It is the tool used to manage the performance of an employee.  A method by which the job performance of an employee is evaluated (generally in terms of quality, quantity, cost, and time) typically by the corresponding manager or supervisor The most important goal of a performance review is to guide the employee into the future. At the end of the review, an employee should have a clear understanding of the performance expectations for the next review period. As changes occur over the review period, make adjustments and document changes to the objectives. Reviews lead directly to employee development discussions

Aim of Performance Appraisal

The performance appraisal has the following objective or aims:

• To view one’s performance in view of broader organizational    goals.
• Identify employee training needs
• To plan for career development
• Document criteria used to allocate organizational rewards
• For personnel salary, promotions, disciplinary actions, bonuses, etc.
• Facilitate communication between employee and administration

PERFORMANCE APPRAISAL METHODS

There are following appraisal methods which is to be used to reward an employee or to achieve performance management objectives

• Critical incident method

The critical incidents for performance appraisal is a method in which the manager writes down positive and negative performance behavior of employees throughout the performance period

• Weighted checklist method

This method describe a performance appraisal method where rater familiar with the jobs being evaluated prepared a large list of descriptive statements about effective and ineffective behavior on jobs

• Paired comparison analysis

Paired comparison analysis is a good way of weighing up the relative importance of options. A range of plausible options is listed. Each option is compared against each of the other options. The results are tallied and the option with the highest score is the preferred option.

• Graphic rating scales

The Rating Scale is a form on which the manager simply checks off the employee’s level of performance. This is the oldest and most widely method used for performance appraisal.

• Essay Evaluation method

This method asked managers / supervisors to describe strengths and weaknesses of an employee’s behavior. Essay evaluation is a non-quantitative technique this method usually use with the graphic rating scale method

• Behaviorally anchored rating scales

This method used to describe a performance rating that focused on specific behaviors or sets as indicators of effective or ineffective performance.
It is a combination of the rating scale and critical incident techniques of employee performance evaluation.

• Performance ranking method

Ranking is a performance appraisal method that is used to evaluate employee performance from best to worst. Manager will compare an employee to another employee, rather than comparing each one to a standard measurement.

• Management By Objectives (MBO) method

MBO is a process in which managers / employees set objectives for the employee, periodically evaluate the performance, and reward according to the result. MBO focuses attention on what must be accomplished (goals) rather than how it is to be accomplished (methods)

• Forced ranking (forced distribution)

Forced ranking is a method of performance appraisal to rank employee but in order of forced distribution. For example, the distribution requested with 10 or 20 percent in the top category, 70 or 80 percent in the middle, and 10 percent in the bottom.

• Behavioral Observation Scales

Behavioral Observation Scales is frequency rating of critical incidents that worker has performed.

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After setting performance expectations and the importance of keeping performance on target through feedback and coaching even with the best efforts, sometimes performance goes into a downward spiral. When clear performance expectations and feedback and coaching no longer work in getting the desired performance, it is time to look at re-aligning performance or to take corrective actions to achieve desired performance.

Discipline without Punishment

The fundamental purpose of confronting and correcting performance deficiencies is to build individual responsibility and re-inspire commitment; it is not to punish. Here the supervisor should help and guide the employees in correcting their problems in a disciplined way rather than by punishments.

Documenting Performance

Documentation is another important source to realign the employee’s performance and to get the set objectives. Here each and every aspect of an employee’s job and related objectives should be documented to keep the person on right track.

Facts

Facts include who, what, where, and when. They should be specific about the performance and focus on the behavior of the employee.

Objectives

Objectives tell the employee what is expected of them. They are positive and specific about what the supervisor expects them to do.

Solutions

Solutions should involve strategies to help the employee meet the objective. They can be suggestions such as taking classes for skill building or a mentor to help guide the employee.

Actions

Actions describe what will happen if the objectives are not met. They can range from coaching, counseling, or written warnings to leave without pay or dismissal. Documenting discipline is, hopefully, not a paper trail for dismissal. It should be viewed as a tool to help employees improve their performance.

Once setting performance expectations has occurred, the supervisor’s goal is to keep performance on target. Understanding feedback and coaching is the best tool used to keep performance on track.

Feed Back

Feedback is one of the most important ways we learn. In the workplace, employees need regular feedback to adjust their performance Feedback comes in many forms verbal comments, non-verbal gestures and cues, letters and memos, ‘strike-through’ and corrections on written work, raises and bonuses, silence, appraisals, criticism, certificates, email, group praise, and ‘drop-in’ visits. Feed back should be

• Specific. (written report)
• Timely and/or immediate
• Focused on behavior
• Authentic(Be sincere, not condescending)
• Involves an action plan(What needs to happen next)
• Well documented(Performance documentation should be a record)

Coaching

Coaching bumps feedback up a level. It focuses on developing collaborative relationships and supportive partnerships in the work environment. Coaching is ‘ongoing’ in nature, whereas feedback is often a one-time event related to a specific issue.

Progress Review

Coaching provides a process that employees and supervisors can use to check, revise, or redirect the status of work in progress. Coaching allows more opportunity for creativity and alternative solutions to be discovered

Skill Development

When potential for an employee’s growth is identified, coaching can be used to help identify, plan, and develop the new skills

Problem Solving

Confronting work behaviors that are not contributing to the mission of a work group is difficult. Redirecting those behaviors is even more challenging. Using coaching can greatly assist in this area.

The performance management process requires several ongoing activities. Basically this detailed process is comprised of four main phases as below:

• Setting performance expectations
• Keeping performance on target
• Realigning performance
• Apprising performance

• SETTING PERFORMANCE EXPECTATIONS

Setting performance expectations is the foundation and first step in performance management. By setting performance expectations early, the employee knows what is expected and the supervisor has specific performance criteria to measure quality and productivity. Here the supervisor is to explain the job, Job purpose and Key responsibilities

Setting Performance Standards

Performance standards are those which tell “how” or “how well” a job is done. How” deals with quality Performance Management system has established qualitative core performance ‘standards’ that are consistent across all agencies. These standards are applied to each individual’s performance and appear in the performance appraisal document Standards should align with the organization’s values, mission, and goals.

Setting Goals and Objectives

The goal is where we want to be. The objectives are the steps needed to get there. Performance objectives are written to describe the measurable results an employee needs to achieve within each key responsibility area. Performance objectives should be tied to the strategic mission and goals of the organization. Objectives clarify the performance expectations within each key responsibility area and describe how they will be met and measured. Objectives provide guidance for the employee and help keep performance focused throughout the evaluation period. Goals should be:

• Specific
• Measurable
• Achievable/Agreed Upon
• Relevant to the firm’s objectives
• Time-bound

Key Points in a GOOD PERFORMANCE MANAGEMENT PROCESS

In any organization the performance management system is required to be implemented in the organization thus this system cant’ achieve the specific and the general objective until and un less it possess the following chrematistics:

• Maximizes staff engagement, development, and performance
• Is consistent across units to enhance full development and utilization
  of talent
• Remains flexible, efficient, measurable, fair, transparent
• Provides better alignment of staff roles and goals with the university’s mission
• Promotes on-going and proactive succession management
• Cornell’s Performance Management Philosophy:
• Addresses the relationship of employees to the institution, from the time they are recruited, through their growth and development, to the time they depart
• Engages and develops employees throughout the year
• Establishes goals and measures performance to those goals
• Depends on the supervisor giving clear, developmental feedback
• Includes a review of past performance and goals and focuses on future development opportunities that are aligned to individual, unit, and university goals

• DEFINITION

By the definition performance management is the process that consolidates goal setting, performance appraisal, and development into single common system, the aim of which is to ensure that the employee’s performance is supporting the company’s strategic aims.

• OR

Performance management is the process of creating a work environment or setting in which people are enabled to perform to the best of their abilities.

HISTORICAL BACKGROUND

Performance Management began around 60 years ago as a source of income justification and was used to determine an employees wage based on performance.

Organizations used Performance Management to drive behaviors from the employees to get specific outcomes. However, where employees were driven by learning and development of their skills, it failed miserably. The gap between justification of pay and the development of skills and knowledge became a huge problem in the use of Performance Management.

This became evident in the late 1980s; the realization that a more comprehensive approach to manage and reward performance was needed. This approach of managing performance was developed in the United Kingdom and the United States much earlier than it was developed in Australia.

In recent decades, however, the process of managing people has become more formalized and specialized. Many of the old performance appraisal methods have been absorbed into the concept of Performance Management, which aims to be a more extensive and comprehensive process of management.

OBJECTIVES

The objectives of Performance Management are to:

• Increase two-way communication between supervisors and employees
• Clarify mission, goals, responsibilities, priorities and expectations
• Identify and resolve performance problems
• Recognize quality performance
• Provide a basis for administrative decisions such as promotions, succession and strategic planning, and pay for performance.

This document will give you the understanding of the percentage of annual average method in measuring seasonal variations of business maths.

PROCEDURE

The first step is to eliminate the effect of the trend. To this end, compute the simple averages for each year and divide each of the given monthly or quarterly observations by the corresponding annual- average, expressing the result as a percentage.

The next step is to average the percentages with a view to removing the cyclical and irregular variations and computing the seasonal indices. For this purpose, sort out these percentages by months or quarters and find the monthly or quarterly average percentages using either the mean or the median. In case of mean, discard the extreme percentages under each month or quarter. If the 12 monthly or the 4 quarterly average percentages do not average 100 adjust them by multiplying each of them by a suitable factor that will make the average of all the percentages equal 100. The resulting 12 or 4 percentages are the required indices.

• The Ratio To Trend Method

In this method, the trend values are obtained for each time period by fitting a least-squares trend line either to the observed time series data or the annual averages. The rest of the computational procedure is the same as that of the ratio-to-moving average method. But this method is inferior to the ratio-to-moving average method as the seasonal index computed by it includes cyclical and irregular variations.

Short but Comprehensive introduction to Link Relatives Method in Measuring Seasonal Variation for Business Maths.

DEFINITION

A method for computing indexes by dividing the value of a magnitude in one period by the value in the previous period. In relative link method of seasonal variations, link relatives are calculated for all the values of the data.

PROCEDURE

Link relatives = value of a year/ value of previous quarter or month * 100

Then we calculate the sum of link relatives for each quarter or month. Average of these totals is calculated by dividing the totals by the total number of years in a quarter or month. Chain indices are calculated from these averages. Chain indices = average link relative of the year * chain index of previous year / 100. For first month or quarter, two chain indices are calculated. Adjustment factor is calculated by taking difference of two chain indices of first month or quarter and dividing it by number of months or number of quarters. The seasonal indices are calculated by subtracting adjustment factor from second quarter or month, twice of adjustment factor from third quarter or month and so on. The seasonal index for first quarter or month remains hundred.

STEPS

• Compute the link relatives by expressing each monthly or quarterly value as a percentage of the proceeding monthly or quarterly value
• Arrange the link relatives by months or quarter and find an appropriate average of these relatives for each month or quarter usually median is used
• Convert the average (median or mean) relatives into a series of chain relatives by setting the value of January or the first quarter as 100, and caring the process to include the first unit of the next period.
• A discrepancy due to trend increment (positive or negative) exists between the chain relative for the first January or quarter and that for the next prod. Adjust the chain relatives for the trend component by subtracting one-twelfth of the discrepancy from the value of February, two-twelfth from the value of march and so on or by subtracting one-fourth of the discrepancy from the relative of seco9nd quarter, two-fourth from the third quarter relative and three-fourth from fourth quarter relative.
• To obtain seasonal indices reduce the, adjusted chain relative to the same level as January or the first quarter by multiplying each of the adjusted chain relatives by the correction factor that will make the average of the all indices equal100. These final figures are the desired indices of seasonal variation.

There are six steps required to compute the seasonal index as mentioned below:

• Calculate the four quarter moving total
• Compute the four quarter moving average
• Center the four quarter moving average
• Calculate the percentage of actual value to moving average value
• Calculate the modified mean for each quarter
• Adjust the modified mean

Calculate The Four Quarter Moving Total

Find the centered 12 monthly (or 4 quarterly) moving averages of the original data values in the series. A moving total is associated with the middle data point in the set of values from which it was calculated. Because the first quarter was calculated

• Compute The Four Quarter Moving Average

Express each original data value of the time-series as a percentage of the corresponding centered moving average values obtained in step(1).

• Center The Four Quarter Moving Average

Arrange these percentages according to months or quarter of given years. Find the averages over all months or quarters of the given years

There are yet many factors that result in Seasonal Variations, for your assistance in MBA Finance Assignment, we brought some facts and figures.

The main factors that can cause the seasonal variation are as follow:

• Climate and weather conditions
• Custom, traditions and habits

FEATURES OF SEASONAL VARIATIONS

The seasonal variation has the following characteristics by which we can estimate the quality of a seasonal variation:

• Regularity
• Easy forecasts
• Increase or decrease
• Fixed proportion

OBJECTIVE TO MEASURE SEASONAL VARIATION

The seasonal variation is to be measure by keeping in view the following objectives:

• Analysis of past behavior of the series
• Forecasting the short time fluctuation
• Elimination of seasonal variation to measure cyclical variation

EXAMPLE O SEASONAL VARIATION IN BUSINESS

• Crops are sown and harvested at certain time every year and the demand for labor growing up during the sowing and harvesting season
• Demand for woolen clothes goes up in winter.
• Price increase during festivals
• With drawl from banks are heavy during first week of month.

METHODS TO MEASURE SEASONAL VARIATION

Seasonal variation is measured in terms of an index, called a seasonal index. It is an average that can be used to compare an actual observation relative to what it would be if there where no seasonal variation. An index value is attached to each period of the time series within a year. This implies that if monthly data are considered there are 12 separate seasonal indices, one for each month. There can also be a further 4 index values for quarterly data. The following methods use seasonal indices to measure seasonal variations of a time-series data.

• Ratio-to-moving average method
• Link relatives’ method
• percentage of annual average method
• Ratio to trend method

RATIO-TO-MOVING AVERAGE METHOD

This technique provides an index to measure the degree of the Seasonal Variation in a time series. The index is based on a mean of 100, with the degree of seasonality measured by variations away from the base.

EXAMPLE

For example if we observe the hotel rentals in a winter resort, we find that the winter quarter index is 124. The value 124 indicates that 124 percent of the average quarterly rental occurs in winter. If the hotel management records 1436 rentals for the whole of last year, then the average quarterly rental would be 359 (1436/4). As the winter-quarter index is 124, we estimate the no. of winter rentals as follows:

359*(124/100) =445;

Here, 359 is the average quarterly rental. 124 is the winter-quarter index. 445 the seasonalized spring-quarter rental.

This is method is also called the percentage moving average method. In this method, the original data values in the time-series are expressed as percentages of moving averages.

This document will let you know about what is a trend and how to measure trend in business maths that is pertaining to your studies over MBA Finance and Banking.

Trend

Trend can be defined as the general tendency of data to grow or decline over a long period of time.

PURPOSE OF MEASURING TREND

There are following purposes of measuring trends:

• Knowledge of past behavior
• Estimations
• Study of other components

HOW TO MEASURE TREND

Start with the broader picture to put trends into perspective. At the moment we discern general and clear global movements such as: the importance and integration of personal and environmental wellness, the demand for transparency and integrity, the longing for authenticity and clarity. These macro developments produce industry trends for instance: the marketing of products and services such as wellness themes in traveling, events and luxury goods. The popularity of branding our business refers to the development of presenting a clear and consistent image, to stand out from the rest.

Stay aware of the counter trends. While some organizations focus on one service or product only, other companies offer a one-stop-shop service. Although we are eager to present our uniqueness, at the same time we do not want to be an island and we become members of associations, alliances and organizations that share our vision. Each choice creates its opposite.

Knowing the macro developments and the duality of our decisions, we have a touchstone to measure trends that you spot in your company, branch or industry.

After you have turned your focus outward to the major existing trends, it is time to look within. How do we want to act upon the ideas we encounter? The following steps provide a process to make a decision about a trend:

To create more success, we should have a clear picture of our surroundings and of ourselves. With a pure external focus, we will lose sight of our inner wisdom and purpose. Measuring trends is measuring us.

As in chess, it is not only the position of the pieces of your opponent that will influence your moves; it is thinking ahead how your own actions will affect the outcome of the game.

• Introduction

Seasonal variation is a component of a time series which is defined as the repetitive and predictable movement around the trend line in one year or less. It is detected by measuring the quantity of interest for small time intervals, such as days, weeks, months or quarters.

• Definition

By the definition seasonal variations are the changes in inventory levels, profits, sales volume, and so on  caused by seasonality of the business.

TIME SERIES

By the definition a time series s is a set of observations recorded according to some period of time. The observations are usually recorded at equal intervals of time to estimate the future values of time series and to                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    cope with uncertainty about future.

TREND

• Definition

The general direction of the price of an asset or market. Trends can be thought of in varying lengths including short, intermediate and long term. If one can identify a trend, it can be highly profitable as you will be able to trade with the trend.

TREND LINE

By the definition a trend is a line on the price or value chart of a security depicting the general direction in which the security is headed. This chart shows an example of an upward trend line.

REASONS FOR STUDYING SEASONAL VARIATION

• It gives way to compare two time intervals
• It predicts the short range patterns such as the demand for cold drinks in the summer
• The description of the seasonal effect provides a better understanding of the impact this component has upon a particular series.
• After establishing the seasonal pattern, methods can be implemented to eliminate it from the time-series to study the effect of other components such as cyclical and irregular variations. This elimination of the seasonal effect is referred to as depersonalizing or seasonal adjustment of data.

These are following advantages of periodic budget applications in a manufacturing company:

• Periodic budget clarifying the business planning.
• Establishing coordination between functions of different departments.
• Measuring and controlling the work efficiency.
• It helps to manage the business finance.
• Informing about the business plans to the related parties.
• Normally there are following objectives of Budgeting:

RECOMMENDATIONS

In view the study I’d like to recommend that:

• The company should factor in some slack and make sure that you have more than enough money socked away or coming in before expanding the business or taking on new employees.
• While many firms draft a budget yearly, small business owners should do so more often. In fact, many small business owners find themselves planning just a month or two ahead because business can be quite volatile and unexpected expenses can throw off revenue assumptions.
• Don’t be afraid to shop around for new suppliers or to save money on other services being performed for your business. This can and should be done at various stages, including when purchasing or starting up a business, when setting annual or monthly budgets, and during periodic business reviews

CONCLUSION

Periodic budgeting is the powerful tool to control company expenses and to achieve the expected revenues. There should be strong coordination among each department and among each element of periodic budget to achieve the desires results and to maximize the company’s profitability.

This document will get you understanding of best qualities of good budget within in an organization.

Department managers in a business make decisions every day that affect the profitability of the business. In order to make effective decisions and coordinate the decisions and actions of the various departments, a business needs to have a plan for its operations. Planning the financial operations of a business is called budgeting.

• Responsibility

To prepare the budget one should be the responsible an dwell defined authority.

• Comprehensiveness

Budget should show the entire financial position of the organization in board details.

• Flexibility

A good budget should have certain flexibility so its implementations can be made easy.

• Reliability

The information of budget which estimates should be reliable as much as possible.

• Integrity

A good budget should involve the assurance that the fiscal program as enacted and as intended. Budget is plan prepared for individual capital expenditure projects.

• Coordination

Different units in the company must also coordinate the many different tasks they perform

• Control

Once a budget is finalized, it is the plan for the operations of the organization. Managers have authority to spend within the budget and responsibility to achieve revenues specified within the budget.

Here is a report that will assist MBA students in their assignments of how to prepare loss and profit report for a manufacturing firm.

For the Six month’s period ended December 31, 2009