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Published by: api-27133856 on Oct 16, 2008
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Page 1 of 19
Performance and Potential Management
Q1. \u201c Performance management is a system. It is not equal to performance
appraisals\u201d. Give your comments. Illustrate. With one example.
1. Performance Management

Change is occurring at an accelerating rate and this is the centre around which we will discuss performance management system. Traditionally the two concepts performance management and performance appraisals were treated as one and the same thing, however not the scenario is completely different. Performance Management is not just HRD technique, it is not just evaluating the performance of an employee once a year, it is the tool in the total performance management system. Earlier there was no need to check performance against goals set but with the changing business environment there is the emergence of a great need to have a performance management system.

Performance Management system is a n integrated system of linking business objectives / goals with Key Results Areas (KRA) of Managers, only then does it become a management tool. The system should be futuristic, the system should be communicated and explained to all heads and employees.

The performance system should be facilitative, aiming to help Managers toenhance their performance and leave some room for discretion. The system should encourage continous learning and development.

Performance Management System implementation process includes the following steps
a. Goal Setting
b. Key Result Areas
c. Actions
d. Self Appraisals
e. Joint Review
f. Management Action
Goal Setting : This is the topmost item on the agenda, before goals are set usually a

SWOT analysis is carried out, then goals are set, goals are set in such a manner that they coincide with the annual budget. In the setting of goals the managers also establishes the measures of what will indicate goal accomplishment. Goals are set so that the need for capital, material and human resources can be arranged at the same time.

Key Results Areas : it is a component of goal to be achieved by a person within a time
frame. It is the expected end result of the goal. Targets should be realistic and achievable,
the main message here is plan your work and work your plan.
Actions : This is the crucial stage. Each KRA is broken into key tasks and activities for

the subordinates to perform, here each task manager will prepare his own performance and action plan. Important precaution is Think before you Act. In this process one can anticipate some events which were not thought of earlier. This is a smoke signal, take

Page 2 of 19
care if it is going to result in a fire. The quality of the manager is to keep the boss
informed. Rectification action can be taken in time.
Self Appraisal : In achieving KRA periodic performance measurement is required

through self appraisal system. The purpose is to assess performance against result areas and to find out the gaps in performance. Self appraisals should be conducted periodically as the time frame for each KRA may not be the same., this system helps the manager to control his own performance and it can result in better motivation.

Joint Review : The Self appraisal report should be submitted to the functional heads,

they with analysis the same and review it with the employee. Review will be with reference to achievement or non achievement of KRA\u2019s. If there is non achievement cause analysis and action plan to overcome the problems will be taken and if need be KRA may be reset.

Management Action :

Top management should get a clear picture so that action plan will be given for execution, while suggesting changes they must take into consideration whether sound support system are available or not and how to reinforce the same, what training facilities should be provided, etc Suitable management action will guarantee sustainable performance.

These are the six important steps in the Performance Management System Process.
Let us have a look at the flow chart:
Performance Management System Process.
Performance Appraisals

The performance of the employee must be considered and this is done through performance appraisals, appraisals can be done in two ways, either by self appraisal or an appraisal being carried out by the superior / manager.

There is difference between performance management and appraisal, performance appraisal is the tool through which one will be able to manage and evaluate the performance of the employee.

Goal Setting
Self Appraisal
Joint Review


Page 3 of 19
Q2. Explain the concept \u201c management By Objective (MBO). What is its co
relationship with cultural issues\u201d
2. Management by Objectives
The concept of Management by Objective is given by Peter Drucker.
Management by Objective can be defined as

1. a dynamic system which integrates the company\u2019s head to achieve its goals for profits and growth with the mangers need to contribute and develop himself. It is a demanding and rewarding style of managing business.

2. The superior and the subordinate managers of the organization jointly define its common goals, define each individuals major areas of responsibilities in term of the results expected of him and use these measures as guides for operating the unit and assessing the contribution of each of its members.

In MBO the superior and subordinate sit down together and set their goals jointly in such a way that there is harmony between the individuals goal and the goal / objective of the organization.

MBO has various advantages and disadvantages.
Advantages :

1. Better appraisals
2. Manager planning
3. Reward Links
4. Corporate Planning
5. Motivating Individuals

Disadvantages :
1. Difficulty in communication
2. Difficult to explain the process to lower level employees
3. Cultural changes

The system of MBO is a very effective system which can help in the growth and success of the organization but for it to succeed the MBO system must possess the following elements :

1. Objectives for positions
2. Joint Objective setting
3. Linking of objectives
4. Measurement and Control

5. Review system
6. Involvement of Superiors
7. Staff support

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