18-Oct-14

Module I: Learning Objectives

Introduction to Performance Management System
(PMS)
Relevance of PMS to create performance excellence
Performance Management System Framework
Best Practices of PMS
Exercise: Reality Check Ideal versus Actual
Performance Management System
Case: Performance Management at Vitality Health
Enterprises Inc.
HBR Article: Creating Sustainable Performance
No. of sessions: 5

Performance Management: Evolution

Traditional concept performance appraisal Wei
Dynasty (AD 221-65) Formal monitoring/controlling
system from F.W. Taylor before 1st World War
1950s & 1960s: Merit Rating in US & UK
1960s & 1970s: Management by Objectives (MBO)
and Behaviourally Anchored Rating Scales
1970s & till today: Result-oriented performance
appraisal
1970s & 1980s & till today: Performance
management

Performance Management: Context

Performance Management: Hay Group Study

For global firms, the recent past has been

marked by financial crisis, an unpredictable
recovery and persistent uncertainty. Looking
to the future, the dominance of fast growing
economies leaves industrialized nations facing
ever greater challenges to maintain a
competitive edge. Those that survived the
economic crisis now need to shift gear the
race is on Hay Group

Research Questions
How do business leaders intend to increase
their competitive advantage and boost
business performance?
Having relied heavily on the classic business
improvement leaders over the past few years
such as cost-cutting and setting aggressive
sales targets, what new approaches should
business leaders be adopting in order to drive
a new growth strategy?

Performance Management: Hay Group Study

Performance Management: Hay Group Study

Research Findings
Setting ambitious growth targets (5% growth on
average) with major focus in performance
management
63% business leaders admit their firms growth
targets present a significant challenge
Organisational capability building
90% agreed that without an approach to
performance management tailored to strategy and
culture, firms will not be in the right shape to deliver
the growth expected of them
Business leaders identify a series of critical risks
inherent in asking for more from their employees

Research Findings
Business leaders agree (64%) that improving
individual performance is critical to achieving
growth targets individual performance
management is a crucial driver to the overall
business performance
Global firms (73% failing rate) are not getting
desired value from performance management
due to disconnection between performance
management and company strategy

18-Oct-14

Performance Management: Hay Group Study

Research Findings
76% firms failed to align performance management
with the companys culture and values
40% managers failed to use their performance
management process effectively and 38% do not
actively support the process
37% managers describe performance management
process as a tick-box-exercise rather than a
powerful managerial tool

Performance Management: Hay Group

Recommendations
Process
Does the performance management process drill down
from the business planning process?
Are the arrangements for reviews and calibration
consistently followed across the whole organisation?
Do managers devote sufficient time all three key phases
of performance management: planning, managing and
reviewing?
Is there a follow through from the performance
management process into talent management,
succession planning, training and reward arrangements?

Performance Management: Hay Group

Recommendations
Reward Architecture
Are levels of reward viewed as being fairly aligned to
levels of contribution?
Does the organisation differentiate its pay for
performance that is clearly around delivering its
strategy?
Are the current reward arrangements based on a strong
insight into what motivates people at different levels of
the organisation so that the reward offering can be
segmented?
Is there a diverse set of rewards, such as learning and
development opportunities, work-life balance, etc?

Performance Management: Hay Group

Recommendations
Metrics
Does your organisational structure support or detract
from the ability of staff and managers to deliver the
strategy? Is there a clear relationship between individual
jobs and key priorities for the organisation?
Do employees at all levels understand the three of four
key priorities the organisation must get right? Do they
understand how their individual contribution links to
these priorities?
Are there measures to evaluate performance beyond
purely financial incorporating internal processes,
customer engagement, learning and development of self
and others?

Performance Management: Hay Group

Recommendations
Managerial Capability
Is people management a non-negotiable measured
accountability for line managers?
Is there an emphasis on managing performance as
opposed to form filling and the mandatory reviews?
Do managers have access to skills development to raise
confidence levels to manage poor performers as well as
develop talent?
Do managers create a climate that encourages and
inspires direct reports to put more effort into their
work?

Performance Management: Hay Group

Recommendations
Metrics
Translating strategy into individual perf. Plan
A focus on holistic perf. Hard and soft measures
Process
Cycle of meetinfs, forms and caliberations
Link to development & talent mgmt.
Managerial Capabilities
Developing managers to manage perf.
Focus on climate & leadership style
Reward architectures
Linking perf. to reward
Reward pakages
Successful Implementation: Integration & balance of above 4 elements

18-Oct-14

Performance: Definition
Performance means both behaviours and results.
Behaviours emanate from the performer and
transform performance from abstraction to
action. Not just the instruments for results,
behaviours are also outcomes in their own right
the product of mental and physical effort
applied to tasks and can be judged apart from
results (Brumbach, 1988)

Performance Management: Meaning &

Definition

Performance Management: Meaning &

Definition
Performance management is a systematic
process for improving organizational
performance by developing the performance of
individuals and teams.
Performance management is much more than
appraising individuals.

Performance Management: Theory Connection

Performance management is the system through which

organizations set work goals, determine performance
standards, assign and evaluate work, provide
performance feedback, determine training and
development needs and distribute rewards (Briscoe &
Claus, 2008)
Business performance management encompasses all
the processes, information, and systems used by
managers to set strategy, develop plans, monitor
execution, forecast performance, report results, and
make decisions (Gartner, 2001).

Goal Theory (Latham & Locke, 1979)

Direct attention to priorities;
Stimulate effort
Challenge people to bring their knowledge and
skills to bear to increase their chances of success
The more challenging the goal, the more people
will draw on their full repertoire of skills

Performance Management: Theory Connection

Performance Management: Theory Connection

Control Theory
attention on feedback as a means of shaping
behaviour
Identifying the discrepancy between what are
actually being done and what are expected to do
Social Cognitive Theory (Bandura, 1986)
Self-efficacy

Reinforcement Theory (Hull, 1951)

Expectancy Theory (Vroom, 1964; Porter &
Lawler, 1968)
Attribution Theory how people explain their
performance
Five types of explanations ability, effort, task
difficulty, adverse circumstances, luck

18-Oct-14

Performance Management: Objectives

Performance Management: Objectives

Reward-driven integration
Development-driven integration
Aligning individual objectives to organizational
objectives and encouraging individuals to uphold
corporate core values
Enabling expectations to be defined and agreed in
terms of role responsibilities and accountabilities
(expected to do), skills (expected to have) and
behaviours (expected to be);
Providing opportunities for individuals to identify their
own goals and develop their skills and competencies;
Motivating people by providing them with recognition
and the opportunity to use and develop their skills and
abilities.

Performance Management Values

Creating high performance culture

Mutual responsibility for improving performance
Differentiate person and issues while assessing
Needs of both individuals and organisations to be
valued
Freedom to express views about objectives
Measures should be clearly understood by the
appraised
Right to feedback and comment
Reason behind specific rating and right to appeal
against the decision
Focus should be on developing rather than managing
performance only

Performance Management System

A performance management system is a set of
interrelated activities and processes that are
treated holistically as an integrated and key
component of an organizations approach to
managing performance through people and
developing the skills and capabilities of its
human capital, thus enhancing organizational
capability and the achievement of sustained
competitive advantage

Performance Management System:

Characteristics
Strategic Congruence individual goal must be
aligned with unit and organisational goals
Thoroughness holistic approach
All employees should be evaluated
All major job responsibilities (both behaviours
and results) should be included
Entire review period should be included
Feedback should be given based on both positive
and developmental aspects

Performance Management System:

Characteristics

Practicality
Meaningfulness & relevance
Specificity
Identification of effective and ineffective
performance
Reliability & Validity
Acceptability & Fairness
Inclusiveness (include imput from multiple
sources)

18-Oct-14

Performance Management System:

Characteristics

Performance Management Cycle

Openness
Correctability (objective vs. subjective)
Standardisation
Ethicality

Performance Management Process

Performance Management: Change Required

Traditional management processes to Best Practices
A best practice must:
Effect a measurable change in performance
Apply to a broad spectrum of organizations
Be proven in practice
Exploit proven technologies
Ensure an acceptable level of control and risk
management
Match the skills and capabilities of the organization
Be capable of operating effectively in an uncertain and
turbulent world

Performance Management: Causes of Failure

Mismatch between Performance Management

Processes and Business Needs
Planning and Reporting the Wrong Stuff
Tying Plan Achievement to Compensation
Incomplete Strategy Definition
Inadequate Risk Recognition
Poor Communication
Weak Integration

Performance Management: Best Practices

The three-step diagnostic that follows comprises
three elements that progressively allow an
organization to:
1. Identify the magnitude of pain inflicted by a
defective performance management process.
2. Isolate the underlying causes.
3. Understand the metrics that help define a best
practice performance management process.

Module II: Learning Objective

Introduction to Performance Planning

Meaning of KPI, KRA, Performance Standard
Deriving KPI and KRA from Business Strategy
Conducting Appraisal Interview
Effective use of Performance Feedback
Exercise: Setting KRA and KPI
Case: (i) Performance Management at National Institute of
Management,
India (A);

(ii) Performance Management at National Institute of

Management, India (B)
HBR Articles: (i) Appraisal of What Performance;
(ii) Formal Performance Appraisal: Improving Results
through Feedback
No. of sessions: 5

18-Oct-14

Performance Planning

Developing Performance Metrics

Performance plans set out the agreed goals and targets

for a particular period or project and performance
reviews assess progress towards achieving them. Reviews
can also be used to assess an individuals behaviour,
especially as a member of a work group or team.
The plan focuses on future behaviour and performance.
Terminologies:
KRA Key result areas are the areas by which the job of a
person can be divided into broad categories
KPI Key Performance Indicators are quantified and
measurable units of all the activities derived from KRAs

KRA & KPI

Company Example: A Textile Company

Core Competence manufacturing linen and wool
Current status one of the top linen brand manufacturing companies in
India; in both the businesses it has leading market share; company sells its
products in over 50 countries, spanning all the six continents of the World;
it has an annual turnover of about Rs.600 crores; winners of several
prestigious awards
Overall Vision: To be the Leader in domestic market in Linen and be the
preferred choice globally in Wool Business.
Overall Mission: To achieve revenue of Rs. 2000 Crore by FY 2017.
Domestic Business Vision: To build Leadership position in Linen and be a
preferred choice for consumers and customers in Wool & Polyester
Viscose segments though innovative products, Brand Building, and
Superior Service.
Domestic Business Mission: To achieve a revenue of Rs. 3,000 Crores and
Rs. 400 Crores EBITDA by FY 2017.

Developing Performance
Metrics

Developing Performance
Metrics
Financial Strategy

I.
II. Marketing Strategy
III. Operational Strategy
IV. General Strategy
V. HR Strategy
Organisational Capability Building by enhancing employee potential,
innovation, and engagement
Competency Mapping
Learning & Development
Culture of Shared Values
Culture of Innovation
Culture of Engagement
Effective Talent Management in terms of acquisition, development,
management, and retention
Cultivating high performance and customer centric culture in the
organization
HR Audit

Company Example: A Textile Company

Group Values:
Integrity
Commitment
Passion
Seamlessness
Speed
Current Business Strategy -- to surpass the benchmark in quality,
productivity and become customer's preferred choice globally and
accordingly to build the organisational capability
Immediate Future Business Strategy to outperform competitors
by focusing more on customer satisfaction; to become the
preferred destination to the customers and employees; to set up
new manufacturing unit in a new State of the country
Current Employee Strength more than 5000

Developing Performance Metrics for HR Department

HR
Strat
egy

KRAs

KPIs / Targets

Comp
etenc
y
Mapp
ing

Designing
crucial
business
competenci
es for next
financial
years

Identifying 85% of global business

competencies (current and upcoming

trends globally) as perceived by textile

strategists within 2nd week of Feb of the

current financial year(interview at least 2
experts, review 30 current literatures)
Identifying 95% business competencies
from the strategic team and the
departmental heads of the company
within 2nd week of Feb of the current
financial year
Design the required business
competencies in the ratio of 40:60
(department wise) for the next financial
year by 3rd week of Feb

Benchmark Measures

Competenc Communicated the required business

y
competencies to the departmental heads
Communica by 4th week of Feb

tion

Publish at least 1 white

paper
Showing the video
recording of expertinterviews to the
executives in batches at
the beginning of the next
financial year
Bring the expert to
address the employees
within the year

Identify competencies for

next 3 years

Wei
ght
ed
KPIs

Actu
al
Scor
es

HR
Strat
egy

KRAs

KPIs

Benchmark Measures

Competency
Mapping

A form to be designed for

Performance
the comments of both
measurement scale
departmental heads and
or metrics to be
concerned employees
communicated to all
about the existing
the employees by 4th
competencies they possess
week of March
by 4th week of Feb

Weig
hted
KPIs

Sco
res

Form to be communicated All the employees to

to the all concerns for
be covered
initial informal assessment
by 4th week of Feb
Competency data to be
All the employees to
collected from 80% of
be covered
nd
employees within 2 week
of April
Learning & Development

Share it with the

employees through ERP
Ask for their comments
on the same

Shared Values
Encouraging Innovations