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Performance Management System in the Banking Sector

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FLOW OF PRESENTATION

• Introduction to Banking Sector • Performance Appraisal of RBI • Performance Appraisal of HSBC • Performance Appraisal of ICICI• Performance Appraisal of HDFC• Comparative Analysis • Conclusion – Teams Views

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INTRODUCTION TO BANKING SECTOR IN INDIA

• Can be defined in many ways• Well regularised and licensed• Investment services, Fixed deposit,

Letter of credit ,Treasury services etc

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Needs and Importance For “Performance Appraisal” in Banking

• To recognise the human potential• People remain the strongest and

most competitive assets of a business

• To secure talent from the same pool• Continuous improvement• Find, train and retain talent• To help face cut throat competition.

Continuous

improvement

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Modern Trends in Banks for Performance Appraisal

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Performance Management System in Reserve Bank of

India (RBI)

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COMPANY PROFILE

• Nation’s Central Bank• Was established on April 1, 1935• The Governor is the Reserve Bank's

Chief Executive• RBI is made up of 26 departments • RBI has 26 regional offices and

branches and in addition to this it also has training centers across the country

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OBJECTIVE

• To study and analyze the present Performance Appraisal System of different Officer Grades and report findings, suggestions and recommendations to improve employee satisfaction with the overall process. This includes recommendations for changes in the current PAR system and the promotion policy of RBI.

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PROJECT BACKGROUND

• Promotion of an employee is based on the combined score of PARS averaged for 3 best scores from the previous 5 years and the interview score. Both the scores carry equal weightage in the final score calculation.

• The study of the PARS Policy carried out for the following grades:– Officer Grade A– Officer Grade B– Officer Grade C

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PERFORMANCE APPRAISAL REPORTING SYSTEM

Features of the PAR system at RBIThe PAR system provides for three different reporting formats for the following categories of officers: a) Officers in Grades ‘A’, ‘B’ & ‘C’;

(Area of focus for this project)b) Officers in Grades ‘D’ & ‘E’ and c) Officers in Grade ‘F’

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• The system also provides a set of competencies against which the performance of officers is to be appraised. The officers from Grades ‘A’ to ‘E’ are to be appraised on ten competencies, while officers in Grade ‘F’ are to be appraised on six competencies. • Appraisal is to be done on a five point

rating scale• There is also a provision for feed-back

and counseling in the system

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PERFORMANCE APPRAISAL PROCESS AT RBI

Department / office furnish appraisee’s

biodata

Self Appraisal and Self Rating

Assessment of the review

committee

Performance Summary

& Performanc

e Rating

Provision for feed-back

and counseling in

the system

Evaluation of the performance of the appraisee

officer

Officers to view their PAR after finalization by

the Review Committee.

Appraisee officer list out

his/her postings and experience

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REPORTING FORMATS FOR OFFICERS IN GRADES ‘A’ TO GRADE ‘E’

The design and contents of the reporting formats for officers in Grade ‘A’ to Grade ‘E’ are similar except for the competencies identified for assessing the appraisee officer.

The formats are divided into five sections:-• SECTION – I

It consists of two parts.

The first part requires the concerned department / office to furnish the appraisee officer's bio-data.

In the second part, the appraisee officer is required to list out a record of his/her postings and experience during preceding three years, including the reporting year. This part does not require any authentication by the concerned department/office.

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• SECTION- II

This section serves the purpose of self appraisal.• SECTION – III

This section is for evaluation of the performance of the appraisee officer and is required to be completed by the reporting and reviewing officers. There are ten competencies with five boxes against each.

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• SECTION – IV

This section deals with the assessment of the review committee which will be final.

• SECTION – V

This section contains instructions for reporting/reviewing officers and review committee.

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RATING SCALE

• Highest rating - ‘Far Above Requirement’ (FAR)

• Lowest rating - ‘Below Requirement’ (BLR). • Between FAR & BLR - ‘Above Requirement’

(ABR), ‘Meets Requirement’ (MTR) and ‘Capable of Meeting Requirement’ (CMR)

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DISCLOSURE OF ENTRIES AND AUTHORITY FOR HEARING APPEAL

• It has now been decided to allow all officers to view their PAR after finalization of the same by the Review Committee.

• Accordingly, every appraisee officer will have to acknowledge on his/her PAR for having seen the same.

• A copy of the PAR will be made available if so desired by the appraisee officer.

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REPORTING PERIOD

• The following reporting periods may be adhered to for recording performance appraisal:-

Category of officers

Reporting Period• Grade ‘A’ - 1 October - 30 September of the

following year• Grade ‘B’ - 1 April - 31 March of the following year• Grade ‘C’ to Grade ‘F’ - 1 July - 30 June of the

following year

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RECOMMENDATIONS

The analysis of the PAR and Promotion interview marks revealed some pain points and loose ends in the PAR and Promotion system. I make the following recommendations:

Performance Appraisal System at other nations’ Central Banks• Bank of England - 360˚ feedback • Reserve Bank of Australia - MBO and BARS• Central Bank of New Zealand - defines goals for and objectives

for each of the departments. The performance of these departments is monitored against these planned objectives. Each department’s plans and performance are scrutinized by the Bank’s Governors and by the Board of Directors.

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IMPROVEMENTS IN THE CURRENT SYSTEM – BARS

• Employees should rate themselves.• Training for managers (supervisors) to

comprehend anchors and marking system and be at same platform.

• Quarterly review & Cumulative Grading

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PERFORMANCE APPRAISAL OF

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COMPANY PROFILE

• HSBC's origins in India date back to 1853, when the Mercantile Bank of India was established in Mumbai. The Bank has since, steadily grown in reach and service offerings, keeping pace with the evolving banking and financial needs of its customers.

• HSBC in India is proud to have retained the Group's pioneering streak by being an active partner in the development of the Indian banking industry - even giving India its first ATM way back in 1987.

• HSBC is a universal bank and is organised within four business groups: Commercial Banking; Global Banking and Markets (investment banking); Personal Financial Services (retail banking); and Private Banking.

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HEAD OFFICE LISTS TARGETS FOR EACH

COUNTRY

CASCADED DOWN TO EACH LOCATION

SUPERVISOR GIVES EACH EMPLOYEE HIS

OBJECTIVES

MEETING WITH THE EMPLOYEE FOR

OBJECTIVE DISCUSSION

FIRST QUARTER REVIEWMID YEAR REVIEW

THIRD QUARTER REVIEW

AT THE END OF THE YEAR JUDGMENT IS

GIVEN

REWARDS OR TRAINING

PERFORMANCE APPRAISAL PROCESS AT HSBC BANK.

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PERFORMANCE APPRAISAL SYSTEM ADOPTED IN HSBC

• The head office in Hong Kong sets a goal to be achieved by each country.

• The country office then divides the goal to each location.

• Each location then makes it the responsibility of the supervisor to delegate and divide the goals for every employee.

• Then there is deliberation between the manager and the employee.(MBO Method).

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PERFORMANCE APPRAISAL SYSTEM ADOPTED IN HSBC

• The performance criteria are divided into 4 quadrants.

Quadrant 1- Customer quadrant Quadrant 2- Internal processes and controls. Quadrant 3- Main Job Quadrant 4- Development Areas.

• Each of these parameters is given a 100% weightage.

• If the employee has performed well, he is liable for a reward in the form of an increment. However, if he has performed poorly, he will be sent for training.

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PERFORMANCE APPRAISAL SYSTEM ADOPTED IN HSBC

• The manager sets 'Stretch Goals' if the employee is able to achieve his target.

• Where the increments are concerned, certain caps are put. The employee cannot receive over 30%.

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

• This is decided by benchmarking the salaries amongst competitor organizations

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PERFORMANCE APPRAISAL SYSTEM ADOPTED IN HSBC

Performance Appraisal is conducted quarterly:• Analysis is done to see if the employee is doing his job.

Managers meet with the non performers and discuss what the problem could be.

• The mid-year appraisal is to check if there are any help areas concerned with the employee. If things are on track, goals are made more challenging.

• The next quarter is again a review of goal attainment.

• At the end of the year, judgment is given.

• Appraisal results are discussed with the employee.

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PERFORMANCE APPRAISAL SYSTEM ADOPTED IN HSBC

• The employee notes down his comments along with the managers.

• Besides increments, there are also non monetary rewards. This depends on individual managers. There are 'Thanks Awards', 'All Star Day', League Tables, etc.

• If there is a skill deficiency, appropriate training is given. Otherwise, the goals are made more realistic.

• Motivation is provided on 3 fronts: Salary Incentives Recognition -

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POSITIVES OF THE PROCESS

• The review given to employees every quarter will be very beneficial to them.

• Consultation with employees about their objectives.

• ‘Stretch Goals’.

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GAPS IN THE PROCESS..

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

• More focus can be given to competencies.

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

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PERFORMANCE MANAGEMENT SYSTEM IN

ICICI PRUDENTIAL

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REASONS FOR “PERFORMANCE APPRAISAL” IN ICICI

PMS

Encourage increased self-understanding among staff as well

as insight into the kind of development activities that are of

value

Develop valuable communication among appraisal participants

Increase staff self-esteemmotivation to perform effectively

Better clarify and define job functions and responsibilities

Gain new insight into staff and supervisors

Clarify organizational goals so they can be more readily accepted

Distribute rewards on a fair and credible basis

Improve institutional/departmental manpower planning, test validation,

and development of training programs

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Eligibility

• All Staff Members who have joined on or before Sep 30th would be part of Appraisal Cycle

• The Performance Management System covers all Managers, Operations Executives and Executives in other Functions

• In case a manager has been transferred to a new role, he has to spend at least 6 months to appraise the Staff Member. In any case the appraising manager is expected to take feedback from the previous manager before appraising the staff member

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Pre Feedback Performance Discussion (PFPD)

• The PFPD is conducted by the appraiser before he reviews the appraisal and provides Appraisal Rating

• Provides the staff member a forum to discuss with his manager about his achievements, what he has done, and how he has done it

• This helps the staff member give a realistic & correct view of his performance to his manager

• The manager through this process gets a clear understanding of the Staff Member's Performance, the level of complexity involved and how the achievements have happened.

• It helps manager give an accurate rating based on Performance .

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Pre Feedback Performance Discussion (PFPD)

• The Manager is not expected to give his views or feedback during the PFPD

• He can neither rate the appraisee before or during the PFPD 

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RATIFICATION

• Authorization & Consent

• Ratification of rating helps in creating a fair and uniform rating system thereby remove biases from the rating

• Ratification process with the ZM/ RM/ Regional Head & HR

• The ratification team can ask for clarifications/ inputs from individual appraisers at any stage of the ratification process.

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Performance Appraisal Process at ICICI Bank

KPI Setting HR & Corporate

Planning Team roll out the KPI

Self Appraisal and Self Rating

Manager transfers the document to

Corporate HR person

Ratification process with the

ZM/ RM/ Regional Head/

Performance Summary &

Performance Rating

Manager conducts Pre

Feedback Performance

discussion (PFPD)

Appraisee submits the appraisal to

manager via PACE

Ratification process with HR

Ratings are discussed with the

individual managers

Managers then conduct the PRD

with the Individual Staff members

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Positive of the Process

• Clear explanation of the person’s role and responsibilities in the organization

• Involvement of employees in the appraisal process ,that is Self Appraisal

• Ratification process to eliminate bias

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Gaps in the Process

• Employees are not get involved for the setting the objectives/ KPI's

• More focus can be given to competencies

• Though the organization is conducting the performance appraisal system on the quarterly basis it is not documented

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PERFORMANCE APPRAISAL SYSTEM AT

HDFC BANK

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COMPANY PROFILE – HDFC BANK

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PERFORMANCE APPRAISAL SYSTEM IN HDFC BANK

1 2 3 4 50%

10%20%30%40%50%60%70%

5%15%

60%

15%5%

Bell Curve Distribution

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

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ELIGIBILITY

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

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

 

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APPRAISAL PROCESS IN HDFC

Manager recommends the rating to the Cluster

Head

KRA setting KRA given to the

employees

Mid review Appraisal in

Oct

Self Appraisal in April

1 to 1 discussion with manager

about performance

Based on discussion Manager gives an Indicator Rating

Branch Manager

receives the rating

Branch Manager gives the rating to

the HR

HR sends a mail to all employees

Discrepancy

HR gives the rating, appraisal

letter and increase if applicable

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GRADE Rating

Outstanding T1

Exceeds Expectation

s

T2

Meets Expectation

s

T3

Unsatisfactory

T4

*Key Performanc

e

KP

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GRADE RATING

T1 Bonus + Increment

T2 Bonus + Increment

T3 No Bonus only Increment

T4 Neither bonus nor increment