PERFORMANCE MANAGEMENT AND

COMPETENCY MAPPING

PROF. SHWETA MITTAL

EVOLUTION OF PERFORMANCE APPRAISAL

There are early references to performance appraisal in America going

back over a hundred years. The federal Civil Service Commission’s
merit rating system was in place in 1887. Lord & Taylor introduced
performance appraisal in 1914.
Before World War II, however, very few organizations conducted
any formal performance appraisals.
In the 1950s Peter Drucker’s novel idea of management by
objectives (MBO) and Douglas McGregor’s book The Human Side of
Enterprise, which introduced his notions of Theory X and Theory Y,
gained a lot of attention.

A few companies moved from a mere trait assessment to the

development of a procedure that concentrated on goal setting and
made the appraisal process a shared responsibility between the
individual and the manager. From the work of Drucker and McGregor,
the performance appraisal procedure has grown to the point where a
huge majority of companies now have a formal appraisal system.
‘‘Effective development of managers,’’ McGregor wrote in a 1957
Harvard Business Review article, ‘‘does not include coercing them
(no matter how benevolently) into acceptance of the goals of the
enterprise, nor does it mean manipulating their behavior to suit
organizational needs.

Rather, it calls for creating a relationship within which a man can

take responsibility for developing his own potentialities, plan for
himself, and learn from putting his plans into action.’’
Drucker’s initial proposal of an MBO process to replace trait appraisals
and McGregor’s integration of a ‘‘Theory Y’’ approach into the
appraisal process produced a change in the way organizations went
about assessing the contributions of their members.

General Electric was singled out by McGregor as an example of a

company that was using an MBO/Theory Y approach to performance
appraisal.

GE conducted a truly scientific study in the early 1960s to test the

effectiveness of its annual, comprehensive appraisal approach.

It found that:

Criticism has a negative effect on achievement of goals.

Praise has little effect one way of the other.

Performance improves most when specific goals are established.

Coaching should be a day-to-day, not a once-a-year activity.

Mutual goal setting, not criticism, improves performance.

Interviews designed primarily to improve a man’s performance should not

at the same time weigh his salary or promotion in the balance.

Participation by the employee in the goal-setting procedure helps produce

favorable results.

These findings remain today as valid as they were when GE first developed
them.

Performance appraisal as a management tool spread quickly in the 1950s,

when about half of 400 employers surveyed reported using appraisal
systems.

Today, depending on the survey, somewhere between

three-quarters and nine-tenths of all companies use a formal performance
appraisal procedure.
Armstrong and Baron (2004) observe that performance management
establishes a shared understanding about what is to be achieved and an
approach to leading and developing people which will ensure that it is
achieved.

Performance management is a systematic and holistic approach to

identify critical dimensions of performance and to carry out activities
necessary to ensure that the missions , objectives , goals , vision , and
values of the organization are being met in an effective and efficient
Manner.
According to Armstrong, ‘PfM is a means of getting better results from
the organizations, teams and individuals by understanding and managing
performance within the agreed framework of planned goals and
competency requirements.’ It is a process for establishing shared
understanding about what is to be achieved and an approach to
managing and developing people.

PfM – Integrated Approach

Armstrong and Baron, defines PfM as a strategic and integrated approach

in delivering sustained success to organizations by improving
performance of people by developing the capabilities of teams and
individuals. These experts consider PfM as a strategic tool since it is
concerned with achievement of long-term organizational goals and
effective functioning of organizations in its external environment.
PfM effects four types of integrations namely,

Vertical Integration :- Aligning objectives at organizational , individual ,

and team levels and integrating them for effective performance.

Functional integration :- It deals with focusing functional energies , plans,

Policies , and strategies onto tasks at different levels and parts of the
organization.

Human resource integration :- This ensures effective integration of

different subsystems of HR management to achieve the organizational goals
with optimum performance.

Goal integration :- It focuses on arriving at a congruence between the needs,

Aspirations, and goals of the managers with that of the goals and objectives
of the organization.
Performance management is a continuous process of identifying ,
measuring, and developing the performance of individuals and teams
and aligning performance with the strategic goals of the organization.

EXAMPLES :- In Merrill Lynch , employees and managers set

employee objectives in the month of January.
Mid year reviews are taken.
Finally end of the year review incorporates feedback from several
sources, evaluates progress towards objectives and identifies areas
that need improvement. Managers also get extensive training on how to
set objectives and conduct reviews.

At Siemens , the performance management system is based

on three pillars : setting clear and measurable goals, implementing
concrete action, and imposing rigorous consequences.

A survey conducted by the consulting firm Watson Wyatt showed that

only 3 in 10 employees believe their company’s performance review
system actually helped them improve their performance.
Performance Management
is NOT
performance appraisal
PM is NOT performance appraisal

• Performance Management
– Strategic business considerations
– Driven by line manager
– Ongoing feedback
• So employee can improve performance
PM is NOT performance appraisal

• Performance Appraisal
– Driven by HR
– Assesses employee
• Strengths &
• Weaknesses
– Once a year
– Lacks ongoing feedback
 PERFORMANCE MANAGEMENT SYSTEM
• Performance management involves thinking through various
facets of performance , identifying critical dimensions of
performance, planning, reviewing and developing and enhancing
performance and related competencies.
It is simple, commonsensical and enjoyable.

Performance has many dimensions:-

1. Output or result dimensions
2. Input dimension
3. Time dimension
4. Focus dimension
5. Quality dimension
6. Cost dimension
Result and Output :- The most acceptable and visible as well as
measurable dimension of performance is result or the output. The sales
figures, customers numbers, financial targets etc are all stated in result
form. They are called key result areas.

Input Dimension :- The input dimension deals with the activities or tasks to
be accomplished by the individual. Performance equation says that any
individual’s is a function of three sets of factors : ability or competence to
perform various tasks that lead to performance, motivation to carry on each
of these tasks or work efforts to carry out the tasks and the organizational
support one gets to carry out these tasks.

Time Dimension :- Performance can be defined for a task, for a day , for a
week, for a month , year or for life. The time period for performance is
important. Performance management is time bound as well as role specific.
Focus :- The performance of a sales executive – focus can be on market
Share , profits or new areas covered .
Difference between Performance Appraisal Systems and PMS

PAS PMS
Focus is on performance Focus is on performance
appraisal and generation of management.
ratings.
Emphasis is on relative Emphasis is on performance
evaluation of individuals. improvements .
Annual Exercise Continuous process.
Emphasis is on ratings and Emphasis is on performance
Evaluation. planning, analysis , review,
development and
improvements.
 PAS PMS
Rewards and recognition of Defining and setting
good performance is an performance standards is an
important component. integral part.

Designed and monitored by Designed by the HR

the HR department. department but could be
monitored by the respective
departments themselves.

Ownership is mostly with the Ownership is with line

HR department. managers, HR facilitates its
implementation.
 PAS PMS
KPAs and KRAs are used KPAs or KRAs are used as
for bringing in objectivity. planning mechanisms.

Developmental needs are Developmental needs are

identified at the end of the identified in the beginning of
year on the basis of the the year on the basis of the
appraisal of competency competency requirements for
gaps. the coming year.

There are review There are review mechanisms

mechanisms to ensure essentially to bring
objectivity in ratings. performance improvements.
Performance is what is expected to be delivered by an individual or
a set of individuals within a time frame. What is expected to be
delivered could be stated in terms of result or effort, tasks and
quality , with specification of condition under which it is to be
delivered.
PERFORMANCE MANAGEMENT CONSISTS OF THE
FOLLOWING :-

1.Defining performance taking into account all the

complexities.
2.Planning performance both in terms of the input, output,
conditions under which these are to take place.

3.Analyzing performance and understanding what caused it

or contributed to it . Positively ? Negatively ?.

4. Developing capabilities to perform or the capability to give

inputs , possess competencies to convert the inputs into
desired output.
5. Monitoring and reviewing it.

6.Recognizing various dimensions of performance and

rewarding it where appropriate.
 OBJECTIVES OF PERFORMANCE APPRAISAL – THE
PAST
The appraisal system in most organizations are designed
today to meet the following objectives :
1. To control employee behavior by using it as an instrument
for rewards, punishments and threats.

2. To make decisions regarding salary increases and

promotions .

3. To appraise people confidentially and generate data

about employee for placement and promotion.

4. To identify the training and developmental needs of the

employees.
 NEW OBJECTIVES OF PERFORMANCE
APPRAISAL
Performance appraisal systems can serve the following purposes, if
designed properly:-
1. They can help each employee to understand more and more about
his role and become clear about his functions.
2. They can be instruments in helping each employee to understand his
own strengths and weaknesses with respect to his role and functions
in the company.
3. They can help in identifying the developmental needs of each
employee with respect to his role and functions.
4. They can increase mutuality between each employee and his
supervising officer.
5. They can be mechanisms of increasing communication between
employee and his supervising officer.
6. They can be instruments to provide an opportunity for the employee for self
reflection and individual goal setting so that individual planned and monitored
development takes place.

7. They can play a role in helping every employee internalize the culture , norms
and values of the organization .

8. They can help in preparing employees for performing higher level jobs.

9. They can be instruments in the creation of a positive and healthy climate in

the organization that drives to give their best and enjoy doing so.
 A SUGGESTED FORMAT

• In order to achieve these objectives the appraisal

format should have the following components:-
1. Identification of key performance areas and target
setting through periodic discussions between each
employee and his boss.
2. Identification of qualities required for the present and
future jobs in the company.
3. Self appraisal by the appraisee.
4. Performance analysis to identify factors that have
facilitated and factors that have hindered performance.
5. Performance discussion and counseling to understand
each other and assist each other.
6. Identification of training needs.

7. Action planning and goal setting for future.

8. Final assessment by the supervising officer for administrative purposes.

SEQUENTIAL STEPS

The following sequences of activities is suggested for using the components

outlined so far :

1. In the beginning of the year every employee sits with his supervisor and
identifies his individual KPAs and sets challenging targets for the next year.

2. At the end of the year the employee appraises his performance on these
KPA’s and targets as well as pre identified behaviors included in the
appraisal format.

3. He then passes on his form to his supervisor. His supervisor reflects about the
performance of his appraisee and make his notes and comments. He then calls
the appraisee for the discussion.
4. During the performance discussion they exchange notes, comments, etc and try to
understand and help each other. They also identify the development needs of the
appraisee and set goals for the next period.

5. The supervisor then gives his final ratings and recommends about the
developmental needs. He shows these to the appraisee and takes his comments if
needed and passes these on to the personnel department through his supervisor.

6. The personnel or HRD department uses these for training , rewards and other
activities.
 THE PERFORMANCE MANAGEMENT AND REWARD
SYSTEMS
A performance management system can make the following
important contributions :-

 Motivation to perform is increased

 Self – esteem is increased
 Manager’s gain insight about subordinates :- Developing
productive relationships with colleagues is a key competency
for managers.

 The definitions of job and criteria are clarified

(behavior and results )
( Specific criteria)
 Self – insight and development are enhanced
 Administrative actions are more fair and appropriate.
 Organizational goals are made clear.
Employees become more competent.

There is better and more time differentiation between good

and poor performers.

Supervisors’ views of performance are communicated more

clearly. ( There is greater accountability in how managers
Discuss performance expectations and provide feedback. Both
assessing and monitoring the performance of others are listed
as key competencies for managers)

Organizational change is facilitated. e.g :- IBM (1980s)

Motivation commitment and intentions to stay in the

organization are enhanced.
COMMENT ON THIS STATEMENT

Randy Pennington , president of Pennington Performance

Group . “ The truth is that the culture change is driven by a
change in performance. An organization’s culture cannot be
installed. It can be guided and influenced by policies,
practices , skills and procedures that are implemented and
reinforced. The only way to change the culture is to change
the way individuals perform on the daily basis.”
 DISADVANTAGES /DANGERS OF POORLY
IMPLEMENTED PM SYSTEMS
• The negative consequences associated with low –quality and
poorly implemented systems are :-
1. Increased turnover :- They can leave physically or withdraw
psychologically.
2. Use of misleading information
3. Lowered self –esteem
4. Wasted time and money
5. Damaged relationships
6. Decreased motivation to perform
7. Employee burn out and job dissatisfaction
8. Unjustified demands on managers and employees resources.
9. Varying and unfair standards and ratings
10. Emerging biases
11. Unclear rating system
 Purposes of PM Systems:
Overview

 Strategic
 Administrative
 Informational
 Developmental
 Organizational maintenance
 Documentational
 Strategic Purpose
 Link individual goals with
organization’s goals
 Communicate most crucial business
strategic initiatives
 Administrative Purpose
 Provide information for making decisions
re:
Salary adjustments
Promotions
Retention or termination
Recognition of individual performance
Layoffs
 Informational Purpose
Communicate to Employees:
 Expectations
 What is important
 How they are doing
 How to improve
 Developmental Purpose
 Performance feedback/coaching
 Identification of individual strengths and weaknesses
 Causes of performance deficiencies
 Tailor development of individual career path

Feedback is an important component of a well – implemented performance management system.

• Organizations should strive to create a “ feedback culture” that reflects support for
feedback , including feedback that is non threatening and is Focused on behaviors and
coaching to help interpret the feedback provided.
ORGANIZATIONAL MAINTENANCE PURPOSE :- Important
component of workforce planning effort is the talent inventory,
which is information on current resources ( e.g., skills, abilities,
promotional potential, and assignment Histories of current
employees). Performance management systems are the
primary means through which accurate talent inventories can be
assembled.

DOCUMENTATIONAL :-PMS allow for the documentation of

important administrative decisions.
 An Ideal PM System:
14 Characteristics
1. Congruent with organizational strategy
2. Thorough
3. Practical
4. Meaningful
5. Specific
6. Identifies effective/ ineffective
performance
7. Reliable
 An Ideal PM System:
14 Characteristics (continued)
8. Valid
9. Acceptable and Fair
10. Inclusive
11. Open (No Secrets)
12. Correctable
13. Standardized
14. Ethical
 Congruent with organizational
strategy
• Consistent with organization’s strategy
• Aligned with unit and organizational
goals
 Thorough
• All employees are evaluated
• All major job responsibilities are
evaluated
• Evaluations cover performance for
entire review period
• Feedback is given on both positive and
negative performance
 Practical

• Available
• Easy to use
• Acceptable to decision makers
• Benefits outweigh costs
 Meaningful
• Standards are important and relevant
• System measures ONLY what employee can
control
• Results have consequences
• Evaluations occur regularly and at
appropriate times
• System provides for continuing skill
development of evaluators
 Specific

Concrete and detailed guidance to

employees
• What’s expected
• How to meet the expectations
 Identifies
effective and ineffective
performance
• Distinguish between effective and
ineffective
– Behaviors
– Results
• Provide ability to identify employees
with various levels of performance
 Reliable

• Consistent
• Free of error
• Inter-rater reliability
 Valid

• Relevant (measures what is important)

• Not deficient (doesn’t measure
unimportant facets of job)
• Not contaminated (only measures what
the employee can control)
ACCEPTABILITY AND FAIRNESS :-

Distributive justice , which includes perception of the

performance evaluation received relative to the work
performed, and perceptions of the rewards received
relative to the evaluation received.

Procedural justice :- It includes perceptions of the

procedures used to determine the ratings as well as the
procedures used to link ratings with rewards.

Good systems are inherently disdiscriminatory.

 Acceptable and Fair

• Perception of Distributive Justice

– Work performed  Evaluation received 
Reward

• Perception of Procedural Justice

– Fairness of procedures used to:
• Determine ratings
• Link ratings to rewards
 Inclusive
• All participants must be given a voice in
the process of designing and
implementing the system.

• Represents concerns of all involved

– When system is created, employees
should help with deciding
• What should be measured
• How it should be measured

– Employee should provide input on

performance prior to evaluation meeting
 Open (No Secrets)

• Frequent, ongoing evaluations and feedback

• 2-way communications in appraisal meeting
• Clear standards, ongoing communication
• Communications are factual, open, honest
 Correctable

• Recognizes that human judgment is

fallible
• Appeals process provided
 Standardized

• Ongoing training of managers to

provide
• Consistent evaluations across
– People
– Time
 Ethical
• Supervisor suppresses self-interest
• Supervisor rates only where she has
sufficient information about the
performance dimension
• Supervisor respects employee privacy
 PERFORMANCE MANAGEMENT
PROCESS
There are six steps involved in the performance
management process :-
1.Prerequisites
2.Performance planning
3.Performance execution
4.Performance Assessment
5.Performance Review
6.Performance Renewal & Recontracting
 Performan
Prerequisit
ce
es
Planning
P
Performan
ce
Performance Management Process
Execution
Performan PPerforma
ce Renewal nce
and Assessmen
Recontracti Performan t
ng ce Review
1. Prerequisites :- There are two prerequisites that are required before a
performance management system is implemented :-

A) Knowledge of the organization’s mission and strategic goals

B) Knowledge of the job in question

Strategic planning allows an organization to clearly define its purpose or reason for
existing, where it wants to be in future, the goals it wants to achieve, and the
strategies it will use to attain these goals.

The important objective of any PMS is to enhance each employee’s contribution to

the goals of the organization.

The second important prerequisite is to understand the job in question. This is

primarily done by job analysis.

As a result of a job analysis, we obtain information regarding the tasks carried out
and the knowledge, skills, and abilities (KSAs ) required of a particular job.
Job descriptions are a key prerequisite for any performance
management system because they provide the criteria
(i.e. yardsticks) that will be used in measuring performance.
2. Performance Planning :- In the beginning of each performance
cycle, the supervisor and the employee meet to discuss , and
agree upon , what needs to be done and how it should be done.
This performance planning discussion includes a consideration of
both results and behaviors as well as a developmental plan.

Results refer to what needs to be done or the outcomes an employee

must produce. A discussion of results needs to include key
accountabilities, specific objectives for each accountability and
performance standards.
 Performance Planning:
Results
Key accountabilities

Specific objectives

Performance standards
 Key Accountabilities

Broad areas of a job for which

the employee is responsible
for producing results
 Specific Objectives

 The objectives are that the

employee will achieve as part of
each accountability.
 Objectives are statements of
important and measurable
outcomes.
 Performance Standards
• “Yardstick” to evaluate how well
employees have achieved each
objective
• Information on acceptable and
unacceptable performance.
 Performance Planning:
Behaviors
How a job is done
 Performance Planning:
Competencies
• Measurable clusters of KSAs

• Critical in determining how results will be

achieved

• Examples of competencies are customer

service , written or oral communication,
creative thinking and dependability
 Performance Planning:
Development Plan
 Areas for improvement
 Goals to be achieved in each area
of improvement
3. Performance Execution :- At the performance
execution stage , the following factors must be
presented :-

Employee Responsibility

 Commitment to goal achievement

 Ongoing performance feedback and coaching
 Communication with supervisor
 Collecting and sharing performance data.
 Preparing for performance reviews
Supervisory have primary responsibility over the following
issues :-

Observation and documentation

Updates

Feedback

Resources

Reinforcement
EXAMPLE :- Lockheed Martin Corporation , PMS includes
the active participation of both employees and their
supervisors.

Employees write their own performance management

objectives based on organization and unit objectives. Then ,
managers approve the objectives and are encouraged to give
ongoing feedback about the progress toward meeting the
objectives.
4. PERFORMANCE ASSESSMENT :- In the assessment phase, both the employee
and the manager are responsible for evaluating the extent to which the desired
behaviors have been achieved.

There are many sources to collect performance information

( e.g. peers, subordinates ), in most cases the direct supervisor provides the
information.
 Multiple Assessments Are
Necessary
Employee involvement in the process is
used for the following purposes :-

 Increase employee ownership

 Increase commitment
 Provide information
 Ensure mutual understanding
 Performance Review
Overview of Appraisal Meeting
The performance review stage involves the meeting
between the employee and the manager to review their
assessments.

• Past
Behaviors and results

Present
– Compensation to be received

• Future
– New goals and development plans
 Performance Renewal and
Recontracting
• Same as/different from Performance
Planning
– Uses insights and information from
previous phases
– Cycle begins again
Phase I – Planning

Setting Performance Objectives

Employees and managers meet to clarify expected outcomes
for the year and set objectives that link the employee’s job to
department and campus objectives. Objectives define “what”
employees are expected to accomplish. Managers and
employees should aim to define S.M.A.R.T. objectives.
Specific
Measurable
Attainable
Relevant
Timely
Phase II – Check-In

Once performance objectives are set, managers should

check in regularly with employees to discuss the status of
objectives and to provide feedback based on observations
of an employee’s performance. It is equally important to
provide feedback on areas of success as on those
requiring improvement.

Phase III – Assessment

The performance assessment summarizes the employee's
contributions over the entire appraisal period (usually one
year). It may occur as often as is necessary to
acknowledge the employee for accomplishments and to
plan together for improved performance
 DEFINING PERFORMANCE AND CHOOSING A
MEASUREMENT APPROACH

Performance management systems usually include

measures of both behaviors ( what an employee
does ) and results ( the outcomes of an employee’s
behavior ). The definition of performance does not
include the results of an employee’s behaviors, but
only the behaviors themselves.
The characteristics of the behaviors are :-
1. Evaluative :- It means that such behaviors can be
judged as negative , neutral or positive for individual
and organizational effectiveness.
2. Multidimensional :- It means that there are many
different kinds of behaviors that have the capacity to
advance ( or hinder ) organizational goals.
EXAMPLE

Consider a set of behaviors that can be grouped under the

general label “ contribution to effectiveness of others in the
work unit”.

This set of behaviors can be defined as follows :

Works with others within and outside the unit in a manner

that improves their effectiveness; shares information and
resources; develops effective working relationships: builds
consensus; constructively manages conflict.
DETERMINANTS OF PERFORMANCE

A combination of 3 factors allows some people to perform at

higher levels than others :
1.Declarative knowledge
2. Procedural knowledge
3. Motivation

Declarative knowledge is information about facts and things ,

including information regarding a given task's requirements , labels
, principles, and goals.

Procedural knowledge is a combination of knowing what to do and

how to do it and includes cognitive, physical , perceptual, motor ,
and interpersonal skills.

Motivation involves 3 types of choices

1. Choice to expend effort.
2. Choice of level of effort
3. Choice to persist in the expenditure of that level of efforts.

The three determinants have a multiplicative relationship,

Such that,

Performance = Declarative knowledge * Procedural knowledge

*Motivation.

Deliberate practice involves the following 5 steps:-

1. Approach performance with the goal of getting better
and better.
2. While performing , focus on what is happening and why u are
Doing things the way u do.
3. When the task is finished, seek performance feedback
from expert sources and the more sources the better.

4. Build mental models of your job, your situation and

your organization.

5. Repeat steps1-4 continually and on an ongoing basis.

IMPLICATIONS FOR ADDRESSING PERFORMANCE PROBLEMS

Performance management system need not only to measure

performance but also to provide information about the source of
any performance deficiencies.
PERFORMANCE = declarative knowledge * Procedural knowledge * Motivation

FACTORS DETERMINING PERFORMANCE

Declarative Procedural Motivation

knowledge knowledge
Facts Cognitive skill Choice to
perform
Principles Psychomotor Level to
skill effort
Goals Physical skill Persistence
of effort
Interpersonal
skill
PERFORMANCE DIMENSIONS

Performance is multidimensional .It means that there is a need to

consider many different types of behaviors to understand performance.
Two types of behaviors or performance facets stand out :

Task performance
Contextual performance

Task performance is defined as :-

Activities that transform raw materials into the goods and services that
are produces by the organization.

Activities that help with the transformation process by replenishing the

supply of raw materials , distributing its finished products, or providing
important planning , coordination , supervising, or staff functions that
enable the organization to function effectively and efficiently.
Contextual performance is defined as those behaviors that
contribute to the Organization’s effectiveness by providing a
good environment in which task performance can occur.
Contextual performance includes behaviors such as the following :-

Persisting with enthusiasm and exerting extra effort as necessary to

complete one’s own task activities successfully.

Volunteering to carry out task activities that are not formally part of the
job.

Helping and cooperating with others.

Following organizational rules and procedures.

Endorsing , supporting , and defending organizational objectives.

TASK PERFORMANCE CONTEXTUAL PERFORMANCE
VARIES FAIRLY SIMPLE
ROLE PRESCRIBED NO ROLE PRESCRIBED
ANTECEDENT:KSA PERSONALITY
The reasons why both task and contextual performance
dimensions should be included in performance management
System :-

1. Global competition is raising the levels of efforts required

of employees.

2. There is a need to offer outstanding customer service.

3. Many organizations are forming employees into teams.

Interpersonal cooperation is a key determinant of team
effectiveness.

4. Both task and contextual performance in the performance

management system provides an additional benefit.
EXAMPLE :- TRW Automotive Inc., one of the world’s largest
automotive suppliers and one of the top financial performers
in the industry.
The majority of the TRW behaviors actually focus on
contextual performance.
Specifically , the TRW behaviors emphasize many of the
elements of contextual performance including trust and
teamwork.

The case of O2 Ireland, Ireland’s second largest mobile

phone operator. Headquartered in Dublin. O2’s PMS includes
Task – related facets centered in hard metrics regarding
productivity as well as contextual – related facets such as
involvement in staff socialization and contribution to team
Development.
O2 concluded that this focus on both task and contextual
performance has led to higher levels of customer service and
employee satisfaction.
 Job Performance in Context

Engages
That
A in
In a produce
perform certain
given various
er behavi
situati results
(individu ors
on
al or
team)
TRAIT BEHAVIOR RESULTS
 Approaches to Measuring
Performance
• Trait Approach
– Emphasizes individual traits of
employees
• Behavior Approach
– Emphasizes how employees do the job
• Results Approach
– Emphasizes what employees produce
 Trait Approach

• Emphasis on individual
• Evaluate stable traits
• Cognitive abilities
• Personality
• Based on relationship
between traits & performance
 Trait Approach (continued)
• Appropriate if
• Structural changes planned for organization
• Disadvantages
• Improvement not under individual’s control
• Trait may not lead to
• Desired behaviors or
• Desired results
 Behavior Approach
Appropriate if
• Link between behaviors and results
is not obvious
• Outcomes occur in the distant future
• Poor results are due to causes
beyond the performer’s control
Not appropriate if
• above conditions are not present
 Results Approach
Advantages:
• Less time
• Lower cost
• Data appear objective
RESULTS APPROACH

The result approach is most appropriate under the following circumstances :-

 Workers are skilled in the needed behaviors :- An emphasis on results is

appropriate when workers have the necessary knowledge and skills to do the work.

 Behaviors and result are obviously related :- Certain results can be

obtained only if a worker engages in certain specific behaviors.

 Results show consistent improvement over time :- When results improve

consistently over time, it is an indication that workers are aware of the behaviors
needed to complete the job successfully.

 There are many ways to do the right job :- When there are different ways in
which one can do the tasks required for a job, a result approach is appropriate.
Shaping the Bell Right
 Vitality Curve
• The Normal Distribution Curve is used as tool in
measuring human capacities, Pioneered by the
leader Jack Welch former CEO of GE
• It is a differentiation tool used to assess an
employee’s performance and promotability
• Jack called it as ‘Vitality Curve'. Also known as
- Dead man’s Curve
- Forced ranking
- Rank and yank
- Up or Out
 Grading the curve
• The employee force is ranked into a 20-
70-10 bucket.
• Where 20 percent are rated as 'excellent‘
• 70 percent as the ‘vital’ - back bone of
the company
• 10 percent as ‘bottom-feeders’
Cont..
Illustratively, it is to show appraisers that,
1. Not more than 10% should be promoted
in each department
2. Least 10% must be weeded out for low
performance;
3. The rest being rated from average, good
to very good.
The Dead Man’s Curve
Also referred to as 9 Block
 Advantages of Vitality Curve in
PAM
• It brings objectivity to the PAM process
• It helps in normalization of the appraisal process
• It lends itself to predictable performance patterns
• It guides appraisers on how to follow an uniform
rating process/pattern
• It helps management in planned attrition and in
predicting promotions/job enlargements/job
enrichments/rewards/incentives, etc.
Cont..
• It systematically identifies high performers for
commensurate rewards and identifies low/weak
performers for training/forced attrition.

• On a predictive index, it provides a bird's eye

view of the uniform, systematic performance
patterns across grades/levels/functions in the
organization.
 Disadvantages of Vitality Curve in
PAM
• It seems rigid and impractical, especially for
small/medium. It may reduce organizational
flexibility.
• It does not promote 'performance adjustments'
• It makes 'extreme raters" skeptical since it does
not allow them to rate as they wish causing anxiety
or discontentment
• It may be difficult to simulate/follow since
outstanding performers or weak performers may
not essentially be 10%-20% , year-on- year.
Cont..
• The methodology may not be easily understood
by all appraisers
• Training inadequacy in appraisers may yield
disastrous results
• Implementation may be difficult since HR has to
ensure constant compliance.
• Being a 'forced-distribution' method, it may face
dissent from appraisers
• It may not adjust well with skill/managerial
demand-supply situations
 Arguments against the use of
vitality curve in PAM
• Unethical - Forcing a certain section of employees
every year is unethical says Praneet Mehrish, Country
Human Resource Director, ST Microelectronics Ltd.

• Subjective - Since the bell curve is applied, not across

all the employees, but to individual department / team
/ function, there is a good chance that the worst in the
high performing group may be better than the best in
an average performing group. Finally, the company may
be left with low performers, while losing some good
ones, says Hari Mohan Jha, VP (HR), ITC Welcome
Group Hotels
Cont..
• Not compatible for small teams - Logically too, such a
model cannot work for a very small group of extremely
high or low performers for the simple reason that it
force-fits them into predefined compartments. If it
works, it can work only for a large, randomly selected
sample, says Madhukar Shukla, Professor, XLRI

• Dysfunctional work environment - Bell curve method

may increase productivity and pave growth
opportunities for good performers, it also creates a
sense of fear among those who remain behind says Ed
Lawler of Enron
 Before you Bell the Curve..
• Use objective parameters for the performance
appraisal system.
• Confront the employee. There could be reason
for his / her poor performance.
• Shift the onus of improvement onto the
employee, but offer your assistance if needed.
• Follow up frequently.
• Finally, document all performance-related
conversations you have had with the employee
in order to have important evidence on your
side if he or she contests the termination.
Balanced Scorecard
A new approach to strategic management was
developed in the early 1990's by Drs. Robert Kaplan
(Harvard Business School) and David Norton. The
balanced scorecard approach provides a clear
prescription as to what companies should measure in
order to 'balance' the financial perspective.
Balanced Scorecard is the Management System that
enables organisation to clarify their vision and strategy
and translate them into action.It provides feedback on
both internal process abd external outcomes in order to
continously improve strategic performance and results.
Kaplan and Norton describe Balanced Scorecard
as: “ Balanced scorecard retains traditional financial
measures. But financial measures tell the story of
past events, an adequate story for industrial age
companies for which investments in long-term
capabilities and customer relationships were not
critical for success. These financial measures are
inadequate, however, for guiding and evaluating the
journey that information age companies must make
to create future value through investment in
customers, suppliers, employees, processes,
technology, and innovation.”
 Financial Perspectives

Customer Business Process

Perspectives Vision and Perspectives
Strategy

Learning and Growth

perspectives
 Explanation of the 4 perspectives

Financial Perspectives:
•Revenue Growth, Profit
• Cost Reduction
• Productivity Improvement
• Asset Utilization
• Investments
 Learning and Growth perspective
• Learning and growth constitute the essential foundation for
success of any knowledge-worker organization.
• Employee training and corporate cultural attitude related to
both individual and corporate self-improvement.
• It includes things like mentor and tutors, within the organization
as well as ease of communication among workers that allows
them to readily get help on a problem when it is needed.
• It includes technological tools “high performance work system”
 Learning and growth Perspective

Core Measurement
Results

Employee Employee
Retention Productivity

Employee
Satisfaction

Enablers

Staff Technology Climate of

Competencies Infrastructure Action
 Business Process Perspective
Critical internal process in which organization must deal. These
processes enable to deliver the value propositions to customers
and satisfy stake holders expectations.
Innovation Process
- Product Design
- Product Development
- Process Implementation
• Operating Process
- Manufacturing
- Marketing
- After Sale Service
 Customer Perspective
• Due to increasing realization of customer focused
and customer satisfaction in any organization
therefore developing the metrics for satisfaction
customers should be analyzed in terms of kind of
customers and kind of processes for which we are
providing a product or service to those customers
groups.

In today’s business scenario “Customer is the king”

 Customer perspective
• Customer Satisfaction
• Customer Retention
• New Customer Acquisition
• Customer Profitability
• Market Share
• Measures of value Proposition to customer
- Short Lead Time
- On Time Delivery
- Innovative Products
- Anticipating Needs
Customer Perspective – Core Measure

Market Share

Customer Customer Customer

Acquisition Profitability Retention

Customer
Satisfaction
 Summary

Financial
Revenue
Perspective
Customer
Customer Loyalty
Perspective
On Time
Delivery
Internal
Process Process Cycle
Process Quality
Time

Learning and
Growth Employee Competitiveness
SL.NO. PERSPECTIVE MEASURES
1 FINANCIAL * Return on Investment
* Revenue per employee

2 CUSTOMER * Customer Satisfaction

* Customer Loyalty
* Total cost to customer
* Price relative to competition
* Hours spent with customer
* Market Share

3 INTERNAL PROCESS * Response time (From Reception to Bed)

* Quality of services rendered.
* Bill Processing time
* Bill Processing accuracy
* Cost of unutilized capacity.

4 LEARNING & GROWTH * Absenteeism

* Turnover rate
* Employee Productivity
* Training Hours
* Leadership Development
* Percentage of employees with advanced degrees.
* Average years of service
* Number of cross-trained employees
* Internal communication rating
Challenges in Executing Strategy

Financial Management
Tools
Balance Sheets Process Management
Income Statements Tools
Statement of Cash Flow Six Sigma
Supply Chain Management Strategy Management
TQM Tools

???
Customer Management
Tools People Management
CRM Tools
Customer Segment Analysis MBO
Customer Surveys Training Programs
HRIS
360 Feedback
 The Balanced Scorecard

Train and Communicate Strategy

Set goals, select performance measures and link

measures to incentives
Feed
Forward
Learning
Set target for each goal and re-deploy resources to
activities and initiatives to achieve targets

Provide feedback on performance and

learn from results
 The Balanced Scorecard
• A robust tool – but keep it simple!
• Makes strategy tangible –everyone’s job!
• Tracks what’s important – hits and misses
• Measurement-lead management
• Provides feedback for short-term course
corrections and long-term learning
 Balanced Scorecard Perspectives

A. Financial
How do we succeed financially?
B. Customer
How do we appear to our customers?
C. Internal Process
At what processes must we excel?
D. Learning and Growth
How do we sustain our ability to change and grow?
We Use the Scorecard to Articulate Strategic
Hypotheses in Cause-effect Terms
And Realize
the Vision

Financial
To Drive Financial
Results Success...

Customer
Benefits Needed to Deliver Unique
Sets of Benefits to Customers...

Internal
To Build the Strategic Capabilities..
Capabilities

Knowledge, Skills, Systems, and Tools Equip our People...

 Balanced Scorecard Perspectives

Financial
How do we Objectives Measures Target
appear to our
Stockholders?
Vision
C u s to &m e r Internal Busi
H ow d o w e ea su resAtTarg
O b jec tivesMStrategy whatets
internal O bjectives Me
In itiatives
ap p ear to o u r processes m ust
C u s tom ers ? we excel?

Learning and G ro wt
H ow d o we O b jectives M easu res Tar
su stain ou r
ab ility to ch an g e
 Cascading Scorecards
to Build Alignment

Organization

Business Business Business

Unit Unit Unit

Teams

Individual Contributors
 Sound Long-Term
Financial Fiscal Budgeting Investment
Mgmt Strategy

Relationship Brand
Product/Services
Customer – The Value Price Selection
Partnership Image
Proposition TheQuality
Value Proposition
Availability Services

Customer Mgmt Innovation Operational Excellence

Deepen Knowledge New learning Admin excellence
about customer Partnerships Network of supplier for
Internal Process Attract Future needs Products & services
Retain Adaptability
Grow Relationship

Climate for Action Competencies

Learning & Growth Personal Growth Functional Excellence
Leadership Skills
Strategic Readiness
 Scorecard Information

Perspective: Financial / Customer / Internal Process / Learning&Growth

Information Type Are…. Example is…

Strategies High Level Goals Increase Market Share

Objectives Measures of action plans Increase Customer

Satisfaction
Measures Indicates success or Average Customer Rating
failure (scale of 1-10)
Targets Desired level of Achieve 9.9 of 10 Average
performance for a Customer Rating
measure
Initiatives Management actions Train CSR Staff in Problem
taken to achieve target Resolution Skills
 The TCS Model

Source: Human Capital Vol.9 No.12 May 2006 ‘Redefine the HR Agenda’
 Vision
• Global Top 10 by 2010 in the IT Industry

Mission
Customer delight by providing best-in-class consulting, IT solutions & services and also delivering value and joy to all stakeholders.
•
 FINANCIAL PERSPECTIVE
Shareholder
Value

Human Capital Human Resource

Effectiveness Efficiency

CUSTOMER PERSPECTIVE

Customer Employee
delight delight

INTERNAL PROCESS PERSPECTIVE

Manage Customer
relationships
Deliver world Manage Operating
class services efficiency

Competencie Cultural Climate Team

s Integration
Strategic Alignment
Leadership
/Motivation
LEARNING & GROWTH PERSPECTIVE

Work Capability
 Keys to Success
• Educate your Executive and Teams
• Devise the right metrics
• Follow through to completion
• Start small!
small – Report immediately
• Don’t over measure
 Getting Started – Customize Your BSC

1. Describe the strategy – burning platform?

– Strategy Map
2. Measure the strategy
– Develop the measures; critical data points
3. Manage the strategy
– Gather detailed information about the measure
and initiative
 The Successful Scorecard…
• Is a dynamic process –
– continues to set higher targets and achieves them –
• Define jobs strategically
– from the perspective of where it fits in with the
strategic business goals
• Supports joint decision
– making about what you do/don’t do based on strategic
goals
Questions?
 PERFORMANCE
APPRAISAL METHODS
 What to Evaluate?
• Traits Measures
– Are an assessment of what the employee is, not what
the employee actually does.
• Behavior-based measures
– Focus on what an employee does and what the
employee should do differently.
• Results-based measures
– Focus is on accomplishments or outcomes that can be
measured objectively. Problems occur when results
measures are difficult to obtain, outside employee
control, or ignore the means by which the results were
obtained.
 How to Evaluate?

• Relative Assessment
– Employees are measured against other
employees and ranked on their distance from
the next higher to the next lower performing
employee.
• Absolute Measurement
– Employees are all measured strictly by
absolute performance requirements or
standards of their jobs.
•• Comparative
Comparative
–– Ranking
Ranking
–– Paired
Paired Comparison
Comparison
–– Forced
Forced Distribution
Distribution Apprais
•• Absolute
Absolute
–– Critical
Critical Incident
Incident al
–– Narrative
Narrative Essay
Essay
–– Checklist
Checklist Method
–– Graphic
Graphic Rating
Rating Scale
Scale
(GRS)
(GRS)
–– Behaviorally
Behaviorally Anchored
Anchored
s
Rating Scales
Rating Scales (BARS)
(BARS)
–– Behavioral
Behavioral Observation
Observation
Scales (BOS)
Scales (BOS)
–– Forced
Forced Choice
Choice
•• Objectives
Objectives
 COMPARATIVE METHODS
• Ranking

• Alternation Ranking

• Paired Comparison

• Forced Distribution
Alternation ranking
ADVANTAGES

Its advantages include ease of administration and

explanation.

DISADVANTAGES

The how and why u have rated A better than B is not

questioned.

There is no attempt to fractionalize what is being appraised

into component elements.

It is subject to the halo and recency effects.

PAIRED COMPARISON METHOD

The paired comparison method is a systematic method

where each employee is compared with all other employees
in the group, for each trait, one at a time.
 PAIRED COMPARISON:
For the trait “Creativity”
ARUP BHAVANA CHARLES DILIP EESHWAR

ARUP
+ + _ _
BHAVANA
_ _ _ _
CHARLES
_ + + _
DILIP
+ + _ +
EESHWAR
+ + + _
MERITS

Simplest method

Need no specialist knowledge or skill

Complete ranking of all employees

Demerits

Time consuming and cumbersome for appraisers.

Suitable for small organization with limited number of

employees.
 FREE ESSAY

• It is a narrative appraisal method and is based on

absolute standards

• It describes an employee's actions rather than

indicating an actual rating

• The intent is to allow the rater more flexibility than

other rating methods do.
 The Process
• A job is broken up into various general
dimensions. Each dimension is followed by some
space where the rater has to write an essay on
that dimension
• These essays concentrate on performance
strengths and weaknesses, identify
developmental needs and also suggest courses
of remedial action
• These essays can either be composed alone or
in collaboration with the appraisee
 Narrative Forms

• Final appraisals
are frequently
written in a
narrative form
• Supervisor rates
employee by
describing the
behaviour related
to each factor
The appraiser takes note of these factors :-

1. Job knowledge and skills exhibited by the appraisee

while performing his job.

2. Appraisee’s relationship with other employees and Manager.

3. Appraisee’s personality traits and attitude toward his job,

peers , manager and the organization.

4. Appraisee’s understanding and commitment to organization’s

goals and objectives; and

5. Appraisee’s potential for future organizational roles.

MERITS

1. More closed evaluations of employee’s work and performance.

2. Employee performance and work behaviors are documented
in detail.
3.Facilitates design of performance improvement programme
with ease given ready availability of performance records.

DEMERITS

1. Incorrect sentence construction can give a different

impression.
2. Maintaining a diary for noting performance of employees
on regular basis increases cost of supervision and reduced
time for performing critical managerial activities.
3. Honesty of appraiser in recording and reporting employee
performance is central to the effectiveness of this method.
CRITICAL INCIDENT METHOD
• Critical incidents are behaviors that result in good or
poor job performance.
• The rater records all such incidents and the ratee’s
involvement in it.
• The rater plays the role of ‘Observer’ rather than
‘Judge’.

• For eg.
 “I saw Mishra closing the steam line valve at the
instant the pipeline burst. We could save a lot of
lives due to the above factor.”
The critical incident method makes the supervisor think about
the subordinate’s appraisal all during the year
(so the rating does not reflect the employee’s most recent
performance).

The critical incident method provides the list which has

numerous examples of what specifically the subordinate
can do to eliminate deficiencies.

The downsize of this method is that without numerical rating ,

this method is not too useful for comparing employees or for
salary decision.
 RECORDING CRITICAL
INCIDENTS
• Should be Specific
• Focus on Observable behaviours that
have been exhibited on the job
• Describe the Context in which the
behaviour occurred
• Indicate the Consequences or Outcomes
of the behaviour
ADVANTAGES

1. The evaluation is based on actual job behavior. The approach

has descriptions in support of particular ratings of an employee.

2. Job related feedback to the ratee is also easy.

3. It also reduces the recency bias, if raters record incident

throughout the rating period.

4. This approach can increase the chances that the subordinate

will improve because they learn more precisely what is
expected of them.
LIMITATIONS

1.Negative incidents are generally more noticeable than

positive ones.

2. The recording of incidents is a chore to the supervisor and

may be put off and easily forgotten.

3. Overly close supervision may result.

4. Managers may unload a series of complaints about

incidents during an annual performance review session.
 CHECKLIST & WEIGHTED
CHECKLIST
• This method requires the rater to select statements or
words that describe the employees performance or
characteristics.
• Checklists consist of groups of statements that pertain
to a given job.
• Raters check statements most representative of the
characteristics and performance of an employee.
 STEPS IN CONSTRUCTION
• Generate a large no. of behavioural
statements relevant to work
– These should represent all levels of
effectiveness
– Rules to follow
• Express only one thought per statement
• Use understandable terminology
• Eliminate double negatives
• Express thoughts simply and clearly
MERITS

1. It is economical.
2. It is easy to do the administration.
3. The rater doesn't require much of the training.
4. It is standardized.

DISADVANTAGES

1. It doesn't allow the rater to give up relative ratings

2. The use of improper weights.
3. Misinterpretations of checklist items.
When points are allotted to the checklist , the technique
becomes a weighted checklist.
 GRAPHIC RATING SCALE
(GRS)
In a Graphic Rating Scale, the rater assesses a
ratee on performance-related characteristics and
personality characteristics,

ie. factors like quantity of work, dependability, job

knowledge, cooperativeness, ability to lead,
interpersonal skills, etc. by using a rating scale.
A graphic rating lists traits ( such as quality and reliability ) and
a range of performance values ( from unsatisfactory
to outstanding ) for each trait.

The supervisor rates each subordinate by circling or checking

the score that best describes his or her performance for each
trait. The assigned values for the traits are then totaled.
 Issues in constructing GRS
Selecting the characteristics to evaluate
• Deciding the number of points on the scale
• Scaling the characteristics
• Providing descriptions for each criteria and
each point on the scale
MERITS

1. It is easy to use.
2. It is easy to understand
3. Many employees can be evaluated.

DEMERIT

1. The rater can be biased.

2. There is an implication that a high score on one factor
can compensate for a low factor on another.
FORCED CHOICE SCALE
 What is the Forced Choice
Method ?
• A rating technique specially designed to increase
objectivity and to decrease biasing factors in
ratings.
• It comprises of the use of statements that are
grouped into sets according to certain statistical
properties.
• Rater is “forced” to select from each group of
statements a subset (usually 2) of those
statements that are “most descriptive” of each
ratee.
For eg.
• Aim of lesson is clearly presented
• Repeats questions to whole class before answering
• Conducts class in orderly manner
• At ease before class

• Is patient with slow learners

• Lectures with confidence
• Keeps interest and attention of class
• Acquaints class with lesson objective in advance
 Forced-Choice Format
• Items for forced-choice scales are arranged
according to two statistical properties of each of
the statement.

 Favourability Index (FI)

 Discriminability Index (DI)

 Discriminability Index – DI
Favorability Index - FI
FI = Indicates the extent to which a statement reflects the
niceness, attractiveness, or social desirability of the
behaviour or characteristic it describes.

DI = Reflects the extent to which a statement describes a

behaviour or a characteristic that distinguishes superior
employees from others.
 Forced Choice Scale

• A tetrad of four statements is provided

• In the tetrad all the 4 statements have equal
favourability
• 2 statements have significantly greater
discriminating power than the other 2.
 DI & FI
STATEMENT DI FI
At ease before class 0.53 2.35
Conducts class in orderly manner 1.20 2.22
Repeats questions to whole class before 0.57 2.29
answering
Aim of lesson is clearly presented 1.14 2.38

STATEMENT DI FI

Is patient with slow learners 1.15 2.82

Lectures with confidence 0.54 2.75

Keeps interest and attention of class 1.39 2.89

Acquaints class with lesson objective in 0.79 2.85

advance
 Advantages of the method
• Difficulty in deliberately distorting ratings in
favor of or against particular individuals
because raters have no idea which statements
of each group will ultimately result in higher (or
lower) ratings.
• Research has proved that ratings from this
method were a more valid measure of real
worth than ratings from other formats used
earlier.
 Why is it not popular among
raters?

• Raters prefer other methods as with this method

they cannot determine whether they are rating
their best people high or their worst people low.
• Inability to make an evaluation or a direct rating
can be frustrating to raters.
ASSESSMENT CENTRE METHOD

This method is used to test candidates in social situation,

using a variety of procedures and number of assessors. The
most important feature of the assessment centre is job
related simulations.

Assessment centers are used for the following purposes:-

1. To measure the potential for first level supervisors, sales

and upper management positions, and also for higher levels
of management for development purposes.
2. To determine the individual training and development needs
of employees.
3. To select recent college students for entry level positions.

4. To make an early determination of potential.

6. To assist in implementing affirmative action goals.

MANAGEMENT ASSESSMENT CENTRES

A management assessment centre is a two to three day

simulation in which 10 to 12 candidates perform realistic
management tasks under the observation of experts who
appraise each candidates leadership potential.

Typical simulated exercise include :-

The in- basket

Leaderless group discussion
Management games
Individual presentations
Objective tests
The interview
DEMERITS

1. Assessment centers are costly.

2. Assessment centre staff are often influenced by subjective
elements such as personality of the candidates.
3. The approach involves real hazards i.e. examination
taking syndrome.
4. Employees who receive a poor report from the centre may
react in negative ways.

A well conducted assessment centre can and does achieve

better forecasts of future performance and progress than other
methods of appraisal.
The reliability, content validity , and predictive are said to be
high in the assessment centers.
 BEHAVIORALLY ANCHORED
RATING SCALES (BARS)
• Developed by Patricia Cain Smith and Lorne
Kendall
• A series of continuous graphic rating scales
arranged vertically
• Behavioural descriptions exemplifying various
degrees of each dimensions serve as anchors
on the scale
• Designed to allow superiors to be more
comfortable while giving feedback
 BARS Dimension:
Quality of Group
Member Input

5 Group member has read all agreed-upon

Effective
Material and gives valuable ideas.
4 Group member has read some agreed-
upon material
3 Group member participates in discussions,
though not always prepared
Group member does little work and offers
2
no valuable ideas or feedback
Ineffective
1 Group member does not attend any meeting
 The Steps in BARS development

• GENERATE CRITICAL INCIDENTS : Ask

persons who know the job (job holders,
supervisors) to describe specific illustrations of
effective and ineffective performance.

• DEVELOP PERFORMANCE DIMENSIONS :

Have them cluster the incidents into a smaller
set of 5 or 10 performance dimensions, and
define each dimension.
 The Steps in BARS development
(contd.)
• REALLOCATE INCIDENTS : Another group of
people who also know the job then reallocate the
original critical incidents.
– They get the cluster definitions and the critical
incidents in a jumbled manner
– They reassign each incident to the cluster they think
it fits best.
– A critical incident is retained if some percentage
(usually 50% to 80%) of this second group assigns it
to the same cluster as did the first group.
 The Steps in BARS development
(contd.)
• SCALE THE INCIDENTS : the second group then rates the
behavior described by the incident as to how effectively or
ineffectively it represents performance on the dimension ( 7-
to 9-point scales are typical)
• DEVELOP A FINAL INSTRUMENT : choose about 6 or 7 of
the incidents as the dimension’s behavioral anchors.
ADVANTAGES :- While more time –consuming than other
appraisal tools, BARS seems to have some advantages :-

1. A more accurate gauge :- People who know and do the job

and its requirements better than anyone develop the BARS.
This should produce a good gauge of job performance.

2. Clearer standards :- The critical incidents along the scale

make clear what to look for in terms of superior performance, average
performance , and so forth.

3. Feedback :- The critical incidents make it easier to explain the

ratings to appraises.

4. Independent dimensions :- Systematically clustering the critical

incidents into five or six performance should help to make the
performance dimensions more independent of one another.

5. Consistency :- BARS based evaluation seem to be relatively

reliable , in that different raters appraisals of that same person tend
to be similar.
Disadvantages

1. A specific deficiency is that the behaviors used are activity

oriented rather than results oriented.

2.It is time consuming and expensive to create BARS.

 MANAGEMENT BY
OBJECTIVES
• The use of Management By Objectives was first
widely advocated in the 1950s by the noted
management theorist Peter Drucker.

• MBO methods of performance appraisal are results-

oriented i.e., they seek to measure employee
performance by examining the extent to which
predetermined work objectives have been met.
In the 90s, Peter Drucker put the significance of this organization
management method into perspective, when he said: "It's just another tool.
It is not the great cure for management inefficiency... Management by
Objectives works if you know the objectives, 90% of the time you don't

Management by objectives (MBO) is a systematic and organized approach

that allows management to focus on achievable goals and to attain the
best possible results from available resources.

It aims to increase organizational performance by aligning goals and

subordinate objectives throughout the organization. Ideally, employees get
strong input to identify their objectives, time lines for completion, etc. MBO
includes ongoing tracking and feedback in the process to reach objectives.
Management by Objectives (MBO) was first outlined by Peter Drucker in
1954 in his book 'The Practice of Management'.
MBO PROCESS
1. Develop overall organizational
goals

2. Establish
specific goals for various
departments subunits and individuals

3. Formulate action plans

4. Implement plans and maintain self-control

5. Review progress periodically

6. Appraise performance
1. Develop overall organizational Goals: - The first step in the
process of MBO in an organization is to establish verifiable
objectives which are based on the mission and vision of the
organization . These are the strategic goals which are set by
the top management and address the targets to be achieved
by the whole organization.

2. Establish specific goals or objects for various Departments

and Individuals: - The goals are set for the various positions
at various levels. In this stage the superiors formulate the
objectives that they plan to achieve in their own department.
Most of the times the organization follow the top –down
approach just described, some organizations even go for
the bottom up approach, in which goals are suggested by
the lower levels what they believe they can achieve.
3.Formulate Action Plans: - An action plan describes what is
to be done, where, when, how and by whom to achieve the
objectives. Action plan helps in accessing the feasibility of
achieving the goals. Subordinates usually develop themselves
with the support of their supervisors.

4.Implement and maintain self- control :- When the goals are

set and action plans determined , individuals should be
given enough freedom to carry out their activities. But
supervisors need to be kept informed about the progress and
any difficulty that arise.

5.Review Progress Periodically: - MBO ensures periodic

meetings between the superiors and the subordinates to
review the progress towards the accomplishment of targets
of the subordinate. It is important that the plans are
implemented and the targets will be achieved.
 6.Appraise Performance :- The appraisal focuses on what
extent the goals are achieved as well as on the shortfalls .
It also ponder what are the reasons of not accomplishing
the expected goals and what measures can be taken to
overcome them.

Goals and plans for the next cycle may also be discussed
at this point.
Strengths of MBO

• MBO aids in planning by making managers establish their

own goals.

• MBO helps in Improving the communication between both

management and employees, because both can express their
views on what objectives they can and cannot accomplish.

•MBO helps in making everybody aware of the organization's

goals.

• With MBO the evaluation process becomes fairer

because people are measured on specified targets and
their performance in achieving goals of the organization.
•With specific objectives laid out, suggestions from all levels
of management can be obtained.

• Managers will have clearer idea of the vital areas of their

responsibility and the standards that are required. Hence,
allowing them to focus and utilize their resources.

• MBO creates a participatory work environment to help

employees become more involved. In this way, every
subordinate in the organization is more motivated.

•It provides a practical approach to analyze training needs

and opportunities for growth on the basis of measurement of
performance against standards.
Weaknesses

• MBO process requires too much time, effort and paperwork

in setting goals, objectives and energy to implement the
whole system effectively.

• Some managers set unrealistic objectives, placing pressure

for performance at the expense of employees.

• Generally the main barrier to effective MBO is lack of

support from top-management, and it is easily stalled by
authoritarian managers.
•Before MBO can be implemented, many changes have to be done in the
organization, including the control procedures and the general style of the
management.

• The support needed to achieve goal achievement is too often not enough
for some managers. managers may be inadequately trained to set goals
and coach employees when necessary.

•It is difficult to establish measurable objectives for certain jobs.

•There is too much emphasis on short term performance and losing sight
of long-term objectives.

It is may be used by some supervisors as a control devise that intimidates

rather than motivates subordinates.

It may tend to introduce inflexibility in the organization.

360 – Degree Feedback System

A 360- degree feedback, system collects performance

information from multiple parties including one’s subordinates
Peers, supervisor and customers and self. These systems are
called 360 degree systems because information is gathered
from individuals all around the employee.

In 360 degree appraisal a gap analysis is conducted to

examine the areas for which there are large discrepancies
between self – perceptions and the perceptions of others.

The 360- degree feedback system is most helpful when it is

used for developmental purposes only and not for
administrative purposes.
360 degree make them aware of that there is a problem with
a competency is a very good first step, but a good 360- degree
feed back system also provides concrete suggestions
about what to do to improve competencies.

360 degree feedback systems are not necessarily beneficial

for all individuals and organizations.
Example :- Individuals who are high on self efficacy are more
likely to improve their performance based on feedback
received from peers compared to individuals low on
self efficacy.
The effect of receiving feedback from multiple sources is
most beneficial for individuals who perceive there is a need
to change their behavior , react positively to feedback,
believe change is feasible, set appropriate goals to improve
their performance, and take concrete actions that lead to
performance improvement.
In terms of organizational characteristics , 360 degree system
Work best in organizations that have cultures that support
open and honest feedback.

These systems work best in organizations that have

participatory , as opposed to authoritarian , leadership style in
which giving and receiving feedback is the norm and is
regarded as valuable.

Example :- Patent Office of UK

The most comprehensive type of multi-source feedback is
360-degree feedback, which involves an employee’s customer
, peer, direct reports, self and manager.
The other degrees are represented

Peer/Co-workers Manager
Customer Direct
Reports/Subordinates
Extent of multi-source feedback

Organizations often choose the source of feedback based

on the criticality of performance interaction. This is also based
on the strategy and values of the organization. IBM, for
example, opts to use customer feedback as opposed to using
all sources to provide additional inputs. In an organization
where teamwork may be critical, the inputs of peers often
Become necessary and are used extensively.
90° (Assessment by manager) Most companies with a
performance management system in place use this mode of
Feedback

180° (Assessment by manager and peer)

· Tata Communications
· ICICI
· Coca Cola

270° (Assessment by manager, peer and direct report)

· Wipro InfoTech

360° (Assessment by manager, peer, direct report and customer)

· ITC
EXAMPLE

360° system, designed for employees in supervisory roles ,

includes information on the following competencies :

1. Communication ( listen to others , processes information,

Communicates effectively )
2. Leadership (instills trust, provides direction, delegates
Responsibility )
3. Adaptability (adjusts to circumstances, thinks creatively )
4. Relationships ( builds personal relationships, facilitates
team success)
5. Task management ( works efficiently, works competently )
6. Production ( takes action , achieves results)
7. Development of others ( cultivates individual talent,
motivates successfully).
8. Personal development ( displays commitment, seeks
improvement)
MERITS

Reveal strengths and weaknesses in management style.

Forces inflexible managers to initiate self – change.

Creates an atmosphere of teamwork and improvement.

Unearths truths about organizational culture and ambience.

Decreased Possibility of biases

Increased awareness of expectations :- Employees become

very aware of others expectations about their performance.
 Increased commitment to improve

 Improved self – perceptions of performance

 Reduced undiscussables

 Employee enabled to take control of their careers

DEMERITS

1. The system can be used to humiliate people.

2. Linking findings to rewards can prove to be unfair.

3. Negative feedback can hurt an employee’s feelings ,

particularly if those giving the feedback do not offer their
comments in a constructive manner.

4. When very few raters are providing the information. 2 or 3 ,

it may be easy for the employee being rated to identify
who the raters are.
 KPA’S AND PERFORMANCE PLANNING
Performance planning fixes accountability, sets role boundaries, helps better
time management, and requires time at once a year. It also helps the manager to
understand and analyze his contributions and increases his responsibility for
continuous performance.

WHAT IS PERFORMANCE PLANNING

Performance planning may be defined as a systematic outlining the activities

that the manager is expected to undertake during a specified period so that he
is able to make his best contribution to developmental and organizational
outcomes.

PLANNING INDIVIDUAL PERFORMANCE THROUGH PERFORMANCE

APPRAISAL

Annual performance appraisal exercises provide good opportunities for

performance planning. These provide many ways in which individual performance
can be planned, some of which include :
 Task analysis
 Key performance areas (KPAs)
 Key Result Areas (KRAs)
 Task and target identification
 Activity plans/action plans
 Goal- setting exercises

KPAS AND PERFORMANCE PLANNING :-

Identifying KPAs and setting quantifiable targets wherever possible is the only way
of planning one’s performance.
Organizations would do better by trying to inculcate a planning orientation and
role clarity through KPAs than improving objectivity.

If the following questions are answered positively after the exercise

the KPAs are well identified :-

1. Do the KPAs and targets emphasize /indicate what the manager (appraisee )
is expected to do by himself ( rather than what his department, subordinate etc,
are expected to do )?

2. Together, do they cover a large part his job and include all significant
contributions expected from his role?
3. Do they indicate the priority areas of work for the appraisee during the year?

4. If all KPAs are well done , can the appraisee be labelled as a good performer?

5. Are the targets set challenging and stretch the capabilities of the appraisee
moderately rather than being routine ?

6. Do they specify the standards of performance expected from the appraisee ?

7. Do they take into consideration realistically the conditions under which the
appraisee is expected to function during the year?

8. Do they satisfy both the appraisee and the appraiser ?

9. Has adequate time been spent on the process of identifying KPAs and
gaining role clarity ?
 KPAs As Mechanisms of Role Clarity and Development

Key performance areas may be defined as the important or critical categories of

functions to be performed by any role incumbent, over a given period of time.
These categories of functions should be so defined that the performance of any
employee can be assessed meaningful for any given period of time. These functions
should specify what the employee would be doing rather than what results are
expected from him.

EXAMPLES OF SALES OFFICER

For a Sales Officer

1. Contacting potential customers
2. Market survey for new products.
3. Attending to customer complaints.

For a R& D Manager

1. Identifying product improvements
2. Development of new products
3. Testing of samples, etc
ROCESS TO IDENTIFY KEY PERFORMANCE AREAS FOR A GIVEN ROLE.

A small group consisting of 4 or 5 persons may be involved in this process.

his group should consist of two categories of people :- those who are
erforming that role at present and those who performed that role in the past
nd are new supervising those performing that role now.

The group should then sit together and make an exhaustive list of all the
asks the role incumbent is expected to undertake. In making such a list of
asks the following questions may be useful :

hat are the main activities in which the role incumbent is involved?
hat exactly does he do in these activities.
ow much of his time goes for each of these activities.
hat can be considered to be his unique contributions by virtue of occupying
is position?
his performance is to be rated as excellent in the next 6 months / one year
hat he have done as this role incumbent ? Etc

In the next step all these activities may be grouped into meaningful
ategories of functions
4. After the performance areas are identified they could be
given weightages for their relation importance to that role.
Thus a weightage of 3 could indicate that the particular PA is
very central and important to that role.
A rating of 2 may indicate that the PA is quite important but is
not central.
A weightage of 1 may indicate that the performance area is
important.

5. After such an exercise is done the Performance Areas for

different roles could be listed and made available to
employees in the form of a directory of performance areas.

6. The areas selected or identified should be the areas which

the appraisee and the appraiser consider as significant
dimensions on which the appraisee’s contributions should
be assessed for that year.
The appraiser and the appraisee may also determine the
weight ages of each of these areas.

In the process of agreeing on the KPAs for the assessment

period both the appraiser and the appraisee should aim at
the following:-

1. Have a clear and common understanding of the various

activities to be performed under each KPA by the appraisee.
2. Have a clear understanding of the importance of each of
these activities and what exactly is expected to be done by
the appraisee.
3. Have an understanding of the expected problems and
support required by the appraisee from the appraiser as well
as others in the organization and the support the appraiser
can give to the appraisee.
4. Have an understanding of the level of performance
expected in relation to each of the KPAs and the possible
ratings associated with different performance levels.

PERFORMANCE TARGETS : ADDING OBJECTIVITY

Identify performance targets under each KPA. The

performance targets may be qualitative or quantitive , but
should be time bound and should specify the level of
acceptable performance to obtain high performance ratings.
EXAMPLES

1. Role : Marketing Manager

KPA : Introducing a new product X in the region assigned to
him.
Performance Targets
1. Complete training programme for all district representatives
to ensure readiness for distribution of product X within
the next three months.
2 To personally contact a random group of 10 major
customers from each district and get their feedback on
the products.
3. Evolve a marketing strategy by the end of the year to
increase sales of the product in consultation with district
representatives.
Role : Manager ( Finance)
KPA : Cost reduction ( Weightage -3)
Performance Targets

1. Complete write up and acceptance of the company’s cost

reduction manual and distribute it to all managers by the
year end.
2. Collect 10 suggested cost reduction ideas per month from
each of six operating managers.

Role : Manager , HRD

KPA : Introducing a new system of development oriented
performance appraisal
Performance Targets
1. Collect information about the development oriented
appraisal system in use from 10 different organizations in the
City and suggest a system for the organization.
PERFORMANCE ANALYSIS

Performance analysis is an important component of appraisal. Understanding the

constituents of performance by breaking it into various elements and
understanding the factors that cause performance is called performance
analysis.

The performance equation = Ability *Motivation *Organizational support +or –

chance factors.

OBJECTIVES

Performance analysis should lead to the following :-

1. Identification of the factors that have helped the appraisee reach the level of
performance he achieved in relation to various KPAs, targets and various other
functions associated with his job. These are called facilitating factors.

2. Identification of the factors that have prevented the appraisee from doing better
or those that hindered his performance. These are called as hindering factors.

3. Identification of the factors would suggest action plans for the appraisee as well
as for the appraiser.
4. Identifying developmental needs for better performance on critical functions
associated with the present role.

5. Gaining a better understanding about the appraisee, his role requirements and
the situation in which he is working and also share with him the expectations and
understanding the appraise so that the communication between them is increased.

METHODOLOGY

1. The appraisee should periodically keep reflecting about how well he is progressing
in his work and in relation to KPAs and other dimensions.

2. In the performance period whenever the employee comes across success

experiences , he should note it down.

3. Whenever he experiences failure or runs into difficulties or feels prevented from

doing better, he should note the factors that are causing it.

4. At the end of the performance period the appraisee considers his own
performance on each of the KPAs and other dimensions.
5. After assigning himself such ratings, he should start listing down all the factors
in detail that have helped him in accomplishing whatever he accomplished. Similarly
he should list down all the factors that have prevented him from doing better or
that have become constraints on his better performance.

6.After listing down the facilitating and hindering factors exhaustively the appraisee
should then classify these factors into the following categories :-

FACILITATING FACTORS

a. FIS (Individual facilitating factors)

b. FROs (Facilitating factors attributable to the reporting officer )
c. FOS ( Facilitating factors attributable to the organization and its system)
d. FS ( Facilitating factors attributable to the subordinate)
e. FE (Facilitating factors attributable to external environment)

INHIBITING FACTORS

a) Inhibiting factors attributable to the individual

b) Inhibiting factors attributable to the reporting officer.
c) Inhibiting factors attributable to subordinate staff
d) Inhibiting factors attributable to the environment.
e) Inhibiting factors attributable to the organization and its system

7. After such an analysis, an individual (appraisee ) may reflect about facilitating

factors he could like to maintain or further strengthen and the inhibiting factors that
he would like to overcome in future.

8. The individual should also reflect on the support that could be extended by
his reporting officer.

9. He then should pass on his performance analysis to his reporting officer for his
comments, additions to the factors identified and performance review and
counseling discussions.