Reference no: EM132874620

Unique Funds Ltd. Is a reputed finance company having 10 branches in different parts of the country. Its staff includes 290 operative employees and 70 executives. The company has a performance rating plan under which the staff members are rated at the end of each financial year by a committee of two executives by means of graphic scale. The qualities considered are : responsibilites, initiative, dependability, leadership potential, cooperative attitude and community service. After the performance is evaluated, the ratings are discussed with the concerned employees by their immediate boss and are used to counsel them and arrange further training for them. The ratings are also used for granting or withholding of increments and promoting of meritious staff.

Recently, two employees working at the Head Office have been denied annual increments due to comparatively low ratings. They have made a representation the Chief Executive of the company expressing their dissatisfaction with the appraisal system and insisting that community service is not a part of their job and it should not influence their ratings. The employees seem to organise a union and demand that annual increments should be granted automatically.

The Chief Executives feels that performance appraisal is a dangerous source of friction and it should be discontinued altogether.

Questions: If you were the Human Resource Manager, how would you defuse the problem?How far do you agree with the Chief Executive's view that performance appraisal should be discontinued? On what lines would you recommend modifications in the performance appraisal system of the company?