This document summarizes a study on employee perceptions of performance appraisal systems at Arun Industries. It finds that the current system, which is based on seniority, is unsatisfactory to most employees. In contrast, an ideal system proposed in a survey receives more positive feedback. Statistical analysis using chi-square tests and percentage analysis show that employees prefer a system that incorporates regular feedback, objective setting, and development planning versus the current seniority-based approach. The study aims to provide suggestions to improve Arun Industries' performance appraisal system.

1. A Study on Employee Perception towards Performance Appraisal
System in Arun Industries.
A second review report
(J. Jasmine Sharon, Roll No: 1314MBA0673, Reg. No: 68513200240)
1. NEED FOR THE STUDY
Performance Appraisal is a process of evaluating an employee’s performance in terms of
its requirements. Performance Appraisal can also be defined as the process of evaluating
the performance and qualifications of the employees in terms of the requirements of the
job for which he/she is employed, for purposes of administration including placement,
selection for promotions, providing financial rewards and other actions which require
differential treatment among the members of a group as distinguished from actions
affecting all members equally.
Formal Performance Appraisal plans are designed to meet three needs, one for the
organization and the other two for the individual, namely:
 Performance Appraisal System provides systematic judgments to back up salary
increases, transfers, demotions or terminations.
 Performance Appraisal System are the means of telling a subordinate how the
employee is doing and suggesting needed changes in employee’s behavior,
attitudes, skills or job knowledge. They let the employee know where he/she stands
with the Boss.
 Superior uses Performance Appraisal System as a base for coaching and counseling
the individual
2.1 PRIMARY OBJECTIVE
1. To examine employee’s perception towards performance appraisal system.
2. To study pitfalls in the existing performance appraisal system.
2.2 SECONDARY OBJECTIVES
1. To ascertain the satisfaction level of employees towards performance appraisal
system.
2. To examine the feedback mechanism in the existing performance appraisal system.
3. To give suggestions for improvement.

2. 3. METHODOLOGY
Date Requirement
The data is required to analyse the perception of the employee. Data will be collected
from the employees via a framed questionnaire.
A questionnaire acts as a tool to obtain information from respondents and as a guide to
interviewer to get the best out of the time the interviewer spend with the interviewee. In
simple terms, it is a form to obtain responses from the interviewee in a way that
optimizes the information value to time ratio. Data processors in the research agencies
use the completed questionnaires to generate analytical frequency tables, charts, graphs
and other statistical application to answer the research questions using the data
collected.
As a questionnaire is a vehicle to obtain information from certain targeted respondents,
it must be designed and framed in view of the respondents. Careful consideration must
be placed on the content, use of words, sequence of questions, routing and coding (if
any) to enable all parties involved in the research process to get the best out of the
questionnaire. All interviewees are not same. Their level of education, attitude and
willingness to co-operate in the interview are not alike. The fieldworkers or interviewers
must also fully understand the objective of the questionnaire and the meaning and
expectation from each question. Data entry people should have convenience and are
able to prepare a data sheet which is easy for Data Processors to understand and
generate tables.
A good questionnaire is one that creates a balance between all of the above. A
questionnaire that fails to achieve the research objective is a poorly designed
questionnaire and ultimately be detrimental to health of whole research project.
Designing questionnaire is one of the preliminary tasks of the research projects. Once
the client company gives the project briefing, the researchers will start designing the
questionnaire addressing the objectives and expected information content of the
research project.
The quality of questionnaire is a function of type of questions, language used, sequence
of questions and question content. Type of question depends on type of expected

3. responses and the nature of research. There are several choices as for the type of
questions. There are various classifications of questions.
Behavioural questions – these types of questions are those that are used to obtain
factual information on who they are (what they do and what they have) and location
where they live. Behavioural questions are used in surveys which are aimed at finding
out market size, market share, and level of awareness and rate of usage of
products/service.
Attitudinal questions – this type of question can get responses as for what people
think, opinion, level of preference and agreement, and why they think so. Attitudinal
questions are commonly used in satisfaction studies, brand mapping studies, positioning
research, etc.
Classification questions – classification questions are used for the purpose of
segmentation. The information can be used to segment respondents based on their
differences in terms of such things as age, gender, income, etc. Classification questions
are used in all surveys.
There are three major types of questionnaires; namely structured, semi-structured and
unstructured.
Structured: Structured Questionnaires are normally used for large surveys of over 50
samples. Structured designs are used when the responses from the survey can be
anticipated to a large extent. This type of questionnaire can be used for telephone, mail,
face-to-face and online surveys.
Semi-structured: This type of questionnaire is used for B2B research where a large
extend of differences may exist among the respondents.

4. Unstructured: Unstructured designs are used mainly for qualitative research such as
focus groups, in-depth interviews, etc. The design allows interviewer or moderator to
probe and search for specific details as for why and why not.
In order to design a good questionnaire, the following factors must be considered;
Survey Objective – A questionnaire must know and fully understand the objective of
the research project.
Conducting Medium – Researcher designing the questionnaire must be clear of how
the interview will be conducted – whether face-to-face, telephone, online, mail, etc.
Knowledge and preferences of interviewee – In designing and framing questions in a
questionnaire, researcher must consider the knowledge, their likes and dislikes so that
interview can be smoothly completed without compromising the scope and quality of
data.
Introduction – The way an interviewer introduces the survey can win the heart of the
interviewee. The questionnaire designer must include and interesting introduction of the
survey in the beginning of the survey. The initial questions must also be interesting.
Sequence – The order in which the questions are arranged throughout the question is
very important for a successful survey. The simple rule is first things first.
Type of Questions - The questions must be chosen with care. The type of question
must suit the expected responses and objective of the question.
Data Processing/processors – The questionnaire designer must also think from the
perspective of data processors. The structure must be convenient for preparing the data
entry sheet and avoid confusion during the data entry process.
The questionnaire is designed in a way where the employee can rate the present
Performance Appraisal System and also rate an ideal Performance Appraisal system. The
Questionnaire is designed to be anonymous so as to encourage the employees to come
up their real perception of a performance appraisal system and removes fear of
repercussions from the company.

5. Research Methodology Adopted
Research Design : Descriptive research
Research Instrument : Structured Questionnaire
Sampling Framework
i) Sample Method : Non-Probability Sampling (Convenience Sampling)
ii) Sample Size : 56
iii) Sample Unit : Employees who do not hold a supervisory position
Sampling Design
Convenience sampling, as the name implies, is based on the convenience of the
researcher who is to select a sample. Respondents in the sample are included in it
merely on account of their being available on the spot where the survey was in progress.
Source of Data
a) Primary Data : Structured Questionnaire
b) Secondary Data : Journals, Booklets, Company Data, etc.
Tools Used for Analysis
The data is recorded from the survey and it is analysed using 3 tools, namely:
a. Chi Square Test
b. Percentage Analysis
c. Pie Charts and Bar Charts
Chi Square Test
Chi-square is a statistical test commonly used to compare observed data with data we
would expect to obtain according to a specific hypothesis. For example, if, according to
Mendel's laws, you expected 10 of 20 offspring from a cross to be male and the actual
observed number was 8 males, then you might want to know about the "goodness to fit"
between the observed and expected. Were the deviations (differences between observed
and expected) the result of chance, or were they due to other factors. How much
deviation can occur before you, the investigator, must conclude that something other
than chance is at work, causing the observed to differ from the expected? The chi-square

6. test is always testing what scientists call the null hypothesis, which states that there is
no significant difference between the expected and observed result.
The formula for calculating chi-square is = (O-E) 2
/E
That is, chi-square is the sum of the squared difference between observed (o) and the
expected (e) data (or the deviation, d), divided by the expected data in all possible
categories.
Percentage Analysis
Percentage analysis consists of reducing a series of related amounts to a series of
percentages of a given base. All items in an income statement are frequently expressed
as a percentage of sales or sometimes as a percentage of cost of goods sold. A balance
sheet may be analysed on the basis of total assets. This analysis facilitates comparison
and is helpful in evaluating the relative size of items or the relative change in items. A
conversion of absolute dollar amounts to percentages may also facilitate comparison
between companies of different size.
Pie and Bar Charts
A pie chart displays data, information, and statistics in an easy-to-read 'pie-slice' format
with varying slice sizes telling you how much of one data element exists. The bigger the
slice, the more of that particular data was gathered.
A bar graph is a chart that uses either horizontal or vertical bars to show comparisons
among categories. One axis of the chart shows the specific categories being compared,
and the other axis represents a discrete value.
4. DATA COLLECTION
Existing appraisal system in Arun Industries
The Current appraisal system in Arun industries is of old traditional appraisal system
which involves
 Promotion / appraisal based on seniority of employees (Person who joins the
company has first priority to get promoted first).
 As appraisal was based on seniority, person who performs better than seniors
were not considered for appraisal or promotion.

7.  Not Regular feedbacks were received from employees before appraisal and after
appraisal review.
 At times, Top management might favour their favourable persons.
The Questionnaire was given to the employees of Arun industries and was asked to fill in
by them. These Questionnaires was given to 56 employees who consist of 5 different
teams such as Finance, Marketing etc... Each team involves 10 team member headed by
a lead forming 11 persons for a team.
The hard copy of collected filled in Questionnaire were submitted and the questionnaire
given to the employee were attached above.
The answers of the questionnaire can be classified into 3 categories majorly
a) Positive feedback (Agree and Strongly agree)
b) Neutral feedback (Neutral)
c) Negative feedback (Strongly disagree and disagree)
5. DATA ANALYSIS
Calculations showing the results obtained out of the study using statistical tests and
inferences derived must be elaborated. The results obtained must provide answers to the
stated objectives. All calculations must be based on the data file as in the previous
section. Hypotheses must be tested using appropriate tools in addition to simple
percentage analysis (which is only descriptive of the sample).
Total No of employees – 56 inclusive of 11 team leaders
From overall analysis it is found that the most 64 percent of employee agree and
strongly agree with the Ideal Performance appraisal system where as for Existing
traditional appraisal system is supported by only 35 percent of employees.
Calculations based on Chi Square Test, Percentage Analysis and Pie & Bar charts are
explained below.
Note: The questionnaire for this analysis can be referred from Annexure and below
values are based on the data obtained as a result of this questionnaire.

8. Chi Square Test
The Chi Square Test had been done using the data from the questionnaire for both the
current appraisal system and an ideal appraisal system. Calculations based on the given
data is shown below.
Current Appraisal System
CHI SQUARE TEST Unsatisfied Average Satisfactory Good Excellent Total
Observed Numbers
(O)
84.00 347.00 173.00 111.00 69.00 784.00
Expected Numbers
(E = 784/5)
156.80 156.80 156.80 156.80 156.80 784.00
(O-E) -72.80 190.20 16.20 -45.80 -87.80 0.00
(O-E)2
5,299.84 36,176.04 262.44 2,097.64 7,708.84 51544.8
(O-E)2
/E 33.80 230.71 1.67 13.38 49.16 328.73
Ideal Performance Appraisal System
CHI SQUARE
TEST
Strongly
Disagree
Disagree Neutral Agree
Strongly
Agree
Total
Observed Numbers
(O) 60.00 109.00 196.00 472.00 227.00 1,064.00
Expected Numbers
(E = 1064/5) 212.80 212.80 212.80 212.80 212.80 1,064.00
(O-E) -152.80 -103.80 -16.80 259.20 14.20 0.00
(O-E)2
23,347.84 10,774.44 282.24 67,184.64 201.64 101,790.80
(O-E)2
/E 109.72 50.63 1.33 315.72 0.95 478.34
Observation
From Chi Square Test, the ‘Total’ (478.34) in Ideal Performance Appraisal system is
observed to be promoting compared to Current Appraisal system.

9. Percentage Analysis
The percentage analysis had been done using the data from the questionnaire (refer
Annexure) for both the current appraisal system and an ideal appraisal system.
Calculations based on the given data is shown below.
Current Appraisal System
Current Appraisal System No. Of Employees = 56
Statement
Very
Poor
Poor Average Good
Very
Good
How do you rate the current appraisal
system?
2 35 10 8 1
Is the current appraisal system were
conducted in Fair process?
10 25 7 8 6
How much rating will you give
yourself?
0 0 0 40 16
Does the management review your
performance before they do your
appraisal?
7 18 13 12 6
Are you satisfied with the current
appraisal system?
3 31 7 7 8
Current Appraisal System No. Of Employees = 56
Statement Unsatisfied Average Satisfactory Good Excellent
Performance Planning/ Goal Setting 0 42 8 2 4
Performance Evaluation 8 18 12 10 8
Development Planning 0 38 4 10 4
Coaching 10 20 26 0 0
Training 11 20 25 0 0
Leadership Development 19 20 17 0 0
Rewards 4 20 24 6 2
Discipline 0 35 10 0 11
Effectiveness of current system 10 25 10 8 3

10. The below table explains the overall numbers for 56 employees in total for the given
statements and categories.
Current Appraisal System
Unsatisfied Average Satisfactory Good Excellent
Total ( for 56 employees) 84 347 173 111 69
Ideal Performance Appraisal System
The below table explains the feedback from 56 employees in total for different
statements, based on New Performance Appraisal System.
Ideal Performance Appraisal System No. Of Employees = 56
Statement
Strongly
disagree
Disagree Neutral Agree
Strongly
Agree
Employee should have authority to
determine work objective
1 1 5 35 14
Employee should have authority to
determine goal
1 2 6 30 17
Employee should receive feedback
regularly on performance
0 9 32 10 5
Employee should understand
organizational goal and objective
0 0 0 11 45
Employee should have his/her objective
realistic and achievable
0 0 11 36 9
Employee should have good
organizational communication
0 0 2 22 32
It should help Employee do work better 1 2 3 38 12
Should help Employee develop skills and
potentials
2 1 4 36 13
It should also be based on employee
experience
32 10 2 10 2
Employee should get feedback after
appraisal review
3 9 30 8 6
Employee should be satisfied the way
manager conducts the review
1 2 3 38 12

11. The below table explains the overall numbers for 56 employees in total for the given
statements and categories.
Ideal Appraisal Performance
System
Strongly
Disagree
Disagree Neutral Agree
Strongly
Agree
Over All ( for 56 employees) 65 117 236 528 286
Observation
From Percentage Analysis, the ‘Agree’ (528) in Ideal Performance Appraisal system is
observed to be promoting compared to Current Appraisal system.
Frequency of the review should be
determined by the leadership team.
12 37 7 0 0
It should help Employee improve
performance
2 4 8 36 6
Employee should find it easy to discuss
work problems with line manager
0 2 10 33 11
Assessment of Employee performance
should be fair and consistent and
unbiased
0 0 9 34 13
Performance Appraisal should work well 0 0 11 35 10
It should have impact on employee's
discipline
0 0 33 15 8
Information from performance reviews
should be used effectively
0 0 11 35 10
It should be transparent for all the
employees
5 30 9 10 2
Employee should be satisfied with
consistent and fair rating of the team
5 8 30 10 3
It should have impact on employee's
performance
0 0 10 25 21
Performance appraisal should impact on
employee's morale
0 0 0 21 35

12. Pie and Bar Charts
Current Appraisal System

13. Ideal Appraisal System
Observation
From the Pie Chart & Bar Chart, the ‘Agree’ (528) in Ideal Performance Appraisal system
is observed to be promoting compared to Current Appraisal system.

14. 6. WORK TO BE DONE
• Using analysed data come up with expected outcome and recommendations.
REFERENCES
1. Deepa, E.; Palaniswamy, R.; Kuppusamy, S. Journal of Contemporary
Management Research; March 2014, Vol. 8 Issue 1.
2. Arvinder Kour Mehta; Abhinav International Monthly Refereed Journal of Research
in Management & Technology, June 2014, Volume 3, Issue 6.
3. Dr. J. Vincent Xavier; International Journal of Research in Management &
Business Studies Jan 2015, Vol. 2 Issue 1.
4. Dr. RajeeshViswanathan, Yasam Lakshmi Narayana Reddy, Dr S Thiyagarajan;
Indian Journal Of Applied Research, May 2014, Volume : 4 | Issue : 5.
5. Chitrangda; GE - International Journal of Management Research, Feb 2014,
Volume 2, Issue 2
J. Jasmine Sharon Dr. Venkateshwara Prasad
(Signature of Student) (Signature of Guide)

15. ANNEXURE – 1
QUESTIONNAIRE FOR PERFORMANCE APPRAISAL SYSTEM
Gender Male Female
Experience Less than 2 year 2-6 year 6-10 Year Above 10Years
On the scale of 1-5 please rate the following statement:
With 1 - least rating and 5 - highest rating
A. How do you rate the current appraisal system?
B. Is the current appraisal system were conducted in Fair process?
C. How much rating will you give yourself?
D. Does the management review your performance before they do your appraisal?
E. Are you satisfied with the current appraisal system?
Please rate your satisfaction with the following parts of your current Appraisal system
(Marking tick)
Statements Unsatisfied Average Satisfactory Good Excellent
1) Performance Planning /
Goal Setting
2) Performance Evaluation
3) Development Planning
4) Coaching
5) Training
6) Leadership Development
7) Rewards
8) Discipline
9) Effectiveness of current
system
Please rate the following statements on an Ideal Performance Appraisal (Marking tick)
Statements Strongly
disagree
Disagree Neutral Agree Strongly
Agree
1) Employee should have authority to
determine work objective
2) Employee should have authority to
determine goal
3) Employee should receive feedback
regularly on performance
4) Employee should understand
organizational goal and objective
5) Employee should have his/her

16. objective realistic and achievable
6) Employee should have good
organizational communication
7) It should help Employee do work
better
8) Should help Employee develop
skills and potentials
9) It should also be based on
employee experience
10)Employee should get feedback
after appraisal review
11)Employee should be satisfied the
way manager conducts the review
12)Frequency of the review should be
determined by the leadership
team.
13)It should help Employee improve
performance
14)Employee should find it easy to
discuss work problems with line
manager
15)Assessment of Employee
performance should be fair and
consistent and unbiased
16)Performance Appraisal should
work well
17)It should have impact on
employee's discipline
18)Information from performance
reviews should be used effectively
19)It should be transparent for all the
employees
20)Employee should be satisfied with
consistent and fair rating of the
team
21)It should have impact on
employee's performance
22)Performance appraisal should
impact on employee's morale

17. ANNEXURE – 2
SURVEY DATA BASED ON THE QUESTIONNAIRE
The below table explains the feedback from 56 employees in total for different
statements, based on Current Appraisal System.
Current Appraisal System No. Of Employees = 56
Statement
Very
Poor
Poor Average Good
Very
Good
How do you rate the current appraisal
system?
2 35 10 8 1
Is the current appraisal system were
conducted in Fair process?
10 25 7 8 6
How much rating will you give
yourself?
0 0 0 40 16
Does the management review your
performance before they do your
appraisal?
7 18 13 12 6
Are you satisfied with the current
appraisal system?
3 31 7 7 8
The below table explains the feedback from 56 employees in total for different
categories, based on Current Appraisal System.
Current Appraisal System No. Of Employees = 56
Statement Unsatisfied Average Satisfactory Good Excellent
Performance Planning/ Goal
Setting
0 42 8 2 4
Performance Evaluation 8 18 12 10 8
Development Planning 0 38 4 10 4
Coaching 10 20 26 0 0
Training 11 20 25 0 0
Leadership Development 19 20 17 0 0
Rewards 4 20 24 6 2
Discipline 0 35 10 0 11
Effectiveness of current system 10 25 10 8 3
Degree of Freedom (DF) = Number of Classes – 1, which is “4”.

18. Ideal Performance Appraisal System
Degree of Freedom = Number of Classes – 1, which is “4”.
Ideal Performance Appraisal System No. Of Employees = 56
Statement
Strongly
disagree
Disagree Neutral Agree
Strongly
Agree
Employee should have authority to
determine work objective
1 1 5 35 14
Employee should have authority to
determine goal
1 2 6 30 17
Employee should receive feedback regularly
on performance
0 9 32 10 5
Employee should understand organizational
goal and objective
0 0 0 11 45
Employee should have his/her objective
realistic and achievable
0 0 11 36 9
Employee should have good organizational
communication
0 0 2 22 32
It should help Employee do work better 1 2 3 38 12
Should help Employee develop skills and
potentials
2 1 4 36 13
It should also be based on employee
experience
32 10 2 10 2
Employee should get feedback after
appraisal review
3 9 30 8 6
Employee should be satisfied the way
manager conducts the review
1 2 3 38 12
Frequency of the review should be
determined by the leadership team.
12 37 7 0 0
It should help Employee improve
performance
2 4 8 36 6
Employee should find it easy to discuss
work problems with line manager
0 2 10 33 11
Assessment of Employee performance
should be fair and consistent and unbiased
0 0 9 34 13
Performance Appraisal should work well 0 0 11 35 10
It should have impact on employee's
discipline
0 0 33 15 8
Information from performance reviews
should be used effectively
0 0 11 35 10
It should be transparent for all the
employees
5 30 9 10 2
Employee should be satisfied with
consistent and fair rating of the team
5 8 30 10 3
It should have impact on employee's
performance
0 0 10 25 21
Performance appraisal should impact on
employee's morale
0 0 0 21 35