IOSR Journal of Business and Management (IOSR-JBM) e-ISSN: 2278-487X, p-ISSN: 2319-7668. Volume 16, Issue 1. Ver. VII (Feb. 2014), PP 26-34 www.iosrjournals.org www.iosrjournals.org 26 | Page Performance Appraisal as a Sub-system of HRD – A Case Study Dr. V. K. Jain Associate Professor & Head Department of Commerce, GMN College, Ambala Cantt., Haryana (India) Abstract: Performance Appraisal is most traditional but widely used method of measuring employee performance on the job, his relative abilities and skills to enable him to take up higher job responsibilities The organizations today are putting increased accentuate on performance appraisal practices to improve employee performance on the one hand and use it as a motivational tool on the other. It is one of the most important HRD mechanisms which contribute significantly to the building up of developmental climate in the organization. The present case study is an attempt to explore and assess the existing performance appraisal practices of public sector organizations in India. The study seeks to examine the existing performance appraisal practices in Indian Public Sector and its likely impact on productivity and efficiency. The study also examines the role of Performance appraisal in interpersonal relations, employee development and motivation development. A total of 125 executives of two public sector undertakings were selected for the purpose of the study. Keywords: Performance Appraisal, Public Sector Organizations, Developmental Climate, Productivity, Efficiency Abbreviations: Human Resource Development (HRD), Management by Objectives (MBO), Perfromance Appraisal (PA) I. Introduction Performance appraisal which was once considered as a process involving a line manager submitting his annual confidential report on subordinate‟s performance, has now become an integral part of Human Resource Development Programme of an organization. It gives an insight into work related behaviour of the individual and gives an opportunity to understand the strengths and weaknesses of that individual so as to devise the ways to utilize his potentials by improving his weaknesses and developing his strengths. The performance appraisal system is, therefore, useful to both the employees and the organization. It gives employees an opportunity to evaluate themselves on the basis of feedback received from his superiors and accordingly improve and develop their skills. It also gives an opportunity to the organization to identify the right persons for the future job positions on the basis of the assessment of the potentials of the employees. It can devise programmes to develop these potentials.It is a strong tool of building developmental climate in te organization. Performance appraisal is considered as an indispensable part of managerial activity. It is essential for almost all important decisions involving people including placements, promotions, remuneration, rewards, training, manpower planning, succession planning etc. As such the performance appraisal system can be viewed as problem solving system because it not only helps the organization in taking important decisions but also intends to remove the weaknesses of the individuals inherent in them from the standpoint of the organization. Considering its role as problem solving activity, organizations today have realized that the performance assessment results need to be shared with the employees to reduce the possibility of biasness and to bring in more transparency. The participative approach to performance appraisal gives boost to employee morale as they get an opportunity to clarify their position on certain points and sometimes the assessment is corrected on the basis of discussion. The efforts of employees can determine the success and survival of an organization (Drucker, 1994; Barney, 1995). Appraisal is potentially one way by which employees can be motivated and their performance can be managed. Thus, performance appraisals can be designed to achieve a number of objectives including a) Administrative: Decision for promotion, salary increase, placement, transfer, discharge etc. and organizational planning: b) Motivational: Appraisal interviews,counselling, participation in goal setting and work planning, self- appraisal etc.; c) Developmental: Counselling, training and development and communication; d) Performance Development: Through MBO and other goal setting and work planning processes. (Pareek& Rao: 1992)