Project Report on Performance Managment

Submitted to Prof.Snigdha Patnaik

Performance Appraisal System in TCS

Submitted By: Auronil Dutta Roll No. 8, PGDM ! "ear# $%%&'$%(%# )A*+,R +NS-+-.-, /0 MANAG,M,N-, B1.BAN,S2AR

Tata Consultancy Services Limited (TCS) is the world-leading information technology consulting, services, and business process outsourcing organization that envisioned and pioneered the adoption of the fle ible global business practices that today enable companies to operate more efficiently and produce more value! They commenced operations in "#$%, when the &T services industry didn't e ist as it does today! (ow, with a presence in )* countries across $ continents, + a comprehensive range of services across diverse industries, they are one of the world,s leading &nformation Technology companies! Seven of the -ortune Top ". companies are among our valued customers! They are part of one of /sia,s largest conglomerates - the T/T/ 0roup - which, with its interests in 1nergy, Telecommunications, -inancial Services, Chemicals, 1ngineering + 2aterials, provides us with a grounded understanding of specific business challenges facing global companies! /s we move into an era of e-business where &T professionals will interview employers so stringently that *. percent employers will miss recruitment goals (source3 0artner 0roup), the role of 45 assumes unthin6able proportions and is sub7ect to mammoth challenges! 8ith this sensitive breed of &T professionals, how has TCS grown to and sustained at the number one position is a 9uestion which mar6et watchers have as6ed themselves a thousand times! There is but one answer - passion for e cellence in the wor6force practices! TCS has developed an unbrea6able bond with sound 45 practices in an environment that defies traditional roles and responsibilities! The TCS-45 group operates with technical e perts to create a synergy which is enviable! -igure " illustrates the role of 45, which evidently is that of a facilitator! So whether it is recruitment or even career development, 45 is the catalyst which initiates and institutionalizes processes! To manage all the functions for over "*... employees is a 4erculean tas6 but the smoothness of operations is intriguing! The 45 structure, which allows fle ibility and empowerment, is the solution!

:/ poor performer is not always a poor performer for life,; says S <admanabhan, e ecutive vice president, global human resources, Tata Consultancy Services (TCS)! The 5s #,=*#-crore &nfoTech ma7or has *>,... employees on its rolls! Close to #. per cent of the company's income flows in from outside &ndia! /nd the bul6 of its employees wor6 across TCS offices in )* countries and on-site in more than >. countries! -or most of them, the supervisor changes every time a pro7ect changes! 0iven that no two pro7ects ? or, for that, matter, no two bosses ? are ali6e, performance management and performance appraisal must be a nightmare! @r is itA

Performance Appraisal Criteria at TCS

OBJECTIVES
Bata relating to performance assessment of employees arc recorded, stored! and used for seven purposes! The main purposes of employee assessment are3 "! To effect promotions based on competence and performance! C! To confirm the services of probationary employees upon their completing the probationary period satisfactorily! )! To assess the training and development needs of employees! *! To decide upon a pay raise where (as in the unorganized sector) regular pay scales have not been fi ed! >! To let the employees 6now where they stand insofar as their performance is concerned and to assist them with constructive criticism and guidance for the purpose of their development! $! To improve communication! <erformance appraisal provides a format for dialogue between the superior and the subordinate, and improves understanding of personal goals and concerns! This can also have the effect of increasing the trust between the rater and the ratee! =! -inally, performance appraisal can be used to determine whether 45 programmes such a selection, training, and transfers have been effective or not! Droadly, performance appraisal serves four ob7ectives(i) (ii) (iii) (iv) developmental uses, administrative usesEdecisions, organizational maintenanceEob7ectives, and documentation purposes

Table below outlines these and specific uses more clearly3-

Multiple Purposes of Performance Assessment

0eneral /pplications

Specific <urpose
&dentification of individual needs <erformance feedbac6 Betermining transfers and 7ob assignments &dentification of individual strengths ad development needs Salary <romotion 5etention or termination 5ecognition of individual performance Lay-offs &dentification of poor performers 45 planning Betermining organization training needs 1valuation of organizational goal achievement &nformation for goal identification 1valuation of 45 systems 5einforcement of organizational development needs Criteria for validation research Bocumentation for 45 decisions 4elping to meet legal re9uirements

Bevelopmental Fses

/dministrative FsesEBecisions

@rganizational 2aintenanceE @b7ectives

Bocumentation

PERFORMANCE APPRAISAL A VANTA!E IN TCS

AN

COMPETITIVE

The ob7ectives of performance appraisal, point out the purpose which such an e ercise see6s to meet! 8hat needs emphasis is that performance evaluation contributes to TCS's competitive strength! Desides encouraging high levels of performance, the evaluation system helps identify employees with potential, reward performance e9uitably and determine employee,s need for training! Specifically, performance appraisal has helped the TCS gain competitive edge in the following ways 3

Strategy and Dehavior

&mproving <erformance

2a6ing correct decisions

Competitive /dvantage

Ialues and Dehavior

2inimizing dissatisfaction and turnover

1nsuring Legal Compliance

TCS con"#cts t$o appraisals3 %& At t'e en" of t'e year (& At t'e en" of a pro)ect& /ppraisals are based on Dalanced Scorecard, which trac6s the achievement of employees on the basis of targets at four levels ? financial customer internal learning and growth

The financial perspecti*e 9uantifies the employee's contribution in terms of revenue growth, cost reduction, improved asset utilization and so onG The c#stomer perspecti*e loo6s at the differentiating value proposition offered by the employeeG the internal perspecti*e refers to the employee's contribution in creating and sustaining valueG the learnin+ an" +ro$t' are self-e planatory! The weightage given to each attribute is based on the function the employee performs! Dased on their individual achievements, employees are rated on a scale of one to five (five H :superstar;)! &f employees get a low rating (less than two) in two consecutive

appraisals, the warning flags go up! :&f the poor performer continues getting low scores then the e it option may be considered; @ver the years TCS has found the pattern that leads to the ma imum decline in performance ? boredom! &f employees wor6 for more than two years on the same pro7ect, typically either their performance dips or they leave the organization! To avoid that, TCS shuffles its employees between pro7ects every "% months or so! :<erformance drops if motivation drops; /t the heart of an employee,s satisfaction lies the fact that his performance is being appreciated and recognized! TCS,s performance management system has metamorphosed into one that emphasizes ob7ectivity and a system that mandates performance evaluation against pre-determined criteria! 8hat deserve special mention is the active participation of the senior management in the determination of guidelines for the performance appraisal process! The process ensure buy in of the employees since the guidelines for the rating system and its conversion into money terms is not unilaterally decided by 45 but is a consensus of a cross functional team with representation from all levels!

TCS,s performance appraisal system is supported by an online system called the 4uman 5esource 2anagement System- an @racle Beveloper C... based tool! The system individual right from his biographical details to his pro7ects performance! /n employee,s performance history at the clic6 of a button and this accurately maintained for "*... employeesJ 5ight from his entry, an employee in TCS get formal performance feedbac6 once very two months till such time that he is confirmed after which the performance feedbac6 is provided twice every year on a formal basis! TCS however widely encourages informal feedbac6 discussions between <ro7ect Leaders and Team 2embers and this concept has found an overwhelming appeal among the people!

Recognition at TCS
0uaranteed high motivation levels at TCS through competitive compensation pac6ages, stimulating 7ob content, outstanding development opportunities, and, not the least, an innovative recognition mechanism

The various ways in which TCS recognizes its people are listed below! <ro7ect milestone parties ? to encourage efficient e ecution of pro7ects! 5ecognition of star performers E high fliers ? to recognize outstanding talent! (omination to covet training programmes ? to encourage self-development! Dest pro7ect award ? to promote a spirit of internal competition across wor6 groups and to foster teamwor6! Dest <&< award ? to encourage innovation and continuous improvement! Dest auditor award ? to ac6nowledge participation in critical support roles Spot awards ? to ensure real-time recognition of employees! 5ecommendations for new technology assignments E 6ey positions ? to ensure career progression and development of employees, full potential! <erformance-based annual increments ? to recognize high performers 1arly confirmations for new employees ? to reward high-performing new employees Long-service awards ? to build organisational loyalty 1I/-based increments ? to ensure performance-based salaries! @n-the-spot recognition ? to guarantee immediate recognition of good performance!

,#man Reso#rce Mana+ement System

The functions of HRMS can be broadly stated as: Organisational set up and configuration Defining organisational structure and hierarchy. Updating organisational structure and hierarchy. Defining and maintaining employee classification and hierarchy. Set up access and appro al le els.

Recruitment Ad ertisements in arious forms. Application processing. !ritten tests and group discussions. Updated lists for campus recruitments.

Employee details maintenance Maintaining ser ice records of employees.

Employee benefits details maintenance Trac"ing changes in salary scales and allo#ances. Producing appropriate reports. $erifying% registering and updating professional memberships. Allo#ances and claims processing. &ssuing loans and ad ances.

Attendance management Trac"ing attendance registers. Trac"ing late arri als. Trac"ing o ertime. Maintaining shift rosters. 'apturing interface data. (enerating interface reports.

Training details maintenance Trac"ing budgetary allocations. Trac"ing internal training programmes. Maintaining details of training institutions. Maintaining training re)uests and re)uirement details. Maintaining post*training details. Maintaining post*training #or" reallocations.

Allocations, transfers and deputation management Allocations% transfers and deputation management. Maintaining deputation details. (enerating transfer details.

Performance-appraisal management Maintaining details of timely performance*appraisal reports. Maintaining details of ratings from appraisal officers. (enerating details of reminders for performance*appraisal reports.

Promotion-details management (enerating lists of eligible candidates. (rading eligible candidates. Maintaining details of promotions.

Leave-details management 'rediting lea e to employee accounts. Maintaining details of lea e a ailed and re)uired appro als. Maintaining details of lea e encashment. $alidating details of residual lea e.

Separation-details management Updating details of terminal benefits. Registering details of employee benefits. (enerating reports of these details. anpo!er planning Maintaining transfer details. Maintaining succession details. (enerating M&S reports. (enerating current human resources details.

P-CMM . PEOPLE CAPABILIT/ MAT0RIT/ MO

EL 1

The concept that is very close to the heart of the 45 group and one that has seen mass appeal is the PEOPLE CAPABILIT/ MAT0RIT/ MO EL or the P-CMM! TCS 'as 2een t'e first company in In"ia to 2e *isite" 2y t'e a#t'or of P-CMM - r& Bill C#rtis& The 45 group along with the Software 1ngineering <rocess 0roup has dedicatedly wor6ed towards achieving a high maturity level for the people processes! /nd it is no mean feat that the two groups have generated such synergy that for a long time every one will be spea6ing one language - the-<-C22! -or the first time, all of the 45 processes will be sub7ected to an audit and that in itself is an achievement to be proud of because we hear so few a company having its 45

processes audited! TCS plans to have an organization wide assessment this year! So 45 now in the boo6s of KLF/L&TMK! -or the first time, all of the 45 processes will be sub7ected to an audit and that in itself is an achievement to be proud of because we hear so few a company having its 45 processes audited! TCS plans to have an organization wide assessment this year! So 45 now in the boo6s of KLF/L&TMK! Beveloping the 45 capabilities has been an imperative! 19uipped with the training programmes at T2TC (The T/T/ 2anagement Training Centre), the e tensive Labs at &S/DS and &S&SB the constant e posure at conferences, the 45 team is a formidable one and at the cutting edge of 45 technology! The 45 team in TCS is transcending from its traditional KmaintenanceK role to a new developmental role! Besigning training modules for Senior <ro7ect Leaders on performances management, facilitating the implementation of <-C22 ( being done for the first time in /sia) or designing a Dalanced Score Card for the team, the 45 group is at the forefront, rubbing shoulders with the technology e perts!

The <eople Capability 2aturity 2odel consists of five maturity levels that establish successive foundations for continuously improving individual competencies, developing effective teams, motivating improved performance, and shaping the wor6force the organization needs to accomplish its future business plans! 1ach maturity level is a welldefined evolutionary plateau that institutionalizes new capabilities for developing the organization,s wor6force! Dy following the maturity framewor6, an organization can avoid introducing wor6force practices that its employees are unprepared to implement effectively!

T'e fi*e sta+es of t'e People CMM frame$or3 are4

P-CMM - Initial Le*el (Typical characteristics3 &nconsistency in performing practices, Bisplacement of responsibility, 5itualistic practices, and 1motionally detached wor6force)! P-CMM - Mana+e" Le*el (Typical characteristics3 8or6 overload, 1nvironmental distractions, unclear performance ob7ectives or feedbac6, Lac6 of relevant 6nowledge, or s6ill, <oor communication, Low morale) P-CMM - efine" Le*el (/lthough there are performing basic wor6force practices, there is inconsistency in how these practices are performed across units and little synergy across the organization! The organization misses opportunities to standardize wor6force practices because the common 6nowledge and s6ills needed for conducting its business activities have not been identified) P-CMM - Pre"icta2le Le*el (The organization manages and e ploits the capability created by its framewor6 of wor6force competencies! The organization is now able to manage its capability and performance 9uantitatively! The organization is able to predict its capability for performing wor6 because it can 9uantify the capability of its wor6force and of the competency-based processes they use in performing their assignments) P-CMM - Optimi5in+ Le*el (The entire organization is focused on continual improvement! These improvements are made to the capability of individuals and wor6groups, to the performance of competency-based processes, and to wor6force practices and activities! The organization uses the results of the 9uantitative management activities established at 2aturity Level * to guide improvements at 2aturity Level >! 2aturity Level > organizations treat change management as an ordinary business process to be performed in an orderly way on a regular basis)
A CASE STUDY ON EVA AND COMPENSATION MANAGEMENT SYSTEM IN TCS

Buring the first 9uarter of the financial year C..>-.$, about "... employees whose performance was not up to the mar6 were as6ed to leave Tata Consultancy Services (TCS), the largest &T company in &ndia! TCS had as6ed around >.. people to leave the company after the second annual appraisal it carries out, citing performance-related issues! Dy the end of the financial year, this number could went up to $..! The employees who were as6ed to leave are mostly those with C-) years of e perience and do not include trainees because they have less than a year's e perience!45 e perts believed that this decision was based on the implementation of the 1I/(1conomic Ialue /dded) based model for assessing employees, contributions, at the company! The first two year cycle of 1I/ had 7ust been completed when the retrenchment decision was ta6en! TCS came in the news for cutting down the variable pay of employees for

slippages in internal growth targets ? a move that will save it about 5s %) crore! This move however was unli6ely to be lin6ed any slowdown worries! This manner of forced attrition was only lin6ed to the appraisal process! &t was not lin6ed to any other factor!Those who were as6ed to leave had obtained low ratings in their performance appraisal for two consecutive years, despite being under mentorship!&t seemed to be a routine e ercise carried out bi-annually to weed out non-performers! The number of employees impacted during this year till date is >.. which constitutes about .!>N of the company's employee strength of ",.%,...! &n this process if an employee gets a grade of C or below during the first appraisal cycle, the company puts the employee on a performance improvement plan that includes additional training and assignments on new pro7ects! /t the end of the second appraisal if the employee's ratings do not improve to a grade better than C, the employee is as6ed to resign! TCS arranges for placement agencies to help the employees get placed in other organizations though! The grades are on a scale from " to >, with " being the lowest and > being the highest! /t a time when &T manpower was in short supply and &T and D<@ companies were going out of their way to reduce employee attrition, TCS,s decision to retrench employees made headlines in several &ndian news dailies! @n /pril "#, C..>, TCS announced its annual results for the fiscal C..*-.>! The company declared total revenues of FSO C!C* billion and net profit of FSO .!>" billion! TCS had been the first &ndian &T company to achieve the FSO " billion revenue milestone in the fiscal C..C-.)! &t continued its success story when it became the first &ndian &T company to earn revenues of more than FSOC billion per annum! S! 5amadorai (5amadorai), C1@ + 2anaging Birector of TCS commented, KConsistent with our position as the pioneer of the &ndian &T industry, TCS is proud to be the first &T Company to cross the two billion dollar milestone! Through our strategic initiatives we have managed to double our revenues in the last two years! 8e are alive to the challenges facing the industry and are geared to enhance our leadership position!K* TCS aimed at earning revenues of FSO > billion by C.".! The 1I/ compensation model was used as a basis for giving incentives to employees and the bonus declared was a part of improved 1I/ achieved! &n the 1I/ model, the components of fi ed and variable pay were determined! -i ed pay comprised of wages and pension while the variable pay had components li6e bonus, profit sharing and stoc6 options! /ccording to him KThere,s no ceiling on the bonus! &t can be e9ual to the fi ed portion of the salary, providing the cell has shown that 6ind of 1I/ growth! &t is not 7ust compensation, the process aimed at employees to also have get a feeling of ownership for their own unit, and its performance! 1ach employee was made to feel as if they are running their business! They had to thin6 li6e entrepreneurs and 6now the cost attached to their business and how will they add value to the investment! TCS adopted 1I/ in "###, when the company had a staff of around ">..., wor6ing at several locations across the world! Through the 1I/ model, TCS aimed at creating economic value by concentrating on long term continuous improvement!

1I/ measured operating and financial performance of the organization through DSC and the compensation of all employees was lin6ed to it! TCS went in for the 1I/ as during that time, the company was not a public limited company and hence could not have a stoc6 option plan! There were several people who played an important role in the success of the organization, who needed to be recognized! /s there was no wealth sharing mechanism in place, 1I/ was adopted to focus on continuous improvement rather than short term goals and also to motivate employees! &t was designed to construct a defined incentive system, which would reward on the basis of profitability! &n "##$, TCS was organized into a three dimensional model with the first dimension comprising of industry practices, which included engineering, transportation and telecomG the second dimension comprising of service practices li6e e-business, outsourcing, technology consultingG while global and regional operating areas formed the third dimension! / business unit could be a part of a service, a practice, a geographical unit or a combination of all the three! 1very unit was considered to be a revenue center and had its own 1I/ target! The units that did not fall under the purview of any of these were corporate offices and research + development, the costs of which were divided among all the units! Through 1I/-lin6ed compensation, employees could claim sta6es at three 1I/ levels - at the organization level, at the business unit and the individual level! The individual was informed how he or she could contribute to the 1I/ enhancement at all three levels! 1I/ was controlled by revenues, capital and costs, and an individual could contribute in any or all of these areas at all the three levels! The benefits of 1I/ were realized across all levels in the organization! 1mployees became aware of their responsibilities and their share in increasing the 1I/ of the unit and organization! /ll the units could determine how they had fared against the targets! The bonus ban6s also helped in sustaining performance from the individuals, with close relationship between pay and performance! There was an increased sense of belonging among the employees and the employees were motivated to increase their contribution as they were also e9ually benefited by the increase in 1I/! 1I/ was not 7ust a performance metric but an integrated management process aimed at achieving long term goals! @ne of the ma7or benefits of implementing 1I/ in TCS was increased transparency in the organization! The internal communication within a unit had increased considerably! The decision ma6ing process became more decentralized The 1I/-based compensation system received severe criticism during the initial years of its implementation! &ndustry analysts commented that 1I/ concentrated mainly on return on investments, due to which the growth of TCS could be restricted! &n C..), TCS caused an uproar in the &T industry when it reduced the variable salaries of employees by ".N! This was the initial impact of 1I/ which was implemented in the company from /pril .", C..)! The reduction in the variable salary resulted in an overall reduction of monthly ta6e-home salary for most of its employees!The TCS move to cut the salary of

the employees on falling short of its pro7ected revenues for the 9uarter has ta6en the &T fraternity by surprise! There was a universal support building up among &T staff in the form of a web campaign condemning the move! -renzied blogs were busy gathering support against the announcement! Though the tactics employed by the management of Tata Consultancy Services (TCS) is perfectly legal, the sudden manner in which the decision had been implemented had caused a furore! There is an element of fear among the entire software community as to if the &T companies would ta6e a cue from the TCS initiative and ma6e such salary pruning a regular practice to show profits in future! The most affected parties of the :salary ad7ustment; were reportedly the confirmed employees of TCS located in the FS and &ndia! These people were li6ely to have their payche9ues lesser by 5s ".,... during -ebruary and 2arch C..%! There is fear that soon other top companies such as &nfosys and 8ipro too may adopt the practice owing to the appreciating rupee value against dollar! /nd this has resulted in blog and email campaigns mustering support against the move! 8hatever be it, the woes of TCS staff did not seem to end only with this 9uarter! -or, there is an ominous reference in the letter saying, :&n L*, we will follow the same basis of advance payment of Iariable <ay as per e pected 1I/ pro7ections at the beginning of C..=-.%! 8hen the audited results for L* are announced in /pril C..%, appropriate ad7ustment in Iariable <ay will be made either upwards or downwards as the case may be!;