XAVIER INSTITUTE OF SOCIAL SERVICE

RANCHI

A REPORT ON PERFORMANCE MANAGEMENT AND DEVELOPMENT UNDER

THE GUIDANCE OF

PROF: I.BANERJEE [H.R.M]

SUB -HUMAN RESOURCE MANAGEMENT

XISS DR. CAMIL BULCKE PATH

RANCHI

PREPARED BY
MARKETING -1
SUB -HUMAN RESOURCE MANAGEMENT
2ND TRIMESTER

DENNIS JOSE -06

SUDEEP BANERJEE-23
ARUN KUMAR-04
SURBHI AGGARWAL-56
GAUTAM KUMAR-53

ABSTRACT

The role of HR in the present scenario has undergone a sea change and its focus is
on evolving such functional strategies which enable successful implementation of
the major corporate strategies. In a way, HR and corporate strategies function in
alignment. Today, HR works towards facilitating and improving the performance of
the employees by building a conducive work environment and providing maximum
opportunities to the employees for participating in organizational planning and
decision making process. Today, all the major activities of HR are driven towards
development of high performance leaders and fostering employee motivation. So, it
can be interpreted that the role of HR has evolved from merely an appraiser to a
facilitator and an enabler.
Performance management is the current buzzword and is the need in the current
times of cut throat competition and the organizational battle for leadership.
Performance management is a much broader and a complicated function of HR, as
it encompasses activities such as joint goal setting, continuous progress
review and frequent communication, feedback and coaching for improved
performance, implementation of employee development programmes and rewarding
achievements. The process of performance management starts with the joining of a
new incumbent in a system and ends when an employee quits the organization.
Performance management can be regarded as a systematic process by which the
overall performance of an organization can be improved by improving the
performance of individuals within a team framework. It is a means for promoting
superior performance by communicating expectations, defining roles within a
required competence framework and establishing achievable benchmarks.

INDEX

TOPIC

PAGE NUMBER
3

ABSTRACT
5
INTRODUCTION
8
CHAPTER 1
14
CHAPTER 2
18
CHAPTER 3
23
CHAPTER 4
48
CHAPTER 5
52
CONCLUSION
54
BIBLIOGRAPHY

Introduction

The role of HR in the present scenario has undergone a sea change and its focus is
on evolving such functional strategies which enable successful implementation of
the major corporate strategies. In a way, HR and corporate strategies function in
alignment. Today, HR works towards facilitating and improving the performance of
the employees by building a condusive work environment and providing maximum
opportunities to the employees for participating in organizational planning and
decision making process. Today, all the major activities of HR are driven towards
development of high performance leaders and fostering employee motivation. So, it
can be interpreted that the role of HR has evolved from merely an appraiser to a
facilitator and an enabler.
Performance management is the current buzzword and is the need in the current
times of cut throat competition and the organizational battle for leadership.
Performance management is a much broader and a complicated function of HR, as
it encompasses activities such as joint goal setting, continuous progress
review and frequent communication, feedback and coaching for improved
performance, implementation of employee development programmes and rewarding
achievements. The process of performance management starts with the joining of a
new incumbent in a system and ends when an employee quits the organization.
Performance management can be regarded as a systematic process by which the
overall performance of an organization can be improved by improving the
performance of individuals within a team framework. It is a means for promoting
superior performance by communicating expectations, defining roles within a
required competence framework and establishing achievable benchmarks.
According to Armstrong and Baron (1998), Performance Management is both a
strategic and an integrated approach to delivering successful results in organizations
by improving the performance and developing the capabilities of teams and
individuals. The term performance management gained its popularity in early 1980s
when total quality management programs received utmost importance for
achievement of superior standards and quality performance. Tools such as job
design, leadership development, training and reward system received an equal
impetus along with the traditional performance appraisal process in the new
comprehensive and a much wider framework.
Performance management (PM) includes activities which ensure that goals are
consistently being met in an effective and efficient manner. Performance
management can focus on the performance of an organization, a department,
employee, or even the processes to build a product of service, as well as many other
areas. . A performance management system includes the following actions.
Developing clear job descriptions and employee performance plans which
includes the key result areas (KRA) and performance indicators.

 Selection of right set of people by implementing an appropriate selection

process.
Negotiating requirements and performance standards for measuring the
outcome and overall productivity against the predefined benchmarks.
Providing continuous coaching and feedback during the period of delivery of
performance.

"The key to an effective performance management system is to equip managers to

give feedback on an ongoing basis. The HR community over-engineered the
performance management systems and lost touch with the employee whose
performance, the process was supposed to enable", told Shubha K, Director-HR,
SunGard to TJinsite, research and knowledge arm of TimesJobs.com, during an
interview about post-appraisal feedback.

A research conducted by TJinsite underlined that in an effective organisation,

assignments and projects are monitored continually. According to 46% of surveyed
organisations, ongoing monitoring - periodic reviews and managerial feedback provides the opportunity to check how well employees are meeting pre-determined
standards and to make changes in unrealistic or problematic standards.
Relating performance feedback process with IPL matches, Shubha says what makes
these cricket matches so exciting is the instant feedback. Performance of every ball
bowled, hit and fielded is delivered instantaneously. From an HR perspective, it is
idyllic as success is not measured in the forms and templates, but dovetailed with
the performance as quickly as possible.
According to Job Buzz, a premier product by TimesJobs.com to help employees
make intelligent career decisions, an effective performance management process is
a major criterion that distinguishes best employers.

In view of Anuraag Maini, Executive VP, Head HR and Training, DLF Pramerica Life
Insurance Company, most employees receive a formal appraisal annually and a
midyear review can help make it more robust as it will not bring surprises during
annual assessment. And, informal reviews will always need to compliment formal
appraisals. He also stressed that frequent appraisals /feedback sessions are often
needed for new employees, for longer serving employees who have moved to new
roles or for those who are below acceptable performance standards
Elaborating the role of HR in the appraisal system, Shubha says while managers
should be delivering instantaneous, task based, operational level feedback and
advice, HR should complement this at a more long term and importantly strategic
level. This is where HR should pull in the metrics that track performance delivery,
giving an opportunity to the employee to step back from the daily routine and see
where his efforts are taking him.
To sum up, experts agreed that the frequency of appraisals needs to be such that
you give the appraisee sufficient time to perform and yet, not enough time for
appraisers to forget. Having two appraisals a year is a good solution, with one
focusing on the increments and promotion and the other focusing on the
development and role areas.

CHAPTER 1
PERFORMANCE MANAGEMENT DEFINED

What is Performance Management?

Performance management is the process of creating a work environment or setting
in which people are enabled to perform to the best of their abilities. It is the main
vehicle by which managers communicate what is required from employees and give
feedback on how well they are achieving job goals (CIPD, 2009). It brings together
many of the elements that make up the practice of people management, including in
particular learning and development.Performance management establishes shared
understanding of what is to be achieved and provides an approach to leading and
developing people that will ensure it is achieved; as such it is an essential element of
your role and will support your relationship with individuals in your team.

As a manager, you need to adopt performance management practices that will

facilitate continuous review and ongoing development of your department/ team in
order to deliver departmental/faculty and University objectives. The underlying
assumption is that by managing the performance of the individual and team,
departmental and organisational performance will follow and by raising individual and
team levels of performance, organisational performance will also improve.Equally
when performance of individuals is not managed, this can lead to frustration and
discontent amongst team members. The department for Business Innovation and
Skills recently calculated that disengaged employees cost the UK economy between
59.4 and 64.7 billion.
Why dont people do what theyre supposed to do?
Perhaps because

they dont know why they should do it

they dont know what theyre supposed to do
they dont know how to do it
they think your way will not work
they think their way is better
they think something else is more important
there is no positive consequence to them for doing it
they think they are doing it
they are rewarded for not doing it
there is - or they anticipate a negative consequence for doing it

 there is no negative consequence to them for unacceptable performance

they dont have the resources to do it
obstacles beyond their control
Performance management is a whole work system that begins when a job is defined
as needed and starts from the assumption that most people want to perform well.
Performance management is about helping your team to perform well and removing
any obstacles to this.

EVOLUTION:
The term performance management gained its importance from the times when the
competitive pressures in the market place started rising and the organizations felt the
need of introducing a comprehensive performance management process into their
system for improving the overall productivity and performance effectiveness.
The performance management process evolved in several phases.

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. This system had suffered from many
drawbacks.

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%.

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
environment.
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.

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.

CHAPTER 2
NEED FOR PERFORMANCE MANAGEMENT

In the era of cut throat competition and globalization, organizations have realized the
importance of strategic HR practices for gaining a competitive edge over the
competitors. A well designed performance management system can play a crucial
role in streamlining the activities of the employees in an organization for realizing the
ultimate corporate mission and vision. Performance management is a useful tool for
aligning all the major organizational functions and sub functions so that the focus is
directed towards attainment of the organizational goal.
Performance management is a much broader system as it is linked with the
processes of planning, implementing, reviewing and evaluating, for augmenting
growth and productivity at both the individual and organizational level.
By clearly defining both individual and team based responsibilities in the form
of KRAs as well as by creating an understanding of shared mutual
accountabilities, a good performance management system enables, empowers
and facilitates the development of staff members.
Managing the performance of the employees is one of the toughest challenges which
the organizations are facing today as this completely depends upon the employees
commitment, competence and clarity of performance. If managed efficiently through
a well planned reward practice and feedback mechanism, a performance
management system can serve as an important tool for employee motivation and
development. The need for the introduction of a robust system of performance
management was felt during the period when the traditional performance appraisal
mechanism started failing and its limitations were surfacing up. The performance
appraisal system of the earlier period was missing objectivity as the diameters or the
parameters for measuring performance were not clearly specified and the focus was
on traits instead on behaviors or measurable targets. As a result, the employees
morale and motivation to work was adversely affected due to an absence of a
transparent feedback mechanism and lack of employee involvement in the entire
process of appraisal. A performance management system overcomes the drawbacks
of the traditional performance appraisal system by maintaining a futuristic approach
instead of assessing the past contributions of the employees for evaluating the
performance of the employees.
Performance management is a strategic tool and is holistic in nature as it
pervades in every activity of the organization which is concerned with the
management of individual, team and the overall organizational performance. The
process is indispensable and very important for an organization as it is concerned
with establishing a culture in which the individuals and teams can excel by
continuously improving in terms of skill sets and the business processes.

Performance management facilitates improvement of quality of relationship amongst

the members of the organization by encouraging sharing of expectations and
building a climate of openness and mutuality. The significance of performance
management has grown in recent times because most of the organizations are
giving a lot of importance to employee development and talent management. The
contemporary organizations are working towards grooming the competencies of the
employees for maintaining a leadership in the competitive market and performing
outstandingly. Arvind Mills of Lalbhai Group, realized the importance of strategic
HRM practices and the implementation of a pro active performance management
system in their organization after facing serious threats from the business
competitors. The company created a Manpower Planning and Resource Group
which took the charge of preparing job descriptions and structuring the jobs for the
employees and was responsible for implementing the recruitment and selection
procedures. An innovative online recruitment system was introduced which was
known as Selection Information System, for fixing interviews, generating call
letters, etc. This system was linked with the Compensation Information System
and Training Information System. The training requirements of the employees
were taken care by the Management and Organizational Development Group. The
company also introduced MBO system, for setting smart goals for the employees
which may motivate them for a superior performance.
Performance management has attracted the attention of many organizations
and in the near future its importance will still grow as it will become more
integrated with the processes like talent management, career management,
pay based on performance, development and talent management.
PM is sometimes confused with human resources and personnel systems, but it is
much more encompassing. PM comprises the methodologies, metrics, processes,
software tools, and systems that manage the performance of an organization. PM is
overarching, from the C-level executives cascading down through the organization
and its processes. To sum up its benets, it enhances broad cross-functional
involvement in decision making and calculated risk taking by providing tremendously
greater visibility with accurate, reliable, and relevant informationall aimed at
executing an organizations strategy. But why is supporting strategy so key? Being
operationally good is not enough. In the long run, good organizational effectiveness
will never trump a mediocre or poor strategy. But there is no single PM methodology,
because PM spans the complete management planning and control cycle. Think of it
as a broad, end-to-end union of solutions incorporating three major functions:
collecting data, transforming and modelling the data into information, and Webreporting it to users. Many of PMs component methodologies have existed for
decades, while others have become recently popular, such as the balanced
scorecard. Some of PMs components, such as activity-based management (ABM),
are partially or crudely implemented in many organizations, and PM renes them so
that they work in better harmony with its other components. Early adopters have
deployed parts of PM, but few have deployed its full vision. This book describes the
full vision. The term knowledge management is frequently mentioned in business
articles. It sounds like something an organization needs, but the term is somewhat
vague and does not offer any direction for improving decisions. In contrast, the main
thrust of PM is to make better decisions that will be evidenced, and ultimately
measured, by outputs and outcomes. Many organizations seem to jump from

improvement program to program, hoping that each one might provide that big,
elusive competitive edge. Most managers, however, would acknowledge that pulling
one lever for improvement rarely results in a substantial changeparticularly a longterm, sustained change. The key to improving is integrating and balancing multiple
improvement methodologies. You cannot simply implement one improvement
program and exclude the other programs and initiatives. It would be nice to have a
management cockpit with one dial and a simple steering mechanism, but managing
an organization, a process, or a function is not that easy. Even with a clearly dened
strategy, conicts are a natural condition in organizations. For example, there will
always be tension between competing customer service levels, process efciencies,
and budget or prot constraints. Managers and employee teams are constantly faced
with conicting objectives and no way to resolve them, so they tend to focus their
energies on their close-in situation and their personal concerns for how they might
be affected. PM escalates the visibility of quantied outputs and outcomesin other
words, results. PM provides explicit linkage between strategic, operational, and
nancial objectives. It communicates these linkages to managers and employee
teams in a way they can comprehend, thereby empowering employees to act rather
than cautiously hesitate or wait for instructions from their managers. PM also
quantitatively measures the impact of planned spending, using key performance
indicators born from the strategy map and balanced scorecard. Knowing these
strategic objectives and their relative importance, managers and employee teams
then use tools from the PM suite, such as activity-based costing data and customer
relationship management information, to objectively evaluate the trade-offs.
Everyone recognizes that employee teams are very knowledgeable in their own
space. When management communicates to them what is wanted, employees can
reply with an understanding of what initiatives it will take and how much it will cost.
Internal politics and gaming are replaced by the preferable behavior of employees
taking responsibility like independent business owners. As problems constantly
surface, the context for making trade-off decisions is framed. This applies to the
ultimate value creators, the executive management team, who struggle with shortterm versus long-term trade-offs. The CEO and CFO also wrestle with those
conicting cost and customer service objectives governing nancial earnings that
investors and hand-wringing stock analysts anxiously anticipate each quarter.
Differentiating customer value from share- holder value is a tricky exercise, and PM
brings objectivity and balance to the process of making spending and investment
decisions. Budgeting becomes a prot-fostering funding mechanism rather than an
accounting police control weapon. Prioritizing and coordinating begin to displace
control.3 The appeal of PM is that it realizes there is no sun around which lesser
improvement programs, management methodologies, or core processes orbit. PM is
about sense-and-respond balancing, always striving for better organizational
direction, traction, and speed. PM involves constructing powerful combinations
linking software, such as business intelligence analytics, with core processes
enhanced by improvement initiatives (e.g., lean and/or six sigma) to prioritize efforts and align an organizations work activities with its corporate strategy. If PM is
properly implemented, it can produce an epidemic of common sense within an
organizationand also probably with the trading partners (e.g., suppliers and
customers) with whom it interacts. Maximizing everywhere is not equivalent to
optimizingit is sub optimizing. Optimizing acknowledges constraints. PM facilitates
balancing conicts.

BENEFITS OF PERFORMANCE MANAGEMENT

A good performance management system works towards the improvement of the

overall organizational performance by managing the performances of teams and
individuals for ensuring the achievement of the overall organizational ambitions and
goals. An effective performance management system can play a very crucial
role in managing the performance in an organization by:
Ensuring that the employees understand the importance of their contributions
to the organizational goals and objectives.
Ensuring each employee understands what is expected from them and
equally ascertaining whether the employees possess the required skills and
support for fulfilling such expectations.
Ensuring proper aligning or linking of objectives and facilitating effective
communication throughout the organization.
Facilitating a cordial and a harmonious relationship between an individual
employee and the line manager based on trust and empowerment.
Performance management practices can have a positive influence on
the job satisfaction and employee loyalty by:
Regularly providing open and transparent job feedbacks to the employees.
Establishing a clear linkage between performance and compensation
Providing ample learning and development opportunities by representing the
employees in leadership development programmes, etc.
Evaluating performance and distributing incentives and rewards on a fair and
equated basis.
Establishing clear performance objectives by facilitating an open
communication and a joint dialogue.
Recognizing and rewarding good performance in an organization.
Providing maximum opportunities for career growth.

An effectively implemented performance management system can benefit the

organization, managers and employees in several ways as depicted in the table
given below:
Organizations
Benefits

Improved organizational performance, employee

retention and loyalty, improved productivity, overcoming
the barriers to communication, clear accountabilities, and
cost advantages.

Managers Benefits

Saves time and reduces conflicts, ensures efficiency and

consistency in performance.

Employees Benefits

Clarifies expectations of the employees, self assessment

opportunities clarifies the job accountabilities and
contributes to improved performance, clearly defines
career paths and promotes job satisfaction.

Clearly defined goals, regular assessments of individual performance and the

company wide requirements can be helpful in defining the corporate competencies
and the major skill gaps which may in turn serve as a useful input for designing the
training and development plans for the employees. A sound performance
management system can serve two crucial objectives:
Evaluation Objectives

By evaluating the readiness of the employees for taking up higher

responsibilities.

By providing a feedback to the employees on their current competencies and

the need for improvement.

By linking the performance with scope of promotions, incentives, rewards and

career development.

Developmental Objectives
The developmental objective is fulfilled by defining the training requirements of the
employees based on the results of the reviews and diagnosis of the individual and
organizational competencies. Coaching and counseling helps in winning the
confidence of the employees and in improving their performance, besides
strengthening the relationship between the superior and the subordinate.
In a nutshell, performance management serves as an important tool for realizing
organizational goals by implementing competitive HRM strategies. It helps in aligning
and integrating the objectives with the KPIs in an organization both vertically and
horizontally across all job categories and the levels and thus helps in driving all the
activities right from the bottom level towards one single goal.

CHAPTER 3
PREREQUISITES FOR PERFORMANCE MANAGEMENT

Performance management can be regarded as a continuous process managing the

performances of people for getting desired results. Performance management is
beneficial to all the major stakeholders of an organization by clearly describing what
is supposed to be done for attaining certain desired goals. Performance
management is the heart of any HR processes in an organization as it influences the
rest other HR functions or processes. Focus on performance management may be
fruitless without the existence of proper organizational design and management
systems.
Some of the essential pre requisites without which performance management
system will not function effectively in an organization are:

Should attract very high levels of participation from all the members
concerned in an organization. It should be a participative process.

Top management support and commitment is very essential for building a

sound performance culture in an organization.

Organizational vision, mission and goals should be clearly defined and

understood by all levels so that the efforts are directed towards the realization
of the organizational ambitions.

Clear definition of the roles for performing a given job within the organizational
framework which emanates from the departmental and the organizational
objectives. The system should also be able to explain the linkages of a role
with other roles.

Open and transparent communication should prevail which will motivate the
employees for participating freely and delivering high performance.
Communication is an essential pre requisite for a performance management
process as it clarifies the expectations and enables the parties in
understanding the desired behaviors or expected results.

Identification of major performance parameters and definition of key

performance indicators.

Consistency and fairness in application.

A commitment towards recognition of high performance. Rewards and

recognitions should be built within the framework of performance
management framework.

Proper organizational training should be provided to the staff members based

on the identification of training needs from periodic evaluation and review of
performance. This will motivate the employees for a superior performance.

Tata Iron and Steel Company (TISCO), a flagship company of India involved in
manufacturing of cost effective steel can be appreciated for their initiatives in the
implementation of an effective performance management framework and innovative
HR practices. TISCO initiated a management restructuring programme for
transforming into a high performing and a growing organization. In the HR front, the
management focused on providing exciting career opportunities and building a team
of high performing professionals for which they hired Mckinsey and Co. The
consultants firstly started with building a lean and a flat strategic business unit with
enriched jobs, increased accountabilities and autonomy. A Performance Ethic
Programme (PEP) was also introduced for promoting young and dynamic
professionals and this was a replacement of seniority based promotions. A new
Performance Management System (PMS) was introduced for aligning the KRAs with
the business strategies and identifying superior performers in the organization by
defining clear career paths and accountabilities. The rewards and recognitions were
linked with the PMS. The new measures in the direction of performance
management boosted the employees motivation and performance. The job
satisfaction also improved due to the introduction of a fair and transparent reward
system. Before we can begin the performance management process, two important
prerequisites must occur. First, strategic planning must be completed because the
performance management process builds on an organizations goals. Once
organizational goals are established, employee goals cascade from there.
Remember, an important objective of the performance management process is to
enhance employees contributions to the organizations goals. The second
prerequisite is a thorough understanding of the job. This is done through job
analysis. If it has been some time since a job analysis was conducted for a position,
it may be necessary to conduct a new analysis before starting the performance
management process. If you are working with job descriptions that read like the last
century, its time to update them if you expect to be successful in todays highly
competitive, technology-driven workplace. Once strategic planning goals are
established and the job analysis information is current, the performance
management process can begin. Once the prerequisites are in place, the next step in the
process is performance planning where the organization establishes the criteria and
expectations for employee performance. Supervisors must communicate this to employees
in such a way that everyone understands the expectations. It would not be appropriate to
expect outstanding performance from employees if they had no idea how the organization
describes and measures outstanding. Clear communication is a central part of the
performance management process. In this step, the manager and employee together

identify what needs to be done and how it will be accomplished. This includes
consideration of results and appropriate behaviors to accomplish tasks. The
supervisor and the employee must agree on the objectives to be accomplished.

These are the specific outcomes the employee is expected to achieve. Outcomes
must include specific, measurable performance standards.

Behaviors include competencies as well as traits like teamwork, leadership and

communication. If employees accomplish their tasks but they are horrible to work
with and have alienated their entire departmentthats not a good outcome! Open
communication, working with a team and meeting deadlines so other staff members
can accomplish their parts of the process are all areas that should be addressed in
the performance review.The last part of the performance plan is to establish
employee developmental goals. If there are areas that need improvement, they
should be identified and plans made to correct the deficiency. Even without needed
improvement, though, employees need an opportunity to grow in their careers and to
learn new skills. Improvement plans should be identified and progress toward goals
measured as part of the review process. Employee growth adds value not only to the
employee personally but to the employees manager and to the organization as a
whole.

CHAPTER 4
PERFORMANCE MANAGEMENT MODELS

We are in an instant information age. Between computers, smart phones, and tablets
we can access information 24/7/365 and likewise we can be accessed by many of
these same devices. As a result there is an expectation that organizations can
readily access analytics and metrics related to performance measurement and the
same information will be available to others. For example, the Federal government,
under the Government Performance and Result Act of 1993, boldly mandated that
federal agencies annually prepare a review of performance relative to targets set in
alignment with the agencys strategic plan. Seventeen years later, the GPRA
Modernization Act of 2010, changed the mandate to performance data being
updated quarterly and that the information be easily accessible by the public. A
recent report (Abramson, Mark, et. al. Seven Management Imperatives. IBM Center
for the Business of Government, Washington DC, 2011) noted Technology has
made it easier to collect, aggregate, and display data, making it available to a wide
range of users. The authors then cite the use of real-time performance data as one
of the seven management imperatives. Real-time performance data emphasizes the
need for the currency of the information provided. So both within and outside of
government there is a dual push to 1) having current information for managing, and
2) that the information is available outside of the inner circle.
To accommodate this push, organizations can no longer remain on the sideline and
question whether they should collect performance data to improve management;
rather organization need to move onto the playing field and address the following
questions: Can we collect the right information for decision- making? When we
have the right information will our manager know how to use it?
In the field of statistics there is a concept known as construct validity. It is defined
as the degree to which inferences can legitimately be made from the
operationalizations in your study to the theoretical constructs on which those
operationalizations were based (William Trochim, Research Methods Knowledge
Database, http://www.socialresearchmethods.net/ kb/constval.php). Though there is
no similar term in performance measurement the concept is critical. If an improper
metric (operationalization) is used, it will be a poor indicator of program performance.
To avoid using the improper metric it is important that the metrics be developed in a
systematic fashion consistent with the goals and objectives of the program. This
model provides a framework for developing meaningful metrics that are consistent
with other planning documents of the organization and can be incorporated into
management decisions.

The terms performance measurement and performance management are often

used in a manner that appears to be interchangeable. For the purposes of this paper
it will be helpful to differentiate them.
Performance Measurement is the process of defining, monitoring, and using
objective indicators of the performance of organizations and programs on a regular
basis.(Poister, Theodore H. Measuring performance in public and non profit
organizations. Josey Bass, San Francisco, CA. 2003)
Performance Management is the process of directing and control- ling employees
and work units in an organization and motivating them to perform at higher levels.
(Poister, Theodore H. Measuring performance in public and non-profit organizations.
Josey- Bass, San Francisco, CA. 2003)
The key for performance measurement is that it occurs on a regular basis.
Performance management uses that information to make changes to the
organization so that it functions at a higher level. This becomes a cycle, because the
changes recommended based on performance management then need to be
monitored to determine that they are having the desired impact on performance.
Hence the model (Figure 1) is termed measurement-based performance
management because it incorporates what the organization does with both
generating the proper performance metrics and using that for management.

The model consists of six stages; the first four relate to performance measurement
and the last two relate to performance management. The stages surround an inner
circle that focuses on the environments in which this process is being conducted. For
example, when the Program Assessment Rating Tool (PART) was instituted by the
Bush administration, many agencies reluctantly complied. When done in that
environment the result is that poor metrics are developed (i.e., the agency uses what
it already has) and the agency spends precious resources gathering information that
is not very useful. The internal and external environments influence how managers
approach the process and what they hope to achieve. Under ideal circumstances the
manager understands the value of this information and how it will result in their group
accomplishing their work more efficiently. That type of attitude results in better
metrics being developed, a greater willingness from the employees to gather and
use the data, and better decisions for improving performance.

The remainder of the chapter presents a description of each of the stages in the
model. Because the model is circular, one can enter at any point. Thus if an agency
or organization has metrics, the model can be used to merely describe how to use
the results for management.

Stage 1: Understand the Context Organizations spend a great deal of time and
money to create strategic plans and then undertake activities that do not always
support those efforts. Stage 1 is to review existing documents like the strategic plan
to determine where the organization is heading and how it proposes to get there, i.e.,
what is its map. The map that is often used is a logic model. The logic model
indicates the impact the organization hopes to achieve and the inputs, activities,
outputs and outcomes (short-term, intermediate and long-term) that result in the
impact being obtained. Ideally it is the impact that should be the focus of
performance measurement, but that is often not feasible. Either it is difficult to
measure the impact or the data are not readily available for that. The outcomes then
become the focus for performance measurement, because if those are being
achieved, then the impact will follow.
This approach of using the strategic plan and/or logic model as the guide posts for
developing performance metrics will result in the metrics being aligned (Stage 2).
Stage 2: Develop Metrics and Align The logic model will identify the outcomes of
interest. The staff of the organization should be able to assist in noting what data
they are currently gathering, what data may be gathered by other departments of the
organization that can be relevant, and whether it is feasible to gather additional data.
It is too easy at this stage to fall into the trap of using what is readily available. Often
those data do not directly relate to the impact or the outcomes of interest. If that is
what the organization uses, then it will move in a direction contrary to what is noted
in the strategic plan.
Metrics can be a double edged sword. On the one hand they serve as a tool to
measure progress. On the other hand what is measured is what gets done.
Therefore, if you are measuring the wrong thing that is what will get done; and the
right thing will not be accomplished.

Internal & External Environments

Develop Metrics & Align
Analyze
Make Changes
Internalize
Implement
Understand Context
Performance Measurement
Performance Management

Stage 3: Implement Once the metrics (definition, source, and how frequently they
will be gathered) have been determined, the next step is to implement the data
collection. If grantees or other organizations are involved in the data collection, it is

useful to let them know why this is being done and provide them guidance on how to
gather the information and what definitions to use.
Stage 4: Analyze Contrary to common opinion, data speak; and for statisticians this
is accomplished by a thorough data analysis. Before analyzing the results, program
personnel need to review the data to determine whether they are reliable. For
example, did all the reporting entities use the same definitions? This may seem trivial
but it is not. If the outcome of interest is increased exercise, determined by the
percentage of program participants who exercised for thirty or more minutes three
times per week, the following questions may arise: 1. Do the thirty minutes have to
be consecutive? 2. Is walking to school exercise, or does exercise have to be
something else? If the latter, how is that defined?
Another aspect of reliability is Are the data accurately reported? One may want to
periodically examine the trends in reporting at the level of the unit reporting (i.e.,
grantee, school district, etc.) to determine whether the 63% reported this period is a
typo and should really be 36%, the same as reported last period. Large changes in
outcomes should always be suspect.
Stage 5: Changes can be of two types. One, the data being gathered are not
meeting the needs and different metrics should be developed. The other change is
that the data indicate a program is not performing as envisioned and there need to
be changes to the program to enhance its performance. The latter is performance
management, making changes based on performance information to enhance the
impact of the program. If changes are made to the program, it then becomes
necessary to go through stages 1-3 to verify that the changes being made are
consistent with the mission of the program, that you have the proper metrics, and
have defined the metrics so that data are gathered consistently.
Stage 6: Internalize If Stage 6 is done correctly, it will impact the inner circle as well,
the internal environment. Internalize means that the organization uses the
information gathered to both monitor performance and to improve performance. The
various components of the organization see the value of this and support its use on a
regular basis. As new programs are developed a logic model should be developed
for the program and a plan should immediately be put into place to gather
performance metrics.
What do organizations need to do? If your organization is regularly gathering
analytics and generating performance metrics, jump to Stage 5. Examine whether
the metrics derived from the analytics are meaningful or merely being gathered
because they are convenient. Do the metrics help the organization move forward to
meeting its strategic objectives? If your organization is not gathering analytics and
generating performance metrics, then the model presented here should help you get
started. Regardless of where your organization is in the process of performance
measurement and management, DRC has an experienced staff of evaluators and

organizational psychologists who can work with you to improve existing systems or
work with you on cost effective methods for beginning.

Different types of High Performance Management Models

THE OPTIMISTIC MODEL

Extrinsic Satisfaction
Management Relations
HPM Practices
Organisational Performance

Commitment
Discretion

THE EXPLOITATION MODEL

Work Intensification
Insecurity
HPM Practices
Organisational Performance

Job Strain
Discretion

Under the optimistic model the impact of HPM is wholly benign. Employees
experiences of work are enhanced and the outcomes are thus beneficial to both
capital and labour. Increased task discretion and autonomy engender behavioural
traits reflected in the state of the psychological contract manifest in enhanced
commitment that, in turn, feeds into performance gains. As noted, the exploitation
position likewise, and somewhat ironically (Edwards 2001, p. 5), assumes a positive
association between HPM and performance gains. However, the distinction is that
any benefits take the form of minor gains in discretion, granted as a means of
securing compliance with managerial aims. Such advances are far outweighed by
work intensification, insecurity and stress (Ramsay et al. 2000, p. 505). Stress arises
because of the added responsibility associated with the new production mode allied
to increased pressure within the working environment due to the absence of buffers
within lean production formats.
Unfortunately, there are only a handful of studies that have collected systematic data
informing this debate. One of the most cited accounts in support of the optimistic
model is that provided by Appelbaum et al. (2000). This study investigated inter alia
the effects of HPM in three manufacturing sectors: steel, clothing and medical
products with data collated from around 4000 workers. HPM was associated with
positive performance gains and evidence was found linking various HPM practices to
job satisfaction. The results did, however, vary markedly by industry. Nevertheless,
the study provided scant support for the notion that HPM gives rise to work related
stress:
In general, our findings suggest that the opportunity for substantive participation is
generally related to lower, not higher levels of job stressors. In particular, workers
who have autonomy over task level decisions and those who are more likely to
communicate with people outside their work groups appear to have lower levels of
job stress.

Such findings were echoed in Harmon (2003) study in the US health care sector. The
research was based upon 112,000 employee responses in 146 separate medical
centres. The results indicated a correlation between HPM and lower costs (e.g.
employee turnover and leaves of absence) with the relationship mediated by
employee satisfaction prompting the comment that, HIWS [high involvement work
systems] may be justified both on humanistic and financial terms.
Managing performance in organizations: a conceptual model
The model proposes an impact of the aligned set of HRM practices involved in
Performance Management on employee perceptions and attitudes and proposes that
front-line managers play a crucial mediating role in implementing these practices.
Employee perceptions and attitudes affect employee performance, which in turn
affects organizational performance. The model also addresses reversed causality
and some of the contingencies. We did not include overall strategy or business
strategy or even HRM strategy in the model for two reasons. First, there is still little
empirical evidence for a link between (a) business strategy and HRM strategy, and
(b) HRM strategy and HR practices or bundles of HR practices. Second, we want to
keep the model as clear and parsimonious as possible. For the same reason, the
organizational performance box was not further refined. Obviously, distinctions are
possible between more proximal outcomes such as productivity, turnover and more
distal financial performance measures.
However, for our purposes, organizational level outcome measures are placed
together. As compared to other models, employee perceptions, reversed causality
and the role of direct supervisors/managers are more prominent. Below, we briefly
discuss these three points and provide a summary of the key assumptions and
propositions of the model.
Managers put Performance Management into practice, and by doing so will affect
employees perception as well as their commitment, motivation, and trust. Work on
leadership, leader-member exchange, goal-setting and motivation, perceived
supervisory and organizational support, and procedural and interactional justice may
help further delineate the importance of direct supervisors and front-line managers in
implementing HR practices.
An HR department can develop (or buy in) sophisticated Performance Management
tools. However, whether these really sort effect depends on the appropriate
enactment by line managers. Their consistency, fairness and skill in using tools such
as holding consultation meetings and conducting appraisal interviews will to a large
degree determine whether such tools indeed generate positive effects on
commitment and employee performance. The role of first line managers in carrying
out policies set by the firm is mentioned in the HRM literature (e.g. Storey, 1995),
however, studies have mostly ignored this role. Performance Management clearly
and directly involves managers in the process. Managers set challenging yet
attainable objectives, appraise performance and give feedback. They ensure

possibilities for subordinates development and stimulate a climate in which high

performance is stressed. Thus, managers skill and fairness in performing these
tasks as well as their relationships with their different subordinates will play a key
role in the success of Performance Management.
Employee perceptions
HRM practices can be seen as signals of the organizations intentions towards its
employees and are interpreted as such by individual employees (e.g. Rousseau &
Greller, 1994). However, employees do not necessarily perceive such signals
similarly or react to them in a similar manner. Guest (1999) noted that only little
research focuses on employees reactions to HRM. He suggests that the impact of
HR practices on employees commitment and performance depends on employees
perception and evaluation of these practices. Perception and attitudes may mediate
and moderate the relationship between HRM practices and employee performance
related behavior.
Variation may exist in employees perceptions of HRM practices or benefits offered
by the organization even when in objective terms what is offered to different
employees is very similar. Individual differences in perceptions and reactions to what
the organization has to offer may, for instance, follow from an employees previous
experience, their beliefs, comparison to others, or the type of employment contract.
Also, different promises made to prospective employees in the recruitment process
may result in different evaluations of what the employer offers (e.g. Rousseau,
1989). This latter perspective is related to research on the psychological contract,
which studies employees evaluation of the content of their exchange relationship
with the organization. Rousseau (1989, p. 121) defined the psychological contract as
individual beliefs in a reciprocal obligation between the individual and the
organization.
Research has focused mostly on the aftermath of contract formation, breach and
associated responses. For instance, research on violation of the psychological
contact shows the consequences of contract breach such as a loss of trust and
decrease in commitment (e.g. Robinson, 1996). Also, research indicates that
workers with different types of psychological contracts respond differently to violation
of the contract and organizational change. Similarly, research in the area of met
expectations and person-organization fit (e.g. Kristoff, 1996) call attention to the
effect that individual differences in the employment relationship may have on
outcomes such as commitment and employee performance.

Reversed causality

Much of the research on HRM and performance is cross-sectional. Thus,

directionality of the linkages is often assumed rather than tested. HRM is proposed
to be one of the causes of a better competitive position and better financial
performance of firms. However, there are also compelling arguments for a reversed
link. Organizations that perform better in financial terms may have more
opportunities to invest in High Performance Work Systems. Thus, the model
proposes that besides HRM influencing performance, there is also a reverse loop.
Organizational success, for example, in terms of high profits or significant growth of
market share, has a positive effect on the willingness to invest in HR practices (e.g.
Hiltrop, 1999; Paauwe & Richardson, 1997). Unraveling what causes what is not
easy. Using subjective performance indicators, Guest, Michie, Conway and Sheehan
(2003) find links between HRM and both productivity and financial performance, but
their longitudinal study fails to show that HRM causes higher performance. Their
analyses support the view that profitability creates scope for more HRM rather than
vice versa. This also holds at other levels. High performance is proposed to
positively affect employees commitment, trust, and motivation.
Employees will be motivated by personal as well as organizational success. For
example, performance affects commitment as much as vice versa. Empirical support
for such processes is available (see e.g. Locke & Latham, 2002)

The model: key propositions

A summary of the key assumptions of the proposed model is:
Most Performance Management practices (e.g. performance appraisal, feedback
training, coaching, information sharing) are facilitated and implemented by direct
supervisors or front-line managers. Therefore the behavior of line-managers will
mediate the effect of (most) practices on employee perception (and behavior).

HRM and Performance Management practices (as implemented by managers) first

affect the employees perception and evaluations. For example, only if information
sharing is seen and interpreted as such (and not as a manipulative form of
commanding), it will have the opportunity to positively affect intentions and behavior.

Employee behavior in turn will have its impact on organizational performance (e.g.
productivity). Contextual factors can constrain the impact individual performance has
on organizational level outcomes.

 Reversed causality plays a role. Organizational success (e.g. high profits or growth
of market share) could increase (a) the willingness of top management to invest in
HR practices, and (b) the employees commitment, trust, and motivation.
Organizational contextual factors, both internal (e.g. capital intensity) and external
(e.g. degree of unionization in the industry), and individual employee characteristics
(e.g. age, gender and level of education) and preferences (e.g. preferred job type,
level of autonomy) may constrain the proposed relationships between HR practices
and organizational performance.
Discussion and future research
Performance Management involves aligning the total set of an organizations HRM
practices in such a way that employee and, ultimately, organizational performance is
maximized. Thus, the link with the field of HRM is clear and many of the research
challenges outlined in the HRM and performance field also hold when considering
Performance Management (see e.g. Delery, 1998; Gerhart, Wright and McMahan,
2000). The model presented above also suggests a research agenda that is more
specific for Performance Management, for example through clearly addressing the
role of employee perceptions and supervisors in research. Research is needed on
the differences in enactment of HRM practices and the effects thereof.
Also, research could assess whether the type of relationship the front line supervisor
has with each subordinate (LMX) moderates the link between HRM practices and
employee perceptions. Other such hypotheses can be developed and tested.
Research on different levels of analysis as well as cross-level influences are of
interest. For example, how and when do individual and group performance influence
organizational performance (and vice versa)? The middle section of the model
describes the impact of direct supervisor/front-line managers, employees
perceptions and attitudes, and employee behavior suggesting research on individual
employee level. Organizational performance is on the organizational level and HRM
practices are set out at the organizational level, although organizations may
differentiate between employee groups (e.g. Den Hartog & Verburg, 2004). Other
levels (such as groups/teams) are also of interest (e.g. how does individual
performance relate to team performance, when do group norms constrain individual
behaviour). Future research will also need to consider the many methodological
challenges involved in multiple and cross-level research (see e.g. Kozlowski & Klein,
2000).
As stated the measurement of performance plays an important role in Performance
Management and some of the interesting challenges for future research are related
to Performance Appraisal (PA). For instance, Fletcher (2001) suggests that the
content of appraisal nowadays goes beyond task performance to incorporate
contextual performance. A key challenge in this area is determining what constitutes

good performance (and hence what should be measured and stimulated), which is
also highly relevant for the wider Performance Management process. For example,
Molleman and Timmerman (2003) describe the impact of shifts in organizational
performance indicators on those of employees. They argue that as organizations
leading performance indicators shift towards innovation and the creation of
knowledge, more non-routine work and interdependence between workers is found
and performance criteria at lower levels should shift to reflect this.

The context of Performance Management is changing, and Fletcher (2001) mentions

cultural differences and the impact of new technology as interesting emerging areas
of research. For instance, as more and more organizations work internationally,
collaboration and coordination of people located in different nations increases. Often
this collaboration within organizations takes the form of global work teams.
Performance Management is problematic in such teams as members are likely to
have widely differing viewpoints about appropriate ways to reward, recognize,
evaluate and train and develop team members
(Kirkman & Den Hartog, 2003). Another point to consider are legal implications that
the use of certain practices may have, which will differ for different countries. Thus,
future research on the wider (and sometimes cross-cultural) context is of interest.
Obviously, additional theory building in the area of Performance Management is
needed. Although our model proposes a general process involving several different
steps, it does not yet specify all of the processes taking place in detail. Research can
focus on the model as a whole or try to flesh out in more detail what happens in
specific parts of the process. Gaining insight in the processes and variables that play
a role in the process performance management is not only of academic interest.
Companies in many different areas are trying to improve their output by
implementing performance management systems and finding that this is an arduous
and complicated task. Research may help improve such systems. Such similarity of
interests of academics and practitioners may help academics gain better entrance to
the empirical reality, which is badly needed to perform the multilevel research
needed to enhance understanding of how and why Performance Management
works.

CHAPTER 5
MERITS AND DEMERITS OF PERFORMANCE MANAGEMENT

The following are some of the advantages of implementing a Performance

Management process within a company:
1. Increased Performance of individuals and department/organisation:
The main goal of performance management is to improve the
performance of individuals to eventually improve the performance of
the organisation as a whole. The correct application of performance
management will identify development areas of each individual as well
as good performance areas. By planning specific outputs linked to
specific standards and measuring the success of the individual against
this on a continuous basis will have a direct impact on the performance
of the individual and indirectly the organisation as a whole. Utilising the
results of the performance management discussions to identify focused
development programs for employees will further assist in attaining the
department/organisation goals. Existing and future problems can be
identified and addressed and eliminated before becoming major
obstacles in realising organisational goals and strategies.
2. Better Communication:
Performance Management focuses on the improvement of
communication between the manager and his subordinates. The
feedback and planning interview create opportunity for the creation and
development of communication channels as well alignment between
the manager and his subordinate.
It creates an opportunity for the manager to communicate
organisational / departmental goals, policies, strategies and information
to the subordinate and to ensure that the outputs of the subordinate is
in line with policies and strategies. It also creates an opportunity for the
manager to give recognition for good performance.
It creates an opportunity for subordinates to express their views and
opinions as well as suggestions for improvement of performance and
identification of obstacles. The subordinate gets the opportunity to
discuss personal and company goals ant together with the manager
fins a balance between them.

3. Performance Standards and indicators:

Performance Management focuses on specific valuable outputs that
the individual must deliver which is linked to specific goals and
standards that must be achieved during the evaluation period. By
clearly defining the outputs, performance standards and performance
indicators the subordinate can understand exactly what is expected
from him. The impact of the subordinates outputs on the department
and organisation can be explained much easier during the planning
phase.
4. Succession and Career planning:
The Performance Management process provides valuable information
that can be used during succession and career planning. Employee
aspirations can be clarified and where possible incorporated into
overall planning of the employee's goals and outputs as well as his
development plan. Clarification of the managers goals and direction
regarding the employee and his role within the department.
Compilation of formal training and development plans per employee to
ensure the development of the employee based on the results of the
performance evaluation phase of the process.
5. Training and development:
The Performance Management process, when applied correctly, will
supply valuable information regarding developmental areas of a
subordinate. The information is used during the compilation of the
subordinate's development and training plan after evaluating the
individual's performance. This will also provide a "check point" to
determine whether the past training had any positive effect on the
employee's performance.
6. Remuneration:
Performance Management simplifies the linkage of salaries, bonus and
allowances because it is comparable and explainable.
7. Recruitment and selection:
The latest requirements and specifications of a specific job and the
readiness for promotion of the subordinate, are supplied by the
Performance Management system. It is a tool that can be used for the
selection of the most appropriate candidate for a specific job.

The following are some of the disadvantages or problems of implementing

a Performance Management process within a company:
1. Decreased Performance of individuals and department/organisation:
It is possible that by implementing performance management within the company
could have a negative impact on the immediate performance of individuals and
indirectly the organisation. This could be because of the following reasons:
1.
2.
3.
4.
5.
6.

Lack of training of the individuals and managers

Lack of an formal change management process
Lack of addressing the change in the culture of the organisation
Subjectivity level to high during evaluations
Performance reviews used as a stick to get back at employees
Lack of addressing the fears of employees and clarification of the whole
process and advantages to the employees
7. Lack of conformity regarding Performance Management in the various
departments
8. Lack of management commitment

2. Degrading of Communication:
Performance Management is a two-way communication process and should
managers neglect this and turn the performance review into a one-way disciplinary
interview it will have a negative impact on the employee. Should the employee feel
that this interview is just to be reminded of things that went wrong, it will have a
negative impact on the employee's performance.
There needs to be a balance between providing negative as well as positive
feedback. Negative feedback should be given in such a way that the focus is on
improving the employee's performance the next time the task has to be performed
and not on another parent-to-child session telling the employee he hasn't done his
job. The focus should either be on giving guidance as to how to prevent this issue
occurring again or even clarify the requirements should it appear that this was not
understood by the employee.
3. Lack of Management commitment:
Even though you may spend lots of time and effort in designing and implementing a
performance management process for your organisation it may have a negative
impact on performance due to the level of management commitment. The most
important factor to successfully implement this process is the commitment and
support of Top Management as well as Line Management. Employees must "feel"
that management is committed to the process and it is to their own benefit to
improve their performance, as there are some rewards in the pipeline should they
improve their performance.

4. Subjectivity:
Subjectivity during the performance management process with specific reference to
the manager, is one the most fatal elements that can negatively impact on an
employees performance. I have noticed many times how subjective evaluations of
managers can negatively impact on the employee's performance. Therefore it is
extremely important to eliminate subjectivity of performance evaluation by utilising
specific measurable performance indicators i.e. financial statistics to prove whether
the employee has done his job or not. Usually the "gut feel" evaluations are very
subjective and can be influenced by the current emotional state of the manager. To
further eliminate subjectivity of performance evaluations is to implement a
360º Performance management process. Various people provide their inputs
regarding the performance of the employee to provide a more objective and fair
reflection thereof.
5. Lack of Rewards:
Should there be a total lack of rewarding the employee for his performance (either
negatively or positively), the performance management process will not be very
effective in improving employee performance. There is always a "what's-in-it-for-me"
element that you will have to address. Employee must see the benefits of the
process. Whether financially or by "soft" rewards (i.e. being nominated as Employee
of the Month).
6. Negative Attitudes:
Negative attitudes of managers:
1. Conflicting goals with regard to performance evaluation.
2. Lack of knowledge regarding the setting of objective performance standards.
3. Incompetence to distinguish between responsibilities that the subordinate has
control over and responsibilities the subordinate does not have control over.
4. Fear of communicating performance evaluation results to the subordinate.
5. It de-motivates employees.
6. Performance evaluation is used for reprimanding poor performance.
Negative attitudes of subordinates :

1. Lack of understanding why performance is evaluated.

2. Lack of objectivity and fairness.
3. Subjective measuring used for performance evaluation.

4. Personality evaluation and not evaluation of outputs.

5. Managers attitude that the subordinate is in full control of his performance.
6. Nothing is done after the performance evaluation.
7. Performance evaluation is just a tool to discipline the subordinate and has no
advantages for the subordinate.

This case study looks at a situation in which a manager initially wants to consider
dismissing an employee for her poor performance even though the employer has
failed to address the poor performance to date.
It is written in the context of a commercial organisation but is procedurally correct. It
should not be used as any kind of template for performance management and all
such formal action should be fully discussed with HR. This is for information
purposes only to give an insight for line managers. In some places it has been edited
to correct for relevance.

Performance Management: A Case Study

Carol is a claims administrator with Rest Assured plc, a life assurance company. In
her mid 60s, she is one of the company's longest-serving employees and has an
unblemished disciplinary record. David, the claims team manager, who joined the
company recently, arranges a meeting with the HR manager, Elaine, to discuss a
problem he is having with Carol. Some of Carol's colleagues have complained to him
that she is not pulling her weight and is dealing with her claims allocation very slowly.
They have to cover for her to prevent a backlog of claims building up.
David explains to Elaine that he has been told that Carol's poor performance has
been a problem for some time but the previous claims team manager did nothing
about it. There is no documentation showing that the problem was being addressed.
The previous manager allowed Carol to coast along, so much so that it appears to
Derek that she has become somewhat "set in her ways". Because of the effect that
Carol's underperformance is having on the rest of the team, David wants to take
decisive action now.

Elaine needs to outline to David the steps that he should take to address Carol's
underperformance. He should take action promptly before Carol's performance
issues escalate further, and follow a performance management procedure. He must
also take care to comply with the requirements of the Acas code of practice on
disciplinary and grievance procedures (PDF format, 1MB) (on the Acas website),
which covers poor performance However, before he takes formal action against
Carol, David must investigate whether or not she is underperforming and, if she is,
why. He will need to meet Carol to discuss the possible cause of her below-standard
job performance. He should make it clear to her that this meeting is investigatory and
is not, at this stage, part of the formal disciplinary process.
Prior to the meeting, David should collect relevant and objective evidence, for
example customer complaints and other evidence to demonstrate that Carol has not
been dealing with claims in a timely manner. If they had been available, he would
also have needed to obtain copies of Carol's appraisals and details of discussions
that her previous manager had with her concerning her performance.
Assuming that the evidence indicates that Carol has been underperforming, based
on the evidence that he collects and his subsequent meeting with Carol, David
should try to establish whether Carol's underperformance is capability or conduct
related, and whether or not there are mitigating reasons for it.
Poor performance that is capability related may be attributable to inadequate or
insufficient training, poor communication, the employee's lack of understanding of his
or her goals and objectives, lack of feedback, poor quality supervision and/or
support, excessive workloads, unrealistic targets and deadlines, poor working
relationships and personal problems. Alternatively, poor performance may be the
result of genuine inability or lack of commitment. If Carol's poor performance is
conduct related, Rest Assured should follow its disciplinary procedure rather than a
performance management process.
If David identifies that Carol's poor performance is capability related, he should agree
specific action points and targets with her, together with a realistic timescale in which
she should achieve them. He should also arrange training or other remedial steps if
these are appropriate and schedule a follow-up meeting to review Carol's
performance.
It is essential that David keep a record of the meeting (including the agreed targets
for improvement) and of the arrangements for the follow-up meeting. He should

continue to monitor Carol's on-going performance. If Carol's performance does not

improve after Rest Assured has followed their performance management procedure,
he may be left with no alternative but to take this to a formal review panel.
To avoid Carol being able successfully to claim any kind of unlawful discrimination
against Rest Assured, for example because of her age, David should deal with her
performance in the same way as he would for other employees in the team. Prior to
this, subject to the (now repealed) statutory retirement procedure, employers could
compulsorily retire employees when they reached retirement age. As a result, many
employers overlooked performance issues in older members of staff who were
approaching retirement age because they would be leaving anyway. David cannot
use the fact that Carol may have attained what was previously the company's
retirement age as a reason to end her employment. Nor can he assume that she will
want to retire at this point. If he treats Carol less favourably than other employees
because she is close to, or has reached, a particular age, this might amount to
unlawful age discrimination. Conversely, if he treats her more leniently than other
members of the team for the same reason, Rest Assured could be vulnerable to
claims of age discrimination by them.
David gathers his evidence and meets with Carol to discuss his concerns. At first
Carol is defensive and claims that her performance is no worse than that of the other
members of the claims team. She does not believe that there have been customer
complaints about her so she cannot see what the problem is. However, when David
shows her evidence that her closure rate of claims files has consistently been the
lowest in the team and that some customers have complained about the slow
handling of their claims, she breaks down in tears and confesses to David that she
has been struggling to cope with the volume of work since a new computer system
for handing claims records was installed over a year ago. Although she received
training when the new system was introduced, she is not as computer literate as
some of the other members of the team and has struggled with it.
Having established that Carol's performance issue is capability and not conduct
related and that her underperformance appears to be due to a training need, David
decides to take an informal approach. He tells her that she needs to improve her
performance or she may be moved to the next stage of the performance
management process, which could ultimately lead to formal warnings.
David arranges for Carol to receive one-to-one refresher training on the new claims
records system. Once the training is complete, David agrees with Carol that, over a

period of three months, she must ensure that her claim closure rates are at, or
above, the claims team's average. He also agrees with her that he will sit down with
her at the end of each month during this period to discuss how she is progressing
towards meeting the target and any concerns that she may have.
At the end of the three-month period, Carol's performance shows a consistent
improvement and the informal approach has serves its purpose without need to
move to more formal measures. He continues to monitor her performance by way of
regular meetings and Rest Assured's appraisal process.
David's experience with Carol demonstrates the benefits for employers of having
robust & fully documented processes and of dealing with performance issues as and
when they arise. Employers that have failed to address poor performance at the
outset may have to tolerate a longer period for improvement than they otherwise
would, because the employee will have become used to performing at the lower
level. It is important to have some documented evidence of a performance issue
before starting formal action and by carrying out an investigation into the poor
performance, the employer should be able to identify whether it is due to capability or
conduct, and follow the correct procedure as a result.

CHAPTER 6
PERFORMANCE MANAGEMENT AND APPRAISAL AT LARSEN & TOUBRO

Larsen & Toubro Limited (L&T) is India's largest engineering and construction
conglomerate with additional interests in Electricals, Electronics and IT. A strong
customer-focus approach and constant quest for top-class quality have enabled L&T
to attain and sustain leadership position over 6 decades. L&T enjoys a premiere
brand image in India and its international presence is on the rise, with a global
spread of over 30 offices and joint ventures with world leaders.
L&T has an international presence, with a global spread of offices. A thrust on
international business has seen overseas earnings grow significantly. It continues to
grow its overseas manufacturing footprint, with facilities in China and the Gulf region.
The company's businesses are supported by a wide marketing and distribution
network, and have established a reputation for strong customer support. It believes
that progress must be achieved in harmony with the environment. A commitment to
community welfare and environmental protection are an integral part of the corporate
vision.
HISTORY:
The evolution of L&T into the country's largest engineering and construction
organization is among the more remarkable success stories in Indian industry. L&T
was founded in Bombay (Mumbai) in 1938 by two Danish engineers, Henning HolckLarsen(4.7.1907 - 27.7.2003) and Soren Kristian Toubro(27.02.1906 4.3.1982).
Both of them were strongly committed to developing India's engineering capabilities
to meet the demands of industry. Beginning with the import of machinery from
Europe, L&T rapidly took on engineering and construction assignments of increasing
sophistication. Today, the company sets global engineering benchmarks in terms of
scale and complexity.
PERFORMANCE DOMAINS IN L&T
Performance domains are those that lend themselves to evaluation of outputs. The
following are considered performance domains in organizations:

Mission
Process
Mission critical sub system
Individual

Vision/Mission

Strategy

Goals

Outcomes
(KRAs)

Activities &
Tasks

Outputs

Tasks

Decisions
Responsibility/Auth
orityity

The translation of an organization Vision into individual activities and work

plan.

Line Manager Appraisal:

It is a mechanism to link individual goals and strategic direction. It focuses on
objectives and targets. It can combine regular informal review of performance with
formal appraisal to agreed timescales. It may also include rating scales for
comparison purposes.
Self-Appraisal:
It is often used as preparation for the line manager/subordinate appraisal. Individuals
take the

lead in reviewing their own performance. It encourages individuals to think about

their performance and development needs in a focused way. The combination of
involvement and responsibility generates commitment to personality taking action.
Upward Appraisal:
It is appropriate in multi-level or source appraisal settings. It may take place in the
context of the subordinates appraisal.
Peer Appraisal:
Individuals nominate their own appraiser. It allows choice of peers who are respected
for relevant knowledge of professional specialization. It is relevant in situation where
there may be no immediate manager in a position to appraise.
Team review and appraisal:
Its main feature is establishing team success and areas for improvement. It aids the
team-building and objective-setting process. It encourages open and constructive
comment among the team.
Competency-based Appraisal:
It sets targets for the roles as specific objectives or other measurable objectives. It
focuses on behavioral descriptions of the standards expected in fulfilling the role. It is
a development plan specifying training, development and support towards achieving
targets and competencies. It is a system of periodic review leading to annual
appraisal of performance against targets and achievement of competences.
360-degree feedback:
Its focus is on the development of skills and competences which will improve
organizational performance. Appraises may include either direct or other managers,
subordinates, peers or customers. Feedback is collected systematically through
formally constructed questionnaires. It can include self-assessment for comparison
with the views of others. It is essentially based on ratings which more often than not
are aggregated to represent an average score.

L&T followed the system of management by objective (MBO), the key result areas of
an individual were not specific and measurable. It was suggested that the individual
goals be aligned with the acronym SMART (specific, measurable, attainable,
realistic, and time-linked). Also, that the organisation develop job competencies for
the main job families in L&T. In addition to the key result areas not being very
specific and measurable, Wadhwa noticed some grey areas in the existing
Performance Appraisal System in L&T, such as:

Core competencies to rate employees was not clearly defined.

Specific role related attributes were not specified.
Rating by the immediate superior alone, led to a bias.
The four-point scale grading system did not identify low-performers.

To overcome these, Wadhwa decided to benchmark the system with leading, noncompeting companies like HLL, Pepsi, Johnson & Johnson, Cadbury India, Knoll
Pharmaceuticals, Novartis, Philips and Godrej GE. Data was collected from
organisations in different sectors which enabled identification of high, medium and
low performers at the supervisory and management level.
This was done through a sampling exercise based on theoretical and structured
questionnaires prepared by her.
Also, competency profiling was done through random sampling of L&T's main
business of manufacturing. This was carried out at the three levels-covenants
(assistant managers, managers and senior managers), executives and supervisorythrough semi-structured interviewwith covenants and focused groups along with
semi-structured interviews at the executive and supervisory level.
Improving feedback
Among other major recommendations to the company, Wadhwa pointed out that
certain functions like HR and finance cannot be easily quantifiable. To make these
specific and measurable:
Objectives should be prioritised as per their importance for the department by
distributing 100 points among the objectives.
Core competencies should be specifically defined on a 100-point scale each.
Competency profiling should be done for the main job families.
In order to avoid biases in the superior's ratings, six internal customers could be
chosen by the employee in consensus with the immediate superior.
Rating on a five-point scale given for each objective and competency could be
multiplied by the points given to that objective and competency.
The total number of points given to employees should be awarded out of a scale
of 500 points so as to clearly demarcate low performers from
outstanding/good/medium performers.

Job competency profiling can be used to identify the training needs. Identified job
competencies can be used to select suitable candidates for different jobs in
future,'asserts Wadhwa. Moreover, this system could also be used to identify the
potential of employees-which in turn, would help build a high-performance culture at
L&T.

CONCLUSION
The cost of doing performance management and employee reviews incorrectly is
something that many managers, HR professionals and companies never consider.
It's too bad. Yes, there is a cost, and a very heavy cost, to doing things badly in the
area of appraising employee performance, or not managing performance properly.
Poor performance management practices incur direct costs through loss in
productivity that happens when performance problems are not addressed quickly.
For example, a manager who only reviews employee performance once a year, and
rarely talks to employees about performance through the year is likely to have huge
inefficiencies. If the problems were discovered and addressed during the year, many
of those productivity problems could be eliminated.
Other costs occur, too. Employees subjected to poor performance management and
performance review practices are likely to get upset, angry, demoralized and demotivated. They start to believe that managers aren't serious about performance, or,
even worse, are trying to find people to blame for performance problems.
Further, employee performance reviews that tend to put the employee and the
manager on opposite sides of the table push employees into not communicating with
managers during the year.

BIBLIOGRAPHY

www.studymode.com
www.slideshare.com
Wikipedia
Human Resource Management By Ashwathappa