Performance

Management

Performance
Management
Its a strategic and systematic approach
to delivering sustained success to
organizations
by improving the performance of the
people who work in them
and by developing the capabilities of the
team and individual contributors

Concerns

With the Outputs,Outcomes,Process

& Inputs
Outputs: Achievement of Results
Outcomes: The impact made on
performance
Process: Process required to achieve
these results
Inputs: in terms of
capabilities(Knowledge, skill and
competencies) expected from team and
individuals

Concerns

Concern with planning

Planning ahead to achieve future
success ie defining expectations
Expressed as objectives and in
business plan
Concern with measurement and
reviewConcern with continuous
development and improvement

Concerns

Concern for communication

Concern for Stake holders
Ethical concern

PM is a natural
process
In an effective organizations there will
be clear defines about the
Importance of defining objectives and
of planning to achieve them
Pursuit of high performance by
developing competence

Characteristics of Effective Goals

Specifi
c

Effectiv
e
Goals

Measurable

Attainable

Realistic

Time-Bound

Performance Management Process

Define performance in behavioral terms
Measure and assess performance
Feedback for goal setting and planning
Improved Performance

PM Evolution

First Phase: The origin of performance management can be traced in

the early 1960s when the performance appraisal systems were in
practice.
During this period, Annual Confidential Reports (ACRs) which was
also known as Employee service Records were maintained for
controlling the behaviors of the employees and these reports provided
substantial information on the performance of the employees.
Any negative comment or a remark in the ESR or ACR used to adversely
affect the prospects of career growth of an employee. The assessments
were usually done for ten traits on a five or a ten point rating scale
basis.
These traits were job knowledge, sincerity, dynamism, punctuality,
leadership, loyalty, etc. The remarks of these reports were never
communicated to the employees and strict confidentiality was
maintained in the entire process.
The employees used to remain in absolute darkness due to the absence
of a transparent mechanism of feedback and communication.

Evolution cntd

Second Phase: This phase continued from late 1960s till

early 1970s, and the key hallmark of this phase was that
whatever adverse remarks were incorporated in the
performance reports were communicated to the employees
so that they could take corrective actions for overcoming
such deficiencies. In this process of appraising the
performance, the reviewing officer used to enjoy a
discretionary power of overruling the ratings given by the
reporting officer. The employees usually used to get a
formal written communication on their identified areas of
improvements if the rating for any specific trait used to be
below 33%.

Evolution cntd

Third Phase: In this phase the term ACR was replaced by

performance appraisal. One of the key changes that were
introduced in this stage was that the employees were
permitted to describe their accomplishments in the
confidential performance reports. The employees were allowed
to describe their accomplishments in the self appraisal forms
in the end of a year. Besides inclusion of the traits in the rating
scale, several new components were considered by many
organizations which could measure the productivity and
performance of an employee in quantifiable terms such as
targets achieved, etc. Certain organizations also introduced a
new section on training needs in the appraisal form. However,
the confidentiality element was still being maintained and the
entire process continued to be control oriented instead of
being development oriented.

Fourth Phase: This phase started in mid 1970s and its origin was in
India as great business tycoons like Larsen & Toubro, followed by State
Bank of India and many others introduced appreciable reforms in this
field. In this phase, the appraisal process was more development driven
target based (performance based), participative and open instead of
being treated as a confidential process. The system focused on
performance planning, review and development of an employee by
following a methodical approach. In the entire process, the appraisee
(employee) and the reporting officer mutually decided upon the key
result areas in the beginning of a year and reviewed it after every six
months. In the review period various issues such as factors affecting the
performance, training needs of an employee, newer targets and also the
ratings were discussed with the appraisee in a collaborative environmen
This phase was a welcoming change in the area of performance
management and many organizations introduced a new HR department

for taking care of the developmental issues of the organization

Evolution cntd

Fifth Phase: This phase was characterized by maturity in

approach of handling peoples issues. It was more
performance driven and emphasis was on development,
planning and improvement. Utmost importance was given
to culture building, team appraisals and quality circles were
established for assessing the improvement in the overall
employee productivity.
The performance management system is still evolving and
in the near future one may expect a far more objective and
a transparent system.

MBO
Applied to
Managers
Emphasis on
individual
objectives
emphasis
onquantified
performance
measures

Perfomance Appraisal

Performance Management

Applied to All Staf

Applied to All staf

emphasis on integrating
Individual Objectives may corporate ,team and individual
be included
objectives
Some qualitative
performance indicators
may also be included

Competence requirements
often included as well as
quantified measures
Continous review with one or
more formal reviews
Joint process,ratings less
common

Annual Appraisal
Annual Appraisal
Top down system
Top down system with
with ratings
ratings
May not direct link
to pay
often linked to pay
May not be a direct link to pay
Complex Paper
Documentation often
Work
Complex Paper Work
minimised
Owned by line
managers and
personnel dept Owned by perssonnel dept Owned by line management

1.

2.

An effective performance management systems aligns

individual performance with the organizations
mission ,vision and objectives
ACA
Basic Aim of PM
Two simple proposition provide the founadtion
upon PM is built
When people (individual and teams) know and
understand what is expected of them, and have taken
part in forming these expectations, they will use their
best endeavors to meet them
The capacity to meet expectations depends on the
levels of capability that can be achieved by individuals
and teams ,the level of support they are given by
management, and the processes, systems and
resources made available to them by the organizations

Why PM

It provides structures built round the natural planning,

monitoring ad reviewing processes of management
It provides the impetus for planned and systematic
learning activities and events that might otherwise
lacking
The skills developed and nurtured by PM are ones
everybody can use to their own benefit as well as to
that of others

PM
PM is communication a manager and a employee arrive together
at an understanding of what work is to be accomplished, how it
will be accomplished, how work is progressing towards desired
results, and finally after effort is expended to accomplish the
work, whether the performance has achieved the agreed upon
plan. The process recycles when the manager and employees
begin planning what work is to be accomplished for the next
performance period. Performance management is an umbrella
term that includes performance planning, performance review
and performance appraisal, Major work plans and appraisals are
generally made annually. Performance review occurs whenever a
manager and an employee confirm, adjust, or correct their
understanding of work performance during work routine work
contacts

PM

Fowler
Management has always been about
getting things done,and good
managers are concerned to get the
right things done well. The essence of
PM the organization of work to
achieve the best possible results .PM is
not a system or technique, it is the
totality of the day to day activities of
all managers

PM

IPM
A strategy which relates to every
activity of the organization set in the
context of its HR policies ,culture
,style and communication systems.
The nature of the strategy depends
on the organizational context and can
vary from organization to
organization

Learning organization
Orgnzn continually improves
by rapidly creating and
refining the capabilities
required for future success

Learning Organization are good at doing 5

things
Systematic

Problem solving
Experimentation
Learning from past experience
Learning from others
Transferring knowledge quickly

Organizational Learning

Learning orgnztn have to be able to adapt to tneir

context and develop their people to match the
context
Organztn Learning: Orgnztns can be
describes as continuous learning systems
Its a process of coordinated systems change,with
mechanisms built in for individuals and groups to
access ,build and use organizational memory,
structure and culture to develop long term
orgnztnl capacity

Five Principles of Organizational Learning

Vision of the organization to be communicated

and maintained across the workforce
Need to develop strategy
Frequent dialogue, communication and
conversation are major facilitator for
organizational learning
To challenge people within the orgnztn to
reexamine what they have done
It is essential to develop a conducive learning
and innovation climate

Learning

Learning occurs under 2 conditions

When an orgnztn achieves what is
intended &
When a mismatch between
intentions and outcomes is identified
and corrected

Single & Double loop Learning

Argyris distinguishes between single loop and

duoble loop
Single loop learning orgztns define the governing
variables ie what they expect to achieve in terms
of targets and standards.They then monitor and
review achievements , and take corrective action
as necessary ,thus completing the loop
Double loop learning occurs when the monitoring
process initiates action to redefine the governing
variables to meet the new situation,which may be
imposes by the external environment

The organization has learned

something new about what has to be
achieved in the light of changed
circumstances and can then decide
how this should be achieved,This
learning is converted into action

Individual Learning

Individual learn from themselves and from

other people
For effective learning to take place at the
individual level it is essential to foster an
environment where individuals are
encouraged to take risks and experiments,
where mistakes are tolerated, but where
means exists for those involved to learn
from their experience

Continuous learning &

development

In Practicable ,learning and work must be

integrated .This means that
encouragement must be given to all
employees to learn from the problems,
challenges and success inherent in their
day to day activities
PM is a continous process and this can be
achieved in two ways.Performance &
development reviews & PDP

PDP

Its carried out by individuals with

guidance, encouragement and help
from their managers as required
Aim: To promote learning and to
provide people with the knowledge
and portfolio of transferable skills that
will help to progress their career
Focus is on Job & Career Development

Responsibility for PDP

It is emphasised that individuals are

primarily responsible for progressing the
plan and for ensuring that they play their
part in implementing it
People also need encouragement
,guidance & support
Team leaders are expected to
.
.

Measuring Performance
Appropriate Performance measurement should have
Ensures Customer requirements have been met
Provides standards for establishing comparison
Highlights quality problem and determining which
areas require priority attention
Gives an indication of the costs of poor quality
Justifies the use of resources
Provides feedback for driving the improvement effort

IS WHAT IS BEING DONE WORTH DOING AND HAS

IT BEEN DONE WELL

Principles of measurement

What to measure is ultimately determined

by what the customer considers important
The customers needs are translated into
strategic priorities and strategic plan
indicating what should be measured
Improvement by providing both team
motivation and information on what work
and what doesnt work

Measurement issues

You cant measure creativity but you can measure

the impact of it
Measurement fails because they cannot consider
things beyond control but measures only indicate
changes in the performance levels, they cannot
explain changes
Measurement is only possible when results are
quantifiable ,they cannot be applied when there is
nothing to count, but whenever people are
expected to do something you can assess the
extent to which they do it

Criteria for Performance

Measures

Be related to the objectives

Focus on measurable outputs and
accomplishments
Be precise as possible
Provide a sound basis for feedback and
action
Be comprehensive

Coaching

Coaching is a person to person

technique designed to develop
individual knowledge ,skills and
attitude. It is most effective if it
takes place informally as part of the
normal process of management or
team leadership

Aims of Coaching

To aware of how well they are doing

Controlled delegation into practice .ie
managers can delegate new tasks or
enlarged areas of work
Enable guidance to be provided on
how to carry out specific tasks

Coaching Sequence

Identify the areas of knowledge,skills or capabilities

where learning needs to take place to qualify people to
carry out the task ,provide for continuous development,
enhance transferrable skills or improve performance
Ensure that people understand and accept the need to
learn
Discuss with people what needs to be learned and the
best way to undertake the learning
Get people to work out how they can manage their own
learning while identifying where they will need help
from the boss or some one else

Provide encouragement and advice

to people in pursuing the self
learning programe
Provide specific guidance as required
where people need your help
Agree how progress be monitored
and reviewed

Counselling

Workplace counselling can be defined

as any activity in the workplace
where one individual uses a set of
skills and techniques to help another
individual to take responsibility for
and to manage their own decision
making whether it is work related or
personal
IPD

Counselling stages

Recognition & understanding

recognizing the existence of problems and
issues
Empowering:enabling employess to recognize
their own problems or situation and encouraging
them to express it ,work out a solution and take
action to implement it
Resourcing: Managing the problem,which will
include deciding on any further help individuals
may need from their managers,a specialist or an
outside resource

Performance Problem Solving

Organizations can provide the climate and the process

for solving performance problems by
Creating a culture in which success is applauded\
Developing performance mgmt process that set
performance standards
Training managers in how to handle performance and
disciplinary actions
Continuously monitoring performance and analyzing
the reason for failure in order to develop
organizational solutions
Ensuring that organizational learning is encouraged
Foster a double loop learning approach

Approaches to Performance Management Training

PMT should focus on
1.Delivering training on just in time basis to ensure that
learning is reinforced
2.Define the learning style
3.Working on organization climate & culture
4.Conducting coaching workshops so that the principles of
coaching to improve performance are properly understood
5.Working on performance planning
6.Conducting performance review
7.Working on the consistency of review

Objectives for PMT

To let people know about the whys

and why
PM
What does PM consists of
How should PM be carried out

To spell out their contribution

To train people in the skills they have to use

Performance Management &

Pay

Paying for performance or for competence ,or

both is regarded by many organization as
desirable for 3 reasons
It motivates people to perform better or to
develop their skills and competencies
It delivers the message that performance and
competence are important
It is fair and equitable to reward people
differentially according to their performance
,competence or contribution

Approaches to contingency pay

PRP for individuals or teams &

Competence related pay
Or
Mix of two-third approach-Mixed ModelContribution related pay
These collectively may be referred to as
contingency or discretionary pay,because the
reward is dependent on the performance of the
individual or team on individual competence and
the amount rewarded is at the discretion of the
management

PRP

Individual PRP relates pay progression or

bonuses to the assessed performance of
individuals
It is an effective motivator
It conveys a clear message to employees that the
organization believes in indeed requires-a high
level of performance from everyone and is
prepared to pay for it
High performers should be paid more than low
performers

Criteria for Performance Pay

Individuals and teams should be clear about the

targets and standards of performance required
They must be able to measure their performance
They should understand what rewards they will
receive for achieving the end result
The reward should be worthwile
The results required to generate the reward
should be attainable
The basis upon which rewards are made should
be communicated positively and should be easy
to understand

Developments in PM
From

To

System

Process

Appraisal

Joint Review

Outputs

Outputs/Inputs

PRP

Development

Top Down

360 degree feedback

Directive

Supportive

Monolithic

Flexible

Owned by HR

Owned by users

Effective Performance
Management System

Definition of PM
1.

Continuous Process of

Identifying
Measuring
Developing

The performance of individuals

and teams

Definition of PM (continued)
and

2. Aligning performance
with

Strategic Goals of the

organization

Contributions of
Performance Management

Contributions of Performance Management

For Employees

Clarify definitions of
job
success criteria

Increase motivation to perform

Increase self-esteem
Enhance self-insight and development

Contributions of Performance Management

For Managers

Communicate supervisors views of

performance more clearly
Managers gain insight about
subordinates
Better and more timely differentiation
between good and poor performers
Employees become more competent

Contributions of Performance Management

For Organization/HR Function

Clarify organizational goals

Facilitate organizational change
Fairer, more appropriate
administrative actions
Better protection from lawsuits

Disadvantages/Dangers of Poorly-implemented
PM Systems

For Employees

Lowered self-esteem
Employee burnout and job
dissatisfaction
Damaged relationships
Use of false or misleading
information

Disadvantages/Dangers of Poorly-implemented
PM Systems

For Managers

Increased turnover
Decreased motivation to perform
Unjustified demands on managers
resources
Varying and unfair standards and
ratings

Disadvantages/Dangers of Poorly-implemented
PM Systems

For Organization

Wasted time and money

Unclear ratings system
Emerging biases
Increased risk of litigation

Reward Systems

Definition
Set of mechanisms for distributing
Tangible returns
and

Intangible or relational returns

As part of an employment relationship

Reward Systems

Tangible returns

Cash compensation
Base pay
Cost-of-Living & Contingent Pay
Incentives (short- and longterm)

Reward Systems

Tangible returns (continued)

Benefits, such as
Income Protection
Allowances
Work/life focus

Reward Systems

Intangible returns

Relational returns, such as

Recognition and status
Employment security
Challenging work
Learning opportunities

Purposes of PM Systems:

Overview

Strategic
Administrative
Informational
Developmental
Organizational maintenance
Documentational

Strategic Purpose

Link individual goals with

organizations 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

Organizational Maintenance
Purpose

Plan effective workforce

Assess future training needs
Evaluate performance at
organizational level
Evaluate effectiveness of HR
interventions

Documentational Purpose

Validate selection instruments

Document administrative
decisions
Help meet legal requirements

An Ideal PM System:
14 Characteristics
1.

2.
3.
4.
5.
6.

7.

Congruent with organizational

strategy
Thorough
Practical
Meaningful
Specific
Identifies effective/ ineffective
performance
Reliable

An Ideal PM System:
14 Characteristics (continued)
8.
9.
10.
11.
12.
13.
14.

Valid
Acceptable and Fair
Inclusive
Open (No Secrets)
Correctable
Standardized
Ethical

PM helps for the Integration with other

departments & development pgms

PM provides information for:

Development of training to meet
organizational needs
Workforce planning
Recruitment and hiring decisions
Development of compensation
systems