Performance Management System PDF

Performance Management System Notes Performance Defined The Oxford English Dictionary defines ‘performance’ as behaviour—the way in which organizations, teams and individuals get work done. Campbell (1990) believes that “Perform...

Performance Management System Notes Performance Defined The Oxford English Dictionary defines ‘performance’ as behaviour—the way in which organizations, teams and individuals get work done. Campbell (1990) believes that “Performance is behavior and should be distinguished from the outcomes because they can be contaminated by systems factors”. A more comprehensive view of performance is achieved if it is defined as embracing both behavior and outcomes. This is well put by Brumbrach (1988): “Performance means both behaviors and results. Behaviors emanate from the performer and transform performance from abstraction to action. Not just the instruments for results, behaviors are also outcomes in their own right—the product or mental and physical effort applied to tasks—and can be judged apart from results.” Performance could, therefore, be regarded as behaviour—the way in which organizations, teams and individuals get work done. Campbell believes that ‘Performance is behavior and should be distinguished from the outcomes because they can be contaminated by systems factors.’ Performance = (Skill to do + Will to do) Creating skill to do: It means resources and infrastructure required for performance. They are mainly: 1. Machine, 2. Money, 3. Material, and 4. Men. They determine the capacity of an organization. Better performance cannot be thought of without state-of-the-art machinery—superior to or equal to the competitors. Paucity or inferiority of money or material will definitely hamper the performance. Hence, their strategic availability is must. Men, the most critical and scares of all the resources are not only most important as also most strategic. Sourcing, attracting, developing, retaining and motivating talent are most crucial jobs of a performing organization. The Pillars of Human Performance Work performance of an individual may be observed and appraised along three dimensions as follows: 1. An understanding of the context of work, or work situation, in terms of its purpose, nature, conditions, requirements, metrics of appraisals, and so on; 2. The ability to carry out the work effectively in terms of the requisite knowledge, skills and capabilities required for performance excellence; and 3. Motivation to carry out the work in terms of one’s commitment and best efforts towards excelling in performance. These three dimensions may be viewed as three pillars of human performance, viz., understanding the context, the ability to be effective, and motivational to excel. These three axes of human performance may be logically applied and instantiated to explicate the nature, norms, and attributes of the human capital as follows: The first pillar, i.e., understanding the context, implies employees’ reflective and critical understanding of the dynamic business environment of their enterprise. It also implies 2 LOVELY PROFESSIONAL UNIVERSITY Performance Management System Notes The Performance Management Cycle Performance management is a process, not an event. It operates as a continuous cycle, as shown in Figure 1.1. Figure 1.1: The Performance Management Cycle plan review monitor act 1.2 Concept of Performance Management The concept of performance management may be categorized into two separate types of management. The first one deals with the performance of an organization as a whole and evaluates the effectiveness of its managers. The second one deals with the system of evaluating employees in order to enable them to achieve reasonable goals and thus ensure that the organization performs better. Figure 1.2: Linkage of Performance Management with other Sub-systems Human resource Recruitment and Industrial relations planning selection Improving working Data on job-person Basis for determining relations fitment criteria selection criteria Joint goal setting Matching for Quality candidates results in improved organizational results in perfor- performance effectiveness mance improvement Performance Performance Annual stock taking management management audit Training and Reward Management Mentoring and counseling development Identification of Developing leadership Basis for training talents skills needs identification Effective career and Employee empower- Aids in performance succession planning ment improvement Compensation Work life balance Competency management Internalization of ethics management policy It is pertinent here to understand what performance is. Brumbrach (1988) defines ‘performance’ both as behavior and results. Behavior emanates from the performer and transforms performance from abstraction to action. Not just the instruments for results, behaviors are also outcomes in their own right—the products of mental and physical effort applied to task and can be 4 LOVELY PROFESSIONAL UNIVERSITY  Unit 1: Introduction to Performance Management 10. The supervisor should be evaluated on the successful administration of the plan and Notes ongoing performance management responsibilities. 11. Training for supervisors and employees is encouraged and will be provided by University Human Resource Services. Note Ten Top Performance Management Tips 1. Talk to your people often in order to head-start performance management of your people 2. Keep formal discussions friendly and simple 3. Be very positive and do not spend extended time on the weaknesses of employees 4. Help employees achieve their needs 5. Build feedback in as a natural activity 6. Be honest in a working relationship for everyone’s benefit 7. Remember that performance management is not an instrument to manage indiscipline 8. Notice great performance and celebrate successes 9. Have a uncomplicated and time-bound system of performance management 10. Learn from mistakes Source: Mitu Maheshwari, May 2007, Business Manager. 1.6 Performance Appraisal to Performance Management The contemporary organizations are undergoing a transformation for coping against the changing needs of the environment and excelling in the business by building up their adaptive capabilities for managing change proactively. The traditional performance appraisal system did not suffice the needs of the changing scenario as it was mainly used as a tool for employee evaluation in which the managers were impelled to make subjective judgments about the performance and behavior of the employees against the predetermined job standards. Note Performance Appraisal vs. Performance Management Performance Appraisal Performance Management Focus is on top down assessment Stresses on mutual objective setting through a process of joint dialogue Performed annually Continuous reviews are performed Usage of ratings is very common Usage of ratings is less common Focus is on traits Focus is on quantifiable objectives, values and behaviors Monolithic system Flexible system Are very much linked with pay Is not directly linked with pay Performance appraisal is a systematic evaluation of present potential capabilities of personnel and employees by their superiors, superior’s or a professional form outside. It is a process of estimating or judging the value, excellent qualities or status of a person or thing. It is a process of collecting, analyzing, and evaluating data relative to job behavior and results of individuals. LOVELY PROFESSIONAL UNIVERSITY 7 Performance Management System Notes 1.9 Keywords Expectancy: It refers to the extent to which the person believes his efforts will lead to the first level outcome. Instrumentality: It refers to the probabilities attached by the individual to each possible performance outcome alternative just as the individual previously assigned probabilities to various levels of effort leading to different levels of performance. Performance Management: It deals with improving organizational performance by improving employee performance. Performance: Behaviors or actions that are relevant to the goals of the organisation. Valence: It means the attraction or an outcome to the individual. 1.10 Self Assessment Fill in the blanks: 1. Performance deals with behavior and………………… 2. Performance management is ……………….. in concept. 3. Performance is best developed through ………………….. and experience. 4. ……………… is a systematic evaluation of present potential capabilities of personnel and employees by their superiors, superior’s or a professional form outside. 5. The performance management approach focuses more on ……………… and concrete results based on the previously established smart objectives. 6. Performance management is a much broader term in comparison with …………………... 7. MBO means …………………... 8. Performance management may be regarded as a …………………... State whether the following statements are true or false: 9. Performance management translates organizational objectives into work units, departmental team and individual goals. 10. Performance management is a continuous and integrated process. 11. In the present scenario, the organizations have shifted their focus from performance management to performance appraisals. 12. Performance management focuses on top down assessment. 13. Performance appraisal is not directly linked with pay. 14. Performance management creates a system of regular feedback with positive reinforcement of employee’s behavior and action. 15. Performance management is more of a developmental tool rather than administration of financial rewards. 1.11 Review Questions 1. Describe the concept of performance management. 2. “Performance management is a key to success.” Do you agree? 10 LOVELY PROFESSIONAL UNIVERSITY Performance Management System Notes 9. There are review mechanisms essentially to bring performance improvements 10. It is a system with deadlines, meetings, input, output and a format. 11. Process driven with emphasis on the format as an aid. 12. Linked to performance improvements and through them to other HR decisions as and when necessary. 13. PMS is change in managerial style of doing work. 14. It creates and nurtures performing culture. 15. Framework of Performance Management. In the organization with performance management systems, 85 percent had performance pay and 76 percent rated performance. The emphasis was on objective –setting and review, which as the authors of the report noted, ‘leaves something of a void when it comes to identifying development needs on a longer-term basis. There is a danger with results orientated schemes in focusing excessively on what is to be achieved and ignoring the how.’ It was noted that some organizations were moving in the direction of competency analysis, but not very systematically. Note Elements of an Effective Performance Management System Clarity and People culture Process Management Capability Effective Performance Measurement and Motivation management reward Learning Role of HR organizational professionals Source: Kathy Armstrong (2005) 2.4 Competency-based PMS Performance management is a strategic and integrated approach for delivering sustained success to organizations by improving the performance of those who work in them and by developing the capabilities of teams and individual contributors. Development is perhaps the most important function of performance management. Performance management is concerned with outputs—the achievement of results; and with outcomes—the impact made on performance. But it is also concerned with the processes required to achieve these results and the inputs in term of capabilities (knowledge, skill and competence) expected from the teams and the individuals involved). Performance management is regarded as a number of inter-linked processes rather than a single system. It was, therefore, common to find performance management carefully aligned with communications strategies, competency development, job design and evaluation, payment systems and motivation practices. 16 LOVELY PROFESSIONAL UNIVERSITY  Unit 2: Performance Management System ? Notes Did u know? What is Competency? Competencies are the knowledge, skills and personal attributes required for excellent performance in a job, role or specific business. Competency development is a carefully crafted process of research and data-gathering about firm’s managers and employees as they perform their daily work, with the goal of determining the specific knowledge, skills and personal attributes required for excellent performance in these actual jobs, roles or businesses. The competencies and the need to develop them translates into a personal development plan and the whole links into what is being tried to be achieved within the organization. Severn Trent Water has developed an interesting definition of competency as ‘grouping of knowledge, skills and behaviors which may well be required in whole or in part within a variety of managerial situations’. Competency analysis is concerned with the behavioral dimensions of the roles. Note Indicator of behaviors for achieving higher levels of performance 1. Personal drive 2. Impact on results 3. Analytical power 4. Strategic thinking 5. Creative thinking 6. Decisiveness 7. Commercial judgments 8. Team management and leadership 9. Interpersonal skills 10. Ability to communicate 11. Ability to adapt and cope with change and pressures 12. Ability to plan and control projects According to Lockett (1992), “The essence of performance management is the development of individuals with competence and commitment, working towards the achievement of shared meaningful objectives within an organization which supports and encourages their achievement.” Performance management is concerned with creating a culture in which organizational and individual learning and development are 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. The drive to enhance performance is making ever-greater demands on the knowledge and skills of the workforce and on people, who carry a much greater responsibility for their own performance. The performance management for teams deserves more attention. What makes an effective team, the competencies required for teamwork and a definition to what can be regarded as a team for performance management purpose? Peer pressure in teamwork is an important factor. LOVELY PROFESSIONAL UNIVERSITY 17  Unit 2: Performance Management System The following steps should be followed while designing a competency based performance Notes management system: 1. Categorizing Competencies: Competencies can be divided into two categories, “threshold” and “differentiating” according to the performance criterion they predict. (a) Threshold Competencies: These are the essential characteristics (usually knowledge or basic skills, such as the ability to read) that everyone in a job needs to be minimally effective but that do not distinguish superior from average performers. A threshold competency for a salesperson is knowledge of the product or ability to fill out invoices. (b) Differentiating Competencies: These factors distinguish superior form average performers. For example, achievement orientation expressed in a person’s setting goals higher than those required by the organization, is a competency that differentiates superior from average salespeople. 2. Mapping Competencies: Competency Mapping beings with identifying key competencies for an organization and/or a job and incorporating those competencies throughout the various processes (i.e. job evaluation, training, recruitment) of the organization. With a competency based job description, the second step involves mapping those competencies throughout the organization’s human resources processes. The competencies of the respective job description also become factors for assessment on performance evaluation. Using competencies helps in more objective evaluations based on displayed or not displayed behaviours. Taking competency mapping one step further, the results of performance evaluation can be used to identify in what competencies individuals need additional development or training. 3. Building Competency Models: There are three ways in which competencies models may be developed: (a) Behavioral Indicators: Behavioural indicators describe the behaviours, thought patterns, abilities and traits that contribute to superior performance. (b) Evaluative Competency Levels: Exceptional competencies of high performers are set as standards for evaluating competency levels of employees. (c) Competencies Describing Job Requirements: This approach is useful for organizations having multiple competency models. Competencies required in a particular job are described. Job specific competency models help in structuring focused appraisal and compensation decisions. 4. Profiling Competency Framework for a Particular Role: To identify role-specific competencies required industry specific, functional and behavioral competencies, which need to be developed for enhanced performance. The approach for developing a competency framework for a particular role is as proposed below: (a) Understand strategic business context of the organizations in term of its structure and environmental variables. (b) Detail role description for positions. Defining and scaling (relative importance and mastery level) of specific behaviours for each identified competency as a measure of performance. (c) Develop competency framework taking into consideration the core values and the culture of the organizations in addition to specific functional and level requirements. This should jell with the vision and mission of the company. (d) Validate the competency framework through a workshop, which should include functional experts and top management personnel in order to define critical and LOVELY PROFESSIONAL UNIVERSITY 19 Performance Management System Notes desirable competencies. And also to substantiate the extent to which the competencies differentiate between high and average performers by validating the content and criteria. The competency framework includes technical competencies, behavioural competencies and the proficiency levels required for each competency. Each competency should be detailed in terms of behavioral indicators that enable observation and assessment. 5. Potential Assessment Centre for Competency Mapping: The linkage between competencies and roles is achieved through a competency mapping exercise, through which the most critical, success driving behaviors for specific roles are established. Against the validated competency framework, an individual’s potential is identified through an Assessment Centre process as outlined below: (a) Design Assessment Centre (b) Conduct Assessment Centre (c) Map individual competencies and gaps (d) Finally assess organizational capability and gaps. A link between people and competencies is established through an effective system of measuring the proficiency of an individual on the desired competencies for the role. The link between people and roles is established through effective measuring tools that evaluate the performance of the person in the role. On-the-job performance of the individual is evaluated on the basis of a performance management system. The Assessment Centre is a powerful tool in the hands of the management for selection and development. As a selection tool it can be used for management promotions, fast tracks schemes, high potential list and change of functional role. As a development tool, it is helpful in succession planning, identifying training needs and career development. Designing and conducting a potential Assessment Centre should follow basic principles in term of accuracy, fairness, reliability, legality, efficiency, multiple assessors, multiple tests and optimal stress to increase performance. It would involve two types of exercises, i.e., group exercises and individual exercises. Note Performance Management System Checklist for Managing Do you have written performance standards for the employees? Yes/No Have you communicated the performance standards to the employees? Yes/No Are the standards clear and reasonable? Yes/No Has HR representative reviewed the standards for any possible problems? Yes/No Have you told the employee what critical element he is failing in? Yes/No Have you counselled the employee on how to improve to an acceptable level? Yes/No Have you fully assessed and utilized all available resources to help the employee improve? Have you explained and offered them to the employee? Yes/No Have you sought employee input regarding what is needed to improve? Yes/No Have interim review periods been established to measure the employee’s improvement? Yes/No Contd.... 20 LOVELY PROFESSIONAL UNIVERSITY  Unit 2: Performance Management System Competency development is a carefully crafted process of research and data-gathering Notes about firm’s managers and employees as they perform their daily work, with the goal of determining the specific knowledge, skills and personal attributes required for excellent performance in these actual jobs, roles or businesses. The competencies and the need to develop them translates into a personal development plan and the whole links into what is being tried to be achieved within the organization. Electronic performance management (or e-performance management) offers great value for money to the organizations and addresses its needs aptly. The e-performance management product allows organizations to maintain a record of core skills and competencies into the employee’s performance management process. 2.7 Keywords Competencies: Competencies are the knowledge, skills and personal attributes required for excellent performance in a job, role or specific business. Competency analysis: Competency analysis is concerned with the behavioral dimensions of the roles. e-performance Management: It is IT-enabled performance management that comes as an effective tool to leverage the full benefits of the system at a comparatively much lesser cost of administration. Performance Management: It deals with improving organizational performance by improving employee performance. 2.8 Self Assessment Fill in the blanks: 1. In the organization with performance management systems,........................ had performance pay and 76 percent rated performance. 2. The goals and objectives of an organisation determine the organizational......................... 3. ……………….. offers the same benefits of system of performance management at a much lower cost. 4......................... is perhaps the most important function of performance management. 5. Performance management is regarded as a number of........................ processes rather than a single system. 6......................... are the knowledge, skills and personal attributes required for excellent performance in a job, role or specific business. 7......................... is concerned with the behavioral dimensions of the roles. 8. Performance management is concerned with creating a culture in which organizational and individual learning and development are a......................... 9. The performance management for........................ deserves more attention. 10. The........................ product allows organizations to maintain a record of core skills and competencies into the employee’s performance management process. LOVELY PROFESSIONAL UNIVERSITY 27  Unit 3: Performance Planning 3. Task and target identification Notes 4. Goal setting exercises 5. Organizational objectives and strategy 6. Assessment of organizational performance needs 7. Setting organizational performance expectations 8. Establishing performance management process 9. Measuring effective of performance management 1. Key Performance Area: Key performance area includes the identification of priority area to an employee and subsequent working on the specified area. The process of key performance area involves the following steps: (a) Identification of important task and activities (b) Determining the area of priority (c) Setting goals in the identified area (d) Seeking the employee’s commitment for identified work (e) Making arrangements for required resources 2. Key Results Area: The term key results area may be defined as general area of outcomes for which a role is responsible. Identifying KRAs helps individual employees in a number ways as enumerated here: (a) Clarify their roles. (b) Align their roles to the organization’s business or strategic plan. (c) Focus on results rather than activities. (d) Communicate their role’s purposes to others. (e) Set goals and objectives. (f) Priorities their activities, and therefore improve their time/work management. (g) Make value-added decision. Key results area areas capture about 80 percent of a work role. The remainder of the role is usually devoted to areas of shared responsibility. Example: ‘Image of the organization is usually a very senior official’s key result area, but hopefully all employees contribute to this outcome. Key results area are worded using as few terms as possible, with no verbs, that is, abut results, not actions, and no direction/measurement. They simply describe the areas for which one is responsible for results. Individuals undertake the following steps to determine the KRAs for their roles: (a) Enlist main day-to-day responsibilities/activities. (b) For each activity, ask ‘Why do I do this?’ (c) Review the answers to ‘why’ questions, looking for common themes or areas. (d) Identify KRAs from these themes. LOVELY PROFESSIONAL UNIVERSITY 33 Performance Management System Notes (e) Share KRAs, preferably with those they report to, those they work along with, and with those who report to them. The KRA approach has three main advantages: (a) Areas such as innovation, customer response time, and employee development are included rather than being overlooked. (b) It is the first stage of objective setting. (c) It makes it easier to assess current performance. 3. Tasks and Target Identification: Tasks and target identification involves the identification of roles, responsibilities, tasks and key targets of the employees. Each and every employee should know their duties and key targets. 4. Goal Setting Exercises: An organization’s ultimate goals determine its strategy. Example: An organization intending to become the world’s largest textile company in the shortest possible time (ultimate goal) will increase its production capacities either through organic route such as setting up new manufacturing facilities, or by acquiring other textile organizations. Since acquisition helps increasing production capacities quickly, the organization shall pursue acquisition as a strategy for faster growth. But acquisition strategy also involves turning around the performance of the older acquired production units which essentially calls for improving human performance for corporate success. 5. Organizational objectives and strategy: (a) Organization’s ultimate goal (b) Organization’s competitive position (c) Comparing organization’s strength with changing environment (d) Examining organization’s critical issues (e) Analysing organization’s opportunities (f) Exploring best approaches in view of organizational resources and competencies 6. Assessment of organizational performance needs: (a) Identifying competencies necessary for achieving organizational objectives and strategy (b) Gathering information about critical issues (c) Determining new and future performance needs (d) Prioritizing organizational improvement measures (e) Recognizing core organizational values 7. Setting organizational performance expectations: (a) Determining required vs. desired performance (b) Determining current performance status (c) Understanding, aligning, and agreeing on performance expectations (d) Formulating key performance indicators 34 LOVELY PROFESSIONAL UNIVERSITY  Unit 3: Performance Planning (e) Evolving job objectives Notes (f) Aligning individual goals with organizational strategy 8. Establishing performance management process: (a) Designing a framework of performance management encompassing (b) Performance planning (c) Performance managing (d) Performance appraisal (e) Performance monitoring 9. Measuring effective of performance management: (a) Identifying opportunities for performance development (b) Providing performance counseling including 360 degree feedback (c) Devising reward strategy and administering reward system (d) Instituting performance management audit (e) Improvement in competitive position of the organization 3.5 Process of Performance Planning There are many advantages to both supervisors and employees in having an effective performance planning and review process. The process should identify clearly what is expected of the employee, which in turn provides the opportunity to recognize good performance and identify areas that need corrective action or added training. Four areas that must be identified in a performance plan are: 1. Job responsibility – What has to be done? 2. Performance measure – How will this be checked or measured? 3. Performance standard – How well must it be done? 4. Target date – When will it be checked? When building a performance plan, you would obtain information in these areas from the job description and you would also look to the organization needs to clarify which duties have priority and the standard they must be performed to. An effective performance plan should outline results expected, performance measures, standards to be achieved and target dates for measurement. The following are the key components of performance planning: 1. Preparation of Performance Plans: Performance plans are usually prepared at the beginning of annual review period, or when an employee first starts their new job. Preparing for the initial planning meeting should be undertaken by both the supervisor and the employee. Both supervisor and employee should be reviewing the goals, objectives and needs of the work unit and looking at the current job description. The supervisor should list the things in the job that they intend to measure, and the standards you will measure to. The employee could write down the ways they think each of their tasks could be measured and how well each should be performed. 2. Identification of Key Success Factors: Performance objectives and results to be achieved should be focused on results and set in order of priority. Measures should be specific to each task, with clear standards which include dates and times when appropriate. LOVELY PROFESSIONAL UNIVERSITY 35 Performance Management System Notes 3. Setting Departmental and Individual Objectives: After setting the organisational goals and objectives the departmental goals and objectives are defined. The departmental objectives are further categorised into individual goals. The individual goals include the key duties and responsibilities to achieve the final goals of the organisation. 4. Providing Regular Feedback: The next step in the process is providing regular feedback. The supervisor should be maintaining a log of performance facts, which will ensure that important issues are given the attention that is required and will help the formal review proceed in a more focused and potentially more positive way. The employee should also maintain a record of accomplishments and special achievements, or issues that need to be resolved. Discussion of these things during scheduled or spontaneous feedback sessions will allow resolution of problems in a timely manner. 5. Performance Review: Reviewing performance gives the supervisor and the employee the opportunity to look at results that have been achieved in relation to the original plan and standards of performance that were established. At this meeting, you should review all performance records and assess each task, discussing whether they met the standards of performance or not, and whether they exceed those standards. Review any outside factors that may have had an effect on performance. At this time, the supervisor should be identifying any areas where improvement may be necessary or performance could be enhanced. The employee should also have the opportunity to discuss areas where they could have used more help. 6. Action Planning: Another important aspect to completing this cycle is action planning. This is where the supervisor and employee would plan for any training that needs to occur, and could also be where you discuss career planning. Task Make a discussion performance planning in Eicher Motors Ltd. 3.6 Barriers to Performance Planning The barriers to performance planning can be categorised as follows: 1. Organisational Barriers: Most of the traditional organisations are not in the favour of performance planning. According to these organisations spending time on performance planning is just the wastage of time. These organisations believe that they have strong implementation strategy. Example: Indian companies tend to spend 30% time on planning and remaining 70% on implementation whereas MNCs usually spend 70% time on performance planning and the remaining 30% time on strategy implementation. 2. Individual Barriers: Lack of commitment in organisation’s employees or management is another important barrier to performance planning. Sometimes managers or employees or both show less commitment towards the achievement of organisational goals. The reasons could be personal, organisational, competitive or any other HR factor. Example: Organisational politics, workplace bullying or high conflict causes employees to show less interest towards their job responsibilities. 36 LOVELY PROFESSIONAL UNIVERSITY Performance Management System Notes Coaches work with performance plans or work plans to keep their employees motivated. Key performance area includes the identification of priority area to an employee and subsequent working on the specified area. The term key results area may be defined as general area of outcomes for which a role is responsible. The process of performance planning should identify clearly what is expected of the employee, which in turn provides the opportunity to recognize good performance and identify areas that need corrective action or added training. 3.8 Keywords Goal: The purpose toward which an endeavor is directed. Mission: It defines what an organization is, why it exists, and its reason for being. Objectives: Something that one’s efforts or actions are intended to attain or accomplish. Performance: It is behavior and should be distinguished from the outcomes because they can be contaminated by systems factors. Vision: A statement giving a broad, inspirational image of the future that an organization is aiming to achieve. 3.9 Self Assessment Fill in the blanks: 1. The performances aspect of the plan obtained agreement on what has to be done to achieve objectives, raise............................... and improve performance. 2. Performance planning is a............................... which starts with understanding of organisational objectives and ends with setting of performance criteria. 3. Performance planning is an integral part of................................ 4................................ includes the identification of priority area to an employee and subsequent working on the specified area. 5. The term key results area may be defined as............................... of outcomes for which a role is responsible. 6. Key results area areas capture about............................... 80 of a work role. 7. An organization’s ultimate goals determine its................................ 8. Performance objectives and results to be achieved should be focused on results and set in order of................................ 9. Indian companies tend to spend 30% time on............................... and remaining 70% on implementation. State whether the following statements are true or false: 10. MNCs usually spend 60% time on performance planning and the remaining 40% time on strategy implementation. 11. Key results area areas capture about 90 percent of a work role. 38 LOVELY PROFESSIONAL UNIVERSITY  Unit 4: Competency Mapping Group Exercises Notes For potential assessment, the following group exercises are conducted: 1. Assigned Role Exercises: Used to assess negotiating skills, decision making skills, and risk taking skills; 2. Unassigned Role Exercises: Used to assess ability to handle uncertainty, change orientation, ethical behavior and global orientation; and 3. Team Exercises: Used to assess ability to work in a team and solve problems efficiently. Individual Exercises For potential assessment, the following individual exercises are conducted: 1. In-Basket Exercises: Used to assess ability to plan, organize, decide, manage and delegate; 2. Learning skill Inventory/Psychometric Inventories: Used to assess ability to learn, leverage knowledge and indicate behavioral patterns; and 3. Interpersonal Effectiveness Module: Used to assess interpersonal effectiveness, excommunication skills, patience and interpersonal skills. Inputs for analysis of an individual’s potential and behavioral patterns are also collected through multilateral feedback (self, peer, subordinate, customer and superior assessment), behavioral event interviews, career aspiration interview, career history, etc. In order to minimize assessors’ bias and ensure objectivity and uniformity multiple trained assessors for each competencies assessment are used. The competencies gaps can be found out by comparing the desired competency (proficiency) levels and displayed competency levels as indicated in the Figure 4.1. Based on the above exercises, feedback details for individuals on their strengths and developmental areas are prepared. ! Caution Positive gaps between desired and displayed competencies indicate areas of improvement; negative gaps indicate strengths. Each gap area needs to be analyzed and prioritized into major and minor gaps. These gaps are to be addressed at the individual, departmental and organizational levels by agreeing on milestones for each individual in terms of projects, job rotations, transfer, training and job enrichment. Setting up a Development Monitoring Cell in HR would help in creating a project plan with deadlines and escalation possibilities with a feedback system for feedback from bosses and individuals. Average assessment results are used to identify strengths and gaps in an organization’s capabilities. LOVELY PROFESSIONAL UNIVERSITY 43 Performance Management System Notes Figure 4.1: Competency Gap Levels 5 4.5 4 Desired 3.5 Competency 3 Level 2.5 Displayed Competency 2 Level 1.5 1 0.5 0 C1 C2 C3 C4 C5 C6 C7 C8 Competencies 4.4 Methods of Competency Mapping It is not easy to identify all the competencies required to fulfill the job requirement. However, a number of methods and approaches have been developed and successfully tried out in organization. These methods have helped managers to a large extent, to identify and reinforce and/or develop these competencies both for the growth of the individual and the growth of our organization. 1. 360-degree multi-rating: It is a type of performance appraisal for assessing the employees more objectively. This appraisal method takes care of many thins like what kind of behavior a person has with superiors, subordinates, peers etc. 2. Organizational surveys: In the organizational survey the questionnaire are filled by the employee, who rates himself. Questionnaires are written list of questions that users fill out questionnaires and return. The techniques are used at various stages of development, depending on the questions that are asked in the questionnaires. 3. Assessment centre: Assessment center is a mechanism to identify the potential for growth. It is a procedure (not location) that uses a variety of techniques to evaluate employees for manpower purpose and decisions. An essential feature of the assessment centre as used by our organization is the use of situational test to observe specific job behavior. Since it is with reference to a job, elements related to the job are simulated through a variety of tests. The assessors observe the behavior and make independent evaluation of what they have observed, which results in identifying strengths and weaknesses of the attributes being studied. 4. Expert’s rating of job analysis: Job analysis tools help companies extract knowledge of core competency required from internal experts and allow the company to have any number of expert raters contribute rating on standard competency scale for any job title or position. The accumulated ratings are transformed into a composite template defining the ideal competency set for that position. Employee or job applicants then complete a self-report version and there are mapped against the template. Skills or competency gaps are thus identified and informed to the training decisions. 44 LOVELY PROFESSIONAL UNIVERSITY Performance Management System Notes 4.5 Summary Competency Mapping begins with identifying key competencies for an organization and/ or a job and incorporating those competencies throughout the various processes (i.e. job evaluation, training, recruitment) of the organization. A link between people and competencies is established through an effective system of measuring the proficiency of an individual on the desired competencies for the role. Competencies are a broader term referring to an individual’s demonstrated knowledge, skills, behaviors, experience, life view and values and constitute observable, behavioral acts that require a combination of all these attributes to execute. Competency mapping serve as behavior-based standards of performance against which people and organizations can be measured over time. 4.6 Keywords Assessment centre: Assessment center is a mechanism to identify the potential for growth. It is a procedure (not location) that uses a variety of techniques to evaluate employees for manpower purpose and decisions. Behavioral Indicators: Behavioral indicators describe the behaviors, thought patterns, abilities and traits that contribute to superior performance. Competency: Skills and abilities, described in behavioral terms that are coach able, observable, measurable and critical to successful individual or organization’s performance. 4.7 Self Assessment Fill in the blanks: 1. The competencies of the respective job description also become factors for assessment on................................ 2. Exceptional competencies of high performers are set as............................... for evaluating competency levels of employees. 3. The............................... is a powerful tool in the hands of the management for selection and development. 4................................ between desired and displayed competencies indicate areas of improvement. State whether the following statements are true or false: 5. Assessment center is a mechanism to identify the potential for growth. 6. The competencies gaps can be found out by comparing the desired competency (proficiency) levels and displayed competency levels. 7. Average assessment results are used to identify strengths and gaps in an organization’s capabilities. 8. On-the-job performance of the individual is evaluated on the basis of a performance planning. 9. The competency framework includes technical competencies, behavioral competencies and the proficiency levels required for each competency. 52 LOVELY PROFESSIONAL UNIVERSITY Pretty Bhalla, Lovely Professional University Unit 5: Performance Appraisal Unit 5: Performance Appraisal Notes CONTENTS Objectives Introduction 5.1 Meaning of Performance Appraisal 5.2 Process of Performance Appraisal 5.3 Approaches of Performance Appraisal 5.4 Summary 5.5 Keywords 5.6 Self Assessment 5.7 Review Questions 5.8 Further Readings Objectives After studying this unit, you will be able to: Describe the process of performance appraisal Explain the approaches of performance appraisal Introduction Many people believe that appraisal systems have created more problems than they have solved; and question their very need in organizations. Experience has shown that appraisal is not a play-safe gimmick. If these are not handled properly, appraisals can do a lot of damage to an organization in the areas of employee morale, climate of trust and consequences for employee relations. 5.1 Meaning of Performance Appraisal Performance appraisal is a systematic evaluation of present potential capabilities of personnel and employees by their superiors, superior’s or a professional form outside. It is a process of estimating or judging the value, excellent qualities or status of a person or thing. It is a process of collecting, analyzing, and evaluating data relative to job behavior and results of individuals. The appraisal system is organized on the principle of goals and management by objectives. Management decisions on performance utilize several integrated inputs: goals and plans, job evaluation, performance evaluation, and individual history. It connotes a two-dimensional concept-at one end of the continuum lies the goals set by the authority, and at the other end, the performance achieved by the individual or any given group. Performance appraisal can be either formal or informal. Formal appraisals are usage of former systems schedule regular sessions in which to discuss an employee’s performance. Informal appraisals are unplanned, often just chance statements made in passing about an employee’s performance. Most organizations use a formal appraisal system. Some organizations use more then one appraisal system for different types of employees or for different appraisal purposes. Organizations need to measure employee performance to determine whether acceptable LOVELY PROFESSIONAL UNIVERSITY 55  Unit 5: Performance Appraisal 5.3 Approaches of Performance Appraisal Notes George Odiorne has identified four basic approaches to performance appraisal. 1. Personality-based systems: In such systems the appraisal form consists of a list of personality traits that presumably are significant in the jobs of the individuals being appraised. Such traits as initiative, drive, intelligence, ingenuity, creativity, loyalty and trustworthiness appear on most such lists. 2. Generalized descriptive systems: Similar to personality-based systems, they differ in the type of descriptive term used. Often they include qualities or actions of presumably good managers: “organizes, plans, controls, motivates others, delegates, communicates, makes things happen,” and so on. Such a system, like the personality-based system, might be useful if meticulous care were taken to define the meaning of each term in respect to actual results. 3. Behavioral descriptive systems: Such systems feature detailed job analysis and job descriptions, including specific statements of the actual behavior required from successfully employees. 4. Result-centered systems: These appraisal systems (sometime called work-centered or job-centered systems) are directly job related. They require that manager and subordinate sit down at the start of each work evaluation period and determine the work to be done in all areas of responsibility and functions, and the specific standards of performance to be used in each area. When introducing performance appraisal a job description in the form of a questionnaire has to be preferred. A typical questionnaire addressed to an individual would cover the following points: 1. What is your job title? 2. To whom are you responsible? 3. Who is responsible to you? 4. What is the main purpose what are your main areas of responsibility? 5. What is the size of your job in such terms of output or sales targets, number of items processed, number of people managed, number of customers? What targets or standards of performance have been assigned for your job? Are there any other ways in which it would be possible to measure the effectiveness with which you carry out your job? 6. Is there any other information you can provide about your job? TCS Asks 1,300 Employees to Leave A round 1,300 employees of Tata Consultancy Services will resign from the company following a routine bi-annual performance appraisal. The employees being asked to leave will constitute around one per cent of the total staff, numbering over 1,30,000, said a spokesperson for the company. Their leaving the company is not part of any cost-cutting exercise designed to cope with the economic slowdown, she said. TCS’ bi-annual performance appraisal throws up under- performers who are given special training; but if they are not up to the mark in the next appraisal, they are asked to leave. Contd... LOVELY PROFESSIONAL UNIVERSITY 57 Pretty Bhalla, Lovely Professional University Unit 6: Methods of Performance Appraisal Unit 6: Methods of Performance Appraisal Notes CONTENTS Objectives Introduction 6.1 Traditional Performance Rating 6.2 Newer Rating Methods 6.3 Results-oriented Appraisal 6.4 360-degree Feedback or 360-degree Appraisal 6.5 Balance Scorecard 6.6 Assessment Centre 6.7 Common Rating Errors 6.8 Summary 6.9 Keywords 6.10 Self Assessment 6.11 Review Questions 6.12 Further Readings Objectives After studying this unit, you will be able to: Explain the methods of performance appraisal Identify the common rating errors Introduction Structure and Sayles have classified performance appraisal into three groups: traditional performance rating, newer-rating method and result-oriented appraisal. A brief description of each is as follows: 6.1 Traditional Performance Rating Traditional rating involves a completion of a form by the immediate supervisor of the individual who is being evaluated. In some cases, attempts are made to accomplish the rating by a committee consisting of the immediate supervisor, the supervisor’s superior and one or two more officers of the company who are familiar with the rates. Although ratings by the committee bring several viewpoints together and overcome the superior’s bias, if any, they are highly time-consuming. The conventional rating scale form incorporates several factors, such as, job knowledge, judgment, organizing ability, dependability, creativity, dealing with people, delegation, and leadership. The rating is assigned by putting a tick mark horizontally. Frequently, descriptive phrases are given in the form to guide the rater while evaluating the rates. This method is very simple to understand and easy to apply. On the basis of ratings on specific factors, it is possible to identify areas in which the individual requires further development. The ratings on specific factors can be summated to obtain a composite performance score. LOVELY PROFESSIONAL UNIVERSITY 61 Performance Management System Notes The merit-rating scales are frequently criticized form the standpoints of clarity in standards, differing perceptions, excessive leniency or strictness, the central tendency, the halo effect, and the impact of an individual’s job. The basic criticism of the traditional performance rating is concerned with its emphasis on personality traits instead of job performance. Such rating is highly subjective in the absence of objective standards. 6.2 Newer Rating Methods Because of several inadequacies in the traditional rating scale, attempts have been made to devise new procedures which are less susceptible to the above weaknesses. Among these included rank order, paired comparison, forced distribution forced choice, critical incident and field review. These methods are discussed below: 1. Rank-order Procedure: It is effective where ten or lesser number of individuals are to be evaluated. According to this procedure, each individual is assigned such ranks as first, second, third and so on. If the evaluation process involves several traits, the ranking is made separately for each trait. Although this method is simple to understand and easy to apply, this technique becomes cumbersome and difficult when a large number of employees are to be evaluated in the organization. 2. Paired-comparison System: Under this, each individual is compared with every other individual. The appraiser is required to put a tick-mark against the name of the individual whom he consider better on the trait in question. The final ranking is determined by the number of times he is judged better than the other. This method becomes complicated when the number of individuals for evaluation is large. 3. Forced Distribution Procedure: It is form of comparative evaluation in which an evaluator rates subordinates according to a specified distribution. Here judgments are made on a relative basis i.e., a person is assessed relative to his performance in the group he works. This procedure can be used for numerous traits if required by evaluating the individuals separately on each trait. The forced distribution method is primarily used to eliminate rating errors such as leniency and central tendency. 4. Forced Choice Technique: It forces to select from a series of several statements or traits, the one which best fits the individual and one which least fits, and each of these statements is assigned a score. Since the appraiser does not know the score value of statements, this method prevents the rater from deliberately checking only the most favorable trait. Moreover, the appraiser is unable to introduce personal bias into the evaluation process because he does not know which of the statements is indicative of effective performance. This enhances the overall objectivity of this procedure. 5. Critical Incident Method: This technique of performance appraisal was developed by Flanagan and Burns. Under this procedure, attempts are made to devise for each job a list of critical job requirements. Superiors are trained to be on the lookout for critical incidents on the part of the subordinates in accomplishing the job requirements. The superiors enlist the incidents as they happen and in the process, tend to build up a record of each subordinate with debit on the minus side and credit on the plus side. The merit of this procedure is that all evaluations are based on objective evidence instead of subjective rating. 6. Field Review: It is an appraisal by someone outside the employee’s own department, usually someone form the corporate office or form the employee’s own human resources department. The field review process involves review of employee records, an interview with the employee, and sometimes with the employee’s superior. Field review as an appraisal method is used primary in making promotion decisions at the managerial level. Field reviews are also useful when comparable information is needed from employees in the different units or locations. 62 LOVELY PROFESSIONAL UNIVERSITY  Unit 6: Methods of Performance Appraisal 6.3 Results-oriented Appraisal Notes The results-oriented appraisals are based on the concrete performance targets which are usually established by superior and subordinates jointly. This procedure has been known as Management by Objectives (MBO). ? Did u know? What is MBO? The definition of MBO, as expressed by its foremost proponent, Dr. George S. Odiorne, is: “Management by objectives is a process whereby the superior and subordinate managers of an organization jointly identify its common goals, define each individual’s major areas of responsibility in terms of the results expected of him, and use these measures as guides for operating the unit and assessing the contribution of each of its members.” MBO is, thus, a method of mutual goal-setting, measuring progress towards the goals, taking action to assure goal attainment, feedback, and participation. It is a result-oriented philosophy, enabling an employee to measure progress toward a goal which the employee often has helped to set In the goals-setting phase of MBO, a superior and subordinate discuss job performance problems and a goal is agreed upon. Along with mutual goal-setting, a major component of MBO is the performance review session between the superior and subordinate, which takes place regularly to evaluate progress towards specified goals. The key features of management by objectives are as under: 1. Superior and subordinate get together and jointly agree the list the principal duties and areas of responsibility of the individual’s job. 2. The subordinate sets his own short-term performance goals or targets in cooperate with his superior. 3. They agree upon criteria for measuring and evaluating performance. 4. From time to time, as decided upon, the superior and subordinate get together to evaluate progress towards the agreed-upon goals. At those meetings, new or modified goals are set for the ensuing period. 5. The superior plays a supportive role. He tries, on a day-to-day basis, to help the subordinate achieve the agreed upon goals, he counsels and coaches. 6. In the appraisal process, the superior plays less of the role of a judge and more of the role of one who helps the subordinate attain the organization goals or targets. 7. The process focuses upon results accomplished and not upon personal traits. Note Steps in MBO There are four main steps in MBO: 1. Define the job: Review, with the subordinates, his or her key responsibilities and duties. 2. Define expected results (set objectives): Here specify in measurable terms what the person is expected to achieve. 3. Measure the results: compare actual goals achieved with expected results. 4. Provide feedback, appraise: Hold periodic performance review meetings with subordinates to discuss and evaluate the latter’s progress in achieving expected results. LOVELY PROFESSIONAL UNIVERSITY 63  Unit 6: Methods of Performance Appraisal which is known as 360-degree appraisal – a performance management in which people receive Notes performance feedback from those on all sides of them in the organization. ? Did u know? 360-degree feedback is also known as ‘multi-rater feedback’, as it is the most comprehensive appraisal where the feedback about the employees’ performance comes from all the sources that 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 and can provide valuable insights and information or feedback regarding the “on-the-job” performance of the employee. 360-degree appraisal has four integral components: 1. Self appraisal 2. Superior’s appraisal 3. Subordinate’s appraisal 4. Peer appraisal. Self appraisal gives a chance to the employee to look at his/her strengths and weaknesses, his achievements, and judge his own performance. Superior’s appraisal forms the traditional part of the 360-degree performance appraisal where the employees’ responsibilities and actual performance is rated by the superior. Subordinates appraisal gives a chance to judge the employee on the parameters like communication and motivating abilities, superior’s ability to delegate the work, leadership qualities etc. Also known as internal customers, the correct feedback given by peers can help to find employees’ abilities to work in a team, co-operation and sensitivity towards others. Self assessment is an indispensable part of 360-degree appraisals and therefore 360-degree Performance appraisal have high employee involvement and also have the strongest impact on behavior and performance. It provides a “360-degree review” of the employees’ performance and is considered to be one of the most credible performance appraisal methods. 360-degree performance appraisal is also a powerful developmental tool because when conducted at regular intervals (say yearly) it helps to keep a track of the changes others’ perceptions about the employees. A 360-degree appraisal is generally found more suitable for the managers as it helps to assess their leadership and managing styles. This technique is being effectively used across the globe for performance appraisals. Some of the Indian organizations following it are Wipro, Infosys, and Reliance Industries etc. Many American companies are now using this 360-degree feedback. Companies that practice 360-degree appraisals include Motorola, Semco Brazil, British Petroleum, British Airways, Central Televisions, and so on. Barring a few multinational companies, in India this system of appraisal is uncommon. This form of performance evaluation can be very beneficial to managers because it typically gives them a much wider range of performance-related feedback than a traditional evaluation. That is, rather than focusing narrowly on objective performance, such as sales increase or productivity gains, 360-degree often focuses on such things as interpersonal relations and style. Of course, to benefit from 360-degree feedback, a manager must have thick skin. The manager is likely to hear some personal comments on sensitive topics, which may be threatening. Thus, a 360-degree feedback system must be carefully managed so that its focus remains on constructive rather than destructive criticism. LOVELY PROFESSIONAL UNIVERSITY 65  Unit 6: Methods of Performance Appraisal 5. 360-degree feedback provides increased the understanding of competence and Notes competency in various roles. 6. 360-degree feedback extends better morale to those who perform and contribute well to the organization. 7. 360-degree feedback reduces training costs by identifying common development needs. 8. 360-degree feedback increases the team’s ability to contribute to the organizations goals. 9. 360-degree feedback helps everyone to work for a common standard and institutionalize performance management. 10. 360-degree feedback ensure better interpersonal relationship and group cohesiveness. 11. It promotes self-directed learning and provides a road map for employee’s development planning. 12. It promotes better communication within departments. 13. 360-degree feedback Increases the team’s ability to contribute to the organizations goals develop better bottom line through boosting the capability of the organization to meet its objectives. Pitfalls of 360-degree Feedback 1. A detailed plan of action, which ensure the transparent and clear implementation of appraisal with employee accountability. 2. Effective follow-up is the prime requirement of 360-degree feedback. Failure in follow-up may cause more harm than good. 3. The 360-degree feedback is time consuming and cost consuming assessment process. Without having adequate resource to implement the process, it will end up nowhere and develop financial burden to organisation. 4. The trust and confidence on the employees who undergo this feedback assessment process is a determinant factor in its outcome. Many consider this appraisal as tool for downsizing. 5. The process involves a lot of paper work. 6. There are high chances of subjectivity from the management and employee part in the feed back assessment. 7. Many times the confidentiality of the appraisal cannot ensure from the HR department. 8. Since the assessment is based on qualitative data many times it cannot ensure unambiguous, clear, specific and, observable and quantifiable formats. 6.5 Balance Scorecard The Balance Scorecard (BSC) creates a template of measurement of organizational performance as well as individual performance. It is a measurement based management system, which enables organizations to clarify vision and strategy before initiating action. It is also a monitoring system that integrates strategy into performance measures and targets, thus making it operational and highly effective. It helps cascade corporate level measures to lower level so that the employees can see what they must do well to improve organizational effectiveness and helps focus the entire LOVELY PROFESSIONAL UNIVERSITY 67 Performance Management System Notes The scorecard puts strategy and vision, not control, at the centre. It establishes goals but assumes that people will adopt whatever behaviours and take whatever actions are necessary to arrive at those goals. The measures are designed to pull people toward the overall vision. Senior managers may know what the end result should be, but they cannot tell employees exactly how to achieve that result, because the conditions in which employees operate are constantly changing. This new approach to performance measurement is consistent with the initiatives under way in many organisation: cross-functional integration, customer supplier partnerships, global scale, continuous improvement, and team rather than individual accountability. By combining the financial, customer, internal process and innovation, and organizational learning perspectives, the balanced scorecard helps managers understand, at least implicitly, many interrelationships. This understanding can help managers transcend traditional notions about functional barriers and ultimately lead to improved decision-making, problem-solving and enhanced performance. The balanced scorecard keeps organisations moving forward. 6.6 Assessment Centre An assessment centre is a comprehensive, standardized procedure in which multiple assessment techniques such as situational exercises and job simulation (Business games, discussions, reports and presentations) are used to evaluate individual employees for a variety of decisions. Most frequently the approach has been applied to individuals being considered for selection, promotion, placement or special training and development in management. Promotion A decision to promote is essentially a decision to select from within the organization those most likely to succeed at higher level jobs. Any method used by the organization to take promotion decisions such as performance appraisal data, interviews, etc. should be supplemented by data from the assessment centre. Since, the assessment centre method is used to study the likely performance and behavior of a person in a role not previously performed by him/her; it can be used to supplement promotion decisions. Using additional inputs not only results in a more appropriate decision, it also helps eliminate individual biases and imparts more transparency and fairness to the promotion system. High validity has been reported in use of assessment centre data for promotions to first level supervisory and middle management levels; while no validity studies have been reported for higher levels of management. Tools used in Assessment Centres As mentioned above, the main characteristics of assessment centres are multiple methods of assessment using multiple assessors. The main assessment tools that are used are: Psychometric Tests In general three types of tests or questionnaires can be used in assessment centres: aptitude tests, ability tests and personality tests. Aptitude tests are those which attempt to evaluate verbal and numerical reasoning ability. Ability tests attempt to measure awareness. Knowledge and other such aspects. They also measure simple skills like problem solving ability, etc. For e.g., a chapter pencil test could be administered to find out the familiarity or level of skill of the individual in relation to computer literacy, financial management skills, etc. Personality tests are those tests which are aimed at studying various dimensions of personality rather than the ability. MBTI and 16 PF are tests used in many organizations. While ability and aptitude tests have right or wrong answers, personality tests do not have the same. 70 LOVELY PROFESSIONAL UNIVERSITY  Unit 6: Methods of Performance Appraisal The tests are selected for assessment taking the following points into consideration: Notes 1. Objective—what needs to be measured; 2. Reliability and validity; 3. Length of time required to administer the test; 4. Availability of qualified experts to administer, scope and interpret the tests; 5. Cost involved. Task Which appraisal method is more suited for appraising the following categories of employees? 1. IT professionals 2. HR professionals 3. Research professionals Give suitable example for choosing any particular method. 6.7 Common Rating Errors Differences in perception and value systems influence evaluations. For instance, two raters observe an employee disagreeing with a supervisor. One perceives this as insubordination, but the other sees it as a willingness to stand up to for what he believes in. Individual rather bias can seriously compromise the credibility of an appraisal. Some of the common syndromes are: 1. Halo Effect: This is a tendency let the assessment of a single trait influence the evaluation of the individual on other traits too. 2. Horns Effect: This is a tendency to allow one negative trait of the employee to color the entire appraisal. This results in an overall lower rating than may be warranted. 3. Leniency or Constant Error: Depending upon the appraiser’s own value system which acts as standard, employees may be rated leniently or strictly. Such a rating does not carry any reference to actual performance of the employees. Some appraisers consistently assign high values to all employees, regardless of merit. This is a leniency error. The strictness tendency is a reverse situation, where all individuals are rated too severely and performance is understated. 4. Central Tendency: This is the most common error that occurs when a rather assigns most middle range scores or values to all individuals under appraisal. Extremely high or extremely low evaluations are avoided by assigning ‘average ratings’ to all. 5. Spill-over Effect: This refers to allowing past performance to influence the evaluation of present performance. 6. Personal Bias: Perhaps the most important error of all arises from the fact that, very few people are capable of objective judgments entirely independent of their values and prejudices. The above errors have evoked concerns about performance appraisal. McGregor (1960), with his concern for the human side of enterprise, appraisal represented a judgment and demotivating process. Similar concerns were voiced by Deming (1982) who suggested that appraisal was ‘a deadly disease which blamed individuals for problems systematic to organizations. Margerison LOVELY PROFESSIONAL UNIVERSITY 71  Unit 6: Methods of Performance Appraisal The quality of an appraiser is much more crucial than the appraisal methods. It is desirable Notes to make the immediate superior a party to the appraisal program. Performance is a thing of the past, while potential includes the possible knowledge, skills and attitudes the employee may possess for better performance. 6.9 Keywords 360-degree Feedback or Appraisal: It is the most comprehensive appraisal where the feedback about the employees’ performance comes from all the sources that come in contact with the employee on his job. The Balance Scorecard: It creates a template of measurement of organizational performance as well as individual performance and enables organizations to clarify vision and strategy before initiating action. Traditional Rating: It involves a completion of a form by the immediate supervisor of the individual who is being evaluated. 6.10 Self Assessment Fill in the blanks: 1. In …………………. method of appraisal, the immediate superior to the employees, fill up a performance review forms. 2. In ………………. method, the employees are assessed relatively to the other employees working in his group. 3. Internal customers are also known as ……………… whose feedback on employee performance is instrumental in improving team spirit. 4. An employee’s current evaluation is largely influenced by his previous performances. This type of error is known as …………………. 5. Performance appraisal is present oriented, whereas ……………. appraisal is future oriented. State whether the following statements are true or false: 6. Performance appraisal can be either formal or informal. 7. MBO may be viewed as a system of management rather than an appraisal method. 8. A 360-degree appraisal is generally found less suitable for the managers. 9. Traditional rating involves a completion of a form by the immediate supervisor of the individual who is being evaluated. 10. The 360-degree feedback is time consuming and cost consuming assessment process. 6.11 Review Questions 1. Contrast traditional rating method and new rating method of appraisal. 2. “MBO is a tool that is inextricably connected with team building so that the work commitment of team members can be increased and their desire to excel in performance can be inspired.” Discuss. 3. How 360 degree feedback system add values? LOVELY PROFESSIONAL UNIVERSITY 73 Amit Kumar Sharma, Lovely Professional University Unit 7: Performance Monitoring Unit 7: Performance Monitoring Notes CONTENTS Objectives Introduction 7.1 Performance Monitoring: Concept and Characteristics 7.2 Objectives of Performance Monitoring 7.3 Importance of Performance Monitoring 7.4 Process of Performance Monitoring 7.5 Summary 7.6 Keywords 7.7 Self Assessment 7.8 Review Questions 7.9 Further Readings Objectives After studying this unit, you will be able to: Explain the characteristics and objectives of performance monitoring State the importance and process of performance monitoring Introduction Perhaps one of the most important concepts of performance management, and it bears frequent repetition, is that it is a continuous process of managing and developing performance standards which reflects normal good practices of direction setting, monitoring and measuring performance, providing feedback and taking action accordingly. Performance management should not be imposed on managers as something ‘special’ that they have to do. Neither should it be imposed on individuals and teams as something ‘special ‘that that is done to them. Performance management does no more than provide a framework within which managers, individuals and teams work together to gain a better understanding of what is to be done, how it is to be done, what has been achieved, and what has to be done to do even better in the future. ! Caution Monitoring managee performance is an essential part of supervisory leadership, and naturally follows planning managee performance. This is a phase in which the cycle of PfM: Planning Monitoring Stocking occurs several times. 7.1 Performance Monitoring: Concept and Characteristics Performance monitoring may be defined as the process of appraising an environment of continuous learning and development, maintaining the employee’s performance, enhancing individual competencies to make them more productive for the organisation. Successful business management requires the ongoing monitoring of performance in order to generate data by which LOVELY PROFESSIONAL UNIVERSITY 75 Performance Management System Notes The manager and the managee, thereafter, discuss corrective measures needed, actions to be taken by either or both of them and other help or support needed to accomplish the requisite tasks and goals. Task Discuss the performance monitoring system in ICICI bank. 7.5 Summary Performance monitoring provides scope for modification, change and/or alteration of the existing performance management system. Performance monitoring may be defined as the process of appraising an environment of continuous learning and development, maintaining the employee’s performance, enhancing individual competencies to make them more productive for the organisation. Successful business management requires the ongoing monitoring of performance in order