360 Degree Appraisal. And Its Suitability. For Indian Public. Sector Banks. Researchjournali s Journal of Human Resource

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1 1 360 Degree Appraisal And Its Suitability For Indian Public Sector Banks Prof. IK Kilam Research Scholar, Manav Rachna International University, Faridabad Dr. S. Banerjee Ex. Professor & HOD MBA, MRCE Faridabad & Ex Director SDIM Faridabad Dr. N C Wadhwa IAS (Retd), Vice Chancellor, Manav Rachna International University, Faridabad

2 2 ABSTRACT Performance Appraisal System (PAS) is a very vital component of the overall HRD system in any organization. Be it the manufacturing sector or the services sector, public or private sector, formal or informal sector, periodic appraisal of employees performance serves as a very good HR developmental tool towards improving performance of employees as also their overall development year after year. It also helps the employees to appraise themselves critically and plan effective steps towards their work improvement and career advancement. And to top it all, the effective implementation of Performance Appraisal System within different organizations helps greatly towards individual - organizational goal integration so very important for overall success of organization and its people. Banking sector constitutes a very important business sector as it contributes to economic development of the country and serves all types of customers depositors, borrowers and a variety of clients in the financial services sector, which indirectly contribute to their business development and overall progress. Performance Appraisal System in the banking sector has been in vogue over past many decades and periodic and needed changes are getting introduced in this system, keeping in view the changes that take place in the economic / banking environment, the HR systems and procedures, customer needs & expectations as also the technological developments and their consequent applicability to the banking system. As far as 360 degree appraisal system is concerned, it has been tried & implemented in some measure in the private sector industry & services sector, particularly the new generation smaller business enterprises, yet it has not found a firm place in the public sector banking sector as yet. This paper brings out the salient features of the 360 degree appraisal system, its advantages & disadvantages and its current relevance in banking sector in general & public sector banks in particular. Keywords: Performance appraisal, 360 degree appraisal, banking, organization, public sector 1. INTRODUCTION Performance Appraisal System (PAS) is a very vital component of the overall HRD system in any organization. Be it the manufacturing sector or the services sector, public or private sector, formal or informal sector, periodic appraisal of employees performance serves as a very good HR developmental tool towards improving performance of employees as also their overall development year after year. It also helps the employees to appraise themselves critically and plan effective steps towards their work improvement and career advancement. And to top it all, the effective implementation of Performance Appraisal System within different organizations helps greatly towards individual - organizational goal integration so very important for overall success of organization and its people. Banking sector constitutes a very important business sector as it contributes to economic development of the country and serves all types of customers depositors, borrowers and a variety of clients in the financial

3 3 services sector, which indirectly contribute to their business development and overall progress. Performance Appraisal System in the banking sector has been in vogue over past many decades and periodic and needed changes are getting introduced in this system, keeping in view the changes that take place in the economic / banking environment, the HR systems and procedures, customer needs & expectations as also the technological developments and their consequent applicability to the banking system. As far as 360 degree appraisal system is concerned, it has been tried & implemented in some measure in the private sector industry & services sector, particularly the new generation smaller business enterprises, yet it has not found a firm place in the public sector banking sector as yet. This paper brings out the salient features of the 360 degree appraisal system, its advantages & disadvantages and its current relevance in banking sector in general & public sector banks in particular. 2. RESEARCH OBJECTIVE The objective of this paper is to understand the relevance of 360 degree appraisal system particularly in the context of public sector banking and to present the study findings based on individual perception of working bankers about their preference towards introducing 360 degree appraisal system within public sector banks. 3. LITERATURE REVIEW Bernardin and Beatty (1984) Have suggested that employee reactions to a performance appraisal system are usually better indicators of the overall viability of a system than the more narrow psychometric indices. Cleveland, Murphy and Williams (1989) Have opined that performance appraisal information is generally used for salary, administration, performance feedback and identification of employee strengths and weaknesses. Bretz, Milkovich and Read (1992) Have emphasized that the most important performance appraisal issue faced by organizations is the perceived fairness of the performance appraisal system. Their findings alarmingly suggest that most employees perceive their performance appraisal system as neither accurate nor fair. Vinson, Mary N. (1993) A 1993 survey of 100 Fortune 500 companies showed that only 10 percent of the employees were satisfied with their performance appraisal systems. Most said that annual reviews were perfunctory discussions that dealt mainly with salary related issues. Most employees want to know where they stand and what they must do to improve. If employees say that they are dissatisfied with the current appraisal system, the alternative is the 360-degree feedback system.

4 4 Many companies have used 360-degree feedback as part of their TQM efforts. TQM pioneer Edwards Deming said that the traditional appraisal system has no place in a quality- oriented company. The fact that the quality movement shifted emphasis from individuals to teams means that multi-rater feedback has the potential to promote cohesiveness. To ensure that the 360-degree feedback has a better chance of producing a change, the authors recommend: The feedback must be anonymous and confidential. Involving enough participants is critical to obtaining truthful, specific feedback. Consider the length of time in the position. Valid feedback depends on people having worked with someone long enough to get to know them. If time on the job is less than six months, feedback from the person s prior work group can serve as a benchmark for the next appraisal. A feedback expert should interpret the feedback. Most people won t act on something that they do not understand. Many feedback instruments are complicated. An expert can explain the scoring and present the results properly. Follow up is an essential part of the process. Employees should develop action plans on low scoring areas on the initial appraisal and assess their improvement in follow up surveys about six months later. 360-degree feedback shouldn t be used to determine salaries or promotions. The aim is to open a dialogue. Let feedback providers give written descriptions as well as numerical ratings. This enables them to be specific, and the feedback will be more meaningful to the recipient. Ensure that the feedback instrument is reliable, valid, and based on statistical methods. To avoid survey fatigue, don t use 360-degree feedback on too many employees at one time. You are likely to obtain unreliable feedback. That doesn t mean that you can t use the process successfully with an entire work group. You just need to stagger the distribution of the forms. Whether it is called, multi-rater, 360-defree, or some other kind of feedback, it is more useful and reliable to obtain information about an employee s performance from several people at different organizational levels. Skarlicki and Folger (1997) Have stated that the appraisal process can become a source of extreme dissatisfaction when employees believe the system is biased, political, or irrelevant. Cascio (1998) Has defined performance appraisal as a process to improve employee s work performance by helping them realize and use their full potential in carrying out the organization s missions and to provide information to employees and managers in making work related decisions. Effective performance appraisal system is an exercise in observation and

5 5 judgment, a feedback process and an organizational intervention. It is a measurement process as well as an intensely emotional process. Above all, it is an inexact, human process that is utilized differently in almost every organization regardless of industry. Srivastava Shefali and Thakur YS (2006) Have conducted a study on Performance Appraisal System at the State Bank of India to find out the changes initiated in the system since liberalization. The authors mention that the criteria of appraisal are assessment of performance in Key Result Areas, qualitative aspects of performance and attributes. They have made a critical analysis of the system and suggested that there is need for revamping the reward system and performance evaluation systems in the public sector banks so as to develop the human resources. Kerrin M, Wilkin H, Carr V (2008) Have discussed the application of 360-degree feedback as part of the performance management system within a company named NOMURA INTERNATIONAL PLC which is a leading financial services firm with over 1500 employees in 30 countries. The objectives of the study were to gather evidence on the reliability and validity of the feedback tool and to explore the relationship between 360-degree feedback and performance outcomes. Practical implications for the continuous improvement of both the instrument and the process in this context were considered. 360-degree feedback questionnaires for all roles showed evidence of good internal reliability. Factor analysis revealed underlying factor structures that differed depending on the role. Factor structures for most roles were similar to the three existing Nomura competencies, although the items within each factor differed somewhat from the original structure. Positive relationships were found between 360-degree feedback ratings and both outcome measures (Year End Report YER and bonus). Feedback ratings from managers and colleagues tended to be more consistently related to YER than were self-ratings. In terms of using 360-degree feedback as part of performance management system, this study has helped the organization to understand where differences might lie between raters and roles. On the whole, the authors find a positive relationship between feedback ratings and performance outcomes. Results suggest that the 360-degree feedback tool is a reliable and valid method for assessing the Nomura competencies. Shrivastava Pallavee and Rai Usha Kiran (2012) Have concluded that Performance Appraisal usually reviews past behaviors. But to be successful they should also be used as a basis for making development and improvement plans and reaching agreement about what should be done in the future. Performance appraisal is often the central pillar of performance management in the banks to keep the motivation of the employees high. Chowdary TSD, Amarnath B, Thulasi Krishna K (2013)

6 6 Have made a study to find which strategic factors influence on appraisal system in banking industry. The authors collected data with the help of structured questionnaire from 200 employees each from the public sector banks of Andhra Bank and Canara Bank and private sector banks of Citi Union Bank and Karnataka Bank. More than 86 percent of the respondents opined that performance appraisal policy of the banks is good and majority of the respondents (63%) opined that circular is the main mode of sharing of performance appraisal in both public and private sector banks. 72 percent of the respondents of both public and private sector banks have opined that the performance appraisal formats are reviewed every year and that the performance of appraisal of select public sector and private sector banks is good. The study indicates that the administrative process of performance appraisal and review process in public and private sector banks is approximately the same. Linkage of performance appraisal to rewards / career in public and private sector banks is also approximately one and the same. The study indicates that the organizational growth by performance appraisal in public and private sector banks is different. Authors suggest that managements have to take much initiative to achieve the business targets. It needs to closely follow up with the manpower and also provide incentives to staff who achieve business targets exceedingly. They also have to provide due weight-age to the performance in the promotion process. The authors suggest performance appraisal once in six months instead of one year. The PA formats may be refined further by taking the feedback from the field level officers and sharing of information on performance appraisal system could be more effective through intranet than circulars. Arguments in favor of 360 degree appraisal system in Indian Public Sector Banks It can bring more transparency in the Performance Appraisal implementation system. It can generate more enthusiasm among all stake holders to implement the PAS in a better manner. Involvement of all stake holders towards PAS implementation can go up. Once the performance commitment & achievement levels improve through improved implementation of PAS, it could lead to improved business growth and customer service. Better team work and team development takes place. Improved accountability of / among different levels of operation. Better commitment and efforts towards business development. Modern IT savvy organizations embracing TQM concept tend to use 360-degree appraisal system for more transparency and objective management process. Feedback is gathered from bosses, peers & subordinates, apart from self appraisals and that makes the exercise more comprehensive and reliable.

7 7 It serves a better purpose towards employee development than mere indicator for staff salaries, increments and compensation matters. It lessens individual discrimination and bias. It tends to promote people cohesiveness within organizations. The feedback generated trough multiple appraisals tends to be more work-specific than general. Arguments against 360 degree appraisal system in Indian Public Sector Banks It is rather difficult to implement sincerely and without possible delays. People generally prefer the status quo and avoid experimenting anything that is rather new. At times, relationships may sour between different levels. Appraisals may become biased / faulty / mutually accommodative. There is no major past experience and research back up as at present for this kind of appraisal system in public sector banks. Not feasible unless people have attained and displayed higher levels of maturity and commitment towards an honest appraisal system. Sometimes, people misuse the opportunity and tend to give unnecessary criticism against seniors and peers. Different colleagues may give different and conflicting opinions against same people & that makes overall appraisal process difficult. Some people could conspire together to pull down certain seniors / colleagues by giving negative feedback in bulk, making the process rather biased and political rather than professional. Consolidation and interpretation of multiple data sometimes becomes cumbersome and repels the implementers towards this process. Reliability of feedback from all levels can sometimes be questioned. 5. RESULTS FROM EMPIRICAL STUDY During , a perceptional study was carried out among little over 500 senior bankers randomly from different public sector banks both as appraisers and appraisees. The questionnaires were got responded during informal interactions in some of the training programmes at training colleges of different banks, including that at National Institute of Bank Management (NIBM), an apex training college for bankers at Pune.

8 Percentage Researchjournali s Journal of Human Resource 8 As many as 202 bankers responded as appraisers. The question to these appraisers was structured as under: Would you prefer a 360 degree appraisal system where performance is assessed by self, juniors, peers and seniors as well. The response from all the bankers as appraisers revealed as under: Response As Percentage Yes 42.57% No 44.06% Can t Say % Appraisers' Response on 360 Degree Appraisal Series Yes (42.57%) No (44.06%) Can't Say (10.86%) Response From the response of these bankers as appraisers, it is revealed that while 42.57% respondents would prefer a 360 degree appraisal system and almost a similar number (44.06%) would not. And as many as 10.86% respondents have not been able to clearly respond to this question as they have answered the can t say option. Similarly, as many as 315 bankers responded as appraisees to a similar question. The response from all these bankers as appraisees revealed as under: Response As Percentage Strongly agree 16.83% 17.46% Agree 42.54% 41.67% Neither agree nor disagree % 12.70% Disagree % 24.21% Strongly disagree % 1.19%

9 Percentage Percentage Researchjournali s Journal of Human Resource 9 Appraisees' Response to 360 Degree Appraisal Strongly Agree (16.83%) Agree ( 42.54%) Neither agree nor disagree (13.65%) Disagree (21.59%) Strongly disagree (0.95%) Series1 Response From this data it is revealed that as many as 16.83% respondents as appraisees strongly agree and 42.54% respondents agree on 360 degree appraisal system. Taken together, this would mean that a reasonable majority (59.37%) of the appraisee respondents would prefer a 360 degree appraisal system. As many as 21.59% respondents disagree and only 0.95% respondents strongly disagree with this kind of appraisal system. Yet, as many as 13.65% respondents have been non committal as they neither agree nor disagree with the concept. If we collate this data for appraisers and appraisees together in respect of all the 517 respondents, it is revealed as under: Response As Percentage Yes 52.80% No 30.94% Can t Say % Overall Response (Appraisees & Appraisers) on 360 Degree Appraisal Yes (52.80%) No (30.94%) Can't Say (12.57%) Response Series1 This combined response data indicates that a bare majority (52.80%) of banker respondents would prefer a 360 degree appraisal, while 30.94% respondents have not favored such a system of appraisal. At the same time, 12.57% respondents have not indicated any clear option as they have tick-marked the can t say option.

10 10 On the whole, it is interesting and encouraging to note that nearly 43% of the appraisers and nearly 60% of the appraisee respondents have favored the concept of 360 degree appraisal system. Combined together, this means that nearly 53% bankers would prefer a 360 degree appraisal system. At the same time, nearly 44% appraisers and 23% appraisees have not favored this system. Again, taken this data together, this would mean that nearly 31% bankers do not favour a 360 degree appraisal. About 11% appraisers and 14% appraisees (on the whole 12.57%) have not been able to indicate a clear preference on this issue. 6. CONCLUSION While no major attempt has so far been made to experiment and introduce 360 degree appraisal system for officials in public sector banks as such, there is no harm in studying the system as in vogue in some of the modern private business organizations in greater details and examining the feasibility of applying the same in some of the major public sector banks particularly where the HR and appraisal systems are well entrenched already and at such levels of hierarchy where the maturity levels and career aspirations are high enough. From the empirical study that has been made on this subject, it appears that a reasonable majority of the bankers do not seem to be unduly averse to the idea of introducing the 360 degree appraisal in public sector banks. Either some of the major banks could take their own initiative in this regard or else the Ministry of Finance, Govt. of India could advise the banks to start the same on an experimental basis, like it introduced a uniform set of performance appraisal formats in all public sector banks in the year With a fair degree of preparation, it seems this kind of appraisal system could be experimented at some senior levels in a few banks before the same can be introduced in all public sector banks. It has to be noted however, that some degree of individual and organizational maturity is necessary for successfully introducing and implementing this system at different levels of organizational hierarchy. In any case, the research wings within HR departments of public sector banks need to be strengthened and made proactive enough to assess the validity of this modern concept of appraisal system and finally introduce such changes in the performance appraisal system of such banks in a phased manner. All said and done, the system is important and so also are the formats (instruments) used, but in the ultimate analysis, what matters more importantly, is the quality of implementation, seriousness on the part of all levels of operation as also the urge to learn from past practices or mistakes (if any), environmental changes taking place in the organizational context, overall business context and in the area of HR philosophies and new practices. It would be, of course, interesting to make a repeat study in such banks which adopt this system and reach a firm conclusion on adopting the 360-degree appraisal system on a uniform pattern in all public sector banks in India. 7. REFERENCES Mary N Vinson (1993). The Pros & Cons of 360-degree feedback: Making it Work.

11 11 Chowdary TSD, Amarnath B, Thulasi Krishna K (2013). Performance Appraisal of Select Public Sector and Private Sector Banks in India, International Journal of Management and Development Studies, Vol: 2, Issue 8, August 2013, ISSN online Shrivastava Pallavee and Rai Usha Kiran (2012). Performance Appraisal Practices in Indian Banks, Integral Review A Journal of Management, e-issn: , P ISSN: , Vol. 5, No. 2, Dec 2012, PP 46 52, Srivastava Shefali & Thakur YS (2006). Case Study: Performance Appraisal in Public Sector Banks, A Case of the State Bank of India, Mangalmay Journal of Management & Technology, Vol: 1, Issue:1, July Dec 2006, PP 75 81, ISSN : M. Kerrin, H. Wilkin, V. Carr (2008). 360-degree feedback in performance appraisals: Deal or No Deal. Conference paper presented at the British Psychological Society, Division of Occupational Psychology Conference Work Psychology Group Ltd, C. Hobson, K. Darcy, Nomura International Plc. P. Jyothi & D.N. Venkatesh (2007). Human Resources Management. Oxford University Press, 2007 PP )