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Performance Management

Unit I
Performance means how well or badly an activity can be done
Performance is measured in terms of effectiveness and efficiency
Efficiency means utilising the resources in an optimum manner so as to maximise productivity
Effectiveness means completing a given task in stipulated time frame.
Factors affecting Performance
1. Personal factors the individual skill, competence, motivation, commitment etc
2. Leadership factors quality of encouragement, guidance and support provided by managers and team
3. Team factors- quality of support from peers
4. System factors infrastructural facilities which include the system of work and facilities provided by
the organisation.
5. Contextual factors internal & external environmental pressures and changes.
Performance management
Performance management is defined as a strategic and integrated approach for delivering sustained success to
organisation by improving the performance of the people
Strategic in the sense it is connected with broader issues of business
Integration of PM in four ways:
Vertical integration linking or aligning business, team and individual needs
Functional integration linking functional strategies of business
Human resource integration linking different aspects of HRM
Individual need integration linking individual needs
Concerns of performance management
Concerned with :
achievement of results
Impact made on performance
Process required to achieve results
The capabilities
Measurement and review
Continuous development and improvement
Concerned for communication information made available to all
Ethical concerns
Respect for individual
Mutual respect
Procedural fairness
Scope of PM
Bringing success to business
Managing the context
Natural process
Continuous process
For everyone

Features of effective organisation

Making whole range of business statements in to small number of general statements
Testing of the statements
Prediction of behaviour
Checks the soundness of decision
Improvement of performance
Developing competence
Approaches for making effective organization
According to Tom peters following approaches make the organisation effective
Break the organisation into small units
Make every employee aware about the profit/loss of the company
Close involvement with customer
Reduce organisational layers
Empower the people
Implement change with new leadership
Pursue innovation
What makes companies different
According to Robert Waterman top companies are different because
They meet the needs of people
They meet the needs of customers
Methods of making organisation effective through competence
setting the goals and measuring the performance against set goal
Managing the structure, process and people can bring success to the organisation
Achieving high performance by developing core, team and individual level of performance
Achieving revenue growth through employees and customers
Techniques of Appraisal
Performance Appraisal (PA)
PA can be defined as a process of systematically evaluating a persons performance against set standards
PA provides important record for the company
Provides information for improving performance and motivation of employees
Improves quality of employees
Helps in deciding promotion and increment
Performance expectations can be communicated to employees.

PA techniques
1)Graphic rating scale this is the simplest and most popular technique. Job performance criterion such as
dependability, initiative, output, attendance, attitude etc are taken as rating scale. Each scale ranges from excellent to
poor. The ratee usually receives a score of 1 to 5 with 5 being excellent.
1)Easy to use
2)Low cost
3)A large number of employees can be evaluated in a short time
4)No training is required for the rater
1)Ratings are subjective
2)Ratings may not be real
Modifications to Graphic rating scale
A mixed standard scale gives the rater three statements describing each trait
Operational and bench mark statements are added to describe different levels of performance
2) Check list Appraisal- A check list appraisal is a record of performance not an evaluation by the supervisor. It
contains a series of yes or no type questions about the employees performance. HR department check the score
using the key
Easy to complete
1) Difficult to prepare the check list
2) No way for adjusting the questions according to employee behaviour.
3) Forced choice approach
Here a set of statements describing employee behaviour is prepared
The appraiser chooses the most or least statement matching the employee characteristics
Examples of statementsLearns fast, work hard, work is reliable, high performance, highly motive, absents often
Prevents the supervisor from saying only positive things
Statements may not be properly framed or they may not be the descriptive of the ratees traits.
4) Forced distribution method- this method assumes that the employee performance follows a bell shaped curve. The
assumed distribution of number of employees will be
excellent 10 %, Good 20 %, Average 40 % , below average 20 %, Unsatisfactory 10 %
1) Useful for overall performance
2) Help in making promotion and merit decision
3) Controls leniency and central tendency errors
4) To make distinctions between employees when differential rewards are to be distributed.
Employee performance always conform normal distribution
Employees are evaluated based on their overall performance rather than on a distinct aspects.

Forced Distribution on a Bell-Shaped Curve

5) Critical incident method

Here the supervisor keeps a written record of incidents that show positive and negative behaviour of an employee
The record should show date, people involved, action taken
At the time of the appraisal the supervisor reviews the record and reach an overall evaluation of the employee
During appraisal interview the employee has a chance to respond to each of the incidents recorded.
It focuses actual behaviour
It is easy
1)Time consuming
2) Negative behaviour is noted most
6) Behaviourally Anchored Rating Scale (BARS)
Smith and Kendall developed BARS.
Here the employee is rated in scales containing statements describing performance in several areas
These scales are prepared by behavioural scientists or organisational psychologist
The supervisor selects the best statement that describes the employee performance.
Each job has different set of rating standards
1.Objectives of organisation is covered
2.Less subjective
1.Time consuming

Behaviorally-Anchored Rating Scale

for Customer Service Skills

7) Behavioral Observation Scales (BOS)

Developed by Latham
This is similar to BARS
This uses critical incidents instead of behavioural statements
8) Peer reviews
Performance appraisal conducted by an employees co-workers. These are not commonly used.
This is used for appraising teams
The purpose is to give managers the feed back about their approaches to subordinates.
9) Field Review Method
This is done by someone outside the assessees own department
The assessor reviews the employee record and holds interview with the ratee and his superior.
This method is used for promotion at managerial level.
Less expensive
Helps in making promotion
Serve as a control for leniency and central tendency errors
Rater not familiar with the work affects the appraisal process
10) Essay Appraisal here the supervisor writes a detailed description of the employee performance
This method is used along with other appraisal methods like Graphic rating
Following traits of employee are used in this method overall impression of the employee, promotability, ability to
perform different jobs, strength and weakness, training and development.
Useful in filling information gap about the employee
Rating depends upon supervisors writing skill
Time consuming process
11) Work Standards approach here employee performance is compared with the standards. Usually supervisor sets
This is used for appraising the production workers

12) Cost accounting: this method evaluated the monetary returns of the employee. The performance of the employee is
evaluated based on the relation between cost and benefit.
13) Paired comparison method- this is a group appraisal method. Employees are ranked by the first two employees on
the list. The supervisor puts a check mark next to the name of the employee whose performance is better. The
process is repeated, comparing the first employees performance with all others. The employee with most check
marks is considered most valuable.
Number of comparison = N(N-1)/2
14)Management by Objective (MBO)
The concept of MBO evolved from the works of Peter Drucker.
Assumptions :
People perform better when they know what is expected of them and can relate their personal goals to that of
organisational goals
People are interested in goal setting process and in evaluating their performance against the targets
MBO is a process where by the superior and the subordinate of the organisation jointly identify its common goals,
define each individual major areas of responsibility in terms of results expected from him and use these
measures as a guide for operating the unit and also in assessing the contribution of each of its members.
Principle of MBO
Cascading of organisational goals and objectives
Specific objectives for each member
Participative decision making
Explicit time period
Performance evaluation & feedback

Process of MBO

g the goals
Setting the
standard for the
Compare the
actual level of
goal attainment
with the set
g the new

15) Psychological appraisal industrial psychologist evaluates the employees intellectual, emotional, motivational &
other related characteristics that suggest individual potential and may predict future performance
The quality of appraisal depends on the skills of the Psychologist.
This is slow and costly
16) 360 degree feed back -

Performance appraisal that combines assessment from several sources. Here the rater collects rating from different
sources and an overall rating is given to the ratee.
Combined opinion is more accurate
Some skills are best judged by peers
Increases motivation
More transparent
Burden some
Results can be difficult to interpret
Can generate suspicion
Rater can hide better rating and project the worst rating
Conflicting rating can be confusing
History of performance management
AD 221- 265 imperial rating system to assess the performance of families
1491- 1556 Ignatius loyola established a formal system of rating of societies
First formal monitoring was introduced by FW Taylor
1920 rating of army officers by US and later by UK
1950 merit rating in US and UK
1960- MBO introduced followed by Critical incidence method and BARS
1970 the term performance management was first used.
Emergence of performance management
1976 the first recorded use of the term performance management by Beer & Ruh
1980 concept of performance management began to emerge in the USA.
1987 Plachy described performance management as communication
The manager and employee together plans what work to be accomplished and checks whether planned work has been
achieved or not. After this they plan for next period.
The first reference to performance management was made at a meeting of IPM by Don Beattie.
1990 performance management has entered the vocabulary of HRM in UK
1992 full recognition of Project management was given by IPM
The rise of HRM also contributed to the rise of PM
Comparison of Performance Management with Performance Appraisal and MBO




Packaged system

Tailor made

Tailor made

Emphasis on individual

Individual objectives
may be included

corporate, team and

Annual Appraisal

Annual Appraisal

Continuous with
one or two reviews

Top Down systems with ratings

Top Down systems

with ratings

Joint process
ratings very less

May not be a direct link to pay

Often linked to pay

May not be a direct

link to pay

Monolithic system

Monolithic system

Flexible process

Complex paper work

Complex paper work


Owned by line managers &

personnel department

Owned by personnel

Owned by the

BARS for Police officer

The following are the important job dimension of a police officer
Job Knowledge
Job Performance
First we have to prepare statements with rating for each dimension
1)Job knowledge
Uses the correct rules always 5
Uses the correct rules some times- 4
Knows about the rule but does not use 3
Knows some rules and not uses 2
Does not know much of the rules - 1
2) Initiative
Always takes initiative and completes the task 5
Takes initiative but leaves the task half way -4
Takes initiative but does not involve in task 3
Takes initiative some times 2
Does not take initiative - 1
3) Job performance
Always perform the job with perfection till completion 5
Perform the job till completion with some complaints 4
Perform the job with more complaints -3
Perform the job up to 50 % - 2
Dose not perform the job - 1

Case study
Case summary

The case is about the appraisal system followed by Uniqe Funds Ltd. Unique funds ltd is a reputed finance company
having branches in different parts of the world. It has 290 operative employees and 70 executives. The company
uses Graphic rating scale for appraising the employees . They uses several qualities for evaluation.
The increments and promotion are based on the rating of the appraisal.
Due to denial of increments of two employees appraisal system of the company is in question and worker unrest also
Key issues
1. Denial of increments of two employees of Head office due to poor rating
2. The aggrieved employees blamed the appraisal system and argued that Community service was not to be considered
for appraisal.
3. Automatic system of increment with our considering appraisal rating
4. The chief executive fees that appraisal system is dangerous and should be discontinued
Graphic scale of appraisal this is the simplest and most popular technique. Job performance criterion such as
dependability, initiative, output, attendance, attitude etc are taken as rating scale. Each scale ranges from excellent
to poor. The ratee usually receives a score of 1 to 5 with 5 being excellent.
Question 1
Job analysis of the staff is conducted to analyse whether community service is an essential part of the job or not. If it is
not an essential part of the job then revise the graphic scale and do the rating of all the employees afresh. If it is an
essential part of the job then call the aggrieved employees and give them a review period of three months for
improving the performance and do the rating after three months.
Question 2
Totally disagree with chief executive officer since performance appraisal is the best method of assessing the
performance of an employee. If required a different appraisal method can be implemented. Increments must be
based on appraisal system.
Question 3
As a service company doing financial services, the company can implement 360 degree appraisal system. The salient
features of the same is given below:
360 degree feed back -

Performance appraisal that combines assessment from several sources. Here the rater collects rating from different
sources and an overall rating is given to the ratee.
Combined opinion is more accurate
Some skills are best judged by peers
Increases motivation
More transparent
Burden some
Results can be difficult to interpret
Can generate suspicion
Rater can hide better rating and project the worst rating
Conflicting rating can be confusing