Effectiveness of Performance Appraisal Systems in Knowledge Organizations in Bangalore

Effectiveness of Performance Appraisal Systems in Knowledge Organizations in Bangalore

EXECUTIVE SUMMARY

The most important, and truly indeed the truly unique contribution of management in the

20th century was the fifty –fold increase in the productivity of the manual worker in

manufacturing. The most important contribution management needs to make in the 21 st

century is similarly to increase the productivity of knowledge work and knowledge

workers who are their most valuable assets. ” A worker, who controls, modifies and

involves in the decision making in a knowledge organization is referred to as a

knowledge worker. An organization which uses or produces knowledge is referred to as

a knowledge organization. Managing knowledge workers is directly related to the

transformation of business organizations over the time. There is a fundamental shift seen

in the focus, sources and processes of innovation and value creation in the modern

business entities. Managing knowledge workers helps in the growth of the organization

as “innovation and productivity of the knowledge worker is unleashed. Managing

knowledge workers is the un-tackled challenge of today’s managerial force. This is

because the knowledge worker is unique in all aspects (psychologically, sociologically

and physiologically). The knowledge workers in today’s knowledge era are conceptually

strong and carry the means of production with them. They do not like to be led and are

clever and intellectually creative. The knowledge based businesses need to be focused on

the productivity of their capital – that is, the productivity of the knowledge worker .One

of the means by which this can be achieved is by developing an appropriate performance

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appraisal system exclusively for the modern day knowledge workers . An effective

performance appraisal system can be used to create team synergy, build trust, impart

conflict management techniques, and develop team working and team development skills

in knowledge organizations. Therefore it is necessary to develop various better, new and

efficient methods to judge the productivity of the Knowledge workers. An increase in the

productivity of the human capital will correspond to the increase in the performance of

the knowledge organization as a whole.

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INTRODUCTION

Business environment is changing fast as a response to evolving conditions .Change is

inevitable in every aspect of life and organizations are no exception to this. The third

wave of human socio-economic development is described by Charles Savage in "Fifth

Generation Management." The first wave was the Agricultural Age with wealth defined

as ownership of land. In the second wave, the Industrial Age, wealth was based on

ownership of Capital, i.e. factories. Modern organization as emerged from the industrial

revolution. The cotton mill and the railroad were first. But while unprecedented, they

were still based on the manual labour as was all earlier work , whether it was farming ,

manufacturing , clearing cheques by hand etc. This was the case as late as 50 or 60 years

ago, even in the most highly developed economies.

In the Knowledge Age i.e.; the third wave, wealth is based upon the ownership of

knowledge and the ability to use that knowledge to create or improve goods and services.

Product improvements include cost, durability, suitability, timeliness of delivery, and

security. A large and growing percentage of value creation in the 21st century economy

results from "knowledge work."

In the face of enormous changes in the business environment of India backed up by

liberalization of economy, globalization of business, modernization of technology,

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changing lifestyles, global competitive pressures and large scale employment ,a need

exists for a fresh look at the human resource .Multinationals, foreign investors and

NRI’s entering the Indian in a big way, communist countries adopting the path of

capitalism and large scale technology transfer, all such factors necessitates a wider

perspectives of human resource .

The society has been subject to continual change and evolutions over time.Gone are the

days of stable environment and relatively few changes; now change has become the

order of the day. Changes may be caused by Political , Economic, Social , Technical,

Legal or Ethical/ Environmental(PESTLE) upheavals, and these changes can be in the

form of paradigm shifts in the organization’s cultural, operational, technical ,

administrative, commercial procedural areas. The manufacturing based industrial

society of the post war period has evolved more and more into a service society, and

more recently into the so- called information society. According to the leading

management thinkers, the manufacturing, service, and information sectors will be based

on knowledge in the coming age, and business organizations will evolve into knowledge

creators in many ways.

Peter Drucker is one of the earliest thinkers who noticed a sign of this great

transformation. He coined the terms “knowledge work” and “knowledge worker” around

1960(Drucker, 1993, p.5). According to his book, Post Capitalist Society (1993), we are

entering “the knowledge society” in which “the basic economic resource” is no longer

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capital, or natural resources, or labour, but “is and will be knowledge”, and where

“knowledge workers” will play a central role (p.7)

Drucker (1993) suggested that one of the most important challenges for every

organization in the knowledge society is to build systematic practices for managing a self

transformation. The organization has to be prepared to abandon knowledge that has

become obsolete and learn to create new things through:

1) Continuing improvement of every activity

2) Development of new applications from its own successes and

3) Continuous innovation as an organized process.

Drucker (1991) also points out that an organization has to raise productivity of

knowledge and service workers in order to meet the challenges

The 21st century has witnessed the emergence of knowledge work and the knowledge

worker – let alone their emergence as the chief source of capital in our knowledge based

society and economy. This is a profound change as when there was a change into the

machine driven economy a few decades back, maybe an even greater one.

The large business in the knowledge era is more likely to resemble a hospital or a

symphony orchestra than a typical manufacturing company. In the Knowledge Age, 2%

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http://en.wikipedia.org/w/index.php?title=Knowledge_Age&action=edit&redlink=1


of the working population will work on the land, 10% will work in Industry and the rest

will be Knowledge Workers.

The effective management of knowledge workers is one of the greatest challenges facing

organization today. Human resource management and knowledge management is needed

in every organization that is interested in growing, stabilizing, diversifying, renewing,

developing become more dynamic in playing leadership roles. Unless the valuable

human resource is properly nurtured, trained and developed, organization effectiveness

would not be achieved .So human resource management has emerged as the most

spectacular field of management in India.

The traditional management process included planning, organizing, directing, leading,

and controlling activities in order to accomplish organizational objectives. The

traditional form of managing human resource will no longer work in the knowledge era.

The single greatest challenge facing managers in the developed countries of the world is

to raise the productivity of knowledge and service workers. This challenge, which will

dominate the management agenda for the next several decades, will ultimately determine

the competitive performance of companies. Even more important, it will determine the

very fabric of society and the quality of life in industrialized nation (Drucker, 1993,

p.69)

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1.1 Knowledge Organizations

Knowledge organizations are organizations that either use or produce knowledge, where

innovation and creativity is the most important input.

The knowledge organization is composed largely of specialists who direct and discipline

their own performance through organized feedback from colleagues, customers, and

headquarters. It is an information based organization.

Knowledge organization pose their own special management problems like motivating

and rewarding the knowledge workers , creating a vision that can unify an organization

of knowledge workers , devising a management structure that works with task forces ,

and ensuring the supply ,preparation and testing of top management people.

1.2 Knowledge Workers

The term was coined by Peter Drucker in 1959, is one who works primarily with

information or one who develops and uses knowledge in the workplace. “Knowledge

worker (also referred to as intellectual worker or brain worker) is someone who is

employed due to his or her knowledge of a subject matter, rather than their ability to

perform manual labor.” It includes those in the information technology fields, such as

computer programmers, systems analysts, technical writers and so forth. The term can

also refer to people outside of information technology but who are hired for their

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http://en.wikipedia.org/wiki/Information_technology

http://en.wikipedia.org/wiki/1959

http://en.wikipedia.org/wiki/Peter_Drucker


knowledge of some subject, such as lawyers, teachers, and scientists. The success of the

knowledge organization depends on the performance of its knowledge workforce.

A Knowledge Worker's benefit to a company could be in the form of developing

business intelligence, increasing the value of intellectual capital, gaining insight into

customer preferences, or a variety of other important gains in knowledge that aid the

business.

Today less than one fifth of the workforce is blue collared. Knowledge workers now may

comprise two fifth of the workforce, and they have a supervisor but are not subordinates.

In the area of their expertise they are their supervisors.

The critical feature of a knowledge workforce is that its workers are not labour, they are

capital. A knowledge based workforce is qualitatively different from a less skilled one.

They are the major creators of wealth and jobs.

In traditional workforce, the worker serves the system, in a knowledge organization the

system must serve the workforce. Employee’s maybe the greatest liability, but people are

considered as the greatest opportunity.

Knowledge worker (instead of just machine capital) are thought to integrate the best of

hierarchy, self-organization and networking Each dictates a different communications

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http://en.wikipedia.org/wiki/Intellectual_capital

http://en.wikipedia.org/wiki/Business_intelligence

http://en.wikipedia.org/wiki/Scientist

http://en.wikipedia.org/wiki/Teacher

http://en.wikipedia.org/wiki/Lawyer


and rewards system, and requires activation of knowledge-sharing and action learning.

Knowledge workers work in an environment described as a knowledge network.

1.3 Management of Knowledge Workers

In order to manage the Knowledge Workers of the 21st century it’s mandatory to know

about the technologies that the knowledge worker employs and how he manages his

knowledge. Knowledge Management ('KM') comprises a range of practices used by

organizations to identify, create, represent, distribute and enable adoption of what it

knows, and how it knows it.

Knowledge may be accessed at three stages: before, during, or after knowledge-related

activities. Successful KM program needs, on the one hand, to convert internalized tacit

knowledge into explicit codified knowledge in order to share it, but, on the other hand, it

also must permit individuals and groups to internalize and make personally meaningful

codified knowledge they have retrieved from the KM system.

What made the traditional the traditional workforce productive was the systems like

Fredrick Winslow Taylor’s “one best way”, Henry Ford’s “assembly line” or Edward

Deming’s “Total Quality Management.” The system enabled individual workers to

perform without much knowledge or skill .In fact, on an assembly line and in TQM

shops, a highly skilled individual can be a threat to co workers and to the entire system.

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http://en.wikipedia.org/w/index.php?title=Knowledge_network&action=edit&redlink=1

http://en.wikipedia.org/wiki/Action_learning


But in a knowledge organization , it is the individual worker’s productivity that makes

the entire system successful .The knowledge organization must be structured around

goals that clearly state management’s performance, expectations for the enterprise and

for each part and specialist and around organized feedback that compares results with the

stated performance expectations so that every member can exercise self control .The

other requirement of the knowledge based information is that everyone take information

responsibility .The knowledge based organization has its own special management

problems .Some of them are as follows:

Developing rewards, recognition, and career opportunities for knowledge

workers

Creating unified vision in an organization of specialists

Devising the management structure for an organization of task forces

Ensuring the supply, preparation , and testing of top management people

The knowledge based businesses need to be focused on the productivity of their capital –

that is, the productivity of the knowledge worker.

1.4 Traditional Performance Appraisal

1.4.1 Introduction

Performance appraisal is the assessment of the performance of an individual

systematically and in orderly sense. Performance appraisal should not be negatively

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understood to assessing the past performance. But this should be taken in positive sense.

It is a device to measure the potentials, which an employee has to make use of them in

future development of individuals and organization. This is reason why an organization

can sustain and the employees can be retained in the Organization till their retirement.

1.4.2 Meaning

Performance evaluation or performance appraisal is the process of assessing the

performance and progress of an employee or a group of employees on a given job and

his potentials for future development. It consists of all formal procedure used in working

organizations to evaluate personalities, contributions and potentials of employees.

1.4.3 Objectives of Performance Appraisal

To provide feedback to employees so that they come to come to know where

they stand and can improve there job performance.

To provide valid database for personnel decisions concerning placements, pay,

promotion, transfer, punishment, etc.

To diagnose the strengths and weakness of individuals so as to identify further

training needs.

1.4.4 Uses of Performance Appraisal

Performance appraisal provides valuable information for personnel decisions

such as pay increases, Promotion demotions, transfers, and terminations.

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It helps to judge the effectiveness of recruitments, selection, placement, and

orientation systems of organization.

It is useful in analyzing training and development needs.

1.4.5 Limitations of Traditional Performance Appraisal

1) Error in rating:

Performance appraisal may not be valid indicator of performance and potential of

employees due the following types of errors:

Halo effect

Stereotyping

Central tendency

Constant error

2 )Lack of reliability:

Reliability implies stability and consistency in the measurement. Lack of consistency

over time and among different raters may reduce the reliability of performance

appraisal. Inconsistent use of measuring Standards and lack of training in appraisal

techniques may also reduce reliability. Different qualities may not give proper weight

age. Factors like initiative or subjective and can not be qualified.

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3) Incompetence:

Raters may fail to evaluate performance accurately due to lack of knowledge and

experience.

Negative approach: Performance appraisal looses most of its value when the

focus of management is on punishment rather than on development of

employees.

Multiple objective : Rates may get confused due to too many objective or

unclear objectives of performance appraisal

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1.4.6 Steps of Traditional Performance Appraisal System

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Establishing standards of Performance

Communicating performance expectations

Measuring actual Performance

Comparing actual performance with standards laid

Discussion of appraisal with employees

Corrective actions


1.4.7 Traditional Performance Appraisal process

Prepare - prepare all materials, notes, agreed tasks and records of performance,

achievements, incidents, reports etc - anything pertaining to performance and

achievement - obviously include the previous performance appraisal documents and

a current job description and understand how performance appraisal system works.

Organize the paperwork to reflect the order of the appraisal and write down the

sequence of items to be covered.

Inform - ensure that the appraisee is informed of a suitable time and place, and

clarify purpose and type of appraisal - give the appraisee the chance to assemble data

and relevant performance and achievement records and materials. If the appraisal

form does not imply a natural order for the discussion then provide an agenda of

items to be covered.

Venue - ensure a suitable venue is planned and available - private and free from

interruptions - observe the same rules as with recruitment interviewing - avoid hotel

lobbies, public lounges, canteens - privacy is absolutely essential.

Layout - room layout and seating are important elements to prepare also - don't

simply accept whatever layout happens to exist in a borrowed or hired room - layout

has a huge influence on atmosphere and mood - irrespective of content, the

atmosphere and mood must be relaxed and informal - remove barriers - don't sit in

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the boss's chair with the other person positioned humbly on the other side of the

desk; you must create a relaxed situation, preferably at a meeting table or in easy

chairs - sit at an angle to each other, 90 degrees ideally - avoid face to face, it's

confrontational.

Review and measure - review the activities, tasks, objectives and achievements one

by one, keeping to distinct separate items one by one - avoid going off on tangents or

vague unspecific views. Keep an order of follow. Concentrate on hard facts and

figures, solid evidence - avoid conjecture, anecdotal or non-specific opinions,

especially about the appraisee. Being objective is one of the greatest challenges for

the appraiser - as with interviewing, resist judging the appraisee in your own image,

according to your own style and approach - facts and figures are the acid test and

provide a good neutral basis for the discussion, free of bias and personal views.

Agree an action plan - An overall plan should be agreed with the appraisee, which

should take account of the job responsibilities, the appraisee's career aspirations, the

departmental and whole organization's priorities, and the reviewed strengths and

weaknesses. The plan can be staged if necessary with short, medium and long term

aspects, but importantly it must be agreed and realistic.

Agree specific objectives - These are the specific actions and targets that together

form the action plan. As with any delegated task or agreed objective these must

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adhere to the SMARTER rules - Specific, Measurable, Agreed, Realistic, Time-

bound, Enjoyable, Recorded. The objectives can be anything that will benefit the

individual, and that the person is happy to commit to.

Agree necessary support - This is the support required for the appraisee to achieve

the objectives, and can include training of various sorts - external courses and

seminars, internal courses, coaching, mentoring, shadowing, distance-learning,

reading, watching videos, attending meetings and workshops, workbooks, manuals

and guides; anything relevant and helpful that will help the person develop towards

the standard and agreed task.

Invite any other points or questions - make sure to capture any other concerns.

Close positively - Thank the appraisee for their contribution to the meeting and their

effort through the year.

Record main points, agreed actions and follow-up - Swiftly follow-up the meeting

with all necessary copies and confirmations, and ensure documents are filed and

copied to relevant departments.

1.4.8 The Tools and Technique

There are several methods and techniques available to the managers to appraise the

performance of their employees.

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Traditional Appraisal Techniques

Straight Ranking Method

Man-to-Man Comparison Method

Grading

Graphic Rating Scale

Forced Choice Description

As services overtake the manufacturing and agriculture sectors, developing quality

knowledge workers is the single most demanding and often frustrating challenge for

organizations. The emphasis is to develop an organization where managers need to be a

benevolent guardians rather than a traditional boss. Therefore it is necessary to develop

various better, new and efficient methods to judge the productivity of the Knowledge

workers. An increase in the productivity of the human capital will correspond to the

increase in the performance of the knowledge organization as a whole. The traditional

methods of performance appraisal do not work for efficient management of knowledge

workers.

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RESEARCH DESIGN

Management is often defined as “getting things done through people”. The role of the

personnel function is to provide guidance and support on all matters relating to an

organization’s employees. The aim is to help management to deal effectively with

everything concerning the employment, development, reward and well-being of people

and the relationship that exist between management and the workforce.

A further key role for the personnel function is to play a part in the creation of an

environment which enables people to make the best use of their capabilities and to

realize their potential to the benefit of both the organization and themselves. Human

resource management is thus essentially a business-oriented philosophy concerning

the management of people in order to achieve competitive advantage.

Research design may be defined as the arrangement for data collection and analysis of

data in the manner that aims to combine relevance to the research purpose with economy

in procedure. It is a conceptual structure within which research is conducted.

The research that is made is direct personal research conducted with the help of

questionnaire in the type of research adopted. It aimed at expanding the frontiers of

knowledge and does not directly involve pragmatic problems. The research design is

purely and simply the frame work or plan for a study that guides the collection and

analysis of data. The study was conducted as an exploratory sampling survey method to

collect primary and secondary data.

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2.1Title of the study

“A STUDY ON THE EFFECTIVENESS OF PERFORMANCE

APPRAISAL SYSTEMS IN KNOWLEDGE ORGANISATIONS IN

BANGALORE”

2.2 Statement of the problem

The IT industry, being a knowledge-based sector, requires a workforce that is highly

competent. Also, the demanding nature of work in the industry requires effective

strategies like sound performance appraisal systems to retain its workforce. With

growing demand for Indian IT professionals overseas and with multinational IT

companies establishing their offices in India, managing employees becomes very

difficult.

The study titled “A STUDY ON THE EFFECTIVENESS OF PERFORMANCE

APPRAISAL SYSTEMS IN KNOWLEDGE ORGANISATIONS IN BANGALORE” is

to identify the areas in the performance appraisal systems that can be improved to

increase employee productivity and quality of knowledge workers in knowledge

organizations.

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2.3 Review of literature

Literature review is one of the prime parts of dissertation. The very basic purpose of the

literature review is to gain insight on the theoretical background of the research problem.

This chapter deals with the various theoretical backgrounds necessary to carryout this

project. After the purpose and scope have been defined, the researcher is faced with one

of the most difficult problem of obtaining and gathering the desired information or data.

It is mandatory that care must be taken while collecting data because data constitute the

foundations on which the superstructure of statistical analysis built. The literature review

helps the researcher to gain strong theoretical basis of the problem under study and also

helps to explore whether any one has done research on the related issue. That's why

literature review helps one to find out the path of problem solving. The results obtained

are purely interpreted and policy decisions are taken.

The source of information may be either primary or secondary. When the investigator

collects first- hand data for the purpose at hand, such data is known as primary data. On

the other hand, if you obtain the data from the published or unpublished sources such

data will constitute secondary data.

For the present dissertation also information where collected from both primary and

secondary sources. Primary sources constitute questionnaire and personal interview.

Most of the theoretical information needed is collected from different textbooks,

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magazines and web sites. Those constitute a significant information source for the

present study. Literature reference mainly concentrated on HRM and particularly the

magazines and articles about Managing knowledge workers and knowledge organization

concerns.

2.4 Source of data

Primary source of data: It is the original source from which all the researchers

directly collect data that have not been previously collected. A Questionnaire is

used to collect data. Primary data was gathered by consulting and filling up

questionnaire by operating level employees in the different departments of the

company.

Secondary source of data: Two types of secondary data were collected for the

preparation of the project report, internal data was generated from company's

brochure, manuals and annual reports and External data on the other hand, was

generated from magazines, research books and internet (Websites).

2.5 Actual Collection of Data

Questionnaire and personal interview method was applied to collect the actual data for

the research study. This helps the employees were more comfortable, free to participate

fully in the interview by giving the required information and express their feelings

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without inhibition. Apart from the interview methods, following tools also has been used

for data collection:

Company Records: Company records like annual reports; HR manual etc, has given

valuable information for the present study.

Internet: Various websites also provided significant contribution in data collection.

Magazines: Magazines like 'HRM Review', Effective Executive etc have been worked

as key informants in data collection.

2.6Sampling techniques

Random sampling: Random sample gives every unit of the population a known and

known zero probabilities of being selected. Since random sampling implies equal

probabilities to every unit in the population, it is necessary that the selection of sample

must be free from human judgment. It no unit can be included more than once it is

known as simple random sampling.

Sample size: An optimum sample size of 100 has been taken. It includes employees

working as Applications Engineer/ Projects Development Engineer.

Sample description: The sampling is done through probability sampling on random

sampling.

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Sampling is simply the process of learning about the population on the basis of a

sample. Thus in sampling techniques instead of every unit of the universe only a part of

the universe is studied and conclusions are drawn on the basis for the entire universe.

A sample is a sub set of population units.

The researcher has adopted stratified sampling. In order to get the information

concerning the population attempts to design a more efficient sample than by the simple

random procedure.

2.6.1 SAMPLE SIZE:

The researcher’s main concentration is to reduce the cost substantially, now if the

researcher surveyed relatively smaller number of units would mean relatively high cost

per interview. Hence sample size consists of fifty (100) for this research.

2.6.2 SAMPLE DESCRIPTION:

The researcher conducted the survey as well as collected the information only

from the officials both appraiser and appraise of all the companies referred.

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2.7 Objectives of the study

Performance Appraisal is a systematic evaluation of the individual with respect to

his performance on the job and his or her potential for development. The study

emphasizes on the effectiveness of performance appraisal in knowledge organizations

and its impact on the productivity of knowledge workers. It also emphasizes to enhance

the following in a knowledge organization

To rate the performance appraisal systems adopted at various knowledge

organizations in the IT sector

To asses the modern trends involved in judging the performance appraisal of

knowledge workers

To study whether the present performance appraisal system motivates the

knowledge worker to increase his productivity

To study the influence of the type of performance appraisal system employed and

the authority conducting the same on the motivation of the knowledge workers to

perform better in the future.

2.8Scope of the study25


The study is done to understand the performance appraisal practices in various

knowledge organizations in Bangalore and bring out the best practice that is effective in

increasing the productivity of the k. worker and k. organization. The scope of the study

involves in suggesting options the creation of a standardized model performance

appraisal protocol for future organizations.

The scope of the study is IT & ITES companies like TCS, INFOSYS, ORACLE, IBM,

and FIDELITY situated in Bangalore. The targeted segments are few employees (100) of

these companies. This was the best sample to conduct the research in a short span of

time.

2.9Research methodology

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2.9.1 METHODOLOGY

The secondary data may be used as the soul for a research study. Since in many

search situations one cannot conduct primary research because of physical, legal or cost

influences. The researcher classified the secondary data, depending upon the gathering or

distribution sources, the primary data as well as external secondary data. The researcher

provided or complied the data in its normal operations within its premises. The

researcher has collected the company profile and sample profile from the various internal

reports prepared by the firm. Researcher from the central library, government sources,

commercial sources, and industrial sources as well as from the Internet has obtained the

external secondary data resource. In the present scenario, the Internet facilitate the

researcher in such a way that where the researcher can collect every possible data.

Perhaps, it includes the profile of the company, library sources as well as historically

significant research studies.

2.9.2 TYPE OF RESEARCH

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The research design constitutes the blue print for the collection, measurement and

the analysis of data. The research design is the plan and structure of investigation so

conceived as to obtain answers to research questions. The plan is the overall scheme

program of the research.

The researcher has adopted descriptive research studies. In order to investigate

difference between the existing and the expected system of appraisal.

2.9.3HYPOTHESIS

In attempting to arrive at decisions about the populations, on the basis of sample

information it is necessary to make assumptions or guesses about the population

parameter involved. Such an assumptions is called statistical hypothesis, which may be

true. The procedure, which enables us to design on the basis of sample, regards whether

hypothesis is true or not is called test of hypothesis or test of significance.

In the test of hypothesis it begins with an assumption or hypothesis is called null

hypothesis.

Null Hypothesis:

The null hypothesis assures that there is no significant difference between the

statistics and the population parameter and whatever observed difference is there is

merely due to fluctuation in sampling from the same population. Null hypothesis is

usually devoted by the symbol Ho. Any hypothesis that contradicts the Ho (Null

Hypothesis is called an Alternate Hypothesis and is devoted by a symbol H1)

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2.9.4 HYPOTHESIS TESTING

Ho: The effectiveness of Performance Appraisal is less than 75%.

H1: The effectiveness of Performance Appraisal is more than 75%.

To test the hypothesis z-test is been used. The total number of respondents who

involved in the survey was 100 out of these 59 employees rated the present Performance

Appraisal System as an effective one.

Ho: P<0.75

H1: P>0.75

Level of significance is 1%.

Table value= 1.96.

Ps = X/N

Where X= number of respondents saying the present Performance Appraisal is effective

one.

N= number of respondents.

Ps= 59/100 = 0.59

P = 0.75

Q = 1- 0.75= 0.25.

Z = (Ps-P)/ [(PQ)/N]

Z= (0.933-0.75)/ [(0.75*0.25)/45]

Z= 2.835

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Interface:

Since Z>1.96, null hypothesis is rejected at 1% level of significance and conclude

that the effectiveness of Performance Appraisal at these companies is 75%. Thus null

hypothesis is rejected in favour of alternative hypothesis.

Implication:

The Performance Appraisal in the top 5 knowledge organizations in the IT sector is

effective and if some more inputs and formats are added to the present system, it will be

more efficient.

2.9.5 INSTRUMENTATION TECHNIQUE:

TOOLS FOR DATA COLLECTION

The secondary data are collected from company magazines, journals, text, book

and articles and primary data are original source from which the researcher directly

collects data have not been previously collected. In the present study, primary data has

been collected using questionnaire. For the purpose of collecting the same respondents

have been selected. In this study primary data plays a vital role for analysis,

interpretation, conclusions and suggestions.

The type of questionnaire adopted in the study is opened ended questionnaire and closed

ended questionnaire wherein it will be helpful to extract the result within our limit.

The researcher has to exercise great care in choosing the method on the basis of

the couple of criteria on consideration, which he thinks are important in the survey. So

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within the given short span of time if the researcher would like to go ahead with mail

survey or E-mail survey or personal observation never be cost effective. So in order to

overcome from all these issues the researcher has done the actual fieldwork by personal

survey. In this process the researcher has submitted a well-structured questionnaire to the

respondent by meeting them personally. The prime motive of the survey is based on the

questioner .A questioner was developed for the current research study with the

consultation of the HR manager of the company. It has been designed as the primary

research instrument. Questioners were distributed to respondents and they were asked to

answer the question given in the questioner.

The questioners were used as an instrumentation technique because of the reason that the

questioner were arranged in a specific order and were logically interconnected for

research study. The advantage of structured questioner lies in the reduction if

interviewers and interpreter's biased in quicker and less costly interviewing and of course

in easier tabulation of results. Finally, coding and analyzing was done for each question's

response to reach in the findings, suggestions and to the conclusions about the topic.

2.10 Data analysis & interpretation

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The data collected are tabulated according to the respondent's response using percentage,

aggregates sources which are essential for study of which help in proper analysis of the

data and also graphs is used in analysis for easy quick interpretation. The data collected

is classified, edited and tabulated.

Editing: - It is the process by which data are prepared for subsequent coding. As it is a

very subjective process, it is necessary that a person who is will qualify and trained

should entrust with this responsibility. Editing is the process of examining errors and

omissions in collected data and making necessary corrections. If there is some

inconsistency in the response or responses are entered in the questionnaire or when it

contains only a partial or a vague answer.

Tabulation:- The process of tabulation that is been done after filling the questionnaire is

tabulation, the number of tabulations will depend on the number of variables, while the

number of responses to a question will depend on the sample size, tabulation may be

done by hand or by machine. If the numbers of variables in a survey are small in size

then it is tabulated by hand, on the other hand, when the numbers of variables involved

in the survey are large than it is more appropriate to opt for machine tabulation. The data

was then analyzed by means of descriptive statistics, Arithmetic averages, and

percentages and ratios were computed and then used to draw inference on the result.

2.11Limitations of the study

32


The study was limited to knowledge organizations in only one sector (few

companies in the IT sector)

The analysis was made based on the assumption that the information given by the

respondents was all correct.

When a group of respondents are answering the questions their responses are

mutual through cross-reference and this may have caused myopia in data, which

deal individual perception.

The researcher could contact only limited number of respondents.

The limitation of time period of three months was a constraint.

2.12Chapter Scheme

33


Chapter1 - Introduction

Researcher has given introduction about knowledge workers and knowledge

organizations and its historical background and various aspects about need for

new performance appraisal systems in these organizations.

Chapter 2 - Research Design

Deals with Research Design of the study which includes Statement of the Problem, Review of literature , Objectives of the Study , Scope of the Study, Hypothesis of the study, Methodology of the study, Methodology of the study, Sampling and limitation of the study.

Chapter 3 - Profiles

It deals with profile of the Industry and Company profiles. It explains History of

the company Organizational structure, product profile, Achievements of the

company, Welfare facilities followed in the selected IT companies.. Turnover,

profit etc...

Chapter4 - Data Analysis & Interpretation

Deals with analysis and Interpretation of the data collected from the respondents.

Chapter 5 - Findings , Suggestions & Conclusions

Deals with findings, conclusions and recommendations which were found after

interpreting and analyzing the data.

3.1 INDUSTRY PROFILE

34


Indian companies are gaining size and strength, but they may be too slow to take on the MNCs.

The figure is $2.6 billion. This is the combined value of the nine big-ticket global outsourcing

contracts that Indian IT services firms bagged during the fiscal year.

The big wins have certainly propped up top lines, but one aspect overshadows them, the

majority has come in the commoditized applications maintenance space. Reason: the

Indian majors still don’t have the scale to go after big-budget contracts in segments like

remote infrastructure and consulting services. The industry still derives 63 percent of its

revenues from the application development and maintenance (ADM) area.

The revenue mix looks lopsided if you consider players individually. The largest

company TCS, saw 69.3 per cent of its Rs.13,386 crore revenues in 2005-06 came from

ADM work. For Infosys, the figure was over 50 per cent of Rs.9,521 crore. High-end

segments like consulting services, for instance, accounted for just 3.5 pent cent of

Infosys’ revenues, while for TCS it was less than 2 per cent. Wipro derives 60.4 per cent

of its revenues from this segment. The balance comes from BPO (largely voice based

services) and new service lines like remote infrastructure management. Satyam

Computer Services gets 50 per cent of its revenues from ADM work, while HCL

technologies’ share is 50 per cent. “The problem is that over time Indian companies may

get saddled with the commoditized work”, says a NASSCOM official.

Recently, all five players started focusing on growing high-end businesses- infrastructure

management, consulting, engineering services, etc. a good bit of this growth will come

from acquisitions, some of which is already under way- Wipro just bought US- based.

Last year, TCS bought Sydney- based Financial Network Services, which brings on

broad a core- banking solution. The question is will the Indian majors be able to build

critical scale in high-end businesses before their multi-critical mass in India? A Forrester

35


analyst says Infosys and TCS should shore in at least 10-15 per cent of revenues from

consulting services by the year end. And if that doesn’t happen, customers may choose to

offshore their high end work to an Accenture or an IBM.

The year 2004-2005 was another successful year for the Information Technology (IT)

industry in India with total software and services revenues recording a high of $22

billion for the year 2004-2005. The employee base also showed a whopping increase to

cross the one million mark in the year 2005. However, despite the growth in the overall

employee base, companies were struggling to retain their existing employees.

Analysts observed that managing attrition in the industry was important because skilled

professionals formed the crux of this knowledge-intensive industry. What's more, the

cost of recruitment and training was a huge expense for most IT firms. Handling the

menace of attrition was therefore very important to IT companies. Attrition affected the

quality of service and also led to higher Training & Development expenditure, affecting

the overall performance of the organization.

IT companies in India were taking steps to counter the rising levels of attrition.

Companies were beginning to realize the importance of factors other than salary with

which to motivate their employees to stay.

A healthy work environment, continuous employee learning, work-life balance,

recognition and corporate brand building were some of the key initiatives taken up by IT

companies in recent years to manage attrition. In 2004, Infosys Technologies Limited

(Infosys) devised a policy of taking security deposits from fresh graduates who joined

the company at the entry level to discourage them from leaving the company during the

training period whereas Wipro Technologies Ltd (Wipro) started a matchmaking service

for its employees. The purpose of this service was to help employees chose their life

36


partners within Wipro in the hope that if employees picked spouses from the same

company, they could spend more time together, say while traveling/dining etc. thereby

improving the work-life balance.

By 1995 there was a new trend of 'poaching' of employees by rival IT firms. Poaching

necessarily meant luring skilled employees of a rival company by offering better pay and

fringe benefits. Over the years, more and more software professionals were also

immigrating to foreign countries, particularly to the US.

By late 1998, the Y2K problem was hanging over companies across the globe and

software services from Indian IT service companies were increasingly in demand.

In 1999, of the total number of H1-B visas given to foreign workers by the US, half were

to Indian IT professionals.

In 2006 the US Senate approved a sweeping immigration Bill that, among other

provisions, proposes doubling of the H-1B visa for skilled foreign workers from 65,000

to 115,000. The new quotas would kick in starting 2007 once approved by the House of

Representatives, whose version of the Bill does not contain the H-1B clause. The senate

Bill also exempts immigrants with certain advanced degrees from the H-1B caps.

The average starting yearly salary in computer software jobs, in that year was $ 60,000 -

nearly 10 times the average salary for a computer professional in a comparable job in

India. The employee turnover in 1999-2000 in Indian IT companies was around 15-20%

with the cost of replacing an employee running at over 120% of the salary per employee.

Commenting on the situation, a recruitment agency said, "The headhunt is on because

the warning is in the air. Qualified techies are migrating to the West for fat paychecks

37


and attractive lifestyles. If the trend continues, India will face a terrible shortage of

software engineers in the next three years."

The IT sector in India witnessed explosive growth in 1999-2000, with the industry

generating export revenues of over $4 billion. In view of this situation, firms in India

started hiking the pay for software professionals. The internet boom in the year 2000

contributed to an upward trend in the US stock market where major Indian software

companies like Wipro and Infosys, had their stock listed. This was also reflected in the

Indian stock market with share prices of companies like Infosys experiencing a rapid

increase. ESOPs made IT employees in India millionaires overnight as prices of IT

stocks sky-rocketed. Many international firms started expanding their businesses and

India was their first choice due to its immense talent pool of skilled IT professionals. As

more and more international companies set up their offices in India, the requirement of

skilled professionals also went up. Indian IT firms catered largely to the needs of the US,

which meant that events in the US had a strong influence on the revenues of these

companies.

Smart companies know that it takes more than on-boarding to retain and motivate new

employees.

Even as Indian tech majors cash in on the growing demand for off shoring, they face

rising attrition and wage inflation that could pressure margins.

The gross addition needed per top Indian vendor every year is estimated at

25,000.

38


IBM's headcount in India is at 38,500 and it is planning for an additional 50,000

over the next 12-15 months.

Accenture has nearly 20,000 people in India and is targeting a staff of 50,000 in

south-east Asia by 2009

Financial service back offices have added 20,000 people in the last three years

Wage inflation for the Indian tech industry averaged 12-14 per cent in FY06

Wipro's attrition at the end of FY06 was 16 per cent up from 14 per cent at the

start of the year.

Techies never had it so good. With the Indian tech sector growing at a fast clip, they're in

great demand. What's more, there are enough global vendors wanting to grow their India

outfits-IBM and Accenture are among the most aggressive. Little wonder then that

attrition for Indian IT firms is inching up, despite fairly good increases in salaries of

between 12-16 per cent over the last two years.

At the end of March Financial Year 2006, Satyam's attrition had touched 19.2 per cent

and even TCS which normally is given to boasting about its low attrition has become a

trite more subdued now that the number is nudging 10 per cent. That's up from 8.7 per

cent in Q3FY06. For Infosys too, the March quarter saw attrition at 11.2 per cent, far

higher than the 9.7 pr cent in March 2005.

The situation has been worse for Tier II players: Patni Computers has hit the 20 per cent

mark, driving down the net profit for the March quarter to 19 per cent below guidance.

Retaining people has become more difficult and attrition is an issue not just because it

means higher costs for training, but because it could result in loss of business

momentum. For fixed price contracts, it could even mean a financial loss.

OFF SHORING STORY GETS BETTER

39


And no company is willing to give up growth just when there are orders aplenty and

large ones too such as ABN Amro, General Motors and Pearl BPO, to name a few.

Recent data from TPI, a consulting firm, says that Indian companies have been able to

increase their share of large deals from 1 per cent in 2004 to 3 per cent in 2005.

Moreover, their share in deals of over $50mn increased to 6 per cent in 2005 from 2 per

cent in 2004(based on the number of deals). Very large deals are being broken down and

restructured so that Indian firms have a better chance of bagging orders.

Indeed, companies need not fear any fall in the growth of volumes as the off shoring

story only continues to get better. Cognizant has indicated that it would grow revenues at

42 per cent in CY06 to $1.26 bn while enterprise software companies such as Oracle and

SAP are optimistic on licence revenues. CIOs in the US are saying IT budgets should

grow by 7.8 per cent over the next twelve months.

IT MAJORS MAKING HAY

Not surprising then that companies are mining their clients faster: Wipro now has 29

clients billing more than $20 million compared with 22 at the start of the year. TCS has

nine $50mn clients today as against five in Q1FY06 and 31 $20 million clients up from

25 in March last year. Across product domains such as package implementation (PI) or

infrastructure management and BPO, Indian firms are fast scaling up their operations.

Even newer businesses such as consulting or testing services are growing fast. The good

news is that Indian firms have been able to reduce the contribution from commoditized

segments such as application development and maintenance (ADM): for companies such

as Infosys and Satyam ADM contributes only half of what it used to five years back.

40


Wipro's R&D practice is getting stronger allowing it to depend less on traditional spaces.

Besides, the geographical spread too is getting better with firms making greater inroads

into Europe: in FY06, Infosys earned 24.5 per cent of its revenues from Europe, up from

22.3 per cent in FY05.

For TCS revenues from Europe constituted 24.3 per cent in Q4FY06 compared with 22

per cent in Q1FY06 while for Wipro Europe accounts for nearly 33 per cent of revenues.

So, the revenue outlook appears to be fairly good with pricing expected to remain stable.

Infosys has announced a 28-30 per cent growth for FY07. If Wipro's guidance for Q1

appears weak at 4 per cent, it's more to do with a couple of big clients ramping down, say

analysts, who believe volumes will pick up in subsequent quarters.

THE HIRING SPREE

IT firms will not be able to tap into the opportunity unless they have the right people and

enough of them. The problem today is that there are many numbers of companies in the

market looking for people. Cognizant has indicated that its head count would go up by

42 per cent in CY06 over CY05- Cap Gemini and CSC have more than 60 per cent of

their offshore employees in India and are looking to add more.

Apart from global IT firms, captive centres among big banks, too are on the rise. One

estimate for a set of such centres has seen employment rise to 80,000 from just 20,000 in

March 02. In FY06, the Indian IT industry is estimated to have recruited around 30-35

per cent more people than in the previous year : Wipro added 11,471 people while TCS

added 21,140.

41


If players are to continue to grow at 25-28 per cent, between them they would need at

least 50,000-60,000 people every year, according to a conservative estimate. The

requirement from the BPO space alone is estimated at more than 100,000 annually.

FATTER WAGE BILLS

The expansion of captive units and ramp-ups by global vendors will mean wage

inflation, especially at the middle management level, where there is a shortage of talent.

Raises, say industry watchers, could exceed those of last year (13-17 per cent in FY06)

perhaps settling in the range of 15-17 per cent.

Satyam Computers, managing director, Ramalinga Raju has said that salaries for off-

shore employees will go up by 18-19 per cent while on-site salaries would increase by 5-

6 per cent in FY07. In the last 18 months, Satyam has raised salaries twice -in October

04 and April 05.

Sasken, it is heard, will be offering raises of around 15-20 per cent for offshore

professionals while TCS is understood to be looking at hikes of between 10-15 per cent.

Players such as Patni too would need to up salaries in line with peers if it want to retain

people.

Jaitirth Rao, CEO, Mphasis said on the analysts call that the problem was not so acute at

the entry level because the supply from the campuses was more or less adequate. The

demand, Rao indicated, was highest at the middle level.

42


It's for these professionals that global majors are willing to offer raises of 30-40 per cent.

To cope with the situation, companies are trying to hire more fresher - in other words,

increasing the bottom of the pyramid.

However, making do with younger teams without jeopardizing execution will be a

challenge. They are also building up infrastructure in Tier II and Tier III cities where the

cost of living is lower and therefore the salaries paid out can be lower.

MARGINS UNDER PRESSURE

For those who believed that the tech story was all but over because wage inflation would

eat into margins, the Infosys March quarter numbers were the last nails in the coffin.

With revenues up just 3.6 per cent sequentially and margins dipping by 226 basis points,

the results were woefully below the Street's expectations.

But, Infosys guidance for the current year has been more than heartening: it is confident

of being able to turn in a 28-30 per cent top line growth and an EPS of Rs 114-116, a rise

of 26.4-28.4 per cent.

Nonetheless, analysts are unanimous in predicting a fall in operating margins of between

100-150 basis points in FY07, across the industry. Companies can of course, make up for

higher costs by increasing the offshore component of revenues, keeping a check on sales,

general and administration costs and managing the bench more effectively so that

utilization and revenue per employee improves.

Offshore utilization, currently at between 65-70 per cent has room for improvement and

with pricing expected to remain stable, there are not too many worries on that front. So,

while NASSCOM targets for Indian IT-ITES exports at $60bn by 2010 from $23bn in

43


FY06 (estimate) a CAGR of 26-27 per cent, may well be achieved, margins may get a

little bruised in the process.

Various industry-academia’s meet and round tables organized by NASSCOM arrived at

specific conclusions regarding the problems faced by the Indian ICT industry in the area

of HR development. IT industry and academic concerns today are centered on the

following issues:

Developing faculty and dealing with shortages of teachers

Standardizing the curriculum (and its delivery process)

Focusing on teaching and examination practices

Upgrading infrastructure

Conducting advanced studies and special research projects (based on current

market requirements) in emerging technology areas

Cultivating Analytical thinking

Building strong fundamentals and concepts

Applying knowledge

Building soft and communication skills

Encouraging and incentivizing universities and institutions (especially lesser

known ones) to establish linkages with the recognized

institutes/association/industry players, globally

Improving the standards of the existing government and private educational

institutes

ICT industry experts, business intelligence analysts and academia have been focusing

on developing a strategic roadmap for India's HR development program. According

to these segments, IT workforce development can be catalyzed through the following

endeavors:

44


Increasing industry-academia linkages through interactive platforms such

as workshops/summits/programs/focused research, etc. to ensure

relevance of IT skills provided

Encouraging corporate to launch mentorship or knowledge enhancement

programs for institutes and colleges under the aegis of industry

associations such as NASSCOM

Exposing students to projects from the Ist and IInd year of college

education

Identifying-from existing or commissioned research-the needs of the ICT

sector in terms of number of persons/skill sets required within various

disciplines, levels (graduate, post-graduate, doctoral) and time-frames

Strengthening India's professional education (through curricula, faculty,

infrastructure, pedagogy improvements), in line with the IT industry's

requirements

Exploring Industry-Academia alliances in the form of FDP (Faculty

Development Programs) for both the IT Services and ITES-BPO sectors

and EDP (Entrepreneurship Development Cells)

Standardizing curricula for IT services and ITES-BPO at the

undergraduate and post graduate levels

Creating case studies on the existing Industry-Academia partnerships in

the Country

Defining policies (with the help of the AICTE; MCIT and MHRD):related

to infrastructure development and grants

Improving the quality of skills produced, especially from Tier II and III

cities and institutions

45


Enabling faculty within the public and private institutional framework to

support IT capability development efforts

THE INDIAN IT WORKFORCE MARKET: Building World-Class Manpower

Relevantly skilled manpower, considered as one of India's primary edge in the global

ICT markets, has remained one of the key concerns and challenges for the country's IT

sector. While India currently boasts one of the world's largest, most qualified pools of

scientific and engineering manpower, growing global demand for appropriately skilled,

industry-oriented professionals and a gradually enlarging demand-supply gap, are

expected to test to the limits, India's ICT manpower development capabilities.

The country is at an important juncture in its history, having completed the transition

from an agrarian economy to a fully-fledged, first-world economy, operating at the

leading edge of contemporary technology. A key element in taking the country forward

and maintaining its growth momentum will be the provision of a highly skilled and

competent global workforce.

Having apt IT and management skills, in fact, is assuming an ever-greater importance, in

the current day environment, where the ICT sector is emerging as a major driver of the

Indian economy.

Clearly, the way forward for India is quality education that conforms to key global

standards and creates professionals that are equipped with international-level

certifications and accreditations.

46


ICT manpower development today, is not only crucial for sustaining the growth of the

Indian economy, it is also important for maintaining the country's edge in the global

markets, where competition is on the rise.

THE INDIAN ICT SECTOR: FACING MANPOWER CHALLENGES

According to recent NASSCOM estimates, the Indian ICT industry will contribute 7

percent of the country's GDP by 2009, providing direct employment to more than 2.2

million people and indirect employment to nearly twice that number.

The Indian IT software and services market is expected to grow to US$ 50 billion by

2009, recording a CAGR of 27 percent. However, NASSOM estimates suggest that the

supply of skilled IT manpower may fall short of requirements by 2009, if specific issues

are not addressed and India's HR challenges successfully met.

Industry surveys have also shown that while India is expected to be one of the few

manpower surplus countries capable of meeting global requirements, the manpower is

unlikely to be readily deployable on account of ineffective education and skills

development.

A 2001 World Bank Study on Science and Technology Manpower in India had shown

that generic shortcomings in India's education system would be a hurdle in the path of

quality ICT manpower development.

47


According to the study, the Indian ICT sector would face the manpower challenges:

Inability of the IT services and ITES-BPO industries to maintain and share

common infrastructure facilities across institutions

Shortage of skilled faculty for providing relevant, industry-oriented training

Inadequate industry exposure

Increasing discrepancy between the education focus and the quality of skills

developed at top-tier educational institutions and other private and public

centers of learning

Lack of correlation and synchronization between the existing technical

education system and industry requirements-absence of adequate academia-

industry linkages

Rigidities in the curriculum and evaluation system.

3.2 COMPANY PROFILES48


3.2.1 Oracle

Oracle has been the center of innovation for business software—birthplace of the first

commercially available relational database, the first suite of Internet-based applications,

and the next-generation enterprise-computing platform, Oracle Fusion.

Today, Oracle is the largest business software company in the world, with more than

320,000 customers, including 98 of the Fortune 100. And Oracle's 85,000 global

employees—including more than 20,000 developers working full-time on Oracle

products—are critical to that success. Projects at Oracle provide a peek into more than

100 teams developing Oracle's global products and services. Graduates and prospects

around the world use this snapshot of the Oracle development organization to guide their

interest in future employment with the world's largest enterprise software company.

Oracle's business is information—how to manage it, use it, share it, and protect it. For

three decades, Oracle has helped governments and businesses around the world drive

their enterprises based on quality, real-time information. We invite you to join the

committed developers and managers that make it all possible.

3.2.2 IBM

49


International Business Machines Corporation, abbreviated IBM and nicknamed "Big

Blue" (for its official corporate color), is a multinational computer technology and IT

consulting corporation headquartered in Armonk, New York, United States. The

company is one of the few information technology companies with a continuous history

dating back to the 19th century. IBM manufactures and sells computer hardware and

software, and offers infrastructure services, hosting services, and consulting services in

areas ranging from mainframe computers to nanotechnology.

IBM has been known through most of its recent history as the world's largest computer

company and systems integrator. With over 388,000 employees worldwide, IBM is the

largest and most profitable information technology employer in the world. IBM holds

more patents than any other U.S. based technology company and has eight research

laboratories worldwide. Widely acclaimed for its highly talented workforce, the

company has scientists, engineers, consultants, and sales professionals in over 170

countries.

IBM employees have earned three Nobel Prizes, four Turing Awards, five National

Medals of Technology, and five National Medals of Science. As a chip maker, IBM has

been among the Worldwide Top 20 Semiconductor Sales Leaders in past years, and in

2007 IBM ranked second in the list of largest software companies in the world.

3.2.3 Infosys

50

http://en.wikipedia.org/wiki/Largest_Software_Companies

http://en.wikipedia.org/wiki/Worldwide_Top_20_Semiconductor_Sales_Leaders

http://en.wikipedia.org/wiki/Integrated_circuit

http://en.wikipedia.org/wiki/National_Medal_of_Science

http://en.wikipedia.org/wiki/National_Medal_of_Technology

http://en.wikipedia.org/wiki/National_Medal_of_Technology

http://en.wikipedia.org/wiki/Turing_Award

http://en.wikipedia.org/wiki/Nobel_Prize

http://en.wikipedia.org/wiki/Patent


http://en.wikipedia.org/wiki/Systems_integrator

http://en.wikipedia.org/wiki/Nanotechnology

http://en.wikipedia.org/wiki/Mainframe_computer

http://en.wikipedia.org/wiki/Consultant

http://en.wikipedia.org/wiki/Internet_hosting_service

http://en.wikipedia.org/wiki/Computer_software

http://en.wikipedia.org/wiki/Computer_hardware


http://en.wikipedia.org/wiki/United_States

http://en.wikipedia.org/wiki/New_York

http://en.wikipedia.org/wiki/Armonk,_New_York

http://en.wikipedia.org/wiki/Corporation

http://en.wikipedia.org/wiki/IT_consulting

http://en.wikipedia.org/wiki/IT_consulting

http://en.wikipedia.org/wiki/Technology

http://en.wikipedia.org/wiki/Computer

http://en.wikipedia.org/wiki/Multinational_corporation


"Our assets walk out of the door each evening. We have to make sure that they

come back the next morning."

N R Narayana Murthy

Chairman and Chief Mentor, Infosys Technologies Ltd.

Infosys Technologies Limited (BSE: 500209, NASDAQ: INFY) is a multinational

information technology services company headquartered in Bangalore, India. It is one of

India's largest IT companies with 104,850 professionals (including subsidiaries) as of

Mar 31, 2009. It has offices in 22 countries and development centers in India, China,

Australia, UK, Canada and Japan

Infosys went public in 1993. Interestingly, Infosys IPO was undersubscribed but it was

"bailed out" by US investment banker Morgan Stanley which picked up 13% of equity at

the offer price of Rs. 95 per share. The share price surged to Rs. 8,100 by 1999 making it

the costliest share on the market at the time. At that time, Infosys was among the 20

biggest companies by market capitalization on the Nasdaq well ahead of Adobe Systems,

Novell and Lycos.

According to Forbes magazine, since listing on the Bombay Stock Exchange till the year

2000, Infosys' sales and earnings compounded at more than 70% a year. In the year

2000, President of the United States Bill Clinton complimented India on its achievements

in high technology areas citing the example of Infosys.

51

http://en.wikipedia.org/wiki/Bill_Clinton

http://en.wikipedia.org/wiki/President_of_the_United_States


http://en.wikipedia.org/wiki/Bombay_Stock_Exchange

http://en.wikipedia.org/wiki/Lycos

http://en.wikipedia.org/wiki/Novell

http://en.wikipedia.org/wiki/Adobe_Systems

http://en.wikipedia.org/wiki/Nasdaq

http://en.wikipedia.org/wiki/Morgan_Stanley


http://en.wikipedia.org/wiki/Initial_public_offering

http://en.wikipedia.org/wiki/Japan

http://en.wikipedia.org/wiki/Canada

http://en.wikipedia.org/wiki/UK

http://en.wikipedia.org/wiki/Australia

http://en.wikipedia.org/wiki/China

http://en.wikipedia.org/wiki/India


http://en.wikipedia.org/wiki/Bangalore


http://en.wikipedia.org/wiki/Multinational_corporation

http://quotes.nasdaq.com/asp/SummaryQuote.asp?symbol=INFY&selected=INFY

http://en.wikipedia.org/wiki/NASDAQ

http://www.bseindia.com/price_finder/stockreach.asp?scripcd=500209



In 2001, it was rated Best Employer in India by Business Today. Infosys won the Global

MAKE (Most Admired Knowledge Enterprises) award, for the years 2003, 2004 and

2005, being the only Indian company to win this award and is inducted into the Global

Hall of Fame for the same.

Infosys was rated best employer to work for in 2000, 2001, and 2002 by Hewitt

Associates. In 2007, Infosys received over 1.3 million applications and hired less than

3% of applicants.

In April 2009, Forbes rated Infosys among the 5 best performing companies in the

software and services sector in the world. In 2009, Infosys was considered one of the

Business Week’s 50 Most Innovative Companies.

3.2.4 TCS

52


http://en.wikipedia.org/wiki/Forbes

http://en.wikipedia.org/wiki/April_2009

http://en.wikipedia.org/wiki/Business_Today



Tata Consultancy Services Limited (TCS) (BSE: 532540, NSE: TCS) is a software

services and consulting company. It is India's largest provider of information technology

and business process outsourcing services. The company is listed on the National Stock

Exchange and Bombay Stock Exchange of India.

TCS is part of one of India's largest and oldest conglomerates, the Tata Group, which has

interests in areas such as energy, telecommunications, financial services, manufacturing,

chemicals, engineering, materials, government and healthcare.

In 2007, TCS launched its Co-Innovation Network, a network of TCS Innovation Labs,

startup alliances, University Research Departments, and venture capitalists.

In addition to TRDDC, TCS has 19 Innovation Labs based in three countries.

TCS is considered one of the largest private sector employers in Indian with a core

strength in excess of 130,000 individuals.TCS claims to have one of the lowest attrition

rates in the Indian IT industries.

3.2.5 Fidelity

53

http://en.wikipedia.org/wiki/Attrition

http://en.wikipedia.org/wiki/Private_sector

http://en.wikipedia.org/wiki/Tata_Group

http://en.wikipedia.org/wiki/Conglomerate



http://en.wikipedia.org/wiki/National_Stock_Exchange_of_India

http://en.wikipedia.org/wiki/National_Stock_Exchange_of_India

http://en.wikipedia.org/wiki/Business_process_outsourcing



Established nearly 40 years ago, FIL Limited operates in markets outside the Americas.

The company and its subsidiaries manage over $157.3 billion for major institutions and

millions of investors around the world. Fidelity encourages fund managers to develop

their individual flair, while basing every investment choice on the most rigorous

research.

FIL Limited, together with our US affiliate, Fidelity Management & Research LLC, has

an unrivalled global team of nearly 1000 investment professionals that covers 95% of

world market capitalisation.Fidelity Mutual Fund has won awards which is indeed

recognition of our investment philosophy. Fidelity National Financial, Inc., through its

subsidiaries, provides title insurance, specialty insurance, claims management, and

information services.

The company primarily provides title insurance, escrow, and other title related services,

including collection and trust activities, trustee’s sales guarantees, recordings, and

reconveyances. It also offers flood, home warranty, homeowners’, automobile, and

personal lines insurance policies. In addition, the company provides outsourced

insurance claims management services to corporate and public sector entities, as well as

offers information services in the human resources, retail, and transportation markets.

It markets and distributes title and escrow products and services to national residential

mortgage lenders, real estate investment trusts, and developers in the residential and

commercial market sectors of the real estate industry. The company markets its specialty

insurance products through an in-house agency, independent agents, and brokers.

4.1 Frequency of Performance Appraisal

Table 4.1

54

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Frequency PercentValid

PercentCumulative

Percent

Valid half yearly 100 100 100 100

Source: Primary Data

Analysis was done to find out the frequency of the performance appraisal system in top 5 knowledge organizations in the IT sector. Out of 100 respondents all respondents said that the performance appraisal system takes place on a half yearly basis.

The employees are satisfied with the duration of the performance appraisal. A half yearly analysis of their performance motivates them and helps them do the required changes to improve their performance

Figure 4.1

4.2 Motivation for future performance

Table 4.2

55


Frequency Percent Valid Percent Cumulative Percent

Valid yes 81 81 81 81no 19 19 19 100Total 100 100 100


Analysis was done to find whether the existing performance appraisal system in top 5 knowledge organizations in the IT sector motivates their knowledge workers to perform better. Out of 100 respondents 81 respondents said that the existing performance appraisal system motivates them to perform better and 19 respondents said that the existing performance appraisal system does not motivate them to perform better

More than 80% of the employees in knowledge organizations are motivated after the performance appraisal. The knowledge workers prefer documentation and transparency in the Performance Appraisal System

Figure 4.2

4.3 Relation of Performance Appraisal results and promotion/ onsite duties

56


Table 4.3

Frequency Percent Valid Percent

Cumulative Percent

Valid highly related 19 19 19 19

unrelated 22 22 22 41

related 59 59 59 100Total 100 100 100


Analysis was done to find whether the results of performance appraisal system in top 5 knowledge organizations in the IT sector relate to the promotion and onsite duties of knowledge workers. Out of 100 respondents 19 respondents said that the promotion and onsite duties are highly related to their performance, 59 respondents said that the promotion and onsite duties are related to their performance and 22 respondents said that there is no relation between the promotions / onsite duties and performance of the knowledge workers

More than 50% of the employees in knowledge organizations are of the opinion that their performance appraisal results correspond to their promotion and better performance also favour onsite duties

Figure 4.3

4.4 Judicious implementation of Performance Appraisal by employees

Table 4.4

57


Frequency Percent Valid Percent Cumulative

Percent

Valid yes 56 56 56 56no 28 28 28 84to certain extent 16 16 16 100

Total 100 100 100Source: Primary Data

Analysis was done to find whether the employees in top 5 knowledge organizations in the IT sector consider the performance appraisal system seriously and judiciously implement the same. Out of 100 respondents 56 respondents said that they judiciously implement and follow their performance appraisal, 28 respondents said that they do not judiciously implement and follow their performance appraisal and 22 respondents said that they to a certain extent judiciously implement and follow their performance appraisal

More than 50% of the employees in knowledge organizations are of the opinion that they judiciously implement and follow their performance appraisal

Figure 4.4

4.5 Performance Appraisal and success of organization

Table 4.5

58



Cumulative Percent

Valid yes 37 37 37 37to a large extent 63 63 63 100


Analysis was done to find whether the existing performance appraisal system in top 5 knowledge organizations in the IT sector correspond to the success of the knowledge organization. Out of 100 respondents 37 respondents said that an effective performance appraisal system is important for the success of the organization and 63 respondents said that the effective performance appraisal system is to a large extent necessary for the success of the organization.

Performance appraisal system motivates and encourages knowledge workers to perform better and thus indirectly leads to the increase in productivity and correspond to the success of the organization.

Figure 4.5

4.6 Objectives and goals informed before appraisal

Table 4.6

59


Frequency Percent

Valid Percent

Cumulative Percent

Valid rarely 9 9 9 9sometimes

36 36 36 45

always 55 55 55 100Total 100 100 100


Analysis was done to find whether the corporate goals and objectives are informed before the performance appraisal in top 5 knowledge organizations in the IT sector. Out of 100 respondents 55 respondents said that the corporate goals and objectives are informed always before the performance appraisal and 36 respondents said that the corporate goals and objectives are informed sometimes before the performance appraisal and 9 respondents said that the corporate goals and objectives are not informed sometimes before the performance appraisal

Thus more than 50% of knowledge workers confirm that their tasks are well informed and defined before the performance appraisal takes place.

Figure 4.6

4.7 Type of Performance Appraisal

Table 4.7


60


Analysis was done to understand the preference of type of performance appraisal by knowledge workers in top 5 knowledge organizations in the IT sector. Out of 100 respondents, 50 respondents said that they prefer an informal performance appraisal method, 19 respondents said that they prefer a formal performance appraisal method and 31 respondents said that the performance appraisal system should employ a method that is both formal and informal.

Figure 4.7


Valid formal 19 19 19 19informal 50 50 50 69

both 26 26 26 954 5 5 5 100

Total 100 100 100

4.8 Persons conducting the Appraisal

Table 4.8

61



Valid superior 13 13 13 13

peers31 31 31 44

self 30 30 30 74

all of them26 26 26 100


Analysis was done to understand the preference of employees on the best authority to conduct the performance appraisal in top 5 knowledge organizations in the IT sector. Out of 100 respondents, 30 respondents said that they prefer a self performance appraisal method, 31 respondents said that they prefer a informal performance appraisal method with peers 13 respondents said that they prefer a formal performance appraisal method with superiors and 26 respondents said that the performance appraisal system should include superiors, peers and self and employ a method that is both formal and informal.

Figure 4.8

4.9 Effectiveness of existing Performance Appraisal System

Table 4.9

62



Cumulative Percent

Valid highly effective 59 59 59 59

effective 36 36 36 95

ineffective 5 5 5 100


Analysis was done to find whether the existing performance appraisal system is effective in top 5 knowledge organizations in the IT sector. Out of 100 respondents 59 respondents said that the existing performance appraisal system is highly effective and 36 respondents said that the performance appraisal system is effective and 5 respondents said that the performance appraisal system is ineffective.

More than 50% of the knowledge workers in knowledge organizations are satisfied with the existing performance appraisal system

Figure 4.9

4.10 Knowledge workers unleashing knowledge

Table 4.10

63


Frequency Percent Valid PercentCumulative

Percent

Valid yes 95 95 95 95no

5 5 5 100


Analysis was done to find whether the employees in top 5 knowledge organizations in the IT sector are given freedom to bring about innovative practices in their work. Out of 100 respondents 95 respondents said that they are given ample freedom to bring about innovative practices in their work.

Thus knowledge organizations encourage their knowledge workers to bring about innovation and creativity thus unleashing their talents and knowledge.

Figure 4.10

4.11 Relation between performance appraisal results and motivation for performance and promotion/ onsite duties

64


Table 4.11.1

Cross tabulation

Countrelation of performance appraisal results and

promotion

Totalhighly relate unrelated related

motivation for performance

yes16 13 52 81

no 3 9 7 19

Total 19 22 59 100Source: Primary Data

Table 4.11.2

Chi-Square Tests

Value df Asymp. Sig. (2-sided)

Pearson Chi-Square8.941a 2 0.011

Likelihood Ratio 7.926 2 0.019Linear-by-Linear Association

1.345 1 0.246N of Valid Cases

100


Interpretation

The chi square result shows that =8.941a, df=2, and p value= .0011 indicating that the significance value is less than 0.050 (5% level of significance). Hence there is a significant relation between the performance appraisal results and motivation for performance and promotion/ onsite duties.

Figure 4.11

65


Relation between performance appraisal results and motivation for performance and promotion/ onsite duties

4.12 Relation Between objectives and goals informed before appraisal and knowledge workers unleashing knowledge (by giving them freedom to innovate)

Table 4.12.1

66


Cross tabulation

Countknowledge workers unleashing

knowledgeTotalyes no

objectives and goals informed before appraisal

rarely 9 0 9

sometimes31 5 36

always 55 0 55Total 95 5 100


Table 4.12.2

Chi-Square Tests


Pearson Chi-Square9.357a 2 0.009

Likelihood Ratio10.691 2 0.005

Linear-by-Linear Association2.574 1 0.109

No of Valid Cases100


Interpretation

The chi square result shows that =9.357a, df=2, and p value= .009 indicating that the significance value is less than 0.050 (5% level of significance). Hence there is a significant relation between the objectives and goals informed before the performance appraisal and knowledge workers unleashing knowledge (by giving them freedom to innovate)

Figure 4.12

Relation Between objectives and goals informed before appraisal and knowledge workers unleashing knowledge

67


4.13 Relation Between motivation for future performance and preferred appraise

Table 4.13.1

Cross tabulation

68


Count

persons conducting appraisal system

Totalsuperior peers selfall of them

motivation for performance yes 11 25 29 16 81

no 2 6 1 10 19Total 13 31 30 26 100


Table 4.13.2

Chi-Square Tests


Pearson Chi-Square 11.296a 3 0.01

Likelihood Ratio 12.205 3 0.007

Linear-by-Linear Association 2.245 1 0.134

No of Valid Cases 100


Interpretation

The chi square result shows that =11.296a, df=3, and p value= .001 indicating that the significance value is less than 0.050 (5% level of significance). Hence there is a significant relation between motivation for future performance by the knowledge worker and the authority conducting the performance appraisal.

Figure 4.13

Relation Between motivation for future performance and preferred appraise

69


4.14 Relation between the preferred performance appraisal type and the preferred appraise

To measure the Relation between the preferred performance appraisal type and the preferred

appraise following hypothesis was formulated.

70


H0: The preferred appraise don’t have a significant impact on the performance appraisal type.

H1: The preferred appraise has a significant impact on the performance appraisal type.

Table 4.14.1

Cross tabulation

Count

persons conducting appraisal system

Totalsuperior peers selfall of them

performance appraisal type

formal 0 5 7 7 19informal 0 22 9 19 50both 8 4 14 0 26

4 5 0 0 0 5Total 13 31 30 26 100


Table 4.14.2

Chi-Square Tests

Value df Asymp. Sig. (2-sided)Pearson Chi-Square 71.665a 9 0

Likelihood Ratio 71.713 9 0

Linear-by-Linear Association 21.636 1 0N of Valid Cases 100


Interpretation

The chi square result shows that =71.665a, df=9, and p value= .000 indicating that the significance value is less than 0.050 (5% level of significance). So the null hypothesis (H0) is being rejected and hence there is a significant relation between the preferred performance appraisal type and the preferred appraise.

Thus, we can say from the results obtained that majority of knowledge workers

prefer appraisal done in an informal way and from the sample 30% prefer appraisal

by self and 31% by superiors, peers and self.

Figure 4.14

71


Relation between the preferred performance appraisal type and the preferred appraise

4.15Relation between motivation of knowledge workers and success of organization

To measure the Relation between motivation of knowledge workers and success of organization the following hypothesis was formulated.

H0: The motivation of knowledge workers don’t have a significant impact on the success of organization

72


H1: The motivation of knowledge workers has a significant impact on the success of organization

Table 4.15.1

Cross tabulation

Count

performance appraisal and success of organisation

Totalyes to a large extentmotivation for performance

yes 24 57 81no 13 6 19


Table 4.15.2

Chi-Square Tests

Value df

Asymp. Sig. (2-sided)

Exact Sig. (2-sided)

Exact Sig. (1-sided)

Pearson Chi-Square 9.935 1 0.002

Continuity Correction 8.341 1 0.004

Likelihood Ratio 9.646 1 0.002 Fisher's Exact Test 0.003 0.002Linear-by-Linear Association 9.836 1 0.002

N of Valid Casesb 100 Source: Primary Data

Interpretation

The chi square result shows that =9.935, df=1, and p value= .002 indicating that the significance value is less than 0.050 (5% level of significance). So the null hypothesis (H0) is being rejected and hence there is a significant relation between the motivation of knowledge and the success of organization

Thus, we can say from the results obtained that motivating knowledge workers will

go a long way in making the knowledge organization successful, as the knowledge

workers carry the means of production and set their own standards of quality.

Figure 4.15

73


Relation between motivation of knowledge workers and success of organization

4.16 Relation between effectiveness of existing performance appraisal system and success of organization

To measure the Relation between effectiveness of existing performance appraisal system and success of organization following hypothesis was formulated.

H0: The presence of an effective performance appraisal system don’t have a significant impact on the success of organization

74


H1: The presence of an effective performance appraisal system don’t have a significant impact on the success of organization

Table 4.16.1

Cross tabulation

Count

effectiveness of existing performance appraisal system

Totalhighly

effective effective ineffectiveperformance appraisal and success of organization

yes33 4 0 37

to a large extent

26 32 5 63

Total 59 36 5 100Source: Primary Data

Table 4.16.2

Chi-Square Tests


Pearson Chi-Square22.360 2 0

Likelihood Ratio 25.716 2 0Linear-by-Linear Association

20.665 1 0No of Valid Cases

100


Interpretation

The chi square result shows that =22.360, df=2, and p value= .002 indicating that the significance value is less than 0.050 (5% level of significance). So the null hypothesis (H0) is being rejected and hence there is a significant relation between the effectiveness of existing performance appraisal system and success of organization

Thus, we can say from the results obtained that the presence of an effective and customized performance appraisal system exclusively for the knowledge workers will correspond directly to the overall success of the knowledge organization.

Figure 4.16

75


Relation between effectiveness of existing performance appraisal system and success of organization

5.1 FINDINGS

The study conducted to analyze the effectiveness of performance appraisal systems in

the top 5 knowledge organizations situated in Bangalore revealed several findings. It

76


involved a study on the trends and preferences of knowledge workers corresponding

to their performance appraisal system.

The findings were observed by taking into account the response of the employees via

questionnaire and the views of the HRD Department.

The findings of the study are as follows:

The knowledge organizations encourage their knowledge workers to bring about

innovation and creativity thus unleashing their talents and knowledge

There is a significant relation between the preferred performance appraisal type

and the preferred appraise

There is a significant relation between the motivation of knowledge workers and

the success of organization

There is significant relation between the performance appraisal results and

motivation for performance and promotion/ onsite duties.

There is a significant relation between the effectiveness of existing performance

appraisal system and success of organization

The presence of an effective and customized performance appraisal system

exclusively for the knowledge workers will correspond directly to the overall

success of the knowledge organization.

77


80% of the employees in knowledge organizations are motivated after the

performance appraisal. The knowledge workers prefer documentation and

transparency in the PAS

50% of the employees in knowledge organizations are of the opinion that their

performance appraisal results correspond to their promotion and better

performance also favour onsite duties

50% of the employees in knowledge organizations are of the opinion that they

judiciously implement and follow their performance appraisal

More than 50% of knowledge workers confirm that their tasks are well informed

and defined before the performance appraisal takes place

31% respondents said that the performance appraisal system should employ a

method that is both formal and informal .The performance appraisal system

should include superiors, peers and self.

5.2 CONCLUSION

78


The two fast moving trends are changing the way companies manage talent. If the

companies don’t pay attention to these facts, they’ll lose their competitive edge even

before they know it. To remain competitive – maybe even to survive – businesses will

have to convert themselves into organizations of knowledgeable specialists. Best practice

calls for emphasis on relationships, collaboration, and professionalism, and for de-

emphasis of formal performance measures. Costs need to be reduced and assets need to

be grown. Knowledge workers have been raised to the platform of being capital assets of

knowledge organizations. The task no longer programmes the knowledge worker. The

knowledge worker is responsible for his own contribution. The knowledge worker

should be made accountable in terms of quality and quantity of work with respect to the

time and cost. The principles of manual worker productivity have long become obsolete.

Therefore it is necessary to develop various better, new and efficient methods to increase

and judge the productivity of the Knowledge workers. An increase in the productivity of

the human capital will correspond to the increase in the performance of the knowledge

organization as a whole. The traditional methods of performance appraisal do not work

for efficient management of knowledge workers. Innovative practices should be brought

out in the existing performance appraisal system employed.

5.3 SUGGESTIONS

79


Based on the findings, suggestions are made with a view to add value to the present

performance appraisal system employed in the Knowledge organizations under study.

The following are some of the suggestions given to enhance the efficiency of the

performance appraisal system and thus improve the productivity of knowledge workers.

The duration of the performance appraisal system may be reduced and can be

conducted after each project as it might help the knowledge organization in the

knowledge management

Concepts such as 360 degree appraisal along with the self performance appraisal

should be encouraged in knowledge organizations as the knowledge worker

decides the task and the quality

The performance appraisal results should relate to the knowledge workers

promotion or onsite duties as this is taken as a motivation for improved

performance

Innovative practices should be encouraged as this may lead to the unleashing of

productivity of the knowledge worker

Job rotation, flexi timings, freedom to experiment and communities of practice

should be encouraged within knowledge organizations.

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Effectiveness of Performance Appraisal Systems in Knowledge Organizations in Bangalore

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