Performance Management

You have learnt about supply chain management and project management in the previous section. The management also needs to evaluate the performance of its staff for a particular task. This evaluation is done by way of performance management.

Performance Management is a way of managing people that encourages and helps them to use their capabilities optimally for achievement of the companies’ business strategies and objectives.It is a process for establishing a shared understanding about what is to be achieved, and how it is to be achieved. It is an approach to manage people in a manner that increases the probability of achieving job-related success by doing the right things in the most effective ways to the best of their ability:

• helping the employees know what "The right things are”;

• encouraging innovative thinking to develop and codify better ways to do job; and

• developing and empowering people to enable them to give their best.A Performance Management System is depicted in the Fig..

Performance Management System

A Performance Management System comprises the following mechanisms and each mechanism follows definite steps.

•Review Mechanism

Step 1:

There is self-proposal form, which each individual has to fill at the beginning of the year. This form would include what the individuals would want to contribute after the departmental objectives are communicated to them.

Step 2:

After filling up the self-proposal form, every individual is required to fill his/her KRAs (Key Result Areas) for the year. These KRAs are documents which clearly state the contribution/ target/ outcome an individual plans to have in the coming year. Each one of these contributions has measures and standards mentioned. Hence an individual is expected to perform as per the standards and measures. The KRAs are decided together by the individual and his/her superior, and ought to be in line with the overall goals of the organization. These are flexible and can change from time to time.

Step 3:

This is a mid term review, where the superior and the subordinates discuss to assess whether the KRA are in line with the overall objectives and whether there is a need for change in KRA or not.

Step 4:

At the end of the year, the individual is expected to fill his/her self-appraisal form, in which he/she has to evaluate her/his performance, contributions etc. The performance criterion here is a mix of both qualitative as well as quantitative assessment. The individuals are assessed by their targets’achievement and also how effectively they have been achieved in terms of cost, time, quality, etc.This is discussed with the immediate superior. On the basis of these KRAs and self-appraisal form, the person is evaluated at the end of the year.In the discussion group, the individual’s immediate superior, and his/her superior is involved. Performance is evaluated on not only the KRAs achievement but also how effectively they have been achieved. Each KRA has different weightage and points are awarded for each one of them.Then these points are converted into grades by the HR department.

Step 5:

After the appraisal, the individual is given feedback on his/her contributions and areas of improvement by his/her immediate superior. Also there is a potential appraisal form where the individual’s strengths and weakness are indicated.Are these steps followed in your utility for performance management?

•Performance Assessment

At the end of the performance assessment, the employees are placed in grades. These grades are given on the basis of the ranking method.

Top 5% performers are given grade A+ and the next 20% get A grade, and so on. Similarly, the bottom 5% get C grade. This method helps the company to identify top performers as well as under performers. The frequency distribution curve helps the company to know the performance status of each and every employee.Percentage-wise, performers in an organization are identified as:

Top performers 25%

Average performers 50%

Under performers 25%
 

For low performers, the management tries to find out obstacles and remove them through training, job shift, etc.

•Training

Training-needs analysis is a part of the appraisal process and every employee is given both in-house as well as external training. Supervisorsprovide training in Performance Management System (PMS) processes.The training is given in-house by a senior person before the review and appraisals. The company has to start with its in-house assessment centre to identify training gaps and use it for developmental purposes only. For consistent under performers, the companies now plan for Voluntary Retirement Scheme (VRS).

•Promotion Criterion

The promotions are given using a point system to ensure objectivity. The grades are allotted with predefined points and an employee needs to get a minimum score to qualify for the promotion. The promotions are given taking into account the performance, vacancy and the potential of the individual.

•Communication
The management provides informal feedback of evaluation only at the final stage. As such, no structured method is adopted. Supervisor is the direct interface and his/her office takes care of other information. Organisational health surveys are conducted to gauge the employee’s perception.

•Reward and Compensation

Reward and compensation are directly linked to performance. The utility may use some of the following measures for motivating its employee:

Performance Bonus

Profit Sharing

Sales Incentive

Personal Improvement

Self-esteem and Recognition

Stretch Assignments

How does the Performance Management System Improve the Organizational Climate?

• Clarity: making it clear what is expected of people.

• Standards: encouraging people to meet and expected challenging goals

• Rewards: linking rewards and recognition more directly to performance.

• Responsibility: encouraging staff to take responsibility for what they do.

• Flexibility: encouraging staff to expand their job, innovate.
• Team commitment: encouraging people to work cooperatively.