ABIT

PERFORMANCE MANAGEMENT SYSTEM

Conceptual Approach to Performance Management

(Module-1)

Mitrabinda Nayak

Introduction to Performance Management

The word Performance in English language means “the accomplishment, execution,

carrying out, working out of anything ordered or undertaken.”

From an organization’s perspective Performance can be defined as “The achievement of an

employee against the expectation from his /her role, along clearly defined targets for the
year is what constitutes the individual’s performance. Therefore, the factors affecting
performance are:

i) Personal factors–the individual’s skill, competence, motivation and commitment

ii) Leadership factors – the quality of encouragement, guidance and support provided
by managers and team leaders
iii) Team factors – the quality of support provided by colleagues
iv) System factors – the system and work and facilities provided by the organization
v) Contextual (Situational) factors–internal and external environmental pressures and
changes

Other related terms:

Competency – This is a combination of knowledge, skills and attitude required for an

individual to effectively perform in a role.

Potential–The capacity of an individual to handle higher responsibilities based on his overall

abilities and current competency levels.
Performance Management

Historically, organisations defined strategy and objectives, and the measurement of

employee and organisational performance as completely separate processes. An
integrated performance management system is a key component of the emerging
requirement to tie the strategy and the organisational processes to Human resources
processes.The term “Performance Management” was first used by Beer and Ruh in the
year 1976.Performance management is an ongoing dynamic process that articulates
organisational vision and objectives, installs performance criteria in light of these
objectives, and continuously reviews internal procedures to integrate them with
organisational philosophy and culture.

Definitions - Armstrong & Baron define performance management as “ a strategic and

integrated approach to delivering sustained success to organisations by improving
performance of the people who work in them and by developing the capabilities of
teams and individual contributors.

 Strategic- long term organisational goals and in the context of external

environment.
 Integrated – four dimensions: vertical, functional, human resource, goals.

Some other definitions –

 Performance management is the process through which managers ensure that

employee’s activities and outputs contribute to organisational goals. –Louis R Gomez &
David B Mejia
 Performance management may be defined as a planned and systematic
approach to managing the performance of individuals ensuring their personal
development and contribution towards organisational goals. – Ronnie Malcom.
History of Performance Management
 In the 3rd century AD, the Chinese were using performance appraisal systems
for their evaluations of their employees
 Industrial Revolution of the 18th century made factory managers aware of the
importance of their employees’ performance on their production outputs.
 American researchers and philosophers contributed in the areas of performance
evaluation by developing ideas of management by objectives (MBOs) and employee
motivation.
 Critical – Incident Techniques and Behaviourally Anchored Rating Scales
(BARS) were also used in the 1960s.
 Spreigel reported in 1962 that by the early 1960s more than 60% of American
organizations had a performance appraisal system. The system’s popularity stemmed
from the Army’s implementation of a performance management system for its officers.
 The origin of PM can be traced in early 1960's when performance appraisal
systems were in practice.
 During this period, Annual Confidential Reports (ACR’s) was also known as
Employee service Records were maintained for controlling the behaviors of the
employees and these reports provided substantial information on the performance of
the employees.
 In next phase around 1980's, whatever adverse remarks were incorporated in the
performance reports were communicated to the employees so that they could take
corrective actions for overcoming such deficiencies. This is when Performance
Management came into being.
 By the 1990s, performance management was given full recognition and PMS
was widely used in all sectors.

Scope of Performance Management

Performance management is about managing the organization. It is a natural process of

management, not a system or a technique (Fowler, 1990). It is also about managing
within the context of the business (its internal & external environment). This will affect
how it is developed, what is sets out to do and how it operates. The context is very
important, and Jones (1995) goes as far as to say,‘manage context, not performance’.

Performance management concerns everyone in the business- not just managers. It

rejects the cultural assumptions that only managers are accountable for the
performance of their teams and replaces it with the belief that responsibility is shared
between managers and team members. In a sense, managers should regard the people
who report to them ascustomers for the managerial contribution and services they can
provide. Managers and their teams are jointly accountable for results and are jointly
involved in agreeing what they need to do and how they need to do it, in monitoring
performance & in taking action.

Objectives of Performance Management

Performance management is the process of identifying, evaluating and developing the

work performance of employees so that the company’s goals and objectives are more
effectively achieved. Effective performance management is designed to enhance
performance, identify performance requirements, provide feedback relevant to those
requirements and assist with career development.

The Basic Aims: -Two simple propositions provide the foundation upon which
performance management is built -

1. When people (individuals & teams) know and understand what is expected of
them, and have taken part in forming these expectations, they will use their best
endeavours to meet them.
2. The capacity to meet expectations depends on the levels of capability that can be
achieved by individuals and teams, the levels of support they are given by
management, and the processes, systems, and resources made available to them by
the organization.

Detailed Aims:- In more details, the aims of performance management are as follows:

1. Help to achieve sustainable improvements in organizational performance.

2. Act as a lever for change in developing a more performance-oriented culture.
3. Increase the motivation and commitment of employees.
4. Enable individuals to develop their abilities, increase their job satisfaction and
achieve their full potential to their own benefit and that of the organization as a whole.
5. Enhance the development of the team cohesion and performance.
6. Provide opportunities for individuals to express their aspirations and expectations
about their work.

Aims Suggested by other Commentators:- The American Compensation Association

(1996) states that organizations rely on performance management to :-

1. Document job responsibilities.

2. Help define performance expectations.
3. Provide a framework for supervisors and employees to communicate with each
other.
4. Provide ongoing opportunities for supervisors to coach and encourage personal
development.
5. Align individual performance expectations with organizational goals.

Process of Managing Performance

Performance management should support corporate strategy formulation and monitor those
elements which make business profitable. To understand the process of managing
performance, the following aspects of what makes organizations, teams and individuals
perform well must be considered:

1) The Context of the organization – Organizations are regarded as open systems

that are continually dependent upon and influenced by their environment. The external
global and natural environment, business economics, political and social scenario are
always changing. Similarly, the social and technical systems in the internal environment are
also dynamic. So each organization has to do what is best for itself in the prevailing
circumstances. Therefore, it is not possible to transfer PMS from one organization to
another.
2) Culture – Culture dominates the internal environment of the organization and
dictates both the behaviour and attitudes of individuals. The components of organizational
culture are values, norms and management style.
3) Functionality–How an organization functions decided the design and operation of
PM processes. Whether the organization is operating globally, or through its headquarters in
different countries / regions or whether they are structured or unstructured, centralized or
decentralized. The organizations of today are making a conscious effort to move from a
structured, inflexible approach to a softer image, from a hierarchical model to a diversified
one, from vertical to horizontal tasks etc.
4) Job Design (for individuals)–It is essential to have a job design which not only
specifies the job context, role expectations and relationships but also satisfies the
requirements of the organizationfor productivity, operational efficiency and quality of product
and service. The job should be designed so as to provide variety in work, decision making,
responsibility, control, and direct feedback.
5) Teamwork–As organizations use more and more multidimensional and
multidisciplinary teams, it is imperative that the performance management be done from a
team’s perspective also.
6) Organizational Development - OD is the planning and implementation of
programmes designed to improve the effectiveness with which an organization functions
and manages change.
7) Purpose and Value Statements – If an organization has a set of core values which
are accepted then it is more likely that it will be able to ensure high level performance which
meets the needs of all the stakeholders. Purpose statements define what is to be achieved
and value statements define the behaviour expected in attaining the purpose.
8) Strategic Management – The core competence and strategy has to be decided at
the top level and that needs to be integrated with the performance expectations for the
organization.
9) Human Resource Management–All HR activities in the end aim at improving
performance.There are many high-performance HR practices which can be followed to
achieve effective performance management.

Implications of Performance Management

The means by which a business achieves high performance was modelled by Sears,
the retailing company, as shown in the following figure. This model emphasizes the
importance of employee attitude and behaviour in making the firm ‘a compelling place to
shop’ and ultimately ‘a compelling place to invest’.
Four implications for the management of performance can be derived from this:

1. The importance of goals, and the measuring and monitoring of performance in

relation to goals.
2. The importance of context (structure, process and people) – it can be argued that
managing the context will make more impact on organizational success than any
narrowly focussed ‘systems’ of performance management.
3. The importance of competence – achieving high performance by developing core
team and individual levels of competence.
4. The importance of value chain – achieving revenue growth and shareholder
value through the two key contributors to organizational effectiveness, namely
employees and customers.
Principles of Performance Management

The principles of performance management have been well summarized by IRS (1996)
as follows:-

1. It translates corporate goals into individuals, teams, department and divisional

goals.
2. It helps to clarify corporate goals.
3. It is a continuous and evolutionary process, in which performance improves over
time.
4. It relies on consensus and cooperation rather than control on coercion.
5. It encourages self-management of individual performance.
6. It requires a management style that is open and honest and encourages to two-
way communication between superiors and subordinates.
7. It requires continuous feedback.
8. It measures and assesses all performance against jointly agreed goals.
9. It should apply to all staff.
10. It is not primarily concerned with linking performance to financial reward.

Performance management should operate in accordance with the following ethical

principles as defined by Winstanely and Stuart- Smith (1996):-

1. Respect for the individuals – People should be treated as ‘ends in themselves’

and not merely as ‘means to other ends.’
2. Mutual respect- The parties involved in performance management processes
should respect each other’s need and preoccupations.
3. Procedural fairness- The procedures incorporated in performance management
should be operated fairly to limit the adverse effect on individuals.
4. Transparency- people affected by decisions emerging from the performance
management process should have the opportunity to scrutinize the basis upon which
decisions were made.

Benefits of Performance Management

The benefits to the organisation, managers and individuals of well- conceived and well-
run performance management processes are summarised below:
For the Organisation:

 Align corporate, individual and team objectives.

 Improve performance.
 Motivate employees.
 Increase commitment.
 Underpin core values.
 Improve training and development process.
 Help to develop a learning organisation

For Managers:

 Provide the basis for clarifying performance and behaviour expectations.

 Afford a framework for reviewing performance and competence levels.
 Improve team and individual performance.
 Support leadership, motivating and teambuilding processes.
 Provide the basis for helping underperformers.
 May be used to develop or coach individuals.

For Individuals:

 Greater clarity of roles and objectives.

 Encouragement and support to perform well.
 The provision of guidance and help in developing abilities and performance.
 Opportunities to spend ‘quality time’ with their managers.
 Opportunities to contribute to the formulation of objectives and plans and to
improvements in the way work is managed and carried out.
 An objective and fair basis for assessing performance.

Performance Management System

Performance management system (PMS) is the heart of any “people management

processes’’ in organization. Organizations exist to perform. If properly designed and
implemented, it can change the course of growth and pace of impact of organizations. If
people do not perform organizations don't survive. If people perform at their peak level
organization can compete and create waves. In the past organizations as well as the
HR function have wasted a lot of time by wrongly focusing on performance appraisals
rather than performance management.

Pre-requisites of a PMS

Some of the essential pre-requisites without which performance management system

will not function effectively in an organization are:

 Should attract very high levels of participation from all the members concerned in
an organization. It should be a participative process.
 Top management support and commitment is very essential for building a sound
performance culture in an organization.
 Organizational vision, mission and goals should be clearly defined and
understood by all levels so that the efforts are directed towards the realization of the
organizational ambitions.
 Clear definition of the roles for performing a given job within the organizational
framework which emanates from the departmental and the organizational objectives.
The system should also be able to explain the linkages of a role with other roles.
 Open and transparent communication should prevail which will motivate the
employees for participating freely and delivering high performance. Communication is
an essential pre-requisite for a performance management process as it clarifies the
expectations and enables the parties in understanding the desired behaviours or
expected results.
 Identification of major performance parameters and definition of key performance
indicators.
 Consistency and fairness in application.
 A commitment towards recognition of high performance. Rewards and
recognitions should be built within the framework of performance management
framework.
 Proper organizational training should be provided to the staff members based on
the identification of training needs from periodic evaluation and review of performance.
This will motivate the employees for a superior performance.

Key concerns of a performance management system in an organization are:

The following are the main concerns of performance management –

1. Concern with outputs, process and inputs - Performance management is

concerned with outputs (the achievement of results) and outcomes (the impact made on
performance). But it is also concerned with the processes required to achieve these
results (competencies) and the inputs in terms of capabilities (knowledge, skill and
competence) expected from the teams and individuals involved.

2. Concern with planning - Performance management is concerned with planning

ahead to achieve success in future. This means defining expectations expressed as
objectives and in business plans.

3. Concern with measurement and review - If you can’t measure it, you can’t
manage it. Performance management is concerned with the measurement of results
and with reviewing progress towards achieving objectives as a basis for action.

4. Concern with continuous improvement - Concern with continuous

improvement is based on the belief that continuously striving to reach higher standards
in every part of the organization will provide a series of incremental gains that will build
superior performance. This means clarifying what organizational, team and individual
effectiveness look like and taking steps to ensure that those defined levels of
effectiveness are achieved. Establishing a culture in which managers, individuals and
groups take responsibility for the continuous improvement of business processes and of
their own skills, competencies and contribution.

5. Concern with continuous development - Performance management is

concerned with creating a culture in which organizational and individual learning and
development is a continuous process. It provides means for the integration of learning
and work so that everyone learns from the successes and challenges inherent in their
day-to-day activities.

6. Concern for communication - Performance management is concerned with

communication. This is done by creating a climate in which a continuing dialogue
between managers and the members of their teams takes place to define expectations
and share information on the organization’s mission, values and objectives. It
establishes mutual understanding of what is to be achieved and a framework for
managing and developing people to ensure that it will be achieved.

7. Concern for stakeholders - Performance management is concerned with

satisfying the needs and expectations of all the organization’s stakeholders,
management, employees, customers, suppliers and the general public. In particular,
employees are treated as partners in the enterprise whose interests are respected,
whose opinions are sought and listened to, and who are encouraged to contribute to the
formulation of objectives and plans for their team and for themselves.

8. Concern for transparency - Four ethical principles that should govern the
operation of the performance management process. These are respect for the
individual, mutual respect, procedural fairness and transparency of decision making.

The performance management approach has become an indispensable tool in the

hands of the corporates as it ensures that the people uphold the corporate values and
tread in the path of accomplishment of the ultimate corporate vision and mission. It is a
forward looking process as it involves both the supervisor and also the employee in a
process of joint planning and goal setting in the beginning of the year.

Effective performance management requires:

 Identifying the parameters of performance and stating them very clearly.

 Setting performance standards.
 Planning in participative ways where appropriate, performance of all constituents.
 Identifying competencies and competency gaps that contribute/hinder to
performance.
 Planning performance development activities.
 Creating ownership.
 Systematically deciding and communicating what needs to be done (aims,
objectives, priorities and targets).
 A plan for ensuring that it happens (improvement, action or service plans).
 Some means of assessing if this has been achieved (performance measures).
Contribution of PMS

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

performance increases the motivation for future performance. Knowledge about how
one is doing & recognition about one’s past success provide the fuel for future
accomplishments.
2. Self-esteem is increased: Receiving feedback about one’s performance fulfils a
basic human need to be recognized & valued at work. This in turn is likely to increase
employee’s self-esteem.
3. Managers gain insight about subordinates: Direct supervisors & other
managers in charge of the appraisal gain new insights into the person being appraised.
Also, supervisors gain a better understanding of each individual’s contribution to the
organization.
4. The definitions of job & 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.
5. Self-insight & development are enhanced: The participants in the system are
likely to develop a better understanding of themselves and of the kind of development
activities that are of value to them as they progress through the organization.

Characteristics of an ideal PM System

1. Strategiccongruence: The system should be congruent with the unit and

organisation’s strategy. In other words, individual goals must be aligned with unit and
organizational goals.
2. Thoroughness: The system should be thorough regarding four elements :all
employees should be evaluated, all major job responsibilities should be evaluated, the
evaluation should include performance spanning the entire review period, not just the
few weeks or months before the review and feedback should be given on positive
performance aspects as well as those that are in need of improvement.
3. Practicality: Systems that are too expensive, time consuming and convoluted
will obviously not be effective. Good, easy-to- use systems are available for managers
to help them make decisions.
4. Specificity: A good system should be specific: it should provide detailed and
concrete guidance to employees about what is expected of them an how they can meet
these expectations.
5. Identification of effective & ineffective performance: The performance
management system should provide information that allows for the identification of
effective and in effective performance.
6. Reliability: A good system should include measures of performance that are
consistent and free of error. For example, if two supervisors provided ratings of the
same employee and performance dimensions, rating should be similar.
7. Validity: The measures of performance should also be valid. In this context,
validity refers to the fact that the measures include all relevant performance facets and
do not include irrelevant performance facets.

Performance Management Strategies

The following strategies need to be followed for PMS to be successful. These are as follows:

1. Define and Communicate Company Goals and Performance Objectives -

Employees cannot meet the performance expectations or company goals if they are not
clearly outlined, making this the first step toward effective performance management.
Sometimes employers are not as clear as they could be when outlining their goals or
company objectives, and often, employees do not come forward to ask follow-up
questions when they are confused or unclear about something. Therefore,
communication needs to extremely clear. This can be done by creating a chart within
the office, by sending out an e-mail, distributing a flyer throughout the office, holding
meetings, or doing each of these things in turn. When you are outlining goals and
objectives, repeat the message so that it sinks in, offer visuals (such as an office chart
and e-mail) so that employees have a reference, and most importantly, hold meetings to
check in on progress.

2. Utilize Performance Management Software – Usinga performance management

software can be one of the methods which can really streamline the performance
management strategies. A good performance management software system is one that
both offers traditional reviews and 360s, is employee-friendly, has an easy-to-use
dashboard interface, allows for quick and actionable reporting and, of course, fosters
employee development.

3. Offer Frequent Performance Feedback– It is important to check in with teams and

employees periodically not only to gauge progress but also to provide feedback.Good
performance feedback reinforces strong skill sets and positive behaviours while
showing opportunity areas with a clear path for improvement. This type of feedback
cannot wait until HR annual review cycle. Instead, it should be given in real time and
integrated into company.

4. Use Peer Reviews - Another great way to foster effective performance management
is to utilize peer reviews, also known as 360-degree reviews. Peer reviews are useful
because they allow co-workers to praise other co-workers and highlight positive aspects
of their performance, as well as point out where improvements can be made.This
exercise helps employees to work together, build better communication, and assess
where they can improve themselves while watching their colleagues. There does need
to be some manager or HR oversight into this process, and all peer reviews should be
read to ensure that no claims, concerns, praises, or other comments go unnoticed or
unaddressed.

5. Pre-emptive Management and Recognition - One way to guarantee results in the

workplace is to implement rewards and practice pre-emptive management. This simply
means that your employees always know what is expected of them so there is never
any guesswork or need for consequences in the workplace.Rewards, or incentives, are
also an effective way to show employees that you care, that you see their efforts and
are pleased with their performance, and that you want them to keep up the good work.

6. Set Regular Meetings to Discuss Outcomes and Results - Also known as

progress reports or progress meetings, setting aside time to meet with your team and
seeing how things are going with your set goals and objectives are important for
meeting those goals and objectives.These meetings can be held weekly, monthly, or as
often as you see fit. When holding these meetings, be sure to have a clear idea of what
you want to cover. Some objectives should include:

 Following Up on Peer Reviews

  Discussing Praises and Areas that Need Work with the Team

 Recognizing Those Team Members Actively Meeting their Goals and Objectives
with Rewards or Incentives

 Discussing Plans for The Next Phase of Projects

 Discussing Company Data: Revenue, Customer Involvement, Marketing and

Campaign Success, Etc.

You should never meet just for meeting’s sake. You want to have something relevant to
address and something worthwhile to talk about. If you feel things are going smoothly,
employees are receiving performance feedback and acting accordingly, and the
company overall is on a positive road, meetings may be held less frequently and treated
as checkpoints throughout the year.

These six strategies for effective performance management may seem simple, but they
can work wonders when implemented into a company’s day-to-day life. Companies
should be about the people involved. Making the most of their abilities, recognizing
where they shine, encouraging them where they need work, and seeing them as full
employees, not just cogs, are really how you can create the right work environment for
success.

The Performance ManagementCycle

There is no right way of doing performance management. It must be tailored to the needs of
the organization and a certain degree of flexibility needs to be present to factor in the needs
of the people in the organization. However, there is a basic model which illustrates the
various components on which other models rest.Performance Management is not an event
but rather a cycle which can be illustrated as follows:
 Plan − decide what to do and how to do it.

 Act − carry out the work needed to implement the plan.

 Monitor − carry out continuous checks on what is being done and measure
outcomes in order to assess progress in implementing the plan.

 Review − consider what has been achieved and, in the light of this, establish what
more needs to be done and any corrective action required if performance is not in line
with the plan.

Performance Management Sequence

The above performance management cycle can be detailed out in a sequence as

follows:
1. Corporate Mission and Strategic Goals – This is the starting point of the PM
process. The aim is to ensure that each of the activities in the sequence is aligned to those
goals and contributes to their achievements.
2. Business and departmental plans and goals – These flow from the corporate
goals with changes brought in to suit the department’s needs.
3. Performance and development agreement – Also known as the performance
contract, it is the agreement on objectives and accountabilities reached by individuals with
their managers. The agreement id usually reached at a formal review meeting and recorded
during or after the meeting on a performance review form. The process is easier is both the
parties (the manager and the individual) are prepared for the meeting. A performance
agreement defines the work to be done, the results to be attained, the performance
standards to be achieved and the competence levels required. It covers the following areas:
 What the person is doing now
 What he might have to do in future
 How the work should be done (competence or process requirements)
 What the expected output and outcomes of the work(performance requirements and
standards) are
 What knowledge, skills and ability are required to do the work (input requirements)
 The core values a person might be expected to withhold.
 What support the person requires – from the manager, from co-workers, from
resources or information.
4. The performance and development plan – This is a joint exploration of what
individuals need to do and know to improve their performance and develop their skills and
competencies, and their managers can help them achieve this.
5. Action - work, development and support – When action is taken to implement
the performance agreement and performance improvement and personal development
plans as individuals carry on with their day-to-day work and their planned learning
activities. It includes a continuous process of providing feedback on performance,
conducting informal progress reviews, updated objectives and, where necessary,
dealing with performance problems.
6. Continuous monitoring and support – Performance management is a continuous
process of managing and developing performance standards which involves practices like
direction setting, monitoring and measuring performance, providing feedback and taking
necessary action.
7. Formal review and feedback - Here a review of performance over a period (could be
annual or half – yearly) takes place covering the aspects like achievements, progress and
problems as the basis for the next part of the continuous cycle – a revised performance
agreement and performance improvement and personal development plans. It can also lead to
performance ratings. This is not appraisal but review. The review includes the following points:
 The achievement of objectives
 The level of competency
 Whether core values have been upheld or not
 Areas for future consideration – development of strengths, trainings needs etc
  Feelings related to work
 Aspirations
 The comments of the individual on the support given by their managers

8. Overall Performance Rating - This is where different appraisal schemes come into
the picture and the organization decides what ratings it would like to have based on its
requirements. The points to be considered here are :
 How many levels of ratings should be there? – Odd no. ( 3 to 5) or even no. ( 4 or 6).
 How to describe these levels? – Avoid ratings using Average. A better description for
example is – Highly effective, Effective, Developing or Improvable.
 How to achieve a degree of consistency, equity and fairness in ratings? – One can
achieve this by choosing between forced distribution, raking, training, peer reviews or
monitoring.

Performance Management in Action

Performance management should not be like a system based on periodical formal

appraisals and detailed documentation. The activities should be logical in the sense of
contributing to an overall approach in which all aspects of the performance
management process are designed.
Thus, in every organization there is a need to declare why performance management is
important, how it works and how people will be affected by it. The declaration should
have the visible and continuous support of top management and should emphasize to
develop a high-performance culture and integrate organizational and individual goals.
Performance management recognizes the fact that we all create the view of the people
who work for the organization and it also makes sense to express that view explicitly
against a framework of reference.
Disadvantages of a poorly implemented PM System:

1. Increased turnover: If the process is not seen as fair, employees may become upset
and leave the organization. They can leave physically or withdraw psychologically.
2. Use of misleading information: If a standardized system is not in place, there are
multiple opportunities for fabricating information about an employee’s performance.
3. Lowered self-esteem: Self-esteem may be lowered if feedback is provided in an
inappropriate and inaccurate way. This in turn can create employee resentment.
4. Wasted time and money: Performance management systems cost money and quite
a bit of time. These resources are wasted when systems are poorly designed and
implemented.
5. Damaged relationships: As a consequence of a deficit system, the relationship
among the individuals involved may be damaged, often permanently.
6. Decreased motivation to perform: Motivation may be lowered for many reasons
including the feeling that superior performance is not translated into meaningful
tangible or intangible rewards.
7. Employee burnout & 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 & job dissatisfaction.
8. Increased risk of litigation: Expensive lawsuits may be filed by individuals who feel
they have been appraised unfairly.

Performance Appraisal

Performance appraisal is the process of obtaining, analyzing and recording information

about the relative worth of an employee. The focus of the performance appraisal is
measuring and improvingthe actual performance and the future potential of the
employee. Flippo defines, "performance appraisal is the systematic, periodic and an
impartial rating of an employee’s excellence in the matters pertaining to his present job
and his potential for a better job." Performance appraisal is a systematic way of
reviewing and assessing the performance of an employee during a given period of time
and planning for his future. The performance assessment often includes both the core
competencies required by the organization and also the competencies specific to the
employee’s job.The appraiser, often a supervisor or manager, will provide the employee
with constructive, actionable feedback based on the assessment. This in turn provides
the employee with the direction needed to improve and develop in their job.Based on
the feedback, a performance appraisal is also an opportunity for the organization to
recognize employee achievements and future potential.

The purpose of a performance appraisal

The purpose of a performance appraisal is two-fold: It helps the organization to

determine the value and productivity that employees contribute, and it also helps
employees to develop in their own roles.The following are the best benefits of
performance appraisal.

1. Alignment with corporate goals: Employee goals are aligned with departmental
and corporate vision, mission and goals to be achieved to provide lot more clarity with
respect to expectations.

2. Performance feedback:Most employees are very much interested in knowing how

well they are doing at present and how they can do better in a future. They want this
information to improve their performance in order to get promotions, satisfaction,
motivation and merit pay.

3. Employee training and development decisions: Performance Appraisal

information is used to find out whether an employee requires additional training and
development. Deficiencies in performance may be due to inadequate knowledge or
skills. Similarly, if the performance appraisal results show that he can perform well in a
higher position, then he is imparted training for the higher level position.

4. Validation of selection process: Organizations spend a lot of time and money for
recruiting and selecting employees. Various tools used in the selection process are
application blanks, interviews, psychological tests etc. These tools are used to predict
the candidate's performance on the job. A proper performance appraisal finds out the
validity of the various selection tools and so the company can follow suitable steps for
selecting employees in future.

5. Promotions: Past appraisals, together with other background data, will enable
management to select proper persons for promotion.

6. Transfers: Transfers often involve changes in job responsibilities, and it is important

to find out the employees who can shoulder these responsibilities.

7. Compensation decisions: Performance appraisal can be used to compensate the

employees by increasing their pay and other incentives. The better performances are
rewarded with merit pay.

8. Career Development: Performance appraisal also enables managers to coach and

counsel employees in their career development.

9. Human resource planning: The appraisal process helps in human resource

planning (HRP) about the knowledge of a person who is capable of being promoted,
demoted, transferred, laid off or terminated, management cannot make employment
plans for the future.

10. Lay off/ retrenchment decisions: Performance appraisal is a good way of taking
layoff decisions. Performance appraisal helps in finding the weakest performers to be
laid off.
Benefits of Performance Appraisal

Benefit for organization

Employee assessments can make a difference in the performance of an organization.

They provide insight into how employees are contributing and enable organizations to:

 Identify where management can improve working conditions in order to increase

productivity and work quality.

 Address behavioral issues before they impact departmental productivity.

 Encourage employees to contribute more by recognizing their talents and skills

 Support employees in skill and career development

 Improve strategic decision-making in situations that require layoffs, succession

planning, or filling open roles internally

Benefit for employee

Performance appraisals are meant to provide a positive outcome for employees. The
insights gained from assessing and discussing an employee’s performance can help:

 Recognize and acknowledge the achievements and contributions made by an

employee.

 Recognize the opportunity for promotion or bonus.

 Identify and support the need for additional training or education to continue career
development.

 Determine the specific areas where skills can be improved.

 Motivate an employee and help them feel involved and invested in their career
development.

 Open discussion to an employee’s long-term goals.

Methods of performance appraisal

These can be divided into 2 kinds - the traditional methods and the modern method

Traditional Methods Modern Methods

Ranking Methods Management by Objectives (MBO)
Behaviourally Anchored Rating Scales
Paired Comparison (BARS)
Grading Method Assessment Centres
Forced Distribution Method 360-degree appraisal
Forced Choice Method Cost accounting method
Checklist Method
Critical Incidents Method
Graphic Scale Method
Essay Method
Field review method
Confidential Report

Traditional Methods

1. Ranking method - This is one of the oldest and simplest techniques of

performance appraisal. In this method, the appraiser ranks the employees from the best
to the poorest on the basis of their overall performance. It is quite useful for a
comparative evaluation In this method ranks are given to employees based on their
performance.
There are different methods of ranking employees.
i) Simple ranking method– It refers to ranks in serial order from the best
employee to the worsteg. If we have to rank 10 best employees we start with the first
best employee and give him the first rank this is followed by the 2nd best and so on until
all 10 have been given ranks.
ii) Alternate ranking method - In this method the serial alternates between the
best and the worst employee. The best employee is given rank 1 and then we move to
the worst employee and give him rank 10 again to 2nd best employee and give him rank
2 and so on.
2. Paired comparison - It is a better technique of comparison than the straight
ranking method, this method compares each employee with all others in the group, one
at a time. In this method each and every person is the group, department or team is
compared with every other person in the team/group/department. The comparison is
made on certain criteria and finally ranks are given. This method is superior because it
compares each and every person on certain qualities and provides a ranking on that
basis.
3. Grading method – In this method, certain categories of worth are established in
advance and carefully defined. There are categories established for employees like
outstanding, satisfactory and unsatisfactory etc. The employee is, then, allocated to the
grade that best describes his or her performance.

4. Forced Choice Method – Under this method, the rater is forced to answer the
ready-made statements as given in the blocks of two or more, about the employees in
terms of true or false. Once he is done with the list, it is forwarded to the HR department
for the final assessment of the employee.
5. Forced Distribution Method -A method which forces the raterto distribute the
ratings of the overall performance of an employee is known as forced distribution
method. Group wise rating is done under this method. This method is suitable to large
organizations, but the individual traits could not be appraised under this method.
Example: a group of workers doing the same job would fall into the same group as
superior, at and above average, below average and poor.
6. Critical incident method: In this method of Performance appraisal, the
evaluator rates the employee on the basis of critical events and how the employee
behaved during those incidents. It includes both negative and positive points. The
drawback of this method is that the supervisor has to note down the critical incidents
and the employee behaviour as and when they occur. This is followed by an analysis of
the person, his abilities and talent, recommendations for the future incentives and
promotions.
Some of the events or incidents are given below:
 Refused to co-operate with other employees.
 Unwilling to attend further training.
 Got angry over work or with subordinates.
 Suggested a change in the method of production.
 Suggested a procedure to improve the quality of goods.
7. Field review method: This is an appraisal done by someone outside employees’
own department, usually from corporate or HR department. This is useful for managerial
level promotions, when comparable information is needed. But problem is an outsider is
generally not familiar with employees work environment so observation of actual
behaviours not possible.

8. Check list method: In this method the senior / rater is given a list of questions
about the job behaviour of the employees. These questions are followed by check
boxes. The superior has to put a tick mark in any one of the boxes. The checklist
contains a list of statements on the basis of which the rater assesses the employees on
the job performance. This method is an extremely simple method and does not involve
a lot of time. The same set of questioners can be given for every employee so that there
is uniformity in selecting employee.
9. Essay Method - In this method the senior or the boss is supposed to write a
narrative essay describing the qualities of his junior. He may describe the employee’s
strength and weakness, analytical abilities etc. The narrative essay ends with a
recommendation for future promotion or for future incentives.
10. Confidential Report:This method is very popular in government departments to
appraise IAS officers and other high level officials. In this method the senior or the boss
writes a report about the junior giving him details about the performance about the
employee. The positive and negative traits, responsibilities handled on the job and
recommendations for future incentives or promotions. The report is kept highly
confidential and access to the report is limited.

11. Graphic rating method: In this method, an employee’s quality and quantity of
work is assessed in a graphic scale indicating different degrees of a particular trait.
Graphic rating scale refers to using specific factors to appraise people. The entire
appraisal is presented in the form of a chart. The chart contains certain columns which
indicate qualities which are being appraised and other columns which specify the rank
to be given The senior has to put a tick mark for a particular quality along with the
ranking. Such charts are prepared for every employee according to the department in
which they work. Sometimes the qualities which are judged may change depending
upon the department.
Modern methods

Modern methods of appraisal are being increasingly used by companies. Now days one
of the striving feature that appraisal involves is, the opinion of many people about the
employee and in some cases psychological test are used to analyze the ability of
employee.

1. Management by objectives (MBO): The concept of ‘Management by

Objectives’ was first given by Peter Drucker (1954). MBO can be defined (MBO) as a
process whereby the employees and the managers come together to identify common
goals. Employees set their goals to be achieved, the standards to be taken and
maintained as the criteria for measurement of their performance and contribution and
deciding the course of action to be followed. The essence of MBO is participative goal
setting, choosing course of actions and decision making (owning). An important part of
the MBO is the measurement and the comparison of the employee’s actual
performance with the standards set. The effectiveness of MBO depends on top
management commitment.

MBO led to the concept of SMART Goal setting.

2. Assessment centers: Assessment centers are places where the employees are
assessed on certain qualities talents and skills which they possess. This method is used
for selection as well as for appraisal. The people who attend assessment centers are
evaluated by multiple techniques and multiple assessors to produce judgments
regarding the extent to which an employee /participant displays selected competencies.
These techniques include management games, psychological tests, puzzles, questions
about different management related situations etc.The trained evaluators observe and
evaluate employees as they perform. The major competencies that are judged in
assessment centers are interpersonal skills, intellectual capability, planning and
organizing capabilities, motivation, career orientation etc.Based on their performance in
these tests and games, theappraisal is done.
3. Behaviourally Anchored Rating Scales (BARS): It is a relatively new
technique which combines the graphic rating scale and critical incidents
method.Behaviourally Anchored Rating Scales (BARS) are designed to bring the
benefits of both qualitative and quantitative data to the employee appraisal process.
BARS compare an individual’s performance against specific examples of behaviour that
are anchored to numerical ratings. It consists of predetermined critical areas of job
performance or sets of behavioural statements describing important job performance
qualities as good or bad (for example, the qualities like inter-personal relationships,
adaptability and reliability, job knowledge etc). An employee’s actual job behaviour is
judged against the desired behaviour by recording and comparing the behaviour with
BARS. Despite intuitive appeal of BARS, findings have not been appealing. BARS use
is superior to traditional graphic scales in reducing halo and leniency errors.

4. 360 degree feedback: Known as 'multi-rater feedback', it is the most comprehensive

appraisal where the feedback about the employees’ performance comes from all the
sources which come in contact with the employee on his job. 360 degree respondents
for an employee can be his/her peers, managers (i.e. superior), subordinates, team
members, customers, suppliers/ vendors. Anyone who comes into contact with the
employee can provide valuable insights and information or feedback regarding the "on-
the-job" performance of the employee. This is one of the most popular methods.
5. Human Resource Accounting Method: Human resource accounting method tries to
find the relative worth of HR assets in the terms of money. The cost of employees
include all the expenses incurred on them like their compensation, recruitment and
selection costs, induction and training costs etc. Whereas their contribution includes the
total value added (in monetary terms). The difference between the cost and the
contribution will be the performance of the employees. Ideally, the contribution of the
employees should be greater than the cost incurred on them.

Process of performance appraisal

1. Establish Performance Standards with Employees: The appraisal process

begins with establishment of performance standards in accordance with the
organisation’s strategic goals. These should evolve out of the company’s strategic
direction- and more specifically, the job analysis and the job description. These
performance standards should also be clear and objective enough to be understood and
measured. Too often, standard are articulated in ambiguous phrases that tell us little,
such as “a full day’s work” or “a good job”. What is full day’s work or a good job? A
supervisor’s expectations of employee work performance must be clear enough in his
mind so that he will be able to, at some later date, communicate these expectations to
his employee, mutually agree to specific job performance measures, and appraise their
performance against these established standards.
2. Mutually Set Measurable Goals: Once performance standards are established,
it is necessary to communicate these expectations; employees should to guess what is
expected of them. Too many jobs have vague performance standards, and the problem
is compounded when these standards are set in isolation and without employee input.
Communication is a two-way street-mere information transfer from supervisor to
employee is not communication.
3. Measure Actual Performance: The third step in the appraisal process is
performance measurement. To determine what actual performance is, we need
information about it. We should be concerned with how we measure and what we
measure. Four common sources of information frequently used by managers address
how to measure actual performance-personal observation, statistical reports, oral
reports, and written reports. Each has its strengths and weaknesses; however, a
combination of them increases both the number of input sources and the propability of
receiving reliable information. What we measure is probably more critical to the
evaluation process then how we measure. Selecting the wrong criteria can produce
serious, dysfunctional consequences. And what we measure determines, to a great
extent, what people in the organization will attempt to excel at. The criteria we measure
must represent performance as it was mutually set in the first two steps of the appraisal
process.
4. Compare Actual Performance with Standards: The fourth step in the appraisal
process in the comparison of actual performance with standards. This step notes
deviations between standard performance and actual performance so that we can the
next step.
5. Discuss the Appraisal with the Employee: This step involves discussion of the
appraisal with the employee. One of the most challenging tasks facing appraisers is to
present an accurate assessment to the employee. Appraising performance may touch
on one of the most emotionally charged activities-evaluation of another individual’s
contribution and ability. The impression that employees receive about their assessment
has a strong impact on their self-esteem and importantly, on their subsequent
performance. Of course, conveying good news is considerably easier for both the
appraiser and the employee than convying bad news. In this context, the appraisal
discussion can have negative as well as positive motivational consequences.
6. If Necessary, Initiate Corrective Action: The final step in the appraisal in the
identification of corrective action where necessary. Corrective action can be of two
types-one is immediate and deals predominantly with symptoms. And the other is basic
and delves into causes. Immediate corrective action is often described as “putting out
fires”.

Limitations of Performance Appraisal

The following are the limitations of performance appraisal.

1. Halo effect- In this case the superior appraises the person on certain positive
qualities only. The negative traits are not considered. Such an appraisal will not give a
true picture about the employee. And in some cases, employees who do not deserve
promotions may get it.

2. Horn effect - In this case only the negative qualities of the employee are considered
and based on this appraisal is done. This again will not help the organization because
such appraisal may not present a true picture about the employee.
3. Central tendency - In this case the superior gives an appraisal by giving central
values. This prevents a really talented employee from getting promotions he deserves
and some employees who do not deserve anything may get promotion.

4. Leniency and strictness - Some bosses are lenient in grading their employees while
some are very strict. Employee who really deserves promotions may loose the
opportunity due to strict bosses while those who may not deserve may get benefits due
to lenient boss.

5. Spill over effect - In this case the employee is judged positively or negatively by the
boss depending upon the past performance. Therefore, although the employee may
have improved performance, he may still not get the benefit.

6. Fear of losing subordinates and spoiling relations - Many bosses do not wish to
spoil their relations with their subordinates. Therefore, when they appraise the
employee, they may end up giving higher grades which are not required. This is an
injustice to really deserving employees.

7. Goodwill and techniques to be used- Sometimes a very strict appraisal may affect
the goodwill between senior and junior. Similarly, when different departments in the
same company use different methods of appraisal it becomes very difficult to compare
employees.

8. Paper work and personal biased- Appraisal involves a lot of paper work. Due to this
the work load of HR department increases. Personal bias and prejudice result in bosses
favouring certain people and not favouring others.

Difference between Performance Appraisal and Performance Management

Performance Management is NOT Performance Appraisal - It is sometimes

assumed that performance appraisal is the same thing as performance
management. But there are significant differences.

 Performance appraisal can be defined as the formal assessment and rating of

individuals by their managers at, usually, an annual review meeting.

 In contrast, performance management is a continuous and much wider, more

comprehensive and more natural process of management that clarifies mutual

expectations, emphasizes the support role of managers who are expected to act as
coaches rather than judges and focuses on the future.

Performance appraisal has been discredited because too often, it has been
operated as a top-down and largely bureaucratic system owned by the HR
department rather than by line managers. It was often backward looking,
concentrating on what had gone wrong, rather than looking forward to future
development needs.

Performance appraisal schemes existed in isolation. There was little or no link

between them and the needs of the business. Line managers have frequently
rejected performance appraisal schemes as being time consuming and irrelevant.
Employees have resented the superficial nature with which appraisals have been
conducted by managers who lack the skills required.

Obstacles to Performance Appraisal

The principal obstacles to effective performance appraisal are:

 Lack of support from top management.
 Performance appraisal demands too much of supervisors efforts in terms of time,
paperwork, and periodic observation of subordinates performance.
 Supervisors are reluctant to play god by judging others.
 Supervisors do not fully understand the purpose and procedures of performance
appraisal.
 Supervisors lack skills in appraisal techniques.
 Performance appraisal is not perceived as being productive.
 Evaluation biases and rating errors, which result in unreliable and invalid ratings.
 Lack of clear, objective standards of performance.
 Failure to communicate purposes and results of performance appraisal to
employees.
 Lack of a suitable appraisal tool.
 Failure to police the appraisal procedure effectively.

Potential Appraisal

The potential appraisal refers to the appraisal i.e. identification of the hidden talents and
skills of a person. The person might or might not be aware of them. Potential appraisal
is a future–oriented appraisal whose main objective is to identify and evaluate the
potential of the employees to assume higher positions and responsibilities in the
organizational hierarchy.

Purpose of Potential Appraisal

 To advise employees about their overall career development and future prospects.
 Help the organization to chalk out succession plans.
 Motivate the employees to further develop their skills and competencies.
 To identify the training needs. Motivate the employees to further develop their skills
and competencies.
 To identify the training needs.

Techniques of Potential Appraisal

 Self – appraisals
 Peer appraisals
 Superior appraisals
 MBO
 Psychological and psychometric tests
 Management games like role playing
 Leadership exercises etc.

Steps of Potential Appraisal System

1. Role Descriptions: Organizational roles and functions must be defined clearly. To

this end, job descriptions must be prepared for each job.
2. Qualities needed to perform the roles: Based on job descriptions, the roles to be
played by people must be prepared (i.e., technical, managerial jobs and behavioral
dimensions).
3. Rating mechanisms: Besides listing the functions and qualities, the potential
appraisal system must list mechanisms of judging the qualities of employees such as
Rating by others, games, tests, records.
4. Organizing the system: After covering the above preliminaries, he must set up a
system that will allow the introduction of the scheme smoothly giving answers to some
puzzling questions:
i. How much weight age to merit in place of seniority in promotion?
ii. How much weight age to each of the performance dimensions – technical,
managerial or behavioural qualities?
iii. What are the mechanisms of assessing the individual on different indicators of his
potential and with what reliability?
5. Feedback: The system must provide an opportunity for every employee to know
the results of his assessment. “He should be helped to understand the qualities actually
required for performing the role for which he thinks he has the potential, the
mechanisms used by the organizations to appraise his potential and the results of such
an appraisal.

Example - Potential Appraisal at Philips India: Philips India has combined performance
and potential appraisal together. It is basically based on the conceptual background as
used by Philips N. V. for potential appraisal.

The various criteria used by Philips N.V. are divided into four types:

1. Conceptual Effectiveness: Vision, business orientation, entrepreneurial orientation

and sense of reality.

2. Operational Effectiveness: Result orientation, individual effectiveness, risk taking and

control.

3. Interpersonal Effectiveness: Network directedness, negotiating power, personal

influence and verbal behaviour.

4. Achievement Motivation: Drive, personal ambition, innovativeness, and stability.

Each of the criterions is then measured on five-point scale. The final grading is based
on the appraisal by management development review team that consists of members
from functional areas with whom the appraisees have close interaction in the normal
course of their job. A 2 × 2 matrix is used to demonstrate the combination of
performance and potential appraisal as shown in the figure.
A brief description of four classifications of appraises are as follows:

1. Low Potential – Low Performance: These employees are low on both dimensions.
These can be advised to improve performance otherwise the result will be planned
separation.

2. High Potential – Low Performance: In order to utilize their high potential, these
employees are shifted either to new locations or new departments. If still they do not
improve their performance, they are reclassified as question mark for planned
separation.

3. Low Potential – High Performance: They are performers termed as solid citizens.
They lack potential for higher job. Therefore, they are encouraged to do their present
jobs better.

4. High Potential – High Performance: They are termed as stars. More developmental
efforts are directed towards them.
 PERFORMANCE MANAGEMENT SYSTEM

Measuring Performance (Module-2)

Mitrabinda Nayak

Why measure?

It is necessary to keep in mind that “What gets measured gets done” and “If you can’t
measure it, you can’t manage it.”

To improve performance, one needs to know what the current performance is. Agreeing and
reviewing objectives is an important aspect of performance management.As a process,
performance measurement is not simply concerned with collecting data associated with a
predefined performance goal or standard. Performance measurement is better thought of
as an overall management system involving prevention and detection aimed at achieving
conformance of the work product or service to your customer's requirements. Additionally,
it is concerned with process optimization through increased efficiency and effectiveness of
the process or product. These actions occur in a continuous cycle, allowing options for
expansion and improvement of the work process or product as better techniques are
discovered and implemented.

Improvements to performance have to start from an understanding of what the level of

current performance is in terms of both results and competencies. This is the basis for
identifying improvement and development needs in the individuals. Mainly, it provides the
information required for career planning and continuous development by identifying
strengths to be enhanced as well as weaknesses to be overcome.

This can only be achieved if there are reliable performance measures. Performance
management also gives opportunities to good performers to take charge of their own
performance. This cannot be done unless they can measure and monitor their own goals.

Performance measurement serves the following purposes:

 Ensures customer requirements have been met

 Provides standards for establishing comparisons
  Provides visibility and a scoreboard for people to monitor their own performance
levels
 Highlights quality problems and determines which areas require priority attention
 Gives an indication of the costs of poor quality
 Justifies the use of resources
 Provides feedback for driving the improvement effort

What should be measured

It can be argued that what gets measured is often what is easy to measure. And in
some jobs what is meaningful is not measurable and what is measurable is not
meaningful. It was asserted by Levinson that: ‘The greater the emphasis on
measurement and quantification, the more likely the subtle, non-measurable
elements of the task will be sacrificed. Quality of performance frequently, therefore,
loses out to quantification.’

Measuring performance is relatively easy for those who are responsible for
achieving quantified targets, for example sales. It is more difficult in the case of
knowledge workers, for example scientists. But this difficulty is alleviated if a
distinction is made between the two forms of results – outputs and outcomes.

Criteria for Performance Measures

Performance measures should be:

 be related to the strategic goals and measures that are organizationally significant and
drive business performance
 be relevant to the objectives and accountabilities of the teams and individuals
concerned – they are effective only if they are derived from the statements of
accountabilities or are based on well-researched competence frameworks, or both
 focus on measurable outputs and accomplishments and ranges of behaviour which
can be precisely and clearly defined (behaviour is how people act and how they
conduct themselves, which is observable as it occurs)
 indicate the data or evidence that will be available as the basis of measurement
 be verifiable – provide information that will confirm the extent to which expectations
have been met
  be as precise as possible in accordance with the purpose of the measurement and the
availability of data
 provide a sound basis for feedback and action
 be comprehensive, covering all the key aspects of performance so that a family of
measures is available.

Classification of Measures

There are various types of measures selected on the basis of the criteria listed above, the
most important being that they are relevant, significant and comprehensive.

Measures or metrics can be classified under the following headings:

 Finance – income, shareholder value, rates of return, costs

 Output – units produced or processed, throughput, new accounts
 Impact – attainment of a standard (quality, level of service etc), changes in behaviour
(internal and external customers). Completion of work / project, level of take-up of a
service, innovation
 Reaction –judgement of others, colleagues, internal and external customers
 Time – speed of response or turnaround, achievements compared with timetables,
amount of backlog, time to market, delivery times.

The following indicators can be used in government set-ups:

 Productivity indicators that focus on the amount of work completed within a defined
length of time
 Utilisation rates that refer to the extent to which available services are used
 Time targets that refer to the average time taken to carry out defined units of work – for
example, the time to process appeals.
 Volume of service – the amount of work done
 Demand / service provision

Expressing measures

Measures can be expresses in four different ways:

i. Counts – the number of times an accomplishment takes place

 ii. Ratios – the no. of times an accomplishment takes place divided by the no. of times it
could have taken place
iii. Percentages - the proportion of actual achievement to total available achievement
iv. Financial impact– of achieving or failing to achieve a result

Focus of performance measures

The focus for senior managers is likely to be based on definitions of key result areas
(KRAs) that spell out their personal responsibility for growth, added value and
results.

The performance of managers, team leaders and professional staff also is

measured by reference to definitions of their KRAs. The achievement of quantitative
targets is still important, but more emphasis will be placed on competence
requirements.

The focus of performance agreements and measures will vary considerably

between different occupations and levels of management as shown in in the
following figure.
In administrative, clerical jobs, performance measures will be related to key
activities which continue standards of performance and work objectives which will
be considered as the main source of measuring performance.

Types of Measures

We can study the types of measures to evaluate the performance for the following :-

A) Organizational
B) Team
C) Individual

A) Types of Performance Measures for an Organization

The three most important things that need to be measured in a business are customer
satisfaction, employee satisfaction and cash flow. Keeping this in mind the different
approaches to measuring organizational performance are as follows:

i) A Balanced Scorecard
The balanced scorecard is a strategic planning and management system that is used
extensively in business and industry, government and non-profit organizations worldwide
to align business activities to the vision and strategy of the organization, improve internal
and external communications, and monitor organization performance against strategic
goals.

The Evolution of Balanced Scorecard

The concept of the balanced scorecard was first touted in the Harvard Business Review
in 1992 in a paper written by Robert S Kaplan and David P Norton. The paper introduced
the idea of focusing on human issues as well as financial ones and measuring
performance across a much wider spectrum than businesses had done before. Kaplan
and Norton published their ideas in full in The Balanced Scorecard: Translating Strategy
into Action in 1996 and it became a business bestseller.

The Balanced Scorecard (BSC) is a performance measurement framework which has

strategic non-financial performance measures to traditional financial metrics to give
managers and executives a more 'balanced' view of organizational performance. The
BSC provides a method for organisation to systematically develop a comprehensive
system of planning and control. It helps in getting a performance measurement system
that translates organisation strategy into objective measures, targets and initiatives.

The term itself signifies its meaning. The term “scorecard” signifies quantified
performance measures and “balanced” signifies the system is balanced between:
• Short-term and long-term objectives
• Financial and non-financial measures
• Lagging and leading indicators
• Internal and external performance perspectives

Why Use a Balanced Scorecard?

1. Improve organizational performance by measuring what matters
2. Increase focus on strategy and results
3. Align organization strategy with workers on a day-to-day basis
4. Focus on the drivers key to future performance
5. Improve communication of the organization’s Vision and Strategy
6. Prioritize Projects / Initiatives

Original Business Perspectives- The Balanced Scorecard model suggests that we view
the organization from 4 perspectives, then develop metrics, collect data and analyze it
relative to each of these perspectives.

The 4 Business perspectives as per Kaplan and Norton are:

1. Financial (shareholder) perspective

Goals - increased profitability, growth, increased return on their investment
Measures - cash flows, cost reduction, economic value added, gross margins, profitability,
return on capital/equity/investments/sales, revenue growth, working capital, turnover.
2. Customer perspective
Goals - new customer acquisition, retention, extension, satisfaction
Measures - market share, customer service, customer satisfaction, number of
new/retained/lost customers, customer profitability, number of complaints, delivery times,
quality performance, response time.
3. Internal perspective
Goals - improved core competencies, improved critical technologies, reduction in
paperwork, better employee morale
Measures - efficiency improvements, development/lead/cycle times, reduced unit costs,
reduced waste, amount of recycled waste, improved sourcing/supplier delivery, employee
morale and satisfaction, internal audit standards, number of employee suggestions, sales
per employee, staff turnover.
4. Innovation and learningperspective
Goals - new product development, continuous improvement, employee development
Measures - number of new products and percentage of sales from these, number of
employees receiving training, training hours per employee, number of strategic skills
acquired, alignment of personal goals with the Scorecard.
Implementation of the Balanced Scorecard

Kaplan and Norton identified a number of stages for implementing the Scorecard. These
include a mix of planning, interviews, workshops and reviews. The type, size and structure
of an organisation will determine the detail of the implementation process and the number
of stages adopted.
The main steps include:
1. Be clear about organisational strategy and objectives- As the Scorecard is
inextricably linked to strategy, the first requirement is to clearly define the strategy and
ensure that senior managers, in particular, are familiar with the key issues. Before any
other action can be planned, it is essential to have an understanding of:
i) the strategy
ii) the key objectives or goals required to realise the strategy
iii) the three or four critical success factors (CSFs) that are fundamental to the
achievement of each major objective or goal.
Starting with strategy and objectives is vital and will help organisations to avoid doing the
wrong things really well. See Related Checklists below for more on developing corporate
mission and strategy.

2. Develop a strategy map- Strategy mapping is a tool developed by Kaplan and

Norton for translating strategy into operational terms. A strategy map provides a graphical
representation of cause and effect between strategic objectives and shows how the
organisation creates value for its customers and stakeholders. Generally speaking,
improving performance in the objectives under learning and growth enables the
organisation to improve performance in its internal processes, which in turn enables the
organisation to create desirable results in the customer and financial perspectives.
3. Decide what to measure- Once the organisation's major strategic objectives have
been determined, a set of measures can be developed. It is vital to ensure that the
measures chosen reflect the strategic objectives and help to align action with strategy. As
a guide, there should be a total limit of 15 to 20 key measures linked to those specific
goals (significantly fewer measures may not achieve a balanced view, and significantly
more may become unwieldy and deal with non-critical issues). The 4 main perspectives
with a list of goals and measures is drawn out.
4. Amend the Scorecard if appropriate- Each organisation must determine its own
strategic goals and the activities to be measured. Some organisations have found that
Kaplan and Norton's template fails to meet their particular needs and have either modified
it or devised their own Scorecard. Public sector organisations, for example, may have
different aims and objectives and may have to tailor the Scorecard to reflect this.
5. Finalise the implementation plan- Further discussions, interviews and workshops
may be required to fine-tune the detail, and agree the strategy, goals and activities to be
measured, ensuring that the measures selected focus on the critical success factors. At
this stage, it is critical to be clear about ‘what good looks like’. It may be worth identifying
the Key Business Processes and drawing up a matrix of Key Business Process and
Critical Success Factors. Key Business Processes that have an impact on many Critical
Success Factors should attract more attention and improvement efforts than those which
influence no or few Critical Success Factors. Before implementation, targets, rates and
other criteria must be set for each of the measures, and processes for how, when and
why the measures are to be recorded should be put in place.
6. Implement the system- An implementation plan should be produced and the whole
project communicated to employees. Everyone should be informed at the beginning of the
project and kept up to date on progress. It is vital to communicate clearly with employees.
Explain the purpose and potential benefits of the system to them and make sure that
everyone is aware that they have a role to play in achieving corporate goals. Thepersonal
objectives need to be linked with the organisational goals. Ideally this will be achieved
through an organisational performance management system. The system for recording
and monitoring the metrics should be in place and tested well before the start date, and,
as far as possible, training in its use should be given to all users. The system should
automatically record all the data required, though some of the measurements may need to
be input manually.
7. Publicise the results- The results of all measurements should be collated on a
regular basis - daily, weekly, monthly, quarterly or as appropriate. This will potentially
comprise a substantial amount of complex data and it will be necessary to decide who will
have access to the full data: senior management only, divisional or departmental heads,
or all employees. Alternatively, partial information may be provided on a need-to-know
basis. Decide how the results will be publicised, through meetings, newsletters, the
organisation's intranet or any other appropriate communication channels.
8. Utilise the results- Any form of business appraisal is not an end in itself. It is a guide
to organisation performance and may point to areas (management, operational,
procedural) that require strengthening. Taking action based upon the obtained information
is as important as the data itself. Indeed, management follow-up action should be seen as
an essential part of the process of appraisal.
9. Review and revise the system- After the first cycle has been completed, a review
should be undertaken to assess the success, or otherwise, of both the information
gathered and the action taken, in order to determine whether any part of the process
requires modification. Refrain from using the same Scorecard measures year upon year.
Review the existing metrics and, where appropriate, remove flawed metrics and replace
them with more reliable ones. Be prepared to introduce additional measures to reflect
current circumstances, for example metrics measuring an organisation’s ethical
performance.
To date, some form of a Balanced Scorecard is used by nearly 60% of Fortune 500
companiesSome of the companies that use the BSC management system
include:Apple, Inc., Exxon Mobil Corporation, Ford Motor Company, General Electric
Company, Honeywell, IBM, Pfizer Inc., Thomson Reuters, University of California,
University of Denver, Wells Fargo Bank.

Examples of BSC:
Advantages of Balanced Scorecard

 Translation of strategy into measurable parameters

 Communication of strategy
 Alignment of individual goals with strategic objectives
 Helps align key performance measures with strategy at all levels of an organization.
 Provides management with a comprehensive picture of business operations.
 Facilitates communication and understanding of business goals and strategies at all
levels of an organization.
 Maximized Cooperation - Team members are focused on helping one another
succeed.
 It provides strategic feedback and learning.
 Initiatives are continually measured and evaluated against industry standards

Potential Pitfalls & Criticisms

 Lack of a well-defined Strategy - The balanced scorecard relies on a well defined

strategy and understanding of linkages between strategic objections and metrics. Without
this foundation the implementation could fail.
 Too much focus on the lagging measures - Focusing on only the lagging measures
may cause a lack of priority or opportunity for the leading measures.
 Use of Generic Metrics - Don’t just copy metrics from another firm. Identify the
measures that apply to your strategy and competitive position.
 Self-serving managers - Managers whose goal is to achieve a desired result in order
to obtain a bonus or other self reward.
 Setting measures that don’t relate to critical success factors
 Over-measuring the organisation
 Allowing the measurement process to interfere with employees' ability to get on with
thejob

ii) The European Foundation for Quality Management (EFQM) model

The EFQM Excellence Model was introduced at the beginning of 1992 as the
framework for assessing applications for The European Quality Award.It is a widely
used organisational framework in Europe and has become the basis for a series of
national and regional Quality Awards. The EFQM model's is used as a management
system that encourages the discipline of organisational self-assessment.

The EFQM Excellence Model is a practical tool to help organisations to do this by

measuring where they are on the path to Excellence; helping them understand the
gaps; and stimulating solutions. It is applicable to organisation irrespective of size
and structure, and sector. Self- assessment has wide applicability to organisations
large and small, in the public as well as the private sectors. The outputs from self-
assessment can be used as part of the business planning process and the model
itself can be used as a basis for operational and project review.

The EFQM Model is a non-prescriptive framework that recognises there are many
approaches to achieving sustainable excellence. Within this approach there are
some fundamental concepts which underpin the EFQM model. However, these
concepts are not fixed. It is accepted that they will change overtime as excellent
organisations develop and improve. It provides an integrated approach to
performance management in that it provides the basis to assess how well the things
are done.The performance of the organisation is also assessed in terms of the
results that are achieved.

There are 9 elements in the model out of which 5 are ‘Enablers’ and 4 are ‘Results’.
Enablers - The five enablers assess and question whether there are effective
approaches in place to enable the achievement of what the organisation has planned
to deliver in terms of its results.
Results - The four results areas question whetherthere are comprehensive
measures in place which can monitor and track performance and assess whether
strategic objectives have been met.

The link between the Enablers and the Results is two way. If there is a need to
improve the results, then a change to one or more enabling factors needs to take
place. In the same way, if a change to an enabling factor is made, the impact this will
have on the results needs to be tracked and traced.
The 9 elements are as below:
1) Leadership – How the behaviour and actions of the executive team and all other
leaders inspire, support and promote a culture of total quality management (TQM).
2) Policy and Strategy – How the organization formulates, deploys and reviews its
policy and strategy and turns it into plans and actions.
3) People Management – How the organization realizes the full potential of the
people.
4) Resources – How the organization manages resources effectively and efficiently
5) Processes – How the organization identifies, manages, reviews and improves its
processes
6) Customer Satisfaction – What the organization is achieving in relation to the
satisfaction of its people.
7) People Satisfaction – What the organization in achieving in relation to the
satisfaction of its people.
8) Impact on Society – What the organization is achieving in satisfying the needs
and the expectations of the local, national and international community.
9) Business Results – What the organization is achieving in relation to its planned
business objectives and in satisfying the needs and expectations of everyone with a
financial interest or stake in the organization.

The EFQM model can help performance management by:

 Developing a fuller understanding of how business results are achieved, and
processes continually improved
 Offering mechanisms for tackling systems problems in the workplace
 Promoting performance management as a two-way dialogue
 Providing a positive and universal framework for the description of jobs and roles
 Helping to align individual and business objectives
 Pointing the way to identifying, defining and building the competencies that the
organization needs its people to demonstrate.

iii) The Economic Value Added Model (EVA)

EVA is the invention of Stern Stewart & Co., a global consulting firm, which launched
EVA in 1989. EVA is Economic Value Added, a measure of economic profit. EVA is a
performance metric that calculates the creation of shareholder value. It distinguishes
itself from traditional financial performance metrics such as net profit and EPS. EVA is
the calculation of what profits remain after the costs of a company's capital - both debt
and equity - are deducted from operating profit.

Technically speaking EVA is nothing but the residual income after factoring the cost of
capital into net operating profit after tax

EVA's most important use is in measuring and rewarding performance inside the firm. It
is said, if carried out consistently, EVA should help us identify the best investments, that
is, the companies that generate more wealth than their rivals. All other things being
equal, firms with high EVAs should over time outperform others with lower or negative
EVAs.

iv) Other traditional financial measures

The traditional financial ratios are :

1. Return on Equity (ROE)

 2. Return on Capital Employed (ROCE)
3. Earnings per Share (EPS)
4. Price / Earning Ratio (PE Ratio)
5. Return on Sales
6. Asset Turnover
7. Overall Overhead / Sales Ratio
8. Profit or Sales or Added Value per employer
9. Output per Employee (productivity)

B) Types of Performance Measures for a Team

Team – A team is a group of people with a full set of complementary skills required to
complete a task, job, or project.

The three main types of teams based on task complexity and membership
configuration dimensions are:

i) Work or service teams:These teams are engaged in routine tasks, including

manufacturing or service tasks.An example is a group of people working at the
assembly line is a car manufacturing plant such as Toyota or Honda.

ii) Project teams:These teams are assembled for a specific purpose and are
expected to dis band as soon as their specific tasks have been completed.The tasks
are outside the core production or service of the organization and are therefore not
as routine as those of work or service teams.

iii) Network teams:These teams include members who are not constrained by
time or space and members who are not limited by organizational
boundaries.Usually, team members are geographically dispersed and stay in touch
via telecommunications technology such asvideo conference and mobile phones.

Principles of Team Performance Management

The basic principles of team management are as follows :

1. Make sure your team is really a team:There are different types of teams.Before
a team component is introduced in the performance management system, we need
to make sure the organization has actual teams.

2. Make the investment to measure:Measuring team performance as is the case

with measuring individual performance, takes time and effort.

3. Define measurement goals clearly:Defining how the data will be used is a

decision that must be made before measures of team performance are
designed.Use a multi method approach to measurement:The measurement of team
performance is complex.Thus, multiple methods and sources of data are often
necessary.

4. Focus on process as well as outcomes:Behavioural process oriented measures

as well as results are as useful for team performance management systems as for
individuals.

5. Measuring long term changes:Although short term processes and results are
easier to measure, it is important to also consider long term measures of
performance.

Team members need to have the following competencies to be able to succeed:

i) Interpersonal understanding
ii) Influence on each other
iii) Customer – service orientation
iv) Adaptability
v) Teamwork and cooperation
vi) Group communication
vii) Achievement orientation
viii) Organizational commitment

Performance measures for teams

Performance measures for teams will be related to the purpose of the team and its objectives.
Team performance measures are likely to fall in either of the following categories:

i) Output
 ii) Activity levels
iii) Customer Service and satisfaction
iv) Financial results

Types of Measures

This can be either output / result measures of team performance or input / process measures.

Output / Results Input / Process

Achievement of team goals Support of team process
Customer satisfaction Participation
Quantity of Work Oral & Written Communication
Quality of Work Collaboration & Collective effort
Process Knowledge Conflict Resolution
Maintenance of technical systems Planning and Goal - setting
Participative decision-making
Problem solving and analytical skills
Credibility and trust
Interdependence
Interpersonal relations
Acceptance & change
Adaptability & Flexibility

Team Performance Management Process

The components of the team management process are :

1. Prerequisites

 The first component of performance management process involves two

prerequisites.First, there is a need to have good knowledge of the organizations mission.
This prerequisite is present regardless of whether there is an emphasis on team
performance.

 Second, there is need to have a good knowledge of the job in question. In the case of
individual jobs, a job analysis is conducted to determine the key components of a
particular job: what task need to be done, how they are to be done and what knowledge,
skills and abilities are needed to do them.
  There are KSAs that are especially conducive to team performance.Examples include
the following:

i) Communication:Giving and receiving constructive feed back, listening, and sharing

information and ideas.

ii) Decision making:Help the team make decision. Collaboration:Dealing with conflict
effectively, committing to the team and its goals, valuing the diversity and experience of
other team members, and sharing accountability.

iii) Team leadership:Taking on the role of team leader, including knowing how to extract
the best out of the team

iv) Self control:Keeping emotions under control and not displaying negative actions even
when faced with opposition or even hostility from others.

2. Performance Planning

 The second component of performance management process includes the

consideration of results and behaviours.

 It planning involves the creation of developmental plan.Each of these issues need to

be considered at the team level, results expected of the team, behaviours expected of
team members, and developmental objectives to be achieved by the team and its
members.

 A discussion of results must include key team accountabilities, specific objectives for
each key accountability and performance standards.A discussion of behaviours need to
include competencies.

 Finally, the developmental plan includes a description of area that need improving and
goals to be achieved in each area.The plan includes goals not only for the team as a
whole, but also developmental objectives for individual performance that will benefit team
performance.

3. Performance Execution
  The third component of performance management process involves performance
execution.Autonomous teams are solely responsible for performance execution,
however, when a team has a supervisor, then both the team and the supervisor share
responsibility for performance execution.For example, team members need to be
committed to goal achievement and should take a proactive role in seeking feedback
from one another as well as from the supervisor.

 The supervisor also has some important responsibilities, including observing and
documenting team performance and relative contribution of team members, updating the
team on any change in the goals of the organization and providing resources and
reinforcement so that team members will be motivated to succeed.

4. Performance Assessment

 The fourth component of performance management process is performance

assessment.All team members must evaluate one another’s performance as well as the
performance of the overall team.

 Peer evaluation are a key component of the assessment stage because they lead to
higher level of work-load sharing, cooperation and performance.Involvement of each
team member in the evaluation process increases their ownership and commitment to
the system.

 Self-appraisal also provides important information to be discussed during the

performance review.In the absence of self-appraisal, it is often not clear to supervisors
whether the team and its members have a real understanding of what is expected of
them.

 Three types of performance need to be assessed:

i) Individual performance or task performance

ii) Contextual performance

iii) Team performance as a whole.

5. Performance Dimensions
 Team performance as a whole can be measured using the following four performance
dimensions:

i) Effectiveness:This is the degree to which results satisfy team stakeholders including

both internal and external customers.

ii) Efficiency:This is the degree to which internal team processes support the
achievement of results, team growth and team member satisfaction.

iii) Learning and growth:This is the degree to which the team is able to learn new skills
and improve performance over time.Specific measures can include innovation,
documented learning, best practices and process involvement.

iv) Team members’ satisfaction:This is the degree to which team members are satisfied
with their team membership. Specific measures can include team members perceptions
regarding the extent to which teamwork contributes to their growth and personal well-
being.

6. Performance Review

 This component of performance management process is the performance review,

which takes place when the team members meet with the supervisor or manager to
discuss how they have been working.

 In organizations that are structured around autonomous teams, there may not be a
supervisor or manager.In that case, a team leader or representative would meet with a
performance review board, which includes representatives from all teams.

 At-least two meetings are needed. First, the supervisor meets with all members of
team together.The focus of this meeting is to discuss the overall team performance
including results achieved by the team as a whole.Information for this meeting comes
from team members evaluating their collective performance, other teams evaluating the
team in question, and the supervisors evaluation.

 Second, the supervisor meets each team member individually.The focus of this
meeting is to discuss how the individual behaviours contributed to team
performance.Information for this meeting comes from individuals evaluating their own
performance, peer ratings of the individuals performance, and the supervisors
evaluation.

7. Performance Renewal and Re-contracting

 The final component of performance management process involves renewal and re-
contracting.Essentially, this component is identical to the performance planning stage;
however, performance renewal and re-contracting uses information gathered during the
review period to make adjustments as needed.

 For example, some new key accountabilities and competencies may be

included.Conversely, some goals may have to be adjusted either upward or downward.

C) Types of Performance Measures for an Individual

 What Makes a Good Performance Measure?

The typical performance measurement guidance usually says performance

measures should be SMART a commonly used mnemonic acronym in
performance management. It provides criteria for drafting strong goal statements.
The concept originated in 1954 when Peter Drucker published a book about
management by objectives. The idea is to ensure each goal statement fits all of
the criteria in the acronym. The letters S and M usually mean specific and
measurable, but the rest have numerous interpretations

 S = Specific, Strategic
 M = Measurable
 A = Achievable, Attainable, Action-Oriented, Agreed-upon, Aligned, Ambitious
 R = Relevant, Realistic, Resourced, Reasonable, Results-based
 T = Time-bound, Time-based, Time-limited, Timely, Time-sensitive

Additional characteristics of strong performance measures outside the S.M.A.R.T.

framework are listed below.

 Easy to understand
 Encourage the right behaviour
 Visible/transparent to those involved

Guidelines for defining Performance Measures

Performance measures need to be agreeable at the same time as objectives are defined. This
provides a fair assessment of the progress and achievements for both individuals and teams.
It also provides a basis for feedback.

The following are the guidelines for defining performance measures:

1. Measures should relate to results and observable behaviours

2. The results should be within the control of the team or individual and be based on
agreed targets.
3. Behavioural requirements (competencies) should be defined and agreed.
4. Data must be available for measurement.
 5. Measures should be objective.

Performance Reviews

A performance review is a formal regulated feedback mechanism in which managers and

other key stakeholders assess an employee’s work performance. The purpose is to
identify their strengths and weaknesses, offer constructive feedback for skill development
in the future, and assist with goal setting.The performance review is a summary of the
ongoing feedback the employee has received throughout the specified time period and
working with them on their goals for the future. It is not just looking behind; it is future
focused for the employee and the organization.

Whichever methodology you choose for performance reviews, a well-planned and

executed performance review boosts employee engagement and sets the tone for creating
a culture of feedback and continual development at your organisation.

Importance of Performance Review

 Gives an employee a summary of how they have performed and goals for the
future.
 Provides clear and objective feedback based on organizational and employee
goals.
 States the areas the employee needs to improve and whether they are meeting the
expectations of the position.
 Is a written record of employee performance.

Basis of Performance Review

The five key elements of performance review meetings are:

1. Measurement – Assessing results against agreed targets and standards

2. Feedback – Providing information on how a person has been doing
3. Positive Reinforcement – Emphasizing what has been done well so that it is done
even better in the future.
4. Exchange of views – Ensuring that the discussion ensure a free and frank
discussion by both the parties.
5. Agreement – Jointly coming to an understanding about what has to be done by
both the parties to improve performance.
What to do before the Performance Review

 Have frequent conversations with your employees on their goals, their

performance.
 Train supervisors in Performance Reviews.
 Make clear that supervisors understand to rate employees equitably.
 Discuss the halo/horn effect and how to avoid it.
 Communicate the Performance Review process to all employees and how it relates
to their compensation.
 Do this frequently so it is understood.
 Let employee know that the performance review is coming up and ask them to put
together areas they would like to discuss

Preparing for the meeting

Reviewer’s side –

The reviewer is the person conducting the review. He should take into account how well
the individual has done in achieving his objectives, how much has he achieved since his
last meeting, the feedback that needs to be given with the evidence, the factors that have
affected his performance, the future course of action, the possible directions that the
employees career can take and the possible objectives for the next review period.

Reviewee’s side –

The individual being reviewed (reviewee) needs to list out his achievements in meeting his
objectives, his progress since the last meeting, the areas in which he feels he can
improve and how, his T&D needs and aspirations for the future. He has to do a self-
appraisal for this.

Self-Appraisal – This means getting people to analyse and assess their own
performance. This has the following advantages :

i) helps generate less inhibited and more positive discussion.

ii) involves reviewees directly in the review process
iii) is likely to reduce defensive behaviour
iv) provides scope to run the review meeting as a constructive dialogue
However, this also has the following disadvantages:

i) Individuals should have clear targets and standards against which they can
assess their performance.
ii) There has to be a climate of mutual trust between the two parties.
iii) The reviewee must believe that the reviewer will not take advantage of his
honest self-assessment.
iv) The reviewee might over assess his performance.

Guidelines for the Review meeting

The meeting aims at discussing the following points:

i) What individuals have learned or need to learn?

ii) Where they have to go?
iii) Where they are going?
iv) How they are going to get there?
v) What they believe they know and can do?
vi) What help or guidance can be provided to them?

The agenda for the review meeting is set by both the parties by a pre-discussion. This
may consist of the following items:

i) A review of the key elements in the job

ii) A point-by-point examination of the results of the objectives, actions and the
achievement of the PDP discussed in the last meeting.
iii) A discussion and agreement on the performance objectives for the next period
iv) A discussion and agreement in the reviewee’s developmental objectives
v) A Performance Development Plan (PDP) should be formulated for the next
period
vi) An agreement on the action plans to conclude the meeting

Characteristics of a Constructive Review Meeting

A constructive review meeting should :

1. Encourage reviewees to do most of the talking

2. Listen actively to what they say
3. Allow scope for reflection and analysis
 4. Analyse performance, not personality
5. Consider the whole period of review and not isolated events
6. Recognise achievements and reinforce strengths
7. End the meeting positively with agreed action plans

Performance Review Skills

The reviewer should possess the following skills to conduct a proper review meeting.

A. Asking the right questions

B. Listening
C. Giving feedback

A. Asking the right questions

There are two kinds of approaches to this:

i) Open questions – These are general questions and nor specific. They encourage
people to open up and talk freely. They create an atmosphere of calm and friendliness.
Some examples of these kinds of questions are as follows:
 How do you feel about that?
 How can we build on that in future?
 Tell me, how did you handle that situation?
 Tell me, how is your project going?

ii) Probe questions – These seek specific information on what has happened and
why. For example :
 To what extent do you believe that …….?
 Have I got the right impression? Do you feel…?

B. Listening – This is an art which needs to be practised. Good listeners :

 Concentrate on the speaker and are aware to subtle body language or nuances of
what is being said.
 Do not interrupt unnecessarily but respond quickly when required.
 Ask questions to clarify their meaning.
C. Giving feedback – Feedback should be given based on fact and not subjective
judgement. The aim is to be able to explain the action that will be taken based on the
review of their performance. The following are the guidelines for giving feedback:
 Build feedback into the job
 Provide feedback on actual events
 Describe but don’t judge
 Refer to specific behaviours
 Ask questions
 Select key issues
 Focus on positive aspects
 Show understanding

Reward Systems & Legal Issues

Performance Management Linked Reward System

Reward is an incentive plan to reinforce the desirable behavior of workers or

employers and in return for their service to the organization. Compensation and
Reward system plays vital role in a business organization.

To connect two ends of the rope, a knot is required; to make it lengthy and useful for
long run. Likewise, the tie up between the reward and performance should be made
for employee retention and their commitment to work, which ultimately improvise the
contributing factor of the employee. Employees should perform well to be rewarded
and the approach designed for this is “Pay for Performance”. Apart from the base
pay, which is based on job description, a variable pay should be announced for their
outstanding performance. Although the pay raise motivates the employees to an
extent, ultimately they want them to be appreciated and recognized in a society for
their work, here comes the employee recognition program. Many employees become
less committed to work not because of their low pay structure, but for the lack of
recognition. Both types of rewarding system should be ensured for higher motivation,
retention, engagement and job satisfaction.

Pay for Performance (PFP) or Performance Related Pay (PRP)

The term “pay-for-performance compensation” refers to performance-based pay
programs where an employee is incentivized and rewarded for achieving goals or
objectives.PRP plans are extremely popular and almost 75% of organizations
currently leverage pay-for-performance compensation as part of their overall
compensation plan.

Objectives of PFP

• Stimulates higher level of performance

• Establishes a high performance culture
• View of justice and equality

Some of the common organisation PFP plans are :

• Incentives:One of the most common pay-for-performance scheme is

awarding compensation incentives when an employee has achieved certain
management-set goals, such as a specified sales target. This incentive can
be based on team/department target or an individual target.
• Profit-sharing:Employees who typically participate in profitsharing schemes
often receive a stated percentage of the company’s profits, if they meet a set
revenue profit.
• Gain-sharing:This incentive is used when companies share any productivity
or profitability improvements with the relevant employees.
• Goal-sharing:Similar to gain-sharing, goal-sharing places an emphasis on
employees to reach certain management-set goals.

Whichever incentive scheme you choose, a good pay-for-performance needs to be

supported by a reliable, clear and transparent performance data collection which
employees feel they are fairly measured and evaluated against.

Benefits of Performance-based Rewarding approach

An effective Performance-based Rewarding approach can bring out multiple benefits

to an organization and employees,

i. Decreased attrition rate - This empowers employee retention in long run and
commitment. Due to decreased attrition rate and increased employee
 retention, recruitment cost is less which helps in the financial stability of the
organization.
ii. Motivate employees to perform better, aligning with the organizational goals -
Employees get a clear insight of what should be done to meet the goals.
iii. Employee involvement (Participation Management) – This is increased which
results in autonomy, more productivity and satisfaction. Employees feel that
they are part of a big success, enabling more confidence and innovation in
work.
iv. Enforces Healthy Competition - Rather than working on routine jobs,
employees volunteer to work on challenging jobs to increase their recognition
levels in the working society. It enforces healthy competition among
individuals to perform better.
v. Employee gets a chance to learn and enhance their skills, which highlights
their development in career.

For the real success of the system, rewards should be implemented without any bias
or oversight. When employees perform well, he should be acknowledged rightly by
the supervisors. HR department should not make this process to follow over a night;
its importance has to be stressed to the supervisors and employees at all levels.
When a perfect system is implemented, it results in higher retention of talented
employees and greater profits to the organization.

There are certain rules to be followed while linking performance to rewards. These
rules are a matter of procedural justice. They are :

i. Consistency Rule– The allocation processes should be consistent between

people and over time.
ii. Bias-Suppression Rule – Bias of any kind should not be there during the
allocation process.
iii. Accuracy Rule – It is necessary to base the allocation on as much accurate
information as possible.
iv. Correctability Rule – Opportunities must exist to modify and reverse
decisions made at various points in the allocation process.
v. Representativeness Rule – All the subgroups in the organization and their
concerns should be take into account.
 vi. Ethicality Rule – The fundamental moral and ethical values have to be taken
into consideration.

Reward Management

Reward Management is concerned with the formulation and implementation of

strategies and policies that aim to reward people fairly, equitably and consistently in
accordance with their value to the organization.

Aim of Reward Management

 Reward employees according to what the organization values and wants to

pay for.

 Reward employees for the value they create.

 Reward the right things to convey the right message about what is important
in terms of behaviors and outcomes.

 Develop a performance culture.

 Motivate employees and obtain their commitment and engagement.

 Operate fairly – employees feel that they are treated justly in accordance with
what is due to them because of their value to the organization.

 Function consistently – decisions on pay do not vary arbitrarily and without

due cause between different people or at different times.

 Operate transparently – employees understand how reward processes

operate and how they are affected by them.

Objectives

 Support the organisation’s strategy

 Recruit & retain

 Motivate employees

 Internal & external equity

 Strengthen psychological contract

  Financially sustainable

 Comply with legislation

 Efficiently administered

Components of Reward System / Classification of rewards

Intrinsic rewards: The satisfaction one gets from the job itself. These include pride
in one’s work, feeling of accomplishment, being a part of team job enrichment,
shorter work-weeks, job rotation etc.

Extrinsic rewards : Includes money, promotions and fringe benefits or a write up in

the company magazine.
Financial rewards : Direct-through wages, bonuses, profit sharing etc., or indirect-
through supportive benefits like pension schemes, leave encashment, purchase
discounts etc.

Non-financial rewards: Incentives make life on the job as more attractive like
standard and well facilitated workplace, attractive position, responsibility of choice,
work autonomy, job security etc.

Performance based: Rewards may be piece rate pay plans, commissions etc.

Membership based: Rewards may be profit sharing, increase in dearness

allowances, seniority based or time bound promotions etc.

Qualities of a good reward system

 Performance based: Better performer must receive better reward than the
average and poor performer.

 Transparent and predictive: Employees must be familiar with the reward

system and the reward must be distributed transparently. Employees should
be able to calculate and predict their reward in an advance. Employees
become enthusiastic and motivated if they are aware about the type, size and
quality of reward.

 Cost effective: Reward must have the quality of balancing the cost benefit
ratio. The reward received by the employee should not exceed the benefit
received by the organization.

 Need based: The reward system must match with the need or requirement of
the employees. If reward system doesn't meet the need of employees, it will
not motivate the employees to perform better in the future.

 Unbiased: Reward must be unbiased and fair. Employees identical to their job
performance should be rewarded equally.

 Competitive: Reward system must be competitive to other organization's

provision. Reward must be revised timely. Good reward system will attract
and retain the competent employees.

Determinants of reward
 i. Performance

ii. Efforts

iii. Seniority

iv. Skill held

v. Job difficulty

vi. Punctuality

vii. Adhering to rules and guidelines

viii. Market competition

Motivating different generations

Baby Boomers (Born: 1946 – 1964): Baby Boomers are most commonly motivated
by things other than just financial incentives, with popular motivators being:

 Opportunities for professional development

 Positions of authority

 Recognition for achievements

 Workplace benefits

Generation X (Born: 1965 – 1980): Generation X employees are most commonly

motivated by things which offer them a good home / work life balance including:

 Family-based benefits

 Lifestyle benefits

 Corporate wellbeing

 Recognition of achievement

 Professional development opportunities

Generation Y -Millennials (Born: 1980 – 1995): Generation Y employees are most

commonly motivated by things which are a little more on the creative and
technological side than other generations including:

 Money Opportunities to learn new technologies

  An enjoyable workplace environment

 Short, changeable and fast tasks

 Opportunities to express creativity and opinions

Generation Z (Born: 1996 Onwards): Generation Z employees are most commonly

motivated by having their voice heard, equality and other motivators including:

 Respect

 Out of work socialization

 Money saving schemes

 Experience days

 Mentoring platforms

Advantages of Reward Management

A. Effectiveness Worth: Creates an increased sense of worth and improved

morale in the workplace. Colleagues see that exceptional performance is
appreciated by upper management and may step up their own productivity
levels with the understanding that their work could be noticed as well.

B. Loyalty: When employees are treated like family, they’re far less likely to
betray the company for personal gain.This reduces the likelihood of issues
like office theft, the release of proprietary information and instances of fudging
time sheets and expense reports. Employees are more likely to talk positively
about their company in the community thus enhancing the business’s
reputation.

C. Longevity: When employees feel valued and appreciated and see they have
room for advancement, they are less likely to look for other employment, even
if the salary is higher. A company that has seasoned, long-term professionals
on staff reduces the costs of continually hiring and training new employees.

D. Quality: Recognizing employees for innovative ideas and concepts can lead
to increased quality of a company’s products and services. Employees who
feel their ideas are welcomed and credit is given where it is due may reject
complacency and continually strive to perform at top levels.
Linkage of Performance Management to Reward and CompensationSystem

Today organizations are showing a high degree of commitment towards

reinforcement of reward practices which are aligned with other HR practices and the
goals of the organization for attracting, retaining and motivating employees. Efficient
reward practices helps in attracting result driven professionals who can thrive and
succeed in performance based environments. Hence, it is a crucial motivator and
may contribute towards the enhancement of the productivity of the employees if
implemented properly. For example, Continental Airlines as a part of their
turnaround strategy introduced on time bonus incentive package according to which
an employee will gain a bonus of $65 every month for ensuring on time flight
operations.

An effective reward system should be linked with the performance development

system, which focuses on performance based pay and offers ample learning
opportunities along with a healthy work environment. Variable pay can play a crucial
role in boosting the performance of the employees especially the star performers
instead of the fixed pay packages. Few such reward practices may take the forms of
gain sharing, bonuses, team based incentives, profit sharing, ESOP’s and equity
based incentive awards.

An efficient management of reward system may have a beneficial effect upon the
performance in several ways - instilling a sense of ownership amongst the
employees, may facilitate long term focus with continuous improvement, reduces
service operating costs, promotes team work, minimizes employee dissatisfaction
and enhanced employee interest in the financial performance of the company. Few
organizations like General Mills, reward their employees for attaining new skills
which may add value to the organizational performance and thereby facilitate job
rotation, cross training and self managed work teams. Few organizations also
recognize exceptional performance by providing recognition awards and lump-sum
merit awards for winning employee commitment and attaining long term beneficial
results. Example, TISCO, offers instant or on the spot rewards, monthly rewards and
annual rewards to its employees under its ‘Shabashi scheme’.

A healthy pay for performance strategy should incorporate the following components
as is provided in the table given below:
Pay for Performance Strategy

Category Performance Measures Basis for Rewards

Corporate BSC, shareholders returns and Employee stock ownership

Leaders EVA and profit sharing.

Business Unit Profitability of the unit Results Sharing.

Leaders

Functional Level of contribution towards the Milestone Awards

Leaders corporate goals

General Specific KRA’s achieved Profit/gain sharing, bonuses

Employees measured periodically

Source: Sullivan E (1999), “Moving to a pay for performance strategy:

Lessons from the Trenches”, In Risher, H(Ed.), Aligning Pay and Results,
AMACOM:NY.

Rewards can be a vital source of motivation for the employees but only if it is
administered under right conditions. Few strategies which improve the effectiveness
of rewards are given below:

 Linking rewards with the performance

 Implement team rewards for the interdependent jobs for example Xerox.
 Ensuring that the rewards are relevant. Example Wal-Mart, rewards bonuses
to the top executives which is based on the company’s overall performance
whereas the frontline employees earn bonus on the basis of the sales figure
or targets attained by their store.
 Ensuring that the rewards are valued by the employees.
 Checking out for the undesirable consequences of administration of any
reward practice.
Besides the monetary rewards, the contemporary employees desire for non
monetary rewards which may be in the form of better career opportunities, skills
development and recognition programs. Many IT and project-based organizations
give much importance to non-monetary rewards for maximizing employee
satisfaction.

The linkage between performance, rewards and motivation can be established by

the following diagram:

The value of the expected reward to the individual (1) combines with the individual’s
perception of the effort involved in attaining the reward and the probability of achieving it (2) to
produce a certain level of effort (3), this effort combines with the individual’s abilities and traits
(4) and the way he /she sees the task (5) to yield specific performance level (6), this resulting
level of performance leads to intrinsic rewards (or negative consequences if the performance
level is lower than expected) that are inherent in the task accomplishment (7a) and perhaps to
extrinsic rewards (7b). The individual has his/her own idea about the appropriateness of the
total set of rewards received (8) which when measured against the rewards actually received,
results in the level of satisfaction experienced by the individual (9). The individual’s experience
will then be applied to his / her future assessments of the values of rewards for further tasks
accomplishment.

“Do what you get paid for” syndrome

The “Do Only What You Get Paid For” Syndrome means that the closer pay is tied to
particular performance indicators, the more employees tend to focus on those indicators
and neglect other important job components. Therefore,easily measured stuff swamps
important but hard to measure stuff.

The impact of this kind of behaviour is as follows:

 Negative Effects on the Spirit of Cooperation - Employees may withhold

information from a colleague if they believe that it will help the other person get ahead
 Lack of Control - Employees often cannot control all the factors affecting their
performance.
 Demotivating when pay is influenced by factors outside one’s control
 Difficulties in Measuring Performance -make it hard to assign a pay level.
 Unethical behaviour might arise to cut corners, to scheme and receive more than
deserved.

Types of Pay for Performance Plans

These are of four types:

A) Individual based
B) Team based
C) Plant wide based
D) Corporate wide based

Micro Level Macro Level

Individual Team Business Unit / Plant Corporate
Profit
Merit Pay Bonuses Gainsharing Sharing
Bonus Awards Bonus Stock Plans
Award Award
Piece Rate

Pay for Performance :Assumptions

Payforperformance or incentive systems reward employee performance on the basis
of these assumptions:
1.Individual employees and work teams differ in how much they contribute not only in
what they do it but how they do it.
2.Company overall performance depends to a large extent on the performance of
individuals and groups.
3.To attract, retain and motivate high performers and be fair to all employees a
company needs to reward employees on the basis of their relative performance.

PayforPerformance :TheChallenges
 Link pay and performance appropriately
 Use payforperformance as part of a broader HRM system
 Build employee trust

Meeting the Challenges of PayforPerformance Systems

 Promote the belief that performance makes a difference

 Use multiple layers of rewards
 Increase employee involvement
 Use motivation and nonfinancial incentives

Types of Pay for Performance Plans -Individual-based plans

•Merit pay
•Bonus programs
•Lump - sum payments

Advantages
•Rewarded performance is likely to be repeated expectancy theory
•Financial incentives can shape an individual's goals
•Help the firm achieve individual equity
•Fit in with an individualistic culture

Disadvantages
•May promote single-mindedness
•Employees do not believe pay and performance are linked
•They may work against achieving quality goals, and they may promote inflexibility.

IndividualConditions under which individual - based plans are most likely to

succeed
•When the contributions of individual employeescan be accurately isolated
•When the job demands autonomy
•When cooperation is less critical to successful performance or when competition is
to be encouraged

Types of Pay for Performance Plans - Teambased

Team based plans attempt to support other efforts to increase the flexibility of the
work force within a firm. These plans normally reward all team members equally
based on group outcomes.

Advantages
 Foster group cohesiveness
 Facilitate performance measurement

Disadvantages
 Possible lack of fit with individualistic cultural values
 Freeriding effect
 Social pressures to limit performance
 Difficulties in identifying meaningful groups
 Intergroup competition leading to a decline in overall performance.

Conditions under which teambased plans are most likely to succeed

  When work tasks are so intertwined it is difficult to single out who did what
 When the firm’s organization facilitates the implementation of team-based
incentives
 When the objective is to foster entrepreneurship in self-managed work groups

Types of Pay for Performance Plans - Plant-wide plans

Generally referred to as gainsharingprograms because they return a portion of the

company's cost savings to the workers, usually in the form of a lump-sum bonus.

Advantages

 Eliciting active employee input

 Increasing the level of cooperation
 Fewer measurement difficulties
 Improved quality

Disadvantages
 Protection of low performers
 Free riders
 Problems with the criteria used to trigger rewards
 Management-labor conflict

Conditions favoring Plant-Wide Plans:

 Firm size
 Small to medium sized plants
 Technology does not limit improvements
 Historical performance takes into account different plants’ varying levels of
efficiency so as to not penalize efficient plants
 Corporate culture - less likely to succeed in firms with a traditional hierarchy
 Demand for product is relatively stable

Types of Pay for Performance Plans - Corporate-wide Plans

These are macro type of incentive programs and are based on the entire
corporation's performance. The types of Plans under this category are :
 Profit-sharing plans - Cash plans where employees receive cash shares of the
firm’s profits at regular intervals.
 Deferred profit-sharing plans - A predetermined portion of profits is placed in
each employee’s account under a trustee’s supervision.
 Employee stock ownership plans (ESOPs) - A corporation annually
contributes its own stockor cash (with a limit of 15% of compensation) to be
used to purchase the stockto a trust established for the employees. The trust
holds the stock in individual employee accounts and distributes it to
employees upon separation from the firm if the employee has worked long
enough to earn ownership of the stock.

Advantages
 Financial flexibility for the firm
 Increased employee commitment
 Tax advantages

Disadvantages
 Risk for employees
 Limited effect on productivity
 Longrun financial difficulties.

Conditions favoring corporate-wideplans

 Firm size
 Interdependence of different parts of the business
 Market conditions
 The presence of other incentives
 PERFORMANCE MANAGEMENT SYSTEM

Performance Management Applications & Improvements

(Module-3)

Mitrabinda Nayak

Performance Management in Practice

Most of the companies have their own system of performance management. There are some
basic principles which most companies follow like objective setting yet there is a wide variety
when it comes to its application.

After analysing the data collected from different organizations in different sectors, the following
broad trends have been identified:

1) Performance Management is regarded as a number of interlinked processes rather

than a single system.
2) It is seen as a continuous process.
3) There is an increasing emphasis on inputs.
4) The focus is on development rather than pay.
5) There is a shift towards line managers’ accepting and owning performance
management as a natural process.
6) There is a rejection of bureaucracy.

1) Performance Management as an interlinked process - The performance system is

linked to other HR processes like –
i) Salary / Pay
ii) Rewards / Recognition systems
iii) Career Development
iv) Training & Development
v) Knowledge Management
vi) Recruitment
vii) Punishment / Discipline
2) Performance Management as a continuous process – Performance Management
System is no longer seen as an annual exercise. The different steps involved in it are carried
out throughout the year culminating in performance appraisal and review.
3) Increasing emphasis on inputs – There is a conscious move towards competence-
based inputs. This means that the objective setting stays. From the objectives there is a top
down approach which flows downs to individual competence as inputs.
4) Focus of development – In the 90’s there was a paradigm shift in emphasis from pay
to development. The key aspect is to help individuals realise their potential and still contribute
to business improvement. There is a strong system of Performance - related – Pay in many
organizations, however these are also linked to development of the individual.
5) Line-manager ownership of performance management – It is the responsibility of
the line manager to ensure that individuals understand the performance management system
of the company, are convinced by it from their business units’ point of view.
6) Rejection of bureaucracy – There is an underlying trend in many organizations where
employees are moving away from the bureaucratic form-filling and rating methods to a more
informal setup where the emphasis is one improving the quality of conversations between
managers and subordinates rather than gathering data.

Key Features of Performance Management in the Manufacturing & Service

Sector

Key Performance Indicator (KPI) – A KPI is a type of performance measurement

that evaluates the success of specific business functions. The type of industry and
the internal goals of a company usually decide the KPIs on which the business
should focus on. KPIs vary depending on the type of business – whether it produces
physical products or offers services. Hence we have to understand performance
management from the perspective of a manufacturing setup as well as a service
industry.

Key performance indicators (KPIs) are the targets that are set to help an
organization define and measure progress. KPIs must be quantifiable, and be
core-critical success factors of the organization. They should also reflect the
organization’s goals. There are literally thousands of measures (KPI’s) that
could be implemented. As with any complex topic, the key to success is
finding the few key measurements that impact the business the most. Some of
the best measurements will be obvious, but others may need to be uncovered
by those experienced in implementing performance management in your
industry.

Performance Management in Manufacturing Sectors

Performance management is an approach to helping a business achieve its goals

through the planning of critical performance targets and the measurement of
progress towards those targets. It can be, and often is, applied at every level of the
business. The important advantages of PM in a manufacturing setup is as follows:

i) From Top Floor to Shop Floor - At its top level, performance management
includes strategic plans and the targets needed to achieve those plans. At its most
detailed level, it includes targets for the manufacturing operations with such key
indicators such as uptime, defects per run, cycle times and others. Performance
management lets you drive results through focused execution of strategies across all
levels of the business. This gives increased visibility and control. Performance
management helps a company make decisions and then execute them. It can be the
backbone that connects all the activities of the business into a system of
accomplishing the high level goals that management wants to achieve, and one
source of the truth. The approach allows you to build the high level goals of the
business, and then to set supporting goals all the way down to individual department
metrics.

ii) Department Silos - It also can provide the shared insights for shop level
personnel to understand their contribution to higher level goals, and empower these
employees to perform better. Today’s manufacturers are often structured with
disconnected silos, which makes it difficult to avoid conflicting activities, with a
potential negative impact on overall company goals. Additionally, manual department
forms, or spreadsheets are difficult to consolidate in order to provide insights to
higher level goals.

iii) In – time Feedback - Performance management is a real time activity that

provides instant feedback when certain activities are not meeting their goals, and to
correct them before they negatively impact the organization. Goals can also be
easily updated to accommodate new facts, and then reviewed as to their effect on
higher level goals. Performance management also establishes alerts and exception
reporting to allow quick reactions to minute by minute deviations from targets.

iv) Achieving Focus - Performance management also provides a focus for the
organization on the most important factors to success. Key performance indicators
(KPIs) are set only for the most critical areas that most impact the results of the
organization. This helps to provide a visibility into the actions that make a direct
difference in accomplishing critical goals

v) The Drivers of Performance Management - Performance management can give

you a deep understanding of the levers affecting performance on any dimension of
your business- production, supply chain, sales, product lines, customers and
channels. Performance management delivers visibility into the true drivers impacting
your bottom line. Understanding these drivers can also provide the basis for
implementing continuous improvement programs in the organization.
vi) ERP – A Foundation for Performance Management - The biggest
advantage of an ERP system is the real-time capability - the ability to see what is
going on within your company as it happens. You have access to literally thousands
of fields of information, and millions of transactions of activity. You can look up
information that spans departments so you can see the big picture.

Key Features of Performance Management in the Manufacturing Sector

i) Aligning with business purpose -The overall goal of performance

management is to align the top level goals of the business to the complex network of
activities within the business. Top level goals can include items such as customer
satisfaction, product variety, quality and a host of others. For success, it is imperative
that all the activities in the business point and execute towards these goals.

ii) Achieving operational success - Another overriding goal of performance

management to optimize of all the sub processes within the business. Developing
feedback for each of the operations can start the incremental process improvements
necessary for organization success.It is critical to determine the key performance
indicators for each role or operation, and start the process of unit improvement.
Measuring each role or operation can also provide the motivational push to initiate
incremental improvements.

iii) ERP Integration - The first step to measure all activities in the operations is
to collect data about all the activities. ERP manufacturing systems have now
integrated all the business management functions, including planning,
inventory/materials management, engineering, order processing, manufacturing,
purchasing, accounting and finance, human resources, and more. Fortunately, the
latest ERP manufacturing systems not only collect all this information, but provide an
IT structure of how one activity relates to another, thereby allowing a view that
crosses departments.

For example, a report of production orders and the associated raw material status is
easy to produce, because the relationship of both has been pre-defined. You can
imagine the difficulty of creating the report if the linkage between them did not exist
(as in manual or piece meal systems).
iv) Using Data as a Strategic Asset - Performance management provides the
insights needed to exceed the competition. You can only imagine an organization
that aligns with each individual’s opinions versus one that aligns to the goals of the
whole. Performance management can align all these processes into the company-
wide goals, and achieve a strategic advantage.

A Simple Example - You have decided that your strategic advantage is to provide
the shortest lead times for your customer orders, even if your prices are a little
higher. You want to appeal to customers who need quick turnaround for whatever
reason. You set this as a strategic goal, and now want to set some focused KPIs to
accomplish it. Your KPIs would need to focus on achieving your goal, and would
probably emphasize such things as material lead time performance, shop queue
time, machine cycle times, and the like. Your employees would then know what you
want to emphasize, and can focus their attention on improving those areas. Other
goals would exist, but would always be secondary to your lead time strategy.

v) Starting with a Goal -

Some High Level Common Goals
 On-time delivery
 Quality improvement
 Flexibility
 Reduced inventory
 Shorter lead times
 Improved productivity
 Information sharing
 Continuous improvement
 Cost reduction
 Demand reliability
 Profitability by unit, product, or area
 Market share

Example KPI’s in Manufacturing

The KPIs will be used to monitor production at a glance. In selecting these KPIs, it is
important to limit the number of KPIs in order to focus on those that are essential for
the overall organization to reach its goals.These production and operational level
metrics provide the basis for higher level KPIs, which finally then provide
performance measurement to strategic goals. At any time, the higher level KPIs can
be drilled down to the lower level KPIs which comprise it, in order to identify the root
cause of problem areas.

Shop floor KPIs:

 Operation Due Dates Met

 Material Usage Variances
 Cost of Scrap & Re-work
 Operator Efficiency %
 Labor Rate Variances
Quality KPIs

 Measurement of Corrective Actions to Customer Issues

 Reduction of Returned Materials
 Lead Time Reduction
 Conformance with Outside/Government Regulations
Maintenance KPIs

 Critical Machine Availability

 Downtime
 MTBF (Mean Time Between Failures)
 Maintenance/Dept Budget vs. Actual
 Maintenance Inventory Levels

vi. Delivering Timely, Actionable Information - The final piece of the

performance management puzzle involves delivering the business insights to
the decision makers within the timeframe for action. This becomes near
impossible for all but computerized systems. For those with modern systems,
it is easy to provide real-time visibility into key operating performance targets,
and to react as crucial changes occur.

Performance Management in Service Sector

The service sector consists of the following industries :

a) Hotels and Restaurants

b) Transport (Railways, Airways, Roadways), Transport and Communication
c) Banking, Financial services & Insurance
d) Real estate
e) Public Administration etc

Service industries often rely on exceptional customer service to ensure strong

operations and to attract repeat business. Continually setting goals and measuring
performance in these key areas helps the business remains competitive, profitable
and successful. Helping staffers understand expectations through goal-setting can
increase productivity and empower staffers to higher levels of performance.

The main features of Performance Management in the service industry comprises

of the following:

1. Key Objectives - Key objectives in the service industry should include:

i) high customer satisfaction levels
ii) increased revenue
iii) positive word-of-mouth reputation
iv) increased market share
v) low employee turnover.

Objectives can be measured through customer comment and suggestion cards,

online surveys, focus groups and in-person interviews. Management may opt to
develop a numerical classification system to gauge and measure performance in
key service areas.

2. Service Initiatives - Service initiatives that can increase performance andgoal

meeting include ongoing on-the-job training and peer-to-peer mentoring. Providing
regular feedback and offering a mechanism for employees to approach
management with concerns and suggestions can help increase overall service
performance. Include staffers in the goal-setting process to ensure buy-in and
make staffers feel they're being heard.
3. Setting Goals - Developing clear, measurable service goals can help
employees in the service industry understand management expectations and set
the stage for how an organization wants customers treated. Goals can be set by
department or by individual and be monitored and measured through customer
satisfaction surveys and performance appraisals. Goals should be clearly defined,
have timelines for completion and should be achievable.
4. Performance Indicators - Develop criteria for measuring goal progress and
performance. In the service sector, indicators could include high marks on
customer feedback surveys, increased repeat business figures, production/output,
revenue generation and customer referral numbers. Also take into consideration
levels of absenteeism, meeting deadlines, taking initiative, staying on budget and
participating in team environments.
5. Performance Evaluation - Staffers in the service industry should be regularly
evaluated on their customer attitudes, knowledge of the company’s products and
services and through customer interaction observance. Employees can be
evaluated on their goal progress. Unsatisfactory evaluations should be followed
with detailed improvement plans, mentoring and ongoing service training. Consider
reverse appraisals to gauge management performance as well as peer-to-peer
evaluations to get a well-rounded picture of performance levels.
6. Value of Performance Measurement - Organizations that regularly monitor
and measure performance in key service areas can stay ahead of their competition.
Having such a system in place allows an organization to monitor customer service
attitudes, get employee feedback, notice areas of concern quickly and fix problems
before they become costly.
Performance Management System at NALCO

Steps in the Appraisal Process at NALCO

Performance Management at ITC

Its diversified businesses includes Five segments ; FMCG, Hotels, Paperboards,

Paper. It was founded in August 24,1920 as Imperial Tobacco Company. ITC Limited
or ITC is an Indian conglomerate headquartered in kolkata, West Bengal.
Performance Management System
  Performance management system includes activities to ensure that goals are
consistently being met in an effective manner.
 Performance management can focus on performance of the organization , a
department processes to build a product or service ,employees.
 Performance management of individual employees - It can be different and
generally includes the following: planning the work, setting goals, offering
feedback and reviews ,offering opportunities to learn more in one’s field, and
rewarding employees who perform well.
 Performance Management Cycle - It’s a technique used by company
managers and executives to encourage employee growth and job satisfaction.
In case of ITC the cycle consists four steps mainly These are Plan, Act,
Monitor, Review.
 Performance Appraisal Methods used in ITC
 Performance Appraisal Methods Used in ITC :
 BARS
 MBO
 360 Degree feedback
 Balance score card

Performance Management at SBI

 SBI has over 2 lakh employees on its rolls. This will be the very first time in India’s
largest commercial bank that, each and every employee can analyse their monthly
performance against assigned targets.
 SBI launched Performance appraisal system. The new PMS of SBI has been
developed in consultation with BCG (Boston Consulting Group).
 The name of PMS of SBI is Career development system/ Sakhsam.
 PMS of SBI involves the following steps
 Goal setting
 Fixing KRA for each employee
 Performance appraisal
 Feedback mechanism
 In SBI importance is given to budgetary, measurable and non-measurable role
assigned to employees.
 Goal setting - Individual goal, organizational goal and mutual goals are set for the
year.SBI has been strategically investing in enhancing its ‘Human Capital’ to achieve
their individual goals which ultimately helps in achieving its corporate goals.
 Key responsibility areas (KRAs) - KRAs are fixed for each & every employee,
(Annual, 2017-18) almost 90% of the positions has been made budgetary or
measurable. (management study guide). Key responsibility areas (KRAs) refer to a
detailed summary of what all an individual is expected to do at the workplace. The
tasks and activities that an individual perform in his/her organization which would
eventually earn revenues for the organization are their key responsibility areas or in
short their KRAs. In SBI KRAs have been standardised for all level of employees
having similar work profile. (Annual, 2017-18) The PMS gather data required for
fixing KRAs and then analyses performance against the standards. The results of the
analysis are then used for Promotions and Rewards and Recognition purpose.
 Performance appraisal - The performance appraisal system of SBI is named as
career development system (Annual, 2017-18), which evaluate individual employee
performance in an objective and transparent manner. This PMS is IT-driven and has
been extended to cover all the employees. SBI follows grading system for appraising
employee performance. Grading like AAA, AA, A, B & C are used to give grade to
employee performance. In performance appraisal system weightage is assigned as
follows:
 70% weightage is given to key responsibilities areas assigned to employees
 30% weightage is given to employee’s immediate supervisor

 Review mechanism - In Indian banking industry for the first time SBI has adopted formal
monthly review system where employees can view their monthly performance against
assigned targets. The result of performance appraisal is then used for promotion,
incentives and rewards to employees. The system also has provision for capturing the
developmental needs of the individual employees through competency assessment. High
performance is rewarded through monetary benefits, taking decisions on an extension in
service, and requests for transfers. SBI also states that Introduction of the new appraisal
system is ‘not meant to identify low performers’.

Strategies for Improving Performance

It goes without saying that good performance is often the result of highly
engaged employees. This is someone who is doing great work, owning their job
and creating awesome results. They are emotionally connected to the organization
and are focused in their efforts and their productivity. They are the kind of employee
that we wish everyone was. This isn’t always the case for all employees, however,
and at times we need to focus our efforts on improving an employee’s performance.

There are six key steps to improving performance:

1. Clarify expectations of good performance. Employees need to know what is

expected so that they can meet those expectations. This is often communicated
through a job description, a performance review and a conversation with their
manager so that they can discuss examples of what good performance looks like.
2. Explain consequences of poor performance. Take a performance improvement
discussion as an opportunity to be clear on what the consequences are if
performance isn’t improved and to hold the team member accountable. This isn’t to
threaten or scare the employee but to emphasize the importance of the need for
improvement. You don’t want the employee to leave the conversation feeling that the
discussion included some “suggestions” for improvement; you want them to
understand that there is a sense of seriousness to the situation.
3. Monitor performance and provide specific feedback. When you see behaviour
from an employee that needs to change, you need to be specific in your feedback.
Vague comments, alluding to a needed behaviour change, or ignoring the situation
does not help the situation. The more specific you are with the person, the more
likely you are to see things improve. This also applies to positive feedback – if an
employee does something awesome, be sure and provide them with specific
feedback so that they will continue to give you awesome performance.
4. Provide advice for improvement. Many times, employees are at a loss for ways
to change their performance and they can be stuck. If you find that the employee is
trying but they continue to produce lacklustre results, have a conversation and give
them some examples of what you are looking for. Discuss the situation in a way that
can inspire them to try new strategies or attempt tasks differently.
5. Give them time to improve. Employees need time to try out new strategies and
opportunities to focus on the desired improvements and to see if their efforts are
effective. It is important to give people enough time before you move forward with
any consequences if things haven’t improved. The more feedback you
provide during this time the better, so that the employee can become clearer on what
it is that they are striving for.
6. Follow through on your consequences. As a part of this process, you outlined
the consequences of poor performance. If performance has not improved then it is
important that you follow through with those consequences. You can always modify
the consequences; however, a conversation with the employee is always warranted
in that situation.

Striving for great employee performance is a two-way street that takes effort
from both the manager and the employee. The more that you can work towards
performance improvement as a partnership between the two of you, the more
successful you will be. Ultimately, employees want to do a good job and the more
you can help them achieve that, the happier everyone will be.

Improving Organizational Performance

To improve organizational performance, top management needs to focus on

developing a high-performance culture.The characteristics of such a culture are −

 a clear line of sight exists between the strategic aims of the organization and
those of its departments and its staff at all levels;

 management defines what it requires in the shape of performance

improvements, sets goals for success and monitors performance to ensure
that the goals are achieved;

 leadership from the top that engenders a shared belief in the importance of
continuous improvement;

 focus on promoting positive attitude that results in a committed, motivated

and engaged workforce.

The momentum for the creation of a high-performance culture has to be provided by

the top management. There is a clear sense of mission underpinned by values and
a culture expressing what the firm is and its relationship with its customers and
employees.
Improving Team Performance

At a team level, performance management approach to teamwork can be used to

improve team performance in the following areas –

i. Setting Objectives - Team objectives can be concerned either with the

achievement of work targets and standards or with the way in which the team
operates.

ii. Work Objectives - Work objectives for teams are formulated in the same
way as individual objectives. They may be related to the mission and overall
objectives of the organization and the function, unit or department in which the team
operates. The team should agree on its overall mission or purpose and then on the
specific objectives that will support the accomplishment of that mission.

iii. Team working objectives - Team working objectives could be agreed on

such matters as working together, contribution of team members, decision making
and getting into action.

iv. Work plans - It is important for teams to get together to create plans for
achieving their agreed objectives. Work plans will specify programs (staged as
necessary), priorities, responsibilities, timetables, budgets and arrangements for
monitoring performance, feedback and holding progress meetings.Work plans can
also be useful for the team to discuss the critical success factors — what must be
done and how it must be done if its mission and objectives are to be attained.

v. Team performance reviews - Team performance review meetings analyzes

and assesses feedback and control information on their joint achievements against
objectives and work plans.

The agenda for such a meeting could be as follows −

 General review − of the progress of the team as a whole.

 Work review − the results obtained by the team and how well it has worked
together.

 Group problem-solving − an analysis of reasons for any major problems

and agreement of steps to be taken to solve them or to avoid their
reoccurrence in the future.
  Updating of objectives and work plans − review of new requirements, and
amendment and updating of objectives and work plans.

Improving Individual Performance

To improve performance, therefore, attention has to be paid to −

 increasing ability − by recruitment (people will want to join the organization),

selection (choosing the right people) and learning and developing (people will
want to enhance their knowledge and skills);

 increasing motivation − by the provision of extrinsic and intrinsic rewards;

 increasing opportunity − by providing people with the opportunity to use,

practice and develop their skills.

At the individual level, improvement in performance can also be achieved through

policies and practices designed to increase learning by coaching, mentoring and
self-managed learning. The aim should be to increase ‘discretionary learning’, which
happens when individuals actively seek to acquire the knowledge and skills required
to achieve the organization’s objectives.

Line managers play a pivotal role in this by encouraging discretionary learning and
supporting it through coaching and mentoring. Performance management provides
a valuable platform for doing this.

Essentially, the approach covers seven steps −

 Select the goal − establish priority areas for action.

 Define expectations − targets and standards.
 Define performance measures − the basis upon which progress to
achieving the goal can be monitored.
 Plan − the improvement program.
 Act − implement the improvement program.
 Monitor − review progress and analysis feedback to ensure the target or
standard is achieved.
 Extend the process − continue the development program as required.

Analyzing Performance Problems

 There are a variety of psychological mechanisms that managers sometimes use to
avoid the unpleasant truth that performance gaps exist. The psychological
mechanisms have been described as follows –

a) Evasion through rationalization - Managers may escape having to demand better

performance by convincing themselves that they have done all they can to establish
expectations. They overlook the possibility of obtaining greater yields from available
resources.

When they do ask for more they are too ready to believe their staff when they claim
that they are already overloaded, and they may weakly take in the extra work
themselves. Or, they may go to the opposite extreme and threaten workers with
arbitrary demands, unaccompanied by specifications of requirements and deadlines
for results.

b) Reliance on procedures

Managers may rely on a variety of procedures, programs and systems to produce

better results. Top managers say, in effect, ‘Let there be performance-related pay,
or performance management’ and sit back to wait for these panaceas to do the trick
– which, of course, they won’t unless they are part of a sustained effort led from the
top, and are based on a vision of what needs to be done to improve performance.

c) Attacks that skirt the target

Managers may set tough goals and insist that they are achieved, but still fail to
produce a sense of accountability in employees or provide the support required to
achieve the goals.

What’s a performance problem?

● Missing deadlines

● Being late for meetings

● Not getting compliance training done

● Takes a long time to fulfil his duties

● Using an ethnic joke to kick off sales meeting

What Steps are to be taken

Managing underperformers is a positive process which is based on feedback throughout
the year that looks forward to what can be done by individuals to overcome performance
problems and how managers can help. The five basic steps required to manage them are
as follows:

1) Identify the problem - Analyze the feedback and, as far as possible, obtain
agreement from the individual on what the shortfall has been. Feedback may be
provided by managers but it can in a sense be built into the job. This takes place
when individuals are aware of their targets and standards, know what performance
measures will be used and either receive feedback/control information automatically
or have easy access to it.With proper feedback, the employees will then be in a
position to measure and assess their own performance and, if they are well-
motivated and well-trained, they can take their own corrective actions. In other
words, a self-regulating feedback mechanism exists. This is a situation that
managers should endeavor to create on the grounds that prevention is better than
cure.

2) Establish the reason(s) for the shortfall - When seeking the reasons for any
shortfalls, the manager should not crudely be trying to attach blame. The aim should
be for the manager and the individual jointly to identify the facts that have contributed
to the problem. It is on the basis of this factual analysis that decisions can be made
on what to do about it by the individual, the manager or the two of them working
together. It is necessary first to identify any causes that are external to the job and
outside the control of either the manager or the individual.

Any factors that are within the control of the individual and/or the manager can then
be considered. What needs to be determined is the extent to which the reason for
the problem is because the individual −

 did not receive adequate support or guidance from his/her manager

 did not fully understand what he/she was expected to do

 could not do it – ability

 did not know how to do it – skill

 would not do it – attitude

3) Decide and agree on the action required - Action may be taken by the
individual, the manager or both parties. This could include −

 the individual taking steps to improve skills or change behavior;

 the individual changing attitudes – the challenge is that people will not
change their attitudes simply because they are told to do so; they can only be
helped to understand that certain changes to their behavior could be
beneficial not only to the organization but also to themselves;

 the manager providing more support or guidance;

 the manager and the individual working jointly to clarify expectations;

 the manager and the individual working jointly to develop abilities and skills –
this is a partnership in the sense that individuals will be expected to take
steps to develop themselves but managers will provide help as required in
the form of coaching, training and providing additional experience.

Whatever action is agreed, both parties must understand how they will know that it
has succeeded. Feedback arrangements can be made but individuals should be
encouraged to monitor their own performance and take further action as required.

4) Resource the action - Provide the coaching, training, guidance, experience or

facilities required to enable agreed actions to happen.

5) Monitor and provide feedback - Both managers and individuals monitor

performance, ensure that feedback is provided or obtained and analyzed, and agree
on any further actions that may be necessary.
Performance Counselling & Coaching – Concept, Principles & Skills

An important aspect of Performance Management is Counselling & Coaching. This takes

place specifically during performance review meetings but can take place any time during the
year. We have counselling and coaching when we feel that there is some problem in terms of
behaviour. There are several reasons for misbehaviour. Some of them are as follows:-

 If misbehaviour is due to wrong attitude, values or habits, a counselling session

facilitated by a skilled manager may help provide both the manager and the employee
concerned with a common desire to improve the situation.
 If misbehaviour is due to lack of skills, knowledge, insufficient prudence or
foresight, mentoring or coaching sessions can help, provided that the manager knows
what and wants to teach and the employee agrees to learn.
 If the employees are insufficient in knowledge and skills but high in attitudes and
habits, the proper management intervention is mentoring / coaching.

Managers must be good coach or mentor. They can only be such if they have gained a
certain level of expertise and proficiency that can inspire respect among personnel. If the
employees are insufficient in proper attitudes and habits, even high in knowledge and
skills, the appropriate management action is Counselling. Managers must be good
counsellors. The best form of counselling is by example. In other words, counselling and
coaching/mentoring are viewed as developmental programs and are considered positive
approaches in aligning employee behaviour with employer’s expectations, goals and
organizational vision, an element of a continuing process of employee discipline.

The Philosophy of Coaching/Mentoring and Counselling

 To empower the organization

 To express management’s concern
 To uplift the spirit
 To empower individual
 To inspire the spirit
 To build a team
 To spread competence

Desired combined results of mentoring and counselling

 A caring organization
 Employees with high morale
 An empowered workforce
 Inspired and passionate individuals
 An entire workforce working as a team
 A widespread competence
 An empowered organization

Counselling

Counselling is defined as a discussion between the employer and the employee about the
real or perceived performance deficiency or job- related behavior; the employee's
perception of the identified behavior and the employer’s involvement in helping the
employee correct these behaviors; and the employee's attempt to reduce or eliminate the
misconduct or incompetence.

Advantages of counselling

 It is a better form of caring.

 Listening to frustrations of employees makes managers express empathy and
sympathy.
 Giving sound advice and counsel, emits positive vibrations and give out sparks of
wisdom.
 A self-esteem that suffered a series of traumatic pressures needs some form or
revival and revitalization.
 Counselling provides healing process to remedy all these pains. minimizes, if not
removes the bitterness of rejection. Whenever management rejects an employee, he
suffers. Counselling alleviates these sufferings.
 It is a powerful means of team-building.
 Counsellor and counselee spend time together and share information.

Steps in counselling

 Listen, observe and analyze.

 Empathize
 Identify the problems / issues
 Generate the alternatives
 Assess each alternative
 Let the person choose his alternative
 Assist the person in implementing it.

Tips in Counselling

 Prepare in advance for counselling sessions.

 Conduct the counselling sessions in privacy. Do not allow outside interruptions.
 Focus your attention on the employee's behaviors and performance indicators that
led to this counseling session.
 Discuss only these behaviors and indicators and not the employee's character,
morality, or personality.
 Be direct and honest. After welcoming the employee, go directly to the reason for
your meeting.
 Remain objective without showing emotion.
 Even though some employees may be hostile, remain calm, speaking in a
measured voice.
 Keep an open mind. Look for a solution or set of solutions.
 Allow the employee an opportunity to talk.You must be a good listener.
 Never characterize the counseling session as "discipline."
 Do not speak in a punitive or derogatory manner to the employee.
 Be sure to thank the employee for meeting with you and make it clear you are
available for further discussion or help.

Coaching

Coaching is a process where a peer or manager works with an employee to motivate her,
help develop her skills and provide reinforcement and feedback.

Advantages of Coaching

 It is a form of caring.
 Whenever managers and supervisors mentor /coach, they give something of
themselves to the employee.
 They express a concrete form of concern, caring, loving. It is an effective approach
at empowerment.
 It gives them preparation and the confidence to just do it and achieve what are
expected of them.
 Before employees are expected to deliver results, they should be equipped with the
needed skills to do their jobs. It is a means of strengthening the mental faculties.
 This shall train the mind to think as much as the muscle to perform the task.
 People who are coached or mentored are expected to think better and do more. It
is a way of enhancing physical ability.
 It is a way of building up physical capabilities, strengthen their stamina, sharpen
their skills and improve knowledge level. It is a team-building mechanism.
 The relationship shares hours of working together, and solve problems jointly. They
consult, discuss and collaborate. It is a way of democratizing power.

To create a really powerful organization, every single member of the organization should
have more knowledge and more competence. It is a way of strengthening the whole
organization. When even the lowliest clerk has competence, the whole organization
stands to benefit. Whenever one resigns or retires, another equally competent guy is
ready to take over.The organization will not crumble when one leaves because everyone
is ready to fill the gap.

Steps in Coaching
 Let the employee observe how you work.
 Break up the work into steps.
 Explain the rationale for each step.
 Allow the employee to do it step by step.
 Allow the employee to identify successes and improvement ideas.
 Allow the employee to formulate improvement steps.
 Assist the employee in perfecting his work.

Tips in Coaching
 Know your work.
 Review the basics.
 Be prepared to answer questions about every aspect of the job.
 Know your company.
 Help the trainee overcome the hurdles of unfamiliar company policies and
practices.
 Get to know your protégé.
 Learn as much as you can about the person you are mentoring. Learn to teach.
 If you have minimal experience in teaching, pick up pointers on teaching methods
from the best trainers you know.  Learn to learn.
 Never stop learning – not only the latest techniques in your own field, but
developments in your industry, in the businesses, and in the overall field of management.
 Be patient. Patience is key to success.
 Be tactful, kind and courteous.
 Be gentle but firm, and let the trainee know you expect the best.
 Do not be afraid to take risks.
 Give your protégé assignments that will challenge his or her capabilities.  Failures
may occur, but we learn from our failures.
 Celebrate successes.Let the trainees know you are proud of their accomplishments
and progress made.
 Encourage your protégé to become a mentor or counsellor.

Coaching Vs Counselling
 Performance Monitoring

Performance monitoring may be defined as the process of appraising an

environment of continuous learning and development. It will be done by maintaining
the employee’s performance, enhancing individual competencies to make them more
productive for the organization.
Successful business management requires the ongoing monitoring of performance in
order to generate data by which to judge the success or otherwise of specific
strategies. The improvement in performance can only be realistically achieved when
management is properly informed about current performance and to this end it is
important to identify key performance indicators (KPIs) that will enable management
to monitor progress.

Characteristics of Performance Monitoring

The key characteristics of performance monitoring are given below:
1. In organizations, a performance monitoring plan is a critical tool for planning,
managing, and documenting data collection.
2. It is an important part of performance management system to control and measure
the behaviours.
3. This helps in maintaining the employees’ performance as per the goals and
objectives of the organization.
4. Performance monitoring helps in building the strong relationships between the
management and employees for their efficient performance.
5. It facilitates career development of employees and provides the training and
development opportunity to employees.

Some Monitoring and Mentoring Behaviours of the Manager are as follows:

 They are praising good performance.
 They help in faulting behaviour without rejecting the person.
 They share feelings rather than pronouncing value judgments.
 They believe in demonstrating and demanding integrity in behaviour and intent.
 Nurturing effective employees through continual reaffirmation of their worth to the
organization.
 Objectives of Performance Monitoring
Performance monitoring explicitly promotes the value that a manager and their
managee accept as joint responsibility for monitoring progress on the tasks and
goals agreed upon during the initial performance planning or expectation setting
meeting and subsequent review meetings. The managers use instruments like
written reports, review discussions and on-the-spot inspections to track:
 Timely and quality fulfilment of managing tasks and goals.
 Help and support legitimately needed by the managee’s tasks, including those
agreed upon during planning and review meetings.
 To improve employee’s job performance as well as methods and techniques of
measuring.
 Introducing the continuous learning and development process.
 Periodic reviews help the performance manager.
 It helps in correct planning assumptions and errors mid-course before it is too late.
 It monitors and encourages progress, and keep the work on track.
 It strengthens a dyadic relationship between the manager and the employee.

Importance of Performance Monitoring

Performance monitoring is important because of the following reason:
 Performance monitoring provides scope for modification, change, and or alteration
of the existing performance management system as per the outcomes measured
in the process.

 It helps in reviewing and correcting performance objectives. Because it is linked to

the mission and objectives of the organization.

 It identifies areas for competency improvement for the overall development of

employees and the organization.

 It continually enhances the performance of employees and making them efficient.

 It helps in realizing the full potential of employees and organizations for excellence
in performance.
 Process of Performance Monitoring
In this process, the manager observes managee performance through:
 Periodic written reports.
 Scheduled meetings.
 On-the-spot inspections, or field or site visits in case of managees whose location
is different from that of the manager.
 Relevant and reliable information from other available sources.

In the entire course of the monitoring process, the manager provides feedback to the
managees and asks for feedback from the managees during group or team
meetings. They need to discuss common issues, problems, etc.

High-Performance Work Teams

High-Performance work teams comprise a group of highly talented and motivated

professionals working together for the achievement of a common goal or business
objectives. High-Performance teams assure the highest levels of performance and
productivity, unlike average teams by leveraging the business resources optimally
and making best utilisation of the available talents or competencies. Such teams
drive business excellence and achieve business synergies by way of effective
planning and execution of the strategies.

The ten essential characteristics of High-Performance Teams:

1. Clearly Defined Mission and Goals: High-Performance teams highlight the
work goals or the mission which inherently implies their reason for existence. Apart
from this, the teams set interim goals periodically and responsible for planning &
implementation of relevant decisions or strategies. The expectations are clearly
defined and the team members exist with a strong sense of purpose.
During the stage of Expectation setting, the leader of the team takes care of the
following factors:
 Seeing to it whether the expectations are adequately communicated
and effectively to the team members.
 Ensures understanding of the expectations of the team members by
defining and implementing effective communication strategies.
 Ascertaining that the team members readily accept and act as per the
pre-established expectations.
 Providing necessary motivation and resource-driven support to the
team members for ensuring the realisation of the expectations.
2. Open Communication: The members of the High-Performance work teams
enjoy the freedom to share or exchange various types of information, can
communicate openly and transparently and give/receive constructive feedback for
improving performance at work. Besides this, the team establishes a specific
process for the dissemination of vital information amongst the team members.
3. Mutual Trust and Cohesiveness Amongst the Team Members: The
members of the High-Performance teams have mutual trust, share a strong bonding,
respect for each other, cooperate and support each other for the realisation of the
superordinate goals. Such teams provide maximum opportunities for social
interaction in a cross-functional set-up and facilitate reliability and oneness by
offering opportunities to the members for participating in cross-functional training
programmes.
4. Proactive and Qualitative Decision-Making and Problem Solving: The
members of the High-Performance teams are active and experts in resolving
complicated issues and implementing vital decisions successfully together as a
group. Decisions which are implemented can be process-driven in nature or initiative
driven.
5. Efficient Conflict Resolution Mechanism: The High-Performance work
teams are quick and proactive in understanding the triggering factors or potential
sources of conflicts and resolve it with the mutual consent of the team members.
Such teams characterise a high level of solidarity and unity, as a result of which are
efficient in conflict management by way of effective communication and resolution
techniques. The members of the teams are trained in conflict management skills and
practising interpersonal and communication skills at work for delivering productive
outcomes. The team members work in a participative culture and are contribute their
innovative ideas or participate in conversations freely.
6. Meetings are Productive in High-Performance Teams: The meetings are
well planned and organised, with more focus given on factors which may help in
enhancing overall team performance and maximising productivity. The team
members contribute brilliant ideas in the meeting for resolving work-related
challenges, participate in decision-making and vital information is shared in the
meetings.
7. Clarity of Roles: The members of the High-Performance teams have clarity
of their roles as well as the responsibilities of others in the team. They are aware of
their duties and accountabilities for fulfilling their work-related obligations and
interdependence of every member of the team for realising the ultimate mission or
objectives.
8. High-Performance Work Teams are Innovative and Deliver Productive
Outcomes: The members of the High-Performance Teams are more productive and
skilled at driving innovative best practices in the workplace, implementing reforms in
the systems/processes and achieving record-breaking milestones. The team
members are experts in benchmark setting and defining the measures for evaluating
the productivity in terms of efficiency (analysing the efficiency of the team processes)
and effectiveness (quality of the outcomes). Innovation and productiveness is
measured as per eight dimensions: Quality improvement, Time Saving, Cost Control
& Reduction, Increase in the Output, Meeting the Committed Deadlines, Adherence
with the Safety Regulations and minimisation of accidents, streamlining of the
existing systems/processes and enhancing interpersonal communication.
9. Strong Leadership: The leaders of the High-Performance teams play a
crucial role in setting up strategic framework and course of action for the team
members. They define the goals and priorities, ensure effective coordination in
various aspects and foster a collaborative environment for enhancing opportunities
and delivering successful outcomes. The leaders facilitate a participative culture,
encourage active participation by the team members in crucial decisions and provide
the necessary support as well as guidance to the members of the team.
10. Provide Maximum Opportunities for Development to the Team
Members: The team members can have access to maximum opportunities for
personal and professional development to the team members. The members of the
team can hone their cross-functional skills by way of experiential learning and
participate in the project assignments. Various developmental interventions which
periodically undertaken in such teams such as classroom training, outdoor training,
self-directed learning, coaching & mentoring and feedback sessions are for the
benefit of the team members.