Performance Management

An iterative process of observation and communication to support, retain and develop employees for organizational success.

Performance Management

Ongoing
Develops future performance Long-term

Clear objectives
Focus on behavior Incremental progress Two-way communication

Why Manage Performance?

Encourage and reward behaviors that are aligned with organizational mission and goals People want to feel what they do adds value and understand their contribution to the team Curb or redirect non-productive activities

STRATEGIC IMPORTANCE
Consistency between job behavior and
Organizational strategy Organization values

Performance Management as an
Employee development tool

Administrative tool

Performance Appraisal
The process by which an employees contribution to the organization during a specified period of time and Competencies are assessed. Lets employees know how well they have performed in comparison with the standards of the organization

Objectives of Performance Appraisal

Objectives of Performance Appraisal
Reward Decision Reward Decision Increments Performance Pay Promotions Demotions Development Objectives Development Objectives Identification of Strength Identification of Weakness Training Needs Identification Career Planning Succession Planning Competence Planning Job Rotation Leadership Development Validating Recruitment Validating Training HR Planning Competancy Inventory Performance Feedback

Punishments
Outplacement

Errors in Performance Appraisal

- Stereotyping - Halo Effect - Horn Effect - Central Tendency - Leniency Error - Strictness Error - Inflationary Error - Status Error

- Spillover Effect
- Low Appraiser Motivation - Rater Bias - Primacy Error/Recency Error

- Same-as-me Error
- Contrast Error - Performance Dimension Order - Attribution Error

Why PA May Fail Mgr not

Unclear Language Mgr not honest or sincere taking PA seriously

Lack appraisal skills

Mgr not prepared

No ongoing feedback
Ineffective discussio n Mgr Lacks Infor.

Insuff. Rewards

Performance Appraisal Interview

Human Performance

Performance Measures & Criteria

Employee Records & HR Decisions

Employee Feedback

Validity
Reliability

Effective Performance Appraisal System

Input into system development Acceptable standards Acceptable goals Control of standards

A GOOD APPRAISAL SYSTEM

Criteria
Freedom from bias: errors Practicality INVOLVEMENT and PARTICIPATION

PA and other HRM Functions

Training & Development
Recruitment

P A
Selection

Compensation

Labor Relations

Methods of Appraisal
MBO Method
Corporate Objectives Department Objectives Appraisers Objectives Appraisers Perception Resources Allocation Agreed Objectives Action Planning Implementation Appraisal, Review Consequences - Results orientation - Agreed objectives - Capacity utilisation - Better motivation - Goal setting culture - SHORT TERM FOCUS - TUG-OF-WAR - CONFLICTS - No Development Feedback Appraisees Perception

PA under a MBO Program

Step 1: Org. goals & metrics Step 2: Dpt. Goals & metrics Step 3: Spvr lists goals & metrics Step 3: Sbt. proposes goals & metrics

Step 5a: Inappropriate goals/metrics deleted

Step 5b: New inputs are then provided Step 4: Mutual agreement

Step 7: Review org. performance

Step 6: Final review

Step 5: Interim review

Methods of Appraisal
MBO Method Graphic Rating Scale Essay Method Assessment Development Centre Behaviourly Anchored Rating Scale Field Review Method

Forced DISTRIBUTION
CRITICAL INCIDENTS Forced Choice Method Check List Method

CRITICAL INCIDENT METHOD

Critical incidents are behaviors that result in good

or poor job performance. The rater records all such incidents and the ratees 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.

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

Forced Distribution
30 25 20 15 10 5 0 Low Low- Avg High- High avg avg Low Low-avg Avg High-avg High

Forced Distribution
Can vary from company to company Can vary year to year Can vary from funcyion to function Can vary from Factory to factory in the same company

Appraisal Process
Objectives of Appraisal
Establish Job Expectations

Design of Appraisal Process and Format Appraisal Performance and Competencies

Consequences-Increments,performance pay,development

Performance Interview

Improving Effectiveness of Performance Appraisal

- Training of Appraisers and Appraisees - Consequences Management - Developmental Orientation

- Communication Climate - TRUST - EMPATHY - LISTENING - TIMELY

- COST EFFECTIVE - OPEN, TRANSPARENT - CONSTANT REVIEW of Process and Format

Assessment Development Centre

- Competency Focussed - Off the Job Method - days Workshop - Multiple, Trained Assessors - Top Management / Consultants - Case Analysis, Presentations - Interviews - Psychometric Tests - Group Discussions

360 Degree Feedback

Reviewing Officer External Customer Reporting Officer Internal Customer

Peer Feedback

Appraisee Self Appraisal

Peer Feedback

Internal Customer

Reportee (Associate) Feedback

External Customer

- Ro / Ro for Reward Decisions - All feedback for Development Decisions - Training required - Giving and Receiving Feedback - Teamwork

360 Feedback

Potential Appraisal

High P O T E N T I A L Problem Children

High

STARS

Outplacement Candidates Low Low

Solid Professionals High

Performance Performance TODAY Potential FUTURE For Career Planning For Succession Planning For Competency Development

Appraisal Interview
- LISTEN and TELL Method

- Listen and Sell Method

- Listen and Mutual Problem Solving Method

- Future Oriented

- Performance Improvement

- Competency Development

Factors Influencing Compensation

- Going Market Rate - Labour Market

- General Economy
- Inflation Rates - Taxation Policies

- Government Regulations
- Bargaining Power of Unions - EQUITY - Individual - Internal - External - ABILITY TO PAY

- Management Philosophy

Components of Executive Compensation

- Basic Pay
- Dearness Allowance

- Performance Pay
- Benefits and Perks

Reasons for Benefits and Perks

- Government Regulations - Tax Planning - Valence

- Cafeteria Approach
- Asset Creation - Wealth Creation - Union Demands - Sense of Belonging

- Involving Family members

Perks and Benefits

- Retirement Benefits - Provident Fund - Gratuity - Pension / Super Annuation - Transport - Company Bus / Vans - Company Car - Conveyance Allowance - Conveyance Reimbursement

- Canteen - Lunch Coupons - Lunch Allowance

- Health Care - Company Hospital - Occupational Health Centre - Medical Reimbursement - Hospitalisation Insurance - Premium Health Checkup

Perks and Benefits

Leave Travel Assistance GIFTS Company Products at discount Loan with no / subsidised interest Housing - Company Housing Colony - Company Leasing Houses - House Rent Allowance ESOP Get together & Picnics Education Assistance Magazines and Newspapers Club Memberships Telephone / Mobile Phones Credit Cards Sports Clubs, Gyms, Fine arts clubs, Libraries Uniforms and Shoes Working Hours / Flexitime Holidays Leave facilities Help Desks

Performance Pay
- Variable Pay - Annual / Monthly / Quarterly - Cash / Gifts / ESOP

- Variable CRITERIA - Performance - Attendance - Service - Specific Criteria - Team Performance

- Result Orientation Culture - In alignment with VROOMS Theory INSTRUMENTALITY - Conflicts and STRESS Inhibits TEAM WORK

CONCEPTS
3-P APPROACH POSITION PERFORMANCE PERSON CAFTERIA APPROACH

PERFORMANCE PAY
-INDIVIDUAL OBJECTIVES TEAM OBJECTIVES SBU OBJECTIVES COMPANY OBJECTIVES HALF YEARLY ANNUAL /PERIODICALLY INCREMENTS/LUMPSUM/ESOPS