PERFORMANCE MANAGEMENT SYSTEM DEFINITION OF PERFORMANCE MANAGEMENT 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. MEANING OF PERFORMANCE MANAGEMENT Performance management is a systematic process by which the overall performance of an organization can be improved by improving the performance of individuals within a team framework. PERFORMANCE MANAGEMENT SYSTEM It is a System or Process of managing employee performance for driving the individuals and the organizations towards desired performance and results to achieve organizational objectives. PROCESS OF PERFORMANCE MANAGEMENT 1. Jointly setting and allotting Performance goals (targets) to departments or teams and individuals. 2. Continuously reviewing progress. 3. Taking remedial actions to over come problems and short falls through continuous feed back and coaching. 4. Motivating employees through rewards. 5. Implementing Training and Development Programs. OBJECTIVES OF PERFORMANCE MANAGEMENT 1.To enable employees to achieve superior standards of work performance. 2. To help employees in identifying the Knowledge, Skills and Attitudes required for performing the job efficiently and effectively. 3. To boost the performance of employees by encouraging employee empowerment, motivation and implementation of an effective reward mechanism. 4. To identify and overcome barriers to effective performance through constant monitoring, coaching and development interventions. 5. To create a basis for strategic planning, succession planning, promotions and performance - based payment.

6. To promote personal growth and advancement in the career of the employees by helping them in acquiring the desired Knowledge, Skills and Attitudes. 7. To promote two-way system of communication between supervisors and employees for (i) - clarifying expectations about the roles and accountabilities, (ii) - communicating the functional and organizational goals, and (iii) - providing a regular and transparent feedback for improving employee performance and continuous coaching. FOCUS OF PMS 1. Concerned with the output (the results achieved), outcomes, processes required for reaching the results and also the inputs (knowledge, skills and attitudes). 2. Concerned with measurement of results and review of progress in the achievement of set targets. 3. Concerned with defining business plans in advance for shaping a successful future. 4. Concerned for continuous performance improvement and development by creating a learning culture and an open system. 5. Concerned with the provision of procedural fairness and transparency in the process of decision making. 6. Concerned with establishing a culture of trust and mutual understanding that fosters free flow of communication at all levels in matters such as clarification of expectations and sharing of information on the core values of an organization which binds the team together. EVOLUTION OF PERFORMANCE MANAGEMENT 5 PHASES OF EVOLUTION OF PM FIRST PHASE: 1. EARLY 1960. 2. ANNUAL CONFIDENTIAL REPORTS OR EMPLOYEE SERVICE RECORDS REFLECTED PERFORMANCE OF EMPLOYEES. 3. ACRs/ESRs USED AS A TOOL TO CONTROL BEHAVIOURS. 4. ADVERSE COMMENTS IN ACRs/ESRs AFFECTED CAREER GROWTH OF EMPLOYEES. 5. ADVERSE COMMENTS NOT COMMUNICATED TO EMPLOYEES. 6. FOR APPRAISAL, NORMALLY TEN TRAITS ON 5 OR 10- POINT- RATING SCALES WERE USED.

THE TRAITS WERE: JOB KNOWLEDGE, SINCERITY, DYNAMISM, PUNCTUALITY, LEADERSHIP, LOYALTY, ETC.. SECOND PHASE: 1. BETWEEN LATE 1960s AND EARLY 1970s. 2. ADVERSE REMARKS OF PERFORMANCE REPORTS WERE COMMUNICATED. 3. COMMUNICATION RELATED TO TRAITS WHICH REQUIRED IMPROVEMENTS. 4. REVIEWING OFFICER HAD POWERS TO OVERRULE RATINGS OF REPORTING OFFICER. THIRD PHASE: THE TERM ACR WAS REPLACED WITH PERFORMANCE APPRAISAL. 2. EMPLOYEES WERE PERMITTED TO WRITE ABOUT THEIR ACCOMPLISHMENTS IN THEIR PERFORMANCE REPORTS. 3. BESIDES RATING TRAITS, SEVERAL NEW COMPONENTS FOR INDICATING ACHIEVEMENTS, IN QUANTITATIVE TERMS, WERE INCLUDED IN THE PERFORMANCE APPRAISAL FORMS BY SOME ORGANISATIONS. 4. CERTAIN ORGANISATION ALSO INCLUDED NEW SECTION ON TRAINING NEEDS IN THE PERFORMANCE APPRAISAL FORMS. 5. HOWEVER THE CONFIDENTIALITY OF REPORTS, WAS STILL MAINTAINED. FOURTH PHASE: STARTED IN MID 1970s IN INDIA. 2. L ARSEN AND TOUBRO, STATE BANK OF INDIA AND SOME OTHER ORGANISATIONS UNDERTOOK REFORMS IN APPRAISAL REPORTS. 3. THE APPRAISAL PROCESS BECAME MORE DEVELOPMENT DRIVEN, TARGET OR PERFORMANCE BASED, PARTICIPATIVE AND OPEN INSTEAD OF CONFIDENTIAL. 4. The system focused on performance planning, review and development of an employee by following a methodical approach. THE REPORTING OFFICER AND APPRAISEE, MUTUALLY DECIDED THE KEY RESULT AREAS IN THE BEGINNING OF THE YEAR AND REVIEWED THE PERFORMANCE AFTER EVERY 6 MONTHS.

IN THE REVIEW, FACTORS AFFECTING PERFORMANCE, TRAINING NEEDS, NEW TARGETS AND RATINGS WERE DISCUSSED, MUTUALLY. 5. MANY ORGANISATION CREATED HR DEPARTMENTS FOR TAKING CARE OF DEVELOPMENTAL ISSUES OF THE ORGANISATION. FIFTH PHASE: PERFORMANCE DRIVEN WITH EMPHASIS ON DEVELOPMENT, PLANNING AND IMPROVEMENT. 2. UTMOST IMPORTANCE WAS GIVEN TO CULTURE BUILDING AND TEAM APPRAISALS. 3. QUALITY CIRCLES WERE ESTABLISHED FOR ASSESSING THE IMPROVEMENT IN THE OVERLL EMPLOYHEE PRODUCTIVITY. PRESENT STATUS IN INDIA: IN GOVERNMENT ORGANISATIONS: STILL ACR SYSTEM IS FOLLOWED. IN PUBLIC SECTOR ORGANISATIONS: NAVRATNA AND MAHANAVRATNA COMPANIES, THE FOCUS IS ON PERFORMANCE PLANNING, REVIEW AND DEVELOPMENT. IN PRIVATE ORGANISATIONS: NON-PROFESSIONAL COMPANIES FOLLOW ACR BASED SYSTEM. PROFESSIONAL COMPANIES FOLLOW PERFORMANCE AND IMPROVEMENT FOCUSED SYSTEM. THUS, PMS IS STILL EVOLVING TOWARDS IMPROVEMENT. PMS BENEFITS BENEFITS TO ORGANISATION 1.Improved organizational performance. 2. Employee retention and loyalty. 3. Improved productivity. 4. Overcoming the barriers to communication. 5. Clear accountabilities, 6. Cost advantages.

BENEFITS TO MANAGERS 1. Saves time. 2. Reduces conflict. 3. Ensures efficiency, and 4. Consistency in performance. BENEFITS TO EMPLOYEES 1. Clarifies expectations of the employees. 2. Provides self assessment opportunities. 3. Clarifies the job accountabilities. 4. Contributes to improved performance. 5. Clearly defines career paths, and 6. Promotes job satisfaction. PMS AND 2 CRUCIAL OBJECTIVES PMS helps achieve: 1. Evaluation Objectives. 2. Developmental Objectives EVAVULATION OBJECTIVES 1. By evaluating the readiness of the employees for taking up higher responsibilities. 2. By providing a feedback to the employees on their current competencies and the need for improvement. 3. By linking the performance with scope of promotions, incentives, rewards and career development. DEVELOPMENT OBJECTIVES 1. By defining the training requirements of the employees based on the results of the reviews and diagnosis of the individual and organizational competencies. 2. Coaching and counseling helps in: winning the confidence of the employees, improving their performance, and strengthening the relationship between the superior and the subordinate.

PMS - PREREQUITES SOME OF THE PREREQUITES: 1. Participative process. 2. All the concerned members should participate, fully. 3. Top management support and commitment. 4. Organizational vision, mission and goals clearly defined and understood by all levels. 5. Clear definition of the roles for performing a given job. 6. Open and transparent communication. 7. Identification of major performance parameters and definition of key performance indicators. 8. Consistency and fairness in application. 9. A commitment towards recognition of high performance. . 1O. Proper organizational training to the staff members based on the identification of training needs from periodic evaluation and review of performance. . PMS : STAGES OF DEVELOPMENT AND IMPLEMENTATION 5 - STAGES 1. WORK PLANNING AND DEFINING EXPECTATIONS. 2. MONITORING PERFORMANCE 3. DEVELOPING WEAK PERFOMANCE. 4.PERFORMANCE RATING. 5.REWARDING GOOD PERFORMANCE PMS IN ACTION AID 1. Action Aid aims at continuous development of the staff members and recognizing their contributions. 2. Assessing the future potential and the development needs (professional and personal), and 3. Facilitating a shared understanding of mutual accountability through giving and receiving feedback.

FEEDBACK IN ACTION AID 360 DEGREE FEEEDBACK from multiple sources on key performance areas of the employees. Such as competency, behavior, attitude, values, work life balance, major achievements and areas of improvements. PERFORMANCE MANAGEMENT PRTOCESS IN ACTION AID PMP IN ACTION AID PASSES THROUGH 6 STAGES: 1. Identification of the Key Result areas both at the organizational level and the regional/unit level. 2. WORK PLANS are derived from the KRAs in the departmental level and also from the job descriptions and assigned to Staff Members. Work Plans are laid down each year for the following year. 3. The staff members describe the key performance indicators, qualitative and quantitative dimensions, which form the basis of assessment for the appraiser. 4. Identification of those set of behaviors and attitudes which are critical for effective performance. 5. Reviews of performance against the plans and behavioral dimensions: - Mid Reviews at departmental or unit level, and - Annual Review at organisation level. 6. Identification of training needs of the staff members followed by finalization of a new action plan for the ensuing year. SUPERIOR PERFORMANCE BENCHMARKING: COMPETENCY MANAGEMENT APPROACH Competency based management approach - Competency based management approach is primarily employee centric performance management that focuses upon how an organization achieves a desired performance. Aim of Competency based approach - It aims at achieving an optimum performance in the long term by developing the skills and competencies of the employees on continuous basis. Alignment - In this approach, the competencies are aligned with the performance management framework. The supervisors provide a feedback to the employees on the performance goals to be achieved and how the work was performed.

Competency based PMS - Competency based performance management systems help the employees in understanding the performance expectations and improving the competencies. Basis of PMS-(Reagan, 1994) -Performance management systems are based on personal competencies, which are derived from the values and core competencies of an organization. High Performing Organisations Collins and Porras (1996) - organizations which use core competencies based systems are regarded as high performers or visionaries. Competencies (Englemann & Roesch, 1996) Competencies are primarily job specifications concerned with the Knowledge, Skills and Abilities of an individual which defines the personal as well as the organizational success. Personal Competencies (Englemann & Roesch, 1996) personal competencies as achievement orientation, team work, analytical thinking, relationship building, customer service orientation, etc.. Integration of Competencies and PMP: 2 Methods METHOD - 1: By identifying and defining the key competencies required for realizing the performance goals/objectives. Who identify Key Competencies? - The manager and the employee, during the stage of setting performance plans, goals and objectives. Purpose of Identification and Definition To realize the performance goals /objetives. Assessment of Competencies Competencies are ultimately assessed during performance review period in connection with the performance goals/objectives realized by the employees.

METHOD 2: By identifying the competencies which are required for performing an employees job/role into the performance management process.

In this Method, the competencies are identified from the competency profile from the employees job description. It also includes the performance goals/objectives for being reviewed. Performance goals and objectives? -The performance goals/objectives deal with the aspect of what must be achieved over the entire period of review, and - The Competencies address the question of how an employee achieved the pre determined performance goal by demonstrating an expected pattern of behavior. Competency Alignment Competencies are aligned in each phase of the performance management cycle. Competency based PMS in Wipro Performance Management Process begins with the identification and assessment of critical competencies for top, senior and middle management on the basis of critical incidents, focus groups and rigorous interviews. 360 degree feedback is used for providing a feedback on the existing competencies of the employees, and Based on the results of the feedback training programme is organized for improving the deficit areas of performance. Preparing Personal Development Plans Finally, personal development plans are formulated for each employee for monitoring and tracking the improvement in competencies or skill sets. Building Competencies For building competencies, Wipro focuses on strategic thinking, vision, building star performers and global focus. PERFORMANCE MANAGEMENT AT LUXOTTICA Products: Sun Glasses and Eyewares Results: 3rd quarter of 2012 NET SALES: INCREASED FROM EURO 1,523.8 MILLION TO EURO 1,783.5 MILLION.

I.E. UP 17.0% ATTRACTING TALENTS - People who work at Luxottica are Imaginative, passionate, dynamic, flexible, simple & fast, entrepreneurial, open to diverse environments and have international backgrounds. THEY CONTRIBUTE - with passion, energy and innovative ideas to company's and their own success. CRITERIA USED FOR EVALUATION - Results achieved and learning agility are the criteria used to evaluate a persons skills assign increasing responsibilities to them, beyond their initial starting positions. TRAINING AND DEVELOPMENT Luxottica makes considerable investments in young talents. Managers and the HR team constantly develop learning and professional training programs. On-the-job learning is preferred. UTMOST IMPORTANCE Utmost importance in Luxottica is sharing our mission and Characteristics, our Corporate culture and vision for the future. PAYS FOR PERFORMANCE * Luxottica links both individual and company performance with compensation and helps employees understand the relationship between the work they do and the company's bottom line. * Luxotticas compensation programs are designed to be competitive within a defined market and deliver total compensation in the top tier of the market, given top-tier individual and/or company performance. AIM OF LUXOTTICAS PROGRAMS * To attract and retain talented people with the skills and expertise needed to achieve company objectives. * To appropriately align compensation with job responsibilities and performance . Differentiate employees by performance in the short and long term. Meet the needs of employees while balancing long-term interests of shareholders and customers. what is in the best in order to

MEASURING AND FORMULATING COMPENSATION There are three levels by which and formulate compensation: 1. Exemplary-behaviors. 2. Successful-behaviors. Luxottica measure the performance of employees

Widely recognized achievement of superior business results through effective

Consistent achievement of

expected business results through effective

3. Unacceptable--Inconsistent achievement of expected business results and/or use of behaviors. REMUNERATION GUIDELINES * Luxotticas compensation programs are designed to be competitive within a defined market and deliver total compensation in the top tier of the market, given top-tier individual and/or company performance. For employees who have a significant percentage of their total compensation in variable pay (annual bonus, long term incentives), when individual and/or company dont achieve the expected results, the programs will deliver total compensation in the lower tier of the market. Talent Management: Practices and Corporate Strategies Talent Management? Effective Management of employees to get desired performance to achieve organizational goals and employee expectation . IT INVOLVES Attracting Talents Example: i. Professional Companies: Infosys, TCS, Wipro. ii. Non-Professional Companies.

2. Paying Competitive Salary and Benefits Examples:Industry-wise. Market rates. Leaders.Nearest Competitors. PAY AND BENEFITS: INFOSYS AND WIPRO: Use VARIABLE PAY AND ESOP for PERFORMANCE AND RETENTION.

EICHER GROUP: - ALLOWS EMPLOYEES to DESIGN their own COMPENSATION PACKAGE. 3. Training and Developing Examples: i. Leading Companies: - Infosys, Wipro, Tata Group, Birla Group, L & T etc,, ii. Government Companies: - Maha Nav Ratna Companies: ONGC, NTPC, SAIL, IOC etc.. 4. Making Succession Planning Examples: Indian family owned large companies. ii. Tata Group. 5. Maximising Job Satisfaction Examples: - Indirctly, all Nationalised Banks. 6. Providing stimulating working environment Examples: i. Leading IT Companies. ii. Other leading Companies. 7. Taking action on Performance reviews Examples: i. All leading performance & employees focused private companies. GLOBAL COMPANIES AND TALENT MANAGEMENT Survey in 2006 by Economist Intelligence Unit (EIU), and International (DDI) Development Dimensions

Global CEOs spend most

of their time on:

Recruitment, Performance management, Talent management, Succession planning, Mentoring, and Retention. Major Strategic Challenges to Talent Management 1. A rise in the trends of globalization in the labor market. 2. An increase in the virtual workplaces. 3. Diverse workforce in terms of age, race, etc. Objective Setting and MBO-SMART Objectives

OBJECTIVE SETTNG It is a process of setting objectives. It is about what is to be achieved. It is part of performance management process. It defines and manages expectations by establishing an understanding on the part of the role holder. It acts as a point of reference during the period of performance review.

BENEFITS OF SETTING OBJECTIVES * Enables defining the Performance expectations. Enables defining verifiable SMART objectives i.e. Specific, Measurable, Achievable, Realistic and Time Bound. * It serves as a basis for: - Performance review. - Monitoring progress .

- Coaching and Training. - Recognition and Rewards. MBO APPROACH Invented by First, adopted by Peter F. Drucker in 1954. General Electric Co., USA.

Today, many organizations set goals and objectives through Management by Objectives. It is an organized and a systematic approach of defining organizational goals and realizing them within the available resources. The main aim of MBO approach is to improve organizational performance by aligning the organizational goals with the individual objectives at all levels and attaining those goals within a prescribed time frame. The main aim of MBO approach is to improve organizational performance by aligning the organizational goals with the individual objectives at all levels and attaining those goals within a prescribed time frame. The system involves continuous monitoring and feedback for improving the quality of outcome.

The major focus of this approach is on inviting participation from all the managers in the goal setting process and strategic planning and implementing a range of performance systems which help an organization to remain on the right path. CLASSIFICATION OF OBJECTIVES 1.Work Objectives. 2. Targets. 3. Tasks/Projects. 4. Behavioral Parameters. 5. Values. 6. Performance Improvement. 7. Developmental Objectives. 1.WORK OBJECTIVES Are the Key Result Areas (KRA) in a role profile of an employee.

They explain what has to be done and why a job has to be done.

Example: Respond proactively to the customer complaints and queries for maximizing customer satisfaction. Desired Work Objectives clearly define activities, to be accomplished. Example: TATA STEEL Tata Steel manages performance of employees by focusing on Work Objectives or the KRAs. The organization rewards and provides career growth opportunities to those employees who perform well in their jobs. 2.TARGETS Are the results which can reduction, service delivered, etc.. 3. TASKS / PROJECTS Are the objectives which carry a deadline and should be fulfilled within a specified time frame or can be completed in phases. 4. BEHAVIOURAL PARAMETERS Are normally set out within the competency frameworks, identified as desirable and undesirable behaviors which may be useful in the process of performance planning and reviewing. Example: INFOSYS be measured in quantifiable terms like output, income, cost in terms of the results or standards, which are

Recruits candidates with high degree of learning ability and having special competencies like analytical skills, communication skills and problem solving skills. 5. VALUE It is a belief of an organization, based on which it does business and uphold its core values. Example: FEDEXs Value is to maximize employee satisfaction for promoting customer satisfaction. 6. PERFORMANCE IMPROVEMENT - Aims at realization of an improved performance by directing all the attention towards achieving better results. - This objective is part of Performance Improvement Plans of employees which describe what steps or measures can be jointly adopted by the Managers and the Employee for an optimal performance. Example: SOUTH WEST AIRLINES

Aims at improving performance of its employees by providing them appropriate training for handling the requirements of the job challenges, compensating them favorably and keeping them motivated for winning their loyalty. 7. DEVELOPMENTAL OBJECTIVES - Are highlighted in the personal development plans and include the diverse areas of development for an employee which can help in the enhancement of skills and knowledge levels of an employee. PREREQUISITE FOR A GOOD OBJECTIVE Should be: 1. Precise and Well defined. 2. Consistent with the values of an organization. 3. Measurable in quantifiable terms. 4. Challenging for encouraging better performance and attainment of superior standards. 5. Achievable as per an individuals capability. 6. Mutually agreed by the manager and the employee concerned. 7. Time bound and team based results. Example: GENERAL ELECTRIC CO. - In GE, training and development is a continuous process for developing the competencies of the employees. - It invests in in-house training and development programmes and sponsors its employees for MBA course in reputed universities. TECHNIQUES FOR PERFORMANCE ASSESSMENT 1. A holistic analysis of performance. 2. Narrative Assessment. 3. Ratings. 4. Forced Distribution. 5. Forced Ranking. 6. Quota Systems.

A HOLISTIC ANALYSIS OF PERFORMANCE: This technique aims at reaching an agreement for future action or development after carefully analyzing the strengths or possible weaknesses. Example: Few organizations like BP Amoco implement this technique of performance assessment for providing a feedback to the staff where they are good at. 2. NARRATIVE ASSESSMENT: This is in the form of a written summary of views about different levels of performance achieved and is normally prepared by the managers. This technique lacks consistency in the criterion used for assessments as different managers will consider different aspects of performance. 3. RATING TECHNIQUE: In this technique, performance can be assessed through evaluation on a scale against certain parameters qualitative or quantitative. Example: GE and ICICI Bank use ratings for assessing the performance of their employees for making pay related decisions. 4. FORCED DISTRIBUTION In this technique, the manager is forced to offer ratings according to the pattern of a normal curve. The basic assumption is that the employees performance levels fall under a normal statistical distribution. EXAMPLE: GENERAL ELECTRIC COMPANY, USA: TOP PERFORMERS - 20% MIDDLE PERFORMERS 70% BOTTOM PERFORMERS 10% 5. FORCED RANKING The employees are assigned ranking on the basis of categories. Since the concept of performance is vague, so the rankings should be accompanied by meaningful performance data.

6. QUOTA SYSTEMS: In Quota system, Managers need to restrict their assessment ratings, as per the quota fixed, for each ranking. PERFORMANCE ASSESSMENT: PROBLEMS AND SOLUTIONS PROBLEM: Performance assessments depend upon the ability to judge a performance. SOLUTION: Qualitative and Quantitative parameters should be specified and Managers be encouraged to measure, accordingly. PROBLEM: Lack of awareness about concept of good performance and not so good performance in Managers and Employees. SOLUTION: They may be explain the concept, supported by Work Study, Time and Motion Study and other similar companies standards for good performance. PROBLEM: Managers have tendency of generalizing few experiences with poor and other aspects of performance. SOLUTION: Standard solutions to common problems of Performance Assessment should be practiced by Managers.