PERFORMANCE MANAGEMENT SYSTEMS

Introduction to Performance Management

Unit I, Session 1
18th Aug, 2011

What is Performance?
Performance is what is expected to be delivered by an individual or a set of individuals (team(s)) within a time frame.

The expectations may be in terms of,

Results or efforts Tasks Quality, with specification of conditions under which it is to be delivered.

Dimensions of Performance Management

1. Output or result dimension
Measurable dimension Consequence of inputs in a summary form or a final or semi-final product form or service form. Describes the standard Measurable in terms of figures like targets, completion of tasks to meet the deadlines, customer numbers. These are called as Key Result Areas (KRAs)

Dimensions of Performance Management

2. Input dimension

Activities or tasks to be accomplished by the individual. Influential factors for inputs are,
Ability or competence to perform these tasks Motivation Organizational support

Performance (o/p) = {work effort(i/p) + [motivation + Support]}

(Intervening Variables)

Dimensions of Performance Management

3. Time Dimension

Performance can be defined for a task, for a day, for a week, month, year or life For IT, Banking, Manufacturing companies the time dimension is for quarter / a three-month period. Normally, individual performance is judged in relation to a role and across a short period. Some organizations which are project driven are interested in the individual performance in a project as well as in a role. Thus, in context of organization, performance management is time bound as well as role specific.

Dimensions of Performance Management

4. Focus dimension
Focus may be on profits, market share, new areas covered, quality, cost or financial dimensions. Competencies Interest Internal environment External environment

5. Input-Output Relationships

Dimensions of Performance Management

6. Dyadic performance

The role played by the boss or subordinate or team member in determining performance. This is normally neglected and less discussed about.
Outcomes measures
Situational variations and are based on assumptions Deals with interpersonal processes Motivation to other person, extent to which there is mutuality, help, synergy and learning.

Dyadic performance measured in two aspects

Process measures

Dimensions of Performance Management

7. Team Performance
It is widely recognized Often mixed with individual performance.

Finally, Performance of an individual in organizational setting may therefore be defined as the output delivered by an individual in relation to a given role during a particular period of time under the set of circumstances operating at that point of time.

Process of Performance Management

Unit I, Session 2
19th Aug, 2011

Performance Management System

It is an organization wide management program that provides a structured approach to:
Communicate business strategy Establish a shared understanding of what is to be achieved and how it is to be achieved Facilitate management of self and others Measure and motivate performance (organizational and individual)

 A process for communicating employee performance expectations, maintaining ongoing performance dialogue, and conducting annual performance appraisals; A procedure for addressing employee performance that falls below expectations; A procedure for encouraging and facilitating employee development;

Training in managing performance and administering the system; and

A procedure for resolving performance pay disputes.

The performance management cycle

Performance and development agreement (PLANNING)

Performance review (REVIEWING)

Managing performance throughout the year (ACTING)

1. PERFORMANCE AGREEMENTS
Performance Agreements form the basis for
Development Assessment Feedback in the Performance management process

Performance agreements incorporates

Performance improvement plans Performance development plans

Performance agreements emerge from

Analysis of role requirements Performance review

PERFORMANCE AGREEMENTS
Defining role requirements in terms of:

Key results expected What role holders need? Competencies required Upholding the organizations core values
On-going role or work objectives Targets Tasks/projects Behaviour

Objectives

PERFORMANCE AGREEMENTS
Criteria for Objectives
S = Specific/stretching clear, unambiguous, straightforward, understandable and challenging. M = Measurable quantity, quality, time, money. A = Achievable challenging but within the reach of a competent and committed person. R = Relevant relevant to the objectives of the organization so that the goal of the individual is aligned to corporate goals. T = Time framed to be completed within an agreed time scale.

PERFORMANCE AGREEMENTS
Performance Measures: Achievement of objectives Competence Quality Contribution to team Customer care Working relationships Productivity Flexibility Skills/learning targets Aligning personal objectives with organizational goals Business awareness Financial awareness

PERFORMANCE AGREEMENTS
Performance planning
agreement between the manager and the individual To achieve objectives raise standards improve performance and develop the required competencies

Personal development planning

self-managed learning Coaching Mentoring project work job enlargement job enrichment

2. MANAGING PERFORMANCE THROUGHOUT THE YEAR

performance management is a continuous process that reflects,
Direction Monitoring Measuring performance Actions taken

3. REVIEWING PERFORMANCE
A formal review in an organization takes place once or twice yearly. This provides a focal point for the consideration of key performance and development issues. This performance review meeting is the means through which the five primary performance management elements
agreement, measurement, feedback, positive reinforcement and dialogue can be put to good use.

REVIEWING PERFORMANCE
The review should be rooted
in the reality of the employees performance. Concrete not abstract it allows managers and individuals to take a positive look together at how performance can become better in the future and Problem solving

REVIEWING PERFORMANCE
Criteria for assessing performance
The criteria for assessing performance should be balanced between:
i. achievements in relation to objectives; ii. the level of knowledge and skills possessed and applied (competences); iii. behaviour in the job as it affects performance (competencies); iv. the degree to which behaviour upholds the core values of the organization; v. day-to-day effectiveness.

REVIEWING PERFORMANCE
Conducting a performance review meeting: Be prepared Work to a clear structure. Create the right atmosphere Provide good feedback Use time productively Use praise Let individuals do most of the talking Invite self-assessment. Discuss performance not personality Encourage analysis of performance Dont deliver unexpected criticisms Agree measurable objectives and a plan of action

Designing Performance Management Systems

Unit I, Session 3
22nd Aug, 2011

Introduction
Organizations use strategic planning to,
Identify objectives/ initiatives, Linking objectives to the organizational vision, Daily activities

Designing of PMS
Performance management systems are not generic or easily passed from one company to another; their design and administration must be tailor-made to match employee and organizational characteristics and qualities. PMS should focus on
Employee performance w.r.t supervisors expectation Employee should know how the performance is viewed. Communication between employee superior

What should a PMS cover?

1. 2. 3. 4. 5. 6. 7. 8. Organizational and employee objectives: Training Frequency of appraisal Maintaining records Measurement systems Conducting the performance appraisal Pay for performance Legal issues

1. Organizational and employee objectives:

Effective performance evaluation system is to determine the organizations objectives.
These are then translated into departmental and then individual position objectives (KPAs) personal performance targets.
This allows the employee to know up front the standards by which his/her performance will be evaluated. This process involves clarifying the job role, job description and responsibilities to wider goals.

2.

Training

Training should start with a focus on providing the manager

a systematic approach for effective people management. the process of managing, motivating and evaluating employee performance.

Training should include:

supervision skills; coaching and counselling; conflict resolution; setting performance standards; linking the system to pay (assuming this is an aim of the appraisal system); providing employee feedback (Evans, 1991)

3.

Frequency of appraisal

Employee reviews should be performed on a frequent and ongoing basis. By conducting reviews frequently two situations are eliminated:
selective memory by the supervisor or the employee; and surprises at an annual review.

Frequent reviews also allow for clarification and revision of objectives

4.

Maintaining records

They establish patterns in an employees behaviour that may be difficult to spot by typical incident-by-incident supervision (Crane, 1991). Careful review of the records helps avoid the selective memory and helps plot appropriate actions.
Well maintained records are essential if the need arises to discipline, demote or dismiss an employee. It is particularly helpful if employees are themselves responsible for part of the process of record-keeping.

5.

Measurement systems

A performance appraisal system which ranks employees according to a numerical rating tends to lead to a great deal of average performers
Eg. On a scale of 1-5

This will help the employees to clearly understand that the measurement system is accurately reflecting the true level of performance for every employee.

6.

Conducting the performance appraisal

the front-line supervisor is responsible for conducting the performance review. However, a multiple rater system provide a form of triangulation that results in ratings in which employees and managers have greater confidence. With large spans of control, several supervisors may work with an individual employee. The input from all supervisors about the employees performance is required to complete a thorough performance review.

Appraisal techniques
Self appraisal, rating, ranking, 360-degree feedback

7.

Pay for performance

Research says the link is often unsatisfactorily established and even less often maintained to the satisfaction of employees and supervisor/ organization. Helps motivate and commit the employee to the appraisal process. It also allows the employee to distinguish clearly how successful or unsuccessful completion of objectives affects them directly.

8.

Legal issues

An effective PMS is to make a company

more productive, profitable and to let employees know their level of performance, legal reasons
Failure to conduct appraisal properly (failing to maintain adequate records) may result in employees (or their trades unions) taking legal action. It is extremely important that all strengths weakness be clearly documented in the performance review and follow up action on unsatisfactory performance pursued and be used in case of termination of an unsatisfactory employee.

Process
Vision

Report/Review

Corporate plans

Targets for individuals

Section Plans

Why PMS Fail?

Thorough knowledge on PMS both employee and supervisor.

Interpreting performance information.

Poor performance should be tackled in a timely manner. Working practices should be reviewed regularly Effective staff recruitment, training & development are essential in maximizing organizations performance.

Implementing PMS
Unit I, Session 4
23rd Aug, 2011

Implementation Process
STEP 1
Define Mission & Desired Outcomes Practices: 1. Involve stakeholders 2. Assess environment 3. Align activities, core processes, & resources

STEP 2
Measure Performance Practices: 4. Produce measures at each organizational level that demonstrate results, respond to multiple priorities, and link to responsible programs 5. Collect data

STEP 3
Use Performance Information Practices: 6. Identify performance Gaps 7. Report information 8. Use information 9. 10. 11. 12.

Reinforce Implementation Practices: delegate decision-making with accountability Create incentives Build expertise Integrate management reforms

Key Lessons Learned for Effective Implementation

1. Assess Organizational Readiness
involvement, commitment, and day-to-day support of enterprise senior managers if they have adequate resources, including staff allocation, skills, time, tools, and use of consultants or technical assistance if needed.

Organizational readiness also means making sure that existing planning and decision making structures can accept performance results so they can be used

Key Lessons Learned for Effective Implementation 2. Follow a Simple Measure Selection Process
Extremely complex should take a balanced approach to goals, objectives, and related measures Should measure, establish baselines and targets, comparing against benchmarks, and monitoring progress for continual improvement.

3. Develop Performance Management System Maturity Over Time

Stages in Performance Management

Traditional Internal Operations

Linking to the Mission with New and Improved Services

Mission/ Results Oriented

Implementation mistakes
Over criticism of the past and over projection of the new or changed system System introduced with fanfare but inadequate effort to help in its implementation Lack of organizational support Lack of competencies in HR department Image of the HR department and inability to promote a sense of ownership of the system among the line managers Lack of follow up on the part of HR department Top management commitment Past experience with all the systems Nature of the system

Nature of Goals
Job Content (Accountabilities) Performance Requirements (Goals) Performance on the Job

Goals are written statements of measurable conditions that will exist when a job is satisfactorily done Goals link actual performance with role responsibilities Taken together, these constitute the role purpose Goals describe how accountabilities are actualised Achievable goals spell out requisites that provide guidance to the goalseeker:
Person, or the role, which has primary responsibility for achieving the goal Key activities or means for achieving the goal Measurable indicators, targets or levels of achievement for key-result areas Completion date

Writing Performance Goals

A well-written goal has two parts: Operational and Outcome Operational part consists of the accountability, specific activity and time frame Outcome part has measurable standards Well-written goals respond to following minimum requirements:
Inform what the most important things to do Inform what the employee is expected to achieve Specify how all concerned will know whether or not goal has been achieved

Three-Step Goal Writing Process

Step 1: Decide which accountability or accountabilities will the goal respond to Step 2: Specify activities to be undertaken and the time frame for execution Step 3: Provide measurable indicator. Describe it by stating Outcome meets expectations when Example: The goal is - Marketing Manager increases company profit margins, through a 10 per cent increase in return-oninvestment, by end of the performance year. Then,
Marketing Manager is having the primary responsibility. Increase in return-on-investment is the means or the key activity. 10 per cent is the target, or the measurable indicator. End of the performance year is the time-frame or the completion date.

Actual Goal-Setting Discussion

Goals proposed by the employee reviewed, critiqued, clarified Their outcome for managers and organisational goals understood Manager may propose additional or substitute goals

employee goals finalised as proposed or mutually revised

Broad discussion on implementation plan: strategies, methods, approaches

Manager and employee agree on date and agenda for first progress review meeting

Performance Measures
Provide evidence of the extent to which goal is achieved Becomes basis for monitoring, control and feedback on performance Good-quality performance measures Relate to results (outputs) not efforts (inputs) Are within the employees control to achieve Are observable and quantitative for which measurement data are available Indicate positive or negative performance Positive standard: What organisation wants that goal to achieve Negative standard: What organisation doesnt want to see intermediate or final outcomes that show that the goal has not been achieved

Potential Appraisal
Unit I, Session 7
26th Aug, 2011

Potential Appraisal
In a competitive world, past achievements do not always guarantee future success. To face competition, firms need to advance at a high speed in all areas:
technology, processes, management, finances, quality, costs, new market creation, new product development, and above all increased efficiency, motivation and productivity on the part of employees.

 In the present scenario, organizations have become,

Technology driven, Market sensitive and customer focused, Quality centered, cost effective, Systems driven and Managerially effective.

To achieve these, it is necessary to have competent managers in strategic roles.

Potential Appraisal is a Necessity

Need to constantly identify competent people.
Competency requirements, Job profile / tasks, Reliable and valid method of assessing

Potential Appraisal is an assessment of the extent to which a given individual has the potential to perform a new task/job. (Unlike promoting in the same vertical) The best way to judge a persons potential and therefore ability to succeed in the new role is to actually put the person on job and assess him. However the organization cannot afford to take risks by assigning new roles. For this the Assessment Centre methodology gains significance

Advantages & Disadvantages

Potential is about the future while performance deals with the past. Potential should relate to competencies while performance related to KPAs and other tasks assigned. It is only fair to create the conditions under which the individual is likely to perform the now job and test him in relation with the situation as well as his competencies

Assessment Centre
An assessment centre is a comprehensive, standardized procedure in which multiple assessment techniques such as situational exercises and job simulation (business games, discussions, reports and presentation) are used to evaluate individual employees for a variety of decisions. Most frequently the approach has been applied to individuals being considered for selection, promotion, placement or special training and development in management.

Tools used in Assessment Centre

1. Psychometric Tests
Aptitude tests (verbal & numerical reasoning) Ability tests (knowledge, awareness, problem solving) Personality tests

The tests are selected for assessment taking the following points into consideration
Objective what needs to be measured; Reliability and validity; Length of time Availability of qualified experts Cost involved

Tools used in Assessment Centre

2. Interviews:
Background interviews (current / previous jobs) Situational interviews (hypothetical/job knowledge Behavior event interviews(BEI) (behavioral description)

3. Leaderless Group Discussion:

Consists of 6 participants to solve a problem(real life) within a specified time period. No one is assigned as the chairperson/roles to team

Tools used in Assessment Centre

4. In-basket techniques:
It is a simulation exercise Day-to-day decision-making situation Memos, correspondence, telephone messages, notes, requests, etc. for participants attention. The participant asked to deal with the tasks within a time period, putting his reaction as much as possible in writing. Based on the reactions, his/her activity level, problem solving, planning, organizing, time management, delegation, etc. can be assessed.

Tools used in Assessment Centre

5. Management Games/Simulation Exercises:
A real life situation is simulated for an entire group stock trading, running a manufacturing operation. Degree of complexity varies in these games. Often a computer program is used to generate information and stimulate the game. Participants are not allowed to use the computer, but a person acts as a mediator (neutral /observer) between computer and the group. The interactive nature of the game provides strategic planning, team work & skills, leadership, analytical ability, etc. Assessor training is also very extensive

Tools used in Assessment Centre

6. Role Plays
Method of adopting roles from real situations. It can be described as method of studying the nature of certain roles by acting out its concrete details in contrived situation that permits better and more objective observation.(Pareek and Rao, 1981) Gains insights on persons attitudes and behavior in a particular role. Conflict management, leadership sills, group problem solving, team skills, flexibility can be evaluated. This technique minimizes the distortions and magnifies the situation to focus on certain aspects.

7. Presentations