How does a change in the cost of capital affect the project’s IRR?
“The internal rate of return (IRR) is considered as the discount rate that nullify the present value of a particular project’s projected cash inflows to the present value of the projects cost (interest rate) or equivalently, the IRR is the rate that forces the NPV to equal zero”
The discount rate often used in capital budgeting that makes the net present value of all cash flows from a particular project equal to zero. Generally speaking, the higher a project’s internal rate of return, the more desirable it is to undertake the project. As such, IRR can be used to rank several prospective projects a firm is considering. Assuming all other factors are equal among the various projects, the project with the highest IRR would probably be considered the best and undertaken first.
The logic behind the IRR method is:
The IRR on a project is its measured rate of return. If the internal rate of return exceeds the cost of the funds used to finance the project, a surplus will remain after paying for the capital, and this surplus will accrue to the firm’s stockholders
Therefore, taking on a project who’s IRR exceeds its cost of capital increases shareholders’ wealth. On the other hand, if the IRR is less than the cost of capital, then taking on the project will impose a cost on current stockholders. It is this “breakeven” characteristic that makes the IRR useful in evaluating capital projects.”
(i) Discuss why the NPV method is often regarded to be superior to the IRR method?
The IRR is defined as the discount rate that equates the present values of a project’s expected cash inflows to the present value of the project’s costs” (Page 351). Additionally, “when dealing with independent projects, the NPV and IRR methods will always yield the same accept/reject result. ‘However, in the case of mutually exclusive projects, NPV and IRR can give conflicting results. One shortcoming of the internal rate of return is that it assumes that cash flows received are reinvested at the project’s internal rate of return, which is not usually true
A conflict exists if the cost of capital is less than the crossover rate. Two basic conditions can cause NPV profiles to cross, and thus conflicts to arise between NPV and IRR:
(1) when project size (or scale) differences exist, meaning that the cost of one project is largest than that of the other, or
(2) when timing differences exist, meaning that the timing of cash flows from the two projects differs such that most of the cash flows from one project come in the early years while most of the cash flows from the other project come in the later years (Page 355)
The value of early cash flows depends on the return we can earn on those cash flows, that is the rate at which we can reinvest them. “The NPV method implicitly assumes that the rate at which cash flows can be reinvested is the cost of capital, whereas the IRR method assumes that the firm can reinvest at the IRR” (Page 355). Because of the above criteria The NPV method is considered as more reliable method than IRR. The best assumption is that the projects’ cash flows can be reinvested at the cost of capital (Page 355).
The IRR is a popular technique primarily because it is a percentage which is easily compared to the WACC. However, it suffers from a couple of flaws:
The calculation of the IRR implicitly assumes that the cash flows are reinvested at the IRR. This may not always be realistic.
Percentages can be misleading (would you rather earn 100% on a $100 investment, or 10% on a $10,000 investment?)
Using both measures gives better results than using either alone. IRR is also useful alone in virtually all time-value-of-money problems.

Critical Appraisal Role Of Physiotherapy Health And Social Care Essay

The aim of this assignment is to critically appraise the scientific research paper “The role of physiotherapy in the treatement of subacromial impingement syndrome” by Dickens, Williams & Bhamra (2005) while detailing the objectives of the paper, research methods used and the outcomes of the research findings.
What is the scientific paper is about?
The aims of the research paper according to Dickens Williams & Bhamara (2005:1) was to investiagte the effectiveness of a physiotherapy programme in patients with subacromial impingement syndrome.
This paper did not outline specific modalities and was reliant on convincing the reader that physiotherapy should be viewed as a first line management for subacromial impingement syndrome against the present orthepedic view which would swing towards operative intervention as the corrective action.
The paper was published by Elsevier for the Chartered Society of Physiotherapy by a combined group of physiotherapists and Orthepedic surgeons and was funded by the Physiotherapy Research Foundation. When combined these groups may lead the paper to be viewed as self servicing and lead the reader to pinpoint a lack of impartiality.
Patients for the research where taken from a waiting list for surgery for subacromial impingement syndrome. Each of these patients was independently reviewed by surgeon James L Williams, a coauthor of the paper, and had “underwent three steroid injections into the subacromial space, given at 6-weekly intervals as part of an exisiting protocol” (Dickens et al, 2005:160).
The study was conducted in a randomised fashion in that the eighty five clients were selected by giving a client on a surgical waiting list an envelope that had within it either control or physiotherapy, 45 joined the physiotherapy group while 40 joined the control group. There were 100 envelopes split 50:50 between the groups which leads the reader to believe this may have been quasi-randomised.

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In order to assess physiotherapy without bias clients who had previous physiotherpay treatement were excluded from the study according to Dickens et al. Also clients with signs of “cervical radiculopathy, adhesive capsulitis or clinically obvious rotator cuff tears … or a grade III subacromial spur on their shoulder suprasinatus outlet radiograph” (Dickens et al, 2005:160). The randomised fashion was administered by human administrators and not via a computerised system.
A control group was used and this group had no alternative but to continue on towards surgical intervention, this created a bias for this group since the probability for having surgical intervention was P-1.
Intitially the group of patients numbered eighty five patients from an initial set of 100 envelopes. 9 of the initial 40 patients in the control group refused to attend the repeat assessmemt at the end of the program, 3 of the physiotherapy group dropped out for social reasons leaving 42 partcipating in there group. Due to the substantial number of dropouts weight must be given to the emergence of unfairness to any comparsion portrayed in the paper.
Follow up occurred after a 6 month period and performed by James L Williams, a coauthor of the paper, and may not have been blind since he could have easily discussed whether “they felt they still needed surgery” (Dickens et al, 2005:161).
How the study was designed?
The aims of the research paper according to Dickens Williams & Bhamara (2005:1) was to investigate the effectiveness of a physiotherapy programme in patients with subacromial impingement syndrome. According to the Webster dictionary the word effectiveness means “to produce a desired effect”, the desired effect is not established in the aim. This ambiguity around the aim of the paper leaves any conclusion open to interpretation by the reader. When the paper is read in its entirety you could potentially interpret the aim as conveying the message that physiotherapy should be first line management for subacromial impingement therefore moving interventive surgery to second line.
There is no published pilot data therefore we cannot correctly establish if the sample size for the scientific paper is justified. We do know that the randomisation process catered for 100 patients, 100 envelopes, of which only 85 were taken up, 72 patients successfully making it to the reassessement stage.
The age ranges within the groups have relevance to the outcome of the scientific research. We only have a mean age of each group without an reference to outliers who could affect the statistical data. It is clear that the more junior males respond better under all conditions. This contradicts the statement “the two groups were well matched for age, sex and initial constant score” (Dickens et al, 2005:161).
The probability values (p-values) have been averaged (pThis lack of depth in the data provided does not allow the reader to establish if a null hypothesis was proved and may lead them to believe this was pure coincidence. Scientific research should always start from the null hypothesis point of view to ensure impartiality.
The selection process for patients, waiting list for surgery, post steroid injection, exclusion of specific pathologies, clinical history and examination meant the group may have been skewed to fulfill the authors aims. Steriod injections can provide an improvement in subacromial impingement due to it’s anti-inflammatory effect. The selection process did not seem to take into account the duration nor the severity of the impingement syndrome on the individual nor if they were receiving treatment from other practitioners not listed.
There is no detailed information regarding the treatment programme dispensed to the physiotherapy patients. If a specific treatment programme had been documented and applied to all patients in this group more quantative data and allowed the research to be replicated and potentially validated by other authors. This would have also allowed the treatments to be cross referenced with socio demographic data from each patient and establish sub sets within the master data.
We are unsure how the null findings are interpreted since the authors do not detail this. Nor have they given any data around the chi-squared test. Probability values are give in a round format (pThe constant score has a low systematic error but is not reliable for clinical follow up in patients.The constant scores taken at the start of the research were based on 85 patients not on the same 72 patients whom allowed themselves to be reassessed at the end of the programme. This lead to a lack of confidence in the method used by the authors to compare pre and post programme data, they may not have itemised which data belonged to each patient and therefore could not remove this anomoly.
The involvement of James L Williams in the reassessment process ensured a lack of blinding and a bias, though the authors clearly did not see this position “the follow up assessments were performed by JLW in a blinded situation” (Dickens et al, 2005:162). All assessments should have been performed by a validated third party reusing the initial assessment criteria.
Since we have no detailed information about the modalities utilised, treatment cycles matched with socio demographic information there is no clinical relevance to the outcomes. To have clinical relevance the process needs to be reproducable which is highly unlikely based on the information presented in the scientific paper.
How was the study conducted?
A quasi-randomised human administer method of 100 envelopes split evenly between the control and physiotherapy groups were handed out to 85 patients. All 85patients were told that participation on the programme would not affect there standing on a waiting list for surgery. This promise may have affected participation since they would have already been convinced of the necessity for surgery by an orthepedic surgeon.
The dropping out of patients in both groups weakened the statistical data which the paper relies upon and imbalanced any findings. Interpreting clinical programmes requires greater participants reducing any potential for the play of chance.
How was the study analysed and were there limitation and errors in the study?
Each treatment group should have been similar based on age, sex, duration of syndrome, decrease in range of movement and similar capacities to perform the home care plan. Based on the information conveyed in the paper we must assume none of these points were established and therefore does not allowed for each group to have a comparable baseline. The quasi-randomised allocation of each patient to a group ensured that the treatment groups were not comparable.
Since all participants stayed within their allocated groups we can establish that the intention was for the results to be analysed by intention to treat. Unfortunately there were patient withdrawals from the programme which would allow to construe that the comparision of treatments would no longer be fair. Also the treatment received within the physiotherapy group as a whole may have differed from individual to individual but no patient moved between groups.
Not enough importance was placed on statistical information like the control group having members who improved, yet were not involved in the physiotherapy programme. Also confounding may have occured due to the pre programme steroid injection. Steroid injections are interrelated to anti inflammatory improvements in a range of impingement syndromes. The report had no reference to any confidence intervals which would have ensured the removal of the chance effect and imporved the significance of any statistics.
The lack of statistical data in table format and the reliance on prose within the paper show the paper to be more a marketing document than a reliable source of data. Quantative data tables would have allowed the reader to view and validate the authors outcomes. This lack of independence in data lead the reader to wonder does the data actually support the outcome. The approach of only conveying ‘results’ taken by the authors, could create suspicion in the mind of the reader, undermines the credibility of the paper.
Side effects are an important factor in all scientific research papers. What if the side effect of the treatment modalities outwayed the alternative approach taken by the control group. Effectiveness of treatment and a lesser set of side effects would need to be established against the control group to ensure there is no bias. Since there is no mention of side effects for either groups we can only assume that the authors wished to purposefully withhold this information. This factor only would ensure that it clinical relevant is negated.
How would you interpret the study and what if any are the implications of the study for your practice?
The main finding “confirms that a physiotherapy programme is of benefit” (Dickens et al, 2005:163) does not confirm the objective of the scientific paper. All the paper conveys is that there are successful alternatives to surgery for a subset of the population. There are too many pervasive factors to rely on the statistical significance of the data put forward by the authors. No true finding can be extracted from the paper and it portrays a message set by the authors who went out to prove it.
Therefore I cannot see any attempt by the authors to perform a null hypothesis test which should have been their approach. The only assumption to an attempt at a null hypothesis is the assumption that at the outset of the programme no difference existed between all patients in each group. Other alternatives could account for the 11 physiotherapy group patients improving, steriod injection, age, change in lifestyle etc.
This overlooking of the steroid injection pre programme participation has a major impact on the validity of the results. The severity and duration of the syndrome on the patient could potentially have an impact of any ‘positive’ results. The research funder being a physiotherapy organisation has may have had an effect on the interpretation of data. The length of gap between the post surgery and final step in the physiotherapy programme and final assessment may have had an effect on the results. Rehabilitation programmes may not have been adhered to during this period. Why not take periodical assessements every fortnight over the final 6 month period? We also do not know how the drop outs from the programme affect the data use to support the outcome. We can only assume if this data was removed the outcome may have not supported the objective and therefore shown the physiotherapy is not or no more effective than surgery.
Alarmingly this scientific research paper references 26 papers published prior to 2000, the oldest being from 1973, while only 5 papers are based between 200 and the time of release of the paper. This points to either a lack of interest in the particular field or a selective extraction of papers to support the authors objective. Normally supporting information referencing in other reports should be relatively up to date and from journals of quality.
Ideally a research paper should look to changing your clinical practice. This paper does not provide me with any rational to change nor if it had a credible case would I understand what I should be changing. Since I cannot replicate the treatment modalities used within the study I cannot change practise nor would I recommend another practioner to perform the same.

Performance Appraisal: Textile Sector

The present study was under taken with such a task in mind and it aims at unearthing the strengths and weakness of the current performance appraisal system in textile industry Coimbatore that is prevalent in the organization that sponsored this research work.
Since organizations exist to achieve goals. The degree of success that individual employees have in reaching their individuals goals is important in determining organizational effectiveness. The assessment of how successful employees have been at meeting their individual goals, therefore, becomes a critical part of Human Resource Management. This leads us to the topic of Performance Appraisal.
This project aims at knowing ‘Performance Appraisal System” in this research has studied the work atmosphere and the welfare measures provided by the organization.
It also aims at finding out the employee’s relationship with the management.
This survey is done within the organization. The sample size is 110. The data was collected by administering questionnaire and by adopting direct personal contact method. The persons met are all employees of the industry.
Collections of data were analyzed and tabulated in a sequential manner and the interpretations are given along with the tabulation. The conclusion observations are also given in this report for the improvement of this system in the organization.
Key Words: Appraiser, Self – reliant, Appraisal, Judgmental, Distributive, Interactional
The performance appraisal plays a vital role in identifying the productivity of workers; it also helps the company for its overall growth. It is the systematic evaluation of the performance of employees and to understand the abilities of a person for further growth and development. Performance appraisal is generally done in systematic ways which are as follows, the supervisors measure the pay of employees and compare it with targets and plans, the supervisor analyses the factor behind work performance of employees, and the employees are in the position to guide the employees for a better performance. In India, Textile Industry is one of the oldest and foremost industries and it provides tremendous opportunities for employment and huge amount as revenue. The Indian Government is also playing a major role in promoting the textile industries. Cotton is the most popular fiber and used to make clothing. Textile Industry is providing one of the most basic needs of people and it hold importance. Maintain sustained growth for improving quality of life. It has a unique position as a self-reliant industry, from the production of raw materials to the delivery of finished products, with substantial value-addition at each stage of processing; it is a major contribution to the country’s economy.

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Coimbatore is called the “South Indian Manchester”. The climate in Coimbatore city is very favorable for the development of textile industries. The easy availability of raw materials, sufficient skilled laborers, humid and soft wind prevailing in Coimbatore district are the other major factors for the development of the textile industry in Coimbatore. There are 98 textile firms in Coimbatore district in which few of the industry are taken into account for the study on the same. India has abundant natural resources in terms of availability of natural fibers like cotton, silk, wool etc. India is the third largest producer of cotton in the world and accounts for about 12% of the total world production. The availability of cheap cotton has been one of the biggest advantages to Indian exporters.
To study about the employees’ opinion about performance appraisal.
To gain practical knowledge about the various factors that forms part of performance appraisal
To study about how they view the present appraisal method
To provide opportunities for the employee’s to express their ideas
Mowday, R.T., Steers, R.M., Porter, L.M. 1979 an employee’s perception of justice in the performance appraisal process will also affect the effectiveness of the performance appraisal process. Justice is thought to have three categories, procedural, distributive, and interactional justice. In a performance appraisal setting, a lack of justice in one area is predicted to have the same effect as a violation of justice in all areas. If an employee perceives that the system processes are fair, the supervisor’s efforts to distribute rewards and punishments based on outcomes of the process, and that the employee is treated fairly, the employee’s perception of justice will be high.
Craig Eric Schneier and Richard W. Beatty, July 1979 Despite its standard practice in most public and private organizations for more than 50 years, performance appraisal still has many problems. Raters show resistance to criticizing subordinates, and the judgmental aspect of evaluating human performance is subject to both covert (subjective and individual) and overt (prejudice and bias) errors. Raters often aren’t trained in employee counseling and may be forced to conduct performance appraisals with inadequate or erroneous information about rate performance.
American Institutes for Research, Washington, D.C.: AIR, 1979 In a 1984 study in New England, 16 raters (Extension administrators designated by their state Extension director as having agent performance appraisal responsibility) completed EABRARS on 141 rural New England Extension agents.5 Reliability analysis of the total ratings indicated that EABRARS was an internally consistent, highly reliable instrument. Differences between New England agents were detected at the .05 confidence level with respect to age, subject-matter area, years of experience, and state of employment.
Nemeroff & Wexley, 1979 study shows that employees are likely to feel more satisfied with their appraisal result if they have the chance to talk freely and discuss their performance. It is also more likely that such employees will be better able to meet future performance goals. Employees are also more likely to feel that the appraisal process is fair if they are given a chance to talk about their performance. This especially, when they are permitted to challenge and appeal against their evaluation. Proper feedback has to be given about their performance to the appraises.
Robert M. Guion, the State of the Art, November 5-6, 1982, pp. 3-4Twenty years ago, nearly all civil servants in the central government of OECD member countries were paid according to service-incremental salary scales. This is not to say that civil servants previously lacked performance incentives. Promotions, and especially those into senior management, were rigorously controlled, serving partly as an incentive but partly also as a way of ensuring the independence of the public service with regard to the executive and thus its ability to serve governments of different political persuasions. Remuneration has been seen as an alternative or a complementary incentive to promotion. Socio-economic pressures have led to the need for types of incentives other than “promotion” to strengthen performance management.
Craig Eric Schneier and Richard W. Beatty, May 1988 To try to rectify some of the problems, Smith and Kendall developed Behaviorally Anchored Rating Scales, better known as BARS. The BARS format deals with measurable behaviors, not personality, provides raters and rates with clear statements of performance goals, and is based on a specific, thorough job analysis. Using BARS, raters focus on specific rate behaviors. These behaviors are compared to specific examples (job dimensions and anchors developed from the job analysis) that provide concrete benchmarks for making appraisal judgments. BARS are mainly used to measure the behaviors of rates.
Dulewicz (1989), “a basic human tendency to make judgments about those one is working with, as well as about oneself.” Appraisal, it seems, is both inevitable and universal. In the absence of a carefully structured system of appraisal, people will tend to judge the work performance of others, including subordinates, naturally, informally and arbitrarily.
This study, by Heneman, Greenberger & Anonyou (1989) reported that in groupers are subordinates who seem to be favored by their supervisors. In their relationship with the boss, they enjoy “a high degree of trust, interaction, support and rewards.”
Tsui, A.S. & O’Reilly, C.A. 1989 most studies focus on the performance appraisal where the supervisor evaluates his or her employees. In this paper, based upon two research projects, we look at both sides of the coin. In one study subordinates evaluated their supervisors, in the other one the focus was upon supervisors’ perception of their subordinates. The contribution aims to determine whether age-related stereotyping plays a significant role in performance appraisals. In both studies, it was determined whether the assesses age is negatively related with the assessor’s view on his or her competencies. Age is taken into consideration for appraisal rating in the above study.
Longenecker (1989) argues that accuracy in performance appraisal is impossible to achieve, since people play social and political games, and they protect their own interests. “No savvy manager…”, says Longenecker, “… is going to use the appraisal process to shoot himself or herself in the foot.”Accuracy in performance appraisal is a major drawback to the system.
Recent research (Bannister & Balkin, 1990) has reported that appraisees’ seem to have greater acceptance of the appraisal process, and feel more satisfied with it, when the process is directly linked to rewards. Such findings are a serious challenge to those who feel that appraisal results and reward outcomes must be strictly isolated from each other. Rewards and work performance are directly linked with each other.
The study was more of a descriptive in nature and it was the survey research design that was used in, by taking a sample of elements at one point of time. The researcher adopted this type of research design to systematically gather the information from the respondents for the purpose of understanding and predicting some aspects concerned with the performance appraisal system in their organization.
The sample unit of the study was 110 employees of Textile Company in Coimbatore
Primary data: Primary data has been collected through a structured questionnaire.
Secondary data: Secondary data has been collected from the books, journals, project reports and Internet.
Data was collected through structured questionnaire. The questionnaire was divided into three parts
First section dealt with the queries relating to the personal details of the employees
Second section dealt with the queries relating to the awareness about performance appraisal
Third section dealt with queries relating to views about the present appraisal system.
The primary data for the study was collected through structured questionnaire and has been analyzed using percentages and represented by pie charts and bar diagrams are used wherever necessary. Mean score value has also been used.
1) Score value = No. of respondents*score
Mean score value = score value/No. of respondents
2) Percentage value = no of respondents/total no of respondent*100
X2 test is based on the Chi- Square distribution and it is a parametric test. It is used for comparing a sample variance to a theoretical population variance. In a non- parametric test, no assumption about the parameters of the population is made. These tests have become very popular because, they can be applied in any type of distribution, they are easy to compute and they can be used in situations when parametric test cannot be applied.
Conditions to be satisfied for applying chi-square test
Data should have been collected at random.
Items constituting the sample should be independent.
The total number of items should be at least 50.
From the chart above it is understood that most of the employees in textile industry fall under the category of the age group between 46-55 years and also most of the employees are from the under graduate background.
From the chart above it is clearly understood that the workers with more than 10 years of experience only earning a return of Rs. 8001 and more. The employees with more years of service are expected to perform well as they have very good experience in their work.
The ranking of factors given by the respondents show that behavior with peers, dependability, behavior and attitude towards superiors, initiative, and attendance were ranked very high. They felt those factors have to be given higher weightages in the appraisal form. There are respondents who have ranked quality of work and cooperation on lower side. There were respondents who felt that all the factors in the appraisal system should be given equal weightage and there was no meaning in awarding high weightages to few factors.
The above table clearly shows that opportunities to increase job satisfaction, need of appraisal for employee, encouragement by raters and knowledge about the appraisal system, are high for employees. Assistance by organization, monetary reward unbiased assessment and satisfaction with the present system were rated average. This may be due to reasons like the employees are not given feedback about their performance since it is maintained confidentially. But the need of appraisal, knowledge about system, encouragement and opportunities to employees were rated high because they want to know about their work performance.
Null hypothesis (Ho): There is no significant relationship between gender and years of service.
Alternative hypothesis (H1): There is a close relationship between gender and years of service.
The result that the calculated value is less than the tabulated value, we accept the null hypothesis. Therefore, there is no significant difference between the gender and years of service.
The result that the calculated value is more than the tabulated value, we reject the null hypothesis and accept the alternative hypothesis. Therefore there is a significant difference between the marital status and monthly income.
From the study it if found out that, most of the respondents feel that the appraisal system creates confidence and hence increase the production level of the employees which in turn will increase their income in one hand. Many employees in the textile industry are not aware of the errors that is caused by performance appraisal like halo effect, horns effect, central tendency and leniency. Majority of them have no idea about errors and its types in the appraisal system. Good training can help improve the appraisal system to prevent errors while rating. Raters are expected to observe the performance in order to judge ones effectiveness and skill in the work condition. Also the superior should avoid bias in appraising their subordinates. The system could be made open to a possible extent and discussions could be encouraged. The employees can come to know about their performance appraisal, how are they rated and what other improvements they can do to their performance. The organization might take up steps to arrange discussions and make the employee aware of how he is getting along and what improvements he needs, where and how he can best utilize his capabilities and skills. Most traditional methods emphasize either the task or the personality of the individual while making an appraisal. In such evaluations, bias always prevails. To bring about a balance the evaluation of task and personality and the modern methods of appraisal by results of MBO can be used.
Performance appraisal motivates employees and influences their productivity and ensures that they are producing at acceptable levels. Performance evaluation system could be linked to company objectives to get better results and good performance of the employees. Effectiveness of any appraisal system depends on how all the users of the system understand the purposes, accept and strive for achieving them. For designing any system, employee and managerial performance should be taken into consideration. From the study, it is found that feedback to the employees is not proper in the organization. Periodical and routine feedback can be given to the employees for their good performance in the work, which motivates the employee to enrich the relationship between the superiors and subordinates.

The Performance Appraisal Systems Performance

The research explores the effect of performance appraisal on performance of employees and in turn on companies as well. The purpose considers the operation of Shell in UK and Pakistan to enhance its employee performance. Furthermore, the academic requirement, the research aim and question are specified in literature available on performance appraisal system. Also with the supporting of related theory available by book s, journals, articles and surveys, the critical review of literature is made in all the aspects of topic and concept of performance appraisal system and its relationship to drive performance.

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The self administered questionnaire is distributed among the selected sample, like Shell UK and Shell Pakistan staff members, also a telephonic interview from the top mangers helped in collection of the required data. Than data is analyzed through different ways of comparison and contrasts. Finally the general recommendation of research findings is made on the current performance appraisal system and main driver of employee performance which company and employee wants.
The study seeks to examine ‘Analyze performance appraisal system and its impact on employees’ performance working in different working environments ‘a case study of Royal Dutch Shell retail specific to operation in UK and PAKISTAN. In the 1980s Western world observed the achievement of Japanese organizations. The main factor identified for this success was the recognition and proper utilization of their work force. This has subjective the key practitioners and writers of western countries and they also start considering the significance of proper management of their work force, they name this management, Human Resource Management or HRM.
Most the organization is no longer rely on the fixed resource of capital and technology to achieve competitive advantage in fast changing and highly competitive environment(sparrow et ,1994).its mainly on the hiring and skilled retention, devoted and motivated employees that will give an organization a competitive edge. To improve the effectiveness of their employee’s organization are more focusing on the management of their human resources. According to Boxall and Purcell (2003) when the human resource practices are aligned to an organization business strategy it become more effective. Furthermore, McCourt and Eldridge (2003) propose the integration of individual human resource practices so that they balance each other.Nonaka and Takeuchi (1995) and Collins and Porras (2004) highlight organizations which have successfully aligned their human resource practices with business strategy. Unfortunately, for many organizations the effective human resources management is still problematic.
Therefore Bratton and Gold (1999), state that performance appraisal (pa) in organization is a continuous and problematic process which is not liked by both mangers and employees. According to Latham and Wexley (1994) performance appraisal is like a seatbelt which still necessary, is unpopular. Lawler et (1995) suggest that since it is noticed that performance appraisal fulfilled the needs of organization and the individual, which are different, performance appraisal will always be characterised by differences in purpose, miscommunications and ineffectiveness. Fletcher (2004) states that many organization move away with the effective performance appraisal. The term performance appraisal will be used in this study to consign to the appraisal practice. Different organization called this on different names such as performance evaluation, performance review, performance rating ,employee evaluation and employee appraisal (ivancevich ,1995).after finding that employee performance can affect largely on productivity of organization ,they continue to endeavour to find out the most effective way of managing its human resources. Performance appraisal is human resource practice used by organization for the development of their employee to best output potential and overall enhancement of an organization’s performance and efficiency.
Shell is known for exploring and producing oil and natural gas products and also famous for retail stations. Shell transport and trade oil and gas product for heavy industrial uses includes fuel and lubricant for ships and planes. Many other activities includes wind power, electricity production, and making solar panels, producing petrochemicals which are used for coatings,plastics and detergents, and build up new technology for hydrogen vehicles .More importantly, approximately 3% of the world’s oil and approximately 3.5% of the world’s gas is produced by Shell companies, similar to other major private oil and gas companies (Shell, 2005).
Using royal Dutch shell plc for research study is because it is international group of energy and petrochemicals companies, operating in more than 145 countries and employing approximately 119,000 people (shell, 2005). They are one of the biggest in the oil sector is known to be listed in the top 50 companies on number one in the world. (Fortune ,Global 500 ,2009).This research is going to look at the concept of HRM, draw up a unified work to examine its role on profitability and growth of businesses, and finally, investigate the current business context with regards to performance appraisal system of Royal Dutch Shell Plc.
Literature review
2.1 Performance appraisal
Performance appraisal is one of the important practices of human resource management started early in 1813 in United states of America ,(Bellows and Estep 1954m cited in wise and Buckley ,1998)so there is increasing interest in and uses of performance appraisal system in the last three decades stated by Murphy and Cleveland ,(1995).therefore extensive literature available on this subject. in spite of this success ,many organization still struggling to make and implement effective performance appraisal system. all the thought given to process ,many of flaws still willful (wise and Buckley ,1998).performance management is a bigger picture in which performance appraisal is located (piggot ,Irvine ,2003),performance management focuses on providing a framework for guiding employee performance towards achieving organizational goals(Torrington et ,2002)performance management is therefore anxious with improving the performance of teams and individual to ensuring the optimal environment is available for their employees to enhance their performance (Armstrong ,2003).
Wilson and westrn, (2003), and Cattell, (1999) argued that performance appraisal is looked in the broader term and that it’s begin in management by objectives, performance management is a continues repeated process of decisive performance expectation, supporting performance, appraising performance and, managing performance standards (Analoui and Fell, 2002). Performance appraisal generally means the annual interview between the manger and employee to discuss the individual’s job performance during the previous 12 months the result of action plans to encourage enhanced performance (Wilson and western, 2001).
Armstrong and Barron (2003) stated that it is easier to achieve the desired goals and objectives when the manger and subordinates clearly know what is expected of them. According to Fletcher (2004), performance appraisal provides a prospect for a manger and for subordinates to discuss the previous performance work on agreed objectives and standards to reach an agreement on how the appraise can enhance job performance.
Performance appraisal is spread in organization since 1960s for employee evaluation, for organization planning purposes, and it is becoming the important element for maximizing the effectiveness of all part of the organization ,from management staffing and development to production and customer services (Creamer and jonosik, 2000).it was used before in this century by larger organization mostly for the administrative purposes (peter and Liang ,2007).
2.2 Why performance appraisal?
Performance appraisal is one of the important among the HRM practices ,many organization is able to measure the development of their employee posture and behavior through the use of appraisal system.teh information which is get by this approach is used for the changing in the selection and training practices to chose and develop employees with the require behavior and attitude. The effectiveness of skilled employee is not in favor unless they are properly motivated to perfume their job (Singh K, 2004). Wan et al (2002) explored that there is encouraging relationship between performance appraisal and employee performance or organizational performance. The basic object of performance appraisal is how productive and employee is and verify the way in which employee productivity can be improved.
2.2 .1 Benefits of performance appraisal to employee
Generally, performance appraisals serve an important purpose in the management of workforce and in achieving the organization objective. From employee perspective, performance appraisal give direction to employee that what exactly their way of required to do the job, also to motivate them to achieve their target and help them to improve their work performance. According to Brown and Heywood, (2005) performance appraisal is formalized way of monitoring the work force and it is proposed to be a management tool to enhance the performance and productivity of worker. Performance appraisal also improves the commitment of employee (Brown and Benson.2003).The Organization needs an appraisal system in order to put their managers in charge of relation to the performance of organization because when employees are given their job responsibilities and duties, then they are liable for these responsibilities.
Also Fletcher (2004) suggested that performance appraisal provide a platform for employees to look forward their tough goals and objectives, which leads them in successful completion of their job. The positive feedback receive from the mangers in appraisal interview will motivate employees in improving their performance likely. Martin and Jackson, (2000) appraisal is also a method of enhancing employee training and development as it provide information about the strength and weaknesses in performance, which create a debate how to improve the performance of employee. In the end it helps the employees to understand their overall contribution in achieving organization goals (Martin and Jackson, 2000).
2.2 .2 Benefits of Performance apprisal to organization
In most of the organization performance appraisal are used to take meaningful decision regarding salary increases, promotion and transfer. Performance appraisal is also the known to be best for the training and consultation of individual employees by their superiors to improve job performance (Wan D et al 2002, Sels L 2003: Singh K, 2004).the performance related pay processes can also be used in integration with appraisal system. There are many ways by which organization will enhance the performance of their employees. They use performance based compensation to give rewards on successful completion on specific organization goals and objectives. Further research has given evidence that compensation to employees help in improving their performance (Gomez -Mejia & wellbourn,1988 ., Milkovich & Boudreau 1998). Another system is the bonus system which can also be used for motivating employee to work towards their achievement of the company (Pfeffer 1994).Empirical studies done and found that there is positive relationship between performance-related pay and overall company performance.
2.3 Problem with performance Appraisal
Deming (2000) stated that performance appraisal is considered to be one of the seven deadly diseases of management practice. He argued that rating employee on individual based was not a suitable way of measuring performance since the working environment is controlled by manager contributes to and affects the way of employee performance. Many problems arise during performance appraisals, some arise from manger side and some from employee, and also some arise from other factors.
2.3 .1 Employee and mangers perception about PA
Mostly employees dislike performance appraisal interview for the fear of uncertainty in handling the questions, fear of criticism, concern about promotion, and also fear because their future job with organization mainly depends upon the outcome of these interviews. Employees see these interviews as validation for those decisions which are already made concerning salaries, promotion and job tenures. Poorly conducted performance appraisal system can more damage the organization environment.
In organization many managers also dislike performance appraisal interviews; it’s difficult for them to explain employees about their poor performance they find it unpleasant and awkward. Some managers fear that performance appraisal gives employees self satisfaction and result in lower of performance. Due to these reasons, they not give any positive information to employees. Another reasons to give regular scheduled for taking appraisal interview. Some manger not involve in seriously performance appraisal they just taking it as job to be completed not a mean of exchanging or sharing suggestion and getting new ideas from their subordinates (Wells and Spinks ,1994).
2.3 .2 Complexity of PA procedure
Armstrong and Baron, (1998) has name performance appraisal as ‘dishonest annual ritual’ because manger and staff disbelieve performance rating with the faith that performance related pay may function unfairly. Some problems with appraisal are known as complex procedure used in assessment, biased elements which bring confusion in the assessment, rewards and progress in the hand of single boss, employees have to work with their appraisers after the appraisal and idea is that performance appraisal aims to limit the collective aspects of work. There are some common problems which are faced by both appraiser and appraise such problem like paperwork; formality of the appraisal process .that’s why performance appraisal has been termed as curse rather than a solution for organization (Taylor, 1998).
2.3.3 Performance appraisal to organization
Grint (1993) argues that due to the subjectivity of performance appraisal is not giving the positive expected result to organization and is unlikely to assist objective appraisals. He indicates that performance appraisal is not as much acceptable to line managers as it is acceptable to human resource managers. However he admits that performance appraisal still play important role in organization. Fletcher (1997) suggests that expecting too much from performance appraisal is danger since it in unlikely solution for all performance problems.
In spite of the criticism, Fletcher (2004), Murphy and Cleveland (1995) argue that performance appraisal is important for improvement performance in organization and Simmons (2002) say again that nobody give reasonable alternative for appraising perfomance.Fletcher (2004), Murphy and Cleveland (1995) suggest that the process that is followed in design and implementation of such a system prohibits effectiveness rather than only performance appraisal is not responsible. Fletcher (2004) further argues that organization spends proper money, time and willing to spend effort can achieved successful performance appraisal system. He also acknowledges though that if organization has an effective performance appraisal system they still have to monitor continuously that system to make sure that it compels all needs of its stakeholders.
2.4 Why performance appraisal fails
Fletcher and Williams (1985) point out that only assessment of people is not only thing involve in appraising person’s work performance. in fact there are two incompatible roles involve in appraisal- these are judge and helper. In its unclear format, foot and Hook (2002) stated that some usual appraisal schemes have been accused of being run for the profit of personnel managers or top managers, with many other people in the organization not really understanding or appreciating what the performance appraisal scheme was trying to achieve.A sample of a typical form for performance appraisal using Management by Objectives (MBO) i.e. (based on objectivity rather than subjectivity) is drawn in appendix a below, that shows that the questions are quite straight forward and seems no direct confusion in terms of understanding:
2.4 .1 Expected many results from PA
Foot and Hook (2002) raised the point that why the performance appraisal fails and where we are mistaken? One major point is that too many purposes are attached to fulfil by the appraisal system. Usually, most of the appraisal schemes drop into one of three categories i.e. they are concerned with performance, potential or reward. Failure to this occurs as they don’t fall into one of the three categories described, but are expected to achieve all three in general.
The recognition of appraisal system downgraded due to the reason that many managers claim that they give this sort of feedback all the time informally, and if they do this well there may indeed be no need for a formal appraisal scheme. Foot and Hook, (2002)
But in general, it is important to say that it is unlikely that all managers in a particular organization will appraise their staff constantly and effectively, so we do not have enough argument against the use of performance appraisal systems.
There are some other flaws in the approach of performance appraisal that are mentioned by Foot and Hook (2002) as below:
Lack of clarity
Linking appraisal with pay
Keeping information secret from the employee
And Subjectivity or attacks on the appraises character
As we now entered into the new millennium, so almost everything is reshaped and rethought for more effective results, so the performance appraisal as well. Mentioned by Stone (2002) that a study by William M. Mercer Consulting in 1995 suggested that 84 per cent of responding companies would continue to use the results of performance appraisals for its further improvement. So it is obvious that performance appraisals will be the keystone of performance management programmes. This studies show that majority of organizations will continue to use some version of these systems with the passage of time.
3 Methodology
This research follows methodology of Saunders (2003) explain the research its in his famous ‘research onion’. The research methodology explained the overall process of implementing research which includes information about how the data will be collected, from whom, who will be included in the collection of data and how the involvement made in research (Saunders,2003).In this research the assessment in detail of findings from the primary research. This will be done through the analysis and discussion of the result obtained through the unstructured interviews and questionnaire which was conduct with various personnel of the shell Pakistan, and Shell UK .The analysis and findings from the primary research, relates to the objective of the research mentioned in the literature review. The primary research findings will be discussed in detail in order to draw conclusions and recommendations, which will discuss in the organizational findings and discussion. In the research a total of 70 questionnaires spread among the targeted sample of shell Pakistan. A total of 28 completed and returned, showing the participation average rate as 47%, which is still a good response rate for questionnaires. The feedback was expected at least 50%; the reason behind was the good management cooperation and the researcher’s good recognition among other employees. The management distributed and recollected the questionnaire in the time frame allotted for this activity and the management also shown their own interest due to the examination of upcoming results to find out the actual root of many problems. In addition to the overall result of the questionnaire, the telephonic interviews were also analyzed to see how it can influence the whole results.
While in Shell UK the same number 70 questionnaires distributed across the selected sample, mainly these questionnaires distributed in the shell retail patrol service stations. in which 35 of them completed and returned, which is the good expected rate of feedback 50 %.the reason is the mangers corporation and organization culture ,which always welcomes these research for the result which gives useful amount of information to the organization to help them in their organization development.
4 Organizations findings and discussion
4.1Organizational Context: Royal-Dutch Shell Group
The ‘Royal Dutch Company for the development of petroleum properly in the Netherlands East indies’ was registered in Hague in 1890.than in 1949 the name is changed to Royal Dutch petroleum company .Shell was first registered back in 1897 by brothers Marcus and Sam Samuel called as ‘the “shell” transport and trading company, Ltd .(now it become PLC ,public limited company ).The first joint operating company Royal-Dutch /shell ,the Asiatic petroleum company was first established in 1903 and in 1907,Royal-Dutch and shell merged their operation respectively ,in 60 % Royal-Dutch ,40 % shell. Even though after merging their interests the main company remain separate: like one can buy share in Royal-Dutch or in Shell-Transport, but not in the Group as such.US oil production increase due to the Group founded the American Gasoline Company to sell gasoline along the pacific coast and also to buy oil in Oklahoma establish the Roxanna petroleum in year 1912.this growth further boost up in 2000 resulting 34 percent earnings from discovery and production and 4 percents is comes from the sales of oil products were generate in USA.(shell .com )(financial report 2009,Royal Dutch shell plc).
4.2 Largest profitable MNCs( multinational corporation)
The Royal Dutch /Shell Group is one of the largest and profitable MNCs in the world (Shell plc ,Annual report 2009 ) .The Anglo -Dutch group of companies is the Royal-Dutch shell group, the two holding companies which own the group is being the shell transport and trading company Plc (UK) and Koninklijke Nederland (Royal Dutch petroleum company, Netherlands).these companies have divided share between them are 40 percent and 60 percent respectively of the following three subsidiaries, which also own them further holding companies for more operating subsidiaries: these are
Shell petroleum NV (Netherland)
Shell petroleum Company LTD (UK)
Shell petroleum Inc.(USA)
4.3 .1 from oil well to the petrol pump
Shell UK is best known for its energy product and services from the oil well to petrol pump, from the pit of North Sea to the warm house throughout UK, shell delivers the energy which full fill the Britain needs. Shell makes major contribution in UK economy, Shell is not just through providing product and services to UK customer ,but also contributes through employment ,investment and tax revenues which boost up economy. Shell has around 8,600 workforces in the UK. In UK energy that is use by millions of people for heating and powering their homes Shell is the major provider of energy in UK.(
4.3.1,2 Upstream business
Shell main upstream business is a leading player in the North Sea for over 30 years. In UK sector of North Sea, shell is giving interest to more than 50 fields, operated in more than 30 installation platforms, 30 subsea installations, three onshore gas plants and a marine terminal. Shell is producing approximately 15 % of UK oil and gas on behalf of its co-ventures.(
4.3.1,3 Downstream business
Shell Downstream business includes 900 shell-branded service stations, operates the second largest refinery in the UK which providing products like premium fuels, chemicals for industry, and V-power patrol. The global headquarters of shell downstream supporting business functions is located on the south bank of the Thames in London. Shell technology centre Thornton, involved the largest community of scientists working on huge range of research projects, and also working on technologies associated with fuels, lubricants, additives, and engineering.(
In term of oil and gas production volumes shell is the largest exploration and manufacturing companies operating in UK. Shell operates major number of its operation in UK continental with the 50:50 joint ventures with ExxonMobil. Mostly UK oil and gas production came from the North Sea .in the Atlantic margin area, shell has an interests as non-operating contributor mainly in the west Shetlands area, which cover area of Schiehallion, Clair and loyal fields.
4.3.2 Shell Pakistan
Bovee, (1997) stated that today work place is completed of the people who differ in race, gender, age, culture, family structure, religion and educational background. Such cultural diversity is the second movement contributing towards the importance of ability of successful communication with people of other cultural. The business messages, how to create, planned, sent, received, and interpreted in the work place is also affected by diversity. (John v, thrill and Courtland, 1977).
4.3.2,1Shell entry in Asia
The brand name ‘Shell’ enjoys a 100-year history in this part of the world, dating back to 1899 when Asiatic Petroleum, the extreme eastern marketing arm of two companies: Shell Transport Company and Royal Dutch Petroleum Company began importing kerosene oil from Azerbaijan into the subcontinent. Even today, the legacy of the past is visible in a storage tank carrying the date – 1898.
4.3.2 ,2 PAKISTAN subcontinent
The known history of Royal Dutch Shell plc in Indo Pakistan subcontinent dates back to 1903 when partnership between the two big companies, The Shell Transport & Trading Company and the Royal Dutch Petroleum Company struck and start supply petroleum to Asia.
In 1928, to increase their distribution capabilities, the marketing interest of Royal Dutch Shell plc and the Burma Oil Company Limited in India were merged and Burma Shell Oil Storage & Distribution Company of India was born. After the independence of Pakistan in 1947, the name was changed to the Burma Shell Oil Distribution Company of Pakistan. In 1970, when 51% of the shareholding was transferred to Pakistani investors, the name changed to Pakistan Burma Shell (PBS) Limited. The Shell and the Burma Groups retained the remaining 49% in equal propositions. In February of 1993, as economic liberalisation began to take root and the Burma divested from PBS, Shell Petroleum stepped into raise its stake to 51%. The years 2001-2 have seen the Shell Petroleum Company successively increasing its share, with the Group now having a 76% stake in Shell Pakistan Ltd (SPL) – an expression of confidence. The company is among one of the best company in the country. The company provides the entire fuel products, competing with the international standards on the standard price.
5 Main findings
After the organizational context the main description of differences in implementation and adaptation of HR practices with the focus on performance appraisal system for their employees while working in the two different business environment ,which is shell UK and shell Pakistan.
In research finding it is clear that the present appraisal system at Shell Pakistan is conducted annually in each and every department of the organisation. Also in findings it is clear that the annual appraisal system at Shell Pakistan consists of a formal appraisal system to evaluate the employee performance. The finding also results in that a very short number of employee 15 % is fully aware of objectives of performance appraisal system, 15 % of wholly respondent fully aware of it means that makes a very weak performance appraisal knowledge base for their recommendation. However, it is clear that in Shell Pakistan there is a significant weakness in conducting of effective training and development programmes by management. As employee working in the ‘Shell Pakistan ‘there is need of more awareness program to let the staff fully aware and get the maximum benefits from it.
While in shell UK also uses formal appraisal system and uses the scorecard for the performance appraisal, employees are rewarded individual performance and also the team achievement in put to sustainability. As comparison to Shell Pakistan, In research findings it is clear that very good percentage number of employee like 40% of wholly respondent is fully aware of performance appraisal and reward management. They know that they can assess on the number of grounds works and will get rewarded according to their individual and group performances. There is also continues training and development program running time to time for the awareness of Shell UK employees. That why employee working for Shell UK is getting much more benefits compare with the employee working for Shell in Pakistan.
Although ‘Shell Pakistan’ has already been practicing it, there still consist some necessary considerations to PRP (Performance Related Pay).Contingent pay covers various methods of providing additional rewards for individuals or teams. As a cost effective factor, stated by Armstrong (2002) that increments may be withheld for unacceptable performance although this is rare, and some structure have a ‘merit bar’ which limits increments unless a defined level of ‘merit’ has been achieved. In the table 1 of appendix has straight merit increments shown as example of merit pay. The increments percentage will depend on total merit pay budget for each performance grade, the number of employee in each performance level and finally their current level of base pay, (John Shields 2007).
One of the best ways of motivation is linking pay directly to employee performance, in Shell UK finding results 70 % of the questioner’s respondents were strongly agree to this statement while 20% agree, 7% disagree and 3 % strongly disagree. It implies that there is need of contingent pay in the company. Even though pay for performance and contingent pay is difficult in mange, but include many methods of providing rewards for individual or team (Armstrong and Stephens, 2002).
Improved team working is one of the core elements in the business strategy for the ‘Shell Pakistan’, so it is good to attach/associate individual performance pay to the performance of individual and teams. On the other hand ensuring that this scheme is distributed fairly so can meet the desired level of performance, competence, contribution or skill and thus improve organizational performance regarding team based tasks while not de-motivating those who cannot currently compete. (Armstrong M, 2002).here HR and operation manager is agree on the point that rewarding those who can meet assured targets is practicing in Shell Pakistan. To maintain these scheme is hard because of political instability in the Pakistan which influence the shell operation .these factor includes limit on production, civil unrest ,international conflicts, and due to local security concern that affect the safe operation of the shell standards in country. Here also employee keen interest in performance pays more than reward because the uncertainty of business environment there is fear of job loss.
While UK economy is one of the best stable economies for business operation, where Shell UK deliver very affective performance appraisal system for their employees. To analyze the performance of team and individual Shell UK have very stable roots in country can focus in increase the business perfor

Performance Appraisal System In Nokia

This report is aimed at critically analysing the performance appraisal and their strategic implications in contemporary firms operating in turbulent and changing business environment, requiring valuable, rare and inimitable business processes to achieve sustainable competitive advantage. In order to achieve the aim of this report, the researcher has chosen Nokia, the Finnish telecom giant that has been highlighted as the best telecommunication company to work for by Forbes International (Datamonitor, 2009). The company is also among one of the largest in terms of market capitalisation within Europe and therefore owes much to the Finnish national culture within its management, especially human resource management. Drawing upon Times (2005), the company has its modest roots as one of the many forestry firms a century ago in Finland; however it has evolved over the years through its effective human resource policies to employ more than 50,000 people across the globe with operations spanning all the developed, emerging and developing economies. It has been argued by Nokia (2009a) that ‘people policies’ have played an important role in the rise of the firm within telecommunication sector that required high degree of creativity and innovation by its employees and workforce. The company is among the few firms within telecommunication industry that has profit margins in excess of 20% to 25% for more than a decade, which have not been effected by the fierce competition by other firms in contemporary firms (Nokia, 2009b). It can therefore be highlighted that intellectual capital has been one of the key source of achieving these efficiencies and effectiveness within the business that have been translated into sustainable competitive advantage.

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Nokia – Organisational Background:
Nokia has held the leadership position within the global mobile handset sector for more than a decade, which has however been challenged at different points in time by a range of other manufacturers but the company has evolved its business model to align itself with the changing business environment. Drawing upon Datamonitor (2009), the company has diversified into related business in the wake of stiff competition from value and luxury segments, therefore requiring both high degree of differentiation and cost leadership by the firm. The company is currently actively pursuing its position within telecommunication equipment, TV set-top boxes, and mobile telephony software and hardware development.
In the light of Nokia (2009c), the company has its roots like many other traditional Finnish companies within forestry in 1865, however the company evolved over the decades and become one of the leading players in mobile technology in 1960’s. It is argued by Pollitt (2004) that the key changes within strategy of the firm came in 1980s when senior management become focused on developing intellectual capital and retaining high performance of the company, which was coupled with public offerings of the firm. The company became part of the global corporations after starting trading in London (1987), Frankfurt (1988) and New York (1994). The company has acquired a number of firms during its evolution and has strategically accumulated the human resources from these firms, which has again benefited from its performance appraisals, pay-for-performance, and talent retention strategies, which have been critically analysed in this report.
Human Resource Strategy:
Nokia has been highlighted by both academic and commercial literature as one of the organisations that can be used for comparison and benchmarking due to the fact that it is flat structured and networked across its global operations (Christopher, 1995). This structure of the firm has led to the fact that it is agile and flexible to grab any window of opportunity that appears within the business environment of the firm. This structure has been aligned with the corporate strategy of the firm to achieve broad market competitive focus within the market that has underlying differentiation competitive advantage in terms of Porter’s Generic Strategies, which can be illustrated as follows:
Cost Leadership
Narrow Target
Lower Cost
Competitive Advantage
Competitive Scope
Nokia’s Position on Porter’s Generic Strategies
Adapted from Porter (1985)
Strategic Core
Strategic Periphery
It can be argued that in order to achieve the strategic aim and objectives of the firm to become an agile and flexible entity that can achieve competitive advantage, the firm required a robust human resource strategy that is in line with these changes. Drawing upon Briscoe & Schuler (2004), there has been radical change within the HRM strategy of the company after the appointment of Mr. Jorma Ollila as the CEO of the firm in 1992, who initiated the pay-for-performance concept within the company. The philosophy behind the refocus of the HRM strategy has been to create a compensation mechanism that in aligned with the performance and hard work of employees, therefore motivating employees to achieve the key performance indicators that are assigned to them. This was aligned with the “Nokia Way”, the values of the firm, which were defined to incorporate performance of employees as one of the key in achieving overall objectives of the firm. It has been argued by Nokia (2009d) that Nokia Way has been seen as the common glue that has held the HRM strategy of the firm aligning it with the business environment. There has been significant discussion within literature highlighting the “best fit” approach of the company towards its retaining talent through appraisals and compensations that are effective and efficient.
Performance Management and Nokia:
The Nokia Way has been highlighted within the literature as one of the key documents consolidating the HRM strategy of Nokia and it is this document that has highlighted retention of high performers. Drawing upon Stanley et al (2000), it can be argued that the document is no different from HRM policies presented by many other organisations; however the way in which it is processed on day to day activities has been highlighted as the key advantage of the firm. Drawing upon Nokia (2009a), performance of individuals working within Nokia is undertaken from a range of dimensions, but three of them are considered very important, which include: (a) overall customer satisfaction added by the individual; (b) respect for others within the team; and (c) achievements of individuals and their continuous learning.
The literature has highlighted that there has been number of issues within management of performance of individuals and their appraisals within companies. Drawing upon Rutter (2002), within Nokia managers and employees have been given high degree of independence in developing the dimensions into quantifiable goals, aims and objectives, which can therefore be related to the overall performance of their team, department and the organisation. This has been because of the initiative of the company to keep entrepreneurism alive within the firm, where the focus is on “getting things done” rather than follow prescriptive steps and procedures.
According to Lynn (2002), these characteristics of performance appraisal have been achieved through a range of in-house programs, which include: “listening to you”, “investing in you” and “pay-for-performance”. The aim of these programs can be seen to be aligned with the overall business strategy of achieving high degree of efficiency and effectiveness of the business, which would therefore help create value for the stakeholders. Erik & Jonathan (1995) have argued that all these programs are a means to an end i.e. to develop an integrated system of performance goals setting, development of strategies to achieve these goals, and quantification of the overall performance. It should be noted that in order for the seamless flow of performance management between these different programs, the culture of the company plays an important role. This is the reason that the company has developed a team orientated internally competitive culture, which deters negative implications of the competition, however highlighting the positive aspects of it to achieve strategic goals and values.
The performance management of the firm also has been expanded into other reigns of HRM, which can be highlighted from the diversity management within the firm. Drawing upon Briscoe & Schuler (2004), it can be argued that the business environment of the company highlights that there is high number of diversity within the demands of the customers across the national markets. In order to fulfil these demands, the company should mimic the business environment in its internal business environment, making its resources and competencies aligned with it. This according to Nokia (2009d) can be achieved through the diversity management and planning of the firm that require performance appraisals to include features and quantification of diversity of thinking. There are number of characteristics that have been highlighted within the literature surrounding performance management in terms of diversity inclusion and management. However, Rutter (2002) has highlighted that it should be achieved at product, functional and cultural level, therefore providing the direction for companies to use and include in their performance management.
The performance appraisals also have to include the achievement of individuals within corporate social responsibility (CSR) area, which has become one of the key criteria for performance at corporate level. Drawing upon Nokia (2009a), in 2009 the company has highlighted that reducing its carbon footprint and making employees to volunteer for educational sectors in developing countries would be included into the performance appraisals of the employees. This would help the firm in achieving high degree of strategic alignment with the current demands of firms to be responsible for the extended social and environmental issues within national and international economies, where they operate.
It can therefore be argued that performance appraisals within Nokia are used as strategic tools, which can help achieve the extended aims and objectives of the firm. It has been argued that these appraisals has helped the firm in retaining intellectual capital that is aligned with the overall philosophy and “Nokia Way”, which have been at the heart of developing sustainable competitive advantage. It can be argued that performance appraisals undertaken by the firm are valuable, rare and inimitable competency of the firm, which contribute a lot in achieving the overall aim and objectives of the company.
Pay for Performance and Motivation:
The review of the commercial literature surrounding performance appraisals has highlighted that at Nokia performance, rewards and motivation management are all interlinked with each other, so that there is an integrated component that can be used to achieve the aim and objectives of the firm. It should be noted that the company uses pay-for-performance as the key tool which logically flows from effective and efficient performance appraisal techniques used by the firm. Harry (1999) has argued that one of the key vulnerability of per-for-performance management systems is that performance needs to be constantly monitored across the business and its functions so that the strategy can work in synch with realities on ground. The reward structure other than pay within Nokia has also been designed in a way that performance appraisals and motivation tendencies of individuals feed into the system to achieve optimal results.
The key issue that has been faced by the management at Nokia is to analyse the performance appraisals of employees working in different economic and social conditions, therefore making their external environment an important driver in how the compensation is perceived. This is the reason there has been discussion surrounding the overall standardisation of the pay and reward structure in the company or localise it according to the national and regional economic conditions. Nokia being a truly global company has therefore been faced with this issue more so than any other organisation, which also stems into the overall reward management and bias of individuals in terms of intrinsic and extrinsic reward structures.
Nokia has therefore taken performance appraisals very seriously, where there are segments within these appraisals, which have been linked with the overall pay and reward structure of the company. It is highlighted that company has included both hard and soft aspects of compensations and rewards in the light of the appraisals (Pfeffer & Langton, 1993). Therefore, it can be argued that the appraisals are not only responsible for the development of overall pay of the individual, but also the type and mix of motivational tools that are applied to their particular performance regimes and trends over the months.
The performance appraisal process adopted by Nokia has been seen very open, broad focused, yet inclusive of employees and their respective teams. The compensation of individuals within Nokia comprises on the results of these appraisals in the form of pay, bonuses, incentives, company stock options and other benefits. The company uses “investing in people” (IIP) as an annual meeting between managers and employees, where discussion surrounding their focused function along with broad company goals are discussed, which are then quantified into the key dimensions that are set out in the light of changing business objectives of the firm. It should be noted that Tahvanainen (1998) has conducted an empirical research on the link between performance appraisals and pay structures at Nokia. The research has highlighted that pay structure within Nokia is considered highly competitive in regards with the other competitors, which is based on 360 degree feedback called “listening to you”, which is an informal discussion between different teams, which leads to making them discuss their objectives and negotiate their access to resources and information, which can help them all in achieving their own respective goals and performance objectives. The company has also rolled out the electronic version of IIP, which uses company’s intranet to discuss and appraise the performance of virtual teams that uses competencies of individuals across the globe to achieve high degree of efficiency and effectiveness in achieving the overall goals of the firm.
Key Recommendations:
The critical review of academic and commercial literature surrounding Nokia’s performance appraisals has been highlighted as a successful model within this report. The critics however argue that in recent developments the company has lost its leadership position within mobile handset sector, which has led to its shifting focus towards other sectors. The strategic development and deployment has both been suggested within the report as key performance indicators of the firm, which has been seen as resulting from open, clear and inclusive performance management and appraisal techniques. In order to further improvise the performance management and its appraisals, the researcher has discussed recommendations in the following discussion.
There have been critics that have argued that although Nokia has strategically aligned its performance management with the aims and objectives of the organisation, however there are still key gaps with its alignment with the business environment, which require attention. It can be argued that although pay-for-performance have its motivating capabilities for the high performers, however for the average performing, which are the majority within any organisation, this can act as a demotivating factor. It can be suggested that Nokia, like any other company would have normal distribution of performance among its employees, suggesting that not more than 15% of the total employee population would be in the high or underperforming categories, while the rest of 85% of workforce would fall into the average performance. This, according to Pfeffer & Langton (1993) has led to the vulnerability within the organisation to alienate these 85% of the workforce, which would add value into the products and services of the company. The performance appraisals should therefore be realistic and standardised across the organisation, where like-for-like comparisons are undertaken, which are abridged between functions to achieve high degree of effectiveness and efficiency.
It can be suggested that the open criteria used within the firm, which boils down to the discussion between managers and employees suggest that each appraisal cannot be compared with the other appraisals, therefore making it hard to compare on like-to-like grounds, which can lead to distortion of performance results. It can also be argued that commercial segment of the company has been one of the high performing section across the firm, which can be due to the fact that sales, revenue and profit margins are quantifiable variables, while performance of employees in support functions is much harder to access through tangible performance indicators, which is also true about these functions. This, according to Storey (1992) can add insecurity among the intellectual capital of the firm regarding their job, pay and other benefits received from the firm. It can therefore be highlighted that the company has to provide the security of pay and then add bonus-per-performance on top of that to make it more plausible in contemporary uncertain times, with job losses and market failures. The internal competition between teams can lead to deterring forces that would affect the overall performance of the company, as team members would engage themselves in negative activities to undercut access to information and resources for other teams, making the organisation lack efficiency and effectiveness.
Conclusive Remarks:
In the light of the critical review of literature and practice of Nokia in the field of performance appraisals, it can be argued that this HRM strategy of the firm has become a source of competitive advantage for the firm. It has been found out that pay-for-performance has only been applicable within Nokia due to the effectiveness and efficiency of the performance appraisal systems, which are seen just, clear and inclusive by employees. The fact that the system is inclusive, the report suggests that it acts as an implicit form of motivation for employees to have a competitive internal business environment, where teams compete to achieve high degree of overall performance for the company. It can be argued that performance appraisal strategy of the firm is in line with its broad focused differentiation based corporate strategy, therefore leading to achieve the strategic goals and objectives.

Appraisal Techniques Available to Finance Managers

‘What are the different appraisal techniques available to finance managers to make decisions relating to investment projects? Discuss each of them and recommend, giving your reasons, which of them you consider as the best technique applicable to your company’.
Investment appraisal also known as capital budgeting. As finance manager one of the important areas of decision-making for the long-term is must to tackle the investment – the need to committed funds by buying buildings, machinery and land. Finance manager have to check of the size of the inflows and outflows of funds, for handling these types of decisions, the degree of risk and the lifespan of the investment cost of obtaining funds are despatched.
The capital budgeting cycle can be summarised in some stage which are as follows:

Expecting investment needs
Identifying project to satisfy needs
Examine the alternatives
Choose the best alternatives
Making the spend
Monitor the project

Looking at investment appraisal involves us in stage 3 and 4 of this cycle. We can classify capital expenditure projects into four broad categories:

Maintenance – replacing old or obsolete assets for example.
Profitability – quality, productivity or location improvement for example.
Expansion – new products, markets and so on.
Indirect – social and welfare facilities.

Even the projects that are unlikely to generate profits should be subjected to investment appraisal. This should help to identify the best way of achieving the project’s aims. So investment appraisal may help to find the cheapest way to provide a new staff restaurant, even though such a project may be unlikely to earn profits for the company.
Investment Appraisal also known as Capital Budgeting is used to assess whether capital
Expenditure on a particular project will be beneficial for the entity or not. These techniques can be used to evaluate projects both in the private and public sector companies. Most commonly used the following techniques.
A: Traditional Methods
1: Payback Period
2: Accounting Rate of Return (ARR)
B: Discounted Cash Flow Methods
3: Discounted Payback Period
4: Net Present Value (NPV)
5: Internal Rate of Return (IRR)
6: Modified Internal Rate of Return (MIRR)
7: Adjusted Present Value (APV)
Traditional Methods
Payback and Accounting rate of return (ARR) period are non discounted methods while all other mentioned methods are discounted. By discounted it is meant that the time value of money is considered in these methods.
1: Payback Period
Payback period calculates the time taken by a project to recoup the initial investment. For a finance manager, evaluating projects by this technique would prefer projects with short payback period than those with longer payback periods.It is simple to calculate and easy to understand.
‘Payback’ is literally the amount of time required for the cash inflows from a capital investment project to equal the cash outflows. The usual way that firms deal with deciding between two or more competing projects is to accept the project that has the shortest payback period. Payback is mostly used as a starting screening method.
Payback period = Initial payment / Annual cash inflow
So, if £12,000000 is invested with the aim of earning £12,00000 per year or net cash earnings, the payback period is calculated thus:
P = £12,000000 / £12,00000 = 10 years
This all looks fairly easy! But what if the project has more uneven cash inflows? Then we need to work out the payback period on the cumulative cash flow over the duration of the project as a whole.
Payback with uneven cash flows:
Of course, in the real world, investment projects by business organisations don’t yield even cash flows. Have a look at the following project’s cash flows with an initial investment in year 0 of £120,000
The payback period is precisely 6 years.
The shorter the payback period, the better the investment, under the payback method. We can appreciate the problems of this method when we consider appraising several projects alongside each other.
We can see that the payback period for two of the projects (3, 5) is six years. In this case, then, the two projects are of equal merit. But, here we must face the real problem posed by payback: the time value of income flows.
Put simply, this issue relates to the sacrifice made as a result of having to wait to receive the funds. In economic terms, this is known as the opportunity cost. More on this point follows later.
So, because there is a time value constraint here, the two projects cannot be viewed as equivalent. Project 3 is better than 5 because the revenues flow quicker in years five and six. Project 4 is better than Projects 1 and 2, because of the earlier flows and because the post-payback revenues are concentrated in the earlier part of that period.
So it’s clear that the payback method is a bit of a blunt instrument. So why use it?
Advantages of payback:
1st, it is popular because of its simplicity. Research over the years has shown that UK firms favour it and perhaps this is understandable given how easy it is to calculate.
2nd, in a business environment of rapid technological change, new plant and machinery may need to be replaced sooner than in the past, so a quick payback on investment is essential.
3rd, the investment climate in UK in particular demands that the investors got fast returns. Mostly long-term profitable possibilities investments are viewed due to longer wait for revenues flow.
Disadvantages of payback:
It has not enough real facts, which choose the length of best payback time? No one from other does – it is planned by pitting one investment opportunity against another. Cash flows are regarded as either pre-payback or post-payback, but the latter tend to be ignored. Payback takes no account of the effect on business profitability. Its sole concern is cash flow.
Payback summary.
It is probably best to regard payback as one of the first methods you use to assess competing projects. It could be used as an initial screening tool, but it is inappropriate as a basis for sophisticated investment decisions.
2: Accounting Rate of Return (ARR):
This technique compares the profit earned by the project to the initial investment required for the project. Thus a project with higher rate of return is preferred.
The Accounting rate of return expresses the profits arising from a project as a percentage of the initial capital cost. However the definition of profits and capital cost are different depending on which textbook you use. For instance, the profits may be taken to include depreciation, or they may not. One of the most common approaches is as follows:
ARR = (Average annual revenue / Initial capital costs) x 100
Let’s use this simple example to illustrate the ARR:
A project to replace an item of machinery is being appraised. The machine will cost £550,000 and is expected to generate total revenues of £80,000 over the project’s seven year life. What is the ARR for this project?
ARR = [(£ 90,000 / 7) / 550,000] x 100ARR = 2.37%
Advantages of ARR
As with the Payback method, the chief advantage with ARR is its simplicity. This makes it relatively easy to understand. There is also a link with some accounting measures that are commonly used. The Accounting rate of return is similar to the Return on Capital Employed in its construction; this may make the ARR easier for business planners to understand. The ARR is expressed in percentage terms and this, again, may make it easier to use.There are several criticisms of ARR which raise questions about its practical application:
Disadvantages of ARR:
1st, the ARR doesn’t take account of the project duration or the timing of cash flows over the course of the project.
2nd, the concept of profit can be very subjective, varying with specific accounting practice and the capitalisation of project costs. As a result, the ARR calculation for identical projects would be likely to result in different outcomes from business to business.
3rd, there is no definitive signal given by the ARR to help manager to decide whether or not to invest. This lack of a guide for decision making means that investment decisions remain subjective.
Discounted Cash Flow Methods
3: Discounted Payback Period
This technique works similar to payback period, the difference here is that discounted values of cash flows are used for calculation of the payback period.
4: Net Present Value (NPV)
The NPV method calculates the present values for all future cash flows. The discount rate may be the Weighted Average Cost of Capital (WACC) or it may be any cost of capital depending on the risk of the project in consideration. This type of appraisal is regarded superior to the ARR and the payback period, however there are certain assumptions, on which this technique is based, making its evaluation less reliable.
The Net Present Value (NPV) is the first Discounted Cash Flow (DCF) technique covered here. It successes on the idea of situation cost to put a value on cash inflows increasing from capital investment.
Keep in mind that opportunity cost is the calculation of what has been given or forward as a result of a special decision. It is also referred to as the ‘real’ cost of taking some action. We can look at the concept of present value as being the cash equivalent now of a sum receivable at a later date. So how does the opportunity cost affect revenues that we can expect to receive later? Well, imagine what a business could do now with the cash sums it must wait some time to receive.
Looked at another way, it is simply that the business have to receive the capital to invest in the project. So, it has to wait for the revenues arising from the investment, the interest is paid on received capital.
NPV is a technique where cash inflows expected in future years are discounted back to their present value. This is calculated by using a discount rate equivalent to the interest that would have been received on the sums, had the inflows been saved, or the interest that has to be paid by the firm on funds borrowed.
Present Value Table
Net Present Value tables provide a value for a range of years and discount rates. Notice the time scale used in the table:
The present value for 0 years is always 1, and this is not included in the present value table.
If we are looking to find the present value of £ 10, 0000 which you expect to receive in 5 years time, at a rate of interest of 7 %, we should use the following table:
Step 1 Look down the top column of the table (‘After n years’) and find 5 years.
Step 2 Look across the row titled ‘At rate r’ for the rate of interest of 7 %.
Step 3 Where the row for 5 years intersects with the column for 7 % in the table, there is the relevant present value factor. In this case this is 0.713.
Step 4 Multiply £ 10, 0000 by 0.713 = £ 71300
NPV Illustration
Calculate the present value of the following project’s cash flows, using a 10 % discount rate.
Assessing the value of NPV calculations is simple. A positive NPV means that the project is worthwhile because the cost of tying up the firm’s capital is compensated for by the cash inflows that result. When more than one project is being appraised, the firm should choose the one that produces the highest NPV.
5:Internal Rate of Return (IRR):
IRR calculates the rate at which the NPV of a project equals zero. According to this method if the cost of capital of a company is more than the IRR, the project will be rejected and if it is lower than the cost of capital it is likely to be accepted. IRR and NPV concepts are correlated.

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We know that when a positive NPV is produced by our DCF calculations, a project is worthwhile. We have also seen that when there are competing projects, we should select the one that produces the highest NPV. But sometimes a finance manager will wants to know how well a project will perform under a range of interest rate scenarios. The aim with IRR is to answer the question: ‘What level of interest will this project be able to withstand?’ Once we know this, the risk of changing interest rate conditions can effectively be minimised.
The IRR is the annual percentage return achieved by a project, at which the sum of the discounted cash inflows over the life of the project is same to the sum of the capital invested. Another way of looking at this is that the IRR is the rate of interest that reduces the NPV to zero.
Making the investment decision
Let’s set out the criteria for accepting or rejecting investment opportunities, using the NPV and IRR.
As a Finance manager, considering whether to accept or reject an investment project, on the basis of their acquiring the funds necessary at a known rate of interest.
1: The NPV approach asks if the present value of cash inflows less the initial investment is positive, at the current borrowing rate.
2: The IRR approach asks if the IRR on the project is greater than the borrowing rate.
Illustration of NPV & IRR
An initial investment of £ 2500 in a project produces cash inflows of £ 750, £ 750,
£ 900, £ 900 and £ 595 at 12 month intervals. The cost of capital to finance the project is 12 %.We are required to decide whether the project is worthwhile using:
1. The Net Present Value
2. The Internal Rate of Return
A positive NPV makes the project worthwhile because the cost of tying up the firm’s capital is compensated for by the cash inflows that result.
2. IRR
The above calculation for NPV used a 12 % discount rate and produced a positive value of £ 318.07. We need to find a discount rate that produces a negative NPV. Let’s try 20 %.
The IRR lies between 12 % and 20 %. But we can get much closer to the precise answer by using arithmetic.
IRR = 12% + Difference between the two discount x Positive NPVRange of +ve to €“ve NPVs
IRR = 12 % + (8 % x 318.07)IRR = 478.73
IRR = 12 % + 5.32IRR = 17.32 %IRR Problems
While there are some different difficulties with the IRR, MIRR solves two of them.
First problem is the IRR accepts that interim complete money movements are invested again at the rate of return which was same as the project which creates them. This is most often happening a plan which is not real and a very simple situation, that the funds will be invested again at a rate where the firm’s cost of capital is closure. Therefore, the IRR often provides a reasonable, hopeful image of the projects which is under study. Normally for checking the projects in the fair way, the weighted average cost of capital can be used for investing again the interim money movements.
2nd, you can find more than one IRRs for projects with different negative and positive flows of cash, which control to confusion.
IRR Summary:
The value to a business of calculating the IRR is that its decision-makers are able to see the level of interest that a project can withstand. In the case where a number of projects are competing for selection, the one that is most resilient can be chosen.
6: Modified Internal Rate of Return (MIRR)
(MIRR) is a managing the methods of an investment’s attractiveness. It is used in capital budgeting to give the rank to different investments. Modified Internal Rate of Return is a change of the (IRR) internal rate of return and intent to solve some problems with the internal rate of return (IRR).
Using (IRR) we assumes that reinvestment rate of the company is the (IRR). (MIRR) overcomes this assumption and evaluate projects on the assumption that the reinvestment rate is the same as the company’s cost of capital. This assumption for the cost of capital makes it a more effective technique as compared to the IRR.
MIRR is calculated as follows:
mbox{MIRR}=sqrt[n]{frac{-FV(text{positive cash flows, reinvestment rate})}{PV(text{negative cash flows, finance rate})}}-1
Where n is used for the number of same periods which is at the finish stage, where the cash flows occur, PV is used for present value, FV is used for future value.
7:Adjusted Present Value (APV)
APV method is used for evaluating investment in projects where risks for a project are different from the company considering such undertakings. This type of evaluation overcomes weaknesses present in the NPV technique. Adjusted present value (APV) is similar to NPV. Use the cost of equity as the discount rate is different. For the financing effects different adjustments are made. Normally with DCF models, adjusted present value calculation is simple but boring.
Calculating the first step of an APV is to calculating the basic NPV by using the cost of equity like discount rate. The company’s cost of equity and this may be the same. To recalculate using CAPM and by estimating a beta, in some cases may be it is necessary.
First calculated the base of NPV, after that calculate the NPV of every set of cash flows which results from financing. The tax results of using debt rather than equity are most obvious. The cost of debt can be discounted or that shows unknown activities about the tax effects at a higher rate. NPV of the tax effects is added then to the basic NPV.
If there are some other activities of financing, also added or subtracted, then APV is the final result.
Given capital organization unrelated, savings from the financing should be levelled by changes in the necessary return on equity and changes in capital structure as well. Normally this makes a simple NPV with the WACC like the discount rate suitable.
Normal NPV calculation:
Where, in a simple situation:
These more complicated situations are more easily handled BY using Adjusted Present Value (APV), more difficult conditions are very easy to handle. APV based on the below:
APV = NPV of project pretended, it€™s all equity financed + NPV of financing results.
APV divide the total value of the project into different parts: any debt is no used for value assuming in one part, and then using the debt in capital structure we add the extra value
Best Technique:
After discussing all the financial appraisal techniques, it seems that the choice of best financial appraisal techniques depends upon the nature of Project.

Internal Rate of Return: A Cautionary Tale
Find MIRR with FinEasy MIRR v1.0 3.”


Critical Appraisal of Pain Assessment Tools

Patients presenting with acute pain in hospital settings need immediate intervention and care to improve health outcomes (Department of Health Service, 2007). When severe acute pain is not appropriately managed, this could lead to adverse psychological and physiological effects, poorer health outcomes and prolonged hospital stay (ANZCA, 2005). In Australia, approximately a third of patients in hospital settings report experiencing moderate to severe pain at least once during their hospital stay (DHS, 2007). While this figure may vary according to the population surveyed in hospital settings, it is observed that inadequate pain relief is still present in these settings (ANZCA, 2005).

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Quality care for patients presenting with acute pain begins with the use of an appropriate pain assessment tool. The main aim of this essay is to critically review current pain assessment tools that are recommended by the Department of Health Services (DHS, 2007). Published primary studies will be used to support the critical analysis. The first part of this essay will compare a range of pain assessment tools for patients presenting with acute pain. The second part critically analyses pain assessment options for patients who are non-verbal, have significant cognitive impairment or language functions disability. A conclusion will then summarise the key issues raised in this essay.
Critical Analysis of Current Pain Assessment Tools
Pain assessment tools range from the use of subjective to objective pain-scoring assessment tools. Examples of subjective-pain scoring tools include the visual analogue scale (VAS), numerical rating scale (NRS) and the faces pain scale (FPS). Objective measures include the behavioural pain assessment scale,functional activity score and Abbey Pain Scale. Currently, VAS is one of the recommended tools for assessing acute pain in different groups of patients (DHS, 2007). Recent studies (Phan et al., 2012; Angthong, Cherchugit, Suntharapa, & Harnroongroj, 2011; Boonstra, SchiphorstPreuper, Reneman, Posthumus, & Stewart, 2008) have also shown its validity and reliability for different health conditions across different groups of patients and in various health care settings outside Australia. Apart from extensive published data on the reliability and validity of the VAS, it is also shown to be more sensitive when compared to descriptive pain scales (Boonstra et al., 2008).
Meanwhile, a randomised controlled trial (Farrar, Troxel, Stott, Duncombe, & Jensen, 2008) also shows the validity and reliability of the numeric rating scale not only in assessing acute pain but also in measuring spasticity of patients suffering from multiple sclerosis. This rating scale ranks pain from 1 to 10 or 0-11. However, it converts pain sensation to a number (Farrar et al., 2008). While it is conceptually straightforward, nurses have to explain its use to the patients. This tool is also language dependent. Hence, it is essential that non-English speaking patients should be assigned to nurses who speak the same language to reduce the risk of misunderstanding on the use of NRS.
Apart from VAS and NRS, FPS is also commonly used for pain assessment. One of the advantages of the FPS is its applicability in measuring pain intensity in paediatric patients. In the study of Tsze, von Baeyer, Bulloch and Dayan (2013) that recruited 620 patients aged 4 to 17 years old, FPS suggests strong psychometric properties for this age group. Importantly, this study shows that reliability and validity were also high between subgroups, sex, ethnicity and age of the children. Tsze et al. (2013) utilised the prospective, observational study involving Spanish and English-speaking children. Although this study design might increase the risk of observer bias due to its study design, a prospective study design is appropriate in validating the FPS (Polit, Beck &Hungler, 2013). While one of the advantages of FPS is its acceptability in younger and paediatric patients (Tsze et al., 2013), it could also be used for the elderly.
In Kim and Buschmann (2006), 31 older adults were recruited to determine the validity of the FPS. Findings suggest high construct validity and test-retest reliability of FPS. However, the small sample size of the study could limit the applicability of the findings to a larger and more heterogeneous population (Polit et al., 2013). As a whole, these subjective pain assessment tools have high inter class correlation. A study conducted amongst Chinese patients during post-operative care (Li, Liu & Herr, 2007) demonstrates high inter class correlation coefficients (ranging from 0.673 to 0.825) of VAS, FPS and NRS. This suggests
that healthcare practitioners can use any of these tools and arrive at a similar pain assessment score.
Meanwhile, objective measures for pain such as the behavioural pain assessment scale and functional activity score are used to assess pain of patients who are non-verbal or have suffered from cognitive impairment such as dementia (Husebo et al., 2008). However, this might increase the risk of rater bias (Hek, Judd & Moule, 2011) since nurses and other healthcare practitioners assess the pain level of the patient. Hence, it is important that inter-rater reliability and internal consistency of these tools should be established. A recent study (Voepel-Lewis, Zanotti, Dammeyer & Merkel, 2010) has shown the use of the Face, Legs, Activity, Cry, Consolability (FLACC) behavioural scale, which is similar to the behavioural pain assessment scale, as an effective tool for pain assessment in critically ill adults and children. It has excellent internal consistency (Cronbach alpha=0.882) and high inter-rater reliability.
Another objective pain assessment tool is the Abbey Pain Scale. This was developed to assess pain in patients with severe cognitive impairment such as those with severe dementia and non-verbal patients. Recent observational studies (Lukas, Barber, Johnson & Gibson, 2013; Neville & Ostini, 2013) demonstrated high validity and reliability of the Abbey Pain scale. In Neville and Ostini (2013), Abbey pain scale was compared with the Checklist of Nonverbal Pain Indicators Scale and Doloplus-2. Findings suggest that all scales showed good psychometric qualities. However, the Abbey Pain Scale is more applicable for nurse raters who demonstrate lower levels of nursing qualification. Neville and Ostini (2013) suggest that nurses who rarely use pain rating scales could use the Abbey Pain Scale while still maintaining inter-rater reliability.
Lukas et al. (2013) compared the Abbey Pain Scale with other pain assessment tools such as the Non-communicative Patient’s Pain Assessment Instrument (NOPPAIN) and the Pain Assessment in Advanced Dementia Scale (PAINAD). All these tools were validated to improve recognition of the presence or absence of pain. These tools were also useful in helping nurses rate the pain severity of older patients with dementia.
While pain assessment is a prerequisite for appropriate management of acute pain, there are some concerns about the use of pain intensity scoring systems. It has been shown that pain is subjective. This suggests that self-reporting of pain is variable and could be influenced by a host of factors. Studies (Narayan, 2010; Garcia, Godoy-Izquierdo, Godoy, Perez & Lopez-Chicheri, 2007) have shown that language, culture and psychological factors could all influence the perception of pain. Reynolds, Hanson, DeVellis, Henderson and Steinhauser (2008) explain that self-reporting of pain only provides healthcare practitioners an insight into how patients perceive their pain levels.
Variations in reporting of pain present a challenge to healthcare practitioners since this might lead to over or under-treatment of pain (Wilson, 2007). Other factors such as expectations of the patient in pain, the acceptability of translated tools and the methodology or terminology used during pain assessment might be foreign to the patients (Hall-Lord & Larsson, 2006). All these could influence reporting of pain. There is also the risk that observers might underestimate the pain (Wilson, 2007). Nurses’ knowledge on pain assessment is crucial since low levels of knowledge on pain assessment might affect how they assess the patient’s level of pain. Wilson (2007) argues that poor knowledge could lead to suboptimal care and poor pain management. This could have important consequences on patients since pain management might not be optimal. Hall-Lord and Larsson (2006) have stressed that pain assessment could be influenced by the nurses’ characteristics and knowledge of pain assessment. Lack of knowledge on pain assessment might lead to inaccurate pain assessment. In turn, this could lead to poor management and treatment of the underlying cause of pain. This also increases the risk of patients receiving inappropriate pain therapy (Wilson, 2007).
Pain assessment is important in managing acute pain in hospital settings. Various tools have been tested for their reliability and validity. These are divided into subjective and objective pain assessment tools. The former is generally used for patients who do not have cognitive impairments while the latter is used for patients with severe cognitive impairment and non-verbal patients. Studies cited in this essay have shown the validity and reliability of these tools. Studies that compare the subjective pain assessments also show high inter-correlation. This suggests that any of the tools could be used to assess pain. Despite extensive studies establishing the sensitivity, reliability and validity of the subjective tools, its application could still be limited. Pain is highly subjective and varies from one person to another. Objective tools might also be influenced by the nurses’ level of knowledge on pain assessment. Finally, this essay shows the need for nurses to increase their knowledge on pain assessment to ensure accurate assessment of pain.
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May Thu Khin, SID: 440468145, SNGP3001

Effective Performance Appraisal System

This paper aims to critically assess an effective appraisal system in relation to employee and employer. One of the major key importances of this study is the satisfaction and acceptance of organisational appraisal system by both employee and the employers, while emphasizing the need of an effective performance appraisal system to function well in terms of satisfying all stakeholders’ needs including the employees. Some employees and employers view performance appraisal negatively, suggesting that it’s only a waste of time, resources and energy. A literature review capturing various understanding of knowledgeable aspects of these study shall be undertaken and various views shall be put into consideration. This study intends to shed light on the performance management and its relation with performance appraisal; guiding us through the reasons for some major rifts in performance appraisal systems continuously affecting employees and employers, while also highlighting some accepted purpose of performance appraisal and its system. This study would give a theoretical background of what organisations should consider in creating an effective performance appraisal system; including understanding the appraisal purpose, description and specification for the appraiser i.e. appropriate and adequate training should disbursed to employee and the employer, and the design and implementation of an effective performance appraisal take employee involvement to consideration. This study draws its conclusion from Hunt N. (2007), who argues that an effective performance appraisal should take the satisfaction of its employees and employers (organization) as a great concern; as a satisfied employee works more efficiently and a profitable company also makes employers or organizational managers happier.

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Performance Management
A suitable analysis of performance appraisal without stating its origin in performance management would not give a true and fair view of performance appraisal in theory. Performance management and performance appraisal are two related aspects that should not be seen identically. In simple terms, we can describe performance management to be a strategic part of human resource management; which is an all-inclusive process that aims to bring together various aspects including performance appraisal. Performance management is viewed as a wider strategic aspects that focus on organizational, team or individual focus rather than performance appraisal which operationally focused on individual’s performance and development. Noticeably, an important aspect of performance appraisal is enhancing performance, which is a key element of organizational life and performance management (CIPD 2005, a – Performance management and performance appraisal).
Research has identified a gap amongst the managers and employees by research between their perception about performance management theory and its actual practice (Bratton J. and Gold J. 1999). Nevertheless, the general acknowledgment that performance management is a tool used to promote employee understanding of its contribution to organisations strategic goals; while also ensuring that the right talent and skills are centered on the things of importance. Even though in practice, it has been regarded as just a documentation phase that is used to fulfill basic organizational and statutory requirements (CIPD – Performance mgt in action). Performance appraisal is a large and vital process of performance management.
INTRODUCTION/the Concept of Performance Appraisal
For decades, performance appraisal has been a significant issue and topic of importance. It has been given considerable attention in various literatures, from both researchers and practitioner’s alike (Roslyn 1996). Past and recent scholars have regarded performance appraisals are often regarded as a strategic and integral part of the organization (Goff 1992 and U.S Dept of Interior 2004). In acceptance of these suggestions, it can be inferred that the management of human capital is an important aspect of organization that has an intense effect in all the activities of the organization.
Pettijohn L. (2001) cites performance appraisal from Longenecker (1997), describing performance appraisal as two simple terms that provoke and propel strong responses, sentiments, opinions and judgment in the organizational context of formal appraisal procedure when mutually used together. He further argue that most organizations of the world according to irrespective of its size, type and product distinction employ the use of performance appraisal; but with different level of accomplishment as an instrument used to drive a mixture of human resource management purpose. However, further literatures’ suggests performance appraisal existed based on several rationales such as a basis for making provision for selection decisions, a yardstick for salary increment, a medium for providing feed-back among managers and employees and facilitation of employee development. Recently, research are been focused toward establishing systems for improving the psychometric properties of performance ratings (Mount 1984, Fombrun and Laud 1983). Nevertheless, Tom Redman (2006) attributes development changes in recent performance appraisal to large scale organisations rather than advances in theory.
Numerous definitions as been given to performance appraisal by numerous scholars, researchers and practitioners. According to Flippo (1984), “performance appraisal is the systematic, periodic and an impartial rating of an employee’s excellence in the matters pertaining to his present job and his potential for a better job.” Flippo described performance appraisal as a systematic way of evaluating and appraising the performance of an employee/subordinate within a specified period of time, while also planning his future career. However, a short and concise definition of performance appraisal by CIPD (2010) was referred as an operational short to medium term tool used to assess individual performance and development. In summary, Performance appraisal is a dominant tool to evaluate, assess and compensate the performance of employee/subordinate. It should help create goal congruence between the organization and it employees.
Past and recent scholars have argued that the lack of a generally acceptable purpose served by performance appraisal system process has raised questions for the degree to which it’s various function conflicts with the employee and employer (Beer, 1981). This may suggest that a key generally acceptable purpose of an effective performance appraisal process is still a major rift in research.
Hunt N. (2007) in his book “Conducting Staff Appraisal” cited past scholars in his literature arguing that organization’s purpose “they claim” is not appraisal inclined but rather to make money and generate profit or in the case of public corporations, provide social amenities i.e. good service. He argued that the view that appraisal does not have a direct connection with production is a fallacious statement and suggested that the purpose of a well structure appraisal system should be promoting satisfaction for both employee and employers (organization), as employees become satisfied knowing that employers or its organization are after its needs and not just the profit objective.
However, research by some major proponents suggests that performance appraisals in practice surface to be aimed at four purposes, which are: making distinctions among employees, differentiation of a person’s strength from its weakness, execute and assess organizations’ human resource systems, and the documentation of personnel assessment (Cleveland, Mohammed, Skattebo, & Sin, 2003; Cleveland, Murphy, & Williams, 1989). Nevertheless, further aims and purpose of performance appraisals may in due course arise and enhance performance at the employee and, subsequently, the employer or organizational level (see DeNisi & Gonzalez, 2000; Meyer, Kay, & French, 1965).
Traditional Performance appraisal
Past approach to performance appraisal referred to as traditional, viewed performance appraisal as a method for justification employee salaries, rewarding and punishing employee for organizational performance. Traditional approach seems to be a judgmental process rather than a developmental process that focus only on historical performance of employees as a basis of their appraisal ( Performance appraisal methods rate employees using the quantitative tools and employ numerical or scalar ratings orientation. The combination of these methods with logical decision will provide sufficient procedure of performance; nevertheless as the complexity of employment increase, the orientation to figures makes it more challenging because the reduction of individual contribution’s complexity and competency to a figure results from a mix of inadequate reasons (Murphy T. and Margulies J. 2004).
Modern Performance appraisal
A more collaborative technique approach to an effective performance appraisal is the modern performance appraisal, which has developed the appraisal system of organizations over the years to a more formal and structured system. This appraisal approach is viewed as a tool for identifying performing employee; identifying training needs of employees; developing employee career paths; promoting rewards, bonus and promotion amongst other development aims. ( Modern appraisal approach includes; management-by-objectives (MBO), work planning and review, 360° appraisals, peer review, etc. (Murphy T. and Margulies J. 2004). Here, the promotion of employee and employer relationship in the organization is strengthened; while communication is also improved through its feedback process. This approach is developmental in nature and future oriented, identifying employees as individuals.
Theoretically, the formal appraisal process merits are numerous and striking to any organization allowing for their use. However in practice, various shortcomings associated with the formal performance appraisal systems design and implementation are well known and continue to raise issues with both practitioners and academics (Goff 1992 and Bernardin & Klatt 1985). According to Nick (1996), the formal role of performance appraisal process has been given common concentration in the recent years and a make believe that an organization’s effective design and well structured implementation appraisal system will provide the employee, the supervisor and the employee/organization with multiple of positive benefits.
Objectives of Performance appraisal
Major objectives of an effective performance appraisal can be perceived from two approaches: the traditional and the system approach. The traditional approach was concerned with attributing guiding values to individuals; the primary goal of this approach was aimed at providing control and documenting employee historical performance. The appraisal was performed occasionally and the leadership practices were estimated and directional in nature. This approach emphasized an individual orientation reward practice with high degree of formality process. On the other hand, the system approach is primarily aimed at developing and creating a problem solving environment for employees; and promotes a leadership style that is facilitative and tutoring in nature. The objective of this system has its guiding value attributed to the performance appraisal system, and employs a more frequent (periodic and continuous activity) appraisal system for employees. This system has a low degree of formality and practice a group or team orientation reward practice. The result of this system approach promotes HR decisions such as reward, promotions, training and development, transfers and demotions. However, the system approach might have emerged from the lapse or the gaps posed by the traditional approach. Bratton and Gold (1999) however, concluded that the tension between the judgemental (Traditional) and developmental (Modern system) process of appraisal systems has never been resolved and is likely to continue in its nearest future.
Drawing from a past literature for performance appraisals, it was suggested that an effective appraisal system should enhance employee motivation and efficiency; ensure concrete basis for wage and salary management; help discuss employee concerns for growth and development; provide adequate information for management decisions; and provision of useful communication tool to carry out employee goal setting and performance planning for managers (Morhman, Resnick-west and Lawler 1989).
Appraisal System
Landahl (2010) suggests that an effective performance appraisal is a significant vehicle for improving performance and productivity by organizations to improve the performance of its employees and organizations’ well designed and implemented appraisal system, which helps to improve company operations. In support of these, Journal of Applied Psychology argues that a, “poorly designed or implemented performance appraisals may lead to employee frustration, resentment and withdrawal.”
Different performance appraisal instrument is been employed by a number organizations with conflicting mixture of goals and objective, and this have frequently resulted in stemming up confusion has to what the accurate meaning of performance appraisal systems. Notwithstanding, Wiese and Buckley (1998) highlighted that the core of performance appraisal process enables an organization to appraise and assess an individual employee’s activities and performance over a scheduled point in time. In addition, Coutts and Schneider (2004) described performance appraisal as a fundamental factor of a more refined position of human resource practices; viewing it has machinery for assessing the level of employee’s performance on a daily basis in line with the organizational set goals and objectives.
Review of Literature
Hunt N. (2007) argues that most employers or large organisations do have performance appraisal policies in existence but the practical implementation of these policies are inefficient and ineffective in reality and this has lead most employees not to take the performance appraisal as a serious tool but a managerial procedure.
One of the most common fear or worries of performance appraisal by employees is the raters’ subjectivity. The human bias nature and favouritism is a loom affecting employee acceptance of performance appraisal system and its outcome.
Many scholars have also ascribed the shortcoming of performance appraisal system to the unwarranted focus on alleviating signs of reduced performance rather than emphasizing the cause of the problem in itself.
A major problem of performance appraisal system is the criteria for its implementation. A bad designed system would not generate a good performance appraisal objective, most recent appraisal focus more on the formal application rather than the substance satisfying objective.
Effective performance appraisal has so far been considered in different perspectives. The exploration of significant areas such as results of effectiveness of performance appraisal and recognition of negative factors that can affect the effectiveness of performance appraisal in both the perspective of employee and employer. The highlighted gap in the perspective of performance appraisal is what this paper is set to discuss.
For one thing, WP&R interviews are strictly man-to-man in character, rather than having a father-and-son flavor, as did so many of the traditional performance appraisals. This seems to be due to the fact that it is much more natural under the WP&R program for the subordinate to take the initiative when his performance on past goals is being reviewed. Thus, in listening to the subordinate’s review of performance, problems and failings, the manager is automatically cast in the role of counselor. This role for the manager, in turn, results naturally in a problem-solving discussion.
In the traditional performance appraisal interview, on the other hand, the manager is automatically cast in the role of judge. The subordinate’s natural reaction is to assume a defensive posture, and thus all the necessary ingredients for an argument are present.
Performance appraisal effectiveness refers to the accuracy of performance observations and ratings as well as the ability of the performance appraisal process to improve the ratee’s future performance (Lee C. 1985).
As highlighted above, that the word performance appraisals evoke immediate and sometimes negative response from the managers and employees in the appraisal process of organizational life (Longenecker 1997). Yet, every manager recognizes that, like it or not, performance appraisals are here to stay.
Longenecker (1989) argues that politics has its stake in an organization’s performance appraisal process and that it takes only the deliberate effort of the manager and those partaking in training employees on appraisal techniques to make the performance appraisal process free from what he called “Mired political game”. Politics has been indicated as a critical determinant in organizations for reward distribution and this however still remains an untapped research (Sogra et al 2009).
For decades, employee evaluations have been used for a variety of different organizational purposes. Previously, the appraisal process was generally considered to be one of the more difficult and yet routine and narrow management practices. In contrast, it is now widely recognized as a significant vehicle for improving performance and productivity of both employees and organizations. To this end, many organizations and managers are currently reexamining their appraisal procedures and practices. Why performance evaluation currently is viewed in such an expanded light after its rather difficult and humble past?
Discrepancies with performance appraisal in relation to employee and employer
Consequently the review of the literature drawing from Crook and Crossman (2004) and Mount’s (1984) research on an effective performance appraisal system, it was discovered that major difference exist in the perception of appraisal system between employees’ and managers’. These differences were however attributed to the roles employees’ and managers’ perform during the appraisal process; Managers’ are “givers” of information and feedbacks, whereas employees’ are mere “receivers”.
Bretz et al. (1992) suggests that major discrepancies arising from performance appraisal system may be traced to the lack of adequate training given to people for their role as an appraisee. The author argues that training to make adequate assessments and oversee an effective performance appraisal system is been given to managers and other principal, while training for analyzing and acting on constructive performance evaluations are not given to the appraisees. He further suggests that those without any appraisal role within the organization do not often receive training in the performance appraisal system, both in efficient utilization of its output and its method of working (Crook and Crossman 2004).
CROOK AND CROSSMAN (2004) based on his findings, asked a fundamental question in solving these discrepancies “is a difference in satisfaction with a PAS linked to a person’s role in an organization a desirable outcome?” He argued that it is advantageous for participants of appraisal alone to be more pleased with the performance appraisal system rather than participants who act both as appraisee and appraisers. The authors further argue participants that fill both roles will encounter problems from both perspectives and therefore ensure a fairly and time-framed appraisal considering their experience.
Organizational managers should identify the significance of employee involvement in establishing performance values at the launch of the appraisal phase and provide performance feedback through the appraisal phase (Inderrieden et al. 1988).
In order to build up an effective performance appraisal system, two major criteria and goal need to be accomplished. Firstly, the relevance and its applicability of performance appraisal to everyday work practice in organizations (both large corporation and small business enterprise) and secondly, the satisfaction and acceptability of the performance appraisal system by employees and employers appraisers and workers (Duraisingham V. And Skinner N. 2005).
Past and recent research have argued that a firm’s objective should be able to focus on how their employee will improve its knowledge and skills in order to have high increase productivity, sustained competitive improvement. Both employee and employers require adequate training in order to participate fairly in the performance appraisal system in ensuring that realistic expectations and feedbacks are received and acted on. An effective work plan (goal setting) for managers was also considered suitable and the consideration of employees’ via discussing their career plans in the appraisal process, which enhance goal congruence between the employee and employer (Crook and Crossman 2004, Mount 1984 and Inderrieden et al. 1988). Bretz et al (1992) also advocated the need for training to be an ongoing process in order to attain utmost efficiency and effectiveness.
Crook and Crossman (2004) states that an effective appraisal system can be achieved by increasing interactional justice by promoting employee involvement in the appraisal system. The joint involvement of both the employee and employer in the performance appraisal system will effectively ensure a more conducive working environment and targeted agreement between both parties; through the use of feedback, training, frequent reviews for development and many more. Systems that focus only on examining performance without any personal benefit would not attract employees (Hunt N. 2007).
An effective performance appraisal system should be as simple as possible without been over-bureaucratic. The operation of the performance appraisal system would however not be effective without the fairness and consistentency in operation by the participants. This will lead to enhanced satisfaction for both employees and employers (Crook and Crossman 2004 and Hunt N. 2007). Hunt N. (2007) suggests that employers and organizations should also eliminate political mentally in order to have a successful and effective performance appraisal as this promotes unfairness and would tamper productivity in the long run
The present paper suggests that utilizing performance appraisal formats and designing training programs without considering the nature of the task may explain unsuccessful attempts in devising more accurate and efficient performance appraisal systems. Appraising performance according to the nature of the task, matching task nature with performance appraisal format, and designing training programs to increase observational accuracy may improve performance appraisal systems as well as contribute to successful organizational placement and promotion decisions. Future research should examine other factors that may contribute to performance appraisal effectiveness (Lee C. 1985).
Whatever system is used, a good measure of success is how those appraised and compensated perceive the accuracy and fairness of the program. A program that is seen as fair and personalized, regardless of sophistication, will likely be motivational. A good first step in deciding whether changes are needed in a performance appraisal system may be a survey of management and employee attitudes about appraisal practices and compensation.
Biased and malicious deliberate appraisers should be eliminated in constructing an effective performance appraisal system. However, it is not feasible for employee – employer relationship to remain good all the time, but the system must be designed in a way that it does not ensure systematic partiality; which might warrant the use of external appraiser (even though this can also lead to rifts).
In establishing an effective and efficient performance appraisal system, it would be imperative put into consideration not only the employee but also the employers, who will act as the appraiser rather than the appraised. Employers and managers would also have anxieties and apprehension about the appraisal system’s effectiveness, whether training would be adequate for employees, whether employees are aware of the opportunities for training and development available within the organization.
In order to have an effective performance appraisal, both participants of the process should be sort during the designing process of the system to the implementation stage.
Performance appraisal is a formal exercise carried out for all executives and workers/ staff with respect to their contributions made towards the growth of the organization. The benefits of a successful appraisal system can be summed up as follows.
a. For the Appraisal
1. Better understanding of this role in the organization. What is expected and what needs to be done in meet those expectations.
2. Clear understanding of his strengths and weakness so as to develop himself into a better performer in future.
b. For the Management
1. Identification of performer & non-performers and their development towards better performance.
2. Identification of training & development needs.
3. Generation of ideas for improvement.
c. For the Organization
1. Improved performance throughout the organization.
2. Creation of culture of continuous improvement and success.
There are many benefits to implementing a regular and systematic performance appraisal system within an AOD organisation. In order to gain the most benefit from performance appraisals it is recommended that a system is developed in consultation with workers and managers, and clear links are established between appraisals and valued rewards and outcomes (Duraisingham V. And Skinner N. 2005).
Read more:
Hunt N. (2007) Conducting Staff Appraisals; How to Books Ltd, United Kingdom. Chapter 1 – 11.
Redman T. and Wilkinson A. (2006); Contemporary Human Resource Management (Text and Cases): Performance Appraisal: Chapter 6 pg 153 – 187; Pearson Education Limited: England.
Bratton J. and Gold J. (1999): Human Resource Management (Theory and Practice): Performance Appraisal: Chapter 8 pg 214 – 236: Palgrave publishers Ltd: Houndmills
Fletcher, C. (1994). Performance appraisal in context: Organizational changes and their impact on practice. In N. Anderson &P. Herriot (Eds.), Assessment and selection in organizations: Methods and practice for recruitment and appraisal (pp. 41-56). Chichester, England: John Wiley & Sons.
Duraisingham V. And Skinner N. (2005): Workforce development ‘TIPS’ – Theory in Practices strategies resource kits: performance Appraisal: Chapter 8:
(Cleveland, Mohammed, Skattebo, & Sin, 2003; Cleveland, Murphy, & Williams, 1989)
DeNisi & Gonzalez, 2000; Meyer, Kay, & French, 1965).