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Performance Management System in the Banking Sector

FLOW OF PRESENTATION

Introduction to Banking Sector Performance Appraisal of RBI Performance Appraisal of HSBC Performance Appraisal of ICICI Performance Appraisal of HDFC Comparative Analysis Conclusion Teams Views
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INTRODUCTION TO BANKING SECTOR IN INDIA


Can be defined in many ways Well regularised and licensed Investment services, Fixed deposit, Letter of credit ,Treasury services etc

needs and Importance for performance appraIsal in Banking

To recognise the human potential People remain the strongest and most competitive assets of a business To secure talent from the same pool Continuous improvement Find, train and retain talent To help face cut throat competition.
Continuous improvement

Modern Trends in Banks for Performance Appraisal

Performance Management System in Reserve Bank of India (RBI)

COMPANY PROFILE
Nations Central Bank Was established on April 1, 1935 The Governor is the Reserve Bank's Chief Executive RBI is made up of 26 departments RBI has 26 regional offices and branches and in addition to this it also has training centers across the country

OBJECTIVE
To study and analyze the present Performance Appraisal System of different Officer Grades and report findings, suggestions and recommendations to improve employee satisfaction with the overall process. This includes recommendations for changes in the current PAR system and the promotion policy of RBI.
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PROJECT BACKGROUND
Promotion of an employee is based on the combined score of PARS averaged for 3 best scores from the previous 5 years and the interview score. Both the scores carry equal weightage in the final score calculation. The study of the PARS Policy carried out for the following grades:
Officer Grade A Officer Grade B Officer Grade C
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PERFORMANCE APPRAISAL REPORTING SYSTEM

Features of the PAR system at RBI The PAR system provides for three different reporting formats for the following categories of officers: a) Officers in Grades A, B & C; (Area of focus for this project) b) Officers in Grades D & E and c) Officers in Grade F

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The system also provides a set of competencies against which the performance of officers is to be appraised. The officers from Grades A to E are to be appraised on ten competencies, while officers in Grade F are to be appraised on six competencies. Appraisal is to be done on a five point rating scale There is also a provision for feed-back and counseling in the system
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PERFORMANCE APPRAISAL PROCESS AT RBI


Department / office furnish appraisees biodata Appraisee officer list out his/her postings and experience Performanc e Summary & Performanc e Rating Self Appraisal and Self Rating Evaluation of the performance of the appraisee officer Officers to view their PAR after finalization by the Review Committee.

Assessment of the review committee

Provision for feed-back and counseling in the system

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REPORTING FORMATS FOR OFFICERS In grades a to grade e

The design and contents of the reporting formats for officers in Grade A to Grade E are similar except for the competencies identified for assessing the appraisee officer. The formats are divided into five sections: SECTION I It consists of two parts. The first part requires the concerned department / office to furnish the appraisee officer's bio-data. In the second part, the appraisee officer is required to list out a record of his/her postings and experience during preceding three years, including the reporting year. This part does not require any authentication by the concerned department/office.
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SECTION- II This section serves the purpose of self appraisal. SECTION III This section is for evaluation of the performance of the appraisee officer and is required to be completed by the reporting and reviewing officers. There are ten competencies with five boxes against each.
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SECTION IV This section deals with the assessment of the review committee which will be final. SECTION V This section contains instructions for reporting/reviewing officers and review committee.

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RATING SCALE

Highest rating - Far Above Requirement (FAR) Lowest rating - Below Requirement (BLR). Between FAR & BLR - Above Requirement (ABR), Meets Requirement (MTR) and Capable of Meeting Requirement (CMR)

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DISCLOSURE OF ENTRIES AND AUTHORITY FOR HEARING APPEAL


It has now been decided to allow all officers to view their PAR after finalization of the same by the Review Committee. Accordingly, every appraisee officer will have to acknowledge on his/her PAR for having seen the same. A copy of the PAR will be made available if so desired by the appraisee officer.
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REPORTING PERIOD

The following reporting periods may be adhered to for recording performance appraisal:Category of officers Reporting Period Grade A - 1 October - 30 September of the following year Grade B - 1 April - 31 March of the following year Grade C to Grade F - 1 July - 30 June of the following year
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RECOMMENDATIONS
The analysis of the PAR and Promotion interview marks revealed some pain points and loose ends in the PAR and Promotion system. I make the following recommendations: Performance Appraisal System at other nations Central Banks Bank of England - 360 feedback Reserve Bank of Australia - MBO and BARS Central Bank of New Zealand - defines goals for and objectives for each of the departments. The performance of these departments is monitored against these planned objectives. Each departments plans and performance are scrutinized by the Banks Governors and by the Board of Directors.
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IMPROVEMENTS IN THE CURRENT SYSTEM BARS

Employees should rate themselves. Training for managers (supervisors) to comprehend anchors and marking system and be at same platform. Quarterly review & Cumulative Grading

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PERFORMANCE APPRAISAL OF

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COMPANY PROFILE
HSBC's origins in India date back to 1853, when the Mercantile Bank of India was established in Mumbai. The Bank has since, steadily grown in reach and service offerings, keeping pace with the evolving banking and financial needs of its customers. HSBC in India is proud to have retained the Group's pioneering streak by being an active partner in the development of the Indian banking industry - even giving India its first ATM way back in 1987. HSBC is a universal bank and is organised within four business groups: Commercial Banking; Global Banking and Markets (investment banking); Personal Financial Services (retail banking); and Private Banking.

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PERFORMANCE APPRAISAL PROCESS AT HSBC BANK.


HEAD OFFICE LISTS TARGETS FOR EACH COUNTRY

CASCADED DOWN TO EACH LOCATION

SUPERVISOR GIVES EACH EMPLOYEE HIS OBJECTIVES

MID YEAR REVIEW

FIRST QUARTER REVIEW

MEETING WITH THE EMPLOYEE FOR OBJECTIVE DISCUSSION

THIRD QUARTER REVIEW

AT THE END OF THE YEAR JUDGMENT IS GIVEN

REWARDS OR TRAINING
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PERFORMANCE APPRAISAL SYSTEM ADOPTED IN HSBC


The head office in Hong Kong sets a goal to be achieved by each country. The country office then divides the goal to each location. Each location then makes it the responsibility of the supervisor to delegate and divide the goals for every employee. Then there is deliberation between the manager and the employee.(MBO Method).

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PERFORMANCE APPRAISAL SYSTEM ADOPTED IN HSBC


The performance criteria are divided into 4 quadrants. Quadrant 1- Customer quadrant Quadrant 2- Internal processes and controls. Quadrant 3- Main Job Quadrant 4- Development Areas.

Each of these parameters is given a 100% weightage. If the employee has performed well, he is liable for a reward in the form of an increment. However, if he has performed poorly, he will be sent for training.
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PERFORMANCE APPRAISAL SYSTEM ADOPTED IN HSBC


The manager sets 'Stretch Goals' if the employee is able to achieve his target. Where the increments are concerned, certain caps are put. The employee cannot receive over 30%.

Depending on his performance, he is given an increment of maximum 30%.


This is decided by benchmarking the salaries amongst competitor organizations

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PERFORMANCE APPRAISAL SYSTEM ADOPTED IN HSBC


Performance Appraisal is conducted quarterly: Analysis is done to see if the employee is doing his job. Managers meet with the non performers and discuss what the problem could be. The mid-year appraisal is to check if there are any help areas concerned with the employee. If things are on track, goals are made more challenging. The next quarter is again a review of goal attainment.

At the end of the year, judgment is given.


Appraisal results are discussed with the employee.
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PERFORMANCE APPRAISAL SYSTEM ADOPTED IN HSBC


The employee notes down his comments along with the managers. Besides increments, there are also non monetary rewards. This depends on individual managers. There are 'Thanks Awards', 'All Star Day', League Tables, etc.

If there is a skill deficiency, appropriate training is given. Otherwise, the goals are made more realistic.
Motivation is provided on 3 fronts: Salary Incentives Recognition 28

POSITIVES OF THE PROCESS


The review given to employees every quarter will be very beneficial to them. Consultation with employees about their objectives. Stretch Goals.

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GAPS IN THE PROCESS..


There should be a place where employees can go to in case they are not satisfied with the current process. More focus can be given to competencies.

Self appraisal can be conducted wherein employees will get the chance to rate themselves.

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PERFORMANCE MANAGEMENT SYSTEM IN ICICI PRUDENTIAL

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reasons for performance appraIsal In IcIcI


Encourage increased selfunderstanding among staff as well as insight into the kind of development activities that are of value
Develop valuable communication among appraisal participants

Improve institutional/department al manpower planning, test validation, and development of training programs

Distribute rewards on a fair and credible basis

PMS

Increase staff self-esteem motivation to perform effectively

Clarify organizational goals so they can be more readily accepted Gain new insight into staff and supervisors

Better clarify and define job functions and responsibilities

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Eligibility
All Staff Members who have joined on or before Sep 30th would be part of Appraisal Cycle The Performance Management System covers all Managers, Operations Executives and Executives in other Functions In case a manager has been transferred to a new role, he has to spend at least 6 months to appraise the Staff Member. In any case the appraising manager is expected to take feedback from the previous manager before appraising the staff member
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Pre Feedback Performance Discussion (PFPD)


The PFPD is conducted by the appraiser before he reviews the appraisal and provides Appraisal Rating Provides the staff member a forum to discuss with his manager about his achievements, what he has done, and how he has done it

This helps the staff member give a realistic & correct view of his performance to his manager
The manager through this process gets a clear understanding of the Staff Member's Performance, the level of complexity involved and how the achievements have happened. It helps manager give an accurate rating based on Performance .
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Pre Feedback Performance Discussion (PFPD)

The Manager is not expected to give his views or feedback during the PFPD He can neither rate the appraisee before or during the PFPD

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RATIFICATION
Authorization & Consent Ratification of rating helps in creating a fair and uniform rating system thereby remove biases from the rating Ratification process with the ZM/ RM/ Regional Head & HR The ratification team can ask for clarifications/ inputs from individual appraisers at any stage of the ratification process.
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Performance Appraisal Process at ICICI Bank

KPI Setting

HR & Corporate Planning Team roll out the KPI

Self Appraisal and Self Rating

Appraisee submits the appraisal to manager via PACE

Ratification process with the ZM/ RM/ Regional Head/

Manager transfers the document to Corporate HR person

Performance Summary & Performance Rating

Manager conducts Pre Feedback Performance discussion (PFPD)

Ratification process with HR

Ratings are discussed with the individual managers

Managers then conduct the PRD with the Individual Staff members

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Positive of the Process

Clear explanation of the persons role and responsibilities in the organization


Involvement of employees in the appraisal process ,that is Self Appraisal Ratification process to eliminate bias
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Gaps in the Process


Employees are not get involved for the setting the objectives/ KPI's More focus can be given to competencies Though the organization is conducting the performance appraisal system on the quarterly basis it is not documented

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PERFORMANCE APPRAISAL SYSTEM AT HDFC BANK

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COMPANY PROFILE HDFC BANK

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PERFORMANCE APPRAISAL SYSTEM IN HDFC BANK

Forced Distribution - Normalization or Bell Curve is used for Performance Appraisal


Bell Curve Distribution
80%

60%
40%

60%

20%
0% 1
5%

15%

15%

5%

5
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ELIGIBILITY

All Staff Members who have got confirmed before October are eligible for the appraisal process in April

The Performance Management System covers all Managers and Executives who are confirmed .

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APPRAISAL PROCESS IN HDFC


KRA setting KRA given to the employees Mid review Appraisal in Oct Self Appraisal in April

Manager recommends the rating to the Cluster Head

Based on discussion Manager gives an Indicator Rating

1 to 1 discussion with manager about performance

Branch Manager receives the rating

Branch Manager gives the rating to the HR

HR sends a mail to all employees

Discrep ancy

HR gives the rating, appraisal letter and increase if applicable 44

GRADE Rating

Outstanding Exceeds Expectations Meets Expectations Unsatisfactory *Key Performance

T1 T2

T3
T4 KP
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GRADE RATING
T1 T2 T3 Bonus + Increment Bonus + Increment No Bonus only Increment

T4

Neither bonus nor increment


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