Well designed PMS: A key to improved organizational

Performance.
Performance management systems are essential for efficient management of large scale
organization. The main aspect of PMS is that it integrates all the HR functions like
recruitment, selection, appraisal, training, etc. A well designed PMS helps in proper alignment
of strategic goals with individual goals. The present articles focuses on various issues and
aspects of a well designed Performance management system.

Hitesh Mehta (name changed), 24 is a young Performance going by dictionary can be

MBA graduate from a reputed B-school,
bright student, merit ranker of the institute
and hence was easily placed in a top MNC.
However within the next year he left the
company. Hitesh describes his experience as
follows, “the work was well defined
however the appraisal systems were unclear
and I didn’t know the basis on which I was
judged”. This is the story of many fresh
graduates joining a company and even those
who are presently working. What may be the
reason behind this? Was the performance
management system faulty? What makes a
well designed performance management
system (PMS)? And what are the effects of a
well designed PMS? The present article tries
to focus on these key issues.
Key words: Performance, Performance
management system, Design of PMS,
goals of PMS.
defined as achievement of quantified
objectives. Measuring performance is
essential for any organization as it represents
the present state of the company and steps
required to reach a desired future state.
Performance management is key area in any
organization as it gives the picture about
how well the various department and
organization as a whole is functioning. It
gives feedback which helps to take
corrective actions. The design of a PMS is
critical in this context. The aim of a well
designed PMS is to develop a culture where
individuals and teams take responsibility for
continuous improvement of business process
and their own skills. In this type of system
there is proper alignment of strategic goals
with individual and team goals. A well
designed PMS means the job description,
the competencies required, the appraisal
parameters, the training and development
need are all well defined. It ensures that only
those employees whose competencies match
to job profile are acquired. The employees
know the parameters on which they are
judged. In case of Hitesh, we can say that
the PMS in his organization was not well
designed. The system described the roles
clearly however there was a lack of
communication and openness. We can say
that a well designed PMS is one which is
near to ideal characteristics of PMS. A well
designed PMS must at least contain
characteristics like specificity, reliability,
openness, strategic congruence,
meaningfulness, validity and it should be
able to identify effective and ineffective
performance.
Key words: Phases of PM, KPI and KRA,
overall effectiveness.
The four phases of performance
management is Plan, Act, Monitor and
review. In a well designed PMS these phases
are properly implemented. The well
designed PMS describes clearly the roles
and responsibilities of a particular job and
competencies required. Thus it helps during
recruitment to get employees which have
necessary skills. The employees know what
they are accountable for. There is a clear
communication regarding the performance
measure. The employees get chance of
negotiation during performance agreement
process. Once the employees agree there is
evaluation done every week, every month or
once in three months. This helps employees
to know their performance and areas of
improvement. The organization is benefited
as it knows which areas have to be given
more attention. In case the employees are
not meeting required performance, the
training and development function ensures
that they are given required skills to perform
adequately. Thus training is imparted to
proper employees. Then a performance
review is carried out half yearly or yearly
which helps to judge how employees have
performed against the Key Performance
Indicators (KPI). Thus a well designed PMS
ensures proper utilization of financial
resources. The overall effectiveness
increases as there is less errors in
recruitment, training and development and
performance appraisal system. The well
designed jobs, roles, responsibilities and
KPI help employees to obtain correct
feedback. It helps in continuous
improvement of employees and processes. It
helps to meet the expectation of shareholder
and stakeholders. It can help an organization
to become an ‘Employer of choice’ and thus
reduce employee turnover. The main feature
of a well designed PMS is that it takes into
consideration the interest of employers and
their employees. It helps to achieve
operational efficiency and better
coordination between different functional
units.
Key words: Company in focus Tata Iron
and Steel Company.
There are examples of companies which
have benefited by a well designed PMS.
Tata Iron and Steel Company (TISCO) a
Tata group company launched a new
performance management system under its
restructuring program which included the
alignment of key result areas (KRAs) with
business strategy at all levels. It developed
clear career path and growth opportunities
for employees. The compensation was
linked to performance and linked to market.
This PMS and compensation system was
clear, transparent, fair and acceptable by
employees. The other example is of Arvind
Mills. Arvind Mills was the third largest
producer of denim in 1990’s, however with
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and corduroy, the business was severely hit.
The company adopted many new policies,
one of them was Management by objective
(MBO). This approach was focused on
producing results desired by management to
achieve organizational objectives and
focusing on satisfaction of employees. This
approach helped to generate harmonious
balance between top management and
workers. These examples show that a well
designed system not only helps to improve
organizational performance but also helps in
easy implementation (Som, 2003).
The various aspects and advantages of a
well designed PMS have been mentioned.
To conclude I would like to say that a well
designed PMS ensures that an organization
is on path to achieve its strategic goals,
obtain efficiency and effectiveness and keep
employees satisfied. This system affects the
overall HR functions and leads in
development of a “Best” organization which
differentiates itself from the “Rest”.
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