Performance Management System PDF

#  %       $ Edited by: Dr. Pretty Bhalla PERFORMANCE MANAGEMENT SYSTEM Edited By Dr. Pretty Bhalla  Printed by EXCEL BOOKS PRIVATE LIMITED A-45, Naraina, Phase-I, New Delhi-110028...

#  %       $ Edited by: Dr. Pretty Bhalla PERFORMANCE MANAGEMENT SYSTEM Edited By Dr. Pretty Bhalla  Printed by EXCEL BOOKS PRIVATE LIMITED A-45, Naraina, Phase-I, New Delhi-110028 for Lovely Professional University Phagwara  SYLLABUS Performance Management System Objectives: The objective of this course is to equip students with comprehensive knowledge and practical skills to improve their ability for performance appraisal in their organizations. It is particularly intended for future managers who will develop suitable strategies & policies for performance management and conduct the performance appraisal of their subordinates. S.No. Description 1. Introduction to Performance management: Characteristics, Objectives and Principles of Performance Management, Performance Appraisal to Performance Management, Challenges to Performance Management. 2. Performance Management System: Objectives, Functions, Characteristics of effective PMS, Competency based PMS, Electronic Performance Management. 3. Performance Planning: Characteristics, Objectives, Importance & Methodologies, Process & Barriers to Performance Planning, Competency Mapping, Methods of Competency Mapping. 4. Performance Appraisal: Process, Approaches, Methods & Common Rating Errors 5. Performance Monitoring: Characteristics, Objectives, Importance and Process of Performance Monitoring. Ongoing Mentoring and Protege Development. 6. Performance Counselling: Principles of Performance Counselling, Performance Counselling Skills & Performance Counselling for higher job performance. 7. Performance Management Implementation: Bottlenecks, Strategies & Factors affecting PM implementation, Operationalizing Change through Performance Management, Building & Leading high performance team, Organizational Culture and Performance Management. 8. Performance Management linked Reward System: Components, its linkage and implications. 9. Ethics in Performance Management: Principles, Ethical Issues & Dilemmas, Developing Code of Ethics, Performance Management in MNCs. 10. Role of HR Professionals in Performance Management System: Appraising HR function, Future role of HR Professionals in Performance Management in Knowledge Millennium.  CONTENT Unit 1: Introduction to Performance Management 1 Pretty Bhalla, Lovely Professional University Unit 2: Performance Management System 13 Pretty Bhalla, Lovely Professional University Unit 3: Performance Planning 30 Pretty Bhalla, Lovely Professional University Unit 4: Competency Mapping 41 Pretty Bhalla, Lovely Professional University Unit 5: Performance Appraisal 55 Pretty Bhalla, Lovely Professional University Unit 6: Methods of Performance Appraisal 61 Pretty Bhalla, Lovely Professional University Unit 7: Performance Monitoring 75 Amit Kumar Sharma, Lovely Professional University Unit 8: Mentoring and Coaching 81 Amit Kumar Sharma, Lovely Professional University Unit 9: Performance Counselling 94 Amit Kumar Sharma, Lovely Professional University Unit 10: Performance Management Implementation 109 Pretty Bhalla, Lovely Professional University Unit 11: Organisational Change through Performance Management 117 Pretty Bhalla, Lovely Professional University Unit 12: Performance Management Linked Reward System 134 Pretty Bhalla, Lovely Professional University Unit 13: Ethics in Performance Management 152 Amit Kumar Sharma, Lovely Professional University Unit 14: Role of HR Professional in Performance Management 162 Pretty Bhalla, Lovely Professional University Pretty Bhalla, Lovely Professional University Unit 1: Introduction to Performance Management Unit 1: Introduction to Performance Management Notes CONTENTS Objectives Introduction 1.1 Concept of Performance 1.2 Concept of Performance Management 1.3 Characteristics of Performance Management 1.4 Objectives of Performance Management 1.5 Principles of Performance Management 1.6 Performance Appraisal to Performance Management 1.7 Challenges to Performance Management 1.8 Summary 1.9 Keywords 1.10 Self Assessment 1.11 Review Questions 1.12 Further Readings Objectives After studying this unit, you will be able to: Explain the meaning and characteristics of performance management State the objectives and principles of performance management Discuss performance appraisal to performance management State the challenges to performance management Introduction The power of organization is increasingly linked to its intellectual capital rather than its physical assets. People are now the drivers of corporate performance and competitiveness. Therefore, performance management deals with improving organizational performance by improving employee performance. Essentially, the cost of competitiveness involves efficiency and productivity. Dr Mritunjay Arthreya (2004) observed that workforce productivity constitutes around 60 percent of the total cost. Therefore, the growing significance of performance management needs no further emphasis. 1.1 Concept of Performance Organizations have to compete for survival. It is survival of the fittest in the true sense of the term. Performance is the only way to do that. An ordinary performance will not do. Even better performance may not be adequate. It has to be necessarily the best in order to compete and thrive. LOVELY PROFESSIONAL UNIVERSITY 1 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  Unit 1: Introduction to Performance Management employees’ comprehension of their company’s vision and strategy, business system design Notes and profit model, competitive logic and core value proposition. More importantly, it implies employees’ clarity of understanding regarding their company’s processes and mechanisms for the creation, capture, and delivery of value; and the nature and rationale of their own individual and collective efforts toward realizing their company’s vision and strategy. The employees’ awareness and understanding of their company’s business context also orients them towards a better appreciation of the present and potential challenges facing their company; and the requirements of knowledge, skills, and capabilities for coping with them. The second pillar, i.e., the ability to be effective, in the context of human capital, implies employees’ abiding dedication to work excellence in their broadly defined and non-rigid work roles. More importantly, it implies employees’ sustained orientation towards learning, upgradation of skills, cultivation of new and needed capabilities, expertise, creative thinking and use of knowledge; for both problem-solving and innovation; streamlining of process, procedures, and routines for eliminating non-value-adding activities; and experimentation and initiatives in search of opportunities. This is so, for the concept of performance excellence, or effectiveness, is neither static nor fixed. The second pillar is meaningfully shaped by the first (i.e., ‘understanding the business context’) in terms of the adaptability of human capital to changes in a firm’s business environment. The requirements of learning, knowledge, skills and capabilities of, and by employees, and the life cycles of its organization and industry. The requirements of employees’ effectively performance would be radically different across disparate organizations like high-technology growth firms, firms in mature or declining industries, or firms caught in industrial shake-outs and consolidation. Even for the same firm, requirements would differ from time-to-time depending upon changes in its competitive situation. The focus of human capital along the second axis of performance is on proactive learning, development, and used of knowledge for customer-valued work excellence. The third pillar i.e., ‘motivation to excel’ implies an organization-wide shared ethos of a high degree of commitment to enterprise goals, and a high level of cooperation among employees toward working together to achieve those goals, These, in turn imply a high level of trust and goodwill among employees in pursuit of shared objectives. Both commitment and cooperation are vital for individuals with complementary and specialized knowledge and skills to collaborate creatively for solving difficult problems, developing new products and/or services, achieving performance breakthroughs, creating new competencies, and generating value through relentless improvement an innovation. Employees in an enterprise, both individually and collectively, must score high on each of the three axes, and consistently across all the three axes and in an expanding manner over time; in order to constitute the firm’s human capital. The ability to meet the foregoing requirements of performance in a continuing manner, raises a basic question. What type of person would be capable of scaling the heights of performance, and sustaining the same in a steady-state fashion over time? Performance excellence and effectiveness in organizations, apart from an individual’s ability and motivation, depend primarily on the individual’s ability to effectively collaborate with others. Collaboration is a purposive relationship based on trust, mutual regard, and sharing of ideas, information, knowledge, resources and responsibilities. It involves working together to learn, solve problems, innovate, meet tight time schedules, cope with obstacles, deal with unforeseen difficulties, and strive to achieve and exceed organizational goals every day. The nature and range of collaborative activities may vary, the collaborating persons, or team members, may be different from time to time, and job rotation assignments may engender new forms and modes of interpersonal and group interactions across organization levels, space and time. But the imperatives of doing one’s best in cooperation with others, helping others when needed, and pursuing stretch goals of the enterprise, remain unchanged. LOVELY PROFESSIONAL UNIVERSITY 3 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 judged apart from the results. In the organizational content, performance means successful Notes formulation and implementation of a value creating strategy which either generates or sustains its competitiveness. Note Key Ingredients of Successful Performance Management Committed leadership Transparent performance information Build competency based development plans Effective multi-source feedback mechanisms to discuss and address performance issue Strong links between performance measures and Useful performance measures program results Adapted from: J. M. Kamensky (2006) Hence, performance management helps organizations in management consistent performance in a manner which holds employees and managers accountable for supporting its objectives and strategy, successfully fulfilling assigned job responsibilities, and accomplishing individual performance goals, this would require the following pre-requisites: 1. Business processes are as simple as possible 2. Lines of leadership and management are clear 3. Employees are empowered, which is an important driver of innovation 4. A distinct organizational culture 5. Workplace interactions are based on honesty, integrity, and trust 6. Openness to change 1.3 Characteristics of Performance Management The following are the key characteristics of performance management: 1. Performance management is an important organizational tool to clarify performance objectives, standards, critical dimensions, and competencies to enhance individual performance. 2. Performance management works best when an employee’s work is planned and goals for achievement are communicated. 3. It emphasizes the development of capability and capacity of employees to perform consistently, coupled with the agility to respond to a changing dynamic business and work environment. 4. Performance management is a ‘systematic’ and ‘holistic’ approach to identify critical dimensions of performance. 5. It helps in integrating performance management process with other critical organizational systems including leadership development, succession planning, and talent management efforts. 6. Performance management is a multidimensional concept and includes imputes, processes, outputs and outcomes. 7. Performance management transforms organizational objectives and strategy into a measurable action plan by getting the right information to and from the right people at the right time and in the right format. LOVELY PROFESSIONAL UNIVERSITY 5 Performance Management System Notes 1.4 Objectives of Performance Management The major objectives of performance management are discussed below: 1. To enable the employees towards achievement of superior standards of work performance. 2. To help the employees in identifying the knowledge and skills required for performing the job efficiently as this would drive their focus towards performing the right task in the right way. 3. Boosting the performance of the employees by encouraging employee empowerment, motivation and implementation of an effective reward mechanism. 4. Promoting a two way system of communication between the supervisors and the employees for clarifying expectations about the roles and accountabilities, communicating the functional and organizational goals, providing a regular and a transparent feedback for improving employee performance and continuous coaching. 5. Identifying the barriers to effective performance and resolving those barriers through constant monitoring, coaching and development interventions. 6. Creating a basis for several administrative decisions strategic planning, succession planning, promotions and performance based payment. 7. Promoting personal growth and advancement in the career of the employees by helping them in acquiring the desired knowledge and skills. 1.5 Principles of Performance Management Some of the major principles of performance management are as follows: 1. Performance management is considered a process, not an event. It follows good management practice in which continual coaching, feedback and communication are integral to success. 2. The Performance Management is primarily a communication tool to ensure mutual understanding of work responsibilities, priorities and performance expectations. 3. Elements for discussion and evaluation should be job specific – not generalized personality traits. The major duties and responsibilities of the specific job should be defined and communicated as the first step in the process. 4. Performance standards for each major duty/responsibility should be defined and communicated. 5. Employee involvement is encouraged in identifying major duties and defining performance standards. 6. Professional development should be an important component of the plan. 7. The formal evaluation period should be long enough to allow for full performance and to establish a history such that evaluations are fair and meaningful. One year is a common evaluation period. 8. Documentation of performance will occur as often as needed to record the continuum of dialogue between supervisor and employee. 9. If formal ratings are included, they should reflect the incumbent’s actual performance in relation to the performance standard for that major duty. 6 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 Traditionally, the performance appraisals were organized in a bureaucratic manner and suffered from unnecessary delays in decisions and corruption. Performance appraisals were mostly narrowly focused and functioned in isolation without bearing any linkage with the overall organizational vision or goals. The side effects of the performance appraisal system was it generated skepticism amongst the managers and the employees on any new initiative of the HR. In the present scenario, the organizations have shifted their focus from performance appraisals to performance management as a result of internationalization of human resources and globalization of business. The functions of HRM have become far more complicated as today the major focus of strategic HRM practices is on the management of talent by implementing such development programmes which enhance the competencies of the employees. The performance management approach focuses more on observed behaviors and concrete results based on the previously established smart objectives. By adopting techniques like Management by Objectives (MBO), smart objectives are established in terms of either facts and figures and in the entire process the superior plays the role of a coach or a facilitator. The objectives are mutually decided at the beginning of the performance season and serve as a standard of performance for evaluation. In this method, the employees can offer a feedback on their contributions by filling up a self appraisal form. Performance management is a much broader term in comparison with performance appraisal as it deals with a gamut of activities which performance appraisals never deal with. This system is a strategic and an integrated approach which aims at building successful organizations by developing high performance teams and individuals and improving the performance of people. This process starts when a job is defined. Performance management emphasizes on front end planning instead of looking backward unlike performance appraisals and the focus is on ongoing dialogue instead of appraisal documents and ratings. Thus, performance management may be regarded as a continuous process. ! Caution The use of performance management in the best-practice companies is not because it is a better technique than performance appraisal, but because it can form one of a number of integrated approaches to the management of performance. 1.7 Challenges to Performance Management Some of the key challenges to performance management are as follows: 1. Concerned with the output (the results achieved), outcomes, processes required for reaching the results and also the inputs (knowledge, skills and attitudes). 2. Concerned with measurement of results and review of progress in the achievement of set targets. 3. Defining business plans in advance for shaping a successful future. 4. Striving for continuous improvement and continuous development by creating a learning culture and an open system. 5. Establishing a culture of trust and mutual understanding that fosters free flow of communication at all levels in matters such as clarification of expectations and sharing of information on the core values of an organization which binds the team together. 6. Procedural fairness and transparency in the process of decision making. Task Make a discussion on key HR challenges faced by Indian corporates. 8 LOVELY PROFESSIONAL UNIVERSITY  Unit 1: Introduction to Performance Management Notes Performance Management in TISCO T ata Iron and Steel Company (TISCO), a flagship company of India involved in manufacturing of cost effective steel can be appreciated for their initiatives in the implementation of an effective performance management framework and innovative HR practices. TISCO initiated a management restructuring programme for transforming into a high performing and a growing organization. In the HR front, the management focused on providing exciting career opportunities and building a team of high performing professionals for which they hired Mckinsey and Co. The consultants firstly started with building a lean and a flat strategic business unit with enriched jobs, increased accountabilities and autonomy. A Performance Ethic Programme (PEP) was also introduced for promoting young and dynamic professionals and this was a replacement of seniority based promotions. A new Performance Management System (PMS) was introduced for aligning the KRA’s with the business strategies and identifying superior performers in the organization by defining clear career paths and accountabilities. The rewards and recognitions were linked with the PMS. The new measures in the direction of performance management boosted the employee’s motivation and performance. The job satisfaction also improved due to the introduction of a fair and transparent reward system. Source: www.managementstudyguide.com 1.8 Summary z Performance management deals with improving organizational performance by improving employee performance. z 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. z Performance management is an important organizational tool to clarify performance objectives, standards, critical dimensions, and competencies to enhance individual performance. z Performance management is a ‘systematic’ and ‘holistic’ approach to identify critical dimensions of performance and to carry out activities necessary to ensure that the mission, objectives, goals, vision, and values of the organization are being met in an effective and efficient manner. z Performance management transforms organizational objectives and strategy into a measurable action plan by getting the right information to and from the right people at the right time and in the right format. z The use of performance management in the best-practice companies is not because it is a better technique than performance appraisal, but because it can form one of a number of integrated approaches to the management of performance. LOVELY PROFESSIONAL UNIVERSITY 9 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  Unit 1: Introduction to Performance Management 3. Discuss the philosophy behind the performance management. Notes 4. What are the pre-requisites of performance management? 5. List the key challenges to performance management. 6. What are the key reasons behind the move from performance appraisal to performance management? 7. Enlist the characteristics of performance management. 8. What are the key objectives and principles of performance management? 9. “Performance management helps in evaluating employees in order to enable them to achieve reasonable goals.” Discuss. 10. Explain the linkage of performance management with other sub-systems. Answers: Self Assessment 1. results 2. multidimensional 3. practical challenges 4. Performance appraisal 5. observed behaviors 6. performance appraisal 7. Management by Objectives 8. continuous process 9. True 10. True 11. False 12. False 13. False 14. True 15. True 1.12 Further Readings Books Aubrey C. Daniels, Bringing out the Best in People, 2nd edition, McGraw-Hill, 1999. BD Singh, Performance Management Systems, Excel Books, New Delhi. Business Performance Management, Magazine, Matt Weiner. Cynthia D Fisher, Human Resource Management, 5th Edition-Biztantra. Dixit Varsha, Performance Management, 1st edition, Vrinda Publications Ltd. Herman Aguinis, Performance Management, Pearson Education, 2007. Kevin R Murphy, Understanding Performance Appraisal: Social, Jeanette Cleveland. Routledge Taylor and Francis Group, Journal of Organizational Behavior Management, Published Quarterly, 2009. Tapomoy Deb, Performance Appraisal and Management, Excel Books, New Delhi. Thomas C. Mawhinney, William K. Redmon and Carl Merle Johnson, Handbook of Organizational Performance, Routledge. 2001. LOVELY PROFESSIONAL UNIVERSITY 11 Performance Management System Notes Online links www.managementhelp.org www.managementstudyguide.org www.scribed.com 12 LOVELY PROFESSIONAL UNIVERSITY Pretty Bhalla, Lovely Professional University Unit 2: Performance Management System Unit 2: Performance Management System Notes CONTENTS Objectives Introduction 2.1 Objectives of Performance System 2.2 Functions of Performance Management System 2.3 Characteristics of Effective PMS 2.4 Competency-based PMS 2.5 Electronic Performance Management 2.6 Summary 2.7 Keywords 2.8 Self Assessment 2.9 Review Questions 2.10 Further Readings Objectives After studying this unit, you will be able to: State the objectives and functions of performance management system Explain the characteristics of effective PMS Define competency-based PMS Discuss electronic performance management system Introduction Performance management system is another way of envisioning the totality of a manager’s function. It views the managerial function holistically – not a random collection of activities that most managers recognize and undertake as their core function. It provides a systemic dimension to the managerial activities – highlighting their mutual interrelatedness and interdependence. It emphasizes the dynamic, sequential and cyclical nature of these activities, essential to actualize their potential synergistic impact, which is the source of high performance and excellence. By implication, it also explains why focusing on only one or a few of these activities doesn’t deliver the results wished-for. Any system needs certain prerequisites to function smoothly. So does PMS. PMS becomes easier to do and more productive to the extent that: 1. It is used holistically, as a system 2. The relevant subsystems are in place and accepted 3. The organization’s philosophy and human environment is conducive to high morale 4. The manager is oriented to, and equipped with, high performing attitudes and leadership skills. LOVELY PROFESSIONAL UNIVERSITY 13 Performance Management System Notes 2.1 Objectives of Performance System Performance management arrived in the late 1980s partly as a reaction to the negative aspects of merit-rating and management by objectives referred to earlier. Of course, it at first incorporated many of the elements of earlier approaches; for example, rating, objective-setting and review, performance pay and a tendency towards trait assessment. Some of these features have changed. Conceptually, however, performance management is significantly different from previous approaches, although in practice the term has often simply replaced performance appraisal, just as human resource management has frequently been substituted for personnel management has frequently been substituted for personnel management without any discernible change in approach lots of distinctions, not many differences. Performance management may often be no more than new wine in old bottles or to mix metaphors, a ‘flavors of the month’. But it exists, and our research demonstrates that interest is growing why? The following are the key objectives of PMS: 1. To leverage the performance of organisation, given that goals are complex 2. To ensure role clarity performance objectives at all the levels of organisation 3. To encourage high performance work culture 4. To encourage team building in the organisation 5. Employee development by systematically identifying training and development needs 6. To improve relationship between manager and employees through a two way communication process 7. To focus on process rather than on format 8. To encourage performance based rewards and recognitions in the organisation ! Caution The use of performance management in the best-practice companies is not because it is a better technique than performance appraisal, but because it can form one of a number of integrated approaches to the management of performance. The appeal of performance management in its fully realized form is that it is holistic: it pervades every aspect of running the business and helps to give purpose and meaning to those involved in achieving organizational success. 2.2 Functions of Performance Management System Performance management system can fulfill different functions for different organisations. The given below are the key functions of PMS: 1. Helps in clarifying the mission, vision, strategy, and values of the organization to the employees in order to enable them achieve the same 2. Helps in improving various business processes as the deficiencies are highlighted. 3. Helps in attracting and retaining talents in the organization and helps in establishing a robust talent review system. 4. Facilitates competency mapping, training and development needs identification, and implementation as part of the performance development tool (employees have the competencies to met both the present and emerging requirements of the organization). 14 LOVELY PROFESSIONAL UNIVERSITY  Unit 2: Performance Management System 5. Assists management in validating their recruitment and selection process and techniques. Notes 6. Helps employees attain their full potential and attain a balance between work and personal life. 7. Improves organization’s ability to change faster by highlighting the gap between potential capabilities and present ability. 8. Helps in making a shift from industrial relations to individual relations with a focus for employee growth an development 9. Enables sustainable organizational competitiveness, innovation, and low employee turnover by helping in reviewing organization structure and plan succession. 10. Builds the intellectual capital not only at managerial level but at front-line level also. In a nutshell, performance management seeks to balance business alignment with learning and development and performance reward. Figure 2.1: Conditions required for Successful Institutionalization Strong organizational Highly competent culture with focus on employees with emphasis Professional relations mentoring, counselling on self-learning, between managers and ethics development, and team spirit Organized attempts Highly motivated to learn form past Successful Institutio- employees receiving experiences and nalization of PMS valuable rewards challenges Highly competent HR Successful employee professionals with positive integration Supportive top management attitude as facilitators and implementers Source: Adapted and Modified from Mohd. Fazal (2005). 2.3 Characteristics of Effective PMS Characteristics of Effective Performance Management System are as follows: 1. Focus is on performance management. 2. Emphasis is on performance improvements of individuals, teams and the organization. 3. Continuous process with quarterly performance review discussions. 4. Emphasis is on performance planning, analysis, review, development and improvements. 5. Performance rewarding may or may not be an integral part. 6. Designed by HR department but could be monitored by the respective departments themselves. 7. Ownership is with line managers, HR facilitates its implementation. KPAs or KRAs are used as planning mechanisms. 8. Developmental needs are identified on the basis of the competency requirements for the coming year. LOVELY PROFESSIONAL UNIVERSITY 15 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 Performance Management System Notes Performance management processes are important in tightly nit and long standing project teams. Some of the key competencies for team work according to Hay/McBer (Gross 1995) are: 1. Interpersonal Understanding 2. Influence 3. Customer Service Orientation 4. Adaptability 5. Team Work 6. Oral Communication 7. Achievement Orientation 8. Organizational Commitment Performance measurement for teams will be related to the purpose of the team and its particular objectives and standards of performance. Process of Formulating Competency-based PMS Both competence and competency is the key to managing performance. People can only perform well if they have the required knowledge and skills. Equally, people need the capability and personal characteristics to develop new skills and to progress to higher quality or more complex work Similarly, it is important for an organization to know both what is required to undertake a particular job - the operational competence - and to be aware of the personal competencies that are likely to predict individual success. Some organizations base their whole performance management strategy around competencies - seeing them as the “common currency” for the organization, providing a language in which roles are described, feedback given and through which the organization communicates its values and notions of “excellence”. As Lockett points out, a clear set of competencies can help in a number of ways: 1. “They enable top management to state clearly the sort of behaviour which will make the organization’s mission achievable. 2. They enable managers to assess people against a common set of agreed criteria. 3. They enable the organization to take a regular stock take of the capability of their people. 4. If clearly stated and widely published, they give individuals an unambiguous guide to their own personal development targets. 5. They facilitate movement across functions by setting out clearly which skills are generic and, therefore transferable. 6. They make “competence gaps” easier to define and, therefore, easier to resolve.” Peter Honey has summarised the contribution of competencies from a learning standpoint as helping learners to: 1. know what is expected of them 2. how they are doing 3. what to do to develop and improve. 18 LOVELY PROFESSIONAL UNIVERSITY  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 Have you advised the employee what he has to do to improve performance and Notes retain the job? Yes/No Have you provided all the agreed assistance including training to the employee? Yes/No Did you consider any requests for accommodation? Yes/No Have you taken into account annual, sick, or to her leave taken during the review period? Yes/No Did you document the employee’s performance, your efforts to assist, the employee’s actions and contributions to the improvement plan, etc.? Yes/No Do you have copies of any notes of counselling and/or assistance to the employee? Yes/No Do you have copies of memoranda of counselling provided to the employee? Yes/No Has there been due process prior to the administration of any discipline? Yes/No Do you have a just cause to administer progressive discipline and/or use the alternate discipline process, and the document to demonstrate the just cause. Yes/No Task Design a research programme to identify the key differences in the performance management system in Indian and foreign companies operating in India. 2.5 Electronic Performance Management Electronic performance management (or e-performance management) offers great value for money to the organizations and addresses its needs aptly. e-performance management is essentially a PMS in the form of an online software package with multiplication modules that is fully integrated with the organizational metrics. It provides greater flexibility, tracking, and access of performance management to large number of employees and managers across the organization, across the world at the press of a button. Bititci et al. (2000) point out that the main benefit of using an IT platform for managing the performance management within an organization is that the maintenance of the information contained within the systems becomes much simpler. They also set up some requirements for an IT platform, which is suitable in such a situation. This e-performance management software is readily available in the market as standard product, or can be customized to meet a specific need of the organization. The e-performance management product allows organizations to maintain a record of core skills and competencies into the employee’s performance management process. e-performance management provides templates for a wide application that could be used across organizations spread in different parts of the world through one software module. e-performance management template provides the following features: 1. Job – or individual – centered performance contracts 2. Uploading of performance criteria 3. Secure online appraisal with password 4. Automatic e-mail notification of completed appraisal to employee and manager 5. Workflow system to monitor appraisal progress 6. Archive retrieval possible for retrieval of previous period appraisals LOVELY PROFESSIONAL UNIVERSITY 21 Performance Management System Notes 7. Assigning different weighting protocols 8. Viewing competency ratings 9. Viewing compensation details 10. Career advancement and opportunities available Implementing performance management across and organization creates the potential for a large amount of administrative overhead. Performance management process must be completed and approved, feedback and counseling must be provided fro multiple reviewers, documents rated, deadlines monitored, and many of these activities must be performed multiple times during each performance cycle for each and every employee. e-performance management (e.g., Oracle’s PeopleSoft Applications) helps organizations automate many of the administrative processes surrounding performance management. e-performance management enables rule-based routing of performance documents for editing and approval, the delivered language editor and results writer tools enable standardized content to be suggested at the time of appraisal, and the status dashboard enables all parties to track their documents as they move the performance management process, that is, from planning to monitoring and beyond. e-performance management offers numerous benefits, some of which are listed below: For Managers 1. Focused and aligned performance goals have a direct influence on organizational performance 2. Employee performance and focus areas are accessible in and instant 3. Performance management is a key part of an organization’s integrated human resource strategy 4. Easy to drill down through performance data for initiating root cause analysis for marginal performers 5. Getting instant feedback on performance with drill down to individual employee performance 6. No need to write performance contracts each year, simply upload and edit from a previous period 7. Development needs emanating from performance discussions are automatically fed into the individual development plan For HR Professionals Organization-wide quality assurance of goals and Key Performance Indicators (KPIs) Note e-performance Management Practices in Indian Organisations Technology has changed the face of business. Many HR transactions have been automated especially performance management. We now look at IT-enabled performance management practices of some leading companies in India. At Nokia India, there are no performance appraisal forms. Performance criteria are set by employee in concurrence with his manager in the appraisal tool. Reviewing officer reviews the same. This tool helps to update the goal setting and achievements periodically. Contd.... 22 LOVELY PROFESSIONAL UNIVERSITY  Unit 2: Performance Management System At PepsiCo, employees unload their performance targets on MDN, a global portal which Notes is available to PepsiCo employees across the world. Mid-term review and final appraisals facilities by MDN, also guides employees in tracking their career plans by preparing Career Development Action Plan. The data is subsequently used by HR. At TCS, managers use an online system for carrying out performance management system, merit pay, and succession planning activities with ease. 1. Progress of goal/KPI setting and appraisal is monitored and managed 2. Monitor appraisal bias within the organization 3. Paper-based forms are eliminated, making process management more efficient and secure 4. Managers are more likely to conduct effective goal/KPI setting and appraisal, given ease of use 5. Performance management more likely to become entrenched in the organization. We conclude in the words of Agha Husan Abedi: “The conventional definition of management is getting work done through people, but real management is developing people through work.” Performance Management System (PMS) at Bharti Telecom Introduction Established in 1985, Bharti Enterprises has been a pioneering force in the telecom sector with many firsts and innovation to its credit: it was the first mobile service in Delhi, first private basic telephone service provider in India, first Indian company to provide comprehensive telecom service outside India (in Seychelles) and the first private sector service provider to launch National Long Distance (NLD) service in India. As on 31st July, 2002, Bharti had approximately 2,112,000 customers—nearly 1,772,000 mobile, 221,000 fixed lines and 119,000 internet customers. Its service sectors businesses include mobile operations in circles of Andhra Pradesh, Chennai, Delhi, Gujarat, Haryana, Himachal Pradesh, Karnataka, Kerala, Kolkata, Madhya Pradesh, Maharashtra, Mumbai, Punjab, Tamil Nadu and Uttar Pradesh (West). In addition, it also has fixed line operations in the states of Madhya Pradesh, Chhattisgarh, Haryana, Delhi, Karnataka and Tamil Nadu, and nationwide broadband and long distance networks. Bharti has recently launched NLD services, offering data transmission services for calls originating and terminating on most of India’s mobile networks. The company is currently implementing a submarine cable project connecting Chennai and Singapore for providing international bandwidth. Bharti also manufactures and exports telephone terminals and cordless phones. Apart from being the largest manufacturer of telephone instruments, it is also the first telecom company to export its products to the US. Bharti provides telecom software solutions to both domestic and overseas clients. The latest addition to Bharti’s business portfolio is the contact venture. Today, Bharti is the largest private sector integrated telecommunications services group in India in terms of numbers of customers. Contd.... LOVELY PROFESSIONAL UNIVERSITY 23 Performance Management System Notes Need of PMS A performance orientation culture is the cornerstone of achieving excellence in any organization. Developing such a culture requires achieving clarity in understanding and managing performance within an agreed framework of planned goals, standards and required attributes and competencies. The process calls for a clear statement of the company’s vision, goals and objectives and aligning statement of the company’s vision, goals and objectives and aligning these with individual targets and activities. A Performance Management System (PMS) aimed at getting better results from teams and individuals has therefore, been introduced at Bharti. The PMS at Bharti is based on the simple proposition that when people know and understand what is expected of them, and have participated in forming those expectations, they can and will performing those expectations, they can and will perform to meet them. This leads to the following questions: 1. What do you think are the most important things you have to do? 2. What do you believe you are expected to achieve in each of these areas? 3. How will you or anyone else know whether or not you have achieved them? Resolving these questions enables people to unambiguously identify their targets and plan their activities towards achieving them. It is equally essential to link recognition and rewards to such achievements to bring about and propagate a performance-oriented culture. The PMS at Bharti encompasses the above aspects and is implemented through Performance- lined Incentive (PLI) scheme. Performance-linked Incentive Scheme at Bharti The PLI is primarily focused on individual performance, though there are schemes designed to recognize performance at the team and company levels too. Step 1: Identification of Key Result Areas (Performance Criteria) The identification of Key Result Areas (KRAs) is an important and systematic process. Starting with the company’s goals and objectives, the KRAs are identified at all levels of management (from the top to the working levels), ensuring alignment and commonality of purpose. For instance, in production, quality, market share and profit could be some KRAs at the senior level. These are further broken down into KRAs at department and working levels. For example, production would depend upon machine utilization, and material and manpower availability, while machine utilization would depend upon power availability, preventive maintenance and availability of spares. A configuration of this type facilitates identification of appropriate KRAs at the identification of appropriate KRAs at the individual, team and company levels. KRAs for individuals comprise of both business parameters (common for all covered by the schemes) and individual parameters. This is to ensure that while striving to achieve their individual targets, employee do not lose sight of the business goals and objectives. Step 2: Assigning Weightage to Selected Criteria Weightage is for each criterion is determined in proportion to its anticipated impact in terms of the company’s topline, bottom line, growth strategies, etc. This enables people to prioritize their activities and expend their time and efforts accordingly. (Weightage should add up to 100 per cent.) Contd.... 24 LOVELY PROFESSIONAL UNIVERSITY  Unit 2: Performance Management System Step 3: Setting Targets Notes This is an important step and involves extensive discussions an deliberation. Care must be taken to ensure that targets are aligned to the company’s budgets and strategies. Step 4: Defining Performance Levels Performance in these selected criteria is measured across 5 levels, level 1 being the minimum and level-5 being the maximum. The targets are normally slotted at level-3. Typically, levels-4 and 5 are set at 110 per cent and 120 percent the target respectively. Similarly, level-1 is fixed at 80 per cent and level-2 at 90 percent. However, there could be exceptions depending upon the nature and scope of the criteria. It is also possible that in some cases levels 1 and level 2 do not exist. Performance-Payout Relationship The payout may vary from 10 percent to 30 percent and may go upto 40 percent as well. Normally, the performance and payout are linked as follows: Performance levels 1 2 3 4 5 Payout percent 10 13 17 23 30 As is evident, the rate of payout progressively increases at higher levels of performance. The percentages in the table are of the annual salary and normally include basic pay, house rent allowance, special allowance, conveyance allowance, LTC, medical, provident fund and superannuation. The entire process of PLI can be illustrated with and example as below: 1. Take any job. Example: Regional Sales Manager 2. Company-wide business parameters Weightage (a) Revenue 20% (b) Profits 20% Individual parameters: Weightage (a) Increase in market share in region (MS) 20% (b) Increase in sales turnover (ST) 20% (c) Increase in reliability and service level of Products (REL) 20% (d) Decrease in level of outstandings (OS) 10% 3. For each responsibility, define a goal or target, for instance (a) Increase market share in the region to 26 percent (b) Increase sales turnover to ` 1,500,000 lakhs (c) Increase reliability and service level of products (CI index of 80 percent) (d) Decrease level of outstanding to 30 days In the case of subjective elements, data is captured as indices. Contd.... LOVELY PROFESSIONAL UNIVERSITY 25 Performance Management System Notes 4. Define measures of performance against targets. Example: Performance index for sales turnover will be: (a) < ` 100 lacs 0 (b) ` 100-120 lacs 10 (c) ` 12-140 lacs 13 (d) ` 140-160 lacs 17 (e) ` 160-200 lacs 23 (f) > ` 200 lacs 30 The above is illustrated in the form of a PLI table. Table 1: Individual Performance-linked Incentive Sales S. No. Performance criteria Weightage Base year Target Performance levels 1. Company 40% 10% ,13%, 17%, 23%, 30% parameters: Revenue (20%) Profits (20%) 2. Individual 20% 26% 220* Parameters: 20% 150 lacs -MS 10% 80% -ST (`) 10% 30 days REL (index) -OS *Represents figure of actual achievement which corresponds to level 5. Similarly, based on the achievement, each parameter would be slotted at an appropriated level and the overall payout percentage would be determined based on the weightages. ________________ ________________ Signature of Individual Signature of Reporting officer Question Make a critical analysis of key tools used by Bharti Telecom for performance management. 2.6 Summary Performance management system is another way of envisioning the totality of a manager’s function. The use of performance management in the best-practice companies is not because it is a better technique than performance appraisal, but because it can form one of a number of integrated approaches to the management of performance. The rise of HRM also contributed to the emergence of performance management. PMS helps in clarifying the mission, vision, strategy, and values of the organization to the employees in order to enable them achieve the same. Companies use performance management systems to evaluate employees’ efficiency at work and ability to perform certain tasks, either by automated or human processes. 26 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 Performance Management System Notes State whether the following statements are true or false: 11. Implementing performance management across and organization creates the potential for a large amount of administrative overhead. 12. e-performance management enables rule-based routing of performance documents for editing and approval. 13. Performance management processes are not effective in tightly nit and long standing project teams. 14. Performance management is not concerned with outputs. 15. An effective PMS link performance requirements to pay, especially for senior managers. 2.9 Review Questions 1. Do you think that performance management system is more successful in large organisations in comparison to the smaller one? Discuss. 2. Performance management system is a inter-linked process. Define the statement by giving some practical example. 3. Why do different organisations have different performance management system, although the principles of performance management system are same? 4. “Performance management should be a continuous process”. In light of this statement, discuss the features of a good performance management system. 5. Why do organisations opt for performance management? 6. What do you mean by employee performance? How can performance be bettered? 7. “Any system needs cert