Final Project on PMS

PERFORMANCE APPRAISAL AT INDIGO

May 20, 2012[PERFORMANCE APPRAISAL AT INDIGO]

PERFORMANCE APPRAISAL AT INDIGO

APROJECT REPORT ONPERFORMANCE APPRAISAL OF INDIGO

For the Partial Fulfilment of the course in Post-Graduation and Diploma in Human Resource

Under the Guidance ofMs. Ritu Sinha (HR-GBP)Mr. Amit Bisht (HR-GBP)

Submitted on20th May, 2012

Submitted byBijayalaxmi PalRoll No- UH11012

XAVIER INSTITUTE OF MANAGEMENT, BHUBANESWAR

ACKNOWLEDGEMENTPreparing a project of this nature is an arduous task and we are fortunate enough to get support from a large number of people to whom we shall always remain grateful.

We would like to express our gratitude to Ms. Ritu Sinha (HR-GBP) for allowing us to undertake this project. We would like to take this opportunity to thank Mr. Amit Bisht (HR-GBP) for the guidance provided to complete the project.

Last but not the least we are also desirous of mentioning our profound indebtedness to SGC Services and other colleagues in the organization for the valuable advice, guidance, precious time and support offered.

COMPANY PROFILEWith the skies opening up in India, many low-cost airlines have made an entry into the industry. IndiGo is another one of the brigade trying to make the most of the previously untapped Aviation sector. It is a no-frills low-fare domestic airline, providing cheap flying options for millions.

IndiGo Air or IndiGo Airlines sports the deep color of IndiGo as its signature color. It is a privately owned low-cost domestic airline based in Gurgaon with Indira Gandhi International Airport as its main base. IndiGo Airlines started operations on 4th August 2006 and is owned by InterGlobe Enterprises and Mr. Rakesh Gangwal. InterGlobe holds 51.12% stake in IndiGo and 48% is held by Caelum Investments, a Virginia, US based firm, run by Rakesh Gangwal.IndiGo placed a firm order of 100 Airbus A320-200 aircraft during June 2005 in plans to commence operations in mid-2006. Former US Airways Executive vice-President and Marketing and Planning Bruce Ashby joined IndiGo as its Chief Executive Officer. The airline already acquired parking lots for its brand new aircraft at both Mumbai and Delhi airports. By the time they announced the first flight, they have already scheduled their first 20 aircraft.IndiGo took delivery of its first Airbus A320-200 aircraft on 28 July 2006, nearly one year after placing the order, and commenced operations on 4 August 2006 with a service from New Delhi to Imphal via Guwahati. By the end of 2006, the airline had six aircraft. Nine more aircraft were acquired in 2007 taking the total to 15. By December 2010, IndiGo replaced the state run flag carrier AirIndia as the top third airline in India. It already had a 17.3% of the market share, behind Kingfisher Airlines and Jet AirwaysIndiGo aims to minimise cost, time and tension during travel. The airline was awarded Best Low-Fare Carrier in India for the year 2007 by the Air Passengers Association of India (APAI).IndiGo connects all the major cities in India and even some of the remote ones. The airline currently operates 120 daily flights with a fleet of 19 brand new Airbus A320 aircrafts and flies to 17 destinations. These destinations include Agartala, Ahmedabad, Bangalore, Bhubaneswar, Chennai, Delhi, Goa, Guwahati, Hyderabad, Imphal, Jaipur, Kochi, Kolkata, Mumbai, Nagpur, Pune and Vadodara.IndiGo operates as a subsidiary of Interglobe Enterprises Limited. The company has redefined airline quality standards by using Airbus A320-232s, having 19 such aircrafts in its possession already; and dishes out thoroughly professional customer service.

InterGlobes Vision:To become a diversified international corporation in the areas of Air Transport Management, Travel Related Services and Information Technology by delivering outstanding value to our Business Partners, Customers, Employees and Shareholders.

Values at InterGlobe:

Integrity Customer Orientation Future-mindedness

InterGlobe has been growing at a phenomenal pace over the last few years. While growth brings vibrancy, the organization requires an unshakeable anchor that holds it together. An anchor of values. InterGlobes core values are: Integrity, customer orientation and future-mindedness. But these values can remain mere words on paper without a clear, specific, actionable definition for each. To us, integrity is about observing financial and intellectual honesty. Taking personal responsibility and facing reality, regardless of consequences. Customer orientation at InterGlobe means seeing things from the customers perspective always. And identifying the customers unstated as well as emerging needs. According to us, future-mindedness is about staying in touch with new developments consistently. Questioning existing assumptions and making new ideas work. All in all, inspiring values, actionable values.

Awards and RecognitionIndiGo has won the following awards for its excellent service across the Indian airspace- Best LCC by the Airline Passengers Association of India (2007). Best LCC at the Galileo Express Travel Awards (2008). CNBC Awaaz's Travel Award for best low cost airline (2009). Safety Excellence Award by Rajiv Gandhi International Airport (2009) Most Admired Travel Product of the Year 2009 by SATTE (2010) Best Domestic Low Cost Service Airline for the Year 2010 by Travel Agents Association of India (TAAI) (2010) Safety Excellence Award by BIAL (2010) Skytrax Central Asia's best low-cost airline award (2011).

ORGANIZATIONAL HIERARCHY

TALENT ACQUISITION The Talent Acquisition departmenthandles the responsibility and process of sourcing, attracting, recruiting, interviewing, and on-boarding employees to an organization. The talent acquisition team devises strategy and recruitment process, as well as actual execution of the sourcing or recruiting campaign. They may be involved not only in finding and screening candidates, but developing the corporate policy for talent bench-marking, talent assessment, and interviewing policies.TALENT MANGEMENT Talent management department deals with employee engagement and retention. A set of communication activities are designed to engage the employees. Talent management focuses on management of the individual deal agreed with each person identified as talent to ensure that their own individual engagement drivers / employee value proposition is implemented to the individuals satisfaction. Talent management here is often about getting key people into key roles, or crucible roles.CORPORATE HR The Corporate HR Department is committed to ensuring that the organization attracts recruits, develops, retains and sustains a high performing, diverse work force by developing and implementing progressive human resource management policies and strategies.

Performance Management SystemPERFORMANCE MANAGEMENT is a Strategic and Integrated process that delivers sustained success to organizations by improving the performance of the people who work in them and by developing the capabilities of individual contributors and teams. - Michael Armstrong

Effective performance management relies on systems and people working together to ensure the right things happen. Equally, a system does not stand apart from day-to-day management.Effective performance management arrangements can help a council or partnership to integrate planning, review, financial management and organisational improvement. It will enable policy makers and managers to make informed decisions and improve services for users and the wider community.In the era of cut throat competition and globalization, organizations have realized the importance of strategic HR practices for gaining a competitive edge over the competitors. A well designed performance management system can play a crucial role in streamlining the activities of the employees in an organization for realizing the ultimate corporate mission and vision.Performance management is a useful tool for aligning all the major organizational functions and sub functions so that the focus is directed towards attainment of the organizational goal. Performance management is a much broader system as it is linked with the processes of planning, implementing, reviewing and evaluating, for augmenting growth and productivity at both the individual and organizational level.Steps in performance management

Figure 1: 6 steps in performance management system.

The six steps in the performance management process are as follows:1. Establish PMS strategy and plan.2. Developing the performance criteria.3. Select evaluation tools and process.4. Measure performance.5. Set improvement goals and plans.6. Review and recalibrate the PMS.

1. Establish PMS strategy and plan:The planning process is the beginning of the performance management cycle. It flows from the organizations mission and vision. It is based on the joint discussion or agreement of roles, objectives, performance standards and capability requirements. It sets the direction and forms a basis for measuring, improving and reviewing performance. Planning defines expectations in term of KSAs required to achieve results.2. Developing the performance criteria:Key performance areas (KPA) and indicators are identified. The importance of these KPAs and KPIs (key performance indicators) are guided by the vision and mission statement, corporate objectives and strategy.3. Selecting evaluation tools and process:Select the tools that can properly measure these indicators. These tools must be easy to implement, understand and should give accurate results so that performance can be measured effectively. The tool that is to be used should be more objective in nature rather than being subjective because by being subjective a lot of biases and error can creep in. Further an inefficient tool might not reflect the actual performance of an employee.

4. Measure performance:

The most difficult part of the Performance appraisal process is measuring the actual performance of the employees that is the work done by the employees during the specified period of time. It is a continuous process which involves monitoring the performance throughout the year. This stage requires the careful selection of the appropriate techniques of measurement, taking care that personal bias does not affect the outcome of the process and providing assistance rather than interfering in an employees work.

5. Set improvement goals and plans:

The actual performance is compared with the desired or the standard performance. The comparison tells the deviations in the performance of the employees from the standards set. The result can show the actual performance being more than the desired performance or, the actual performance being less than the desired performance depicting a negative deviation in the organizational performance. It includes recalling, evaluating and analysis of data related to the employees performance.

6. Review and recalibrate the PMS:

The last step of the process is to take decisions which can be taken either to improve the performance of the employees, take the required corrective actions, or the related HR decisions like rewards, promotions, demotions, transfers etc. or it can be further used to recalibrate the PMS so that errors and biases are minimized.

Performance Appraisal vs. Performance Management:

Performance management is theprocess of identifying, measuring, managing, and developing the performance of the human resources in an organization. Basically we are trying to figure out how well employees perform and then to ultimately improve that performance level. When used correctly, performance management is a systematic analysis and measurement of worker performance (including communication of that assessment to the individual) that we use to improve performance over time.

Performance appraisal, on the other hand, is the on-going process of evaluating employee performance. Performance appraisals are reviews of employee performance over time, so appraisal is just one piece of performance management.

Performance Appraisal methods:Performance appraisal methods and formats are mostly are based on three criteria:1. Trait2. Behaviour3. Result

Depending on these criteria there are several methods:Comparative/Relative approach:

These types of appraisal techniques specifically call for relative comparisons among workers performances. These techniques are referred to as personnel comparison systems, and they include the paired comparison, rank-ordering, and forced-distribution methods. Ranking Paired Comparison Forced Distribution/Forced ranking

Absolute Standard approach:

Some of the most popular rating methods typically call for some type of absolute judgment of performance that is, the rater must indicate whether or not the ratees performance meets the standards that are described in statements on the rating scale. Some of the absolute rating standards are as follows: Critical Incident Narrative Essay Checklist Graphic Rating Scale (GRS) Behaviourally Anchored Rating Scales (BARS) Behavioural Observation Scales (BOS) Forced Choice

Result based approach:

In contrast, outcome-oriented appraisal techniques are primarily concerned with the results of work performance. These techniques include work planning and review and the well-known managementby objectives approach. They are intended to focus not on what an employee does or are but on what an employee produces. Management by Objectives (MBO)

Evaluate DecisionsDevelopment Decisions

Fig2.Performance Appraisal Measurement Methods and Forms

Critical incidents approach:The critical incident method consists of collecting reports of behaviours that are considered critical in thesense that they make a difference in the success or failure of a particular work situation. The incident isdefined as critical by an observer, who also makes a judgment as to its effectiveness. According toFlanagan (1954), a legitimate critical incident report is one in which there is reference to actual behaviour ina specific situation with no mention of traits or judgmental inferences. Flanagan pointed out that training with the critical incident method will quickly improve the quality of theincident reports.BARSSeveral remedies have been proposed for the recurring problems in performance measurement, but none of them has been more heavily researched in recent years than behavioural expectation scaling or behaviourally anchored rating scales (BARS). The BARS method was introduced by Patricia Cain Smith and the late Lorne Kendall in a 1963 study sponsored by the National League for Nursing. Since that time, there have been. BARS may be described as graphic rating scales with specific behavioural descriptions utilizing various points along each scale. Each scale represents a dimension or factor considered important for work performance. Typically, both raters and ratees are involved in the development of the dimensions and the generation of behavioural descriptions.MBO

Management by objectives (MBO) is the popular name for a process of managing that can focus on the performance of individuals in organizations. In general, it is a goal setting process whereby objectives may be established for the organization, each department, each manager within each department, and each employee. MBO is not a measure of employee behaviour; it is an attempt to measure employee effectiveness, or contribution to organizational success and goal attainment.

Desirable characteristics of an appraisal form:1. It must be simple2. Relevant3. Clarity of content4. Adaptable5. Comprehensive6. Communicability of the form must be easy

Common Problems with the Performance Appraisal Process:

Fig 3.Performance Appraisal Problems and Avoiding Them

Bias:Bias is simply a personality-based tendency, either toward or against something. In the case of performance assessment, bias is towards or against an individual employee. All human beings have biases, but supervisors especially cannot afford to allow their biases to enter into their evaluation of subordinates in the firm. This is very easy to say, but very difficult to do. Biases make the evaluation process subjective rather than objective, and certainly provide the opportunity for a lack of consistency in effect on different groups of employees. So to overcome the bias problem, we need to be objective and not let our feelings of liking or disliking the individual influence our assessment.Stereotyping:Stereotyping is mentally classifying a person into an affinity group, and then identifying the person as having the same assumed characteristics as the group. Though stereotyping is almost always assumed to be negative, there are many incidents of positive stereotypes. However, regardless of whether the stereotype is positive or negative, making membership in a group, rather than explicitly identifying the characteristics of the individuals, creates the potential for significant error in evaluations. So we can avoid stereotyping by getting to know each employee as an individual and objectively evaluating individual employees based on their actual performance.

Halo error:This error occurs when the evaluator has a generallypositive or negative (negative halo error is sometimes called horns error) impression of an individual, and the evaluator then artificially extends that general impression to many individual categories of performance to create an overall evaluation of the individual that is either positive or negative.In other words, if employees are judged by their supervisor to be generally good employees and the supervisor then evaluates each of the areas of their performance as good, regardless of any behaviour or results to the contrary, the supervisor is guilty of halo error. We can avoid halo error by remembering that employees are often strong in some areas and weaker in others, and we need to objectively evaluate individual employees based on their actual performance for each and every item of assessment.Distributional errors:These errors occur in three forms: severity or strictness, central tendency, and leniency. They are based on a standard normal distribution, or the bell curve that we are all so familiar with. In severityorstrictnesserror, the rater evaluates everyone, or nearly everyone, as below average. Central tendencyerror occurs when raters evaluate everyone under their control as average nobody is either really good or really bad. Finally, leniencyerror occurs when the rater evaluates all others as above average. Leniency error, therefore, is basically a form of grade inflation. We can avoid distributional errors by giving a range of evaluations. The distribution is often based on the ranking method of evaluation and forced distribution.Similarity error:This error occurs when raters evaluate subordinates that they consider more similar to themselves as better employees, and subordinates that they consider different from themselves as poorer employees. We all have a tendency to feel more comfortable with people who we feel are more similar to ourselves, and if we are not careful, we can allow this feeling of comfort with similar individuals to be reflected in the performance appraisal process. We can avoid similarity error by embracing diversity and objectively evaluating individual employees based on their actual performance, even if they are different from us and dont do things the same way that we do.Proximity error:This error states that similar marks may be given to items that are near (proximate to) each other on the performance appraisal form, regardless of differences in performance on those measures. We can avoid proximity error by objectively evaluating employees actual performance on each and every item on the assessment form.Recency error:This error occurs when raters use only the last few weeks or month of a rating period as evidence of their ratings of others. We can avoid the recency error by evaluating the employee based on the entire assessment period, commonly 6 - 12 months. Using the critical incidents method really helps our recall and assessment of the entire period more objectively.Contrast error:In contrast error, the rater compares and contrasts performance between two employees, rather than using absolute measures of performance to measure each employee. For example, the rater may contrast a good performer with an outstanding performer, and as a result of the significant contrast, the good performer may seem to be below average. This would be a contrast error. We can avoid contrast error by objectively evaluating individual employees based on their actual performance. We must use the ranking method correctly; first we assess each individual based on the items on the assessment form then we rank the individuals based on their assessments.

Attribution error:In simplified terms, attribution is a process where an individual assumesreasons or motivations (such as attitudes, values, or beliefs) for an observed behaviour. So, attribution error in performance appraisal might occur when the rater observes an employee action such as an argumentative answer to a question and assumes that the individual has a negative attitude toward the job and is a poor performer. This may not be true, and in such a case the rater would be guilty of an attribution error. We need to avoid attribution error because it is based on our subjective conclusion. When in doubt, we shouldnt assume we know why the employee did or didnt do something. We should talk to employees to find out so that we can objectively evaluate employees based on their actual performance.

What is forced ranking?Forced Ranking is a system of performance management where managers must identify a pre-determined proportion of its best and worst performers, regardless of how well or badly they are actually performing.

Forced ranking systems/the bell curve model:Forced ranking systems direct managers to evaluate their employees' performance against other employees, rather than the more common (and often grade inflated) measure of evaluating performance against pre-determined standards. The result of such a process is often brutally blunt: The top 20 percent of performers are amply rewarded, and the bottom 10 percent is shown the door.Supporters argue that forced ranking creates a true meritocracy; while critics charge that a "rank and yank" approach is unfair to people performing at an acceptable level and creates an unhealthy cult-of-star culture. Forced ranking is the antidote to the problems of inflated rating and the failure to differentiate that many organizations have installed to help bring the truth into the performance management process.By implementing a forced ranking procedure, organizations guarantee that managers will differentiate talent. While conventional performance appraisal systems may allow managers to inflate ratings and award Superior ratings to all, a forced ranking system ensures that distribution requirements will be met. Assuming that the system is wisely constructed and effectively executed, a forced ranking system can provide information that conventional performance appraisal systems can't.But just ensuring differentiation, while valuable in itself, isn't the whole reason companies have gone to using forced ranking systems.Creating a forced ranking system forces a company to articulate the criteria that are required for success in the organization. Whatever the criteria the organization decides on, the deliberations that senior managers engage in in determining these criteria help them to define and understand what they believe genuinely is important for success in the organization. The discussion of criteria often sparks significant arguments about exactly what the measures and factors should be. There is value in this process even if no further action is taken. And simply knowing the criteria that senior executives use to assess talent increases the probability that organization members will alter their behaviour in order to demonstrate more of the attributes that they now know will lead to success

BELL CURVE SAMPLE:

Total No of Employees Reviewed200

Please key in data here

RatingsBottom 10Vital 70Top 20

Recommended %10%70%20%

Ideal Bell Curve Distribution2014040

Actual Bell Curve Distribution50

100

50

Organizations implementing forced ranking/bell curve and how they do it.Corporate Models of pioneers in PMS:GE:Commentators suggest that GE is the innovator of the modern forced ranking system. GE is a major corporation employing more than 300,000 employees and 4,000 senior managers. GEs vitality curve requires that managers rank their employees (management included) by the top twenty per cent(Top 20), the middle seventy per cent (The Vital 70), and the bottom ten per cent (The Bottom 10). Ultimately, the distinctions are arrived at by sorting out the A, B, and C players. Requiring managers to rank employees on a 20-70-10 grid forces managers to make tough decisions and allows the top performers to be justifiably rewarded so they stay happy and willing to grow with the company. The forced ranking promotes efficiency within the company, and GE maintains that not removing the bottom ten per cent early in their careers would be to do them a disservice. The company regularly reassesses its system based on employee feedback.

Enron:Enron force ranked its employees biannually on a five-point scale. Employees were differentiated into tiers by superior (top five per cent); in the middle were the excellent (thirty per cent), strong (thirtyper cent) and satisfactory (twenty per cent), while the needs improvement was on the bottom (bottom fifteen per cent). Employees falling in the bottom fifteen per cent were placed on probationary status and given a period of six months to meet the requisite standard or be terminated.

Microsoft:Microsoft Corporation (Microsoft) conducts performance evaluations and force ranks its employees twice a year. Management assigns each employee a scaled rating from 1.0 to 5.0 andthen ranks the employee among the other members in his division. Within each work group, twenty-five per cent must be rated 3.0 or below, forty per cent will be rated 3.5, and only thirty-five per cent will receive a rating of 4.0 or higher. Salary adjustments, stock option awards, and promotional opportunities are offered according to the employees rank. Management provides employees who are unhappy with their rank the opportunity to appeal.

Ford:Ford Motor Companys (Ford) original forced ranking system created enormous controversy. In fact, Fords system was so controversial that the company overhauled its original system and instituted a new version. The original system gave employees grades of A, B, or C, forcing ten per cent to be graded A, eighty per cent B, and ten per cent C. Managers receiving a C were not eligible for bonuses or raises, and were thereafter put on notice that another consecutive C rating could result in the managers demotion or termination. Fords ultimate goal was to eliminate deficient employees who might otherwise fall through the cracks using traditional employee evaluations. Fords revised forced ranking system variegates employees by top achievers, achievers, and those needing improvement. The new system does not mandate a specific percentage of employees for each category, nor does it prevent low ranked managers from receiving a bonus or merit increase.

Sun:Sun Microsystems (Sun) also diverged from its original forced ranking system. Instead, Sun adopted a more employee friendly approach that provides employees with supplemental resources to treat the root cause of poor performance, rather than automatically terminating employees falling in the bottom category. Suns new and improved forced ranking model reduces its number of tiers from five to three. The revised model characterizes employees by the top twenty per cent (superior), the middle seventy per cent (Sun Standard), and the bottom ten per cent (underperformers). Interestingly, this is the same breakdown as GEs vitality curve which commentators agree is largely successful. At Sun, the bottom ten per cent have the choice of leaving with an exit package or following a plan to improve their performance, a plan that includes one-on-one coaching to help them meet the requisite standard.

Hewlett-Packard & PepsiCo:Hewlett-Packard uses a 1-5 scale with 15% receiving the best grade of 5 and 5% receiving 1s.PepsiCo uses a quartile approach where managers allocate their troops into one of four quartiles. Within the quartiles, there are distinctions drawn of one employee as compared to the next, and often the bottom 5% of the lowest quadrant is targeted for being coached out of a company, while a certain percentage of those in the top quartile are selected for leadership opportunities.

Disadvantages of forced ranking:Turnover:Critics have countered the popularity of forced ranking by suggesting that it is a system that may help with some problems, but which creates many others. According to this line of thinking, those businesses that believe that applying forced ranking to their workforce will bring them closer to the achievements are in for a rude shock. Few organizations have the tolerance for the type of turnover that occurs.

The Subjectivity Complaint:Is forced ranking arbitrary and subjective? Of course it is arbitrary: managers are required to assign employees into a specific and arbitrary number of performance categories. But the rigorous procedures in place in most organizations that use forced ranking prevent the process from becoming erratic and capricious.

It is a myth that forced ranking systems make assessors more objective. Being forced to differentiate employee performance is not a substitute for improved accuracy of performance assessments. Using rankings is neither a prerequisite to identifying clear assessment criteria, nor does it overcome assessors tendencies to be influenced by factors that do not relate to job performance. Being fallible humans, managers are prone to give high ratings to people like themselves, people they like, people they hired, good negotiators, those who have performed well very recently and so on, regardless of the mechanism used to record their assessments. Another fundamental problem is that distribution methods never accurately reflect reality. Normal distribution (bell) curves statistically fit large samples (e.g. many thousands of employees) affected by non-systemic patterns. There is no reason to assume that the performance of 30 or even 300 employees in a department or function will coincide with such patterns. Totem pole systems whereby employees are ranked one-by one are equally misleading, implying that all employees perform at (measurably) different but evenly-spaced levels. Serious problems result from distribution patterns being applied to different structural subunits. If a companys marketing function is performing brilliantly and attracts fabulous people but its IT function is a dismal failure, is it appropriate for the good but lowest performers in marketing to be punished and the poor but top performers in IT to be rewarded?

Advantages:

Figure 5: Advantages of forced ranking

APPRAISAL PROCESS AT INDIGO

PMS AT INDIGOSetting performance standards, observing and providing feedback, and conducting appraisals enables the organization to achieve the best results through managing employee performance.Here at indigo there are five bands under which the organization is divided:

Band A: - It includes all employees of the executive levelBand B: - Assistant ManagerBand C: - Deputy Manager, ManagerBand D: - DGM, GM, DirectorBand E: - Vice President

The appraisal process here at Indigo is an annual process. To begin the process, the Reporting manager and the employee collaborates on the development of goals. The individual is asked to develop their goals for the current review period. These goals thus developed by the employees are cross-checked by the reporting manager. If these goals are unsatisfactory then they are reviewed and sent back to the employees for resetting.

These goals thus set moves up on hierarchy and is analysed by the Reviewing manager. If the goals are unsatisfactory then it is sent back for resetting through the Reporting manager.The Reviewing manager along with the employee then develops 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. Discussion of goals and objectives throughout the year provides a framework to ensure that employees achieve results through One on One and mutual feedback.

At the end of the rating period, the Reporting manager appraises the employee's performance against existing standards, and establishes new goals together for the next rating period.As the immediate supervisor, the Reporting manager plays an important role; his closest interaction with the employee occurs at this level.

There are four key elements in the appraisal system:

1. Set objectives - Decide what the Reporting manager wants from the employees and agree these objectives with them.

2. Manage performance - Give employees the tools, resources and training they need to perform well.

3. Carry out the appraisal - monitor and assess the employees' performance, discuss those assessments with them and agree on future objectives.

4. Provide rewards/remedies - Consider pay awards and/or promotion based on the appraisal and decide how to tackle poor performance.

After that the goals are set and the budget to be allocated for different departments is decided upon. The buckets for the appraisal process are also decided. The key process of appraisal henceforth is conducted as shown in the figure below:

Forced Ranking in Indigo:Indigo airlines uses a 1-5 Likert scale with 20% receiving the best grade of 5, 10% receiving a grade of 2. The majority of employees that is 50% are given a grade of 3. 15% of employees receive a grade of 4 and 5% receiving 1s. The employees those who are new in the organization who hasnt worked for more than six months are given a grade of 3. Creating a forced ranking system forces Indigo to articulate the criteria that are required for success in the organization. It is more or less based on the model given below:

Figure 4: Forced Ranking Model

Conclusion:Forced ranking is a powerful tool but strategy,structure and culture must be alignedI wouldnt want to inject a vitality curve cold-turkey into anorganization without a performance culture already in place.Differentiation is hard stuff. Our curve works because we spentover a decade building a culture with candor and openness atevery level.Jack Welch

ANNEXUREPage -1-IndiGo Employee Performance Evaluation(Band A)Fiscal Year 2010 - 11EMPLOYEE INFORMATIONEmployee Name:Employee ID:

Employee Designation:Review Period:

Employee Date of Joining:Managers Name:

Employees Department:Reviewing Managers Name:

Section I Performance Against Established Goals & Objectives (Band A)

Rating Scale:1 Unacceptable (routinely does not achieve desired objectives although given appropriate direction)4 Highly Effective (achieves all objectives with thorough attention to detail and requires minimal supervision; highlights any obstacles encountered to management and seeks resolution)

2 Needs Improvement(either less than 6 months in position, or achieves desired objectives if closely supervised and directed)5 Outstanding (exceeds desired objectives, providing new insights and self-motivated to find resolutions to any obstacles encountered)

3 Effective (competently achieves, but does not routinely exceed, desired objectives )

Part A. (This section is used for evaluating accomplishments as compared to established goals and objectives)GoalsTop five goals & objectives as established by the Manager with Employees concurrence

RatingManager needs to evaluate the employee on a scale of 1 (Unacceptable) to 5 (Outstanding)

GOALS & OBJECTIVES12345

1.

2.

3.

4.

5.

Average (take total of above scores and divide by five; or divide by number of goals with ratings provided, if less than five were provided)

Goal setting sign off:Employee _______________________ Manager __________________________

Part B. Managers Comment / Recommandation:

Part C. Reviewing Managers Comments:

Page -2-

Section II Behavioural Competencies(Band A)

Rating Scale:1 Unacceptable (creates workplace or external conflicts/issues requiring others to intervene)4 Highly Effective (assists others and proactively finds solutions to issues; routinely demonstrates a can-do attitude)

2 Needs Improvement(either less than 6 months in this level of position, or requires close supervision and direction)5 Outstanding (shines among peers; demonstrates behavioural leadership capabilities well above current position level)

3 Effective (demonstrates appropriate behaviours for current position )

Part A: To be filled in by the Employees Manager:CompetenciesEvaluated by Manager and shared with Employee

RatingManager needs to evaluate the employee on a scale of 1 (Does Not Meet Expectations) to 5 (Excellent)

COMPETENCIES12345

1. Achieving ResultsFocused to achieve the set goals, Self-motivated and ambitious; Plans consistently and over achieves relative to set targets

2.Delighting The CustomerAnticipates, Recognizes and adheres to customer service initiatives and systems and works cross functionally to maximize customer delight; Engages and empathizes with customers and seeks feedback..

3.Valuing PeopleIs open, empathetic and fair in dealings with members of the team and across functions; models consultation and constructive challenge.

4.Facilitating Change & InnovationResponds effectively to changes in business direction and priorities, demonstrating flexibility in work style, learning new skills and accepting new challenges. Demonstrated and encourages innovation

5.Business & Commercial AcumenUnderstands business implications of actions within own area; Manages resources within the stipulated budget and operational constraints and implements initiatives; understands and clearly defines problems through analysis and evaluation.

Average (take total of above scores and divide by Five)

Part B. Managers Comments:

Part C. Reviewing Managers Comments:

Page -3-

Section III - Summary( Band A )

Section I (Goals and Objectives) Average Score

Section II (Behavioural Competencies) Average Score

Overall Performance Rating (Average of above scores)

I have discussed this review with my Manager: (Employees Signature and Date): _______________________________________________

Employee Managers Comments / Recommendation for Employee Development / Signature / Date

Reviewing Managers Comments / Recommendation if any / Signature / Date

For use of Human Resources Department

PLEASE CONSIDER THIS AS A CONFIDENTIAL REPORT AND RETURN IN A SEALED ENVEOLPE TO IndiGo HR Department, GBP. 17 | Page