HRM Project

Analyzing
Performance
Appraisal System

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 ACKNOWLEDGEMENT
“Vital to every operation is co-operation”. We really agree to this wonderful quotation put
forth by Mr. Frank Tyger. This project was successful due to the co-operation extended by
people who have truly contributed towards it. We gratefully acknowledge Prof. ______ who’s
deep sharing and synergy has moved us many levels beyond our own thinking. We want to
thank the management of various companies who gave us the permission to conduct research.
We would also like to thank all the employees and HR executives who empowered us with
valuable information. And finally to those whose lives and writings has come the wisdom of
the ages. We have tried to learn from your legacy.

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 ABSTRACT
Appraisal is a continuous process and done annually as a formal exercise before completion
of the financial year. Appraisal has tremendous motivational impact on people through
meaningful feedback and is a powerful tool for recognition. This project explains
performance appraisal system and tries to find out how efficiently Performance Appraisal is
conducted. And if performance appraisal doesn’t meet its objective then, what are the factors
causing failure.

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 TABLE OF CONTENTS

Sr. No Title Page No

1 Introduction 1
2 Research & Survey 5
3 Results 6
4 Findings and Recommendations 23
5 Conclusion 26
6 Appendices 27
7 Bibliography 31

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 1.INTRODUCTION
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.

1.1 Understanding Performance Management

PERFORMANCE MANAGEMENT

CORPORATE GOALS

DETERMINE INDIVIDUAL
OBJECTIVES LINKED TO
CORPORATE GOALS
ENSURE RESPONSIBILITY AND
ACCOUNTABILITY

PERFORMANCE APPRAISAL

PERFORMANCE LINKED
INCREMENTS/ INCENTIVES/
REWARDS

1.2 What is Performance?

Performance is synonymous with behaviour; 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

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refers to the evaluation of results of performance that is beyond the influence or control of the
individual.

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

1.4 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

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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 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 GEARED TO:

 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

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  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

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

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 2.RESEARCH AND SURVEY:

Statement of the Problem:

Performance appraisal is a process of assessing, summarizing and developing the work
performance of an employee. In order to be effective and constructive, the performance
manager should make every effort to obtain as much objective information about the
employee's performance as possible. Low performance can push the organization back in
today’s tough competition scenario. The project is aimed at analyzing the performance
appraisal in companies.

Objective:
The various objectives of our research are as follows:
To examine why an appraisal system is important.
To study existing appraisal system in various organizations across sectors like BPO, IT &
Telecom.
To find the expectation of appraiser and appraisee
To determine the satisfaction level of the appraisee
To reveal the various loopholes in the appraisal system if any
To find the consequences of an inappropriately conducted appraisal system

Research Methodology:
The data source: Primary as well as Secondary.
The research approach: Survey Method.
The research instrument: Questionnaire.
The respondents: The Managers & Employees of various organizations.
The primary data was collected with the help of survey information. A concise questionnaire
was prepared keeping in mind the information specifications.

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 3.RESULTS

Findings from Appraisee Survey

1. Expectations from Appraisal System :

Respondents were asked to rank the various options according to their preference.
(Rank 1 being most preferred and rank 6 being least preferred). Then scoring was
given on the basis of ranks. 1 mark was allotted to rank 1, 2 marks for rank 2 and so
on.

Particular Score Overall Rank

Salary Administration and Benefits 87 1
Determination of promotion or transfer 109 2
Assistance in goal 228 3
Guideline for training plan 254 4
An insight into your strengths and weakness 312 5
Decision to layoff 354 6

From the above table it can be seen that employees expect “Salary Administration and
Benefits” to be the main reason for conducting a Performance Appraisal. “Decision to
layoff” is of least importance as per the appraisee.
2. Awareness about Responsibilities :

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 From the graph it can be seen that majority of employees are aware about their
responsibilities, which implies that the appraisers have efficiently communicated to
the appraisees all the parameters that will be taken into account during appraisal.

3. Satisfaction Level among appraise regarding Appraisal System :

From graph it can be seen that majority of the respondents are satisfied with the
appraisal system. Only a meager 30% were dissatisfied with the Performance
Appraisal programs.

4. Awareness about performance ratings :

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 This clearly shows that majority of the employees are not aware about the
performance ratings that are taken into account while conducting a performance
appraisal.

5. Alowing Self ratings :

From graph it can be seen that majority of respondents want self rating to be a method
of conducting the appraisals .

6. Chance to rate your own performance

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 From the graph we can see that majority of the employees are not given a chance to
rate their own performance in the organization.

7. Timing of Appraisals

This shows that most of the organisations conduct their Performance Appraisal
programs annually. A very small percentage of the organisations conduct Performance
Appraisals on a half yearly basis. The share of the quarterly and monthly appraisals
are extremely minimal.

8. Credibility of Appraiser

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 This shows that according to the employees/appraisees the credibility of the appraiser
is extremely important and it has an effect on the overall Performance appraisal
program.

9. Complaint channel for employees

This shows that there is no proper complaint channel existing in the organisations for
the employees who are dissatisfied with the performance appraisal system.

10. Standards communicated to employees

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 From this it can be seen that there is a clear majority among the employees who say
that the standards on the basis of which the performance appraisal is carried out is not
communicated to the employees before hand.

11. Performance Appraisal

Almost all the Performance Appraisals are carried our by the Immediate Supervisor in
these organisations. In very few organisations, Rating committees carry out the
performance appraisals. None of the organisations use Peer Appraisals, Appraisals by
subordinates and Self rating as a method of Performance Appraisal.

12. Clear understanding of Appraisee’s job

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 This shows that the performance Appraisal programs are successful in giving a clear
understanding of the appraisee’s job to both appraiser and appraisee.

13. Objectives of Appraisal System

From the figure we can derive that the objective for conducting the Appraisal system
is clear only to half of the employees. The remaining half are not clear about the
objective for which the Performance Appraisal is carried out.

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14. Good communication between top management and business goals

This shows that the appraisal systems do not provide a good communication flow of
the top-management plans and business goals to the staff below.

15. Comments and suggestions to be considered

Almost all the employees expect that their comments and suggestions should be taken
into consideration while conducting the Performance Appraisal.

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16. Post Appraisal interview

As per the response from the employees we can see that there is no interview
conducted after the appraisal program for majority of the employees.

Findings from Appraiser Survey

1. Purpose of Appraisal

Respondents were asked to rank the various options according to their preference.
(Rank 1 being most preferred and rank 6 being least preferred). Then scoring was
done on basis of these ranks. 1 mark was allotted to rank 1, 2 marks for rank 2 and so

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 on. Then the total score for each purpose was calculated and overall ranking was
given.
Particular Score Overall Rank
Determination of promotion or transfer 24 1
Salary Administration and Benefits 27 2
Decision to layoff 42 3
Guideline for training plan 69 4
Assistance in goal 72 5
An insight into your strengths and weakness 81 6

From table it can be seen that appraiser considers “Determination of promotion or

transfer” & “Salary administration and Benefits” as two important factors for
conducting an Appraisal.

2. Appraisal System

In this question appraiser was asked to rate how helpful the appraisal system is, from
the graph it can be seen that majority of appraisers have rated 5,4 & 3 which implies
that Performance Appraisal system is very helpful in Planning their work. Also most
of the appraisers are satisfied with the appraisal system.

3. Support from subordinate

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 This question was asked to find out how helpful appraisal system is in communicating
the support that apprasier needs from appraisee. From results it is seen that the
performance appraisal system is very helpful in communicating the support and help
needed by the appraiser from the appraisee.

4. Type of Appraisal System

From results its clear that majority of companies prefer to use “360 degree feedback”
system for Performance Appraisal. As 360 degree feedback gives feedback of
appraisee from everyone interacting with him, it is more reliable and hence most
preferred.

5. Performance Appraisal criteria

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 From results we can see that Qualitative Process is considered as the most important
criteria for which the Performance appraisal programs are carried out, which shows
that companies consider Qualitiy of product & service and Customer satisfaction as
most important factors.

6. Timing of Appraisals

From graphs we can see that most of companies conduct appraisals on annual basis.
Some companies conduct quaterly also.
7. Effect of poor Appraisal System

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 It can be seen from results that most of the employees get De-motivated because of a
poorly conducted appraisal. To some extent employees dont coordinate with their
team members. Thus resulting in reduction of output.

8. Communication between top management and staff

All appraisers totally agree that performance appraisal helps in communicating the top
management plans and business goals to staff at lower level.

9. Insight to Apprasiee’s strength and weakness

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 It is evident from the results that performance appraisal system doesn’t help the
appraiser in understanding strength and weakness of apraisee.

10. Appraisee’s comment and suggestion

From the results it can be seen that appraisee’s comments and suggestion are not taken
into consideration before Performance Appraisal. Performance Appraisal system is
designed by appraiser without consulting appraisee.

11. Performance Appraisal

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 It is evident from the results that performance appraisal is conducted by the
Immediate Supervisor in all the companies.

12. Understanding of Apprasiee’s Job

From this it is clearly seen that according to appraiser there is a clear and joint
understanding of the appraisee’s job.

13. Standards for Performance Appraisal

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 From results it is evident that Performance appraisal standards are very well
communicated to Appraisee before the Appraisal is carried out.

14. Self rating in Performance Appraisal

From results it can be clearly seen that the Appraisee is not given a chance to rate his
own performance.

15. Action after Performance Appraisal

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This shows that most of the companies act upon the results of their Performance Appraisal
program.

4.FINDINGS AND RECOMMENDATIONS

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 From the survey results its evident that both the appraisee’s and appraisers
expectation from Performance appraisal system are the same i.e. “Determination
of Promotion or Transfer” and “Salary Administration and Benefits”. Hence a
single performance appraisal system can satisfy needs of both the Appraiser and
appraisee. Therefore the Performance appraisal program would be designed in
such a way that the appraiser would be able to analyse the contribution of the
employee to the orgaisation periodically and all the employees who have been
performing well would be rewarded suitably either by an increase in the salary or
a promotion. Through this the appraiser can also motivate the employees who felt
that they had no growth in the organisation and serves the purpose of employee
development.Thus performance appraisals can be used as a significant tool fo
career lanning.

 Analyzing ones own strengths and weaknesses is the best way of identifying the
potentials available, rather than the other person telling. Self-appraisal is a tool to
analyze oneself. One of the most important findings was that almost all the
employees wanted self-rating to be a part of performance appraisal program
carried out by the organisation. From the responses of the appraiser we can also
see that Self rating is not encouraged by the organisations. This could therefore be
an important factor which leads to dissatisfaction among the appraisees. At the
end of the year of the appraisal period the appraisal process should begin with
self-appraisal by every employee. To appraise ones own self on key performing
targets and qualities, the appraisee would go through a process of reflection and
review. It is an established fact that change is faster when it is self initiated. If
any employee has to improve or do better, he must first feel the need to do so.
Reflection and review is a process that enables him to feel the need and improve
more upon his strengths and weaknesses

 Another point to be noticed is that even in the other forms of Performance

Appraisal also the employees expect that they should be given a chance to rate
their own performance. This can allow the employee to analyze ones own

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 performance which gives new insights on how one is performing and what are the
critical points where he has to put his best and improve upon

 The existence of a proper complain channel was also of utmost importance to the
appraisees. They should be given a chance to convey their greviences to the top
management.

 The appraisees also expect that their comments and suggestions should be taken in
to account while conducting the appraisals. This expectation is not fulfilled as the
appraisers do not take their comments and suggestions into consideration.
Therefore they should look into this matter before it leads to dissatisfaction among
the employees.

 The results also indicate that the there is no communication of top management
plans and business goal to the appraisee. The appraisers on the other hand feel that
the goals and plans have been clearly communicated to the appraisees.
Communication is very essential for any system to function efficiently. Therefore
the appraisers should look into this matter and see to it that the goals and plans are
communicated effectively.

 The findings suggest that for success of Appraisal system the credibility of
appraiser is of utmost importance.

 As per the Appraiser, a poorly conducted appraisal system would lead to

demotivation and ineffective teamwok which will result in inefficient functioning
and low productivity in the organization. Therefore, if at all they feel there is
dissatisfaction among the appraisee’s they should motivate them. Achievement,
recogntion, invelvement, job satisfaction and development can motivate the
employees to a large extent. Along with this satisfactory working conditions and
appropraite awards also play an important role.

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 Also a majority of employees were satisfied with the current appraisal system
although they requested for some changes.

 Most of the employees were also not clear about the criteria on which ratings were
given to each employee while conducting the performance appraisal. Instead of
secrecy there should be openess. Because of lack of communication, employees
may not know how they are rated. The standards by which employees think they
are being judged are sometimes different from those their superiors actually use.
Proper communication of these ratings can help the employers achieve the level of
acceptability and commitment which is required from the employ.

 From the survey we can also derive that the appraisee’s expect a post appraisal
interview to be conducted wherein they are given a proper feedback on their
performance and they can also put forward their complaints if any. The appraisal
should also be followed up with a session of counseling which is often neglected
in many organizations. Counseling involves helping an employee to identify his
strengths and weaknesses to contribute to his growth and development. Purpose is
to help an employee improve his performance level, maintain his morale, guide
him to identify and develop his strong points, overcome his weak points, develop
new capabilities to handle more responsibilities, identify his training needs.

5.CONCLUSION

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With rewards being directly linked to achievement of objectives, goal setting and
Performance Appraisal assumes utmost importance. The Performance Appraisal
System has been professionally designed and it is monitored by HRD. The
implementation is the responsibility of each and every employee along with their
supervisor. There should be adequate training to the evaluator that will go a long way
in answering the quality of Performance Appraisal. In conclusion, a Performance
Appraisal is a very important tool used to influence employees. A formal Performance
review is important as it gives an opportunity to get an overall view of job
performance and staff development. It encourages systematic and regular joint-
stocking and planning for the future. Good performance reviews therefore don’t just
summarize the past they help determine future performance.

6. Appendices
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 Questions for Appraisee

Name: ___________________________ Contact No: __________________________

1. What do you expect from a Performance appraisal :

(Rank the options from 1 to 6; 1 being most preferred & 6 being

least preferred)
Detail Rank

Salary Administration and Benefits

Determination of promotion or transfer

Decision on layoff

Assistance in goal

Guideline for training Plan

An insight into your strengths and

weakness

2. Do you know what exactly is expected from you at work?

a. Yes b. No

3. Are you satisfied with the appraisal system?

1 2 3 4 5
(1 = Least satisfied; 5 = Most satisfied)

4. Are you aware of performance ratings?

a. Yes b. No

5. Do you think you should be given an opportunity to rate your own

performance?

a. Yes b. No

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6. Are you given a chance to rate your own performance?

a. Yes b. No

7. Timing of Appraisals

a. Monthly

b. Quarterly

c. Half Yearly

d. Annual

e. Anytime

8. Does the credibility of Appraiser affect the Performance Appraisal System?

a. Yes b. No

9. Is there a complaint channel for the employees who are dissatisfied with
the performance appraisal system?

a. Yes b. No

10.Are the standards on the basis of which the performance appraisal is

carried out communicated to the employees before hand?

a. Yes b. No

11.Who conducts the performance appraisal”?

a. Immediate supervisor

b. Peer appraisal

c. Rating committees

d. Self-rating

e. Appraisal by subordinates

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 12.Is the performance Appraisal successful in giving a clear understanding of
the appraisee’s job to both appraiser and appraise?

a. Yes b. No

Are the objectives of appraisal system clear to you?

a. Yes b. No

Does the appraisal system provide a good communication between the top-
management plans and business goals to staff below?
b. Yes b. No

13.Do you want your comments and suggestions to be taken into

consideration during appraisal?

a. Yes b. No

14.Is there a post appraisal interview conducted?

a. Yes b. No

Questions for Appraiser

Name: ___________________________ Contact No: __________________________

1. Purpose of Performance appraisal :

(Rank the options from 1 to 6; 1 being main purpose & 6 being last
purpose)
Detail Rank

Salary Administration and Benefits

Retain performing employees

Determination of promotion or transfer

Decision on layoff

Assistance in goal

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 Guideline for training Plan

Is the Performance Appraisal helping you to plan your work well?

1 2 3 4 5
(1 = Least helpful; 5 = Most helpful)

2. Does the system provide you a chance to communicate the support

you need from your subordinate to perform the job well.

a. Yes b. No

3. Which appraisal system is being employed in the company?

a. Assessment centre

b. MBO

c. BARS

d. 360 degree feedback

e. Balance scorecard

4. Performance Appraisal criteria

a. Quantitative outcome criteria (Sales volume, Sales price,

Productivity, Goal accomplishment rate)

b. Qualitative process criteria (Quality of product or service, Customer

satisfaction)

c. Quantitative process criteria (Efficiency, Cost/expenses,

Attendance)

d. Qualitative process criteria (Judgment, Work attitude, Leadership,

Conduct /Trait)

5. Timing of Appraisals

a. Monthly

b. Quarterly

c. Half Yearly

d. Annual

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 e. Anytime

6. What do you think is the effect of a poor appraisal system

a. De-motivation
b. Retention
c. Ineffective teamwork

Does the appraisal system provide a good communication between the top-
management plans and business goals to staff below?
d. Yes b. No

Does it give insight to appraisee regarding his strength or weakness?

e. Yes b. No

7. Are employee’s comments and suggestions taken into consideration

before the appraisal?

a. Yes b. No

8. Who conducts the performance appraisal”

a. Immediate supervisor

b. Peer appraisal

c. Rating committees

d. Self-rating

e. Appraisal by subordinates

9. Is the performance Appraisal successful in giving a clear understanding of

the appraisee’s job to both appraiser and appraise?

b. Yes b. No

10.Are the standards on the basis of which the performance appraisal is

carried out communicated to the employees before hand?

a. Yes b. No

11.Do you give an opportunity to the appraisee to rate his own performance?

a. Yes b. No

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12.Do you act upon the results of your performance appraisal?

a. Yes b. No

13.If yes, then mention the remedial measures taken?

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