Banking industry in India

Banking in India originated in the last decades of the 18th century. The
first banks were The General Bank of India which started in 1786, and the Bank of
Hindustan, both of which are now defunct. The oldest bank in existence in India is the
State Bank of India, which originated in the Bank of Calcutta in June 1806, which almost
immediately became the Bank of Bengal. This was one of the three presidency banks, the
other two being the Bank of Bombay and the Bank of Madras, all three of which were
established under charters from the British East India Company. For many years the
Presidency banks acted as quasi-central banks, as did their successors. The three banks
merged in 1921 to form the Imperial Bank of India, which, upon India's independence,
became the State Bank of India.

Indian merchants in Calcutta established the Union Bank in 1839, but it

failed in 1848 as a consequence of the economic crisis of 1848-49. The Allahabad Bank,
established in 1865 and still functioning today, is the oldest Joint Stock bank in India.
(Joint Stock Bank: A company that issues stock and requires shareholders to be held
liable for the company's debt) It was not the first though. That honor belongs to the Bank
of Upper India, which was established in 1863, and which survived until 1913, when it
failed, with some of its assets and liabilities being transferred to the Alliance Bank of
Simla.

The American Civil War stopped the supply of cotton to Lancashire from
the Confederate States, promoters opened banks to finance trading in Indian cotton. With
large exposure to speculative ventures, most of the banks opened in India during that
period failed. The depositors lost money and lost interest in keeping deposits with banks.
Subsequently, banking in India remained the exclusive domain of Europeans for next
several decades until the beginning of the 20th century.

Foreign banks too started to arrive, particularly in Calcutta, in the 1860s.

The Comptoire d'Escompte de Paris opened a branch in Calcutta in 1860, and another in
Bombay in 1862; branches in Madras and Puducherry, then a French colony, followed.

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HSBC established itself in Bengal in 1869. Calcutta was the most active trading port in
India, mainly due to the trade of the British Empire, and so became a banking center.

The first entirely Indian joint stock bank was the Oudh Commercial Bank,
established in 1881 in Faizabad. It failed in 1958. The next was the Punjab National
Bank, established in Lahore in 1895, which has survived to the present and is now one of
the largest banks in India.

Around the turn of the 20th Century, the Indian economy was passing
through a relative period of stability. Around five decades had elapsed since the Indian
Mutiny, and the social, industrial and other infrastructure had improved. Indians had
established small banks, most of which served particular ethnic and religious
communities.

The presidency banks dominated banking in India but there were also
some exchange banks and a number of Indian joint stock banks. All these banks operated
in different segments of the economy. The exchange banks, mostly owned by Europeans,
concentrated on financing foreign trade. Indian joint stock banks were generally under
capitalized and lacked the experience and maturity to compete with the presidency and
exchange banks. This segmentation let Lord Curzon to observe, "In respect of banking it
seems we are behind the times. We are like some old fashioned sailing ship, divided by
solid wooden bulkheads into separate and cumbersome compartments."

The period between 1906 and 1911, saw the establishment of banks inspired by the
Swadeshi movement. The Swadeshi movement inspired local businessmen and political
figures to found banks of and for the Indian community. A number of banks established
then have survived to the present such as Bank of India, Corporation Bank, Indian Bank,
Bank of Baroda, Canara Bank and Central Bank of India.

The fervor of Swadeshi movement lead to establishing of many private banks in

Dakshina Kannada and Udupi district which were unified earlier and known by the name
South Canara ( South Kanara ) district. Four nationalised banks started in this district and

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also a leading private sector bank. Hence undivided Dakshina Kannada district is known
as "Cradle of Indian Banking".

Initially all the banks in India were private banks, which were founded in
the pre-independence era to supply to the banking needs of the people. In 1921, three
major banks i.e. Banks of Bengal, Bank of Bombay, and Bank of Madras, merged to form
Imperial Bank of India. In 1935, the Reserve Bank of India (RBI) was established and it
took over the central banking responsibilities from the Imperial Bank of India,
transferring commercial banking functions completely to IBI. In 1955, after the
declaration of first-five year plan, Imperial Bank of India was subsequently transformed
into State Bank of India (SBI).

Following this, occurred the nationalization of major banks in India on 19

July 1969. The Government of India issued an ordinance and nationalized the 14 largest
commercial banks of India, including Punjab National Bank (PNB), Allahabad Bank,
Canara Bank, Central Bank of India, etc. Thus, public sector banks revived to take up
leading role in the banking structure. In 1980, the GOI nationalized 6 more commercial
banks, with control over 91% of banking business of India.

In 1994, the Reserve Bank Of India issued a policy of liberalization to

license limited number of private banks, which came to be known as New Generation
tech-savvy banks. Global Trust Bank was, thus, the first private bank after liberalization;
it was later amalgamated with Oriental Bank of Commerce (OBC). Then Housing
Development Finance Corporation Limited (HDFC) became the first (still existing) to
receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank
in the private sector.

At present, Private Banks in India includes leading banks like ICICI

Banks, ING Vysya Bank, Jammu & Kashmir Bank, Karnataka Bank, Kotak Mahindra
Bank, SBI Commercial and International Bank, etc. Undoubtedly, being tech-savvy and
full of expertise, private banks have played a major role in the development of Indian
banking industry. They have made banking more efficient and customer friendly. In the

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process they have jolted public sector banks out of complacency and forced them to
become more competitive

The guidelines for licensing of new banks in the private sector were issued
by the Reserve Bank of India (RBI) on January 22, 1993. Out of various applications
received, RBI had granted licenses to 10 banks. After a review of the experience gained
on the functioning of the new banks in the private sector, in consultation with the
Government, it has now been decided to revise the licensing guidelines.

During the First World War (1914-1918) through the end of the Second
World War (1939-1945), and two years thereafter until the independence of India were
challenging for Indian banking. The years of the First World War were turbulent, and it
took its toll with banks simply collapsing despite the Indian economy gaining indirect
boost due to war-related economic activities. At least 94 banks in India failed between
1913 and 1918 as indicated in the following table:

Number of banks Authorized capital Paid-up Capital

Years
that failed (Rs. Lakhs) (Rs. Lakhs)
1913 12 274 35
1914 42 710 109
1915 11 56 5
1916 13 231 4
1917 9 76 25
1918 7 209 1

The First and Second World Wars acted as eclipses for the Banks in India.
Inspire of a boost in the Indian Economy, as many as 94 banks collapsed. People lost
their savings and also the interest in depositing more money in the banks. The situation
stabilized post-independence. The Reserve Bank Of India was nationalized in 1948 and
then given the power "to regulate, control, and inspect the banks in India." a year later

Types of banks in India

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 In 1969, 14 largest commercial and privately owned Banks were
nationalized. Then again in 1980, six more banks were nationalized on the pretext of
controlling the credit delivery in India. A decade later the new generation IT Banks
came into being. These were UTI Bank (now Axis Bank), ICICI Bank and HDFC Bank.

The Banks in India referred to as Scheduled Commercial Banks (SCB) are categorized
into three on the basis of the government stake holding. These are:

 Public Sector Banks

 Private Banks
 Foreign Banks

Banks List in India

Below are the listings of some of the major banks with information
available on each bank about their branch network, the products and services offered,
their official sites and their ATM's.

RBI ABN AMRO Bank Andhra Bank

Axis Bank Bank of Baroda Bank Of India
Barclays Bank Canara Bank Central Bank of India
Citibank Corporation Bank Dena Bank
Deutsche Bank GE Financial HDFC
HSBC ICICI IDBI
Indiabulls Financial Indian Bank Indian Overseas Bank
Services
ING Vysya Kotak Mahindra Bank LIC Housing Finance
Corporation
National Housing Bank Oriental Bank of PNB
Commerce
Punjab & Sind Bank Reliance Money SBI
Standard Chartered Syndicate Bank Union Bank of India
United Bank of India

Performance Appraisal Systems in Indian Banks

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 Banking services is one sector where a great degree of attention is being
paid to Performance Appraisal Systems. Several of the public sector banks (PSBs) have
changed their PAS or are in the process of changing them. State Bank of India has recently
adopted an open system of appraisal. Its associate banks are likely to follow the same after
detailed experiences of State Bank of India are available. Several banks also have self-
appraisal as a part of performance appraisal, although mostly such self-appraisal is more
of a communication of achievements.
Allahabad Bank has introduced a system that aims in helping officers to
identify their strengths and weaknesses and encourage improvement of performance on
the job. Indian Overseas Bank has a system in which a branch manager gives a self-
appraisal on business growth, customer service, internal administration and
training requirements in great detail. Union Bank of India has an appraisal system in
which the reporting officer is required to assess each of his appraise officers on technical
skills, human skills and conceptual skills. All these are defined for different categories of
roles and the assessment has to be made on a five-point scale. Corporation Bank, UCO
Bank, Central Bank of India, Dena Bank and Bank of Baroda has introduced similar self-
appraisal formats. Punjab National Bank has, primarily, a development-oriented appraisal
form. There are ten different formats available for ten different categories of employees.
The bank started the system with a self-appraisal by the appraise.

Studies of the operating system of the successful organizations, in

general, reveal that a good PAS is the corner stone to navigate an organization
successfully in this globalize environment of uncertainty and continuous change. They
have, therefore, developed and employed such system and harnessing maximum
benefits. But, like many fields of organizational development, the PSBs are lagging
behind in this area too.
Most of the PSBs have an Annual Appraisal System that is historic in
nature and documents the past activities. It is a one time annual affair only. Study of the
format of annual appraisal of many of the PSBs reveal that they are basically uniform in
character with emphasis in historical events and little or no importance for future growth.
In comparison with the new generation banks and progressive organizations, the

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appraisal system in PSBs, thus, is basically dysfunctional. The PAS, as an
important component of Performance Management System, is yet to be conceived and
made operational. But developing and implementing a PAS seems overdue and vitally
important.
Models of Performance Appraisal
In performance appraisal, a model is a guide that indicates how best
competencies could be fit into a Performance Appraisal Process. There are one-
dimensional models, mixed models and three-dimensional models. One-
dimensional model or the traditional model is based on the single factor of performance and
the entire focus is on what to be achieved. The 'How' factor of achievement is not
looked into in this type of model and is perhaps not fit for today's world of business where
short term survival and long term survival is equally important.
One Dimensional Model:
In one-dimensional model people are not aware whether an
achievement is one time and situational. Employees can adopt practices that can boost
their performance in the short run making colossal losses for the future. There are enough
examples of the loopholes of the one-dimensional model. The following is a one-
dimensional model where the key stress is on what is to be performed.

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Mixed model

A performance appraisal process that combines planning, managing and

reviewing both results and competencies is called a mixed model. Mixed model or the
competency based performance models for their added advantage are becoming the
performance management model of the future. These mixed models assess and reward
both results and competencies demonstrated on the job. It shows what the employees
achieved and how they have achieved.

The mixed model represents a more powerful and long lasting approach
to performance management than what one-dimensional objective-based approach. A
competency based' approach brings a different perspective to performance
management. It employs a wider, a more comprehensive tool to describe the performance
expected from an individual. Here, performance is defined not only in terms of what is to
be achieved but how it is to be achieved and what competencies must be utilized as is
depicted in the following model.

Three Dimensional Model

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 The next model takes another dimension besides objectives and
competencies. The most important dimension -customer - fits in this model. The
customer is involved in setting the performance contract and on giving feedback to the
performance review.

When the whole banking industry is going for CBS, its time to make PAS IT
enabled in such a way that once submitted on-line, there will be no provision of editing or
rectification after the date of submission. The objective portion of the PAS should
generate immediate feedback and the system should be so oriented that within a specified
time of say, seven days the entire feedback should reach the appraise for developing
weak (opportunity) areas. This will reduce the criticism of bias or alteration of opinion
by the reviewer in subsequent period.

Besides, the raters (appraiser and reviewer) should be

adequately trained so that they are capable to overcome gender bias, personality
bias and other sort of biases. They should focus more on performance and less on
personality. The leniency error and the 'hallo' effect (a good perception in

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one area leads to rating good in all areas) and thorn effect (a biased perception in
one area leading to bad rating in all areas) in appraisal system can be corrected
only through appropriate training of the rater. Appraises may also be
trained suitably for providing accurate rating in their self appraisal.

Guidelines for Building a Model Performance Appraisal System

Performance is concerned with means as well as ends,

inputs (competence) as well as outputs (results). Performance is about everyday
actions and behaviors which, as individuals, we take to reach planned objectives.
Performance Elements and Performance Standards :
Performance elements tell us what we have to do and performance
standards tell us how well we have to do. There are three performance elements.

Critical Elements (CE)

CE is an assignment or responsibility of such critical importance that
unacceptable performance in these elements would make our (appraises)
performance altogether unacceptable. The number of CEs ranges from a minimum of
three (3) and a maximum of eight (8).

Non Critical Elements (NCE)

NCE is an assignment or responsibility of such importance that
unacceptable performance in these elements would make our (Group or Unit)
performance altogether unacceptable. This is non critical at individual level but critical at
group level.
Additional Performance Elements (APE)
An APE is a dimension or aspect of an individual, team, or organizational
performance that is not critical element for individual or group performance evaluation
but successful performance may earn credit at individual and group performance level.
Example of APE: an employee/officer volunteered to work in a new project that requires new
skills, such assignments are non-threatening and an intelligent failure would not be minus

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mark on performance.

Activity Trap

Many employees/officers remain busy and active but the ultimate outcome
seldom adds to any value addition to the organization. The people who are entrapped in
activities without understanding the purpose of business are said to be in activity trap.

Concept of Ideal Performance Plan (IPA)

An ideal performance plan should have a proper blend of critical, non-

critical, and additional performance elements. Such plans should have provisions of
apprising employee performance against planned agreement on elements at five levels based

on (elements to be weighted) according to specific needs of the organization.

• Outstanding Performance Level (OPL) who scores 100%

• Standard Performance Level (SPL): who scores 60% or above

• Acceptable But Poor Performance Level (ABPPL): who scores 50% or above

• Unacceptable Performance Level (UPL): who scores less than 50%

All appraises should perform at least Standard Performance

Level. However, every bank would want most of her employees and officers
endeavor to reach Outstanding Performance Level so that the bank becomes a high
performing and high value organization as embodied in its Mission and Vision statement.

In the competency evaluation, the following skills may be evaluated with the
bank deciding on the number of marks to be allotted on factors as under or may be altered to
suit to its specific needs and objectives.

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 The typical traditional Performance Appraisal Process of the
1990s focused almost entirely on defining what is to be achieved. However, today
competency based Performance Management Schemes are plentiful and becoming the
model for the future. These mixed models assess and reward both results and
demonstration of competencies; both what employees actually deliver and how they do it.
The mixed model represents a more powerful and long lasting approach to performance
management than just an objective based approach. Competency-based approach brings
a different perspective to performance management. It uses a wider, more comprehensive
language to describe the performance expected from an employee. Performance is defined
in terms of the results and also in terms of behaviors employees use to achieve the job
results.
The Performance Appraisal System must lead to action. Appraisal for its
own sake should be abandoned. The Performance Appraisal System must not be
considered as perfect and to remain so in the long term. Appraisal should be
on parameters which are important to the organization and really needed, not which are
easy to measure. Multiple feedback system including feedback from peers, sub-
ordinates, customers may give vital clue for development.

PERFORMANCE MANAGEMENT
In the business world investment is made in machinery, equipment and
services. Quite naturally time and money is spent ensuring that they provide what their
suppliers claim. In other words the performance is constantly appraised against the results
expected.
When it comes to one of the most expensive resources companies invest
in, namely people, the job appraising performance against results is often carried out with
the same objectivity. Each individual has a role to play and management has to ensure
that the individual’s objectives translate into overall corporate objectives of the company.
Performance Management includes the performance appraisal process which in turn helps
identifying the training needs and provides a direction for career and succession planning.

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 Understanding Performance Management

PERFORMANCE MANAGEMENT

CORPORATE GOALS

DETERMINE INDIVIDUAL
OBJECTIVES LINKED TO
CORPORATE GOALS
ENSURE RESPONSIBILITY AND
ACCOUNTABILITY

PERFORMANCE APPRAISAL

PERFORMANCE LINKED
INCREMENTS/ INCENTIVES/
What is Performance? REWARDS
Performance is synonymous with behavior; it is what people actually do.
Performance includes those actions that are relevant to the organizational growth and can
be measured in terms of each individual’s proficiency (level of contribution).
Effectiveness Performance refers to the evaluation of results of performance that is
beyond the influence or control of the individual.

How is Performance managed?

Good performance by the employees creates a culture of excellence,
which benefits the organization in the long run. The activity includes evaluation of jobs
and people both, managing gender bias, career planning, and devising methods of
employee satisfaction etc. the efforts are to make to generate the individual’s aspirations
with the objectives of the organization. Organization has to clear the way of career
advancements for talented and hardworking people. Fear of any kind from the minds of
the employees should be removed so that they give best to their organization. Allow free
flow of information. Communication network should be designed in such a way no one

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should be allowed to become a hurdle. This enables the managers to take correct
decisions and that too quickly.

Why Performance Appraisal?

Today’s working climate demands a great deal of commitment and effort
from employees, who in turn naturally expect a great deal more from their employers.
Performance appraisal is designed to maximize effectiveness by bringing participation to
more individual level in that it provides a forum for consultation about standards of work,
potential, aspirations and concerns. It is an opportunity for employees to have
significantly greater influence upon the quality of their working lives. In these times of
emphasis on “quality”, there is a natural equation: better quality goods and services from
employees who enjoy better quality “goods and services” from their employers.

Performance appraisal must be seen as an intrinsic part of a manager’s

responsibility and not an unwelcome and time-consuming addition to them. It is about
improving performance and ultimate effectiveness.

Performance appraisal is a systematic means of ensuring that managers

and their staff meet regularly to discuss post and present performance issues and to agree
what future is appropriate on both sides.
This meeting should be based on clear and mutual understanding of the job in question
and the standards and outcomes, which are a part of it. In normal circumstances,
employees should be appraised by their immediate managers on one to one basis. Often
the distinction between performance and appraising is not made. Assessment concerns
itself only with the past and the present. The staff is being appraised when they are
encouraged to look ahead to improve effectiveness, utilize strengths, redress weaknesses
and examine how potentials and aspirations should match up.

It should also be understood that pushing a previously prepared report

across and desk cursorily inviting comments, and expecting it to be neatly signed by the

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employee is not appraisal - this is merely a form filling exercise which achieves little in
terms of giving staff any positive guidance and motivation.

THE APPRAISAL OF PERFORMANCE SHOULD BE:

 Improving the ability of the jobholder;

 Identifying obstacles which are restricting performance
 Agreeing a plan of action, that will lead to improved performance.

It is widely accepted that the most important factor in organization effectiveness is the
effectiveness of the individuals who make up the organization. If every individual in the
organization becomes more effective, then the organization itself will become more
effective. The task of reviewing situations and improving individual performance must
therefore be a key task for all managers.
For appraisal to be effective, which means producing results for the company, each
manager has to develop and apply the skills of appraisal

These are: -
 Setting standards on the performance required, which will contribute to the
achievement of specific objectives

 Monitoring performance in a cost –effective manner, to ensure that previously

agreed performance standards are actually being achieved on an ongoing basis

 Analyzing any differences between the actual performance and the required
performance to establish the real cause of a shortfall rather than assume the fault
to be in the jot holder.

 Interviewing having a discussion with the jobholder to verify the true cause of a
shortfall, a developing a plan of action, which will provide the performance,
required

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 Appraisal can then become a way of life, not concerned simply with the
regulation of rewards and the identification of potential, but concerned with improving
the performance of the company. The benefits of appraisal in these terms are immediate
and accrue to the appraising manager, the subordinate manager/employee, and to the
company as a whole.

Setting and clearly communicating performance standards and expectations, observing

and providing feedback, and conducting appraisals enables you to achieve the best results
through managing employee performance.

To begin the process, you and the employee will collaborate on the
development of performance standards. You will develop a performance plan that directs
the employee's efforts toward achieving specific results, to support organizational growth
as well as the employee's professional growth. Discuss goals and objectives throughout
the year, providing a framework to ensure employees achieve results through coaching
and mutual feedback. At the end of the rating period, you will appraise the employee's
performance against existing standards, and establish new goals together for the next
rating period.

As the immediate supervisor, you play an important role; your closest

interaction with the employee occurs at this level.

• Observation and Feedback (Coaching)

• Other Resources
• Performance Appraisal
• Performance Standards
• Training Resources

Performance Standards
Performance expectations are the basis for appraising employee
performance. Written performance standards let we compare the employee's performance
with mutually understood expectations and minimize ambiguity in providing feedback.

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Having performance standards is not a new concept; standards exist whether or not they
are discussed or put in writing. When you observe an employee's performance, you
usually make a judgment about whether that performance is acceptable. How do you
decide what's acceptable and what's unacceptable performance? The answer to this
question is the first step in establishing written standards.
Standards identify a baseline for measuring performance. From performance standards,
supervisors can provide specific feedback describing the gap between expected and
actual performance.

Guiding Principles Effective performance standards:

• Serve as an objective basis for communicating about performance

• Enable the employee to differentiate between acceptable and unacceptable results
• Increase job satisfaction because employees know when tasks are performed well
• Inform new employees of your expectations about job performance
• Encourage an open and trusting relationship with employees

Key Areas of Responsibility

Write performance standards for each key area of responsibility on the
employee's job description. The employee should participate actively in their
development. Standards are usually established when an assignment is made, and they
should be reviewed if the employee's job description is updated. The discussion of
standards should include the criteria for achieving satisfactory performance and the proof
of performance (methods you will use to gather information about work performance).

Characteristics of Performance Standards

Standards describe the conditions that must exist before the performance
can be rated satisfactory. A performance standard should:

• Be realistic, in other words, attainable by any qualified, competent, and fully

trained person who has the authority and resources to achieve the desired result
• Describe the conditions that exist when performance meets expectations

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 • Be expressed in terms of quantity, quality, time, cost, effect, manner of
performance, or method of doing
• Be measurable, with specified method(s) of gathering performance data and
measuring performance against standards

Expressing Standards
The terms for expressing performance standards are outlined below:

• Quantity:

specifies how much work must be completed within a certain period of

time, e.g., enters 30 enrollments per day.

• Quality:

describes how well the work must be accomplished. Specifies accuracy,

precision, appearance, or effectiveness, e.g., 95% of documents submitted are
accepted without revision.

• Timeliness:

Answers the questions, By when? , How soon? , or Within what period? ,

e.g., all work orders completed within five working days of receipt.

• Effective Use of Resources:

used when performance can be assessed in terms of utilization of

resources: money saved, waste reduced, etc., e.g., the computer handbook project
will be completed with only internal resources.

• Effects of Effort:

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 Addresses the ultimate effect to be obtained; expands statements of
effectiveness by using phrases such as: so that, in order to, or as shown by, e.g.,
establish inventory levels for storeroom so that supplies are maintained 100% of
the time.

• Manner of Performance:

Describes conditions in which an individual's personal behavior has an

effect on performance, e.g., assists other employees in the work unit in
accomplishing assignments.

• Method of Performing Assignments:

Describes requirements; used when only the officially-prescribed policy,

procedure, or rule for accomplishing the work is acceptable, e.g., 100A Forms are
completed in accordance with established office procedures.

Three Components of Performance Standards

Borthwick and Nolan (1996) describe the three components of performance standards:

1. Performance descriptions

These distill the content standards to identify what is essential and what is
able to be assessed. (Content standards commonly include expectations that cannot be
assessed validly or reliably, such as "develop a love of reading.") Content standards that
may run to several pages are thus reduced to a succinct set of statements of what
employee should be expected to know and be able to do.

2. Samples of employee work

The performance descriptions are matched with samples of employee

work that have been judged to illustrate the quality of work expected to meet the standard
at a given grade level.

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3. Commentaries on employee work

The employee work samples are accompanied by commentary that

explains how the employee work illustrates the quality required to meet the expectations
set out in the performance descriptions.

Employee Performance Standards

Companies set performance standards to clarify workplace expectations

between employers and employees. Employee performance standards provide context for
each job position and its responsibilities.

Definition

According to Indiana University, performance standards outline the

specific expectations for a certain duty. Employees must demonstrate observable
behaviors and actions to meet performance standards.

Types

1. Employee performance standards include expectations about employee behavior,

professionalism, work ethic, organizational skills, productivity and time
management. Some standards are quantitative in nature. For example, a
productivity standard in a factory may state that an employee must manufacture
10 bolts per hour. That production rate helps gauge standard compliance.

Function

2. Employee performance standards create order and consistency in the workplace.

Performance evaluations revisit these standards. During an evaluation, supervisors
review performance standards and compare these expectations against an
employee's workplace activity.

Effects

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 3. Performance standards determine if an employee helps or hinders an
organization's mission. Employees who meet or exceed the standards may qualify
for promotions or raises. Those who fall short of the standards, however, may
receive demotions or work probation.

How to Create Employee Performance Standards

As a business manager, you need to guarantee your employees are pulling

their own weight. An important part of a successful workplace is one that consistently
encourages and achieves high performance standards. Communication is a big part of
making this happen. When you clearly express your expectations and convey
consequences, your employees will realize the seriousness assessment plays in their
careers. Just make sure when you create your employee performance standards that they
are fair, targeted and progressive.

Creating Employee Performance Standards

1. Determine average performance levels based on current employee performance.

Make sure when doing this, you only compare employees with similar experience.
Drawing an average from the entire employee pool is practically useless.
2. Use the average performance level as a minimum standard for all employees in
said experience bracket. By placing the "average" as a bare minimum, you are
making a serious statement about the need for business growth. This should
encourage a more dynamic work goal environment immediately.
3. Make long-term goals for sales and performance, so that the "average"
performance is only average at the current point in time. To remain viable,
business must grow and become more efficient. Building profit growth into the
performance standard system makes growth an inherent expectation. Success, in
short, becomes the new model.

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 4. Counsel workers who fail to meet the performance standards about their need to
improve. Letting employees slide will only undermine the system you have put in
place, and possibly encourage poor morale among the general workforce.
5. Establish a mentoring system between more experienced, successful employees
and newer hires. This is an excellent way to delegate managerial responsibility
while building a sense of employee-owned success; the more accountability your
employees take for the company's success, the stronger the business model.

Performance Measurements
Since one of the characteristics of a performance standard is that it can be
measured, you should identify how and where evidence about the employee's
performance will be gathered. Specifying the performance measurements when the
responsibility is assigned will help the employee keep track of his progress, as well as
helping you in the future performance discussions.

There are many effective ways to monitor and verify performance, the most common of
which are:

• Direct observation
• Specific work results (tangible evidence that can be reviewed without the
employee being present)
• Reports and records, such as attendance, safety, inventory, financial records, etc.

Commendations or constructive or critical comments received about the employee's work

DEFINE PERFRMANCE STANDARDS FOR EACH DUTY

While the list of Major Job Duties tells the employee what is to be done,
performance standards provide the employee with specific performance expectations for
each major duty. They are the observable behaviors and actions which explain how the
job is to be done, plus the results that are expected for satisfactory job performance. They

22
tell the employee what a good job looks like. The purpose of performance standards is to
communicate expectations. Some supervisors prefer to make them as specific as possible,
and some prefer to use them as talking points with the specificity defined in the
discussion. Keep in mind that good performance typically involves more than technical
expertise. You also expect certain behaviors (e.g. friendliness, helpfulness,
courteousness, punctuality, etc.) It is often these behaviors that determine whether
performance is acceptable. Performance standards are:

• Based on the position, not the individual

• Observable, specific indicators of success
• Meaningful, reasonable and attainable
• Describe "fully satisfactory" performance once trained
• Expressed in terms of Quantity, Quality, Timeliness, Cost, Safety, or Outcomes

Example of Performance Standards for PA Positions

• Develops project objectives, budgets, work plans and implementation strategies

o consistent with departmental goals
o communicates clearly to all levels
o falls within budget guidelines
o can reasonably be accomplished in specified time frame
o follows up and resolves problems in timely manner to keep project on
track.
• Analyzes, synthesizes and communicates financial information and data in
complex account structures; uses data to develop budget and financial plans.
o uses appropriate sources of information
o uses the most recent data
o meets specified deadlines
o conclusions and recommendations are justified by the data
o federal, state and university guidelines are followed
• Designs/develops and negotiates contracts with clients and vendors
o contracts are clear, complete and reflect the needs of the unit

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 o negotiation skills are such that the best value is achieved for the institution
o solutions are effective and mutually acceptable
o good client and vendor relationships are maintained
o contracts are consistent with all federal, state and university policies and
procedures
• Develops policies and/or interprets and implements all federal, state, local and
university policies, procedure and regulations
o policies are clearly written and include all necessary components
o all pre-approval steps have been followed to include necessary in-put from
concerned parties
o sufficient research is conducted to provide accurate background
knowledge necessary to the process of development and/or interpretation
o communication regarding policies is done in a timely manner to all
affected groups and in an unambiguous, customer friendly manner
• Performs management duties with accountability and authority for the strategic
direction of the department
o planning, budget, staffing, resource allocation, policy development, staff
supervision, etc.:
 the unit is in compliance with governmental and university policies
and procedures
 staff morale remains high
 complaints about personnel, leadership and work of department are
minimal
 organizational goals are achieved in timely manner
• Assists students with academic problems and/or advises students regarding degree
requirements
o works with students in a customer oriented manner
o gives accurate information
o keeps updated on requirement changes and keeps students informed
o knows and utilizes resources to resolve problems

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Example of Performance Standards for a Receptionist

• Greet customers
o opens office promptly at 8:00 a.m.
o consistently conveys friendly, helpful, professional manner
o provides accurate information
o demonstrates a customer service orientation
o secures back-up for times of absences from desk
• Answers phone
o answers with a friendly greeting
o speaks clearly and distinctly
o uses all functions of phone (hold, transfer, etc.) in knowledgeable and
customer friendly manner
o takes messages accurately and completely
• Distributes incoming and prepares outgoing mail
o sorts and date stamps incoming mail
o distributes to individual mailboxes in timely fashion
o logs in packages and notifies recipients
o prepares FEDEX and UPS documentation correctly
o takes outgoing mail to mail room in time for pick-up times
o forwards mail as needed
• Maintains files
o keeps files in organized fashion so that materials are easily located
o refiles material within 1/2 day of return
o checks out files as requested, using proper forms and "file locator tabs"
• Duplicates materials
o accurately duplicates materials within 4 hours of receipt or as requested
o collates and staples materials to assure professional appearance
o notifies staff of completed orders
o maintains machine, resolves problems and contacts service personnel as
needed

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Example of Performance Standards for Accounting Associate

• Researches information:
o review contents of time-sensitive publications, accurately summarize
funding information, and appropriately distribute in weekly email
• Processes requests for external funding:
o verifies accuracy of budgets and forms,
o secures appropriate internal signatures,
o submits to finance in an accurate and timely manner
o maintains office files so that tracking the funding process is easily
managed
• Monitors accounts and processes paperwork:
o identifies charges, verifies availability of funds and obtains proper
authorizations in accurate and timely manner
o processes expenditures within five working days

Example of Performance Standards for a Laboratory Technician

• Prepares laboratory reagents, cultures and solutions:

o all reagents, cultures and solutions are prepared with extreme accuracy
o all reagents, cultures and solutions are stored appropriately
o all specified safety regulations are followed
o stocks are kept in supply
• Washes and sterilizes glassware and equipment:
o cleansing operations are done according to specified guidelines
o glassware and equipment are returned to cabinets once sterilized
o all glassware is washed and sterilized within 4 hours of use
• Keeps records of research results:
o records are accurate, neat and easily interpreted
o records are completed within 1 day of actual experiment

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Example of Performance Standards for a Library Services Associate

• Oversees library department desk

o assures coverage for all times library is open
o responds to patrons' questions and resolves problems in a timely manner
and with a strong focus on customer service
• Trains student workers:
o assures that all students have the proper training to work at the desk
o training is completed within the first two weeks of the semester
o follows up on each student's performance and continues training and
coaching as needed
• Reshelves books:
o all books are reshelved within 24 hours of return
o books are reshelved in proper location

Example of Performance Standards for Administrative Secretary

• Oversees clerical support functions:

o work priorities are clearly established and followed
o manages the performance of the support staff by providing a motivational
environment, correcting poor performance and acknowledging good
performance
• Composes correspondence:
o composition is professional, grammatically correct, clear and logical and
reflects the tone and philosophy of the department
o correspondence is timely and has a customer friendly orientation
• Develops and maintains complex files and databases:
o files and databases are accurate and updated on a regular basis
o trains others in use and interpretation of databases
o assures back-up in maintaining files and databases

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 • Makes travel arrangements and completes travel documents:
o all arrangements are made in a timely manner
o assures that all travel stays within the travel budget with exceptions
cleared by the Chair
o monitors to assure accuracy in documents
o responsible for determining all extenuating circumstances and resolving
problems

Example of Performance Standards for Technical Support Provider

• Provides technical support to computer users:

o identifies and resolves problems such that the user feels that the problem is
resolved
o installs hardware and software in a timely manner and with minimum
interruption to the user
o conducts all interactions with the user in a customer friendly manner
• Makes recommendations as to system needs:
o makes recommendations consistent with customer needs
o recommendations are consistent with departmental budget guidelines
• Serves as resource on technical questions:
o keeps updated on latest in the field and attends all training offered
o researches answers when not immediately knowledgeable
o responds in a timely manner
o answers questions and deals with all customers with respect and
understanding
o always interacts with customers from a customer service perspective

Common standards applicable to everyone in a particular group

There may be a set of common standards and behaviors that are expected
from everyone. For example, all supervisors may be expected to perform similarly around
several functions, or everyone in the unit will be held to the same standards around

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teamwork, customer service, etc. In cases like this, you might want to make a list of the
common standards that apply and attach to each individual's performance management
plan.

EXAMPLES

Leadership

• communicates a vision of the future and moves self and others toward it through
shared goal setting
• influences others to accomplish/achieve desired goals
• guides others through change
• adapts style to the situation and the person
• obtains commitment and cooperation from others
• maintains open communication
• fosters an environment that encourages innovation, risk taking, ownership ,
learning and growth in others
• utilizes skills and abilities of others effectively
• delegates responsibilities appropriately
• provides an environment of motivation
• manages performance of staff

Team Orientation

• works effectively with others

• actively contributes to the achievement of group and organizational goals
• accepts shared responsibility and ownership of projects
• maintains open communication among team members
• utilizes strengths of individuals within group to the benefit of the team

Innovation/ Creativity

• develops and implements ideas, products or solutions to achieve goals

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 • seeks and provides unique/different perspectives to opportunities
• supports risk taking and encourages innovation in others

Customer Service

• projects a customer orientation – is customer focused

• assumes ownership and responsibility for the needs of the customer
• makes effective decisions, balancing organizational needs and customer needs

Problem Solving/ Decision Making

• analyzes and solves problems within realistic time frames

• makes timely and effective decisions on the basis of available information
• involves the appropriate people in defining and resolving a problem
• supports decision with facts and rationale

Interpersonal Communication

• listens actively to others

• asks appropriate questions for clarification
• gives and receives feedback
• is aware of own and other's communication style and makes adjustments as
necessary
• encourages and is receptive to suggestions and solutions from others
• recognizes and manages conflict effectively

Flexibility

• effectively adjusts behavior and modifies strategies when confronted with

changing, uncertain or unstructured situations
• adapts to change without loss of effectiveness
• deals effectively with ambiguity

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 • acquires new knowledge/skills to meet changing demands

Performance Management

• makes appropriate hires; trains and coaches toward full performance

• identifies and communicates major job duties and performance standards
• facilitates and encourages two-way communication regarding responsibilities,
expectations, goals and performance
• provides ongoing, balanced feedback on performance
• distinguishes between good and poor performance and acts accordingly

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