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Wednesday, Oct 27, 2004

Published Articles of
Chandramowly Leadership Competency Series

Evaluating Performance

LEADERSHIP COMPETENCY/ Managing and measuring performance is a complex competency involving many
people and processes. Competency based performance management requires the ability to assign responsibilities for
objectives and decisions, set stretch goals, measure and monitor progress by providing timely support, evaluate
overall performance, provide constructive feedback, coach and develop employees to achieve superior performance,

A MANUFACTURING company identified a list of competencies that are important to achieve their business
objectives. The competencies selected by the company are arranged in the order of “easy to learnt-easy to assess”
moving up to “difficult to learn-difficult to assess” level. These competencies are attached to every position in two
folds of functional competencies and organisational competencies.

Functional competencies reflect on the specific job responsibilities and organisational competencies are those,
which are critical to the company business, irrespective of functions. All the jobs are rolled in to banding system of
five to six levels. In the jobs at the top most bandwidth are senior positions with competencies like “vision and
purpose”, “global awareness”, which are difficult to learn and assess.

The threshold band for executives at entry level starts with competencies like “achievement orientation”, “technical
knowledge”, which are easy to learn and assess. Thus, competencies are identified for each position and the
evaluation methodology is incorporated in the selection process to recruit employees in to those positions.

A newly recruited employee gets feedback on his/her current level of competencies as part of the selection process. A
development objective and performance plan is defined for the new employee who would start on it after his/her
induction period. The new employee is also told about which of the selected competencies are most critical for
achieving his/her job goals, which is part of performance, plan to track and evaluate. This provides an immediate
link between competencies used for selection and competency based Performance Management System.

How is it different?

Performance management eventually is a people process, which is capable of moving strategies/operations towards
success or failure. It is people, who make judgments on strategies. It is they, who translate strategies in to actions to
achieve business results. How good is the process of performance management in organisations? How distinct they
are in enhancing superior performance? The answers become a key to evaluate the PMS and its success. Identifying
competencies for superior performance in present and future jobs adds great value to PMS.

A competency based PMS can make employees to perform above the acceptable level by bringing in a stretch
mentality” displaying behaviours to enhance performance.

It helps managers to coach employees to achieve performance improvement, rising up from current competency
level to desired level. Current competency level of employees can be assessed using a multi-source feedback and
“desired” competency levels can be identified which an employee wants to develop for performance improvement
and to reach career advancement goals.

Competency based PMS approach clearly differentiates conventional PMS. The new approach focuses on the
“behaviours” that demonstrate superior performance and the later on organisation results. Competency based
structure also ensures documented managerial accountability for people development, making PMS an effective
business driver.

Results versus skills

The traditional PMS with its focal point on quantitative bottom line (“what” performance, “which” goals),
productivity/quality and compensation revision/rewards has changed now, to appraisal of “competencies”, the
“how” of performance of results focused on “behavioural change orientation” which is more qualitative with long-
term time frame. Competency based PMS is a total performance management, which is based on specific
“behaviours” employees displayed in achieving superior performance.

The shift from “pay for results” to “pay for competencies” can be evidently seen practiced in IT industry, where
higher compensation and rewards are ensured to employees, based on the value of their technical competencies at
the level of engineers and behavioural competencies at the level of project managers.

Success and stability of a performance management system depends on its four corner stones; (1) Performance
Planning, (2) Coaching/Managing, (3) Appraising Performance/competency feedback and (4) using the PMS
information for other HR actions.

Performance planning

In performance planning stage, an organisation defines its business strategies based on which the short term and
long-term objectives are set. From these objectives, the organisation’s business units, offices, functional departments
develop their key result areas. Using these KRAs, individual employee goals for a financial year is jointly drawn,
clearly specifying what has to be achieved and how, what value system and principles are used, achieved in what
time frame and how the performance is measured.

Coaching and managing

In the coaching stage, managers offer feedback, provide support, and reinforce the required competency
development during the performance period. In this stage, the set goals are some times fine-tuned to fully align with
business strategies, which have been changed by external factors.

Defining a job, its functional and behavioural competencies, setting responsibilities and work expectations are the
prerequisites of this stage. Managing this stage takes in observation and documentation of performance, providing
timely coaching and feedback, reflecting developmental experiences and reinforcing effective behaviours for
performance improvement and goal achievement.
Appraising performance

In the third stage, which comes at the end of performance period, performance evaluation is made in three
dimensions. Unfortunately, for many managers and organisations, this stage itself becomes the performance
management system focusing on 2-3 pages of a form.

The first fold of appraisal is overall evaluation of performance achieved (results versus job expectation). In the
second, specific competencies that are displayed (in achieving superior performance) are assessed besides looking at
areas of performance improvement and developing new competencies (behaviours that are required to be improved
and the new behaviours needed for performance effectiveness).

Finally, the action points for competency development to improve performance are mutually discussed and
documented. Thus, the PMS is built with the support of performance planning, Coaching/Managing, appraisal as a
continuous homogeneous process.

The fourth corner stone is about what we do with the out come of appraisal.

Using PMS outcome

Performance management inputs are used for various HR decisions. There are judgmental actions like deciding
compensation revision, merit pay or performance bonus.

Employees are pre-identified to replace candidates in higher jobs by matching current competencies with the new
job competencies in a process of “Succession Planning”. Some organisations look at performance appraisal inputs,
to judge individual behavioural fitness to organisation culture and may exercise certain disciplinary measures.

Career-path is another area, which uses performance inputs. An employee is provided with specific career path to
move up on the ladder where he/she will know before hand, which new competencies are to be developed and
displayed to move up. Job-person match and developmental assignments can help this process to develop future job
competency requirements.

Finally in the development plan, the essence of performance appraisal system; activities, assignments, training,
monitoring and relevant discussion are recorded with details of who should do what and when.

Performance management surveys indicate more failing cases of PMS with the employee satisfaction rate on the
system dropping below 8 per cent.

Appraisal forms are seen as painful paperwork and over 70 per cent of managers do not provide clear direction to
employees and do not follow up on career development. With the lack of direction and strategy implementation,
development activities take a back seat as top victim of cost cutting is mostly training budget. Adding on to this,
tolerance to poor performers is one of the causes for the failure of PMS.

The author is an HRD and Leadership Competency Consultant.