Chapter – 1 INTRODUCTION
CHAPTER – 1
INTRODUCTION
In today’s fast paced world the competition is getting more complex and fierce day by day. Every industry all around the world, in its quest to reach the top and gain the highest profit margin is fighting with its competitors for all kinds of resources which are obviously less than what the needs are. In such a race to get the maximum quantity and the best quality of resources the major problem is to get the required human resource. There are price wars for service people fueled by the competition for good talent. Not only is it difficult to recruit skilled workers, but also to retain them. In the past, companies expected job loyalty, but today, we hear stories of employees accepting other job offers only weeks after being hired. We have to wonder if a person have changed or is it that employers are not able to satisfy employees. To win the battle for workforce share, companies must rethink their strategies to effectively recruit, motivate, and retain committed employees.
If we analyze the most important tool which helps in motivating the employees so that the employee benefits the company and the nation as a whole is the performance management system because of a number of reasons. Performance management is the only part of human resource which enlightens the employee and gives him/her a chance to learn and to improve his/her performance. It is the basic human nature that we want to get a feedback for whatever we do. Whether that is positive or negative is regardless as long as we know that whatever we do is noticed by others. Ignorance is worse than negative feedback.
The topic under consideration in this thesis is “Performance Appraisal and Employee Motivation: A Case Study of the Banking Sector of Pakistan”, in which the importance of a well established performance appraisal system is studied and how it is affecting the motivation of employees and the contribution to the betterment of the banking industry in Pakistan.
1.1 Academic and practical importance of the topic
Whatever that I have learnt in my academics related to the performance appraisal systems and how the employees can be motivated to perform their job can be applied to the topic e.g. what are the methods the banks can use to prevent employees being demotivated and how the performance appraisal forms can be customized to meet the demands of the employees so as to motivate them.
This topic has also its practical implications because human resource has recently started to come into limelight and the shift from the administration to the human resources is taking place. Among that as well I think that performance appraisals are the most important and the most complex part which is not getting the importance that it should be getting. Apart from that most of the people are just working for the sake of doing a job and are not really satisfied and motivated to do what they are doing. This aspect can also be improved by the proper use of the performance appraisal systems if an effort is made in that direction. Banking sector is one of the ever-changing sectors in Pakistan and it is an issue for them as well.
This study would help them analyze their position among the other banks and it would help them motivate their employees by effectively using the performance appraisal system.
1.2 Need for Performance Management System
Performance management is the process of creating a work environment or setting in which people are enabled to perform to the best of their abilities. Performance management is a whole work system that begins when a job is defined as needed. It ends when an employee leaves your organization.
Managers cite performance appraisals or annual reviews as one of their most disliked tasks. Performance management eliminates the performance appraisal or annual review as the focus and concentrates on the entire spectrum of performance management and development issues. Employee performance development, training, cross-training, the provision of challenging assignments and regular performance feedback are included in an effective performance management system.
Performance management system should be thought of in a broader manner. A performance management system includes the following actions.
§ Develop clear job descriptions.
§ Select appropriate people with an appropriate selection process.
§ Negotiate requirements and accomplishment-based performance standards, outcomes, and measures.
§ Provide effective orientation, education, and training.
§ Provide on-going coaching and feedback.
§ Conduct quarterly performance development discussions.
§ Design effective compensation and recognition systems that reward people for their contributions.
§ Provide promotional/career development opportunities for staff.
§ Assist with exit interviews to understand WHY valued employees leave the organization.
1.3 Benefits of the Performance management system
An effective PMS should provide the following benefits:
§ Increase in employee involvement and motivation
§ Fair measurement of performance and potential
§ Provision of a career development framework
§ Equitable reward and compensation
With the attainment of the above mentioned benefits, PMS can also act as a tool which can retain and motivate the employees for the organization.
1.4 Strategic shift
Until recently, performance appraisals had initiated moderate to little interest in most of the organizations. The issues related to performance appraisals were more a matter of routine personnel department records and reports than boardroom strategizing. Typically, statistical information was dutifully recorded, studied, then filed.
This is no longer the case anymore. Performance appraisals are now into a position of priority on executive team and boardroom planning schedules. There is an increasing need for HR to become more proactive in its participation with top management to develop a comprehensive performance appraisal system which can cater to the needs of the employees at all levels.
Another issue is that of the motivation of employees. Most of the senior employees in the banking sector probably were demotivated about their jobs from the very initial stages but no importance was given to this problem by the authorities. The shift took place only recently when the lack of motivation on the part of the employees started affecting the profit margins of the bank. This scenario is more prevalent and commonly seen at the older banks whose workforce comprise majority of the older employees.
The linkage between the performance appraisal system and the motivation of employees must be viewed as a strategic business issue. The only approach that has the possibility of a successful outcome is a systemic one. It requires full commitment of management in addition to full alliance with the Human Resource Department.
Motivation of employees will require a comprehensive process that aligns appropriate employee wants and needs with the performance appraisal system.
The internal and external situations that cause the employees to be demotivated are vast and complex. Organizations can do little to control the country's economy or an employee's preference for mobility. An enterprise can, however, design internal culture, structures, strategies, programs and above all an effective performance appraisal system that motivate employees.
To accomplish this task it is necessary to determine the major issues which cause the employee’s demotivation for the banking industry. Motivation issues are the result of very complex and multifaceted phenomenon. There is not just one strategy, methodology or program that is the definitive answer to motivate employees. But the problems can be reduced to some extent by having a comprehensive performance appraisal system which is aligned with the needs of the employees.
1.5 Scope of the study
There are twenty-four private banks in Pakistan while some other are government banks but three have been taken as a sample size among them for detailed study about their employees. Some other banks are also studied broadly and their features have been highlighted. The banks that are chosen for the research are:
§ Bank Alfalah Limited
§ Habib Bank Limited
§ Allied Bank Limited
1.6 Objectives of the study
The objective of the study is to find the impact of performance appraisals on the motivation of employees in today's organizations in general and in the banking sector of Pakistan in particular. To find about the problems that they face and how they can focus their energy in a proactive manner to motivate them.
Motivating good employees in the banks requires more than just thinking. For banks to remain competitive, it has to be a reality and for that reality to be implemented the linkage of the performance appraisal with the motivation of the employees is essential.
A huge industrialist once commented, “Take away my factories, my plants; take away my railroads, my ships, my transportation, take away my money; strip me of all of these but leave me my key people (who are motivated), and in two or three years, I will have them all again.”
The aim of the thesis is to find ways and methods to motivate employees in the banking sector primarily by improving and designing better performance appraisal systems.
1.7 Limitations of the research
The research has some limitations as well which should be highlighted here for better understanding of the whole content. Firstly, the sample is relatively small, which limits the significance of the results. Although maximum efforts were made to get a large number of responses from each bank but the average size were about 25 participants from each bank.
Secondly, the biggest problem in the research regarding performance appraisals was the honestly and integrity of the participants in filling out the forms. As the research is dependent on questionnaire, so individual concerns in filling out questionnaire honestly is a limitation. Apart from that in the older banks where majority of the employees are senior employees were not willing to fill out the questionnaires and some of them who even did fill were not very interested and did not take the process very seriously.
Finally, this thesis focused on a fairly broad aspect of motivation. Although a number of aspects have been defined to find out how motivated an employee is e.g. learning from the job, communication with the peers, subordinates and superiors, the level of satisfaction with the whole appraisal process, work environment and job content etc, but still all the aspects of motivation could not be taken into consideration. For that reason it is reasonable to believe that there might be additional moderators operating here that would be worthy of future investigation
1.8 Hypothesis
Some of the hypothesis which were kept in mind while conducting the research are as follows:
1. Higher objectivity in questions lead to higher job satisfaction
2. Awareness of the appraiser lead to higher motivation
3. More time spent at a bank leads to higher motivation
4. Frequent promotions lead to higher motivation of employees
5. Perception of unfairness of the appraisal forms lead to dissatisfaction of the employees
1.9 Research questions
Some of the key research questions that would be highlighted and studied in this thesis are as under:
§ How frequently are the appraisals being carried out at the bank?
§ What are the major issues which lead to the demotivation of the employees?
§ Why is the level of job satisfaction and the motivation due to the performance appraisal system more in the new banks as compared to the older banks?
§ Is there a linkage between the performance appraisal system and the promotion of employees?
§ Are any steps being taken to improve the whole process?
§ Is there an effective orientation program which gives the employees a clear insight into why and how the appraisal process takes place?
§ Is performance being overseen?
§ Are the employees being offered any development program in accordance to the performance appraisal process?
§ Are the banks meeting individual needs?
Figure – 1: Theoretical framework flow
Independent Variables Dependent Variables
1.10 Data collection instruments
Questionnaires were the primary data collection instrument; it is appropriate to discuss here that other quantitative technique have also been used. In addition to questionnaires, the banks provided various written information, such as corporate annual statements, co-worker magazines, and brochures and leaflets describing corporate policies and philosophies.
1.10a Employee’s Surveys (Questionnaire)
Most of the data that was received about the performance appraisals and the motivation of employees at the banks was through the questionnaires. It was helpful in getting large amount of information in a more quantitative manner. On the average a sample size of 25 to 30 employees were questioned in each bank to have a reliable database about the issues related to the motivation of employees.
1.10b Interviews
Interviews help in getting the information that cannot be gathered through the questionnaires, therefore some of the top executives from each bank are interviewed as well, to have a two-way communication and to resolve some untapped areas.
1.10c Secondary Data
As a part of this thesis a detailed literature review is carried out to gather existing information and research studies about the issue and to analyze the issues through certain best practices through out the world. Theories, articles and some surveys are used and highlighted as to gather information about employee satisfaction and retention rate.
1.10d Extensive On-line Search
Internet is used to gather information and literature review as well as to gather information about how to solve the issue.
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Research Report On: Performance Appraisal and Employee Motivation
(A Case Study of The Banking Sector of Pakistan)
Chapter – 2 LITERATURE REVIEW
CHAPTER – 2
LITERATURE REVIEW
MOTIVATIONAL PRESPECTIVES AND THEORIES
2.1 Employee perspectives about performance appraisals
The concept of performance management is a very broad concept with a number of terms constituting it. One of the major constituents of the performance management process is the performance appraisal system. These two terms are often used interchangeably but in reality they are two entirely different processes. Performance management system is a whole whereas performance appraisal system just deals with the measurement of the performance of the people. Not just the meaning, the concept of performance appraisal systems has different perceptions for the employees and organizations which is where the major problem lies.
2.1a Definitions
Before going into the details of the concept, some of the definitions of the performance appraisal process are given below:
§ Performance appraisal is a method of acquiring and processing the information needed to improve an individual employee’s performance and accomplishments. (Douglass)