Analysis of Performance Appraisal System

Published Date: 08 Feb 2018

ABSTRACT

This article examines the Performance Appraisal System of Opsonin Pharma Ltd. It discusses one previous format of performance appraisal and the current performance appraisal. Author has tried to find out whether performance appraisal system of the company motivates the employees to achieve the company goal. Researcher has conducted the survey in the head office people of the company to get the idea of management people. The study uses primary and secondary data to do the analysis of the research where it has searched academic literature for the theories of performance appraisal, performance management, motivation and human resource management.

Result has come out through the survey that current performance appraisal system has shown positive impression but still it needs some improvement such as proper practice and introduction of performance management.

Chapter 1. Introduction

Survival of the fittest' once advocated by famous biologist Charles Darwin in his ‘Origin of Species (1859)' transcended the boundary of biological world. Now this principle has become true in areas where competition determines ultimate fate. In the realm of organization, this principle operates in the name of productivity, profitability, efficiency, effectiveness and so on. Organization theorists during classical period emphasized on structural and technological perfection for survival and growth. Such mechanistic ideas of competitiveness started fading since 1930s onwards. The rise of behavioural and industrial humanism made way to ‘human capital' to be considered central in the study of competitiveness. The measurement unit of contribution of human capital is termed as ‘Performance'.

Performance Appraisal (PA) as a technique of measuring competitiveness of organizations or institutions is not a modern phenomena. It has started from Han Dynasty in 206 BC-220 AD where they used to use merit exam for selection and promotion (Wren, 1994). But most probably PA system started in the industry from Robert Owen's textile mills of the 1800s, where he used silent monitor system with the block of woods with different colours that he put in the work station of each employee. Everyone could see the performance with each other (Wren, 1994). This gave rise to an annual assessment which was recorded in a “book of character”. The assessments were subjective, which is one of the main criticisms still leveled at performance appraisal today.

In the early part of the twentieth century Owen's ideas were superseded by those of ‘scientific management', devised by F.W. Taylor and popularly associated with Henry Ford. This emphasised the use of quantitative methods to measure work performance (e.g., a fair days work and differential piece rate system), and led to the development of ‘work study' techniques in the inter-war period.

Though today, private sector has been credited as the perfectionist of performance management techniques, the modern psychometric approach to performance appraisal has been brought by the public sector (Torrington, Weightmen and John, 1989, p.66). Due to its monopolistic and legalistic nature, public sector performance appraisal practices could not reach that standard as reached by the private sector, which took appraisal as a response to market competition.

The study is based on Opsonin Pharma Limited, a leading pharmaceutical company in Bangladesh. It was incorporated as a private company in 1976. It manufactures, and markets generic medicines for both human and animal use. Its value-added products improve the quality of life of both the people and animals in Bangladesh as well as abroad and help them enjoy longer, healthier, and more productive lives. Opsonin is known for long as a provider of regular and life saving medicines at affordable price. It has long been established and recognized as one of the most leading, progressive and modern pharmaceutical company in the country with the assurance of manufacturing quality products as the company is committed to contribute much to develop national health sector.

1.1 PURPOSE OF STUDY:

Purpose of the study is to identify whether the management people who are working in the head office are convinced or not with performance appraisal system of the company.

1.2 AIM AND OBJECTIVES:

1.2.1 AIM:

Aim for this research is to gather knowledge about performance appraisal system in Opsonin Pharma Ltd. and to get clear idea about performance appraisal system through literature review.

1.2.2 OBJECTIVES:

• To provide recommendation to Opsonin Pharma Ltd how they can improve their performance appraisal system.
• To examine how performance appraisal system works.
• To analyse how Opsonin Pharma motivate the employees through performance appraisal system.
• To make an overview of Opsonin Pharma Limited.
• To make an overview of Performance Appraisal System of Opsonin Pharma Limited.
• To determine the interrelation between Performance Appraisal System and other Human Resource aspects.
• To measure the level of employee development.
• To determine the impact of Performance Appraisal System for motivating the employees of Opsonin Pharma Limited.

1.3 RESEARCH QUESTIONS:

1. How effective is the performance appraisal system in Opsonin Pharma Ltd.?
2. Do the management people think that current performance appraisal system works properly in the company?
3. Does performance appraisal system motivate the employees at Opsonin Pharma Ltd.?

Chapter 2. LITERATURE REVIEW

The Performance Appraisal (PA) system is essential for maintaining high standard of human resource of any organization, both private and public sector. Performance appraisal is a part of working link that emphasizes for both bosses and subordinates their managerial responsibilities (Williams, 1972, p.8). A good performance appraisal should introduce in the company to know employees' abilities and efforts to match organizational expectations. A good PA system can measure employees' activities with reasonable accuracy and it can provide feedback to employees on their performance, and make a chance to employees to develop their weaknesses. There is a chance to make wrong personnel decisions which lead to affect organizations' capacity without good performance appraisal systems. But ineffective appraisal system can bring many problems including frustration for good performers which will encourage them to leave the company, causing the organization to incur high recruitment costs (Chou, 2005, p.42).

This concern is addressed by ensuring that employees understand how their work contributes to the achievement of organizational goals, by ensuring that employees have the skills to make that contribution and, above all, by developing a climate of open discussion in which performance, achievements, and difficulties can be approached openly and supportively. A sound PA system, therefore, measures performance of employees not only to make some backwardly-linked like recruitment validity, motivation, morale, etc. and forwardly-linked like career growth, reward and sanction, employee development personnel decisions etc., but to integrate between organizational goals and personal goals of employees (Hyde, 1982, p.295).

It is a really hard task for reflecting employee performance through performance appraisal system. Performance appraisal systems are not general idea that can be followed by all companies without any modification because it depends on employee and organizational characteristics and qualities (Henderson, 1984, p.54).

At first glance performance appraisal appears as though it should be something relatively straightforward. Torrington, Weightman and Johns (1989, p.814) offer a working definition of appraisal as:

“The process of judging a person's performance and reporting that judgment.”

Alan Fowler has given very good definition about the objective of performance appraisal system. He suggested that:

“Staff work best when they know what they have to do, how well they have to do it, and how well they are thought to have done, so they need to talk to their managers at least once a year about this, and their manager's need to take their staff's view into account when setting work goals and deciding who needs what training.”

(Fisher, 1995, p.12)

Traditional performance appraisal is more of a control mechanism used to make the most of an employee. How an employee is contributing toward achievement of organizational goal is the main concern here? Based on contribution ratio of the employees, the management makes some personnel decisions such as promotion, salary increase, sanction, and training needs. This uni-dimensional concept goes more with the philosophy of personnel management.

2.1 Formal versus Informal Performance Appraisal:

Formal performance appraisals usually occur at specified time periods once, twice or thrice a year. Formal performance appraisals are required by the organization or institution for the purpose of employee assessment.

Informal performance appraisals can take place whenever the supervisor or manager feels communication is needed.

2.2 Purpose, Objectives & Benefits of Performance Appraisal:

2.2.1 Purpose:

The purpose of performance appraisal is to devlop the organization's performance throughout the improved performance of employees.

2.2.2 Objectives:

Organization uses performance appraisal system to execute some objectives. The main objectives in using performance appraisal in an organization are as follows:

• Motivating and allocating rewards for employees
• Review past performance to rectifying the mistakes from management and employees (Fisher, 1995, p.11)
• Proper utilization of company resources.
• Identifying areas where training and improvement are required.
• Coaching and developing employees so that they can perform better to achieve the company goal.
• Identifying the area where developments programs need to be introduced.
• Giving employees' feedback about their work so that they can be inspired.
• Improve communication between managers and subordinates.
• Identifying the base for pay, promotion etc.. (Yeates, 1990, p.36)

2.2.3 Benefits:

The benefits of a successful appraisal system can be concluded as follows:

For the organization: Improved performance all the time in the organization due to:

• Achieve organization's objectives and values it needs proper communication;
• Increase sense of group work and reliability;
• Establish better relationship between managers and staff;
• Managers have got the scope and power to use their leadership skills to motivate and improve their subordinates.
• Improve outline of the tasks completed by employees.
• Classification of thoughts for improvement.
• Prospect and long-term view of the company can be developed.
• Training and development requirements appeared more clearly.
• A culture of continuous progress and success can be formed and maintained.
• People who have got potential can be classified for career development plans to provide for future staff requirements.
• The message is passed to everyone that employees are valued properly.

(Fisher, 1995, pp.15-16).

For the appraiser: Performance appraisal is a chance to develop an overview of individual jobs and organizations.

• Classification of ideas for development.
• Improved job satisfaction.
• Increased sense of individual value.
• There is an opportunity for appraiser to associate team and individual objectives to fulfil departmental and organizational objectives.
• There is an opportunity to explain expectations of the contribution the manager expects from team and individuals.
• The opportunity to set up the targets.
• There is a chance to make productive relationship with subordinates based on common interest and understanding.

(Fisher, 1995, p.16)

For the appraisee :

• Boost them up to increase motivation.
• Enlarged their career through job satisfaction
• They realize that they are valued.
• When they will get feedback after performance appraisal then they get a clear idea of what is expected from them and what they have to do to meet expectations.
• Supervisors discuss with them to improve their lacking areas.
• They are offered for training and development for their improvement.
• When managers are creating scope for developing their subordinate's career then it is ultimately developing relationship between them.

(Fisher, 1995, pp.16-17)

2.3 What should be appraised?

Managers should consider four things when they are going to do the performance appraisal.

Inputs - Appraisers will see how job holders have implemented their knowledge and skills to perform their job effectively.

Process - Job holders outcome will indicate the implementation of knowledge and skills for their activities. These are sometimes called to as competences. These illustrate the performance required of people to complete their job effectively. This kind of performance can make a difference between highly effective and less effective performers in a given role such as personal drive, analytical power, team management and leadership and ability to communicate.

Outputs - Measurable or observable results of the performer will be expressed by jobholders.

Outcomes- Result will show the ultimate impact of the jobholders and their teams or departments and their overall activities to achieve the objectives of the organizations.

(Fisher, 1995, p.25)

2.4 When appraisals should take place:

Formal performance appraisal are usually held annually but some of the fast moving companies prefer to do it twice a year or even more frequently, it could be quarterly. Those who are working in projects under a consultancy firm, their performance evaluation could happen after each assignment but there would still be an overall review at the end of the year. Some of the organizations conduct progress meetings at specific time to review progress towards achiev­ing objectives, work plans or projects. Some of them are doing two or three times a year, the main purpose of which is to review and update objectives.

(Fisher, 1995, p.27)

There are some reasons behind failure of appraisals. Reasons are as follows:

• Employees don't know about the time frame and what exactly they need to do in terms of good performance;
• Others fail because of problems with the measures used to actually appraise the performance;
• An easygoing supervisor might rate as high, for instance, subordinates who are actually substandard
• Other problems, like arguing and poor communication, undermine the interview feedback session.

Storey and Sisson (1993) have suggested that performance appraisal system actually have three steps: objective setting, feedback, and evaluation.

The first step of an appraisal system is to give the guidance to the employee on how to apply their efforts for the benefit of the organization. The second step is to ensure employees work toward the achievement of their objectives through a process of positive communication with their supervisor. The final step involves the supervisor making an appraisal of the employees' performance over the entire assessment cycle.

(Brown & Benson, 2005, p.101)

2.5 Popular Appraisal Methods:

Managers usually conduct the appraisal using a predetermined and formal method one or more of the followings:

2.5.1 Graphic rating scale (GRS):

The Graphic Rating Scale is the simplest and most popular technique for appraising performance. GRS measures personality traits and performance along with a point continuum scale or anchored scale. It lists traits such as quality and reliability and a range of performance values from unsatisfactory to outstanding for each trait. The manager or supervisor rates each subordinate by circling or checking the score that best describes his or her performance for each trait. In the end of marking manager or supervisor do the totals of the assigned values for the traits.

(Dessler, 1999, p.156)

The rater is given wide freedom in choosing a point, which is a threat to reliability and workability.

2.5.2 Alternation Ranking Method:

Positioning employees from best to worst on a trait or traits is another appraisal option. Since it is usually easier to distinguish between the worst and best employees, an alternation ranking method is most popular. First, list all subordinates to be rated, and then cross out the names of any not known well enough to rank. Then, indicate the employee who is the highest on the characteristic being measured and also the one who is the lowest. Then choose the next highest and the next lowest, alternating between highest and lowest until all employees have been ranked.

(Dessler, 1999, p.158)

2.5.3 Paired Comparison Method:

The paired comparison method helps make the ranking method more precise. For every trait such as quantity of work, quality of work, and so on will be considered for appraisal for instant, top performer of quantity of work and top performer of quality of work will be pared. (Dessler, 1999, PP. 158-159)

2.5.4 Forced Choice Method (FCM):

FCM intends to mitigate reliability problem of GRS by making scaling unknown to the rater. Here, the rater is served with some statements about a particular trait or performance factor. The rater is to choose a statement that best describes the employee. The rating is done by someone else. This is unworkable in larger organization. Both the rater and the ratee feel uncomfortable with FCM

(Anderson, 1993, p.24)

2.5.5 Forced Distribution Method (FDM):

The forced distribution method is similar to grading on a curve. With this method, manager places predetermined percentages of ratees into performance categories. FDM is a GRS or BARS scaling with a population distribution requirement. Usually it requires a normal distribution i.e. the lowest and the highest grade contain 10% of population each. The remaining 80% is distributed among others with highest distribution reserved for the mid-grade. FDM intends to minimize overrating. Yet it carries high probability of inequality in case of heterogeneous population.

(Dessler, 1999, p.159)

2.5.6 Critical Incident Method:

With this method, the supervisor keeps a log of positive and negative example (critical incidents) of a subordinate's work-related behaviour. Every six months or so, supervisor and subordinate meet to discuss the latter's performance, using the incidents as examples.

There are several advantages of this method of which are as follows:

• It provides actual examples of good and poor performance the supervisor can use to explain the person's rating.
• It ensures that the manager or supervisor thinks about the subordinate's appraisal all during the year.
• The rating does not just reflect the employee's most recent performance.
• The list hopefully provides examples of what specifically the subordinate can do to eliminate any deficiencies.
• However, without some numerical rating, this method is not too useful for comparing employees or making salary decisions.

(Baird, Beatty & Schneier, 1982, pp.45-46)

2.5.7 Behaviorally Anchored Rating Scale (BARS):

A behaviourally anchored rating scale combines the benefits of narratives, critical incidents, and quantified scales, by anchoring a rating scale with specific examples of behavioural activities for good or bad performance. Its supporters say it gives more equitable appraisal than do the other tools we discussed. Although BARS scales still present performance on a continuum; they provide specific behavioral anchors to help clarify the meaning of the performance dimensions and help calibrate the raters' definitions of what constitutes good and poor performance. Some supporters of behaviorally focused scales also claimed that they would remove unnecessary subjectivity (Latham & Wexley, 1977). BARS is judged from a set of scales- one scale describes each job dimension, or broad types of duties, responsibilities, or activities of a job. Placed on a scale are a set of statements clarifying of worker behaviour on the particular job dimension.

(Baird, Beatty & Schneier, 1982, p.61).

Rating dimension would vary according to the nature of the job- between six and nine seems quite common. For example one British study identified seven: Supervision of operators, scheduling and planning, technical troubleshooting, handling men, communications, administrative problems of wiring wire and dealing with other departments. BARC system has got substantial advantage it has some draw back as well such as time consuming and expensive. Some of them have identified ten dimension of performance. They are interpersonal relationships, organizing and planning, reactions to problems, reliability, communicating, adaptability, growth, productivity, quality of work and teaching.

(Fletcher & Williams, 1985, pp. 42-44)

2.5.8 Computerised and web-based performance appraisal:

Many people who have got the charged for performance appraisal for their subordinates may not be able to do so particularly newly appointed supervisors. As they will take over new responsibilities so they may not be efficient in expressing themselves in writing about employee performance. Eventhough some of them have got the strength to do perfectly but still they may need some format for developing effective, useful employee performance appraisals.

Computer software programs are making the performance appraisal system easier from many aspects such as writing a difficult employee performance appraisal. Management software that is commonly called MBA-ware, offers expert guidance in management issues that would cover from creating a business plan to writing employee policy manuals (Sprout, 1995). Some managers are looking for a develop technology to solve the problems that they are facing during performance appraisal.

Current computer software programs allow the managers to make performance appraisal documents that are in complete format, professional in appearance, and easy to use in the performance appraisal system. Additionally, this software programs provide classification of job performances that will be counted for appraising and offer various pre-written descriptions of behaviors for each criteria.

There are three leading programs for employee evaluation software that are Review Writer 1.0, Performance Now! 2.03, and Employee Appraiser 2.0 (Stewart, 1994; Robinson, 1994). There are some similar software programs in the market but it do not do the evaluation process that way the other three software work (D.W. Pratt, personal communication, July 24, 1996).

These three leading software programs work step-by-step to evaluate employees' performance. Managers input the employees' information into the system, mark the job description and/or categories to be used, choose the correct written evaluations, and print it.

(Spinks, Wells & Meche, 1999, p.94)

2.5.9 Mixed Standard Scales:

These scales are made to make the evaluation system reliable through confirming each individual rates, each scales rate and each rater rates and to minimize halo and leniency errors (Blanz & Ghiselli, 1972). The idea of mixed standard scale has come from the logic of forced choice method. Halo and leniency errors could reduce if ratings are not made on a scale where statements come in an obvious order of merit hierarchy. Practical findings provide support to these hypotheses (Saal & Landy, 1977). This scale is choosing three items for each performance dimension which are good, average and poor.

2.5.10 Management By Objectives (MBO)

More than half of the organizations regularly used performance appraisals in the beginning of 1950s, compared with only 15 per cent immediately after World War II (Spriegel, 1962). They had ordinary, numerical system which was trait rating system. This system focuses on past actions to appraise people on the basis of a previously established set of dimensions (DeVries et al., 1981). Lots of employees who were being apprised by the manager were not happy due to the way of performance measuring system. Trait rating system did not develop the employee's performance rather than there was clear indication for being sacked for low performers (Van Riper, 1958). It is mentionable that this rating system gave chance to managers to play the role of judge instead of employee development for achieving both the employees and the organizations goals (McGregor, 1957). Out come of the performance appraisal system was conflicting with present roles of managers and the achievement of organizational goal that's why new thought was introduced after World War II to update performance appraisal systems (DeVries et al., 1981). Due to the limitations of performance appraisal systems in the 1950s which led to the development of new systems based on management by objectives (MBO)

In theory, at least, Management by Objectives provided a clear and unambiguous framework for specifying and measuring employee performance. Labovitz and Baird have given some ideas about MBO that is:

“MBO approach to managing people is a process of continually structuring expectations through mutual goal setting with subordinates, establishing action plans and target dates, reaching objectives and providing feedback. This is a way of managing subordinates that permits them to meet their personal needs for responsibility, freedom of action and recognition. At the same time the MBO approach provides a supervisor with an element of control, and change his or her role from police officer to colleague or coach.” (Baird, Beatty & Schneier, 1982, pp.51-52). MBO is introduced in the management for improving performance, reducing role vagueness and redirecting effort to important organizational target. MBO system could be fit and work with any types of organization for planning process, a control technique and a form of individual performance appraisal. (Baird, Beatty & Schneier, 1982, p.57).

MBO has many positive sides but it has some limitations that we need to consider. The main issue that a company should consider first to implement MBO is the high level of management commitment and time frame to reorient the thinking of employees (Patten, 1977). Communication is the key to get a good out come and to prevent the complexity of the system from primary excitement that will lead into confusion and disillusionment, bring the result to an end with disinterest and failure. The purpose for the new system needs to be clearly recognized also, because while MBO is a useful tool for performance planning and feedback, it is not easily used for administrative decisions (DeVries et al., 1981).

A high standard of job assessment and implication skills are needed to determine which performance dimensions to measure and the goal achievement standards to use. Primarily, the goals and objectives which are set likely to be easily quantified, easily achieved and not necessarily central to the job (Murphy & Cleveland, 1995). Levinson (1970) found out an inclination for objective-setting measures such as sales dollars or number of units produced result in a lack of attention for less calculative aspects of job performance such as customer service and quality work. As a result this method will be ineffective if objectives are activity focused instead of output centered. There is also an inclination for managers to overlook the factors which are out of employees control, but which frequently affect goal fulfillment, leaving the employee responsible for goal completion inspite of external influences (Goodale, 1977). Managerial jobs are frequently measured in terms of unit, rather than individual, an objective, which requires that individuals be held accountable for outcomes requiring interdependent employee efforts (Levinson, 1970; Schneier & Beatty, 1978). These are some common errors associated with MBO (Kleber, 1972), but they help to illustrate the complexity of this performance appraisal method.

Longenecker (1989) points to the common assumption that appraisals are often ‘political' in nature, that their mechanisms for justifying decisions which have already been taken and disregard individual merit. This is particularly the case when performance related pay (PRP) is involved.

As a student of International Human Resource Management, researcher wants to discuss about international perspective of performance appraisal system.

Hofstede (1980) found that national culture is a factor to vary on value dimension between managers and employees. One of the value dimensions is individualism against collectivism. Individualism is such a thing where people show their action according to their individual preferences whereas collectivism is such a thing where people behaving as a member of a group. We can see the individualistic culture in western part and collective culture in eastern part of the world.

(Taormina & Gao, 2009, p.103)

The inception of Human Resource Management (HRM) made the Human Capital as the most important strategic resource of an organization and thereby linked it with strategic vision, mission, values, and other processes of organization. Performance Management (PM) thus replaced traditional PA under HRM philosophy. Here, both the organization and employees are of equal concern.

Performance management is seen by Armstrong and Baron (1998, p.37) as:

“a means of aligning organizational and individual objectives to achieve organizational effectiveness.”

Mohrman and Mohrman define PM as:

“The practices through which work is defined and reviewed; through which capabilities are developed and through which rewards are distributed in an organization. Performance management may involve goal setting, employee selection and placement, compensation, performance appraisal, training and development and career management” (Mohrman and Mohrman, 1995, p.2).

From above two definitions we can draw following generic features of PM:

1. It integrates between individual and organizational goals and thereby creates a sense of belongingness in the employees;
2. It views performance as a function of organizational environment i.e. culture, climate, flow of resource, critical external environmental factors, etc;
3. It contributes towards a climate of open discussion between management and workers about all organizational aspects.

It enables employees to identify their weaknesses as well as strengths and motivates them for superior performance.

2.6 Motivation and Performance Management:

Motivation has multiplier effect on performance. A sound and legitimate appraisal system is a precondition of having a highly motivated workforce. Conversely, a flawed system might demotivate and demoralize the employees in a way that appraisal becomes a ritual and sometimes counterproductive. Milkovich & Wigdor (1991, p.34) identify two essential functions of PM linking to motivation: a) it provides the basis for individuals to form beliefs about causal connections between their performance and pay; b) it indicates degree of association between individual's effort and performance.

2.7 Selection of Measurement Technique Suitable to Organizational Context:

Organization's mission, strategy, structure, job design, culture, management system, workforce characteristics have percussions on the success of the appraisal technique.

Milkovich and Wigdor (1991) suggested following considerations:

1. Using very precise individual performance measures and incentives systems for managerial and professional jobs can have potentially negative consequences for the company; Flexibility should be allowed.
2. Organizations differ in their ability to articulate strategic goals that provide direction throughout the management hierarchy in setting meaningful performance appraisal goals. Some organizations—especially public-sector organizations—find it difficult to articulate overall mission or strategic goals. Employee participation, therefore, should be allowed in setting mission and goals.

2.8 Performance Measurement Plan (PMP):

Components of PMP are:

2.8.1 Employee Performance Plan (EPP):

Each employee should have a position description (PD). Based on this PD, some critical and non-critical factors for performance measurement are developed. A Critical Factor is defined as element of one's responsibilities that significantly influences organizational activities. A Non-critical Factor is defined as a task element or expression of one's aptitude that supports better performance, but its absence does not obstruct organizational activities. Identification of critical and non-critical factors has to be determined in consultation with the incumbent. But they must be clearly defined in terms of organizational goals and one's PD. Target for each critical factor should be worked out in a participative manner. This practice allows flexibility and mutual trust between the rater and the rate (OPM, USA, 1996).

2.8.2 Setting Performance Standard (PS):

Performance standard means the management-approved expression of the performance threshold(s), requirement(s), or expectation(s) for an element that must be met to be appraised at a particular level of performance. A performance standard may include, but is not limited to, factors such as quality, quantity, timeliness, cost effectiveness and manner of performance. Standards for critical and non-critical factors have to be separate and well defined. Usually, five standards are used, e.g. Exceptional, Superior, Fully Satisfactory, Minimally Satisfactory, and Unsatisfactory.

2.8.3 Weightage Planning:

Giving weightage to each critical and non critical factors is important for two reasons (McCarthy, 2000, p. 24):

          A) Some factors are relatively more important than others. Giving them better weightage makes the rater able to differentiate between relative performances and thus avoid over or underrating.

          B) Weightage makes employee conscious about developing much sought qualifications to be more focused in rating.

2.8.4 Performance and Potential Measurement:

Potential measurement is important for understanding one's natural growth path and subsequent development accordingly. Moreover, performance in the existing job does not assure performance in higher jobs. Therefore, potential measurement is an important tool for career planning. Potentials are usually measured through trait, knowledge and ability rating (Murphy & Cleveland, 1991).

2.8.5 Exclusive Nature of Top Managerial Positions:

Milkovich & Wigdor have found that most top managerial positions are less amenable to job analysis and development of individual critical factors. They are, therefore, rated with global factors like policy analysis, advisory support, asset management, efficiency planning, strategic supervision, capital budgeting, long range planning, etc. Therefore, separate form should be used for top managerial positions. (Milkovich & Wigdor 1991, pp. 49-66)

2.8.6 Monitoring

Effective and timely feedback during the performance appraisal period addressing employee performance on elements and standards is an essential component of a successful performance management program. Employees need to know in a timely manner how well they are performing. They need to be told what they are doing well and if there are areas needing improvement.

2.8.7 Employee Development

Developing employees is more than just training employees. Developing employees covers all efforts to foster learning, which happens on the job every day. When organizations focus on developing their employees' capacity to perform rather than just training them, employees will be able to adapt to a variety of situations, which is vital for the survival, well-being, and goal achievement of individuals as well as organizations.

2.8.8 Rating

Rating involves formal recording of performance score in a standardized form. Most of the efficient managements ensure the ratees consent in the rating process.

2.8.9 Action Based on Rating

A basic principle of effective management is that all behavior is controlled by its consequences. Those consequences can and should be both formal and informal and both positive and negative. Positive consequences include rewards and recognition, promotions, within-grade-increases, etc. Negative consequences may include counseling, reassigning, removing, or downgrading the employee.

2.9 Errors of Performance Appraisal:

There are different kinds of errors in the performance appraisal process. Some of them are discussed below:

2.9.1 Recency error:

We can see recency error when a rater gives bigger weight to recent activities rather than past activities when appraising an individual's performance. Rater makes comments and put recommendation on recent actions, it could be good or bad. They will not be able to keep the previous record in their mind if they don't follow the proper procedure. They can record day to day or monthly performance for the employee to make a good judgment.

(Gillen, 1995, p.15)

2.9.2 Central tendency error:

Raters, who rate the employees within a range where they use usually middle or average line, they don't choose highest one or lowest one for the employees then it creates a error which is called central tendency error.

2.9.3 Leniency error:

Every appraiser has his own appraisal system beside the traditional methods, which acts as standard appraisal system against the appraisal which is made. Some of them mark the employees with higher grade some of them mark the employees with lower grade. So, higher one would be treated as positive error and the lower one would be treated as negative error.

2.9.4 Halo effect:

The halo error could happen if appraiser rates an employee either high or low on all items because of his/her characteristic.

This error could avoidable if appraiser assess on the performance instead of predefine criteria.

(Baird, Beatty & Schneier, 1982, p.116)

2.9.5 Contrast error:

This error is a tendency where appraisers rate people comparing to other people rather than to performance standards. This kind of error is avoidable if appraisers set a performance standard for performance appraisal instead of comparing.

2.9.6 Similarity error:

When appraisers rate other people in the same way that the appraisers observe themselves, they are making a similarity error. On the basis of perception that evaluators have themselves, they use those perceptions onto others.

2.9.7 Personal prejudice:

Disliking for a group or class of people may deform the ratings those people receives. We can see discrimination against age, gender, religion, and country of origin, etc. It is noticeable that sometimes male supervisors give unfair low ratings to women who hold usually male jobs. Some supervisors or appraisers have got prejudice in their mind which could make unfair assessment for employee.

(Gillen, 1995, p.16)

2.10 Who should do the appraising?

There are five possible way of appraising we can see. These are 1) Supervisor of the employees, 2) Organizational peers of the appraisee, 3) The appraisee himself, 4) Subordinates of the appraisee, and 5) persons outside the immediate work environment of the appraisee.

2.10.1 Immediate Supervisor:

Supervisors' ratings are the heart of most appraisals system of the organization. Supervisors who are working closely with the employees will make decision about development and evaluation. Research suggests that immediate supervisors' appraisal is mostly related to the average evaluation and to objective measures of performance.

2.10.2 Peer Appraisals:

This kind of appraisal is mostly used in the high professional organization like professors in universities, physicians in clinics etc. Peer appraisal could be effective by taking two considerations. firstly peers will maintain high level of interpersonal trust and share, in addition noncompetitive reward system and secondly appraisees' will get performance methods or outcomes equally.

2.10.3 Self-Appraisal:

In this system the employees would appraise themselves. This system could work where appraisee is completely isolated from everyone or unique possessor of a rare skill. This system has come into practice in the beginning of 1960.

(Baird, Beatty & Schneier, 1982, pp.81-83)

2.10.4 Appraisal by Subordinates:

This system is introduced by some organizations as a part of their manager's development. Organizations will get chance to assess their manager's leadership quality through the appraisal of subordinates. Firm like FedEx use this kind of performance appraisal system to improve supervisory performance.

2.10.5 Rating Committees:

Many organizations use rating committees to assess employees performance. These committees are usually made by the employee's immediate supervisor and three or four other supervisors. This performance appraisal system is more reliable, fair and valid than others which is run by single supervisor.

2.10.6 360-Degree Feedback:

Many firms have expanded the idea of upward feedback into 360-degree feedback. In 360 degree feed back system, performance information is gathered from every part such as supervisors, subordinates, customers etc.(Dessler, 1999, pp.155-156)

2.11 How to avoid appraisal problems:

Above problems could be happened during performance appraisal system but supervisors or managers could minimize them:

First, raters should learn and understand the possible problems and the solutions for each factor or criteria. If someone finds out the problems from any issue then it will be easy to make solution.

Second, appraisers always follow the right procedure for performance appraisal. Each method has its own advantages and disadvantages. For example, the ranking method avoids central tendency but can cause bad feelings when employees' performances are in fact all “high”; and the ranking and forced distribution methods both provide relative - not absolute - ratings.

Third, supervisors should be learnt how to reduce rating errors such as halo, leniency, and central tendency.

Fourth, daily diary keeping would be helpful to analyze the previous performance.

Chapter 3. Case Study @ Opsonin Pharma Ltd.

3.1 Company Profile:

Opsonin Pharma Limited is one of the leading pharmaceutical companies in Bangladesh. Currently it develops, manufactures, and markets generic medicines for both human and animal use. Its value-added products improve the quality of life of both the people and animals in Bangladesh as well as abroad and help them enjoy longer, healthier, and more productive lives. Opsonin is known for long as a provider of regular and life saving medicines at affordable price. It has long been established and recognized as one of the most leading, progressive and modern pharmaceutical company in the country with the assurance of manufacturing quality products as the company is committed to contribute much to develop national health sector. Since the company started manufacturing and marketing in 1956, continuous standardization of modern machinery, highly qualified and skilled professionals both in production and marketing could bring a glorious prospect to the company as one of the largest in the country.

Location

Corporate Headquarters Office

30 New Eskaton Road, Dhaka - 1000, Bangladesh

Tel: (880 2) 9332262, 9356451, 9356533, 9357023

Fax: (880 2) 8311905, Web: www.opsonin.com

Factory

Bogura Road, Barisal, Bangladesh

Tel: (880 431)53105-6, 53054, 53038, 52484, 53274, Fax: (880 431) 52552

(http://www.opsonin.com/home.php)

3.2 History of the Opsonin:

Opsonin is founded by the founder chairman late Abdul Khaleque Khan for industrial development in this country and his successors have maintained continuous development and progress in the industrial units mainly in the pharmaceuticals and related sectors.

OPSONIN: 1956-2006

1956:Partnership business started

1962:Manufacturing of injectables

1976:Established as private limited company

1980:Expanded nationwide marketing and distribution

1982:Manufacturing of antibiotic capsules

1985:Export of products to South East Asia and the Middle East

1996:Manufacturing of suppositories first time in Bangladesh

1997:Manufacturing of soft gelatin capsules

2000:ISO 9001 certification

2003:Site development and planning for new factory

    :Starting the journey to reach the land mark of 2200 Million BDT annual turnover

2005:(http://www.opsonin.com/history.php)

3.3 Vision, Mission, and Values:

3.3.1 Vision

The vision of Opsonin, since its inception, is to derive and deliver such medicines, which are primarily requisites of every human being even at the remotest corner of the country.

3.3.2 Mission

The mission of Opsonin is Continuous Quality Advancement to Ensure Improved Human Life Full of Health and Happiness.

3.3.3 Values

To achieve their goal, they affirm their values of Leadership, Teamwork, Respect for People, Customer Focus, Performance and Integrity.

3.4 Leadership

They empower their top management to share knowledge and reward those who are working with them for outstanding individual effort. Their management always wishes to achieve difficult goals, envisioning what needs to happen and motivating others.

3.5 Teamwork

They believe that team work is the key for success for company, they are always working together to meet the changing needs of our customer.

3.6 Respect for People

They think that people are the cornerstone of the Opsonin's success and they are proud of their history of treating people with respect and dignity.

3.7 Customer Focus

They are deeply committed to meeting the needs of their customers, and they constantly focus on customer satisfaction.

3.8 Performance

They strive for continuous improvement in their performance, measuring results carefully, and ensuring that integrity and respect for people are never compromised.

3.9 Integrity

They always consider ethical ground. So, they are very much careful about their products and processes that always maintain high standard quality.

3.10 Product Mix:

Opsonin do believes in quality products. Its strengths remain with the diversification of product and its powerful line extension. It has the latest technologies for production of wide varieties of dosage forms, which are as follows:

• Tablet
• Non-coated (plain, chewable, vaginal)
• Coated (film coated, enteric coated)
• Sustained release (coated / non-coated)
• Capsule
• Hard gelatin
• Soft gelatin
• Injection
• Vial containing dry powder for injections
• Small volume parenterals
• Liquid
• Oral (Suspension, Syrup and Drops)
• Topical solution
• Topical semisolid
• Cram
• Ointment
• Gel
• Suppository

Opsonin has a wide range of products. At present it runs the business with around 300 products and 158 brands in different therapeutic classes, as mentioned below.

Opsonin has introduced many time-demanded molecules first time in Bangladesh. These include Ranitidine (Ranitid), Omeprazole (Ometid), Cisapride (Cisarid) etc. Opsonin is the first national company which introduced Ceftriaxone (Traxon) formulations in 1992 and this brought a breakthrough in the history of domestic pharmaceutical industry. Moreover, Opsonin is the first national company which introduced Suppository formulation in 1996.

(http://www.opsonin.com/pd_therapeutic_index.php)

3.11 Different Important Divisions / Departments:

3.11.1 Human Resources:

Opsonin has more than 2100 employees which includes diversified professional teams like pharmacist, chemist, biochemist, microbiologist, engineer, medical professional, IT professional, chartered accountant, MBA etc. Opsonin is committed to develop its human resources through continuous training and development.

(http://www.opsonin.com/humanres.php)

3.11.2 Marketing & Sales:

Opsonin has one of the largest marketing team in Bangladesh. Product Management, Medical Affairs, Training, New Product Management and Regulatory Affairs are the major departments of the Marketing Division which is headed by one Marketing Manager. This highly skilled Marketing team ensures formulation and implementation of all sorts of marketing strategies and operations of Opsonin.

Sales team consists of chiefly General Manager, Sales, Three Assistant Manager, Eleven Regional Managers, Seventy Field Manager and Four Hundred Twenty Five Medical Promotion Officers. It promotes the products and secures the order as per the guideline set by the Product Management.

(http://www.opsonin.com/humanres.php)

3.11.3 Manufacturing & Quality Assurance:

The sacred vow of Opsonin is to ensure quality man, material, and machine for good manufacturing practice. The production units are equipped with sophisticated machines made by world-renowned manufacturers and operated by highly skilled personnel. The processes through which the products are made in the machines are also validated. Opsonin has adopted the World Health Organization's (WHO) Guidelines on GMP in the Quality Management System.

(http://www.opsonin.com/manufact.php)

Quality Assurance (QA) of Opsonin ensures that the quality of products are maintained by strict compliance with international pharmacopoeias' (BP, USP and EP) specifications on raw materials, packaging materials and finished products. In addition to raw and finished product testing, tests are carried on work-in-process materials to ensure that the process and hence products are always within acceptable quality limits. Also, completely separate facilities exist for microbiological testing, which checks to ensure that the products are free from undesired bacterial and other particulate contamination.

(http://www.opsonin.com/qualityassurance.php)

3.11.4 Product Development:

Being a national company Opsonin has got some social commitments. Apart from the business, it wants momentous and fruitful interaction in terms of quality with the people. It has fully dedicated Product Development (PD) Laboratory for development of new products. All new products are made in pilot batches in appropriately sized machinery before going into commercial production. Opsonin's Product Development Laboratory is the only fully equipped facility in the country dedicated for the purpose.

(http://www.opsonin.com/productdevelopment.php)

3.11.5 Information Flow Technology:

Business operating systems of Opsonin are mostly computerized. Opsonin has in house developed software for maintaining production planning, warehousing, inventory control, general ledger etc. Its corporate office and production facilities are all time connected with WAN and LAN.

3.11.6 Distribution:

Back to the eighties when national road transport system was not developed, Opsonin with the help of its wide distribution network ensured the supply of medicines to the remotest areas of the country. It has currently 20 distribution depots all over the country and supplies the medicines using its own vehicles.

(http://www.opsonin.com/distributions.php)

3.11.7 New Product Idea Generation:

New product launching is a crucial parameter. Besides the existing molecules, top generic companies compete strongly with each other regarding the launching of different molecules of different indications to serve the patient pool with different diseases.

The proposal initiates the technical feasibility study, which tells it is feasible for the existing facilities of the company to launch the product or not. If not, it is feasible the launch the product by purchasing the needed machineries or manufacturing it from other pharmaceuticals. If the molecule is technically feasible to launch, then the time will be for market feasibility study. Market feasibility must cover the following sectors:

optimum share receiving probability

market awareness of the disease and medication

Share of voice (SOV) creating capacity, i.e. internal strength

After all these analysis, the conclusion may be for launching the product or not. However, commercial feasibility of the product is also carried out before reaching final decision.

3.11.8 Product Development:

The responsible department manages the required sample from renowned more than one source and matches the finished product as per the declared status and parent company product.

As per their findings they prepare the sample-finished goods and send it to marketing. Marketing match the product with that of the parent company from the view of outlook, color, flavor, patient group, probable patient acceptance and market situations.

After all of these a pilot sample batch is manufactured and kept under accelerated stability study. After confirming the stability after 6 months the company goes for final large-scale production as per the requirement of marketing.

(http://www.opsonin.com/distributions.php)

3.12 Performance Appraisal System in Practice of Opsonin Pharma Ltd

3.12.1 Previous Performance Appraisal System:

Previous Appraisal System is more or less Annual Confidential Report (ACR). It is a performance evaluation report of employee which is written by his superior. In addition to performance it contains specific observations on the character, conduct and integrity of the officer reported upon. This appraisal system is to be countersigned by an officer immediately superior to the officer who writes the report on his immediate subordinate. The report is classified as confidential.

Adverse remarks written by the reporting officers have to be communicated to the officer who may be affected. The latter has a right to reply to the adverse remarks. The reporting officer then comments upon the reply. Based on this the head of office, usually the countersigning officer, decides whether or not to expunge the adverse remarks. If adverse remarks are not communicated at all, they stand nullified.

It contains traits and performance related factors. It is reported that this system is mainly trait -based and thus neglects the reviews on direct job related dimensions. The factors are very much subjective in nature. In many cases, last few months before the appraisal dates are crucial in influencing the assessment of appraisers. Repetition of interrelated criteria has made the appraisal long and complicated. The supervisory officers are reluctant to give negative feed back for their subordinate whom will work in the next day. The appraisal systems are applicable to all employees irrespective of grades. However, forms are different for different grades of employees.

The immediate supervisor usually appraises his subordinates, which is counter signed by the immediate supervisor's superior. The counter signing officer indicates his or her rating. If he disagrees, he must give reasons. Employees are rated against a four points scale starting from outstanding to average. An outstanding employee is one who demonstrates complete mastery of the job and is recognized as a rare professional in the field. Employee showing unacceptable performance with frequent failures to meet expected result is rated as average. Executives and managers are rated on 200 marks. 200 marks are allocated to different factors as they apply to different group of those employees. Rest of the employees are rated on 100 marks.

There is a tendency to keep the result of rating is secret. The factors are: Job knowledge, Ability to plan, Ability to produce output, Ability to determine and suggest solution, Leadership, Team work, Ability to work under pressure, Initiative, etc. The Traditional Performance Appraisal was filled up confidentially. This non-communication keeps the employee in dark about what is expected from them or where they stand.

3.12.2 Present Performance Appraisal System:

Brief Description

Performance Appraisal System of Opsonin Pharma Ltd. is for managing, evaluating and developing the performance of the employees. It applies to all top executives, officers and service staffs.

3.13 Aim:

The performance appraisal of Opsonin Pharma Ltd. is just not all about measuring performance of employees, but also aims at development of performance in terms of skill and knowledge and leadership behavioural competencies required in the job.

Structurally, first, it focuses on the job accomplishment and considers the following parameters in a given period of time:

• What assignment was given by the work plan?
• What was expected?
• What has been delivered?
• How has been delivered?
• What has gone well?
• What has gone wrong?
• What could have been done differently to do better?

Getting to these answers helps find the ways and means to improve performance learning from past successes and failures.

Second, it examines the professional skills & knowledge which are required in a job vis-à-vis the actual skill level job holder possesses and thus helps in finding skill gaps to be addressed for personal development.

Third, it reviews the leadership behavioural competencies which are required in a job vis-à-vis real demonstration of behavioural competencies by the job holder and thus helps find competency gaps to be addressed for personal development.

Therefore, their appraisal system takes care of the following:

• Business performance (on the job accomplishment in terms of a work plan)
• Depth of skill & knowledge
• Width of behavioural competencies
• Individual personal development plan

3.14 Objective:

The objective of the performance appraisal system is to shape outstanding performance in a competitive way to ensure sustainable and profitable growth in business.

Length of appraisal

The performance appraisal will be conducted annually but pre assessment will be conducted six monthly.

Key elements in the appraisal system

3.14.1 The details of the key elements are as follows:

Part-I: It contains the personal details of the executives.

Part-II: It constitutes the assessment of employees' performance and work competencies that are required in a job and the job holder must have those competencies to accomplish the assigned responsibilities in a qualitative way. This area has also been designed for different levels of employees appropriate to the job portfolios.

Part-III: It constitutes the assessment of employee's skills & ability that are required in a job and the job holder must have those skills & ability to accomplish the assigned responsibilities in a qualitative way. This area has been designed for different levels of employees appropriate to the job portfolios.

These three parts are major part but it also contains another six parts, which are Calculation of Marks, Disciplinary Record, Strength & Weakness of the Appraisee, Recommended Training for Development, Potentiality Assessment, and Appraiser's ability in assessing.

3.15 Who will be individual targets & develop individual work plan?

The Head of each function and/ or immediate superior will set individual targets and develop work plan for the people reporting to him or her.

In most cases, individual targets/ work plan will be derived from the team target/ work plan and will be used to highlight the priority target areas for the year.

Team target/ Work plan in case of head of branches and others profit centre will constitute their respective individual target/ work plan.

HR will support in the process of target setting and work plan development.

3.16 Who will make performance assessment?

The manager, Divisional Head or immediate supervisor and his/her direct reports will conduct the exercise of performance appraisal jointly.

At the out set individual members of the team will make the self assessment covering the elements included into the appraisal system.

The Appraiser will also consult his/ her superior in the process for any input, if necessary.

Following Appraiser and Appraise agreement, Appraiser's superior will review the entire exercise done and will give his comment/ observation.

Then the final documentation will be prepared and sign off by all parties concerned.

HR will support in the process with expertise as the business partner.

3.17 Appraisal forms:

The appraisal system has been designed taking into consideration two categories of employees as follows.

          a) Managers and Executives

          b) Other non-Management/ Service staff

3.18 Standard of performance measures:

3.18.1 Uses of Performance Appraisal System:

• Payment of incentive bonus.
• Promotions
• Merit increment
• Punishment
• Standard Performance Distribution (SPD)

The current performance appraisal system pursues the following SPD:

1. SPD of population by function/ department and across the organization will stand as follows under normal circumstances.
2. Each Head of the function in joint consultation with HR will ensure the given principles correctly followed so as to keep consistency.

3.19 Evaluation of Performance rating by different committees:

Following Performance Appraisal each year, more than one committee will be constituted by the MD to review the quality of the appraisal and rating. Particularly, focus will be more on the cases of “Outstanding” and “Superior” rated employees. The committee will examine the rating quality as well as will ensure that the “Performance Standard Distribution” norms are maintained within the policy.

The committee will also see overall performance distribution standard by department/ function and by job grades. For example: (a) in a department- how many are outstanding, superior, good, needs improvement respectively. Similarly, in job grade, say, all managers-how many are outstanding, superior, good, needs improvement respectively. Same exercise will be conducted covering all job grades and departments. The final one will be for the global picture.

This helps identifying High Potential people in different grades as well as ensures consistency check globally