PERFORMANCE MANGEMENT SYSTEM: A CASE STUDY OF NTPC

KANIKA GOYAL

Lecturer in Commerce & Management, Hindu Girls (PG) College,

Jagadhari (Haryana), email:kanika_1284@yahoo.com

DR ASHOK KHURANA

Associate Professor, PG Department of Commerce, Guru Nanak Khalsa College,

Yamunanagar,email:khuranaa17@yahoo.co.in

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ABSTRACT towards attaining the objective of improvement can be termed
as performance management system. It is such a process

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which helps in efficaciously managing both the individuals
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The performance management system has an intrinsic
and the teams to attain the goal of achieving very high levels
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motivational significance that facilitates learning and
brings about role clarity which helps people focus on of organisational performance. Performance management
performance development. It is a continuous process to system establishes shared understanding about what is to be
understand the employee’s ability, competencies, relative achieved and an approach to leading and developing people
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merits and worth of the organization. The present study which will ensure that it is achieved. Performance
explores performance management system (PMS) of
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management in other words can also be termed as a

National Thermal Power Corporation Limited (NTPC), a
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continuous business cycle. This approach should cater to all

leading public sector organization in the power sector. It
the requirements of the organisation and take a holistic view
is descriptive in nature, and based on information
obtained from secondary as well as primary source. The by shunning the approach of isolation. The aim of the
study observed that NTPC believes in achieving organisation should be to evolve a culture with high standards
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organizational excellence through human resource. The and excellence in quality of service. For the improvement of
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organizations system is based upon the four building the performance level there is an abundant demand of
blocks i.e. competence building, commitment building, demonstrating improvements both in private as well as public
culture building, and systems building. At NTPC, sector organisations. To ensure that the aims set forth by an
performance management system evaluates five
components namely performance, competencies, values, organisation are achieved appropriate actions in this direction
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potential appraisal, performance and potential appraisal. can be undertaken by understanding the chronological profile
The study observed that the performance management of a particular organisation in terms of its performance in the
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system in the organization is capable to specifically part or its present status of performance level. In brief,
address the developmental needs in order to overcome performance management can be identified as a corrective
competency gaps in the employees under appraisal. approach by properly understanding the actual performance
with a view to make a laudable performance which is in much
Key Words: competencies, descriptive, public sector
organization, satisfied. demand in the present twenty first century.

Under this system for effective execution and reaping the

1. INTRODUCTION bumper benefits, an organisation can direct, monitor, refine,
an employee’s performance by establishing good
The establishment of a framework necessary for planning, communication with him and with his free will and consent to
supervising, and revising, what an organisation does contribute to any sector of business organisation for its
improvement and success. In present context and keeping in

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 mind the cut throat competition at the global level in the the performance management process, involving a formal
market, an organisation must equip itself with employees review of individual performance. It is contended that
who are able to work in the changing scenario of market performance management represents possibly the greatest
where a highly professional approach is the prerequisite to opportunity for a human resource (HR) system to make a
deliver the best performance. The old beliefs and values telling contribution to organisational performance (Sparrow
concerning organisations have become obsolete and and Hiltrop, 1994). It represents a system that can inform how
outdated in the present context. Therefore, management the firm's human resources contribute to the organisation's
alone cannot attain the goal of achieving high level of strategic objectives. Unfortunately the extent to which it is an
performance. Here, performance management system is effective and useful system in practice remains open to
an absolute necessity for carving a niche for itself by the question. For example, the high use of various facets of
organisation in view of stiff competition faced by the performance management does not always correlate with high
management of an organisation. It is also helpful that results regarding perceived effectiveness (CIPD, 2005). The
some values which are not only superior but also deluxe study considers the performance management process by
in terms of offers are made to the stakeholders. The role applying a critical lens to some of the main approaches set out
of the employees in present set up of organisations has thus far. Following this, they consider the primary tool in

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assumed all the more importance particularly because performance management systems, namely performance
today the employees need to respond to the issues of the appraisal. The discussion is more contemporary development

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day and above all in this arena where the whole focus has including the use of 360-degree feedback and forced

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been laid on the performance culture. Hence, a good distribution, before concluding.

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performance management system is indispensable in
modern times.
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Guru”. Despite its low rates of postgraduate science and
2. REVIEW OF LITRATURE engineering graduation, India is rapidly becoming a global hub
for R&D, with a momentum and scale similar to those it
Neeraja Sharma & Aman Sharma (2009) examined the accomplished in IT services. If engineering education is so
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“Employers’ Perspectives Regarding Performance critical to global competitiveness, how is India succeeding? To
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Appraisal and Reward Philosophy in Insurance Sector in answer this, a meeting has been conducted with the CEOs,
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Haryana”. This paper studies the employer’s perspectives human-resource directors, R&D leaders, managers, and
regarding performance appraisal and reward philosophy employees, and visited the R&D and training facilities of 24
and the effect of demographic variables on it. The sample leading companies in India in this study. These were in rapidly
is selected on the basis of convenient sampling method. growing emerging sectors, including IT services, business-
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This study is based on the hypothesis that demographic process outsourcing, semiconductors, pharmaceuticals,
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variables and employers’ opinions are independent of financial services, retail, hospitality, and education - all of
each other. which have managed to grow and innovate despite skills gaps
and talent shortages. In this study seven key areas in which
Anthony McDonnell & Patrick Gunnigle (2008)
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Indian companies have developed innovative practices:

conducted a study on “Performance management”, a
employee recruitment, new employee training, continuing
strategically oriented concept, i.e. where it plays an
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employee development, managerial training and development,

integral role in the formulation and implementation of
performance management and appraisal, workforce retention,
strategy (Scott-Lennon, 1995). It is this strategic impetus
and education upgrades.
which differentiates it from performance appraisal.
Performance management seeks to align a number of Angelo S. DeNisi & Robert D. Pritchard (2006) examined a
processes (e.g. performance related pay systems) with motivational framework on “Performance Management and
corporate objectives (McKenna and Beech, 2008). Improving Individual performance”. This research has resulted
Theoretically it involves a shared process between in very few specific recommendations about designing and
managers, individuals and teams where goals are agreed implementing appraisal and performance management systems
and jointly reviewed. Further, corporate, divisional, whose goal is performance improvement. We believe that a
departmental, team and individual objectives should all be reason for this is that appraisal research became too interested
integrated. Performance appraisal is a crucial element of in measurement issues and not interested enough in ways to

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 improve performance, although some recent trends in the iv. To involve the Appraisee through various stages of
area have begun moving the field in the right direction. Performance Management, thereby reducing the
We review these trends and their genesis, and propose a Performance gaps.
v. To map competencies and potential of executives for
motivational framework as a means of integrating what
enabling the organization to source the talent
we have learned and generating proposals for future generally from within the company for meeting
research that focus on employees performance organizational growth.
improvement. vi. To involve the executive to share the responsibility
and become accountable for efficient management of
Michelle Brown & Jhon S. Heywood (2005) conduct a the business for result oriented performance through
survey on “Performance Appraisal Systems: Determinants mutual involvement.
and Change” in context of Australian Workplace vii. To provide a transparent system to help each
Industrial Relations, this paper estimates the determinants executive to evaluate his own performance and
of performance appraisal systems. The results indicate develop himself with the help of Reporting Officer To
that performance appraisal is associated with workers provide for removal of differences, if any, in
having shorter expected tenure and greater influence over performance appraisal through intervention of the

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Reviewing Officer.
productivity and those circumstances in which the net

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benefits of performance appraisal are likely to be greatest.

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4. NTPC’s HR Vision
It indicates the complementary human resource

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To enable our people to be a family of committed world class
management practices, such as formal training and professionals making NTPC a learning organization.

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incentive pay, are associated with an increased likelihood

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of performance appraisal, but that union density is 4.1Human Resources
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associated with a reduced likelihood of performance
appraisal. NTPC believes in achieving organizational excellence through
Human Resources and follows "People First" approach to
Michelle Brown & Jhon Benson (2003) conduct a study leverage the potential of its 24,500 employees to fulfill its
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on “Rated to Exhaustion- Reactions to Performance business plans. 'People before PLF (Plant Load Factor)' is
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Appraisal Processes.” It evaluated performance appraisal the guiding philosophy behind the entire gamut of HR policies
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within the organization to enhance employee commitment at NTPC. NTPC are strongly committed to the development
and growth of all our employees as individuals and not just as
and productivity. This paper examines the consequences
employees.
of three aspects of a performance appraisal system
(distributive justice, procedural justice and the
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4.2Elements of HR Strategy
performance rating) on the level of emotional exhaustion
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reported by employees in a large public sector research Competence building, Commitment building, Culture building
organization. and Systems building are the four building blocks on which
our HR systems are based.
3.OBJECTIVES OF PMS OF NTPC: The Company
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has introduced performance management system to

achieve the following objectives:
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i. To accomplish organizational goals through a

system of performance assessment linked to
company's objectives.
ii. To encourage a two-way communication process
between the Appraisee and the Reporting Officer
for bringing objectivity in Performance Appraisal
System.
iii. To evaluate the potential of the executive to
assume higher responsibilities along the 4.3 HR as a Strategic Business Partner in NTPC
hierarchy.
To actualize HR Vision & the Corporate Vision, an integrated
HR model has been developed by NTPC. As per the model, at

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 the periphery lies the role of HR to facilitate the PART IV – POTENTIAL APPRAISAL
organization in fulfilling its Corporate Social
Responsibility & facilitate good governance practices. PART V – PERFORMANCE & POTENTIAL APPRAISAL
Within this framework, lies the role of HR to establish
good customer relationship. 6.1 PERFORMANCE: At NTPC, the performance is
evaluated at two intervals i.e. first half year performance
At the centre of the Model, lies the role of HR to create a appraisal, and second half performance appraisal.
Learning Organization based on four building blocks i.e.
building Competence, Commitment, Culture and Systems. 6.1.1 FIRST HALF PERFORMANCE:: The System
All these HR roles are performed by a dynamic provides for the Reporting Officer (Appraiser) and the
mechanism namely as Systems Designer, Internal executive (Appraisee) to identify through discussion and
Consultant, Systems Monitor and Impact Assessors. agree upon a set of Key Performance Areas (KPAs) in brief
at the beginning of the first half-year. While identifying
5. PERFORMANCE MANAGEMENT SYSTEM KPAs, actual ‘Measures’ for each KPA is defined in written.
OF NTPC The KPA Targets are given different weightage and limited
The focus of the Performance Management System for to 8 Key Performance Areas only. The idea is to enable the
senior executives is to appraise them on different executive to focus on given deliverables and not miss

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components of managerial responsibilities, consisting important critical areas. The KPAs are determined using

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of Performance, Generic Managerial Competencies, ‘SMART’ approach i.e. Specific, Measurable, Agreed
Values and Potential, totaling to 100 marks. The (mutually arrived at by the Appraiser and the Appraisee),

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Realistic and Time-Bound. The Appraiser and Appraisee

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Performance Component as identified and measures
evolved would have 50% weightage in total appraisal. jointly evolve KPAs, define measures and allocate marks for

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Generic Managerial competencies exhibited by an each KPA at the beginning of first half-year in April. The

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Appraisee while discharging duties have been given Performance under Part IA is jointly reviewed and
performance evaluated at the beginning of 2nd half year. At
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20% weightage in appraisal. The Company’s
concern for actualization of organizational Core the time of joint review, actual achievement is briefly
Values is reflected in the Performance Management recorded against each KPA and marks obtained w.r.t. each
and is assigned a weightage of 15% in appraisal. The KPA is indicated in relevant column. The aggregate of marks
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Performance Management System provides for obtained for different KPAs is worked out and indicated as
appraisal of the executive’s Potential to assume higher aggregate of IA. Both the Appraisee and the Reporting
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responsibility and has a weightage of 15% in Officer sign the Part IA.
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appraisal. The Performance Management System

brings to focus important managerial attributes and 6.1.2 SECOND HALF PERFORMANCE: The System
strikes a balance between ‘Performance’ and other helps to review the Key Performance Area Targets for the
aspects of managerial talents/skills. Executives will Second Half-Year based on the evaluation of 1st half-year
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have a set of Key Performance Areas to be identified KPAs depending on actual achievements. The reworked
through discussion and achieve them during the KPA targets are briefly recorded, ‘Measures’ for each
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performance period. The system is to develop the KPA defined and Marks allocated. KPAs which extend
competencies by involving the executive in setting beyond the 1st half year may be re-recorded in the targets
targets and identifying Key Performance Areas. The of the 2nd half-year.
System aims to bring the concept of ownership and
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6.1.3 COMMENTS ON PERFORMANCE

accountability on both Appraisee and Appraiser to
create mutual trust and confidence. To utilize the
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Reporting Officer completes the performance report at the

Performance Management System for facilitating end of Appraisal year. In Part IC the Reporting Officer
individual career development and bring organisation- offers comments w.r.t. KPAs, Measures, Achievements
wide HR intervention at senior levels to bridge and sums up in brief the Performance profile of the
competency gaps. appraisee in writing.

6. PERFORMANCE MEASURES OF NTPC: 6.2 COMPETENCIES AND EVALUATION: To

Performance management system at NTPC comprises reward Appraisees not solely on the performance but also
appraisal of 5 components: on the competencies, as performance may be influenced by
several other factors on which executive has no direct
PART 1 – PERFORMANCE control. Competency based evaluation would help the
organisation to take systematic steps for bridging the
PART II –COMPETENCIES competency gaps.

PART III - VALUES

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 6.2.1 COMPETENCES: There are 8 competencies evaluation of Values and completion of Part III for the
assessed and rated at NTPC. These competencies are previous appraisal year is done at the end of Performance
technical Knowledge, Business Attitude, Strategic Appraisal Year, not later than 15th April.
Thinking, Resources Management, Communication
6.4 POTENTIAL APPRAISAL: Potential is a component
Skills, Systematic Thinking, Interpersonal
related to “Competencies”. It seeks to achieve one of the
Competence, and Empowering Skills.
major objectives of the Performance Appraisal System,
6.2.2 RATINGS OF COMPETENCIES: namely evaluating the suitability of the executive to assume
higher responsibilities along the hierarchy.
The competencies are evaluated annually on a five-point
rating scale-1,2,3,4 & 5 - the rating 1 being the lowest end In due course of time, the appraisal of ‘Potential Component’
of the scale and 5 being the highest on the scale. Based on may be done through Assessment Centre or with the help of
the competencies observed, the Reporting Officer such other means, to make the appraisal more broad-based.
classifies each competency on a scale of 1 to 5. The The personality profile of each individual based on the
Reporting Officer discusses each competency (A to H) Assessment Centre or with the help of other process can
with the Appraisee and plot the rating. The become available to the Reporting Officer to enable him to
competencies all together have a weightage of 20% in the evaluate potential of the appraise with more objectivity. The
total Performance Appraisal. The aggregate of the rating Reporting Officer would objectively evaluate the potential of

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of each competency is to be arrived at the bottom of the the assessee based on factual information observed during
ratings column. Thereafter the aggregate rating is to be assessment year.

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converted to marks out of 20 using the Conversion

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6.4.1 POTENTIAL EVALUATION CRITERIAS: There
formula (based on the maximum attainable marks of 40
are 4 generic competencies i.e.Team Building, Conceptual
i.e. 8 competencies x 5 maximum rating = 40). The Part II

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Ability, Strategic Vision, and Leadership Abilities are covered
is duly signed by the Appraisee and the Reporting Officer.
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The review of competencies and completion of Part II for
for potential evaluation of Executives.
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the previous appraisal year is done at the end of Appraisal 6.4.2 RATING OF POTENTIAL EVALUATION:The
year, not later than 15th April. evaluation of ‘Generic Competencies’ for potential Appraisal
is done through discussion on a rating scale of 1 to 5. Rating 1
6.3 VALUES: Adoption of the Company’s Core Values
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is the lowest and rating 5 being the highest. The evaluation of

in the business dealings is one of the essential duties of
potential is done on each competency and rating given against
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employees at all levels. Especially Senior Executives

each in the rating column by the Reporting Officer. The
who occupy leadership positions in the Company, have a
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aggregate of all the comptencies A to D would be arrived at by

major role in the actualisation of Core Values by being
totalling all the ratings. This would be out of 20 marks. The
‘Role Models’ in observing and practising them and
Potential Appraisal has a weightage of 15% in the total
thereby leading by example. Hence due emphasis
Performance Appraisal. The rating on potential out of 15
is laid on the Core Values demonstrated by the executive
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marks is obtained by using the Conversion formula at the

in his day-to-day business dealings and 15% weightage
bottom of Part IV. The marks so obtained out of 15 marks is
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has been ascribed in the Performance Appraisal to the

written in the Box.The Part IV is jointly signed by the
process of Value actualisation exhibited by the executive.
Reporting Officer and the Appraisee at the bottom of the
6.3.1 COMPANY VALUES: The Corporate Values page. The appraisal of this Part for the previous appraisal year
‘COMIT’ and the indicative observable behavior in is done at the end of Performance Appraisal year, not later
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respect of each value is Customer Focus, Organisational than 15th April.

Pride, Mutual Respect and Trust, Initiative and Speed,
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6.5 PERFORMANCE AND POTENTIAL PROFILE: The

Total Quality Part V would sum up all marks scored for the Performance
6.3.2 RATINGS Appraisal year. The marks scored for Part I, Part II, Part III
and Part IV is transferred to this section and entered against
Each value has to be evaluated through discussion on a respective item. The aggregate of the marks scored is arrived
rating scale of 1 to 5 the rating 1 being the lowest and 5 at by adding all marks scored for different components. This
being the highest. The Reporting Officer would evaluate would form the Final score of Performance & Potential
the Appraisee on each of the Value and mark the rating Appraisal rating of the executive out of 100 marks.
for each value. The ratings are then aggregated at the
bottom of the rating column out of maximum of 25. The 7. CONCLUSION & SUGGESTION: The Performance
ratings so obtained would be converted to 15 marks by the Management System is a tool to be utilised for identifying the
conversion formula given. The marks obtained out of 15 developmental needs of the appraisee. It is observed that
marks is written in the Box. The Part III is signed jointly performance management system of NTPC clearly establishes
by the Reporting Officer and the Appraisee. The an understanding about what is to be achieved and developing

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 the people to ensure that how it is to be achieved. With
absolute clear vision and strong HR strategy, its
performance management system evaluates its human
resources on different components of managerial
responsibilities, consisting of Performance, Generic
Managerial Competencies, Values and Potential, The
Reporting evaluates Performance, Competencies, Values
and Potential. Hence, it is clear on the basis of study and
evaluation of PMS system that the company’s appraisal
system is strong enough to identify and specifically
address the developmental needs in order to overcome the
competency gaps in its human resources.

REFERENCES
1. Brown, Michelle and Benson, John, Rated to

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Exhaustion? Reactions to Performance Appraisal

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Processes. Industrial Relations Journal, Vol. 34, pp.

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67-81, March 2003. Available at SSRN:

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http://ssrn.com/abstract=416626

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2. Brown, Michelle and Heywood, John S.,

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Performance Appraisal Systems: Determinants and
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Change. British Journal of Industrial Relations, Vol.
43, No. 4, pp. 659-679, December 2005. Available at
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doi:10.1111/j.1467-8543.2005.00478.x
3. DeNisi, Angelo S. and Pritchard, Robert D.,
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Performance Appraisal, Performance Management

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and Improving Individual Performance: A

Motivational Framework. Management and
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doi:10.1111/j.1740-8784.2006.00042.x
4. McDonnell, Anthony and Gunnigle, Patrick,
Performance Management (September 12, 2008).
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Available at SSRN: http://ssrn.com/abstract=1267160

5. Sharma, Neeraja and Sharma, Aman, Employers’
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Perspectives Regarding Performance Appraisal and

Reward Philosophy in Insurance Sector in Haryana
(May 4, 2009). The Icfaian Journal of Management
Research, Vol. VIII, No. 4, pp. 67-86, April 2009.
Available at SSRN: http://ssrn.com/abstract=1398564
6. Wadhwa, Vivek, A Disciple Becomes the Guru
(October 15, 2008). Harvard International Review,
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http://ssrn.com/abstract=1349457
7. www.ntpc.com

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AUTHORS:
1. DR ASHOK KHURANA
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ASSOCIATE PROFESSOR
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P.G. DEPARTMENT OF COMMERCE

G N K COLLEGE, YAMUNANAGAR (HARYANA)

2. KANIKA GOYAL
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LECTURER IN COMMERCE&MANAGEMENT
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HINDU GIRLS (P.G.) COLLEGE

JAGADHRI (HARYANA)
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