Project Report on Performance Managment

Submitted to Prof.Snigdha Patnaik

Performance Appraisal System in TCS

Submitted By: Auronil Dutta Roll No. 8, PGDM (3 Year) (2007-2010) XAVIER INSTITUTE OF MANAGEMENT, BHUBANESWAR

with its interests in Energy. With this sensitive breed of IT professionals. is the solution. they are one of the world's leading Information Technology companies. So whether it is recruitment or even career development. when the IT services industry didn’t exist as it does today. Figure 1 illustrates the role of HR. Engineering & Materials. the role of HR assumes unthinkable proportions and is subject to mammoth challenges. which allows flexibility and empowerment. There is but one answer . how has TCS grown to and sustained at the number one position is a question which market watchers have asked themselves a thousand times. Telecommunications. Chemicals.passion for excellence in the workforce practices. services.the TATA Group . To manage all the functions for over 14000 employees is a Herculean task but the smoothness of operations is intriguing. & a comprehensive range of services across diverse industries. with a presence in 34 countries across 6 continents. Now. which evidently is that of a facilitator. Financial Services. The TCS-HR group operates with technical experts to create a synergy which is enviable. As we move into an era of e-business where IT professionals will interview employers so stringently that 40 percent employers will miss recruitment goals (source: Gartner Group). They commenced operations in 1968.which. and business process outsourcing organization that envisioned and pioneered the adoption of the flexible global business practices that today enable companies to operate more efficiently and produce more value. They are part of one of Asia's largest conglomerates .Tata Consultancy Services Limited (TCS) is the world-leading information technology consulting. HR is the catalyst which initiates and institutionalizes processes. Seven of the Fortune Top 10 companies are among our valued customers. The HR structure. provides us with a grounded understanding of specific business challenges facing global companies. . TCS has developed an unbreakable bond with sound HR practices in an environment that defies traditional roles and responsibilities.

global human resources.“A poor performer is not always a poor performer for life. the supervisor changes every time a project changes. The Rs 9. executive vice president. And the bulk of its employees work across TCS offices in 34 countries and on-site in more than 50 countries. Close to 90 per cent of the company’s income flows in from outside India. for that.000 employees on its rolls.749-crore InfoTech major has 45. Given that no two projects — or. matter. performance management and performance appraisal must be a nightmare. no two bosses — are alike. For most of them.” says S Padmanabhan. Tata Consultancy Services (TCS). Or is it? Performance Appraisal Criteria at TCS .

To assess the training and development needs of employees. To let the employees know where they stand insofar as their performance is concerned and to assist them with constructive criticism and guidance for the purpose of their development. and improves understanding of personal goals and concerns. and used for seven purposes. Broadly. Finally. 7. and documentation purposes Table below outlines these and specific uses more clearly:- Multiple Purposes of Performance Assessment .OBJECTIVES Data relating to performance assessment of employees arc recorded. The main purposes of employee assessment are: 1. This can also have the effect of increasing the trust between the rater and the ratee. training. To decide upon a pay raise where (as in the unorganized sector) regular pay scales have not been fixed. 2. Performance appraisal provides a format for dialogue between the superior and the subordinate. To effect promotions based on competence and performance. performance appraisal serves four objectives(i) (ii) (iii) (iv) developmental uses. performance appraisal can be used to determine whether HR programmes such a selection. and transfers have been effective or not. To improve communication. administrative uses/decisions. 4. To confirm the services of probationary employees upon their completing the probationary period satisfactorily. 3. organizational maintenance/objectives. 5. 6. stored.

the evaluation system helps identify employees with potential. What needs emphasis is that performance evaluation contributes to TCS’s competitive strength.General Applications Specific Purpose Identification of individual needs Performance feedback Determining transfers and job assignments Identification of individual strengths ad development needs Salary Promotion Retention or termination Recognition of individual performance Lay-offs Identification of poor performers HR planning Determining organization training needs Evaluation of organizational goal achievement Information for goal identification Evaluation of HR systems Reinforcement of organizational development needs Criteria for validation research Documentation for HR decisions Helping to meet legal requirements Developmental Uses Administrative Uses/Decisions Organizational Maintenance/ Objectives Documentation PERFORMANCE APPRAISAL ADVANTAGE IN TCS AND COMPETITIVE The objectives of performance appraisal. Besides encouraging high levels of performance. Specifically. performance appraisal has helped the TCS gain competitive edge in the following ways : . reward performance equitably and determine employee's need for training. point out the purpose which such an exercise seeks to meet.

employees are rated on a scale of one to five (five = “superstar”). If employees get a low rating (less than two) in two consecutive . At the end of a project. Appraisals are based on Balanced Scorecard. Based on their individual achievements. the learning and growth are self-explanatory. which tracks the achievement of employees on the basis of targets at four levels —     financial customer internal learning and growth The financial perspective quantifies the employee’s contribution in terms of revenue growth. At the end of the year 2. The weightage given to each attribute is based on the function the employee performs. improved asset utilization and so on.Strategy and Behavior Improving Performance Making correct decisions Competitive Advantage Values and Behavior Minimizing dissatisfaction and turnover Ensuring Legal Compliance TCS conducts two appraisals: 1. the internal perspective refers to the employee’s contribution in creating and sustaining value. cost reduction. The customer perspective looks at the differentiating value proposition offered by the employee.

not the least. “If the poor performer continues getting low scores then the exit option may be considered” Over the years TCS has found the pattern that leads to the maximum decline in performance — boredom. TCS's performance appraisal system is supported by an online system called the Human Resource Management System. TCS however widely encourages informal feedback discussions between Project Leaders and Team Members and this concept has found an overwhelming appeal among the people.an Oracle Developer 2000 based tool. What deserve special mention is the active participation of the senior management in the determination of guidelines for the performance appraisal process. typically either their performance dips or they leave the organization. The system individual right from his biographical details to his projects performance. If employees work for more than two years on the same project. 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 HR but is a consensus of a cross functional team with representation from all levels. outstanding development opportunities. To avoid that. TCS shuffles its employees between projects every 18 months or so. An employee's performance history at the click of a button and this accurately maintained for 14000 employees! Right from his entry. Recognition at TCS Guaranteed high motivation levels at TCS through competitive compensation packages.appraisals. TCS's performance management system has metamorphosed into one that emphasizes objectivity and a system that mandates performance evaluation against pre-determined criteria. an innovative recognition mechanism . an employee in TCS get formal performance feedback once very two months till such time that he is confirmed after which the performance feedback is provided twice every year on a formal basis. “Performance drops if motivation drops” At the heart of an employee's satisfaction lies the fact that his performance is being appreciated and recognized. stimulating job content. the warning flags go up. and.

. Best auditor award — to acknowledge participation in critical support roles Spot awards — to ensure real-time recognition of employees. Updated lists for campus recruitments. Application processing. Defining and maintaining employee classification and hierarchy.              Project milestone parties — to encourage efficient execution of projects. Best project award — to promote a spirit of internal competition across work groups and to foster teamwork. Written tests and group discussions. Human Resource Management System The functions of HRMS can be broadly stated as: Organisational set up and configuration Defining organisational structure and hierarchy. Recruitment Advertisements in various forms. On-the-spot recognition — to guarantee immediate recognition of good performance. Performance-based annual increments — to recognize high performers Early confirmations for new employees — to reward high-performing new employees Long-service awards — to build organisational loyalty EVA-based increments — to ensure performance-based salaries. Recognition of star performers / high fliers — to recognize outstanding talent. Employee details maintenance Maintaining service records of employees. Best PIP award — to encourage innovation and continuous improvement. Nomination to covet training programmes — to encourage self-development.The various ways in which TCS recognizes its people are listed below. Updating organisational structure and hierarchy. Set up access and approval levels. Recommendations for new technology assignments / key positions — to ensure career progression and development of employees' full potential.

Allowances and claims processing. Maintaining details of ratings from appraisal officers.Employee benefits details maintenance Tracking changes in salary scales and allowances. Maintaining training requests and requirement details. Maintaining post-training work reallocations. Generating interface reports. Tracking overtime. Tracking late arrivals. Allocations. Verifying. Performance-appraisal management Maintaining details of timely performance-appraisal reports. Maintaining post-training details. Tracking internal training programmes. Attendance management Tracking attendance registers. registering and updating professional memberships. Maintaining details of training institutions. Generating details of reminders for performance-appraisal reports. Producing appropriate reports. Training details maintenance Tracking budgetary allocations. Generating transfer details. Capturing interface data. transfers and deputation management Allocations. . Maintaining deputation details. Issuing loans and advances. transfers and deputation management. Maintaining shift rosters.

Maintaining succession details. For the first time. Leave-details management Crediting leave to employee accounts.Dr. Maintaining details of leave availed and required approvals. Maintaining details of leave encashment.the-P-CMM. P-CMM ( PEOPLE CAPABILITY MATURITY MODEL ) The concept that is very close to the heart of the HR group and one that has seen mass appeal is the PEOPLE CAPABILITY MATURITY MODEL or the P-CMM. all of the HR processes will be subjected to an audit and that in itself is an achievement to be proud of because we hear so few a company having its HR . And it is no mean feat that the two groups have generated such synergy that for a long time every one will be speaking one language .Promotion-details management Generating lists of eligible candidates. The HR group along with the Software Engineering Process Group has dedicatedly worked towards achieving a high maturity level for the people processes. Manpower planning Maintaining transfer details. Grading eligible candidates. Separation-details management Updating details of terminal benefits. Generating reports of these details. Validating details of residual leave. Maintaining details of promotions. Bill Curtis. Generating MIS reports. TCS has been the first company in India to be visited by the author of P-CMM . Generating current human resources details. Registering details of employee benefits.

TCS plans to have an organization wide assessment this year. the HR group is at the forefront. For the first time. facilitating the implementation of P-CMM ( being done for the first time in Asia) or designing a Balanced Score Card for the team.processes audited. Developing the HR capabilities has been an imperative. So HR now in the books of "QUALITY". . TCS plans to have an organization wide assessment this year. Designing training modules for Senior Project Leaders on performances management. rubbing shoulders with the technology experts. So HR now in the books of "QUALITY". The HR team in TCS is transcending from its traditional "maintenance" role to a new developmental role. Equipped with the training programmes at TMTC (The TATA Management Training Centre). all of the HR processes will be subjected to an audit and that in itself is an achievement to be proud of because we hear so few a company having its HR processes audited. the HR team is a formidable one and at the cutting edge of HR technology. the extensive Labs at ISABS and ISISD the constant exposure at conferences.

The People Capability Maturity Model consists of five maturity levels that establish successive foundations for continuously improving individual competencies. and shaping the workforce the organization needs to accomplish its future business plans. Each maturity level is a welldefined evolutionary plateau that institutionalizes new capabilities for developing the organization's workforce. developing effective teams. By following the maturity framework. an organization can avoid introducing workforce practices that its employees are unprepared to implement effectively. . motivating improved performance.

The five stages of the People CMM framework are: P-CMM . and Emotionally detached workforce).Initial Level (Typical characteristics: Inconsistency in performing practices. The organization uses the results of the quantitative management activities established at Maturity Level 4 to guide improvements at Maturity Level 5. By the end of the financial year. TCS had asked around 500 people to leave the company after the second annual appraisal it carries out. and to workforce practices and activities. Poor communication. Maturity Level 5 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 During the first quarter of the financial year 2005-06. unclear performance objectives or feedback.Predictable Level (The organization manages and exploits the capability created by its framework of workforce competencies. this number could went up to 600.Managed Level (Typical characteristics: Work overload. The organization is now able to manage its capability and performance quantitatively. The organization is able to predict its capability for performing work because it can quantify the capability of its workforce and of the competency-based processes they use in performing their assignments) P-CMM .Optimizing Level (The entire organization is focused on continual improvement. about 1000 employees whose performance was not up to the mark were asked to leave Tata Consultancy Services (TCS). TCS came in the news for cutting down the variable pay of employees for . The employees who were asked to leave are mostly those with 2-3 years of experience and do not include trainees because they have less than a year’s experience. Lack of relevant knowledge.Defined Level (Although there are performing basic workforce practices. Displacement of responsibility. at the company. The first two year cycle of EVA had just been completed when the retrenchment decision was taken.HR experts believed that this decision was based on the implementation of the EVA(Economic Value Added) based model for assessing employees' contributions. Ritualistic practices. to the performance of competency-based processes. the largest IT company in India. citing performance-related issues. or skill. Environmental distractions. Low morale) P-CMM . The organization misses opportunities to standardize workforce practices because the common knowledge and skills needed for conducting its business activities have not been identified) P-CMM . there is inconsistency in how these practices are performed across units and little synergy across the organization. These improvements are made to the capability of individuals and workgroups. P-CMM .

Ramadorai (Ramadorai). Through our strategic initiatives we have managed to double our revenues in the last two years. This manner of forced attrition was only linked to the appraisal process.51 billion. In the EVA model. The EVA compensation model was used as a basis for giving incentives to employees and the bonus declared was a part of improved EVA achieved. It continued its success story when it became the first Indian IT company to earn revenues of more than US$2 billion per annum.slippages in internal growth targets — a move that will save it about Rs 83 crore. the process aimed at employees to also have get a feeling of ownership for their own unit.It seemed to be a routine exercise carried out bi-annually to weed out non-performers. At a time when IT manpower was in short supply and IT and BPO companies were going out of their way to reduce employee attrition. despite being under mentorship. It was not linked to any other factor. the company puts the employee on a performance improvement plan that includes additional training and assignments on new projects. the components of fixed and variable pay were determined. On April 19. At the end of the second appraisal if the employee’s ratings do not improve to a grade better than 2. The company declared total revenues of US$ 2. Fixed pay comprised of wages and pension while the variable pay had components like bonus. 2005. profit sharing and stock options. This move however was unlikely to be linked any slowdown worries. TCS's decision to retrench employees made headlines in several Indian news dailies. They had to think like entrepreneurs and know the cost attached to their business and how will they add value to the investment. Through the EVA model. TCS announced its annual results for the fiscal 2004-05. We are alive to the challenges facing the industry and are geared to enhance our leadership position. TCS aimed at creating economic value by concentrating on long term continuous improvement. working at several locations across the world. It can be equal to the fixed portion of the salary.08. CEO & Managing Director of TCS commented. The grades are on a scale from 1 to 5. . providing the cell has shown that kind of EVA growth. Each employee was made to feel as if they are running their business. TCS adopted EVA in 1999. S.5% of the company’s employee strength of 1. "Consistent with our position as the pioneer of the Indian IT industry.Those who were asked to leave had obtained low ratings in their performance appraisal for two consecutive years. the employee is asked to resign. In this process if an employee gets a grade of 2 or below during the first appraisal cycle. According to him "There's no ceiling on the bonus."4 TCS aimed at earning revenues of US$ 5 billion by 2010. TCS arranges for placement agencies to help the employees get placed in other organizations though. and its performance. with 1 being the lowest and 5 being the highest. The number of employees impacted during this year till date is 500 which constitutes about 0. when the company had a staff of around 15000. TCS had been the first Indian IT company to achieve the US$ 1 billion revenue milestone in the fiscal 2002-03. It is not just compensation.000. TCS is proud to be the first IT Company to cross the two billion dollar milestone.24 billion and net profit of US$ 0.

the costs of which were divided among all the units. There was an increased sense of belonging among the employees and the employees were motivated to increase their contribution as they were also equally benefited by the increase in EVA. the second dimension comprising of service practices like e-business. The benefits of EVA were realized across all levels in the organization. In 2003. the company was not a public limited company and hence could not have a stock option plan. outsourcing. EVA was not just a performance metric but an integrated management process aimed at achieving long term goals. One of the major benefits of implementing EVA in TCS was increased transparency in the organization. a practice. Through EVA-linked compensation. transportation and telecom. The reduction in the variable salary resulted in an overall reduction of monthly take-home salary for most of its employees. In 1996. employees could claim stakes at three EVA levels . technology consulting. Every unit was considered to be a revenue center and had its own EVA target.The TCS move to cut the salary of . and an individual could contribute in any or all of these areas at all the three levels. capital and costs. The bonus banks also helped in sustaining performance from the individuals. TCS went in for the EVA as during that time. at the business unit and the individual level. 2003. EVA was adopted to focus on continuous improvement rather than short term goals and also to motivate employees. The units that did not fall under the purview of any of these were corporate offices and research & development. with close relationship between pay and performance. while global and regional operating areas formed the third dimension. EVA was controlled by revenues. The decision making process became more decentralized The EVA-based compensation system received severe criticism during the initial years of its implementation. The internal communication within a unit had increased considerably. which included engineering. Industry analysts commented that EVA concentrated mainly on return on investments. A business unit could be a part of a service. who needed to be recognized. It was designed to construct a defined incentive system. The individual was informed how he or she could contribute to the EVA enhancement at all three levels.at the organization level. As there was no wealth sharing mechanism in place. which would reward on the basis of profitability. TCS was organized into a three dimensional model with the first dimension comprising of industry practices. TCS caused an uproar in the IT industry when it reduced the variable salaries of employees by 10%. a geographical unit or a combination of all the three. due to which the growth of TCS could be restricted. Employees became aware of their responsibilities and their share in increasing the EVA of the unit and organization. There were several people who played an important role in the success of the organization. This was the initial impact of EVA which was implemented in the company from April 01.EVA measured operating and financial performance of the organization through BSC and the compensation of all employees was linked to it. All the units could determine how they had fared against the targets.

appropriate adjustment in Variable Pay will be made either upwards or downwards as the case may be. There is an element of fear among the entire software community as to if the IT companies would take a cue from the TCS initiative and make such salary pruning a regular practice to show profits in future. And this has resulted in blog and email campaigns mustering support against the move. Though the tactics employed by the management of Tata Consultancy Services (TCS) is perfectly legal. When the audited results for Q4 are announced in April 2008. There was a universal support building up among IT staff in the form of a web campaign condemning the move.the employees on falling short of its projected revenues for the quarter has taken the IT fraternity by surprise. the woes of TCS staff did not seem to end only with this quarter. For. Frenzied blogs were busy gathering support against the announcement. we will follow the same basis of advance payment of Variable Pay as per expected EVA projections at the beginning of 2007-08. the sudden manner in which the decision had been implemented had caused a furore. These people were likely to have their paycheques lesser by Rs 10.” . Whatever be it. there is an ominous reference in the letter saying. The most affected parties of the “salary adjustment” were reportedly the confirmed employees of TCS located in the US and India. There is fear that soon other top companies such as Infosys and Wipro too may adopt the practice owing to the appreciating rupee value against dollar. “In Q4.000 during February and March 2008.

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