ATTOCK REFINERY LIMITED: PERFORMANCE MANAGEMENT

CASE STUDY NO: 01

Submitted By
Salma Aziz (20884)
Suman Baloch (20104)
Nawal Sohail longi (32771)

Submitted To
Mr. Ahsan Ullah Durani
Wednesday (6:30-9:30pm)

Karachi, Pakistan

APRIL, 2017
1. Was the real problem the modified PMS or the employees attitudes about it?

The real problem lies with the modified PMS as it failed to link the employee
development with the appraisal. Using the information from the employee’s self-
appraisal form and observations, it should determine the developmental opportunities that
will assist the employee not only in achieving short-term goals, but long-term career
goals as well. The modified PMS failed to provide the Individual Development Plans.
The line manager’s recommendations were ignored, which if taken into account, would
have played a vital role in an assessment of the training needs of the employees. The
Individual Development Plan is an organized approach to professional development
activities and programs that are designed to improve the employee’s professional skills
and the department’s productivity. This is a joint process, both in design and execution,
in that supervisors are more familiar with the department’s future directions and the
employee is more aware of specific, individual needs and aspirations. ARL failed to link
the training and its relationship with the appraisal process Training and performance
appraisal have the same objective, to improve performance, which means both behavior
and results. The organization failed to relate the two plus there were fever training
opportunities for the employees. Performance appraisal programs identify strengths and
weaknesses in an employee’s performance. These weaknesses can be translated into
training needs, which are a basic ingredient of practical training programs but at ARL
there was an apprehension of the PAC that after getting the training employees might
leave the organization.
The organization could not define the competencies on the basis of which their
performance was being evaluated, their human resource professionals and supervisors did
not clearly specify the definition of the competencies or traits that served as the standards
against which the employee’s performance was being judged. The employees therefore
were unaware of the criteria and the required behaviors and competencies they were
expected to have for effective job performance and the line managers were having
difficulties in differencing them on the scale of 1 to 5.
Meaningful increments were not given to the superior performers due to which the
employees could not see the difference between the top performers and poor performers
which resulted in decrease in the performance level.
Another problem with PMS was that it consisted of bias errors. PAC members were not
changed and members of committee were the same for every year. Committee members
were seemed to be biased by “First impression effect”. In this way employees actual
performance was ignored and the members seemed to hold an initial favorable or
unfavorable judgments.
Committee members were also seemed to be biased by “Leniency and strictness”. Most
of their rating was based on Management philosophies. Managers appraised the
employees performance more highly than they really rate compared with the objective
criteria or they rate their performance lower than it would actually be if compared against
the criteria.
There was no effective communication between the supervisors and the employees
therefore goals were not clearly defined. Employees were ambiguous about what actually
constitute the SMART goals and what they are required to do in order to accomplish
those goals.

Performance management is the area that generally businesses change to improve the
most in order to increase productivity and become more competitive in their market, it’s
expected that both large organizations and small businesses will embrace new
performance management processes with dynamic change in the world.
The goal of any PMS throughout is to support employees in developing their skills and
becoming more proficient in their work, with respect to change is hard to accept.
The problem rested with the new PMS system mostly.

 MBO or Target based appraisal focus on removing subjectivity from the measurement
process which can become demotivating and leave negative effect.
 Also the issue with basing performance management on competencies, is that
employees need to understand how their job contributes to the success of the
organization, how it “fits”. Competencies do not allow easily for that, while a more
traditional approach with clear objectives gives more of an opportunity to understand
this line of sight.
 The employees could not figure out the competencies on the basis of which their
performance was being evaluated, supervisors did not clearly specify the definition of
the competencies or traits that served as the standards against which the employee’s
performance was being judged. The employees therefore were unaware of the criteria
and the required behaviors and competencies they were expected to have for effective
performance.
 ARL shifted their focus from fixed increment to pay for performance culture with primary
focus of delivery of objectives being reached. Rather than performance management focus on
growth and development with competency approach.
 Halo effect could be adhered with appraisal as the appraisal committee did not change over
time. And as previously mentioned and proved many promotions and appraisals were based
of relation with the superiors.
 Another problem was the levels and types training, as well as their relation to the appraisal
process was not defined.
 Shift to performance driven culture means employees engage and deliver to the fullest of
their abilities, teams adding value, the output is larger than the sum of the individual
components, and all working together in the same direction.  Which direction it is, does not
impact the fact that the organization needs to have this culture of performance. What it does
impact may be how this culture looks, or what the intended outcomes are.
 Employees complained of vague recommendations in development need area in appraisal
form which didn’t clearly identified areas needed improvement and thus few training
programs. Also repetition of training programs with wastage of resources.

2. Were the employees perceptions just a routine and normal reaction or did they
allude to deeper issues that could eventually confront the organization?
The employees concerns in this regards seem to be meaningful. These concerns should
definitely be addressed. Failing in resolving those concerns could hamper the
organization’s productivity. Poorly-implemented and designed performance management
will cost the company.
ARL could confront some serious problems if they fail to address the issues regarding
their modified performance management system. Some of them are:

 Employees Could Quit Based on Unfair Results

If an employee performs well and then feels that he/she was assessed unfairly,
there’s little motivation left for him/her to stay with the company. Even if an
employee doesn’t quit the company, he/she may become withdrawn and
disengaged.
 Employees may Lose Self-Esteem.

Employees who feel that they were evaluated unfairly will likely lose self- esteem,
which can create resentment towards management and the organization as a whole.

 Resources including Time and Money are Wasted

Preparing for an annual review takes up a great deal of time. It is found that the
average manager spends 210 hours on performance review activities.
 Employees become Demotivated

When employees feel unappreciated or unrecognized, their motivation drops, which

ultimately leads to lower performance rates.

 Job Satisfaction Drops and Employees become Burnt Out

If the performance management system is unfair and invalid, employees are more
likely to become dissatisfied and burnt out in their roles.

 Legal Risks Increase

Giving negative appraisals with no data or proof to back up claims of poor

performance is extremely risky. Employees who feel that they haven’t been
evaluated fairly could take legal action against your company.

 Failure to Set Standards Makes the Process Unfair

If there are no standards for performance in employees’ roles, they won’t know
what’s expected of them, and therefore simply won’t know what justifies excellent
vs. poor performance.

 Biases become more Prevalent

Without data and metrics to rely on to gauge performance, managers are more
likely to give biased reviews.
 In addition to, few more major factors are:

 High turnover can be a very common result if the system if not confronted timely. Employees
may find the appraisal assessment unfair and not matching to their expectation or
performance. Employees retention may also suffer.
 Pay for performance requires obedience with goals. Implicitly, it communicates context that
the goal must be achieved. Following the orders is a powerful force and can make one
blinded to other considerations such as ethics and legality etc.
 Trainings were not properly related to appraisal and the form didn’t assess the right training
required. This may lead to wastage of resources and demotivation in employees. Lack of
proper training may suffer the process.
 Given the limitations of metrics, the ability of the supervisor to communicate to each
employee the value of his contribution, and what superior performance worthy of merit pay
entails, is an ongoing challenge. Some supervisors communicate better than others and
communication about what entails superior performance is easier in some jobs than in others.

3. What are ARL’s option for solving these problems?

Following are the few options for solving these problem:
 Inclusion of Individual development plan:

ARL should compose Individual development plan based on the Performance management
system. The Individual Development Plan (IDP) is an organized approach to professional
development activities and programs that are designed to improve the employee’s
professional skills and the department’s productivity.

1. Prepare the Individual Development Plan at the conclusion of the employee’s evaluation
period.
2. Involve the employee in the design of the IDP. You may want to do this early in the
process, when you have only identified major areas where development should take place
and let the employee propose the more specific ways to accomplish this. Or, you may
prefer to have the employee design the plan and then jointly review and refine the content.
3. Consider each area of the employee’s performance from the following perspectives and
determine which should be developed in the upcoming evaluation period:
  Strengths that, if enhanced, will contribute to the overall mission of the
organization and increase productivity.
 New skills that will be needed in the upcoming evaluation period.
 Areas of performance/skills that need to be improved.

4. Determine the appropriate learning methods and resources that will be needed.

5. Once the learning methods and resources have been selected, define the measures or
criteria that will be used to determine if the targeted learning has been accomplished.

6. The supervisor and the employee sign the IDP to document mutual agreement with it and
commitment to completing it. Clarify responsibilities with the employee.

7. Set up a reporting system so that the employee’s progress can be gauged at any time and
adjustments can be made to the plan as needed.

 Defining the competencies:

At ARL the managers were unaware of the definition of the competencies on the basis
of which the employees were rated. In their PMS different weighs were assigned for
employees at different levels for example “Job knowledge” was more important for
lower level officers and “Leadership” was given more weight for top level employees.
Unfortunately the appraiser used to assume different meaning of the competencies.
The line mangers were having difficulties to differentiate the employees on the scale
of 1 to 5. It is recommended that Human resource professionals and supervisors should
avoid this problem by working together in advance to clearly specify the definition of
traits. The company can also employ behaviorally anchored rating scale. Appraisers
can list those behaviors that they think are most representative of the job the employee
must perform. BARS is based on actual observable job behaviors.
 Train the appraisers to use the rating instrument properly:
Raters need to know how to apply performance appraisal standards when they make
judgments. The uniform application of the standards is extremely important. In
addition evaluators should be aware of common rater errors.

 Communicate the standards:

Employees should clearly communicated what they need to receive the increments.
Open communication helps employees develop reasonable expectations and
encourages them to trust the system and those who operate it.

 Differentiate among employees:

PMS should ensure meaningful increments. Employees in ARL did not see significant
distinctions between top and poor performers. Due to which top performers seemed
frustrated and reduced their level of performance

 Appropriately Linking of Pay and Performance

 Usually the formula of measuring pay to the performance is not appropriate enough and only
in some cases the rewarded pay can be justified by the management.
 Pay for Performance as Component of HRM System
 Unless the complementary Human Resource Management programs are not applied, the
solely pay for performance programs are not complete enough to generate the expected
results.
 Building of the Trust of Employees
 One of the effective solutions to the challenges of pay for performance system is that the
management should build the trust of the employees. If there is cutthroat culture in the
organization or if the labor relation are poorly handled by the management of the
organization in the past, then even the most effective program of pay for performance can
become negative.
 Performance makes a Difference
 The concept that performance makes a different can be served as healthy solution to the
challenges of the pay for performance system. When the organization promotes this concept
 in its employees then the high achievement culture is promoted in the organization which
otherwise become as low achievement if the potential concept is not rooted in minds of the
employees.
 Multiple Layers of Rewards
 It is a big fact that there are definitely some positive as well as some negative impacts of any
pay for performance system. So when the rewards are offered in layers according to different
situations which mean more than one kind of incentives, then the results of pay for
performance systems becomes effective.
 Increase in the Involvement of Employees
 The employees should be involved when the pay for performance system is developing in the
organization because this system is design for smooth working of the employees. If the
employees do not consider an implemented pay for performance program as legitimate, then
they can take some actions to make it subvert.
 Non-Financial Incentives & Motivation
 Some employees of the organization are not much interested in the financial aspects of their
job, but rather they also take into account the non-financial aspects of the job. So employees
should be motivated to perform well other than through the financial compensation.