18 MBA 304C

PERFORMANCE MANAGEMENT SYSTEM

MODULE-I

INTRODUCTION TO PERFORMANCE MANAGEMENT:

What is Performance?
The accomplishing an action , task or function can be termed as Performance.
What is Performance Management (PM) ?
Performance Management is a continuous process of identifying, measuring and developing the
performance of individuals and team and aligning performance with the strategic goal of the
organization.
1. Continuous process. Performance management is ongoing. It involves a never ending
process of setting goals and objectives, observing performance, and giving and receiving
ongoing coaching and feedback
2. Link to mission and goals. Performance management requires that managers ensure that
employees’ activities and outputs are congruent with the organisation’s goals and,
consequently, help the organisation gain a competitive business advantage. Performance
management therefore creates a direct link between employee performance and
organisational goals, and makes the employees’ contribution to the organisation explicit.

Definition of Performance Management:

• According to Ronnie Malcom,2007,” Performance Management may be defined as a
planned and systematic approach to managing the performance of individuals ensuring
their personal development and contribution towards organizational goals.
• According to Michel Armstrong & Angela Baron , 2004” Performance Management is a
process which the effective management of individuals and teams in order to achieve
high levels of organizational performance.
•
PERFORMANCE MANAGEMENT IMPLICATION:

There are many advantages associated with the implementation of a performance management
system. A performance management system can make the following important contributions:

1. Motivation to perform is increased. Receiving feedback about one’s performance increases

the motivation for future performance. Knowledge about how one is doing and recognition of
one’s past successes provide the fuel for future accomplishments.

2. Self-esteem is increased. Receiving feedback about one’s performance fulfils a basic need to
be appreciated and valued at work. This, in turn, is likely to increase employees’ self-esteem.

3. The job definition and criteria are clarified. The job of the person being appraised may be
clarified and defined more clearly. In other words, employees gain a better understanding of the
behaviours and results required of their specific position.

4. Self-insight and development are enhanced. The participants in the system are likely to
develop a better understanding of themselves and of the kind of development activities of value
to them as they progress through the organisation. Participants in the system also gain a better
understanding of their strengths and weaknesses, which can help them better define future career
paths.

5. Personnel actions are more fair and appropriate. Performance management systems provide
valid information about performance, which can be used for personnel actions such as merit
increases, promotions and transfers, as well as terminations. In general, a performance
management system helps ensure that rewards are distributed on a fair and credible basis.

6. Employees become more competent. An obvious contribution is that the performance of

employees is improved. In addition, there is a solid foundation for developing and improving
employees by establishing developmental plans.

7. There is better and more timely differentiation between good and poor performers.
Performance management systems allow for a quicker identification of good and poor
performers. Also, they force supervisors to face up to and address performance problems on a
timely basis (i.e., before the problem is too costly and cannot be remedied).

DISADVANTAGES/DANGERS OF POORLY IMPLEMENTED PM SYSTEMS:

1. Employees may quit due to results.
If the process is not seen as fair, employees may become upset and leave the organisation. They
can leave physically (i.e., quit) or withdraw psychologically (i.e., minimise their effort until they
are able to find a job elsewhere).

2. False or misleading information may be used.

If a standardised system is not in place, there are multiple opportunities for fabricating
information about an employee’s performance.

3. Self-esteem may be lowered.

Self-esteem may be lowered if feedback is provided in an inappropriate and inaccurate way.This,
in turn, can create employee resentment.

4. Time and money are wasted.

Performance management systems cost money and quite a bit of time. These resources are
wasted when systems are poorly designed and implemented.

5. Relationships are damaged.

As a consequence of a deficient system, the relationships among the individuals involved may be
damaged, often permanently.

6. Motivation to perform is decreased.

Motivation may be lowered for many reasons, including the feeling that superior performance is
not translated into meaningful tangible rewards (e.g., pay increase) or intangible rewards (e.g.,
personal recognition).

7. Employees suffer from job burnout and job dissatisfaction. When the performance assessment
instrument is not seen as valid, and the system is not perceived as fair, employees are likely to
feel increased levels of job burnout and job dissatisfaction. As a consequence, employees are
likely to become increasingly irritated.
8. There is increased risk of litigation.
Expensive lawsuits may be filed by individuals who feel they have been appraised unfairly.

THE MAJOR OBJECTIVES OF PERFORMANCE MANAGEMENT:

• To Formulate strategy determining what the objective of the organization are and how the
organization plans to achieve them.
• Manage the strategy implementation process , by examining.
• To help the employees in identifying the knowledge and skills required for performing
the job efficiently as this would drive their focus towards performing the right task in the
right way.
• Identifying the barriers to effective performance and resolving those barriers through
constant monitoring, coaching and development interventions.
• Assess current management potential and assign rating to individual employees for the
purpose of succession planning and management.
• Empower employees to set their own performance criteria so that achieving these
objectives becomes their mission.

PROCESS FOR MANAGING PERFORMANCE:

Step 1: Prerequisites:
There are two important prerequisites before a performance management system implemented:
• Knowledge of the organization’s mission and strategic goals.
• Knowledge of the job in question
Knowledge of the organization’s mission and strategic goals(Strategic Planning):
The development of an organizations strategic plan requires, a Careful analysis of the
organizations competitive situation, the organization’s current position and destination, the
development of the organizations strategic goals, the design of a plan of action and
implementation, and the allocation of resource that will increase the likelihood of achieving the
stated goals.
Steps For strategic planning:
1. The conduct of environmental analysis
 2. The creation of organizational mission
3. The creation of organizational vision
4. Setting goals
5. The creation of strategies that will allow the organization to fulfill its mission and vision
and achieve its goals.
The second important prerequisite before a performance management system is implemented is
to understand the job in question. This is done through job analysis.
Job analysis is a process of determining the key components of a particular job, including
activities, tasks, products, services, and processes. A job analysis is a fundamental prerequisite of
any performance management system. Without a job analysis, it is difficult to understand what
constitutes the required duties for a particular job. If we don’t know what an employee is
supposed to do on the job, we won’t know what needs to be evaluated and how to do so.
As a result of a job analysis, we obtain information regarding the tasks carried out and the
knowledge, skills, and abilities (KSAs) required of a particular job. Knowledge includes having
the information needed to perform the work, but not necessarily having done it. Skills refer to
required attributes that are usually acquired by having done the work in the past. Ability refers to
having the physical, emotional, intellectual, and psychological aptitude to perform the work, but
neither having done the job nor having been trained to do the work is required.
This job description includes information about what tasks are performed (e.g., operation of a
specific type of truck). It also includes information about the needed knowledge (e.g., manifests,
bills of lading), skills (e.g., keeping the truck and trailer under control, particularly in difficult
weather conditions), and abilities (e.g., physical and spatial abilities needed to turn narrow
corners). Job analysis can be conducted using observation, off-the-shelf questionnaires, or
interviews. Data are collected from job incumbents (i.e., those doing the job at present) and their
supervisors. Alternatively, if the job is yet to be created, data can be gathered from the
individual(s) responsible for creating the new position and those who will supervise individuals
in the new position.

Step 2: Performance planning:

• This process is typically consists of “meeting” between appraisers and appraise who are
ready to spend quality time for discussion.
• It is a platform which gives a chance to the manager or appraiser to interact with his
subordinate or apprise directly and get to know about his/ her performances through
discussion or interaction.
• It also provides an opportunity to appraiser and appraise to know about their further
career plans and goals through discussion.
• The performance planning discussion includes a consideration of both result and behavior
as well as development plan.
There are three important attributes of performance planning:
i. Results
ii. Behaviors, &
iii. Development Plan

Results: Results refer to what needs to be done or the outcomes an employee must produce. A
consideration of results needs to include the key accountabilities, or broad areas of a job for
which the employee is responsible for producing results. This information is typically obtained
from the job description. A discussion of results also includes specific objectives that the
employee will achieve as part of each accountability. Objectives are statements of important and
measurable outcomes. Finally, discussing results also means discussing performance standards.
A performance standard is a yardstick used to evaluate how well employees have achieved each
objective. Performance standards provide information about acceptable and unacceptable
performance (e.g., quality, quantity, cost, and time). Consider the job of university professors.
Two key accountabilities are (1) teaching (preparation and delivery of instructional materials to
students) and (2) research (creation and dissemination of new knowledge). An objective for
teaching could be “to obtain a student evaluation of teaching performance of 3 on a 4-point
scale.” An objective for research could be “to publish two articles in scholarly refereed journals
per year.” Performance standards could be “to obtain a student evaluation of teaching
performance of at least 2 on a 4-point scale” and “to publish at least one article in scholarly
referred journals per year.” Thus, the objective is the desired level of performance, whereas the
standard is usually a minimum acceptable level of performance.

Behaviors Although it is important to measure results, an exclusive emphasis on results can give
a skewed or incomplete picture of employee performance. For example, for some jobs it may be
difficult to establish precise objectives and standards. For other jobs, employees may have
control over how they do their jobs but not over the results of their behaviors. For example, the
sales figures of a salesperson could be affected more by the assigned sales territory than by the
salesperson’s ability and performance. Behaviors, or how a job is done, thus constitute an
important component of the planning phase. Examples of competencies are customer service,
written or oral communication, creative thinking, and dependability. Returning to the example of
the professor, assume that teaching is done online and numerous technology-related problems
exist, so that the resulting teaching evaluations are deficient (i.e., lower than the standard of 2).
This is an example of a situation in which behaviors should be given more importance than
results.

Development Plan An important step before the review cycle begins is for the supervisor and
employee to agree on a development plan. At a minimum, this plan should include identifying
areas that need improvement and setting goals to be achieved in each area. Development plans
usually include both results and behaviors.
performance planning includes the consideration of results and behaviors and the development
plan. A discussion of results needs to include key accountabilities (i.e., broad areas for which an
employee is responsible), specific objectives for each key accountability (i.e., goals to be
reached), and performance standards (i.e., what constitutes acceptable and unacceptable levels of
performance). A discussion of behaviors needs to include competencies (i.e., clusters of KSAs).
Finally, the development plan includes a description of areas that need improving and goals to be
achieved in each area.
Stage 3: Performance Execution:
Performance execution is considered as most important stage because the whole exercise of
creating performance management systems and building up standards would depend on it.
The primary responsibility and ownership of performance execution is with employee, which is
followed by department and then organization.
Employees primary responsibility:
1. Commitment to goal achievement. The employee must be committed to the goals that were
set. One way to enhance commitment is to allow the employee to be an active participant in the
process of setting the goals.
2. Ongoing performance feedback and coaching. The employee should not wait until the review
cycle is over to solicit performance feedback. Also, the employee should not wait until a serious
problem develops to ask for coaching. The employee needs to take a proactive role in soliciting
performance feedback and coaching from her supervisor.
3. Communication with supervisor. Supervisors are busy with multiple obligations. The burden
is on the employee to communicate openly and regularly with the supervisor.
4. Collecting and sharing performance data. The employee should provide the supervisor with
regular updates on progress toward goal achievement, in terms of both behaviors and results.
5. Preparing for performance reviews. The employee should not wait until the end of the review
cycle approaches to prepare for the review. On the contrary, the employee should engage in an
ongoing and realistic self-appraisal so that immediate corrective action can be taken if necessary.
The usefulness of the self-appraisal process can be enhanced by gathering informal performance
information from peers and customers (both internal and external).
Managers primary responsibility:
1. Observation and documentation. Supervisors must observe and document performance on a
daily basis. It is important to keep track of examples of both good and poor performance.
2. Updates. As the organization’s goals may change, it is important to update and revise initial
objectives, standards, and key accountabilities (in the case of results) and competency areas (in
the case of behaviors).
3. Feedback. Feedback on progression toward goals and coaching to improve performance
should be provided on a regular basis certainly before the review cycle is over.
4. Resources. Supervisors should provide employees with resources and opportunities to
participate in developmental activities. Thus, they should encourage (and sponsor) participation
in training, classes, and special assignments. Overall, supervisors have a responsibility to ensure
that the employee has the necessary supplies and funding to perform the job properly.
5. Reinforcement. Supervisors must let employees know that their outstanding performance is
noticed by reinforcing effective behaviors and progress toward goals. Also, supervisors should
provide feedback regarding negative performance and how to remedy the observed problem.
Observation and communication are not sufficient. Performance problems must be diagnosed
early, and appropriate steps must be taken as soon as the problem is discovered.

Stage 4: Performance Assessment:

• Performance assessment is the next stage followed by performance execution. In this
phase, the employee and manager both are responsible to measure and assess the
performance of employee against his targets.
• The process should comprise to the extent of individual targets, behaviors or attitude and
special achievements during the performance appraisal cycle.
• It is important that both the employee and the manager take ownership of the assessment
process.
• The manager fill out his appraisal form, and the employee should also fill out his form.
• For which both the parties are active participants in the appraisal process ,there is a
greater likelihood that the information will be used productively in the future.
• In sum, both the employee and the supervisor must evaluate employee performance.
Employee involvement in the process increases employee ownership and commitment to
the system. In addition, it provides important information to be discussed during the
performance review.
Stage 5: Performance Review
• The performance review stage is a platform where the subordinate and superior exchange
performance feedbacks and review performances against given targets or goals to
individual.
Steps:
1. Identify what the employee has done well and poorly by citing positive and negative
behaviors.
2. Solicit feedback from your employee about these behaviors. listen for reactions and
explanations.
3. Discuss the implication of changing or not changing behaviors. Aware them what will
happen if bad performance continues.
4. Explain to the employee how past achievement skills used to overcome any current
performance problems.
 5. Encourage employee to ask questions for improving his performance.
6. Set up a meeting to follow up and agree on the behaviors, actions, and attitudes to be
evaluated.
• Apart from performance review, they also discuss about the development plans, trainings
to improve skills and knowledge, next year goals and targets and expectations of
employee and manager both.
Stage 6: Performance Renewal and Reconstructing:
• The performance management process is an ongoing continuous process. Once the
performance has been reviewed and end, then the cycle starts for the next performance
appraisal.
• It should be again align with next year organization mission, goals and objective and
integrated with departments goals In facts, it is a process which starts all over again
which needs to be discuss, design, develop , executed and review again.
• This is necessitate because the external environment of company like market, customers ,
competitors , suppliers etc. also revolved and all subsequent changes has to prerequisites
for performance planning and setting with strategic objectives of organization.

THE PRINCIPLES OF PERFORMANCE MANAGEMENT

 It translates corporate goals into individual, team, department and divisional goals.
 It helps to clarify corporate goals.
 It is a continuous and evolutionary process, in which performance improves over time.
 It relies on consensus and co-operation rather than control or coercion.
 It creates a shared understanding of what is required to improve performance and how it
will be achieved.
 It encourages self-management of individual performance.
 It requires a management style that is open and honest and encourages two-way
communication between superiors and subordinates.
 It requires continuous feedback.
BENEFITS OF PERFORMANCE MANAGEMENT:

• Helps in aligning individual performance expectations with the organizations mission and
strategy for effective goal achievement.
• Helps employees in evaluating their competencies and the resources and support required
to successfully achieve the performance expectations.
• Strengthens team work in the organization.
• Helps in delivering negative feedback to increase performance being a participative
process .
• Helps in integrating the organizations ethics into an individuals inherent value system
through reinforcement and counseling methods.
• Provides opportunities for learning and development as well as for other employment by
identifying competencies required for high performance.
• Allows creation of career path and gives employees and managers ownership of their
career development.

PERFORMANCE MANAGEMENT STRATEGIES:

Strategic planning is a process that involves describing the organization’s destination, assessing
barriers that stand in the way of that destination, and selecting approaches for moving forward.
The main goal of strategic planning is to allocate resources in a way that provides organizations
with a competitive advantage.
Strategies for Performance Management Purpose:
 • Helps define the organization’s identity
• Helps organizations prepare for future
• Enhances ability to adapt to environmental changes
• Produces an organizational culture of cooperation
• Provides employees with information to direct daily activities.
• Allows for the consideration of new options and opportunities
• Provides employees with information to direct daily activities

Strategic planning serves the following purposes:

1. First and foremost, strategic planning allows organizations to define their identities. In
other words, it provides organizations with a clearer sense of who they are and what their
purposes are.
2. Second, strategic planning helps organizations prepare for the future because it clarifies
the desired destination. Knowing where the organization wants to go is a key first step in
planning how to get there.
3. Third, strategic planning allows organizations to analyze their environment, and doing so
enhances their ability to adapt to environmental changes and even anticipate future
changes. Although knowledge of the environment does not guarantee that an organization
will be more likely to change and adapt, knowledge is the first step toward possible
adaptation.
4. Fourth, strategic planning provides organizations with focus and allows them to allocate
resources to what matters most.
5. Fifth, strategic planning can produce a culture of cooperation within the organization
given that a common set of goals is created. Such a culture of cooperation can gain
organizations a key competitive advantage.
6. Sixth, strategic planning can be a good corporate eye-opener because it generates new
options and opportunities to be considered. New opportunities to be considered may
include expanding to new markets or offering new products.
7. Finally, strategic planning can be a powerful tool to guide employees’ daily activities
because it identifies the behaviors and results that really matter.
 There are several steps that must be considered in the creation of a successful strategic plan. These
include (1) the conduct of an environmental analysis (i.e., the identification of the internal and
external parameters of the environment in which the organization operates);
(2) the creation of an organizational mission (i.e., statement of what the organization is all about);
(3) the creation of an organizational vision (i.e., statement of where the organization intends to be in
the long term, say, about 10 years);
(4) setting goals (i.e., what the organization intends to do in the short term, say, one to three years);
and
(5) the creation of strategies that will allow the organization to fulfill its mission and vision and
achieve its goals (i.e., descriptions of game plans or how-to procedures to reach the stated objectives).

1 ENVIRONMENTAL ANALYSIS The first step in conducting a strategic plan is to step back to
take in the “big picture.” This is accomplished through what is called an environmental analysis. An
environmental analysis identifies external and internal parameters with the purpose of understanding
broad issues related to the industry where the organization operates.
An examination of the external environment includes a consideration of opportunities and threats.
Opportunities are characteristics of the environment that can help the organization succeed. Examples
of such opportunities might be markets not currently being served, untapped labor pools, and new
technological advances. On the other hand, threats are characteristics of the external environment that
can prevent the organization from being successful. Examples of such threats range from economic
recession to the innovative products of competitors.
The following is a non exhaustive list of external factors that should be considered in any
environmental analysis:
• Economic. For example, is there an economic recession on the horizon? Or, is the current economic
recession likely to end in the near future? How would these economic trends affect our business?
• Political/legal. For example, how will political changes in domestic or international markets we are
planning on entering affect our entry strategy?
• Social. For example, what is the impact of an aging workforce on our organization?
• Technological. For example, what technological changes are anticipated in our industry and how
will these changes affect how we do business?
• Competitors. For example, how do the strategies and products of our competitors affect our own
strategies and products? Can we anticipate our competitors’ next move?
• Customers. For example, what do our customers want now, and what will they want in the next five
years or so? Can we anticipate such needs?
• Suppliers. For example, what is the relationship with our suppliers now and is it likely to change,
and in what way, in the near future?
An examination of the internal environment includes a consideration of strengths and weaknesses.
Strengths are internal characteristics that the organization can use to its advantage. Weaknesses are
internal characteristics that are likely to hinder the success of the organization.
The following is a non exhaustive list of internal issues that should be considered in any
environmental analysis:
• Organizational structure. For example, is the current structure conducive to fast and effective
communication?
• Organizational culture. Organizational culture includes the unwritten norms and values espoused by
the members of the organization. For example, is the current organizational culture likely to
encourage or hinder innovation and entrepreneurial behaviors on the part of middle-level managers?
• Politics. For example, are the various units competing for resources in such a way that any type of
cross-unit collaboration is virtually impossible? Or, are units likely to be open and collaborative in
cross-unit projects?
• Processes. For example, are the supply chains working properly? Can customers reach us when they
need to and receive a satisfying response when they do? • Size. For example, is the organization too
small or too large? Are we growing too fast? Will we be able to manage growth (or downsizing)
effectively?

After external and internal issues have been considered, information is collected regarding
opportunities, threats, strengths, and weaknesses. This information is used to conduct a gap analysis,
which analyzes the external environment in relation to the internal environment.
The pairing of external opportunities and threats with internal strengths and weaknesses leads to the
following situations (ranked from most to least competitive):
1. Opportunity + Strength = Leverage. The best combination of external and internal factors occurs
when there is an opportunity in the environment and a matching strength within the organization
to take advantage of that opportunity.
2. Opportunity + Weakness = Constraint. In a constraint situation, the external opportunity is
present; however, the internal situation is not conducive to taking advantage of the external
opportunity.
3. Threat + Strength = Vulnerability. In this situation, there is an external threat, but this threat can
be contained because of the presence of internal strengths.
4. Threat + Weakness = Problem. In the worst scenario, there is an external threat and an
accompanying internal weakness.

2 MISSION After the environmental analysis has been completed and the gap analysis reveals an
organization’s leverage, constraints, vulnerabilities, and problems, the members of the organization
must determine who they are and what they do. Mission statements provide information on the
purpose of the organization and its scope.
Good mission statements provide answers to the following questions:
• Why does the organization exist?
• What is the scope of the organization’s activities?
• Who are the customers served?
• What are the products or services offered?
3.VISION An organization’s vision is a statement of future aspirations. In other words, the vision
statement includes a description of what the organization would like to become in the future (about
10 years in the future). Vision statements are typically written after the mission statement is
completed.

Vision Statement:
One Company Though we encourage and embrace our diversity of language, location,
business and origin, we are one company: Greif.
One Mission We provide the packaging that gives ultimate value to our customers.
One Vision We will be the best packaging company in the world, working in true partnership
with our customers, our suppliers, and among ourselves.
4. GOALS After an organization has analyzed its external opportunities and threats as well as
internal strengths and weaknesses and has defined its mission and vision, it can realistically
establish goals that will further its mission. The purpose of setting such goals is to formalize
statements about what the organization hopes to achieve in the medium- to long-range period
(i.e., within the next three years or so). Goals can also be a source of motivation and provide
employees with a more tangible target for which to strive. Goals also provide a good basis for
making decisions by keeping desired outcomes in mind. And, finally, goals provide the basis for
performance measurement because they allow for a comparison of what needs to be achieved
versus what each unit, group, and individual is achieving.

5. STRATEGIES At this point, we know what the organization is all about (mission), what it
wants to be in the future (vision), and some intermediate steps to follow to get there (goals).
What remains is a discussion of how to fulfill the mission and vision and how to achieve the
stated goals. This is done by creating strategies, which are descriptions of game plans or
how-to procedures to reach the stated objectives. The strategies could address issues of
growth, survival, turnaround, stability, innovation, and leadership, among others.
Specifically, the HR function can make the following contributions:
• Communicate knowledge of strategic plan. The HR function can be a good conduit to
communicate the various components of the strategic plan (e.g., mission, vision, and goals)
to all the employees.
• Outline knowledge, skills, and abilities (KSAs) needed for strategy implementation. The
HR function, through job analyses and the resulting job descriptions, serves as a repository
of knowledge regarding what KSAs are needed for a successful implementation of the
strategic plan.
• Propose reward systems. The HR function can provide useful information on what type of
reward system should be implemented to motivate employees to support the strategic plan.

PERFORMANCE APPRAISAL & POTENTIAL APPRAISAL:

PERFORMANCE APPRAISAL:
Meaning:
Performance Appraisal is the systematic evaluation of the performance of employees and to
understand the abilities of a person for further growth and development.
Performance appraisal is generally done in systematic ways which are as follows:
• The supervisors measure the pay of employees and compare it with targets and plans.
• The supervisor analyses the factors behind work performances of employees.
• The employers are in position to guide the employees for a better performance.

Definition:
 “performance appraisal maybe considered as the process through which an organization
tries to the judge the relative worth of an individual employee in performing his job.”
  “Performance appraisal is the evaluation of employees’ current and potential levels of
performance to allow managers to make objective human resources decisions. “
 “Performance appraisal is the process by which an employee’s contribution to the
organization during a specified period of time is assessed.”
Purpose of Performance appraisal:
There are various reasons for undertaking a performance appraisal but mainly there are the three
major reasons:
 It allows a manager to let subordinates know how well they are doing and how they can
do better in the future.
 It provides an effective basis for distributing rewards such as pay raises and promotions.
 It helps the organization monitor its employee selection, training, and development
activities.
 Thus from the above we can see that This task acts as Major feedback and feed forward
tool for evaluating internal personnel processes.

Types of Performance to Measure:

 Trait-based Appraisals Assess personality or personal characteristics rather than
performance (e.g., friendly, ability to make decisions) It is questionable – since it
does not assess actual job-related behaviors .
 Behavior-based appraisals :Employees assessed on basis of what they actually do
Useful when manner in which job is performed is important Useful for feedback
 Results-based appraisals Hinges on measures on performance outcomes Subject to
contamination and deficiency (some results difficult to determine or measure)

Objectives of Performance Appraisal

Performance Appraisal can be done with following objectives in mind:
• To maintain records in order to determine compensation packages, wage structure,
salaries raises, etc.
• To identify the strengths and weaknesses of employees to place right men on right job.
• To maintain and assess the potential present in a person for further growth and
development.
• To provide a feedback to employees regarding their performance and related status.
• It serves as a basis for influencing working habits of the employees.
• To review and retain the promotional and other training programmes.

Advantages of Performance Appraisal

It is said that performance appraisal is an investment for the company which can be justified by
following advantages:
1. Promotion: Performance Appraisal helps the supervisors to chalk out the promotion
programmes for efficient employees. In this regards, inefficient workers can be dismissed
or demoted in case.
2. Compensation: Performance Appraisal helps in chalking out compensation packages for
employees. Compensation packages which includes bonus, high salary rates, extra
benefits, allowances and pre-requisites are dependent on performance appraisal. The
criteria should be merit rather than seniority.
3. Employees Development: The systematic procedure of performance appraisal helps the
supervisors to frame training policies and programmes. It helps to analyze strengths and
weaknesses of employees so that new jobs can be designed for efficient employees. It
also helps in framing future development programmes.
4. Selection Validation: Performance Appraisal helps the supervisors to understand the
strengths and weaknesses and importance of the selection procedure. Future changes in
selection methods can be made in this regard.
5. Communication: For an organization, effective communication between employees and
employers is very important. Through performance appraisal, communication can be
sought for in the following ways:
 Through performance appraisal, the employers can understand and accept skills of
subordinates.
 The subordinates can also understand and create a trust and confidence in superiors.
 It also helps in maintaining cordial and congenial labour management relationship.
 It develops the spirit of work and boosts the morale of employees.

Process of Performance Appraisal:

There are six steps involved in the process of performance appraisal:
Establishing Performance Standards: The first step in the process of performance
appraisal is the setting up of the standards which will be used to compare the actual
performance of the employees against the standards set. The standards set should be clear,
easily understandable and measurable.

Communicating the Standards: Once performance standards are set, it is the responsibility
of the management to communicate the standards to all the employees of the Organization.
The employees should be informed and the standards should be clearly explained to the
employees. This will help them to understand their roles and to know what exactly is
expected from them.

Measuring the Actual Performance: It is a continuous process which involves monitoring

the performance throughout the year

Comparing the Actual with the Desired Performance: 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
Discussing Results: The result of the appraisal is communicated and discussed with the
employees on one-to-one basis. The results, the problems and the possible solutions are
discussed with the aim of problem solving and reaching consensus. The feedback should be
given with a positive attitude as this can have an effect on the employees’ future
performance. The purpose of the meeting should be to solve the problems faced and motivate
the employees to perform better.

Decision Making: 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.

METHODS OF APPRAISING PERFORMANCE:

Straight Ranking Method :
It is the oldest and the simplest method of performance appraisal, by which the man and his
performance are considered as an entity by the rater. That is the ranking of a man in a work
group is done against that of another.
The relative position of each man is tested in terms of his numerical rank. It may also be done by
ranking a person on his job performance against that of another member of a competitive group
by placing him as number one or two or three in total group i.e. persons are tested in order of
merit and placed in a simple grouping. This is the simplest method of separating the most
efficient from the least efficient: and relatively easy to develop and use.
But there are also some limitations to it: In practice it is very difficult to compare a single
individual with human beings having varying behaviour.
The method only tells us how a man stands in relation to the others in the group but odes not
indicate how much better or worse he is than another.
The task of ranking individuals is difficult when a large number of persons are rated.
Paired Comparison Technique:
This is an improvement over the straight ranking method. By this technique, each employee is
compared with all other persons in pairs one at a time. With this technique, judgment is easier
and simpler than with the ordinary ranking method.
The number of times each individual is compared with another is tallied on a piece of paper.
These numbers yield the rank order of the entire group.
For example, if there are five persons to be compared, then A’s performance is compared to B’s
and decision is arrived at as to whose performance is better. Then A is compared to C, D, E… in
that order. Next B is compared with all the others individually. Since he has already been
compared with A, he is compared only with C, D, and E. A similar comparison is made in
respect of other personnel. Thus, by this method, we arrive at ten decisions, and only two are
involved in each decision. The number of decisions is determined by the formula N (N-2), where
N represents the number of persons to be compared.

Graphic Rating Scale :

This is the most commonly used method of performance appraisal. Under it a printed forms, one
for each person to be rated.
According to Jucius, these factors are: employee characteristics and employee contribution. In
employee characteristics are included such qualities as imitativeness, leadership, co-
cooperativeness, dependability, industry, attitude, enthusiasm, loyalty, creative ability,
decisiveness, analytical ability emotional ability, and co-ordination. In the employee contribution
are included the quantity and quality of work, the responsibility assumed, specific goals
achieved, regularity of attendance, leadership offered, attitude towards superiors and associates,
versatility etc. These traits are the evaluated on a continuous scale, wherein the rater places a
mark somewhere along a continuum.

The rating scale method is easy to understand and easy to use, and permits a statistical tabulation
of scores. A ready comparison of scores among the employees is possible.

Forced Choice Description Method:

 This method evolved after a great deal of research conducted for the military services during
World War II. It tries to check a rater’s tendency to give consistently high or low ratings to all
employees.
Under this method, the rating elements are several sets of pair phrases or adjectives (usually sets
of four phrases two of which are positive, two negative) relating to job proficiency or personal
qualifications. The rater is asked to indicate which of the four phrases is most and least
descriptive of the employee. The following statements are examples of the type of statement that
are used;
 Makes little effort from his own side
 Organizes the work well
 Lacks the ability to make people feel at ease
 Has a cool temperament
 Is punctual and careful
 Is dishonest and disloyal
 Is hard worker and co-operative

Forced-Choice Method:
The forced-choice method is developed by J. P. Guilford. It contains a series of groups of
statements, and rater rates how effectively a statement describes each individual being
evaluated. Common method of forced-choice method contains two statements, both positive
and negative.
Examples of positive statements are:
1. Gives good and clear instructions to the subordinates.
2. Can be depended upon to complete any job assigned.
A pair of negative statements may be as follows:
1. Makes promises beyond his limit to keep these.
2. Inclines to favour some employees.
Each statement carries a score or weight, which is not made known to the rater.
The human resource section does rating for all sets of statements— both positive and
negative.
The final rating is done on the basis of all sets of statements. Thus, employee rating in this
manner makes the method more objective.
The only problem associated with this method is that the actual constructing of several
evaluative statements also called ‘forced-choice scales’, takes a lot of time and effort.

Checklists and weighted checklists: Another simple type of individual evaluation method is
the checklist ,a set of objectives or descriptive statements about the employee and his
 behavior. If the rater believes strongly that the employee possesses a particular listed trait, he
checks the item; otherwise, he leaves the item blank. A more recent variation of the checklist
method is the weighted list. Under this, the value of each question may be weighted equally
or certain questions may be weighted more heavily than others.
The following are some of the sample questions in the checklist.
Is the employee really interested in the task assigned? Yes/No
Is he respected by his colleagues (co-workers) Yes/No
Does he give respect to his superiors? Yes/No
Does he follow instructions properly? Yes/No
Does he make mistakes frequently? Yes/No

A rating score from the checklist helps the manager in evaluation of the performance of the
employee.
Limitation:The rater may be biased in distinguishing the positive and negative questions. He
may assign biased weights to the questions.
Another limitation could be that this method is expensive and time consuming. Finally, it
becomes difficult for the manager to assemble, analyze and weigh a number of statements
about the employee's characteristics, contributions and behaviors.

Critical Incident Method :

This method was developed following research conducted by the armed forces in the United
States during World War II. The essence of this system is that it attempts to measure
worker’s performance in terms of certain ’events’ or ‘episodes’ that occur in the
performances of the rate’s job. These events are known as Critical incidents.
The basis of this method is the principle that “there are certain significant acts in each
employee’s behaviour and performance which make all the difference between success and
failure on the job”. The supervisor keeps a written record of the events (either good or bad)
that can easily be recalled and used in the course of a periodical or formal appraisal.
Feedback is provided about the incidents during performance review session.
Various behaviors are recorded under such categories as the type of job, requirements for
employees, judgment, learning ability, productivity, precision in work, responsibility and
initia-tive.
Say for example, a sales manager may be trained to look for and recognize the following
critical incidents in a sales agent’s performance:
 He treated a customer in a markedly impolite fashion;
 He helped a buyer to prepare an unusually difficult purchase order
 He rejected a customer who was asking for a discount for bulk purchase
 He failed to return an important phone call; and
 These critical incidents are discovered after a thorough study of the personnel
working on a job. The collected incidents are than ranked in order of frequency and
importance.
The advantages of this method are:
 This method provides an objective basis for conducting a discussion of an individual’s
performance.
 Vague impressions and general remarks are avoided, for the supervisors are trained to
record, accurately the actual incidents from the daily activities of an employee.
 This approach reduces the “regency” effect (most recent incidents get too much
emphasis) of most performance rating.
This method suffers however from the following limitations:
1. Negative incidents may be more noticeable than positive incidents.
 2. The supervisors have a tendency to unload a series of complaints about incidents during
an annual performance review session.
3. It results in very close supervision which may not be liked by the employee.
4. The recording of incidents may be a chore for the manager concerned, who may be too
busy or forget to do it.

Essay evaluation:
Under this method, the rater is asked to express the strong as well as weak points of the
employee's behavior.
WHILE PREPARING THE ESSAY ON THE EMPLOYEE, THE RATER CONSIDERS
THE FOLLOWING FACTORS:
(i) Job knowledge and potential of the employee;
(ii) Employee's understanding of the company's programmes, policies, objectives, etc.;
(iii) The employee's relations with co-workers and superiors;
(iv) The employee's general planning, organizing and controlling ability;
(v) The attitudes and perceptions of the employee, in general.

THE ESSAY EVALUATION METHOD HOWEVER, SUFFERS FROM THE

FOLLOWING LIMITATIONS:
1. It is highly subjective; the supervisor may write a biased essay. The employees who are
sycophants will be evaluated more favorably then other employees.
2. Some evaluators may be poor in writing essays on employee performance. Others may be
superficial in explanation and use flowery language which may not reflect the actual
performance of the employee. It is very difficult to find effective writers nowadays.
3. The appraiser is required to find time to prepare the essay. A busy appraiser may write
the essay hurriedly without properly assessing the actual performance of the worker. On
the other hand, appraiser takes a long time, this becomes uneconomical from the view
point of the firm, because the time of the evaluator (supervisor) is costly.
Field Review Method:
When there is a reason to suspect rater’s biased ness or his or her rating appears to be quite
higher than others, these are neutralized with the help of a review process. The review
process is usually conducted by the personnel officer in the HR department.
The review process involves the following activities:
(a) Identify areas of inter-rater disagreement.
(b) Help the group arrive at a consensus.
(c) Ensure that each rater conceives of the standard similarity.
However, the process is a time-consuming one. The supervisors generally resent what they
consider the staff interference. Hence, the method is not widely used.
Confidential report:
• It is mostly used in government organizations.
• It is a descriptive report prepared, generally at the end of every year, by the employee's
immediate superior.
• The report highlights the strengths and weaknesses of the subordinate. The report is not
data based.
• The impressions of the superior about the subordinate are merely recorded there.
• It does not offer any feedback to the appraisee.
• The appraisee is not very sure about why his ratings have fallen despite his best efforts,
why others are rated high when compared to him, how to rectify his mistakes, if any; on
what basis he is going to be evaluated next year, etc.
• Since the report is generally not made public and hence no feedback is available, the
subjective analysis of the superior is likely to be hotly contested.
 • In recent years, due to pressure from courts and trade unions, the details of a negative
confidential report are given to the appraisee.

Management by Objectives:
 This concept was given by Peter.F.Drucker, according to him, the performance of an
employee can be assessed on the basis of the targets achieved by him as set by the
management of an organization. MBO process goes as under.
• Establish goals and desired outcomes for each subordinate
• Setting performance standards
• Comparison of actual goals with goals attained by the employee
• Establish new goals and new strategies for goals not achieved in previous year.
 Firstly, the management sets the goals and communicate the same to the employees, and
then the performance of an employee is compared against these set goals and is evaluated
on this basis.
 In case the employee is not able to achieve the pre-established goals, then management
decides on a new strategy or policy that should be undertaken for the accomplishment of
unattainable goals.
Benefits of MBO :
 MBO helps and increase employee motivation because it helps to relate an individual’s
goals with the organizational goals.
 Managers are more likely to compete with themselves than with others. Since my targets
are to be achieved by me only and hence attempts to better self performance becomes
important.
 MBO forces mangers to PLAN. Since target setting itself requires planning hence this
process aids to planning MBO identifies problems better and early.
 Frequent review sessions help in this. Since it helps to identify performance deficiencies
and enables the management and the employees to understand the training needs.

Drawbacks MBO :
 programme takes a great deal of time, energy and form completing on the part of
managers.
 It is very often difficult to apply MBO concepts to work habits.
 It is hard to think about the results of work rather than the work itself.
 Subordinates may try to set the lowest possible targets to avoid not meeting them.

Behaviorally Anchored Rating Scales (BARS):

 This is a new appraisal technique, which has been recently developed. The procedure for
BARS is usually five stepped.
 Generate Critical Incidents. Person who have the knowledge of a particular job
are asked to describe situations or incidents whereby the effectiveness or
ineffectiveness of an individual’s performance can be judged.
 Develop performance dimensions. The incidents are then clustered into smaller
sets of performance dimensions and each dimension is the defined.
 Relocate incidents: any groups of people who also have knowledge then relocate
the incidents.
 Rating of level of performance for each incident.
 Development of the final instrument. A set of incidents is used as “behaviour
anchors” for the performance dimensions

A BARS can be developed in following steps.

 1. Collecting samples of effective and ineffective job behavior from the experts by
analyzing the critical incident method
2. Converting these samples into performance dimension
3. Relocating the performance dimension (from unacceptable to outstanding)
4. Rating the performance dimension accordingly, starting from 1
5. Finally, using the scale anchor to evaluate employee’s performance

Assessment Centers:
The assessment center is the central location where the managers come and perform the job
exercises.
Here the assessee is requested to participate in in-basket exercises, role playing, discussions,
computer simulations, etc. Where they are evaluated in term of their persuasive ability,
communication skills, confidence, sensitivity to the feelings of others, mental alertness,
administrative ability, etc.
This entire exercise is done under the trainer who observes the employee behavior and then
discusses it with the rater who finally evaluates the employee’s performance.
The characteristics assessed in assessment center can be assertiveness, persuasive ability,
communicating ability, planning and organizational ability, self confidence, resistance to stress,
energy level, decision making, sensitivity to feelings, administrative ability, creativity and
mental alertness etc.

The major limitations are :

 It is a time consuming process.
 A relatively expensive process.
 Assessment center rating are said to be strongly influenced by participants interpersonal
skills.
 Costs of employees traveling and lodging, psychologists, ratings strongly influenced by
assessee’s inter-personal skills. Those who are not selected for this also may get affected.

Advantages – well-conducted assessment center can achieve better forecasts of future

performance and progress than other methods of appraisals. Also reliability, content validity and
predictive ability are said to be high in assessment centers. The tests also make sure that the
wrong people are not hired or promoted. Finally it clearly defines the criteria for selection and
promotion.

360 DEGREE PERFORMANCE APPRAISAL

The 360 degrees Performance Appraisal method was first used in the 1940s. Analogous to the
multiple points on a compass, the 360 method provides each employee the opportunity to receive
performance feedback from his or her supervisor, peers, staff members, co-workers and
customers.
It is a technique which is systematic collection of performance data on an individual group,
derived from a number of stakeholders like immediate supervisors, team members, customers,
peers and self. In fact anyone who has useful information on how an employee does a job may be
one of the appraisers. This technique is highly useful in terms of broader perspective, greater
self-development and multi-source feedback is useful. 360-degree appraisals are useful to
measure inter-personal skills, customer satisfaction and team building skills. However on the
negative side, receiving feedback from multiple sources can be intimidating, threatening etc.
Multiple raters may be less adept at providing balanced and objective feedback.
360 degree appraisal has four integral components:
 Self appraisal
  Superior’s appraisal
 Subordinate’s appraisal
 Peer appraisal.

How to implement 360 degree performance appraisal system?

In order to design an effective 360 degree appraisal system one has to take care of following
things.

 Determine the right skill to be assessed.

 Proper selection of appraiser.
 Proper training should be provided to all the employees about how to use the 360 degree
review system.
 The intention of appraisal system should be elucidate.
 Design simple and easily understandable process.
 Ensure that a follow up is taken after appraisal review

Advantages of 360 degree assessment

 This system provides a comprehensive view towards the performance of employees.

 It improves the credibility of the performance appraisal system
 The feedback from colleagues helps to strengthen the self development process of the
employee
 It also increases the responsibility and alertness of employee towards their clients.
 The different ideas coming from different raters combined provide more accurate 360
degree assessment.
 More persuasive opinions can be gathered from different participants.
 Here not only manager but colleagues are also responsible for assessment of staff
performance which empowers them.
 Employees get motivated who generally undervalue themselves.
 Honest culture can be established among the organization using 360 degree performance
appraisal system.
Disadvantages of 360 degree assessment

 The process is very lengthy, complex and takes a lot of time.

 If the feedback got exchange among the employees it can create trouble and tension
among the staff.
 A lot of effort has to be placed in order to train the employee to effectively use the 360
degree appraisal system.
 It is very difficult to figure out the results.
 Some feedbacks are useless and need to be deleted carefully.
 A suspicious environment can be created in the organization as the information is not
available to everybody.

Cost Accounting Method:

 This method evaluates an employee’s performance from the monetary benefits the
employee yields to his/her organisation. This is ascertained by establishing a relationship
between the costs involved in retaining the employee, and the benefits an organisation
derives from Him/her.
 While evaluating an employee’s performance under this method, the following
factors are also taken into consideration:
 1. Unit wise average value of production or service.
 2. Quality of product produced or service rendered.
 3. Overhead cost incurred.
 4. Accidents, damages, errors, spoilage, wastage caused through unusual wear and tear.
 5. Human relationship with others.
 6. Cost of the time supervisor spent in appraising the employee.

POTENTIAL APPRAISAL:
Potential appraisal is a part of performance appraisal that helps to identify the hidden talents and
potential of the individuals. Identifying these potential talents helps in preparing the individuals
for higher responsibilities and positions in the future.

What is Potential?
Potential can be defined as ‘a latent but unrealised ability’. Potential includes the possible
knowledge, skills, and attitudes the employee may possess for better performance There are
many people who have the desire and potential to advance through the job they are in and
wanting the opportunity to operate at a higher level of competence in the same type of work.

Indicators of Potential:
There exist some indicators of potential which managers meticulously observe and consider
while making decisions about their potential. Some of the indicators are a sense of reality,
imagination, power of analysis, breadth of vision, and persuasiveness.
i. Sense of reality – People usually act based on their thought process. A sense of reality refers to
the extent to which a person thinks and acts objectively, controls his emotional pressure, and
continues to pursue realistic projects with enthusiasm and achieves business goals.
ii. Imagination – Imagination is the mind’s eye. A man dreams by virtue of his imaginative
power. It is the ability to let the mind range over a wide variety of possible causes of actions to
achieve specific results. Imagination goes beyond conventional approaches to situations and does
not remain confined to, ‘this work is done in only one way’.
iii. Power of analysis – Power of analysis refers to the capacity to reformulate, innovate, break
down, and transform an apparently complicated situation into manageable terms. People with
power of analysis believe in, ‘innovate or evaporate’.
iv. Breadth of vision – People need visionary skills and their breadth of vision should be wider.
Breadth of vision means the ability to examine a problem in the context of a much broader
framework of reference. People with breadth of vision can detect relationships with those aspects
within a specific situation which could impact the situation.
v. Persuasiveness – Persuasiveness helps one trying as long as it takes to produce results. It is the
ability to sell ideas to others and gain a continuing commitment. Using managerial authority may
not always produce results. Persuasion refers to using personal influence by way of negotiation.
These five indicators are standard factors that are considered while judging the potential of any
individual. These have helped many organizations in taking decisions.

Objectives of Potential Appraisal:

1. Identification of Employees Having Capabilities to Perform Higher Level Jobs:
It identifies people who have potential to take over higher jobs. This task is difficult to
accomplish in industrial settings. It may take the help of assessment centre/development centres
to find out suitable/capable employees for promotion.
2. Assessment of General Potential:
It assesses whether the employees have abilities to perform some types of work. Employees’
aptitudes, level of competency, skill are appraised for better utilization in the organization
activities.
3. Identification of Training Needs of Employees:
For growth and development of organization employees’ development of skill, knowledge,
abilities is needed. This is possible through training. Potential appraisal identifies the area which
requires training for reinforcement/improvement.
4. Implementing Succession Planning Activities:
It helps organization to effectively carry out succession planning activities by way of providing
data / information in respect of employees who are suitable for filling in vacant posts.
5. Assisting Employees in Personal Development Process:
It makes the employees aware of their strengths and weaknesses through feedback / counselling,
discussion programmes so that they can prepare their personal development plan effectively.

Importance of Potential Appraisal:

1. Evaluation of Capabilities:
With the help of the potential appraisal form, the employees are judged on various performance
and behavioural parameters. Appraising employee’s potential helps to evaluate his capability to
take greater challenges, responsibilities and positions in the organisational hierarchy. It helps
organization to identify the employees who are capable of taking more challenging roles &
responsibilities in future.
2. Succession Planning:
Succession planning is a process for identifying and developing new leaders, who can replace
old leaders when they leave, retire or die. Such planning increases the availability of experienced
and capable employees that are prepared to assume these roles as they become available. Most
organisations incorporate potential appraisal in their appraisal processes for identifying and
developing suitable employee base for succession planning.
3. Career Development:
The potential appraisal results in identification of hidden talents and skills of an employee. The
employee himself might not be aware of his certain competencies. The potential appraisal aids in
career development of an employee by giving him opportunity to work on his potential
capabilities.
4. Motivate Employees:
It leads to identification of hidden talents & thereby motivates the employees to further develop
their skills and competencies. It also benefits the organization as it results in versatile workforce
who can assume greater roles & responsibilities in future.
5. Identify Training Needs:
The potential appraisal helps the organization to identify the training needs. Such appraisal
throws light on the hidden competencies of employees which could be developed further with the
help of appropriate training programmes.
6. Organizational Goals:
The potential appraisal concentrates on the future. It helps to create a pool of experienced and
capable employees by giving them opportunity to discover their hidden talent. It also helps
employees to develop their personal interests in alignment with the organisational goals.

TECHNIQUES OF POTENTIAL APPRAISAL:

The techniques of potential appraisal are as follows:
1. Self-Appraisals:
A self-appraisal form is prepared, which is required to be filled by the employee.
2. Peer Appraisals:
The HR Head may design a form for peer appraisal or ask the peers in confidence in small size
companies, to take feedback on the employee
3. Superior Appraisals:
The superiors are always required to carry out appraisal in every setup, which may be defined
annual appraisals by way of confidential reports or any other method
4. MBO:
The use of management objectives was first widely advocated in the 1950s by the noted
management theorist Peter Drucker. MBO (management by objectives) methods of performance
appraisal are results-oriented. That is, they seek to measure employee performance by examining
the extent to which predetermined work objectives have been met.
Usually the objectives are established jointly by the supervisor and subordinate. Once an
objective is agreed, the employee is usually expected to self-audit; that is, to identify the skills
needed to achieve the objective. Typically they do not rely on others to locate and specify their
strengths and weaknesses. They are expected to monitor their own development and progress.
5. Psychological and Psychometric Tests:
Since the early 1900’s, psychologists have employed testing in an effort to quantify people’s
intelligence, preferences, and behaviors. Today these assessments, called psychometric tests are
used in schools, the military, mental health clinics, psychotherapists’ offices, correctional
facilities, and in companies. Market analysts commonly use psychometric testing to determine
people’s preferences for products, packaging, and branding.

MODULE II
MEASURING PERFORMANCE:

A performance measure is a numeric description of an agency’s work and the results of that
work. Performance measures are based on data, and tell a story about whether an agency or
activity is achieving its objectives and if progress is being made toward attaining policy or
organizational goals. In technical terms, a performance measure is a quantifiable expression of
the amount, cost, or result of activities that indicate how much, how well, and at what level,
products or services are provided to customers during a given time period.

“Quantifiable” means the description can be counted more than once, or measured using
numbers.

“Activities” mean the work, business processes and functions of Washington state government
agencies.

“Results” are what the agency’s work is intended to achieve or accomplish for its customers.

Examples of performance measures:

• Average days to process a permit per quarter
• Number of acres cleared per year
• Percentage of graduates finding work within one month
Criteria for performance measures:
Performance Measures Criteria used to evaluate Performance Management Systems:
Good performance measures are:
• Relevant
• Understandable
• Timely
• Comparable
• Reliable
• Cost effective
 Relevant measures matter to the intended audience, and clearly relate to the activity being
measured. Logic models are a way of establishing relevant measures.
 Understandable measures are clear, concise, and easy for a non-specialist to comprehend.
This applies to language used in the title and description, and to technical aspects of the
measure such as the scale used in charts or selection of performance targets.
 Timely measures have information available frequently enough to have value in making
decisions.
 Comparable measures have enough data to tell if performance is getting better, worse or
staying about the same. They also provide the reader with a frame of reference or context
to tell if current performance meets or exceeds expectations.
 Reliable measures have data that is verifiable, free from bias, and an accurate
representation of what it is intended to be.
 Cost effective measures justify the time and effort to collect, record, display, and analyze
the data given the measure’s value. Another aspect of cost-effectiveness is feasibility. For
instance, an ideal metric may require data collection, the scope and scale of which is far
beyond its potential usefulness.

CLASSIFICATION OF MEASURES:
 TYPES OF MEASURES: There are five specific types of measures they are:
Input: Input measures monitor the amount of resources being used to develop, maintain, or
deliver a product, activity or service. Examples include:
 Money spent on equipment
 Number of employee hours worked
 Number of vehicles
 Facility costs
 Total operating expenditures
 Rental fees
 Number of full-time employees
Output
Output measures monitor “how much” was produced or provided. They provide a number
indicating how many items, referrals, actions, products, etc. were involved. Examples include:

 Number of permits issued

 Number of pavement miles resurfaced
 Number of people trained
 Number of water leaks fixed
 Number of cases managed
 Number of arrests made
 Number of documents processed
 Number of clients served
Efficiency
Efficiency measures are used to monitor the relationship between the amount produced and the
resources used. This means that efficiency measures are created by comparing input and output,
see expressing measures with two or more variables. There are two general types of efficiency
measures: unit cost and productivity. Unit cost is a comparison of an input to an output (i.e.
resources used/number produced). Productivity is a comparison of an output to an input (i.e.
number produced/resources used). Examples include:
Unit Cost
 Cost per license issued
 Cost per employee taught
 Cost per lane-mile paved
 Cost per client served
 Cost per document
Productivity
 Licenses processed per employee-hour
 Units produced per week
 Students taught per instructor
 Cases resolved per agent
 Calls handled per hour
Quality
Quality measures are used to determine whether customer expectations are being met. These
expectations can take many forms, including: timeliness, accuracy, meeting regulatory
requirements, courtesy, and meeting customer needs. The expectations can be identified as a
result of internal or external feedback.
The comparison of outputs is often used to create measures of quality. It may be important to
identify certain aspects (aspects / total outputs) about the services, products or activities
produced by an organization that are important to its customers. This comparison of specific
outputs to total outputs is used to create measures of accuracy, timeliness and to determine the
extent regulatory requirements are met. Quality measures can also be derived from the
evaluation of customer feedback data. See expressing measures with two or more variables.
Examples include:

Timeliness
 Busy signal rate
 Percent of drivers licenses issued within one hour.
Accuracy
 Percent of applications requiring rework due to internal errors.
 Taxpayer error rate on tax returns.
Requirements
 Percent of wells meeting minimum water quality requirements.
 Percentage of clients that rated themselves as successfully rehabilitated.
Meeting Customer Needs
 Percentage of customers that rated service good, very good or excellent.
Outcome
Outcome measures are used determine the extent to which a core function, goal, activity,
product, or service has impacted its intended audience. These measures are usually built around
the specific purpose or result the function, goal, service, product, or activity is intended to deliver
or fulfill. An outcome measure should show progress towards or achievement of agency mission
or goals. See expressing measures with two or more variables. Examples include:
 Highway death rate
 Crime recidivism rate
 Percent of persons able to read and write after attending a remedial
 education course
 Percent of entities in compliance with requirements
 Percent of clients rehabilitated
 Percent of cases resolved

BALANCE SCORE-CARD:
The Balanced Scorecard is a strategic planning and management system used to align business
activities to the vision and strategy of the organization by monitoring performance against
strategic goals.
The balanced scorecard (BSC) is a strategic planning and management system that organizations
use to:

 Communicate what they are trying to accomplish

 Align the day-to-day work that everyone is doing with strategy
 Prioritize projects, products, and services
 Measure and monitor progress towards strategic targets
A key benefit of using a disciplined framework is that it gives organizations a way to “connect
the dots” between the various components of strategic planning and management, meaning that
there will be a visible connection between the projects and programs that people are working on,
the measurements being used to track success (KPIs), the strategic objectives the organization is
trying to accomplish, and the mission, vision, and strategy of the organization.

WHY USE A BALANCED SCORECARD?

 Improve organizational performance by measuring what matters

 Increase focus on strategy and results
 Align organization strategy with workers on a day-to-day basis
 Focus on the drivers key to future performance
 Improve communication of the organization’s Vision and Strategy
 Prioritize Projects / Initiatives

THE BASICS OF BALANCED SCORECARD

The four boxes represent the main areas of consideration under balanced scorecard.

The balanced scorecard is divided into four main areas and a successful organization is one that
finds the right balance between these areas.
Each area (perspective) represents a different aspect of the business organization in order to
operate at optimal capacity.
• Financial Perspective - This consists of costs or measurement involved, in terms of rate
of return on capital (ROI) employed and operating income of the organization.
• Customer Perspective - Measures the level of customer satisfaction, customer retention
and market share held by the organization.
• Business Process Perspective - This consists of measures such as cost and quality related
to the business processes.
• Learning and Growth Perspective - Consists of measures such as employee satisfaction,
employee retention and knowledge management.

FEATURES OF BALANCED SCORECARD:

There are four perspectives on a balanced scorecard. Each of these four perspectives should be
considered with respect to the following factors.
When it comes to defining and assessing the four perspectives, following factors are used:
Objectives - This reflects the organization's objectives such as profitability or market share.
Measures - Based on the objectives, measures will be put in place to gauge the progress of
achieving objectives.
Targets - This could be department based or overall as a company. There will be specific targets
that have been set to achieve the measures.
Initiatives - These could be classified as actions that are taken to meet the objectives.

Advantages Of BSC
• It is used to align the business activities to vision and strategy
• It improves Internal & External communications
• It is used to monitor organizations performance
• It provides management with comprehensive picture of operations
• It provides strategic feed back
• It improves decisions & better solutions

Disadvantages Of BSC
• It Doesn’t provide Recommendations
• It is not fully Efficient
• It takes time
• It is High Implementation of cost
• It can show low profit
What is EVA?
Economic Value Added (EVA) is a measure of financial performance based on the concept
that all capital has a cost and that earning more than the cost of capital creates value for
shareholders.
It is after-tax net operating profit (NOPAT) minus a capital charge. It is true economic profit
consisting of all costs including the cost of capital. If a company’s return on capital exceeds
its cost of capital it is creating true value for the shareholder.
EVA Calculation:
EVA = (r-c) x Capital
EVA = (r x Capital) – (c x Capital)
EVA = NOPAT- c x Capital
EVA = operating profits – a capital charge
where: r = rate of return, and
c = cost of capital, or the weighted average cost of capital.
The equation of the Economic Value Added is simple.
Economic Value Added = Net Operating Profits after Taxes- (Capital x minimum rate of
return)
For example: Mr. X own a company, and want to open another branch elsewhere. Mr. X
have $50,000 to invest in his new branch. Mr. X do the math and find out that he will make a
profit of around $5,000 per year. Mr. X also want at least a 15% return on capital for his
contribution. Once it substitute all these numbers into the equation, will get:
$5,000 – ($50,000 x 15%) = -$2,500
This proves that such an investment would be a loss. The negative answer should let his
investment to be a failure, and so, Mr. X should invest his $50,000 on something more
profitable.

NOPAT is profits derived from a company’s operations after taxes but before financing costs
and noncash-bookkeeping entries. It is the total pool of profits available to provide a cash
return to those who provide capital to the firm.
Capital is the amount of cash invested in the business, net of depreciation. It can be
calculated as the sum of interest-bearing debt and equity or as the sum of net assets less
noninterest-bearing current liabilities.
Capital charge is the cash flow required to compensate investors for the riskiness of the
business given the amount of capital invested. The cost of capital is the minimum rate of
return on capital required to compensate debt and equity investors for bearing risk.
RONA
Another perspective on EVA can be gained by looking at a firm’s Return on Net Assets
(RONA). RONA is a ratio that is calculated by dividing a firm’s NOPAT by the amount of
capital it employs (RONA = NOPAT/Capital) after making the necessary adjustments of the
data reported by a conventional financial accounting system.
EVA = (Net Investments)(RONA – Required minimum return)
If RONA is above the threshold rate, EVA is positive.

Advantages:
EVA is a tool which helps to focus managers’ attention on the impact of their decisions in
increasing shareholders’ wealth.
(n) EVA is a good guide for investors; as on the bias of EVA, they can decide whether a
particular company is worth investing money in or not.
(iii) EVA can be used as a basis for valuation of goodwill and shares.
(iv) EVA is a good controlling device in a decentralised enterprise. Management can apply
EVA to find out EVA contribution of each decentralised unit or segment of the company.
(v) EVA linked compensation schemes (for both operatives and managers) can be developed
towards protecting (or rather improving) shareholders’ wealth.

Disadvantages:
• EVA does not take size differences into consideration. A plant or division that is larger in
size will obviously have a higher EVA, in comparison to something that is smaller in
size, which could distort your calculations and give you an inaccurate result.
• EVA can be used for personal gains by the manager, which might not be particularly
profitable for the firm.
• EVA might overemphasize the immediate need to generate the results. It might put more
emphasis on short-term gains than long-term ones.

Market Value Added (MVA):

• MVA is the difference between the current market value of the company and the capital
employed by it. Suppose the market value of the company (the sum of the market value
of equity and debt) is Rs. 1.00,000 and its economic book value of capital is Rs.80, 000;
then MVA is Rs 20,000 (1, 00,000-80,000).
• If the market value of a company exceeds its capital employed; MVA is positive, if, on
the other hand, market value of a company is less than its capital employed; MVA is
negative

Relationships between EVA and MVA:

• MVA is simply the present value of all the future EVAs.

• Where, C = weighted average cost of capital

WHAT IS THE EFQM MODEL?

• EFQM stands for: European Foundation for Quality Management. EFQM was founded in
1988 with the objective to create a platform where organizations can learn from each
other to continuously improve their performance.
• The EFQM Model is a globally-recognized management framework which allows
organizations to achieve success by measuring where they are on the path towards
transformation, helping them understand the gaps and possible solutions available, and
empowering them to progress and significantly improve their organization’s
performance.
• EFQM wants to support managers and directors in training, sharing ideas and innovating
with the aid of the so-called EFQM model as a common framework.
• It supports to self-assess and reflect. 84% of our members say that the EFQM model
helps to improve their organisation.
The EFQM Model
• This quality management model aims at sustainable excellence in which quality,
efficiency and sustainability are the key elements.
• The basis of the EFQM Model consists of the Total Quality Management
(TQM) concept. It consists of a universal framework of concepts, thus enabling
 organizations to share information in an effective way, irrespective of the different
sectors, cultures and life stages in which they are located.
• Organizations can thus take other organizations as a model, so that they obtain insight
into how far they meet the image of a high-quality organization.

The EFQM Model consists of nine criteria that are subdivided into five Enablers and four
Results:

• The framework of the EFQM Excellence Model is based on nine criteria. Five of these
are Enablers' and four are 'Results'.
• The 'Enabler' criteria cover what an organisation does. The 'Results' criteria cover what
an organisation achieves. Results' are caused by 'Enablers' and feedback from 'Results'
help to improve 'Enablers'.
The five organizational areas indicate how these objectives can be achieved:
1. Leadership
2. People
3. Policy & Strategy
4. Partnerships & Resources
5. Processes
The four results indicate what the intended objectives are:
1. People Result
2. Customer Result
3. Society Result
4. Key Performance Results

The fundamental concepts which underpin the EFQM mode:

Results Orientation - Excellence is achieving results that impress all the organization's
stakeholders.
Customer Focus - Excellence is creating sustainable customer value.
Leadership & Constancy of Purpose - Excellence is visionary and inspirational leadership,
coupled with purpose.
Management by Processes & Facts - Excellence is managing the organization through a set
of interdependent and interrelated systems, processes and facts.
People Development & Involvement - Excellence is maximizing the contribution of
employees through their development and involvement.
Continuous Learning, Innovation & Improvement - Excellence is challenging the status
quo and effecting change by using learning to create innovation and improvement
opportunities.
Partnership Development - Excellence is developing and maintaining value-adding
partnerships.
Corporate Social Responsibility - Excellence is exceeding the minimum regulatory
framework in which the organization operates and to strive to understand and respond to the
expectations of their stakeholders in society .
1. LEADERSHIP :
Excellent organisations have leaders who shape the future and make it happen, acting as role
models for its values and ethics and inspiring trust at all times. They are flexible, enabling the
organisation to anticipate and react in a timely manner to ensure the on-going success of the
organisation.
„ a. Leaders develop the Mission, Vision, Values and ethics and act as role models. „
b. Leaders define, monitor, review and drive the improvement of the organisation’s
management system and performance. „
c. Leaders engage with external stakeholders. „
d. Leaders reinforce a culture of excellence with the organisation’s people. „
e. Leaders ensure that the organisation is flexible and manages change effectively

2. PEOPLE :
Excellent organisations value their people and create a culture that allows the mutually
beneficial achievement of organisational and personal goals. They develop the capabilities of
their people and promote fairness and equality. They care for, communicate, reward and
recognise, in a way that motivates people, builds commitment and enables them to use their
skills and knowledge for the benefit of the organisation. „
a. People plans support the organisation’s strategy. „
b. People’s knowledge and capabilities are developed. „
c. People are aligned, involved and empowered. „
d. People communicate effectively throughout the organisation. „
e. People are rewarded, recognized and cared for.

3. STRATEGY :
Excellent organisations implement their Mission and Vision by developing a stakeholder
focused strategy. Policies, plans, objectives and processes are developed and deployed to
deliver the strategy. „
a. Strategy is based on understanding the needs and expectations of both stakeholders and
the external environment. „
b. Strategy is based on understanding internal performance and capabilities. „
c. Strategy and supporting policies are developed, reviewed and updated. „
d. Strategy and supporting policies are communicated, implemented and monitored.

4. PARTNERSHIPS & RESOURCES :

Excellent organisations plan and manage external partnerships, suppliers and internal
resources in order to support their strategy, policies and the effective operation of processes.
They ensure that they effectively manage their environmental and societal impact.
„ a. Partners and suppliers are managed for sustainable benefit. „
b. Finances are managed to secure sustained success. „
c. Buildings, equipment, materials and natural resources are managed in a sustainable way. „
d. Technology is managed to support the delivery of strategy. „
e. Information and knowledge are managed to support effective decision making and to
build the organisation’s capability

5. PROCESSES, PRODUCTS & SERVICES :

Excellent organisations design, manage and improve processes, products and services to
generate increasing value for customers and other stakeholders. „
a. Processes are designed and managed to optimize stakeholder value.
b. Products and services are developed to create optimum value for customers. „
c. Products and services are effectively promoted and marketed. „
d. Products and services are produced, delivered and managed. „
e. Customer relationships are managed and enhanced.

A. CUSTOMER RESULTS :
Excellent organisations achieve and sustain outstanding results that meet or exceed the needs
and expectations of their customers. In practice, it find that excellent organisations: „
• Use a set of perception measures and related performance indicators to determine the
successful deployment of their strategy and supporting policies, based on the needs and
expectations of their customers. „
• Set clear targets for the key customer results based on the needs and expectations of their
customers, in line with their chosen strategy. „
• Segment results to understand the experience, needs and expectations of specific
customer groups. „
• Demonstrate positive or sustained good customer results over at least 3 years. „
• Clearly understand the underlying reasons and drivers of observed trends and the impact
these results will have on other performance indicators, perceptions and related
outcomes. „
• Have confidence in their future performance and results based on their understanding of
the cause and effect relationships established. „
• Understand how their key customer results compare to similar organisations and use this
data, where relevant, for target setting.

B. PEOPLE RESULTS:
These are the people’s perception of the organisation. These may be obtained from a number
of sources, including surveys, focus groups, interviews and structured appraisals.

MEASURES COULD INCLUDE PERCEPTIONS OF: „ Satisfaction, involvement and

engagement „ Motivation and empowerment „ Leadership and management „ Competency
and performance management „ Training and career development „ Effective
communications „ Working conditions.
C. SOCIETY RESULT:
This is society’s perception of the organisation. This may be obtained from a number of
sources, including surveys, reports, press articles, public meetings, Non-Governmental
Organisations, public representatives and governmental authorities. These perceptions should
give a clear understanding of the effectiveness, from society’s perspective, of the deployment
and outcomes of the organisation’s societal and environmental strategy and supporting
policies and processes.
MEASURES COULD INCLUDE PERCEPTIONS OF: „ Environmental impact „ Image and
reputation „ Societal impact „ Workplace impact „ Awards and media coverage.

D. BUSINESS RESULTS:
These are the key financial and non-financial business outcomes which demonstrate the
success of the organisation’s deployment of their strategy.
The set of measures and relevant targets will be defined and agreed with the business
stakeholders.
OUTCOME MEASURES COULD INCLUDE: „
Financial outcomes ,„ Business stakeholder perceptions „ ,Performance against budget
„ ,Volume of key products or services delivered „ ,Key process outcomes

Performance Review Process :

• It is an assessment tool to evaluate the performance of staff and employees of a company
or organization, the review template is ideal to assess employee’s performance as well as
the overall performance of an organization in a particular course of time.
• Financial reviews, sales reviews, marketing reviews and other performance reviews can
be evaluate by this performance review process .
• Performance reviews are two-fold; it’s both for employee evaluation and development.
• Performance reviews should not be confined to giving employees reports with ratings.
Instead, the process can be an interactive reflection of the employee’s performance.
• That’s why managers must plan for performance reviews. Doing so helps to leverage the
opportunity to evaluate and support employee growth.
Planning for performance reviews should include the following elements:
1. Define the purpose of your organization’s performance review process.
2. Understand your organization’s values, goals, and expectations.
3. Align individual goals and expectations to the organization’s vision and core values.

OBJECTIVES:
Performance reviews can be done with the following objectives in mind:
• Maintaining records in order to determine compensation packages, wage structure, salary
increases and bonus schemes
• Identifying the strengths and weaknesses of employees. This helps ensure that the right
people are in the right job. Happy employees promote a positive and happy work place.
• Maintaining and assessing the potential further growth and development of an employee
• Providing feedback to employees regarding their performance

KEY STEPS TO TAKE PLANNING PERFORMANCE REVIEWS:

Make sure the employee’s job description is up-to-date. Like performance reviews, job
descriptions should be updated at least once a year. One of the most accurate ways to update
a job description is to have the employee review it themselves. Without an up-to-date job
description, it becomes impossible to provide accurate feedback because there are different
expectations for every responsibility. So before anything else, make revisions were needed to
job descriptions.
Clarify key job functions. This essentially means asking “what are the core reasons for this
position to exist?”. Have these job functions changed since the last performance review? Do
some need to be added or replaced? Having identified key job functions will help guide you
in setting any new performance expectations.
Revisit performance expectations. With a current job description and key job functions, it’s
review and updates performance expectations. Performance expectations should be a list of
outcomes that will occur if all key job functions were fulfilled. As a rule of thumb,
performance expectations should be developed collaboratively and aligned with the goals and
core values of the company.
Revisit goals and/or objectives. When planning for performance reviews, it can revisit
several types of goals into the process. As it have identified before, there’s both evaluation
and development are crucial takeaways to every review cycle. That’s why job function and
development goals should be assessed and set.

Review Process for Different Position:

New Staff Employees
New staff employees (and current employees beginning a new position) have a six month
provisional period in which supervisors are asked to provide adequate training, monitor
employees work, and deliver ongoing coaching and feedback. Towards the end of a new
employee's provisional period, the supervisor is asked to complete a provisional report which
is shared with the employee. The provisional report focuses on the key accountabilities of the
position.
Current Staff Employees
Staff and supervisors are required to meet four times a year to discuss the employee’s
performance. The fourth meeting should be a summary of the previous meetings and time to
discuss plans for the next year. Employees and supervisors are expected to document
progress and outcomes for Key Accountabilities, Success Factors and goals. The self-
appraisal and supervisor's assessment sets the stage for a performance discussion to review
results and start planning for the next performance period.
Research Employees
Research employees (research scientists, research engineers, research associates, and
research interns) may also be asked to participate in the annual appraisal process at their
department's and/or supervisor's request. The process is the same as for classified staff.
However, your appraisal will focus on project goals and assignments rather than key
accountabilities.

HOW TO BUILD AN EFFECTIVE PERFORMANCE REVIEW PROCESS:

1. Introduce useful employee evaluation techniques:
• Critical incidents: With critical incidents reviews, managers keep logs with instances
when employees did exceptional work or made serious mistakes. This technique helps
managers remember significant events so they can justify their employee performance
evaluations with detailed examples.
• Performance measurements: Measurements are useful in quantifying an employee’s
work. Discuss what metrics make sense for each team. For example, sales teams may use
the number of successful sales calls per week as a possible metric in an employee
performance review.
• Detailed rating scales: Consider using behaviorally anchored rating
scales (BARS) where every point of the scale is accurately defined to avoid inconsistent
employee evaluations (e.g. a score of five on a five-point scale can mean a customer
support representative “answers all customer questions quickly and accurately, with
minimum supervision.”)

2. Complement formal performance reviews with frequent feedback:

• Too many meetings can be impractical. Opt for short, weekly or bi-weekly meetings
• An open-door culture is important. Employees want to be heard. If their manager isn’t
accessible, frequent meetings may not yield the best results.

3. Take advantage of technology:

Performance reviews can be time-consuming for managers. Technology can save time and
streamline the process:
Project management tools, like asana and trello, help with task and goal monitoring.
Performance review software, like small improvements and spidergap, can help you keep
all assessments in one place and review them more easily.
Instant feedback apps, like impraise and tinypulse, are becoming more popular. Managers
and employees can provide or access evaluations at any time.

4. Encourage management by performance objectives:

• Ask for their team members’ input.
• Align an individual employee’s goals with team and organizational goals. Employees
should know how their work adds value to their company’s business.
• Set high but attainable goals. Setting unrealistic goals can demoralize employees, while
setting the bar too low can make their job feel purposeless. Use the smart
method (specific, measurable, appropriate, realistic, time-bound) when setting goals.

5. Teach managers to give meaningful employee feedback:

Managers can arrange a meeting with their team members to discuss performance, and they
can make the most of those discussions if they:
• Open with positive feedback to set the tone of their meeting and help their employees
relax.
• Avoid inflating or downplaying problems and focus on corrective actions.
• Back their reviews up with evidence. If they have given a low rating to an employee for a
specific skill, they should explain why.
• Ask team members for their suggestions on how to improve their own performance, and
use their input to create a development plan.
• Discuss plans to enhance team members’ strengths.

ADVANTAGES OF PERFORMANCE REVIEWS:

Conducting regular performance reviews, should be seen as an investment for the business as
Performance offer many benefits, including:
• Promotion: Performance reviews can help Managers/Supervisors discuss and consider
any promotion or successional opportunities for high performing employees.
• Compensation: Performance reviews can help Managers/Supervisors better determine
attractive compensation packages for employees. By merit rating and taking into
consideration work performance, attendance, communication etc during a review,
employers can better determine salary packages. Packages could include bonuses, higher
salary rates, extra benefits and allowances for effective employees.
• Employees Development: Performance reviews help Managers/Supervisors to frame
future training policies and programs. It also helps to analyse strengths and weaknesses of
employees, to ascertain if the right employee is in the right job.
• Communication: For any organization, effective communication between employees
and employers is very important. Having an honest approach during performance
reviews and an ‘open door’ policy further creates a caring culture where employees feel
listened to and validated.

REWARD MANAGEMENT:
PERFORMANCE MANAGEMENT LINKED REWARDSYSTEMS:
A traditional approach in implementing reward systems is to reward employees for
the positions they fill as indicated by their job descriptions and not necessarily by
how they do their work. In traditional reward systems, the type of position and seniority are
the determinants of salary and salary increases, not performance. In such reward systems,
there is no relationship between performance management and rewards.
Contingent pay (CP), also called pay for performance, means that individuals are rewarded
based on how well they perform on the job.

LEGAL PRINCIPLES AFFECTING PERFORMANCE MANAGEMENT :

There are six important concepts that often come into play in the case of litigation related to
the implementation of a performance management system: employment at will, negligence,
defamation, misrepresentation, adverse impact, and illegal discrimination.
 Employment at will. In employment at will, the employer or employee can end the
employment relationship at any time. This type of employment relationship gives
employers considerable latitude in determining whether, when, and how to measure
and reward performance
 First, there may be an implied contract derived from conversations with others in the
organization or from information found in the company’s documentation (e.g.,
employee handbook) indicating that employees would be terminated for just cause
only. Second, decisions about terminating an employee should consider a potential
violation of public policy.
 Negligence. Many organizations outline a performance management system in their
employee manual, employment contract, or other materials. When the system is
described in such documents and not implemented as described, legal problems can
arise. For example, there may be a description of how frequently appraisals take
place, or how frequently supervisors and employees are to meet formally to discuss
performance issues. If an employee receives what she believes is an unfair
performance evaluation and the system has not been implemented as was expected,
she may be able to challenge the system based on negligence on the part of the
organization.
 Defamation. Defamation is the disclosure of untrue, unfavorable performance
information that damages an employee’s reputation. An employee can argue that the
organization defamed her if the employer states false and libelous information during
the course of the performance evaluation. Defamation can also occur if the
organization negligently or intentionally communicates these statements to a third
party such as a potential future employer, thus subjecting the employee to harm or
loss of reputation.
 Misrepresentation. Whereas defamation is about disclosing untrue unfavorable
information, misrepresentation is about disclosing untrue favorable performance, and
this information causes risk or harm to others. When a past employer provides a
glowing recommendation for a former employee who was actually terminated
because of poor performance, that employer is guilty of misrepresentation.
 Adverse impact. Adverse impact, also called unintentional discrimination, occurs
when the performance management system has an unintentional impact on a
protected class
 Illegal discrimination. Illegal discrimination, also called disparate treatment, means
that raters assign scores differentially to various employees based on factors that are
 not performance related, such as race, nationality, color, or ethnic and national origin.
As a consequence of such ratings, some employees receive more training, feedback,
or rewards, than others.

CHARACTERISTICS OF LEGALLY SOUND PERFORMANCE

MANAGEMENT SYSTEMS:
 Performance dimensions and standards are clearly defined and explained to
the employee, are job related, and are within the control of the employee.
 Procedures are standardized and uniform for all employees within a job group.
 The system is formally explained and communicated to all employees.
 Employees are given timely information on performance deficiencies and
opportunities to correct them. Employees are given a voice in the review
process and are treated with courtesy and civility throughout the process.
 The system includes a formal appeals process. Performance information is
gathered from multiple, diverse, and unbiased raters.
 Supervisors are provided with formal training and information on how to
manage the performance of their employees.
 The system includes thorough and consistent documentation, including
specific examples of performance based on firsthand knowledge.
 The system includes procedures to detect potentially discriminatory effects or
biases and abuses in the system.

LAWS AFFECTING PERFORMANCE MANAGEMENT:

For example, the following laws have been passed in the United Kingdom:
• Equal Pay Act of 1970. Aims to give individuals the right to the same
contractual pay and benefits as a person of the opposite sex in the same
employment.
• Race Relations Act of 1976. Makes it illegal to discriminate against someone on
the grounds of color, race, nationality or ethnic or national origins.
• Sex Discrimination Act of 1975. Makes it illegal to discriminate on the grounds
of sex, marital status, and gender reassignment in a limited manner.
• Disability Discrimination Act of 1995. Makes it illegal to discriminate on the
grounds of disability status.
• Employment Equality (Sexual Orientation) Regulations 2003. Makes it illegal
to discriminate on the grounds of sexual orientation.
• Employment Equality (Religion or Belief) Regulations 2003. Makes it illegal to
discriminate on the grounds of religion and belief.
Similarly, the following laws have been passed in the United States:
• Equal Pay Act of 1963. Prohibits sex discrimination in the payment of wages.
• Civil Rights Act of 1964 (as amended by the Equal Employment Opportunity
Act of 1972). Prohibits discrimination on the basis of race, color, religion, sex, or
national origin.
• Age Discrimination in Employment Act of 1967 (as amended in 1986). Prohibits
discrimination on the basis of age.
• Americans with Disabilities Act of 1990. Makes it illegal to discriminate against
people with disabilities.

Reward management defined:

Reward management is concerned with the strategies, policies and processes required to ensure
that the value of people and the contribution they make to achieving organizational,
departmental and team goals is recognized and rewarded.
It is about the design, implementation and maintenance of reward systems (interrelated reward
processes, practices and procedures) that aim to satisfy the needs of both the organization and
its stakeholders and to operate fairly, equitably and consistently.
These systems will include arrangements for assessing the value of jobs through job evaluation
and market pricing, the design and management of grade and pay structures, performance
management processes, schemes for rewarding and recognizing people according to their
individual performance or contribution and/or team or organizational performance.

OBJECTIVE OF REWARD SYSTEM:

 Reward management deals with processes, policies and strategies which are required to
guarantee that the contribution of employees to the business is recognized by all means.
 To reward employees fairly, equitably and consistently in correlation to the value of
these individuals to the organization.
 Reward system exists in order to motivate employees to work towards achieving
strategic goals which are set by entities.
 Reward management is not only concerned with pay and employee benefits.
 It is equally concerned with non-financial rewards such as recognition, training,
development and increased job responsibility.

 Extrinsic reward are direct indirect financial and non financial reward that are external
to the job and come from outside source mainly management. It is related with job
context. Extrinsic reward focuses on optimum use of human resource, maximize
productivity and achieve predetermined objective. Extrinsic rewards includes , • Pay •
Fringe benefits • Job security • Good working environment • Supportive supervision •
 Status, promotion • Recognition, praise. There are various Extrinsic reward system.
These are:
 Bonuses: Usually annually, Bonuses motivates the employee to put in all endeavours
and efforts during the year to achieve more than a satisfactory appraisal that increases
the chance of earning several salaries as lump sum. The scheme of bonuses varies
within organizations; some organizations ensure fixed bonuses which eliminate the
element of asymmetric information, conversely, other organizations deal with bonuses
in terms of performance which is subjective and may develop some sort of bias which
may discourage employees and create setback. Therefore, managers must be extra
cautious and unbiased.
 Salary raise: Is achieved after hard work and effort of employees, attaining and
acquiring new skills or academic certificates and as appreciation for employees duty
(yearly increments) in an organization. This type of reward is beneficial for the reason
that it motivates employees in developing their skills and competence which is also an
investment for the organization due to increased productivity and performance. This
type of reward offers long-term satisfaction to employees. Nevertheless, managers must
also be fair and equal with employees serving the organization and eliminate the
possibility of adverse selection where some employees can be treated superior or
inferior to others.
 Gifts: Are considered short-term. Mainly presented as a token of appreciation for an
achievement or obtaining an organizations desired goal. Any employee would
appreciate a tangible matter that boosts their self-esteem for the reason of recognition
and appreciation from the management. This type of reward basically provides a clear
vision of the employee's correct path and motivates employee into stabilising or
increasing their efforts to achieve higher returns and attainments. Monetary gifts, such
as Gift cards are also more likely to be used for luxury purchases and can build an
emotional bond with the organisation.
 Promotion: Quite similar to the former type of reward. Promotions tend to effect the
long-term satisfaction of employees. This can be done by elevating the employee to a
higher stage and offering a title with increased accountability and responsibility due to
employee efforts, behaviour and period serving a specific organization. This type of
reward is vital for the main reason of redundancy and routine. The employee is
motivated in this type of reward to contribute all his efforts in order to gain
managements trust and acquire their delegation and responsibility. The issue revolved
around promotion is adverse selection and managers must be fair and reasonable in
promoting their employees.
 Other kinds of tangible rewards

 Intrinsic reward are the personal satisfaction of employees derived directly from their
jobs. It is related with job content. Intrinsic reward focuses on job satisfaction high
level of motivation of employees. Intrinsic rewards includes, • Achievement •
Involvement • Independency • Participation • Self-responsibility • Facing challenges •
Self development • Work itself. There are various intrinsic reward system. These are:
 Information / feedback: Also a significant type of reward that successful and effective
managers never neglect. This type of rewards offers guidance to employees whether
positive (remain on track) or negative (guidance to the correct path). This also creates a
bond and adds value to the relationship of managers and employees.
  Recognition: Is recognizing an employee's performance by verbal appreciation. This
type of reward may take the presence of being formal for example meeting or informal
such as a "pat on the back" to boost employees self-esteem and happiness which will
result in additional contributing efforts.
 Trust/empowerment: in any society or organization, trust is a vital aspect between
living individuals in order to add value to any relationship. This form of reliance is
essential in order to complete tasks successfully. Also, takes place in empowerment
when managers delegate tasks to employees. This adds importance to an employee
where his decisions and actions are reflected. Therefore, this reward may benefit
organizations for the idea of two minds better than one.
Intrinsic rewards makes the employee feel better in the organization, while Extrinsic rewards
focus on the performance and activities of the employee in order to attain a certain outcome. The
principal difficulty is to find a balance between employees' performance (extrinsic) and
happiness (intrinsic).[11]
The reward also needs to be according to the employee's personality. For instance, a sports fan
will be really happy to get some tickets for the next big match. However a mother who passes all
her time with her children, may not use them and therefore they will be wasted.

 Financial rewards financial rewards are monetary rewards in order to enhance

employees financial wellbeing. They are tangible and fulfill financial need of
employees. Financial rewards includes: pay • allowances • fringe benefits • bonus •
profit sharing • piece rate system • retirement benefits • prize, awards financial rewards

 Non-financial rewards non financial rewards are non monetary incentives created to
add attraction to life on the job. They are intangible and fulfill psychological need of
employees. Non-financial rewards includes • achievement • recognition • appreciation •
respect • praise • affiliation • independency • participation non-financial rewards.

 Performance based reward are strategy to provide reward to employees on the basis
of their performance. It means employees having high level of performance would get
better incentives vice versa. It implies incentives in terms of piece rate wage,
commission on sales, bonus on high production, share of profit etc. • Performance
based reward encourage competition between employees and may even lead to
conflicting priorities. • created to maximize productivity and achieve desired goals.
 Membership based reward are strategy to provide reward to employees on the basis
of team performance. every member of a team is equally rewarded in terms of
incentives.. It implies incentives such as profit sharing, bonus, merit benefits, skills
incentives and so on. • Team encourage collaboration and cooperation to achieve shares
and goals. • created to achieve synergetic effect from team members.
 Individual
o Base pay, incentives, benefits
o Rewards attendance, performance, competence
 Team: team bonus, rewards group cooperation
 Organization: profit-sharing, shares, gain-sharing

 COMPONENT OF REWARD SYSTEM:
Compensation: In addition to base salary, offer other types of compensation that motivate
employees to perform well. A variable-pay system rewards employees based on performance.
Once the employee achieves this level of pay, it must be earned again for each subsequent pay
period. Short-term incentive pay offers extra compensation for short-term (less than a year)
performance improvements. Long-term incentive pay offers rewards such as stock options and
cash bonuses for sustained productivity and performance for longer than one year. Top
employees find these options attractive because they know they can consistently outperform
expectations.
Benefits: Offer benefits that go beyond the legally mandated minimum of Social Security
insurance, Medicare, unemployment insurance, worker’s compensation insurance and state
disability insurance. Vacation package, along with leave of absence, sick leave and bereavement
leave, can attract top-notch employees. Consider offering a variety of retirement plans from
simple Individual Retirement Accounts to retirement benefits plans.
Work-Life Balance: work environment should promote a healthy balance between work and
personal time. If you create an atmosphere that recognizes your employees’ needs to have a work
schedule that allows them to get enough rest, you foster better morale. Offer flexible scheduling
for those who must take care of elderly dependents. Promote wellness through fitness facilities,
nutritional counseling, health screenings and stress-reduction workshops. Offer a child-care
facility. Consider offering financial counseling that includes planning for retirement and an
overview of investment alternatives.
Performance Recognition: Employees need to feel that their hard work is appreciated and
critical to your company’s ability to achieve goals. Lack of development opportunities is the
number-one reason employees leave their jobs. Don’t let that be the reason your best talent
leaves. Offer career development opportunities tailored to your employees’ goals for growth, and
be sure to provide the resources they need, such as access to training and courses.
Development: Lack of development opportunities is the number-one reason employees leave
their jobs. Don’t let that be the reason your best talent leaves. Offer career development
opportunities tailored to your employees’ goals for growth, and be sure to provide the resources
they need, such as access to training and courses.

LINKAGE OF PERFORMANCE MANAGEMENT TO REWARD AND

COMPENSATION SYSTEMS:

Performance-related reward system involves rewarding employees according to their

performance, or results achieved or contribution to organisations performance as individuals or
as a part of a group. It involves a shift of focus from remuneration models based on the worth of
jobs and employee skills to their performance.

Designing a performance-linked reward system is conditioned by a variety of factors such as the

nature of business, type of technology, the attitude of unions and human resource management
strategies of the organisation.

There are several types of performance-linked reward schemes. These are:

1. Merit Incentive Pay

A common method which has long been in existence is pay increase or bonus payment on the basis of
performance rating.
The merit incentive pay scheme provides another method of recognising and rewarding
differential performance. This method could particularly be suitable for office staff. The scheme
essentially involves the following steps:

a) The determination of result-oriented merit rating procedures,

b) The identification of job factors and their relative importance,

c) The formulation of a scale of reward, and

d) The communication of the basis of monetary reward.

The actual merit rating score will give the percentage of basic wage or basic wage plus D.A. as
incentive bonus. Given a result-oriented merit rating procedure and its objective operation in an
organization, it should not be difficult to install a merit incentive pay system. This is not to
minimize the difficulties that are usually encountered in operating a -merit rating system. The
effectiveness of the performance appraisal system will depend on the soundness of the
performance appraisal system.

Sometimes merit increments and merit awards are also given in recognition of superior
performance on the part of individuals. These are poor substitutes for a system of merit incentive
pay because of several shortcomings.

Under a system of merit increments, there is no prompt relationship between reward and effort.
The quantum of reward at a point of time will be considered inadequate. Additional cost in the
form of enhanced allowances is built for the company on permanent basis. Employees continue
to benefit from their best performance even if it remains below standard in the future.

Employees getting merit awards cannot visualize a proportionate relationship between their
performance and reward. The basis of determining the quantum can not be explained to
employees who are not given such awards.

Incentive Payments

Lumpsum payments such as sales commission is another traditional method. Generally, the
performance and the payment of lumpsum are linked by a formula. Sales commission, however,
does not generally consider other parameters of performance such as realisation of outstandings
and selling high profit margin products.

Another traditional method of rewarding performance is piece rates. There are several
weaknesses in this system. It is not easy to agree with workers on the standard output required.
Frequent changes may be needed in the standard output due to technology changes and this may
lead to conflict between unions and management.

Also factors other than individual performance such as change in work method affect output.
Conflicts may also arise between different work groups when one group is dependent on another.
There is a potential for conflict when norms have to be revised because of such factors as
technology changes. Also, modernisation of technology and automation has rendered piece rates
somewhat obsolete.
2. Incentive Schemes
Output-based incentive scheme are appropriate where tasks are repetitive and measurable. These
involve the following steps:

 Selecting the objectives

 Determining the parameters of performance in accordance with the objectives

 Determining the norms or base values or benchmark values for each parameter

 Determining performance-reward relationship

 Fixing the relative importance of the selected parameters, that is, their weightages

 Designing information and procedure formats

 Determining the maximum payable incentive amount (incentive opportunity) and ,

payment period

 Formulating a communication and review scheme

3. Group Incentive and Productivity Gain Sharing

Under the productivity gain sharing schemes, productivity gains are shared in accordance to an
agreed pre-determined formula. Profit sharing gives a share of profit. Sometimes, the quantum of
bonus is determined on the basis of profit as well as productivity improvements according to a
pre-determined benchmark value for each of them.

4. Productivity Bargaining
Productivity bargaining can provide yet another method of improving productivity and linking
wage increases- to such improvements. Productivity bargaining, however, does not mean an
incentive scheme or wage increases in return for assurances and promises from unions for
achieving production targets. This method implies (a) a detailed analysis of the firms operations,
(b) the identification of cost reduction possibilities, (c) estimation of savings in cost, and (d) the
development of a system o indexing wage increases with cost reductions actually realised over
time. The climate for productivity bargaining has never been more favourable than now. It is for
managements to take initiative and build this approach in their collective bargaining relationship
with Unions.

5. Long-Term Incentive (ESOP)

Long-term incentive in the form of employee stock options schemes are operated both to
improve long-term incentive and to reduce fixed cost. ESOP envisages employee participation in
and ownership of a company’s equity.

This plan is intended to provide an incentive to the employees to improve the all- round
performance and growth of the company and share its prosperity. The plan usually involves
allotment of equity shares according to a laid down procedure and subject to governmental
regulations, laws and rules. The employees benefit in the form of enhanced market value of his
shares and capital gains, which in turn depend on company’s and employee performance. Several
software and high-tech organisations such as Infosys have conceived and designed such plans.
6. Competency-based Pay
The competency is a critical determinant of performance. Therefore, there is an increasing
interest in offering monetary incentive for acquiring competencies required for higher
performance on the present job or for the next job. Such competency may for instance include
values, attitude and behavioural characteristics which influence performance.

In designing a performance linked reward scheme, choice of an appropriate scheme should be

considered as critical. The choice will be determined by a variety of factors such as the nature of
the organisation, the nature of technology, the nature of profits, the nature of markets, the human
resource strategy and business objectives.

ISSUES AND TRENDS

There are many issues and trends occur in linking performance with reward system which are as
follows:-

1. Level of Education
The level of education of the employees, among other factors, will determine what type of
scheme is likely to be easily understood by them and will motivate them. The nature of the
business and the operations will also influence. Organisations in low cost manufacturing or
which promote innovation, skills and higher performance or which are in service industries may
need to consider different forms of performance pay. Their business and human resource
management strategy will differ; the form and content as well as objectives of performance pay
should be consistent with them.

2. Trade Union
The chance of success of performance-linked pay will depend on the tradition of collective
bargaining and attitudes of unions. While the negative attitudes hinder its introduction, the
positive attitude considerably facilitates it

3. Organisational Culture
Performance pay gives better results in organisations characterised by employee involvement
and team spirit. A pro-active culture in the organisation is found to be valuable to performance
and productivity.

4. Package of Monetary and Non-Monetary Incentives

Performance pay is at best an element in the reward management and motivational system.
Besides performance pay, it is essential to pay attention simultaneously to such aspects as re-
organisation of work process, training, employee involvement and participative decision-making,
opportunities to contribute ideas and knowledge, non- monetary recognition, career development
and goal setting.

5. Rewarding Good Performance

Rewarding good performance may include, among others, such mechanisms as cash awards,
appreciation letter and certificates, training in reputed institutions, foreign travel, job
enlargement and enriched roles, publicity in newsletters and membership of professional
societies, etc. For higher effectiveness of performance-linked pays system, such reward
mechanisms should also be used.
6. Performance Pay and Performance Management
It is increasingly realised that performance is affected by a variety of factors. These factors, for
instance, will include knowledge and skills which are developed through training, work attitudes
and intrinsic rewards. These and other factors which affect performance are considered in the
wider context of performance management and human resource management with performance
pay constituting an element of it.

7. Caveats: It is being increasingly realised that the performance pay systems should be designed
to promote the kind of performance an organisation needs. it should, therefore, be integrated with
human resource management strategy for better performance and growth of the organisation. the
performance pay should underpin the organisation’s main values such as team work, creativity,
flexibility and quality.

“DO ONLY WHAT YOU GET PAID FOR” SYNDROME”

Pay for performance plans signal a movement away from entitlements, sometimes a very slow
movement toward pay that varies with some measure of individual or organizational
performance. Pay will vary with some measure of individual, team, or organizational

The term “pay-for-performance compensation” refers to performance-based pay programs where

an employee is incentivized and rewarded for achieving goals or objectives.

Incentive plans:

Incentive plan envisage a basic rate usually on time basis applicable to all workers and incentives
rates payable to the more efficient among them as extra compensation for their meritorious
performance in term of time, costs and quality.

Incentive plan provides incentives to workers to produce more and are paid bonus or premium
for additional work. This additional payment is called incentive wages. It offers an attraction of
extra payment for efficiency or more production. The basic objective of any incentive plan is to
increase the production by giving an inducement to workers in the form of higher wages.

Features of Incentive plans:

 Minimum wages are guaranteed to all workers

 Incentives by way of bonus, are offered to efficient workers for the time saved
 A standard time is fixed and the worker is expected to perform the given work within the
time

Individual incentive plans : Individual incentive plans may be either time based or production
based. Under time based incentive plans, a standard time is determined for doing a job.
Under the production based incentive plans, a standard of output is determined on scientific
basis, and payment of wages is made on the basis of number of units produced by a worker.

Group incentive plans: Where it is impossible to relate output to an individual employee’s

effort it may be possible to relate it to the efforts of the work group. If in addition,
cooperation is required to produce the desired output, then a group incentive plan may be the
best alternative.

A group incentive plan can reward things that are very different from what an individual plan
rewards, in particular : cooperation, teamwork, and coordination of activities. Group
Incentives can Improve Organizational Performance ,Organizational Measures, Measured
Periodically.
Conditions for Effective Incentives Plans :

 Plan is clearly communicated

 Plan is understood
 Rewards are easy to calculate
 Employees participate in administering the plan
 Employees believe they are being treated fairly
 Employees believe they can trust the company and that they have security
 Rewards are awarded as soon as possible after the desired performance.

Plant Wide Incentive

Plant-wide incentives can be understood as the gain sharing program as these include distribution
of a portion of the company’s profit or the cost savings to its workers, often in form of the lump
sum amount. This usually happens at the manufacturing plants which can be of any type.
Incentives often come from the profits gained by the efforts of the workers of the manufacturing
plant.
Incentives are distributed to appreciate and motivate the workers of the plant for keeping up their
good work. Incentives are also distributed among the workers, as a gesture to show that the
organization values their hard working employees. The plant-wide incentive plan can be applied
to the groups as well as to individuals. There are different methods of incentive distribution, the
most common method of incentive distribution is equal sharing of the surplus. In the plant-wide
setup, group incentive plan is rarely used as in the plant-wide setup the premium is distributed as
per the output of the entire factory. Sometimes Plant-wide incentive schemes cover only the
production workers and in some other cases clerical staffs and even auxiliary workers share the
increased earnings.
Conditions to be considered for the plant-wide incentives plan:-
1. Technology
2. Size of the firm
3. Corporate culture
4. Historical performance
5. Stability of the product market

Three major types of Plant-wide incentives:-

1. Scanlon Plan- This type of plan rewards labor savings, most appropriate for the organization
that has high labor content.
2. Rucker Plan- This plan is useful for the companies that want to improve other elements such
as energy consumption or scrap reduction in addition to labor.
3. Improshare- This plan is the easiest of the profit sharing plans to install and understand.

ADVANTAGES:-
1. Increase in the level of cooperation.
2. Improved quality.
3. Decrease in the measurement difficulties.
4. Eliciting active employee input.

DISADVANTAGES:-
1. Results in the protection of low performers.
2. Management-labor conflict.

MODULE III

PERFORMANCE MANAGEMENT PRACTICES OF SERVICE SECTOR AND

MANUFACTURING SECTOR:

Performance Management Performance management is a process that provides feedback,

accountability, and documentation for performance outcomes. It helps employees to channel
their talents toward organizational goals. It basically looks at how an organization plans,
measures, monitors and enhances its performance on different levels (departmental, procedural,
workforce, systems or financial) in order to ensure the overall success of the organization.
  Today, a lot of companies, regardless of size, have performance management systems set in
place, some of them performing better than others
 A good performance management plan aims at increasing and aligning all organizational levels
 Performance management is used differently in every organization
 To form an idea, below is an overview of how companies perform performance management
practices to align individual and organizational objectives :-
 Planning: It involves finding ways of using the scarce resources such as time, money and energy
to achieve the organizational objectives: it implies setting clear objectives and providing the
necessary ‘ingredients’ for achieving such objectives, like giving incentives and training.
 Appraisal : This is where the pre-defined goals are assessed in order to see whether individuals
and management have been successful in achieving them
 Coaching: It gives the necessary support to employees, including good leadership practices like
mentoring, giving timely and clear feedback and providing support where needed.

PERFORMANCE MANAGEMENT OF INFOSYS LTD. :

ABOUT INFOSYS: Infosys Limited (NASDAQ: INFY) – started on 1981 by seven people with
US$ 250. • Today, it is a global leader in the "next generation" of IT and consulting. • Revenues
of US$ 6.604 billion (LTM Q2-FY12).

• Vision : "We will be a globally respected corporation."

• Mission : "To achieve our objectives in an environment of fairness, honesty, and courtesy
towards our clients, employees, vendors and society at large.“

• Values – Infosys believes that the softest pillow is a clear conscience. The values that drive it
underscore its commitment to:

– Client Value: To surpass client expectations consistently

– Leadership by Example: To set standards in our business and transactions and be an exemplar
for the industry and ourselves

– Integrity and Transparency: To be ethical, sincere and open in all our transactions

– Fairness: To be objective and transaction-oriented, and thereby earn trust and respect

– Excellence: To strive relentlessly, constantly improve ourselves, our teams, our services and
products to become the best.

Performance Management System

• It is an organization - wide management program that provides a structured approach to:

• Communicate business strategy
• Establish a shared understanding of what is to be achieved and how it is to be achieved
• Facilitate management of self and others
• Measure and motivate performance (organizational and individual)
PMS Consists:

• A process for communicating employee performance expectations, maintaining ongoing

performance dialogue, and conducting annual performance appraisals;
• A procedure for addressing employee performance that falls below expectations;

• A procedure for encouraging and facilitating employee development;

• Training in managing performance and administering the system; and

• A procedure for resolving performance pay disputes.

KEY RESULTANT AREA:

• KRAs are mutually set through a discussion between the manager and the employee.

– Self Assessment (by appraise)

–Review by Team Leader in a one to one meeting between the project manager and the software
engineer.

– Final review by the project Manager (Reviewer)

– Finally the points are given.

– The report is sent three levels higher.

– Then it is sent back to the engineer to find if he/she is satisfied.

– If it is agreeable then it is finalized.

– There is a salary hike or a band change accordingly.

• This entire system is online. Hence everyone involved in the process gets to gets track of it.
This ensures transparency.
PERFORMANCE ASSESSMENT

• A bi-annual process.

• The system is called Online- PERFORMAGIC.

• Consolidated relative rating is calculated. Assessment of an individual’s performance relative

to the peer group is carried.

• Rating ranges from 1+ to 4.

• 1+ star performance

• 4 is under performance
RATINGS:

• Combined Ratings impact three key areas:

– Performance Incentives

– Salary Reviews

– Promotions

• Star performers awarded with STAR INFOSIAN Certificate.

Performance Management practices at Apple:

 Planning:
Goals Management: Apple goals are made known to employees immediately after
organizational goals are set. This is jointly discussed by line-managers and the necessary
steps taking in order to achieve such goals. However, individuals are measured based on
these goals agreed on and initiated. Individuals are informed on their contribution to the
achievement of the objectives of the company
 Appraisal:
 Appraisal at Apple is on-going and tends to give feedbacks to both appraiser and
appraised and to serve as formal opportunity for personal counselling, motivation salary
reviews and allocation of merit payments.
 Staff members are accessed based on terms of objectives, tasks and results achieved
based on pre-determined goals planned and agreed jointly by individuals and their line
managers.
 The appraisal system helps the HR to determine any shortage in a particular skill, and
therefore undertake recruitment to replace such efficiency. Rewards are given for good
performance
 Apple uses two appraisal tools for evaluating its employees performance that are :

Peer Appraisal : It is a method of performance appraisal wherein the peers

and teammates provide a unique perspective on performance. While managers are best able to
assess a individual’s outcomes and results, peers provide insight into an individual’s
interpersonal interactions and skills

360 Degree feedback : A 360-degree feedback is an employee evaluation tool

that includes feedback from supervisors, subordinates, colleagues and customers It’s purpose is
to create a broader view of the employee's performance based on the impact of relationships with
key stakeholders. This information is then incorporated into that person's performance review.
  Coaching: Management gives the necessary support to their staff so the they can achieve
the standards and objectives of the organization, this involves review of the
organizational performance plan, observing and documenting performance and giving
feedback. Management tends to ensure that individuals whose performance is not up to
standard are corrected and are given the necessary guidance.
It further includes two aspects :
 Leadership & Mentoring : Leaders in Apple are supposed to lead by example, Steve
Jobs was one of the greatest leaders who really impacted on apple not just
technologically but also leadership, he had good leadership qualities which make
employees prompt to work whenever he is involved: Leaders at Apple act as mentors and
coaches, this is what we call leadership by example, and they also encourage teamwork
and togetherness
 Communication : Since communication is very important in every organization, Apple
has a very strong skill of communicating information from top to down and the vice
versa, feedbacks are given on time and the necessary steps are taking to improve
performance.

Pros and Cons: Employees in Apple are not allowed to use social media at work, not only that
but also are not allowed to make any critical comment on the company on any social media,
since Apple considers its image as the centre of its success Individuals in the organization are no
allowed to do anything that will destroy their image since it is the centre of their success

What is “Performance Counseling?”

 Performance Counseling is a very important activity that helps employees to know

themselves better. Performance Counseling refers to the help provided by a manager to
his subordinates in objectively analyzing their performance. It attempts to help the
employee in:
 Understanding himself - his strengths and weaknesses.
 Improving his professional and interpersonal competence by giving him feedback about
his behavior.
 Setting goals and formulating action plans for further improvement.

Features of Performance Counseling

(1) Conditions for effective counseling

 A climate of trust, confidence and openness is essential for effective counseling.

Counseling cannot be effective if the subordinate does not trust his boss.
 It is necessary that the subordinate should feel free to participate without fear or
inhibition as it is a dialogue between supervisor and subordinate and hence should be a
two way communication.
 The main purpose of counseling is employee development.
(2) Performance Counseling Phases

(a) Rapport Building: In the rapport building phase, a good counselor attempts to establish a
climate of acceptance, warmth, support, openness and mutuality. This phase involves generating
confidence in the employee to open up frankly, share his perceptions, problems, concerns,
feelings etc. The subordinate must be made to feel wanted and that his superior is genuinely
interested in his development.

(b) Exploration: In this phase, the counselor should attempt to help the employee understand and
appreciate his strengths and weaknesses. He should also understand his own situation, problems
and needs. Questions should be asked which help the employee focus on his problem. For
example, if an employee feels that his problem is that others do not co-operate with him, the
counselor may ask questions to narrow down the problem to the employee’s relationship with a
few individuals. Then the superior may ask questions to help the employee understand what he
does (or says) to his colleagues that is making it difficult for him to win their co-operations.
Problem identification is a critical step in planning for improvement. To help the employee make
a correct diagnosis of the problem, open-ended questions may be asked.

(c) Action Planning: Counseling interviews should end with specific plans of action for
development of the employee. The main contribution of the superior in this phase is in helping
the employee think of alternative ways of dealing with a problem. For example, in case of an
employee whose relationships with colleagues are poor, the superior may suggest “What three
things can you do in the coming week to improve your relationship with X?” After helping the
employee brainstorm, the superior may also add more alternatives to the solutions already
generated.

Counseling Skills

Approaches to counseling; Counseling Process – Beginning, Developing and Terminating a

Counseling Relationship and Follow up
What are the objectives of Counseling?
According to Eisenberg & Delaney, the aims of Counseling are as follows:
1. Understanding self
2. Making impersonal decisions
3. Setting achievable goals which enhance growth
4. Planning in the present to bring about desired future
5. Effective solutions to personal and interpersonal problems.
6. Coping with difficult situations
7. Controlling self defeating emotions
8. Acquiring effective transaction skills.
9. Acquiring ‘positive self-regard’ and a sense of optimism about one’s own ability to satisfy
one’s basic needs.

When to counsel?
An employee should be counseled when he or she has personal problems that affect job
performance. Some signs of a troubled employee include
• Sudden change of behavior
• Preoccupation
• Irritability
• Increased accidents
• Increased fatigue
• Excessive drinking
• Reduced production
• Waste
• Difficulty in absorbing training

What are the traits of a good counsellor?

The set of attitudes required for an efficient counsellor are:
• Respect i.e. High esteem for human dignity, recognition of a person’s freedom & rights and
faith in human potential to grow.
• Sincerity, authenticity.
• Understanding
• Non-judgmental approach towards the counselee.

The set of skills required for an efficient counsellor are:

• Decency skills i.e. social etiquettes, warm manners
• Excellent communication skills which also include non-verbal communication and listening
skills
• Objectivity
• Maintaining confidentiality
• Empathy

Processes in Performance Counseling:-

(1) Feedback:

 It is extremely important that the feedback is communicated in a manner that produces a

constructive response in the subordinate. Given below are some guidelines that could be
followed in giving feedback:
 Feedback should be descriptive and non- evaluative. Rather than putting the employee in
a defensive position by telling him” Your coming in late convinces me that you are not
serious about your work”, a manager may say, “I notice that you have been regularly
coming late and I am deeply concerned about this”.
 It should be focused on the behavior of the person rather than on the person himself. It is
necessary to distinguish between the individual and his behavior in conveying the
negative feedback. It should be clear to the employee that what is being rejected or
criticized is some specific behavior of his. The intent is not to condemn the employee as
an individual.
 When conveying feedback, it is generally desirable to back it up with few examples of
actual events. Care must be exercised not to overdo this as the subordinate may
misinterpret it that the superior is systematically building up a well-documented case
against him.
 Feedback should be given timely. It should be given at the first opportunity when the
employee is in the receptive mood.
 Feedback should be continuous. It should become a regular practice so that the
subordinate develops an ability to accept and act upon the feedback.
 Feedback should be checked and verified. This will ensure that the subordinate has not
misinterpreted the feedback received from his superior.

(2) Pre-Interview Preparation:

  Make sure you know what was mutually agreed in terms of job responsibilities
 Review the employee’s background, education, training and experience.
 Determine the strengths and development needs to be discussed with the employee.
 Identify areas that need attention during the next review period.
 Make sure that the employee has sufficient advance notice for the interview so that he has
time to do his own preparation.
 It is always useful to note down the key points on a piece of paper.
(3) Interview

 Be sincere, informal and friendly. Explain the purpose of the discussion and make it clear
to the subordinate that the interview is a two way communication.
 Encourage the employee to discuss how he appraises his own performance.
 Before discussing suggestions you have for his development, encourage the employee to
tell his own plans.
 Make a record of plans you and the employee have made, points requiring follow-up.

Principles of Counselling:
1. Principle of acceptance—accept the patient with his physical, psychological, social,

economical and cultural conditions.

2. Principle of communication—communication should be verbal as well as non-verbal and

should be skilful.

3. Principle of empathy—instead of showing sympathy put yourself in patients shoes and then

give reflections accordingly (Empathy is ability to identify with a person.)

4. Principle of non-judge—mental attitude-do not criticize or comment negatively regarding

patient’s complaints.

5. Principle of confidentiality—always keep the patient’s name, and the problem strictly secrete

and assure the patient about the same.

6. Principle of individuality—treat each and every patient as unique and respect his problem as

well.

7. Principles of non-emotional involvement—not getting emotionally involved with the patient

and avoid getting carried away with his feelings.

What is Performance Coaching?
Performance Coaching is a process where one person facilitates the development and action
planning of another, in order that the individual can bring about changes in their lives.
Performance Coaching is not advice giving and does not involve the coach sharing their
experience or opinions.

Performance Coaching helps you move forward at your pace within an equal and trusting
relationship.

Coaching has been defined as 1) the processes of encouraging the individual to

improve both job skills and knowledge (Hahne & Schultze, 1996), 2) to assist in
problem solving or mastering new skills (Bittel & Newstrom, 1996), 3) and the process
of providing others with valuable information so that the organization learns (Schon,
1983).

There are four major causes of performance problems:

o Knowledge or Skills - The employee does not know how to perform the process
correctly - lack of skills, knowledge, or abilities.
o Process - The problem is not employee related, but is caused by working conditions,
improper procedures, etc.
o Resources - Lack of resources or technology.
o Motivation or Culture - The employee knows how to perform, but does so incorrectly.

1. Attitude — Resilience and Optimism

Successful organisations need a positive culture/attitude, they should be resilient and bounce
back quickly from set-backs. If a product or strategy is not working they need to be flexible to
try something else and move quickly. They are optimistic in their outlook and believe in their
products and services, they therefore expect the best and get it.

2. Visions — Strengths, Skills, Values and Purpose

Successful organisations play to their strengths and the abilities of their people, products,
services and markets. They are aware of their organisation skills and weaknesses and work with
business partner organisations to underpin these and vice-versa. They believe in the Diversity of
their people and therefore have multiple perspectives and strengths throughout. They have a clear
vision which is communicated and a strategy to achieve it. They ensure everything they do is
underpinned by their shared corporate values and they have a clear purpose for what they are
doing thus creating a high-performance culture.

3. Strategy — Goals and the Disciplined Use of Time

Their short-term strategy underpins their long term. They set goals which are milestones towards
their visions, then put into practice their natural skills and abilities, and are disciplined in their
use of time towards those goals. They free-up resources for where they will make the most
different (often creating project teams) and then have dogged pursuit of their goals. However,
 they also know where to stop and do something else if it is not working, they listen out for those
early-warning signals.

4. Risk-taking and Action-orientated — Flexibility and Intuition

They trust themselves, their leaders and staff at all levels. Empowerment is fundamental. They
have leaders at all levels of the organisation. Their leaders trust their intuition and take calculated
risks putting into action their decisions and having the flexibility and adaptability to change
along the way as appropriate. The structures, processes and systems are in place to ensure
efficiency and standards, but freedom is given to ensure creativity and responsiveness is
maintained, allowing change to happen quickly. This consequently creates success and a good
financial standing.

5. Relationships — Visibility and Brand Perceptions

Trust relationships are key both internally throughout the organisation and also externally with
stakeholders and partners as well as their clients: you need people to achieve your visions.
Successful organisations know the importance of knowing who they are and what you stand for,
their unique brand. They also realise they need visibility for their great work and manage the
perceptions of others. Therefore, their internal brand (seen by their staff) and their external brand
(client-facing) are aligned and they live the brand in everything they do. They have a corporate
conscience and balance environmental issues with profit.

High-Performance Coaching Skills and Tools

 Be respectful of the coachee as an individual.
 Be respectful of the coachee's skills and goals in life.
 Be honest in providing constructive and challenging feedback, and set high goals that the
coachee is likely to achieve.