HUMAN RESOURCE MANAGEMENT

GROUP MEMBERS: MUHAMMAD FAISAL QURAT-UL-AIN SIDDIQUI RAFIA ASLAM ZUNAIRA AHMED USSAMA SAEED FINAL PROJECT REPORT PERFORMANCE APPRAISAL AT SSGC

SUBMITED TO: Ms ABIDA SHAHEEN DATE OF SUBMISSION: 21st DEC 2010

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ACKNOWLEDGMENT
First of all we would like to thank Allah Almighty for giving us the wisdom to work on such a purposeful report. Making an idea actually work is not possible without the grace of Allah, prayers of parents and support from friends. We are truly thankful to our instructor Ms ABIDA SHAHEEN as she has been very cooperative and supportive throughout the semester and in this work. We would also like to thank Ms. MARIUM (HR executive in SSGC) who provided her valuable time and really supported us in preparing this term report. We would like to take this opportunity to thank all those people who helped in the compilation of this report and provided their valuable advice.

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TABLE OF CONTENT
S.NO

TOPICS
Introduction to the company Company Performance Management System Performance Management Cycle Methods of Performance Management Graphical Rating Scale/ Ranking Method Essay writing Method Bell Curve Performance Review Form of SSGC Problems while Appraising Performance Management Process Compensation System based on Performance Conclusion Recommendation

Page No.

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13.

6 7 10 11 11 13 14 15 20 21 23 24 25

EXECUTIVE SUMMARY
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This report is about the significance and objectives of Performance Management system of SSGC (SUI SOUTHERN GAS COMPANY). This report is mainly concerned with the overall Performance management system of the company which includes company’s performance appraisal system. We conducted a detailed interview with the company’s Hr professionals and covered the topic of performance appraisal from almost all perspectives. In this report we have discussed that on what grounds company has conducted its Performance management system. In this report we have also highlighted why Performance appraisal system is necessary for the organization, what are the beneficial outcomes of it, what are the company methods to appraise employee performance, the problems faced by the company while implementing its performance appraisal system and what is their reward system. At the end of this report we have also given some recommendations for the betterment of company’s Performance appraisal system.

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COMPANY OBJECTIVE The SSGC objective is to supply natural gas where ever there is enough load in order to justify the infra structure cost. They expand the gas network to meet economic and social requirements in many places through funding support from the Federal and Provincial governments. In 2003, the comprehensive 5- year gas network development and expansion plan has been launched by the company to connect several small towns and villages in remote areas of Sindh and Baluchistan which the piped natural gas is in the very poor condition of piped natural gas. On yearly basis, the company adds nearly 66000 new customers (industrial, commercial and domestic) to its customer based and lays hundreds of kilometers of transmission pipelines and distribution network. Further they install other facilities such as metering/billing stations in its system by the help of its staff of technically qualified and skilled employees

MISSION “To meet the energy requirements of customers through reliable, environment friendly And sustainable supply of national gas, while conducting company business professionally, efficiently ethically, and with responsibility to all our stake holders, community and the nation.”

VISION “To be a model utility, providing quality service by maintaining a high level of ethical and professional standards and through optimum use of resources.”

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INTRODUCTION
Company Overview SSGC was established in 1989 as a result of the merger of two gas companies - Sui Gas Transmission Company Limited (SGTC) and Southern Gas Company Limited (SGC). Sui Southern Gas Company Limited (SSGC) is the major company of the country which is involved in purification, transmission and distribution of natural gas throughout the country. SSGC employs and maintains a team of competent professional staff to run its operations effectively. Its staff is well-experienced in their respective fields. The present strength of SSGC staff is 5,500 which comprises of 1,350 executives and 4,150 nonexecutive staff. SSGC helps its staff improve and update their expertise in respective fields, based on world-wide gas industry practices, by arranging specialized training programmes locally and abroad. SSGC is primarily involved in operations and maintenance of: I. Gas purification facilities at Sui; II. Gas transmission pipelines; III. Gas compression facilities and IV. Gas distribution pipelines In order to support its operations SSGC has appropriate infrastructural facilities spread over the two provinces of the country. SSGC's major infrastructure components comprising of gas transmission/distribution pipelines, purification facilities and compressor stations. SSGC shares with SNGPL the ownership of gas purification facilities at Sui. It purchases natural gas from 5 different sources and sells this gas to its customers in Sindh and Baluchistan. SSGC also distributes liquefied petroleum gas (LPG) throughout Pakistan and manufactures gas meters for domestic and commercial consumers under a licensing arrangement with Schlumberger of France since 1976. SSGC operates under well established technical standards and practices of the oil and gas industry institutions.

COMPANY PERFORMANCE MANAGEMENT SYSTEM
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2.1 Overview of PMS at SSGC PMS is a planned and integrated method which is crucial to success of SSGC as it helps in improving the performance of the staff. By definition performance management is a process that comprises of goal setting, performance appraisal and development into a one common system whose objective is to ensure that the employee’s are working in a manner that must support the company’s strategic aims and long term goals.

Figure 1.1

Previously SSGC have been using performance appraisals to decide annual pay increases. But, the broader goals such as employee development, improving performance, team building, or providing useful feedback to employees were being neglected. Therefore, PMS was adopted to ensure and increase efficiency in the work. The PMS is the foundation of the SSGC’s performance excellence as it comprises of clear and specific targets and work standards for the top management which keeps them focused and aligned with the company objectives. It is a source of periodic informal and formal feedback from individual’s performance relative to the goals. The company’s current PMS system provides a review to support decisions related to training and career development, compensation, transfers and promotions. The key to prevent performance problem is two-way communication between supervisor/manager and employee. This results in complete understanding of the task specification and the required results. 7

The benefits associated are: The executive or top management gets a birds’ eye view of the performance milestones being achieved and the areas where efforts must be made The manager gains an accurate information about the moral of people working as a result of the communication being required The company retains highly motivated staff who are inclined to work for the objectives of company as a whole SSGC’s PMS is though time consuming but pays-off in terms of increased performance productivity, employee morale and quality of work, plus a reduction in employee relations problems is well worth the investment.

The SSGC system of evaluating performance has been designed to ensure: • • • That all executives have an opportunity to discuss their future career goals That training needs are being met to help them develop to their fullest potential That strengths and weaknesses of all employees are required to be recorded so that the organization can make accurate decisions regarding an employee’s contribution, career development, training needs, promotional opportunities, pay increases, etc.

In order to utilize this system effectively, all company managers/supervisors pay special attention to the following major underlying elements of the system: • • Supervisor responsibility: This is a part of the normal day-today responsibility of every supervisor and relates to planning and assigning work to the subordinate. Performance criteria: Criteria for job performance are set to reflect requirements of different positions, levels of assignment and operating conditions. Communication: Supervisors communicate job standards, goals and other expectations to employees before the evaluation period begins (during the process of Performance Plan). Continuous feedback: Executives accept suggestions for improving and/or maintaining their performance when they receive feedback continuously (e.g. daily, weekly or monthly). This also assures that company employees are not surprised by negative feedback during the formal appraisal but they take it as a chance for improvement. This 8

also prevents the executives from asking for a review of their rating as they are fully aware of it • • Development coaching: The company supervisors are instructors and team leaders in the development of their subordinates. Link to compensation: Effective compensation systems link performance achievements to salary increments, as the widespread system of the company is merit oriented. Rating is based on performance only.

2.2 Principles of Performance Management System The principles of PM System being adopted by SSGC are listed below: • • • • • • Effective business management Tool to help managers to manage Driven by corporate values and strategic goals Focuses on solutions to work problems and produces results Promotes change in behavior, increases productivity and reduces paperwork Its not just a “System” – its about managing people in the best possible way

2.3 Performance Management Cycle at SSGC

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The S
Figure 1.2

1. The performance and development plan is generally made by the head supervisors who divide the task responsibilities in teams. The manager or the immediate supervisor begins the process by noticeably discussing with the employee the expectations for the evaluation period. 2. After assigning different assignments to each employee supervisors keep a check on their workers to make sure that they are properly working on time or before time. 3. In the last step the supervisors review the employee performance in order to assess the outputs and achievements during the specified time frame. Thus the employee and the supervisor both become dynamic in this step of performance management cycle and both of them have the responsibility to review performance against goals and objectives.

2.3 Methods of performance Management

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The methods distinctively being adopted and practiced at SSGC are: • Performance Review Form a. Ranking method/Graphic rating scales b. Essay Method/Pen Picture • Bell Curve

2.3.1 Ranking method/Graphic rating scales The Graphic ranking is a performance appraisal method which is being implemented at SSGC that facilitates the company management in evaluating employee performance from finest to most terrible. In this method Graphic rating scales require an evaluator to indicate on a scale the degree to which an employee demonstrates a particular trait, behavior, or performance result. In addition the rating forms are a collection of a number of scales, each linked to a certain job or performance-related dimension, such as job knowledge, responsibility, or quality of work. Each scale is a continuum of scale points, or anchors, which vary from high to low, from good to poor, and from most to least effective. The common problem with various levels is the requirement to justify the difference among each level. As the objective measures and ratings are complicated to achieve in any appraisal system, and in team of high-performing employees, the division between diverse levels of performance may be fake. Thus at SSGC the management focuses on the trend to trim down, the number of rating levels in appraisal systems.

Rating scales used in SSGC are:
I.

Substantially exceed expectation 81% and above (SEE) 11

II. III. IV. V.

Exceed expectation 66% to 80% (EE) Meets expectation 51% to 65% (ME) Below expectation 26% to 50% (BE) Not acceptable 0% to 25% (NA) SSGCs Rating Scale Characteristics: SSGC’s rating scales have the following characteristics 1. Performance dimensions are clearly defined. 2. Scales are behaviorally based so that a rater is able to support all ratings with objective, observable evidence. 3. Points, or anchors, on each scaled dimension are brief, unambiguous, and relevant to the dimension being rated. SSGCs Rating Scale Advantages: Carefully constructed graphic rating scales gives SSGC a number of advantages given below: 1. Standardization of content permitting comparison of employees. 2. Ease of development use and relatively low development and usage cost. 3. Reasonably high rater and rate acceptance. SSGCs Rating Scale Disadvantages The biggest disadvantage of such rating scales is that they are vulnerable to rating errors that may lead to incorrect appraisals in the company. Some of the probable rating errors of the company’s performance appraisal system consist of: When a rating on one dimension of an appraisal instrument considerably manipulates the ratings on other dimensions for the same employee it results to halo effect. Consequently an employee is rated regarding the similar across all performance dimensions.

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Central tendency occurs due to deficient variation or deviation among ratings of different subordinates, where most employees are likely to be rated as average. 2.3.2 Essay Writing/Pen Picture The essay method being implemented at SSGC involves an evaluator's written report appraising an employee's performance, usually in terms of job behaviors and/or results. The subject of an essay appraisal is often justification of pay, promotion, or termination decisions, but essays can be used for developmental purposes as well. Since essay appraisals are to a large extent unstructured and open-ended, lack of standardization is a major problem faced by the company. The open-ended, unstructured nature of the essay appraisal makes it highly susceptible to evaluator bias, which may in some cases be discriminatory. By not having to report on all job-related behaviors or results, an evaluator may simply comment on those that reflect favorably or unfavorably on an employee. This does not usually represent a true picture of the employee or the job, and content validity of the method suffers.

2.3.3 Bell Curve Method of Performance Appraisal

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Figure 1.3

Bell curve system of appraisal is a forced ranking system enforced on the employees by the management. The Forced ranking is a workforce management tool under which a company must identify its best and worst performers, then look after the former and recover or discard the latter. Under this system comparison of performance of the entire workforce engaged in similar activity is being done and they are ranked on the basis of their performance. The company management separates the entire workforce as the top performers, medium performers and the poor performers. The percentile varies with the company policy. In SSGC they have top performers 10%, middle performers 80% and the bottom performers 10%. • • • The employees belonging to the higher grade are rewarded with rewards bonuses, in order to motivate them to show their better performance. The middle percentile employees are provided with training to enhance their key skills to improve their work performance. The lower level employees are given the chances to improve their efforts and are abandoned from the system. 2.4 Performance Review Form of SSGC

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At SSGC all the immediate supervisors of respective department’s fill out the annual performance review form of the individual’s performance in the month of June. The performance plan and input form which is submitted by the employees is used to evaluate the employee performance. This form is a complete assessment process carried out by the immediate supervisor based on compensation of KPIs and skills and competencies required for the job and those displayed by the individuals. The percentage of increment is determined and paid in July of each year on the basis of the annual rating. The current performance review form of the SSGC is revised to include KPIs specific to an individual’s job, in addition to the general KPIs. This revision makes the form more objective. The Annual Review Form of the SSGC has been revised and emphasize on performance as measured against specified competencies (as opposed to specific tasks or behaviors) that are identified for each position. The system of evaluating performance has been designed to ensure:

The company executives are responsible to decide their future career goals and training requirements with their manager/supervisor in order to build up their fullest potential. The strengths and weaknesses of the company executives are verified to take the exact decisions linked to the employee’s contribution, career development, training requirements, promotional opportunities, pay increases, etc.

To highlight the value of this process, top management at SSGC send a message to all the managers and supervisors of the company that the procedure of rating employee performance is an important source to carry out this task, with obligation rather than filling the forms without having any meetings. Without organizational commitment to the process managers/supervisors will consider review writing of no use. Managers/supervisors make sure that ratings are fair and accurate. For example:
• • •

High ratings for everyone (leniency approach) Low ratings for everyone (severity approach) Middle level of the bell curve (everyone is doing just fine)

2.4.1 Parts of Performance Review Form 15

The SSGC performance review form has six parts. Each part is divided on the basis of feedback from different subordinates, immediate supervisor and ultimately by senior reporting officers. Part I – Personal Information This part consists of personal information related to the employee’s name, current grade, last qualification achieved, and the department he/she is working for, the date he/she joined the company and achieved last promotion, the department he/she worked before and is currently working. This part helps SSGC to understand the information of employee accurately. The information entered in the form is updated in Oracle’s Human Resource Information System (HRIS) which helps SSGC to track down their employees recent and past personal activities. Promotion is done on a number of factors such as minimum working time period in SSGC of 3 years, the prior trainings and the current trainings acquired, the past performance (KPI) and the current performance of the employee. SSGC policy determines that when these factors are achieved by an employee then he/she will be eligible to be promoted. Part II – Performance Indicators SSGC asses their employee’s on five different ratings: 1. Substantially Exceed Expectation: The employee which has shown remarkable performance over the period. The employee’s whose performance is consistently superior and significantly exceeds the position requirements is marked on SEE rank. 2. Exceed Expectations: The employee which has performed very well and the performance frequently exceed position requirements is marked on EE rank. 3. Meets Expectations: The employee which is proficient has consistently meets the current position requirements are marked on ME rank. 4. Below Expectations: The employee which meets some, but not all position requirements. The employee having less anticipation is marked on BE rank. 5. Not Acceptable: The employee having poor performance and consistently fails to meet minimum position requirements; lacks skills required or fails to utilize necessary skills is marked on NA rank. 16

This Part II of the form is further divided into general and specific Key Indicators: 1 Performance: 1.1 General Key Indicators i. Targets achieved, additional work done ii. Planning and organizing iii. Changing management iv. Proactive actions for UFG Control v. Creativity, initiative & drive 1.2 Job relevant KPI’s to be selected from Annex-A as applicable to individual Key Performance Indicators (KPI) in SSGC The SSGC Key Performance Indicators are:
• • •

Quantifiable measurements that reflect the significant success factors of the company. Reflect the company’s goals, and key to its success. Considered long-term considerations. The definition of what they are and how they are measured do not change often.

Human resources KPI’S of SSGC: They include KPI about human resources management such as employee loyalty, labor relation, compensation, training and development, recruitment etc

 Recruitment KPI
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They

include

KPIs

about

recruitment

They include KPIs about performance management. Employee loyalty KPI They include KPIs about employee and faithfulness devotion. HR efficiency KPI They include KPIs about effectiveness of workforce.

process. Training KPI They include KPIs about training practices. Health and safety KPI They include KPIs about health and safety of workers. Performance KPI 2. Competencies & skills i. Communication skills

ii. Development and presentation of case/project iii. Interpersonal skills iv. Delegation of work and management control v. Leadership skills, attitude and motivation 3. Development Efforts i. Training efforts for subordinates ii. Willingness to accept New responsibilities iii. Willingness to accept change of job/station (job rotation) iv. Self Development efforts (training and education) v. Conformance to medical advice

4. Core Values i. Team work ii. Fostering merit iii. Integrity of decision iv. Degree of self discipline v. General conduct, adherence to rule and company ethics

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Conflict Resolution On these general and specific KPIs, employees are awarded points based on their performance. There are times when the employee is not satisfied with the points awarded to him/her by the immediate supervisor. In such a case a committee is made specifically for Grievance Handling. Under this committee, a proper meeting is held depending on the number of employees not satisfied with their awarded points. Although this meeting is held annually, but depending upon the number of meetings it can also be held semi-annually. In this meeting, the employee (not satisfied with awarded points), employee Head/immediate supervisor and Jury of HR is present. The case is presented to the Jury and after discussion it is decided whether the points were awarded unjustly or there was some other misunderstanding. Part III – Pen Picture In this part, overall work performance, personality and potential of the employee are stated in brief. Major strengths and weaknesses are also written down by the immediate supervisors which are needed to be reinforced and overcome respectively. Part IV – Improvements in performance on the basis of training received during the year under review This part contains a small section which tells whether or not the employee has fulfilled all the requirements to be promoted. If he/she has than the immediate supervisor ticks on the YES check box and writes down the position to which he/she would be promoted to. There is also a section in which he needs to mention the reasons pertaining to the promotion. Part V – Any disciplinary proceedings Disciplinary procedure is a step-by-step process followed by the company in the situations where an employee has to be advice, warned, or given notice to. Failure to follow a fair, transparent, and uniform disciplinary procedure may result in legal penalties (damages) and/or annulment of the firm's action. In the form, an employee can be given a disciplinary proceeding because of either low rating, unacceptable performance, not meeting the standards of the job, etc. 19

Part VI – Comments by Reporting Officers This section includes comments made by Initiating Reporting Officer, Senior Reporting Officer, Geographical Head, Departmental Head and lastly Division Head/Managing Director. This final section of the form is designed to allow comments by all members of the reporting line in the interest of maintaining transparency. In all cases reporting line extends up to department head level. In the case of DGM/GM the reporting line is SGM/MD. 2.4.2 Problems while Appraising employee Performance: • Sometimes the company’s performance evaluations may lead to a pessimistic impact on office dynamics. When the employees are trained to work in teams the employee may perceive that an unjust evaluation is given to him/her. Thus negative reports develop resentment among coworkers who her evaluated on lower basis or may develop rivalry towards the immediate supervisors who review their work. • Time consuming: The performance appraisal process is highly time consuming. The company managers and supervisors invest too much of their time in completing the forms and meeting with employees to explain them the results which may take hours, or sometimes days to complete. It is often a waste of time if not completed properly. • Employee de-motivation: when the company is unable to reward their employees according to their performances due to high government influence, practices of favoritism and biasness among employees, this leads to extreme de-motivation among the employees that may affect the employee performances. • Legal issues: o Personal Bias/Favoritism: Many of the company managers allow their impressions of employees or their personal feelings about them to dominate the performance rating process. This at times results into distortion of the appraisal process and also causes frustration and disappointment among those employees who are discriminated against age, race, and sex.

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The company is under high government influence. For instance the company even has to pay to those employees who never bother to come for their job and do not perform their job duties. 2.5 Performance Management Process The process of Performance Management that is used in SSGC consists of 4 steps: 1. Performance plan 2. Midyear review 3. Executive input 4. Annual performance review STEP 1: PERFORMANCE PLAN In this step, first there is preparation and distribution of Performance Plan form, to Department Heads. Then the individuals complete the form, after that the line managers of that particular department after consultation and agreement approved it. Executive/Line manager keep a copy of the form and original forwarded to HR department. This form is split into the following 5 path: • • • • • Ongoing activities Planned objectives Development/HR objectives Competencies & skills Core values

On 1st July each year, it is essential for all executives to make their own performance plan for the year (1st July to 30th June) associated with the business plan of their own departments. The plan contains task listed according to the level of priority which has to be completed in the given span of time. This plan is discussed and must be mutually agreed upon between the employee and his Line Manager. STEP 2: MID YEAR REVIEW 21

In December the Executive and Line manager carry out a review to check if the plan is been fulfilled as per schedule. They prepare and distribute midyear Review forms to Executives, after that the form would be completed by SSGC employees with details of task performed as planned and justify short comings if any. Then this form is submitted to manager for his agreement and approval and forwarded to HR department. STEP 3: EXECUTIVE INPUT This form provides the individuals of SSGC the chance to list the entire task that they perform during the year under review to prove their accomplishment of the Performance Plan and other extra task that they carry out at their own initiative. In case of non fulfillment of any task in the performance plan a detailed justification is provided. Example: lack of resources, lack of coordination among the departments, etc. This step includes the task of Preparation and distribution of input forms to executives. Individuals give details of assignments (routine and special carried out in accordance with the performance plan). If incase the task contained in the plan have not been accomplished, then a rational has to be provided by the executive. This Form is submitted to the line manager who retains a copy for preference (for annual review) and original is dispatched to HR department. STEP 4: STEP IV: ANNUAL PERFORMANCE REVIEW Preparation and distribution of performance review forms and the completion of form is done by line manager. Annual review is discussed by line manager with Department head on the basis of input form. Also, discussion is held between line managers/department head and Division Head to ensure bell curve conformity. Discussion between line manager and individual on performance rating would also be done. Conflict resolution is also held in this section in case where individual does not agree with rating carrying less than 50 points. 2.6 Compensation System at SSGC 22

The company’s compensation system comprises of: • • Performance based rewarding Extrinsic rewards.

2.6.1 Performance Based rewarding The company management monitors and identifies the sound performers and rewards them in the similar manner according to their performance in their respective departments. Such performers are individually identified in the department inorder perform well. The company uses performance based compensation system in which it provides monetary rewards to its employees such as salary increments, bonuses, etc. 2.6.2 Extrinsic rewards The SSGC extrinsic rewarding system includes: • • • • Pay roll increments Bonuses Provident fund Bonds

The above compensation system is valid for officers and subordinates only.

2.6.3 Rewarding for labor class At SSGC the labor class is rewarded through: • • Over time payment Commissions

At SSGC generally the blue collars are being compensated by union based system or Collective Barraging Agent. 23

After analyzing the company compensation system, it is identified that one more system is existing in the organization is the union which is running and contributing in many affairs of at SSGC. Many employees gain the compensation remunerations through the company’s Union influence. The person who had a close type of relationship with the union can easily avail the opportunity of the compensation. This resulted in a big issue as those employees who performed well got de-motivated when they found that the medium or low performers were given the same benefits, incentives & rewards given to them.

2.7 CONCLUSION
Through the study of the Performance Management System of SSGC, we can conclude that an organization can be successful in running all its operations and activities according to their strategic goals and objective when its employees work effectively. So, it is essential for the management of the company to appraise the performance of employees and evaluate them properly in order to achieve their target and long term goals. Performance appraisal is a tool that should be done in a proper manner otherwise the company could suffer from problems like biasness/ favoritism, halo effect that would lead to the demotivation of employees and can negatively affect the morale and performance of employees who are the main human resource for every organization.

2.8 Recommendations
Semi Government Organization issues:

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1. Since company is a semi-government organization, the problem of mismanagement is present at the moment. There must be serious accountability from both ends (the top and the bottom management) to make sure that the company resources are not exploited. 2. Because the governmental officials keep on changing from time to time, the lack in concentration and work/assignment importance is hindered. As the newly appointed top executive abolishes the previous assignments and reassigns new tasks creates disinterest amongst the staff. Hence it is recommended that the company policy must be changed and a clause must be included which should state a minimum time period till which the top executive must work. And he/she should complete the current projects and assignments due in his/her period. 3. The company must introduce the 360 degree performance appraisal method. This may help the company to provide each employee the opportunity to receive performance feedback from his or her supervisor and four to eight peers, reporting staff members, coworkers and customers. 4. The company must reward their employees according to their performances by avoiding practices of favoritism, halo effects and biasness among employees, in order to avoid extreme de-motivation among the employees that may affect the employee performances.

Annexure
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