Concept & Process of Performance Management

Performance management
Performance management is a means of getting better results from the organization, teams, and individuals by managing performance in line with organizational strategy. It requires: Knowing what priorities managers and their employees should be focusing on;
Having clear targets and goals that focus on priorities; Measuring actual performance against agreed targets and goals; and Identifying and remedying performance problems.

Performance management may be defined as a planned and systematic

approach to managing the performance of individual ensuring their

personal development and contribution towards organizational goals.

Objectives of performance management

Broadly classified as: 1. Strategic : Comprises the role of managing strategy implementation and challenging assumption e.g. Formulate strategy determining what the objectives of the organization are and how the organization plans to achieve them. 2. Communication : Comprises the role of checking position, complying with the non-negotiable parameters, communicating directions, providing feedback, and benchmarking e.g communicate direction to the rest of the employees, by passing on information about what are the strategic goals individuals are expected to achieve. 3. Motivational : Comprises the role of evaluating and rewarding behavior, and encouraging improvement and learning e.g encourage improvement and learning at all levels and across the organization by nurturing talents of employees for building their capabilities to demonstrate success in a fair and objective manner

Importance & benefits of PM

1.Help in clarifying organization 2. Helps in improving business process 3.Helps in attracting and retaining talents 4. Assist management in validating their recruitment & selection process 5. Facilitates in competency mapping 6. Helps in organizational change by finding the GAP between potential mission, vision, strategy, and values of the

capabilities & present abilities

Importance & benefits of PM

7. Helps in making a shift from Industrial Relation to Individual Relation. 8. Helps in aligning individual performance expectations with the organizations

mission & strategy

9.Hepls employees in evaluating their competencies 10 Helps in integrating the organizations ethics into an individuals inherent value system through reinforcement and counseling methods

Performance Management Process

Phase I Phase II Phase III Phase IV Performance Planning Performance Execution Performance Assessment Performance Review

Phase V
Phase VI

Performance Development
Performance Audit

Phase I Performance planning

Key accountability of subordinates job is discussed for the upcoming

year
Major areas in which subordinate id responsible for getting results Specific objectives the subordinate will achieve with in each

accountability area
Standards that will be used to evaluate how well the subordinate has

achieved the each objective

The performance factors, competencies or behavior that will be

critical in determining how results will be achieved

The elements of development plan that subordinate will complete

during the year

Phase II Performance Execution

During this phase the supervisor is responsible for on going

feedback and coaching.

Phase III Performance Assessment

Appraiser and appraisee independently evaluate the degree to

which the different elements of the plan were achieved. The

manager completes the assessment of the subordinates performance and typically get it reviewed and approved by

senior management and HR personnel prior to discuss it with the

subordinate.

Phase IV Performance Review

Now appraiser and appraisee meet to review their appraisal.

they discuss the results that were achieved and the performance factors that contributed to their

accomplishment. It includes
Results achieved
Performance and behavioral effectiveness Overall performance Development plan and progress

Performance Appraisal
It is a method of evaluating behavior of employee in the

work spot, normally including both the quantitative and

qualitative aspects of job performance.

It is a systematic and objective way of evaluating both

work-related behavior and potential of employee.

It

is

process

that

involves

determining

and

communicating to an employee how he or she is performing the job and ideally, establishing a plan of improvement.

Performance appraisal
Employee Assessment the assessment of an employee's effectiveness, usually as undertaken at regular intervals. It may be defined as a structured formal interaction between a subordinate and supervisor in which the work

performance of the subordinate is examined and

discussed with a view to identifying weaknesses and strengths as well as opportunities for improvement and skills development

Why Have Performance Appraisal ?

Performance Appraisal offers several advantages at the level of the: Individual

Recognition of past effort Developmental requirements can be uncovered Alignment of effort with objectives Motivation of team members

Team

Organization

Development of staff Achievement of key objectives Best and focused utilization of human resources

Objectives of Performance Appraisal

Compensation decisions

Promotion decisions
Training and development programmes

Feedback to the employee

Personal growth and development

To explore hidden potential

Characteristics of an Effective Appraisal System

Job-related criteria Performance expectations Standardization Trained appraisers Continuous open communication Performance reviews

Who can Appraise ?

Supervisor Peers Subordinates Self Appraisal Users of services Consultants

Performance Management Vs. Performance Appraisal

Performance Management
Strategic

Performance Appraisal
Operational

Long-run Goals
Forward looking Constant Process Integrated Holistic Manager Owned Focus on individual's growth Practical and effective Can be linked to total rewards

Short to mid-run goals

Retrospective Episodic System Isolated from business needs Individualistic HR Owned Focus

on individual past mistakes and behavior Linked to financial rewards

Performance Appraisal Process

Establishing performance standards Step 1

Communicating standards and expectations

Measuring the actual performance Comparing with standards

Step 2
Step 3 Step 4

Discussing results (providing feedback)

Decision making (taking corrective actions)

Step 5
Step 6

STEP 1 : ESTABLISHING PERFORMANCE STANDARDS

The first step in the process of performance appraisal is the setting up of the standards which will be used to as the base to compare the actual performance of the employees. This step requires setting the criteria to judge The performance of the employees as successful or unsuccessful and the degrees of their contribution to the organizational goals and objectives. The standards set should be clear, easily understandable and in Measurable terms. In case the performance of the employee cannot be

measured, great Care should be taken to describe the standards.

STEP 2 :COMMUNICATING THE STANDARDS:

Once set, it is the responsibility of the management to communicate the standards to all the employees of the

organization. The employees should be informed and the standards

should be clearly explained to the. This will help them to understand their roles and to know what exactly is expected from them. The standards should also be communicated to the appraisers or the evaluators and if required, the standards can also be

modified at this stage itself according to the relevant feedback

from the employees or the evaluators.

STEP 3 : MEASURING THE ACTUAL PERFORMANCE :

The most difficult part of the Performance appraisal process is measuring the actual performance of the employees that is the

work done by the employees during the specified period of time.

It is a continuous process which involves monitoring the performance throughout the year. This stage requires the careful selection of the appropriate techniques of measurement, taking care that personal bias does not affect the outcome of the

process and providing assistance rather than interfering in an

employees work.

STEP 4 : COMPARING THE ACTUAL WITH THE DESIRED PERFORMANCE

The actual performance is compared with the desired or the standard performance. The comparison tells the deviations in the performance of the employees from the standards set. The result can show the actual performance being more than

the desired performance or, the actual Performance being

less than the desired performance depicting a negative deviation in the organizational performance. It includes recalling, evaluating and analysis of data related to the employees performance.

STEP 5 : DISCUSSING RESULTS

The result of the appraisal is communicated and discussed with the employees on one-to-one basis. The focus of this discussion

is on communication and listening. The results, the problems and

the possible solutions are discussed with the aim of problem solving and reaching consensus. The feedback should be given with a positive attitude as this can have an effect on the employees future performance. The purpose of the meeting should be to solve the problems faced and motivate the employees to perform better.

STEP 6 : DECISION MAKING

The last step of the process is to take decisions which can be taken either to improve the performance of the employees, take the required corrective actions, or the related HR decisions like rewards, promotions, demotions,

transfers etc.

Methods of Performance appraisal

Individual Evaluation Methods
1. Confidential Report 2. Essay evaluation 3. Critical incidents 4. Checklist 5. Graphic rating scale 6. Behaviorally anchored rating scales

Multiple-person evaluation methods

Other Methods

1. Ranking
2. Paired Comparison 3. Forced Distribution

1. Group Appraisal 2. Assessment Centre 3. 360 degree feedback

7. Forced choice
methods 8. MBO

Individual evaluation methods

1.

Confidential report :- It is a descriptive report prepared, generally at the end of every year, by the employees immediate superior. The report highlights the strengths and weakness of the subordinate.

2.

Essay Evaluation :-This method asked managers / supervisors

to describe strengths and weaknesses of an employees

behavior. This technique is normally used with a combination of the graphic rating scale. Its an non-qualitative technique. The

rater consider the following factors : 1 Job knowledge 2.

Employee relations with co-workers 3. Employees planning & organizing ability 4. Employees attitude & perceptions

Individual evaluation methods

3.

Critical incident technique : Under this, the manager prepares lists of statements of every effective and ineffective behavior of an employee. The manager maintains logs on each employee, whereby he periodically records critical incidents of the workers behavior.

Example : July 12 the sales officer patiently attended to customers complaint. He is polite, prompt, enthusiastic in solving the customers problem. OR July 12 The sales officer stayed 45 min. over on his break during the busiest part of the day. He failed to answer the store managers call thrice. He is lazy, negligent, stubborn and uninterested in work.

Individual evaluation methods

4.

Checklist: It represents a set of objectives or descriptive statements about the employee and his behavior. Example

Statements
Is he respected by his colleagues Does he respect his superiors Does he make mistakes frequently

Response
Yes / No Yes / No Yes/No Yes / No

Is the employee really interested in the task assigned

Individual evaluation methods

5.

Graphic rating scale: In this a printed form is used to evaluate the performance of an employee. A variety of traits may be used in these types of rating devices, the most common being the quality and quantity of work. In the below example the rater will have to use a scale of 1 unsatisfactory to 5 outstanding
Parameters Quality of work Neatness, thoroughness and accurate 1 2 3 4 5

Knowledge of job A clear understanding of the factors connected with the job Cooperation Willingness and ability to work with others

Individual evaluation methods

6.

Behaviorally anchored rating scale : It is a combination of rating scale and critical incident technique. The critical incidents serve as anchor statements on a scale and the rating form usually contains six to eight specifically defined performance dimensions. Following are the steps:

1. 2. 3. 4. 5.

Collect critical incidents

Identify performance dimensions Reclassification of incidents Assigning scale values to the incidents Producing final statements

Behaviorally Anchored Rating Scales

Uses specific descriptions of actual behaviors to rate various levels of
actual performance

Individual evaluation methods

7.

Forced choice methods : The primary purpose of the forced choice method is to correct the tendency of a rater to give

consistently high or low ratings to all the employees. The rater

is asked to indicate which of the four phrases is the most and least descriptive of a particular worker. In the preparation of

sets of phrases an expert is needed and as such the methods

becomes very expensive.

Individual evaluation methods

S.N

Forced Choice items

Least
A Does not anticipate difficulties Grasps explanation easily and quickly Does not waste time Very easy to talk to

Most
A B C D Most Can be a leader Wastes time on unproductive things At all times, cool and calm Smart Worker A B C D

B C D Least A

B C D

INDIVIDUAL EVALUATION METHODS

8.

Management by objectives : MBO requires the management to set specific, measurable goals with each employee and then periodically discuss the latters progress towards these goals. This technique emphasis participatively set goals that are tangible, verifiable and measurable.

It is a process whereby the superior and subordinate manager of

an organization jointly identify its common goals, define each individuals major areas of responsibility in terms of the results expected of him, and use these measure for operating the unit and assessing the contribution of each of its members.

Characteristics of MBO
Superiors and subordinate get together and jointly agree upon the list of

principal duties and areas of responsibilities of the individual

The subordinate sets his own short-term department goals in co-

operation with his superior.

They agree upon the criteria for measuring and evaluating performance.

Superiors and subordinate collectively evaluate progress towards the

agreed-upon goals. And if needed the goals can be modified for rest of the periods
In this method the superior plays a supportive role, who helps the

subordinate to achieve the goals and provide counseling and coaching.

Process of MBO
1. Set the organizations goals 2. Set departmental goals 3. Discuss departmental goals 4. Define expected results (Individual) 5. Performance Review 6. Provide Feedback

Multiple-person Evaluation Techniques

9. Ranking Method : In this method the ranking of an

employee in a work group is done against that of another employee. The relative position of each employee is expressed in terms of his numerical rank.

The evaluator is asked to rate employees from highest

to lowest on some overall criterion. When a large number of employees are working, ranking of individual becomes a difficult issue.

Multiple-person Evaluation Techniques

10. Paired comparison method : Each employee is

compared with all other employees. Ranking becomes easier and more reliable under the paired comparison.

For every trait employee is to be compared with all

other employees.

Multiple-person Evaluation Techniques

11. Forced distribution method : The rater is asked to appraise

the employee according to a predetermined distribution scale.

Normally two criteria used here for rating are the job
performance and promotability. Further, a five point

performance scale is used without any mention of descriptive

statements. Employees are placed between two extreme of good

and bad performance. For e.g. all top grade workers should go to the highest 10% grade; 20% employees should go to the next highest grade and so on.

Other Methods
12. Group Appraisal :- An employee is appraised by a group of

appraisers. This group is consist of the immediate supervisor of

the employee, other supervisor who have close contact with the
employee work, manager or head of the department and consultants. This group uses one of the multiple techniques

discussed earlier. The immediate supervisor enlightens other

members about job characteristics, demand, standards of performance, etc. then the group appraises the performance of the employee, compares the actual with standards, find deviations, discuss the reasons and suggest ways for improvement.

Other Methods
13. Assessment Centre : - This is not merely a technique of performance

appraisal by itself. In fact it is a system or organization, where assessment of several individuals is done by various experts using various techniques. In this approach, individual from various departments are brought together to spend two or three days working

on individual of group assignments similar to the ones they would be

handling when promoted. It includes the activities and methods like, in-basket, role playing, case studies, simulation exercises etc. The

observer rank the performance of each and every participants in order

to merit. These centers are basically meant for evaluating the potential of candidate to be considered for promotion, training & development.

Other Methods
14. 360-Degree Feedback System: This system collects

performance information from multiple parties, including

ones subordinates, peers, supervisor and customer.

Generally done for development rather than for pay raises. Upward and peer feedback may or may not have positive effects on behavior. Introducing a 360-degree system into a culture not prepared for it can have disastrous effects

Procedure for conducting 360-degree appraisal

Determining Objectives Deciding the receiver and giver of feedback Establish performance Criteria
To identify T&D needs For determination of compensation Succession Planning or Performance Mgt. Decide about employees whose performance are to be evaluated and who will be the evaluator The areas of work and behavior on which feedback will be gathered Development of questionnaire Analysis may include performance dimensions summary, individual item rating, individual strength & weaknesses etc.

Mode of collecting data

Finalize the method of data Analysis Execution of feedback Evaluation and communication

The process of gathering the feedback should be initiated

After the feedback is collected the data should be communicated very carefully to the all those concerned.

Problems with Performance appraisal

Judgment Errors Primacy Effect (First Impression)

Halo
Horn Effect Leniency Stereotyping Recency effect Poor Appraisal Forms Lack of raters preparedness Ineffective organization policies

Potential Appraisal

Potential appraisal
The potential appraisal refers to the appraisal i.e.

identification of the hidden talents and skills of a person.

The person might or might not be aware of them. Potential

appraisal is a future oriented appraisal whose main

objective is to identify and evaluate the potential of the

employees to assume higher positions and responsibilities in the organizational hierarchy. Many organizations consider and use potential appraisal as a part of the performance appraisal processes.

Potential appraisal
In organizations that subscribe to HRD, the potential (career-

enhancement possibilities) of every employee is assessed

periodically.
Such assessment is used for development planning as well as

for placement.
Every year or two, the supervisor of a group of employee

assesses the potential of each of them to perform different (usually higher level) functions on the basis of the supervisors observations and experiences during that period.

Potential appraisal can serve the following purposes:

To advise employees about their overall career development and

future prospects
Help the organization to chalk out succession plans
Motivate the employees to further develop their skills and

competencies.
To identify the training needs.

Scope of Potential Appraisal

Data storage Career planning and development
Potential Appraisal

Manpower planning

Feedback and counseling

Job rotation and enlargement

Training & development

How do companies appraise potential

High

Problem Employees
Potential

Stars

Planned Separation

Solid Citizens
High

Low

Performance

Potential appraisal Criteria

Conceptual effectiveness (includes business orientation,

vision, entrepreneurial orientation, sense of reality)

Interpersonal effectiveness (includes network directedness,

negotiation power, personal influence, verbal behavior)

Operational

effectiveness (includes result orientation,

individual effectiveness, risk-taking, control)

Achievement Motivation (drive, professional ambition,

innovativeness, stability)

Steps of performance appraisal

1. Role descriptions 2. Quality needed to perform the roles 3. Rating mechanisms (rating by others, tests, games,

records)
4. Organizing

the

system

weightage

setting

for

performance dimensions)
5. Feedback