Performance Management System (PMS)

Lecture 11

Performance management system involves a number of activities. They are more than simply reviewing what an employee has done.

Purpose of PMS :
Performance appraisal conveys to employees how efficiently they have performed on established goals & tasks. Goals and performance measurement are mutually set between employee and supervisor which ultimately help to ensure performance of employee. Acts as a criteria for rewarding increment, promotion etc. PMS influences decision to reward or punish employee in an appropriate way.

Difficulty in PMS: Individual focus: Appraising individual is probably one of the difficult jobs of a supervisor. Because emotions acts in the way which may influence decision and may give rise to conflict. So any emotional aspect must be removed which increases the confidence and satisfaction of the employee. Focus on the process: A particular and standard process must be followed while conducting appraisal process. The performance appraisal process should be designed in such a way that maximum benefit can be achieved in terms of future direction for developing the employee and reward for the employee. Appraisal Process 1. Estrablish performance standards with employees 2. Mutually set measurable goals 3. Measure actual performance 4 Compare actual performance with standard 5. Discuss the appraisal with the employee 6. Initiate corrective action, if needed.

Appraisal methods
Different methods exist to do the appraisal. 1) Absolute standard method : Here employee are compared with an standard. Easy appraisal method : Appraiser writes down a narrative description of employees strength weakness, past performance, potential & suggestion for improvement. Though it is a simple method, description are unstructured so variation exists. Critical incident method : The appraiser rates critical factors or key behavior that make the difference between doing a job effectively or ineffectively. The main part of such method is that it focuses more on the behavioral aspect of an employee. Check list appraisal : In this method, the evaluator uses a list of behavioral description and check these points against those behaviors of the employee. Ex: Are supervisors order usually followed ? Yes No Does the individual approach the customers promptly ? Yes No Does the employee lose his temper while dealing customers ? Yes No Adjective rating scale : Rating scale can be used to asses quantity & quality of work, job knowledge, co-operation, loyalty, dependability, attendance, honesty, integrity, attitudes and initiative. Performance rating Consistently unsatisfactory Consistently unsatisfactory Poor knowledge Requires constant supervision Occassionally unsatisfactory Occassionally unsatisfactory Occassionally unsatisfactory Requires occasional follow-up Consistently satisfactory Consistently satisfactory Can answer most questions about job Usually can be counted on Sometimes superior Sometimes superior Understands all phases of job Requires very little supervision Consistently Superior Consistently Superior Has complete knowledge in all aspects Requires minimum or no supervision.

Performance rating
Performance Factor Accuracy, skill & completeness of work Productivity, volume of work done in a day Job knowledge Supervision / explation of directions and company policies required

Forced choice appraisal : It is special type of check list where the rater must choose between two or more statements. Each statement may be favourable and unfavorable. Ex: Students evaluating college instructor Keep up with schedule identified in the syllabus / Give lecture with confidence / demonstrate how concepts are practically applied in todays organizations etc. The advantage is that it reduces the biasness and distortion of

appraiser as he does not know the right answer. The disadvantage is that the rater is frustrated as he cannot determine which is the good or poor answer. 2) Relative Standard Method Here the individuals are compared against other individuals. These methods are relative standards rather than absolute measuring methods. Group ordering method : Individual ranking Paired comparison

3) Management by objective (MBO) :Employees are evaluated on how well they accomplish a specific set of objectives. The process covers organizational objectives into individual objectives. It consists of four steps: 1. Goal setting 2. Action planning 3. Self control 4. Periodic review

Factors distorting appraisals :

Many factors come into play to influence the impartiality of appraisal process as follows: Leniency error : Every evaluator has his own value system which acts as a standard against which appraisal are made. Thus some evaluations are marked high or even low. Halo error: It is the tendency of the rater to rate high or low on all factors due to impression of a high or low rating on some specific factors. For example : if an employee tends to be dependable, the rater might become biased to give him good rating on many other issues. Similarity error : When evalautor perceives the candidate to be of themselves will initiate error in appraisal. (Ex: The evaluator perceives himself or herself as aggressive may evaluate others by looking for aggressiveness.) Low appraisal motivation: If the evaluator perceives that poor appraisal may hurt the employee, the evaluator may be reluctant to give a realistic appraisal. Central tendency : It is the reluctance of the evaluator to make extreme ratings. Here there is tendency to rate all employee as average.

Establishing effective performance evaluating system:

Use behavior-based measures: Traits like loyalty, initiative, courage, reliability, selfexpression are intuitively appealing but does not mean that the factors will ensure performance.

Combine absolute and relative standard: This is a dual method of appraisal when
absolute and relative standard are judged. Ex: Students get an absolute grade like A B C D and next to it is a relative mark showing how the student ranked in the class.

Provide ongoing feed back: Employees frequently want to know how they are doing
instead of being appraised once or twice is a year. So the solution lies in communicating with the employee regarding expectations and disappointment on a frequent basis.

Have multiple raters : As the number of raters increases, the probability of attaining
more accurate information increases. Some raters may be more careful in eliciting any strength and weakness.

Use peer evaluation : Supervisors are not able to observe the employee all the time. So
peer remains a better means to collect informations. The main advantages of peer evaluation are 1) Coworkers tend to have a constructive insight regarding colleagues 2) Recommendation tends to be more specific

360 degree appraisal: An appraisal system that seeks performance feedback from
various sources like boss, peer, team member, customers & suppliers which has become very popular in contemporary organizations. The system also helps in the following ways: Many managers do not care about how other members in the organizations evaluate their performance and behavioral pattern. Ideas from various corners help to develop in a more effective way. Accurate feedback, reducing the subjective evaluation process and developing leadership ability are influenced by 360 degree appraisal method.

Rate selectively : The appraisers should rate in only those areas where they have
considerable expertise. Train appraisers : Training can make raters more accurate in terms of rating. Many types of error can be minimized through proper training.