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What is Performance Management?

Definition Performance Management is a process of creating a work environment or setting in which people are enabled to perform to the best of their abilities. It is a scientific process which starts from job definition till Exit. It is operationalized through a host of HR processes including Job Design, Rewards, Compensation and Benefits, Culture, and Leadership Development. It lays the Architecture for developing people and Organizations. Many writers, consultants and users use the term performance management interchangeably with performance appraisal. That is NOT so. Appraisal is an activity, a sub set of Performance Management. Difference between Performance Appraisal and Performance Management: Performance Appraisal Happens at the end of the performance cycle Input comes from actual performance Forms input for Compensation, Promotion, Individual Development Performance Management Happens throughout the year Input comes from Organizational Performance Strategy Forms input for Mentoring, MIS, Compensation, Promotion, Individual Development and organizations growth plans Key Result Areas are defined for Job Midterm review is mandatory

Key Result Areas are defined for person Midterm review is discretionary

Deciding on a Performance Management System (PMS) Major decisions which need to be taken when an organization is exploring Performance Management: Why: Some of the typical reasons / objectives from a PMS are: Fair basis of rewarding performance and identifying non performers; Bring objectivity in appraising performance; Develop talent to enhance performance capability; Establish a Scientific system to identify and leverage potential; Employee motivation is to be leveraged for companywide strategic project/s; Enhance team work; Have an integrated approach to HR i.e. Compensation, Motivation, Development. When- The tough call to take is WHEN to implement. In the initial stages, involvement of the top management team is critical. When top leaders put their weight behind the initiative starts a chain of

healthy discussion and conviction. Their presence at the meetings, goal setting and reviews ensures the process gets institutionalized. Unanimity at the top is critical, rest can be obtained. Design can start any time. Rolling out, ideally should coincide with the beginning of the financial year. Coverage -Who is going to be covered by it, depends on the objective. If it is for employee development, bringing objectivity in appraisal or integrating HR, then it has to start by covering all Jobs and permanent employees. If the purpose is to devise performance linked pay or give critical mass to strategic projects, then perhaps it might be prudent to restrict the coverage to certain key levels in the hierarchy. This will test the validity of the system before going companywide and also create benchmarks which can be used to convince the rest of the organization on its benefits. Features- The Policy must contain definitions and examples of the following: The Hierarchy of Goals with weightage apportioned to each category ie. whether Company, Department, Individual The Structure of Goals whether arising from Role Based /specific to Job or Person Some key Business / Department Key Result Areas Process of Measurement and Criteria Target / Scales Basis and How to Review System / Frequency and consequences of non compliance. Team Performance Management is a business critical functional area of HR, requiring 24/7 commitment of resources. Therefore it is a advised that a separate team having the skills set of business understanding, ability to analyse performance, communicate, convince and coach, be allocated for this initiative. It is one of the key management processes, of motivating people towards delivering on the expectations of its stakeholders. Its interactive and dynamic, giving real time performance information. Unless this information is not acted upon in time, the real gains from the system will get diluted.

Performance Management Process The Process of Managing Performance consists of four clear-cut sub processes. Every organisation has todefine these sub processes to ensure that the process gets institutionalized. These sub processes / steps are: Performance Planning Carried out at the beginning of the year, deciding areas to focus on, aligned to strategy, the target figures, what resources will be required etc. Performance Measurement Continuous measurement of plan vs. actual, gathering objective data, using it to monitor whats happening; Performance Review Summing and assessing progress at specific time periods to see if any mid course corrections are required. Performance Development Continuous coaching and skill enhancement to align with what the role holder requires to deliver, building capability permanently.

However good a Performance Appraisal System may be, if any of the above steps are missed out , it is NOT Performance Management. While improved productivity i.e. more output (results) per unit of input (skills) from people is possible by focussing only on Planning or Measurement, strategic growth may be difficult to attain. Key Success Factors in implementing A Performance Management System However great the design of a Performance Management System, its success is determined by the success in execution i.e.whether It is being rigorously followed by all the jobholders covered by it; It is used to reward performers and decide their career path; It is leading to achievement of organization strategy, and It is owned by each individual.

Philosophy Purpose of PMS is To create an environment* i n w h i c h e a c h i n d i v i d u a l i s g i v e n optimum opportunity to realize his /her full potential To aid every manager promoting the most effective use of human resources. To ensure that...* E a c h m e m b e r m a k e s t h e o p t i m u m c o n t r i b u t i o n t o t h e c o m p a n y s performance and the profitability.*Helps self & team members to get high degree of job satisfaction

PMS OBJECTIVES To provide analysis of how well individual is performing . In his current responsibilities Based on goals set & results achieved An objective analysis. To promote shared understanding of task and relationship between supervisors & sub ordinates.

To aid in determining performance rewards that are commensurate with individual achievements & capabilities. To prepare a development plan for individual to Improve individual performance Prepare him for future responsibility

Key components of PMS

Characteristics of an effective PMS Clearly defined goals Regular feedback Coaching & Mentoring Focus on solving problems Promotes self assessment Balance between Performance & potential Transparency in ratings Focus feedback on behavior or results Manage marginal performers

Pre-requisites of a performance management


Performance management can be regarded as a continuous process managing the performances of people for getting desired results. Performance management is beneficial to all the major stakeholders of an organization by clearly describing what is supposed to be done for attaining certain desired goals. Performance management is the heart of any HR processes in an organization as it influences the rest other HR functions or processes. Focus on performance management may be fruitless without the existence of proper organizational design and management systems. Some of the essential pre requisites without which performance management system will not function effectively in an organization are:

Should attract very high levels of participation from all the members concerned in an organization. It should be a participative process. Top management support and commitment is very essential for building a sound performance culture in an organization. Organizational vision, mission and goals should be clearly defined and understood by all levels so that the efforts are directed towards the realization of the organizational ambitions.

Clear definition of the roles for performing a given job within the organizational framework which emanates from the departmental and the organizational objectives. The system should also be able to explain the linkages of a role with other roles. Open and transparent communication should prevail which will motivate the employees for participating freely and delivering high performance. Communication is an essential pre requisite for a performance management process as it clarifies the expectations and enables the parties in understanding the desired behaviors or expected results. Identification of major performance parameters and definition of key performance indicators. Consistency and fairness in application. A commitment towards recognition of high performance. Rewards and recognitions should be built within the framework of performance management framework. Proper organizational training should be provided to the staff members based on the identification of training needs from periodic evaluation and review of performance. This will motivate the employees for a superior performance.

Performance Management and Strategic Planning


A strategy is a unified, comprehensive and integrated plan that relates the strategic advantage of the firm to the challenges of the environment. it is designed to ensure that the basic objectives of the enterprise are achieved through proper execution. It is difficult to distinguish between policies and strategies, sometimes both are used interchangeably. A strategy is a policy in the respect that it is a broad guide to thinking but a strategy is a particular kind of policy. Strategic planning is a process that involves describing the organizations destination, assessing barriers that stand in the way of that destination, and selecting approaches for moving forward. The main goal of strategic planning is to allocate resources in a way that provides organizations with a competitive advantage. Overall, a strategic plan serves as a blueprint that defines how the organization will allocate its resources in pursuit of its goals. Strategic planning is done at top management level. The main objectives are set, strategies re devised, policies are laid down. Planning takes macro view of the business by giving consideration to economic, political and social environment. Strategic planning sets the direction in which the business will grow. It keeps in view the moves of competitors, market factors, consumer preferences, life cycle of the product, plans for expansion and diversification. Strategic plans should be prepared by keeping in view the strength and weaknesses of the enterprises in mind. Purposes of Strategic Planning:

Strategic Plan : Purposes Helps define the organizations identity Helps organizations prepare for the future Enhances ability to adapt to environmental changes Provides focus and allows for better allocation of resources Produces an organizational culture of cooperation Allows for the consideration of new options and opportunities. Provides employees with information to direct daily activities.

The mere presence of a strategic plan does not guarantee that this information will be use effectively as part of the performance management system. In facts, countless organizations spend thousands of hours creating strategic plans that lead to no tangible actions. Many organizations spend too much time and efforts crafting their mission and vision statements without undertaking any concrete follow up actions. The process then ends up being a huge waste of time and a source of frustration and long lasting cynicism. Thus, to ensure that strategy cascades down the organization and leads to concrete actions, a conscious effort must be made to link the strategic plan with individual performance.

-Link among Organization and Unit Strategic Plans, Job Descriptions, and individual and Team Performance: Organizations Strategic Plan Mission, Vision, Goals, Strategies Unit Strategic Plan Mission, Vision, Goals, Strategies Job Description Tasks, Knowledge, Skills, Abilities Individual and Team Performance, Behaviours, Developmental Plan

Defining Performance Standards


Performance standards provide the employee with specific performance expectations for each major duty. They are the observable behaviors and actions which explain how the job is to be done, plus the results that are expected for satisfactory job performance. The purpose of performance standards is to communicate expectations. Keep in mind that good performance typically involves more than technical expertise. Performance standards are:

Based on the position, not the individual Observable, specific indicators of success Meaningful, reasonable and attainable Used to describe a "fully satisfactory" performance once an employee is trained Expressed in terms of quantity, quality, timeliness, cost, or outcomes

In determining performance standards, consider the following:


What does a good job look like? How many or how much is needed? How long should it take? When are the results needed? How accurate or how good is acceptable? Are there budget considerations? Are there safety considerations? Are there legislative or regulatory requirements that require strict adherence? Are there behaviors that are expected in your department to promote teamwork, leadership, creativity, customer service? What results would be considered satisfactory? What condition will exist when the duty is well performed? What is the difference between good and poor performance?