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Well designed PMS: A key to improved organizational

Performance management systems are essential for efficient management of large scale
organization. The main aspect of PMS is that it integrates all the HR functions like
recruitment, selection, appraisal, training, etc. A well designed PMS helps in proper alignment
of strategic goals with individual goals. The present articles focuses on various issues and
aspects of a well designed Performance management system.

Hitesh Mehta (name changed), 24 is a young Performance going by dictionary can be
MBA graduate from a reputed B-school, defined as achievement of quantified
bright student, merit ranker of the institute objectives. Measuring performance is
and hence was easily placed in a top MNC. essential for any organization as it represents
However within the next year he left the the present state of the company and steps
company. Hitesh describes his experience as required to reach a desired future state.
follows, “the work was well defined Performance management is key area in any
however the appraisal systems were unclear organization as it gives the picture about
and I didn’t know the basis on which I was how well the various department and
judged”. This is the story of many fresh organization as a whole is functioning. It
graduates joining a company and even those gives feedback which helps to take
who are presently working. What may be the corrective actions. The design of a PMS is
reason behind this? Was the performance critical in this context. The aim of a well
management system faulty? What makes a designed PMS is to develop a culture where
well designed performance management individuals and teams take responsibility for
system (PMS)? And what are the effects of a continuous improvement of business process
well designed PMS? The present article tries and their own skills. In this type of system
to focus on these key issues. there is proper alignment of strategic goals
with individual and team goals. A well
Key words: Performance, Performance
designed PMS means the job description,
management system, Design of PMS,
goals of PMS. the competencies required, the appraisal
parameters, the training and development
need are all well defined. It ensures that only
those employees whose competencies match negotiation during performance agreement
to job profile are acquired. The employees process. Once the employees agree there is
know the parameters on which they are evaluation done every week, every month or
judged. In case of Hitesh, we can say that once in three months. This helps employees
the PMS in his organization was not well to know their performance and areas of
designed. The system described the roles improvement. The organization is benefited
clearly however there was a lack of as it knows which areas have to be given
communication and openness. We can say more attention. In case the employees are
that a well designed PMS is one which is not meeting required performance, the
near to ideal characteristics of PMS. A well training and development function ensures
designed PMS must at least contain that they are given required skills to perform
characteristics like specificity, reliability, adequately. Thus training is imparted to
openness, strategic congruence, proper employees. Then a performance
meaningfulness, validity and it should be review is carried out half yearly or yearly
able to identify effective and ineffective which helps to judge how employees have
performance. performed against the Key Performance
Indicators (KPI). Thus a well designed PMS
Key words: Phases of PM, KPI and KRA,
ensures proper utilization of financial
overall effectiveness.
resources. The overall effectiveness
increases as there is less errors in
The four phases of performance
recruitment, training and development and
management is Plan, Act, Monitor and
performance appraisal system. The well
review. In a well designed PMS these phases
designed jobs, roles, responsibilities and
are properly implemented. The well
KPI help employees to obtain correct
designed PMS describes clearly the roles
feedback. It helps in continuous
and responsibilities of a particular job and
improvement of employees and processes. It
competencies required. Thus it helps during
helps to meet the expectation of shareholder
recruitment to get employees which have
and stakeholders. It can help an organization
necessary skills. The employees know what
to become an ‘Employer of choice’ and thus
they are accountable for. There is a clear
reduce employee turnover. The main feature
communication regarding the performance
of a well designed PMS is that it takes into
measure. The employees get chance of
consideration the interest of employers and change in fashion from denim to gabardine
their employees. It helps to achieve and corduroy, the business was severely hit.
operational efficiency and better The company adopted many new policies,
coordination between different functional one of them was Management by objective
units. (MBO). This approach was focused on
producing results desired by management to
Key words: Company in focus Tata Iron achieve organizational objectives and
and Steel Company.
focusing on satisfaction of employees. This
approach helped to generate harmonious
There are examples of companies which
balance between top management and
have benefited by a well designed PMS.
workers. These examples show that a well
Tata Iron and Steel Company (TISCO) a
designed system not only helps to improve
Tata group company launched a new
organizational performance but also helps in
performance management system under its
easy implementation (Som, 2003).
restructuring program which included the
alignment of key result areas (KRAs) with The various aspects and advantages of a
business strategy at all levels. It developed well designed PMS have been mentioned.
clear career path and growth opportunities To conclude I would like to say that a well
for employees. The compensation was designed PMS ensures that an organization
linked to performance and linked to market. is on path to achieve its strategic goals,
This PMS and compensation system was obtain efficiency and effectiveness and keep
clear, transparent, fair and acceptable by employees satisfied. This system affects the
employees. The other example is of Arvind overall HR functions and leads in
Mills. Arvind Mills was the third largest development of a “Best” organization which
producer of denim in 1990’s, however with differentiates itself from the “Rest”.

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