FRAMEWORK FOR LINKING

APPRAISALS WITH

INCENTIVES AND REWARDS

(FAIR 2020)

MANUAL

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 Larsen & Toubro
CONTENTS

A. Why FAIR? 3
B. Summary of the FAIR System 3–4
C. Objective of the System 5
D. Appraisal Period 5
E. Coverage 5
F. Performance Thrust Areas 5
G. Steps of the FAIR Process 5 - 11
Step 1: Performance Planning Workshop 5
Step 2: Employee Performance Planning (Goal Setting) 6
Step 3: Development Goals 7
Step 4: Anytime Performance Conversations (APC) 8
Step 5: Mid-Year Review 8
Step 6: Assessment Process 9
Step 7: MVG Normalization Process – MVG Rating 9
Step 8: Feedback to the employees 10
H. FAIR, in certain situations 11 - 13
•
Performance Review in case of Matrix-Reporting
•
Performance Review in case of new employees and
transferees
• Special Considerations
I. Performance Management Cycle
14
Process Control Reports
J. Linkage to Rewards & Promotions 14
K. Annexures 15 - 25
Annexure A: Schedule for FAIR (2019-20) & Development Goals
15
(2020-21)
Annexure B: Guidelines for Cascading Goals through PPW 16
Annexure C: Sample Goals 17 - 19
Annexure D: Aspects of Feedback 20
Annexure E: Format of Report to IC Head & CHR 21
Annexure F: Rating distribution 22
Annexure G: Attributes of effective Internal Controls Behaviour 23
Annexure H: Legend 24
Annexure I: Explanatory Note on Internal Financial Controls 25

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 A. Why FAIR?

Careers in L&T depend on a troika of factors i.e. Performance, Potential and Position.
Performance is tracked by FAIR, which is designed to be an employee-centered process
that helps in Assessment and Development. The potential tracking is done through
Development Centres (DCs) for high performers and Position Clarification (PCs) for
role expansion and for stimulating the person’s potential and the business’s growth
opportunities. Hence, FAIR is an important input in the tripod.

B. Summary of the FAIR System

The FAIR system is designed to establish a clear linkage between performance ratings
and rewards and serve as a tool for identifying developmental needs of an employee
in his/her current role. It facilitates a meaningful dialogue between the superior and
subordinate. This system covers employees from Junior Supervisory to Tier 4.

The FAIR System is now deployed electronically through the PMGM module of SAP
Success Factors. The system facilitates the Goal setting process through Performance
Planning Workshops (PPW). Each IC / SBG / Business Unit is required to conduct
Performance Planning Workshops, following the finalization of its annual budget,
through which Business Goals for the year are cascaded. The key result areas derived
through cascading at the workshop forms the basis for individual Appraisee’s goals.
The Immediate Superior (IS) and Appraisee together decide on the individual goals of
the Appraisee. Development Goals are also set simultaneously.

The FAIR system also provides Anytime Performance Conversations mechanism to

provide year-round exchange between the IS and Appraisee on task completion,
additional support required, course corrections and feedback. These are short
conversations that provide the inputs when cumulated for the longer conversation
during Mid-Year Review and Annual Appraisal Process.

At the end of six months of the appraisal period, the IS holds a performance
feedback and development discussion meeting with the Appraisee.

This six-monthly review is more from a development perspective and is an important

milestone along with the annual review for the detailed performance conversation.
This also helps in any course correction required for the achievement of the Annual
Goals. The benchmark for a meaningful conversation after 6 months and then, after
one year is 60 minutes of uninterrupted conversation. This will help in determining the
progress against set goals and if need be, initiate remedial action to help achieve the
Goal by the year-end. Above all it will facilitate the process of providing developmental
feedback to the Appraisee. Please refer Annexure D for aspects of feedback. In all
cases the conversation summary will be documented / entered in the system.

The Annual appraisal at the end of the appraisal period, lays emphasis on Performance
Evaluation in which the IS evaluates the Appraisee’s performance. The IS assigns a
1-8 rating to the Appraisee relative to others in the same Tier / Band keeping in mind
Key Behavioural Indicators (KBIs) and role related attributes i.e., speed, volume and
quality of work and internal customer orientation besides achievements against set
goals and deliverables. Achievement of goals and deliverables are at the heart of the
rating and must be based on metrics, cascading out of the IC goals/ budgets. The IS
is expected to view the performance of an individual, relative not only to those
reporting to him / her but relative to the highest level of performance in the same
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 Tier/Band across the IC / SBG. The Performance Form flows to Next Superior (NS) for
his/her comments, ratings and recommendations. NS then routes the Form to
Department Head (DH) who provides his/her comments, ratings and
recommendations. HR shares the DH Ratings with the Macro View Group (MVG).
Finally, the MVG reviews the rating given by the DH and moderates it to arrive at a
relative rating across the IC / SBG, as the case may be, to be in line with the distribution
percentages mentioned in Annexure F.

The ratings finalized by MVG are communicated by HR to the DH who will inform the
IS/NS. IS then gives feedback to the Appraisee and conveys the final rating category.

Once the IS/NS receives the feedback back from the MVG about the final rating decided
for the employee based on relativities, the conversation between the dyad (IS/NS«-»
Employee) stand at the centre of the FAIR process. The results of this conversation
can be either:

1. The IS/NS and the employee have a constructive conversation to build a new
rigour into the subsequent goals set for the employee, such that the
achievement of these, will qualify for a higher rating. The outcome of such
conversations is usually positive. (Effective Conversation)

Or

2. The employee feels despondent about the rating being below his / her
expectation. The outcome of such conversations is usually negative.
(Dysfunctional Conversation)

Hence, the IS/NS needs to ensure that the conversation is positive and constructive.

The Appraisee’s relative performance within the band as assigned by the MVG and the
IC/SBG performance as derived from the applicable parameters of the IC/SBG
Performance Metrics will form the basis for:

1. The final yearly performance conversation

2. Development Goals and

3. Computation of corpus and distribution of annual rewards. The relative

weightage is suitably assigned to the two factors (IC/SBG Performance & the
Individual Performance)

Development Goals in such cases will incorporate the new competencies required to
deliver the higher rating.

FAIR strives to build a culture of positivity and high productivity.

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 C. Objective of the FAIR System

To provide a system that helps to bring in high performance work culture through
following actions –

• Define measurable goals at the beginning of the year

• Communicate clear expectations
• Monitor the set goals
• Establish a clear linkage between performance, ratings and rewards
• Manage expectations of both superiors and subordinates
• Provide the basis of open and honest feedback on performance
• Identify developmental needs of the Appraisee
• Increase productivity
• Create a record for performance management, with details of evaluation and
feedback for administrative and developmental reasons

D. Appraisal Period

The appraisal period is from April to March. This aligns with the Company’s budget
period. The performance plans (goals) are set for this period and performance is
appraised.

E. Coverage

The system is designed to cover all the employees on Regular rolls in the following
bands & Tier:

• Junior Supervisory, Supervisory, Executive Band & equivalent Bands

• Tier 1 to Tier 4 in Covenanted Cadre

F. Performance Thrust Areas

Performance thrust areas of the organization IC / SBG / BU / Business Entities, are
designed based on targets concerning PAT, Order Booking, Revenue, Margins,
Incremental increase in Profitability, Working Capital Budgets and other financial
measures. In addition non financial goals such as Environmental, Safety, Succession
planning and governance, for the current year and coming year in relation to Strategic
Plan 2016-21 (Lakshya) will be incorporated. Other factors include the learnings from
last year, economic environment of Business, Competition, People & Processes etc.
These help in arriving at the Business Goals for the year. The Business Head will record
these Business Goals or Thrust Areas which are captured as Organizational Goals in
PMGM.

G. Steps of the FAIR Process

STEP 1: Performance Planning Workshop

The Performance management cycle shall commence with a Performance Planning
Workshop facilitated by the IC HR Head with the support of the IC Head. The Business
Goals of the IC / SBG / BU may further be cascaded down the level based on an
appropriate methodology such as, Hoshin Kanri X- Matrix, Balanced Score Card which
will form the basis for determining the goals of individual employees. Outcomes or end
results for each Role / Job as per the Position Clarification form should also serve as
an input for setting Individual Performance Goals. The goals should be realistic but

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 designed with stretch so as to stimulate potential. This Goal Cascade is effected in the
Goal Plan sheet in PMGM.

Please refer to Guidelines for Cascading Goals through PPW - Annexure B.

STEP 2: Employee Performance Planning (Goal Setting)

As a part of this process, the Immediate Superior (IS) and the Appraisee together
discuss & decide on the goals of the Appraisee while ensuring that these are in line
with the business goals derived at the PPW. The Goals are captured in the Goal Plan
sheet and Goals set should be specific and measurable. Goals include the KRAs (Key
Result Areas), which are immediate Business related Goals and KBIs (Key Behavioral
Indicators). The Goals can also be submitted in the Performance Form. However, the
Goal Plan sheet facilitates Goals Cascade and this is useful in aligning individual Goals
to overall Unit Goals.

KBIs are generic competencies specific to Tier/band of the employee and required to
be demonstrated on the job. The KBIs are provided by the system and are bespoke to
the Tier/ Band of the Appraisee and need not be specifically set for every individual.
The KBIs have been identified based on how closely they connect with the
competencies relevant for the particular Band/Tier. However, the standard lexicon of
KBIs recommended by Success Factors has been retained for consistency in using the
ERP system. It may be noted that the competencies for each ascending Tier are a
build-up on competencies already honed in the previous Tier(s). The weightages of
KRAs and KBIs in the overall appraisal system will be 80% and 20%, respectively.

The process provides for cascading of KRAs across the Business Unit through Goal Plan
sheet to bring in the required congruence between Business Goals and Individual
Goals.

The process provides for guidance, for appropriate goal selection through a Goal
Library that contains goals crafted from a body of knowledge researched from best
practices and Goal Cascading trees. Businesses can pick Goals relevant to their thrust
areas and further expand this Goal Library by adding business specific SMART goals to
it. The Goal Library is illustrative and not exhaustive. It may have more such goals that
emanate from the parameters.

To set the said KRAs / goals, there is a menu of 8 parameters, identified as critical for
success. An IS and Appraisee may choose a minimum of 4 and not more than 6 goals
for a year from the menu of parameters. The Digital initiatives parameter is mandatory.
The Functional & Financial parameter is also mandatory.

Goal setting is not a mechanical listing of activities. It involves specific and broad level
deliverables to be achieved during the performance year and shall have weightages
with pre-defined timelines attached to it. The goals will be directly linked to the
business units’ goals and the individual performance should have a direct linkage to
the business performance.

Based on the impact of the Goal on the role, a weightage should be assigned to it,
which should be jointly decided by both Appraisee and IS. However, in no case should
the weightage be less than 5% for a given goal. For every set Goal, the measures of
success need to be defined

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 Sr Parameters Parameter Description – (Specific goals emanate Recomm-
No from Parameters) ended
Weightage

1. Functional & Key Outcomes / Accountabilities of the role are set as >= 50 %
Financial Functional Goals; Revenues, margins, budgets etc. are
set as financial goals;

2. Digital Identify and design innovative digital solutions by >= 10 %

initiatives integrating technology and digitalization with business
requirements

3. Espousing Identify the work processes which reflect the values of <= 20 %
Corporate the organization; Highlight the employee and customer
Values & experiences which are in sync or aligned to the values;
Vision Including demonstrating attributes of effective Internal
controls behavior detailed in Annexure G

4. Improvement Participation in Organization change Processes, Open

Parameter productivity improvements, value management, Large
Scale Interactive Processes, etc.

5. Development Applicable for Employees with subordinate reporting; Open

of Identify work on feedback on how the team member
Subordinate / (TM) performs against goal, what learning and
Successor development opportunities TM should pursue next, what
they need to do to move to the next role;

6. Internal Streamline, build and abide by internal processes to Open

process ensure successful achievement of goals in line with
business requirements

7. Resource Mobilize, allocate and optimize resources effectively to Open

management achieve desired outcomes

8. Customer Building strong and enduring relationships with existing Open

Relations and potential customers

9 Safety Bring in a safe working culture by encouraging safe

behaviours that are cascaded throughout the business Open
taking various initiatives including effective training
interventions

Please refer to Sample Goals – Annexure C. The Goal setting should be followed by
setting of Development Goals.

STEP 3 : Performance Goals and Development Goals Approval

The Goals submitted as above in the Goal Plan sheet are to be approved by the IS in
the Performance Form. This is a dynamic Form and provides an opportunity to the
employee and Superior to review Goals in Performance Form and effect any change in
these goals, if required, during the year. It also provides for intimation to employee
and IS on changes made therein. This is largely applicable in cases of role change,
new tasks assigned or transfers.

Setting of Development Goals is the first step in development process by identifying

development needs of the employee in his/her current role and forms an integral part
of the appraisal system. PMGM captures a set of listed Training programs under
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 Development Goals. Based on the Performance feedback received by the Employee
and change of roles if any, employee can request the Training programs to be
attended. The IS to suitably approve the submitted training program to meet the
Developmental Goals of the employee and IS can also capture additional development
inputs that may be required for the employee to perform better.

It is linked to the feedback session between the IS/NS and the appraisee particularly
when the MVG normalizes the relative rating of an individual and where the individual
and IS/NS set goals for the next year that has additional rigour.

Development Goals encourages the IS and Appraisee to plan for the Appraisee’s
competency development through various training and non-training interventions.

The identification of Learning & Development needs commences with an analysis of

the areas of strengths and improvements of an individual which has facilitated or
hindered his/her performance in the current role. The Development Goals should be
“Performance Oriented". Hence, it should develop the competencies of Appraisee
keeping the current role and KBIs of the Appraisee in mind and should facilitate the
Appraisee to enhance his/her performance level. These KBIs or competencies can be
either Leadership / Behavioral, or Domain / Functional or Digital Technology related
competencies. In the event the Appraisee and IS are of the opinion that the
competency gaps can be met through non-training interventions, the same can be
specified in the Development Goals form.

A concrete action plan for the development of competencies needs to be drawn up by

the Appraisee and IS seeking inputs from the NS/DH. The focus of Development Goals
will be on developing depth / expertise in at least two competencies in a year.

On completion of both, the Goal setting and the Development Goals form, will move
to the IS for approval. Once the IS approves the goals, the employee needs to provide
feedback through the system on the discussion that has taken place and his / her level
of satisfaction with the same.

STEP 4: Anytime Performance Conversations (Short conversations –

Moments of Truth)

Apart from the MTR process, there is the Anytime Performance Conversation (APC)
feature made available in the FAIR system. This is a platform available to the employee
and IS for the entire appraisal year i.e. 1st April to 31st March. This is to encourage
periodic/event-based conversations between Employee and IS on progress of task
completion, course corrections needed, additional support required and development
feedback. This helps in breaking down actions for achieving a Goal, recording
Achievements along these activities and critical incidents for Feedback to be provided
for the successful completion of activities. IS can seek feedback from other Managers
or team members who have actively participated in the goals taken up by the
employee.

STEP 5: Mid-Year Review (Longer conversations)

By the end of six months of the appraisal period, i.e., in the month of October the
employee should review his / her performance to take stock of progress with respect
to the goals set. The employee will need to fill the Self-Review column in the
performance form. The same will flow to the IS for approval. The details captured in

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 the APC also act as inputs for the mid-year review. The mid-term review/ feedback
should be a consolidation of the previous 6 months.

The IS then conducts a performance feedback and development discussion meeting

with the Appraisee. The focus during this discussion should be on the completion of
a set of Goals and development of the employee. During this meeting, feedback on
how the employee has performed on each goal is deliberated and the way forward is
discussed. As a two-way process, the IS also actively seeks feedback from the
employee on what more is required to support his/her goal achievement.

The IS captures the comments on the attainment of each Goal in the system, which
can be viewed by the DH, NS as well as the employee.

In case the review indicates that there is a shortfall in achievement with respect to
targets in the six-month period, the IS should be able to guide the individual on how
to make up for the shortfall in the balance six months.

Please refer to Aspects of Feedback - Annexure D.

STEP 6: Assessment process

against the goals set and submits the same to his/her IS for approval. The APC
There is a provision for the IS to seek feedback from other stakeholders about the
employee’s performance. Comments of IS may cover the context, the situation in
which the results (including KBIs demonstrated) have been achieved and any other
significant achievements of the Appraisee. The IS will enter his/her comments, and
ratings on the system against each KRA and KBI. This flows to the NS who in turn
records his/her comments, and ratings. The Performance Form then moves to the DH
to record his/her comments and Rating.

The NS and DH must provide the Overall rating and comments for the Appraisee. In
addition, it is mandatory for IS, NS and DH/FH to provide specific Promotion
recommendations for the Appraisee (for Promotion in July or January or Not
recommended for Promotion).

The Department Head (DH) then arrives at a normalized rating (on a scale of 1-8) or
relative performance as per the prescribed distribution after considering the relative
performance and contribution of the Appraisee, vis-à-vis his / her peers in the same
band, across the department. The comparison should include aspects of KBIs and
speed of execution, stretched goals (in terms of volume and quality of work), internal
customer orientation in relation to his/her peer group. DH gives comments on his/her
views on the basis of the normalization or relative performance and overall
performance feedback based on the inputs received from IS and NS and enters the
comments and ratings on the system. In case there is a difference of two points or
more on the 1-8 Rating scale between the ratings given by the DH and that given by
the IS/NS, then the DH discusses with the IS/NS and explains the rationale for the
difference.
The DH should ensure that all employees are relatively rated as per the distribution
curve specified in this manual.

STEP 7: MVG Normalization Process – MVG Rating

IC HR Head should declare the composition of the Macro View Group (MVG) of various
IC / SBG / BUs. MVGs are constituted such that they have a line of sight of the

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 employees whose rating is being normalized by them and are aware of the
performance of the employees. Members of the MVG shall be within 2 to 3 reporting
levels of the employees being appraised.

• For Supervisory and Executive Bands and Tier 1, MVG should be chaired by an
employee in Grade M3-C or above (preferably DH of larger business),
• For Tier 2 and Tier 3 Bands, MVG should be chaired by an employee in Tier 4
or above (BU / SBG Head)
• For Tier 4, MVG should be chaired by IC Head
In cases when the number of employees considered for normalization in MVG is less
than 30, it is recommended that related Departments / functions be clubbed together
under one MVG.

IC HR collates the ratings and forwards the same to the respective MVGs.

The MVG reviews the rating given by the DH and normalizes it to arrive at MVG rating
as per the recommended distribution percentages of the IC or the Business. KBIs and
Role related attributes such as speed of execution, volume and quality of work are
given due consideration when the MVG decides the ratings. In case there is a large
difference (two points or more in rating scale of 1-8) between the ratings given by the
MVG and that of the DH, MVG discusses with the DH and if need be with NS / IS.

Moderation of Performance ratings to fit distribution guideline

Head of IC and IC HR will ensure that the MVG adheres to the rating distribution
guideline curve as applicable to the IC in letter and spirit and this is not pushed
upwards for moderation. MVG has the role of convincing the DH/NS/IS to take
accountability for “owning” the rating and the performance conversation that ensues.

Communication of Rating

MVG should keep the IS apprised (through HR) about the rating category (vital
contributor etc.) of the employee reporting to him before communication of rewards
to the employee.

STEP 8: Feedback to the employees

The emphasis, over the years, is to improve organization productivity. There has been
and continues to be a consistent need to differentiate performers through the process
of FAIR. There should be a performance filter to identify the critical mass to retain and
develop and continuously filter out the below minimum expectation performers from
the organization. This churn will be supplemented with the intake of better performers
to substitute the below minimum expectation performers. Thus, the performance
feedback process is very critical to justify the churn and the below minimum
expectation performer is not taken by surprise at the end of the year.

IS feedback is based on comments of DH / NS and the MVG Rating Category. With

these inputs, IS will provide the feedback to the Appraisee. The basis of the
performance discussion shall be on facts and focus of the feedback session will be
directed towards developmental inputs for the employee in order to enable him / her
to perform better next year.

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 IS while giving feedback on these lines, may also explain the process that was followed
while evaluating. It may be explained that as there is a relative rating of contributions
made by her/his peer group or employees in similar Tier/Band.

This feedback session should lead to discussions on how to improve the performance
for the next year and ways and means to achieve the same. Based on this feedback,
the next year’s goals set for the Appraisee may be reviewed to set goals with higher
rigour and to make suitable changes in the Development Goals.

For the purpose of feedback, all Appraisees in a band who are rated on a 1-8 scale will
be categorised into 5 appraisal buckets

Rating 8 - Outstanding Performer

Rating 7&6 - Top Performer
Rating 5 - Vital Contributor
Rating 4 - Needs Improvement
Rating 3, 2 & 1 - Below Expectations

Please refer to Schedule for the Performance Planning Appraisal Cycle - Annexure A.

H. FAIR, in certain situations

Performance Review in case of Matrix-Reporting

In case an Appraisee reports functionally to one person and administratively to

another, the main responsibility of the performance review will be that of the superior
who is involved in the Goal setting.

It is mandatory that both superiors (administrative and functional) are involved in the
entire PA exercise.

Similarly, in case an Appraisee is a member of a Task Force / Project for the entire
performance cycle, while being based in a Department, the main responsibility of
performance review will be of the superior who sets the goals. It is recommended that
both functional and Taskforce / Project Head are involved in the PA exercise.

In case of Area / Regional / Branch offices, it is recommended that IS from the business
gives ratings after having a discussion with Area / Regional / Branch Manager. IS
should solicit comments on ‘Espousing Corporate Values and Vision’ from the Regional
/ Area Manager / Branch Manager and mention this in his/her comments, on the
system.

Performance Review in case of New Employees and Transferees

Newly inducted employees will be covered in the performance review cycle if they
have joined the Company on or before 2nd Jan in the relevant review year. Though the
entire process should be followed for the first performance cycle, the performance
measurement and rating shall not be reckoned for the distribution curve for the IC /
Business. The PLR committed during the recruitment process will be protected in the
first year unless the person is rated as 4 or below

Transferees will go through the PA exercise the reference point being the goals to
be achieved by them in the giving department for which purpose the taking department
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 shall obtain the feedback on performance from the giving department. The
departments where they are working at the time of being appraised will be responsible
for the employees consolidated appraisal rating. The transferee can incorporate goals
assigned to him/her in the new department in the performance form of the appraisal
year. At the end of the appraisal year, the employee is required to capture his/her
achievements in the performance form.

The DH with whom he/she is working at the time of appraisal will decide the final
rating after taking into account the inputs from the employee’s IS / DH in the previous
department(s). The PMS system provides the appraising IS the facility to seek feedback
from the previous IS – the PMS Form can be moved electronically to the Previous IS
for filling up of comments sought.

If the IS / NS is new to the department, he/she should consult the earlier role holder
before appraising the performance of the team members.

Special Considerations in the FAIR process

1. Trainees to be excluded from Rating Distribution Guidelines

a) All categories of trainees (such as GET/JET/MT/CA/ICWA/ACS etc)

confirmed in Executive & Supervisory cadres after successful completion of
their training period and absorption in regular rolls, and who are eligible for
the appraisal process, shall be excluded from being fitted into the rating
distribution guideline curve as applicable to the IC.

b) These Trainees shall be rated on their absolute performance on a rating

scale of 1 to 8 and will be provided with performance feedback. Those who
are categorised as bottom performers (4 and below) will however be
identified for a performance improvement plan and/ or replacement.

c) A lot of effort and resources go into recruitment of trainees. The

recruitment rigour for the best quality of trainees must be ensured so that
the selection of the best available talent from the campuses is sourced and
hired and the number of trainees identified for replacement decreases.

2. Lateral hires to be excluded from Rating Distribution Guidelines

a) All employees joining laterally and eligible for being appraised, in the first
assessment year after joining, shall be excluded from being fitted into the rating
distribution curve as applicable to the IC.

b) They shall be rated as per their absolute performance on a rating scale of 1 to 8

and will be provided with performance feedback. Those new lateral hires who are
categorised as below minimum expectation performers will however be identified
for replacement.

In both the above cases (i.e. Trainees and Lateral Hires), from the second appraisal
year, will be assessed as regular employees and will be covered by the rating
distribution as applicable to the IC.

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 3. Assessment of Lady Employees proceeding on Maternity Leave

a) Lady employees proceeding on maternity leave shall carry the rating for the
appraisal year when they proceed on Maternity leave and resume for duty
after the leave. This rating shall not be less than their average ratings of
the last two appraisal years before proceeding on maternity leave. If the
maternity leave period straddles two appraisal review years, the year for
reckoning the previous two years’ average rating as a minimum, will be the
assessment year when the employee avails the maximum portion of the
maternity leave.

Illustration: An employee goes on maternity leave from 15th Feb 2019 and
returns on 16th August 2019. In this instance her period of leave straddles two
assessment years 2018-19 by 1.5 months and 2019-20 by 4.5 months. In such
an instance her rating in 2019-20 should not be less than previous two years
(i.e. 2017-18 and 2018-19) average rating.

b) Such employees will be covered by the rating distribution as applicable to

the IC

c) Performance conversations shall take place notwithstanding the above.

4. Assessment of employees transferred from one IC to another

a) Final performance ratings will be given and “owned” by the IS of the

receiving IC’s i.e. IS concerned for the purpose of Performance
Conversations after consulting with the IS of the giving IC for making the
Performance Conversations more rich, meaningful and complete.

The person will be fitted into the distribution curve of the taking/receiving
IC .

b) The receiving ICs IS may decide in some cases to award a better

performance rating, which is perfectly feasible if the transferred person
surpasses the performance standards expected. However, the transferee
shall be given a rating that shall not be less than the average rating of the
last two appraisal years of the transferee. This norm will be applicable only
in the appraisal year in which the employee is transferred.

c) Performance conversations shall take place notwithstanding the above.

5. Any other exclusion of any category of employees will require the specific
approval of the MD & CEO and CHR, since this is a departure from the policy.

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 I. Performance Management Cycle & Process control Reports

Stages:
PPW
Goal Setting
Development Goals Setting

Performance
Planning Mid Term
Exercise & Goal Review
Setting

Stages:
Performance Appraisal Recording Achievements –
Appraisee
IS / NS / DH Reviews
Normalization process – MVG
Performance Feedback

As a process owner, IC HR team is suggested to monitor the FAIR progress,

effectiveness and timelines through the following parameters:

➢ Number of Employees in the business covered under the Performance Planning

Workshop
➢ Percentage of Employees who are part of the performance review cycle and
completed the Goal setting process within the time frame
➢ Percentage of Employees completed the Mid-term review within time frame
➢ Any measures on Performance Conversations and Feedback sessions
compliance

IC HR Head may present the above to the IC Head for review. A copy of the same be
sent to CHR.

Please refer to Format of Report to IC Head & CHR - Annexure E.

J. Linkage to Rewards & Promotions

The Appraisee’s relative performance within the band as assigned by the MVG (MVG
Rating) and the IC/SBG performance and as derived from the applicable parameters
of the IC/SBG Performance Metrics will form the basis for performance conversations
and computation of corpus and distribution of annual rewards. The rating shall also
form the basis for Compensation increases / fitment along with other elements of
compensation.

However, along with Performance Ratings all inter band/tier promotions should be
accompanied by a significant increase in job responsibility. Such promotions should be
carefully evaluated as per IPE version 3.2 and should meet the Position Class criteria
required for the higher grade. The process of decisions on inter-band/tier promotions
should include interviews by a panel constituted by the IC Head.

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 Annexures
Annexure A

Schedule for FAIR (2019-20) & Development Goals (2020-21)

Start Medium
Activity End Date
Date
Performance Planning (PP) 2020-21

Budget Best Estimate 21 Apr

MS Team or Zoom
IC / SBG Head Communique on Strategic Themes 22-Apr 30-Apr Outcome to be captured as Organizational Goals in
PMGM (IC-SBG-BU)
MS-Team or Zoom
IC/ SBG Performance Planning Workshops & declare
01-May 09-May Followed by Department Heads carrying out Goal
Initiatives and KRAs
Cascade in PMGM
In PMGM (Goal Plan) and consultation through
Employee sets goals (PP) in consultation with IS By 15-May
phone/zoom/MS-Team
In PMGM (Performance Form) phone/zoom/MS-
Goals Approved by IS in PMGM By 20-May
Team
Performance Appraisal (PA) 2019-20

In PMGM and consultation through phone/zoom/MS-

Employee fills and submits PA 01-Apr 15-Apr
Team
Review & Performance Feedback by Superiors In PMGM and consultation through phone/zoom/MS-
16-Apr 14-May
(Immediate, Next, Dept. Head) Team
MVG Application linked to PMGM
Moderation by MVG 15-May 15-Jun
e-Letters from HR
Communication by HR 16-Jun 28-Jun

Development Goals 2020-21

Employee fills and submits Development Goals in In PMGM and consultation through phone/zoom/MS-
16-Apr 14-May Team
consultation with IS

Anytime Performance Conversations (APC) 2020-21

Round the year performance discussions between

01-June to 31 Mar APC- PMGM
Employee and IS
Midterm Review 2020-21
PMGM
Mid-year Review with Development Discussion 01-Oct 31-Oct

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 Annexure B

Guidelines for Cascading Goals through Performance Planning Workshops

• IC / SBG Head releases a communiqué to all

• Highlights progress during the last year and the strategic focus areas for the
current year.

• IC / SBG conducts Performance Planning Workshop

• Workshops facilitated by IC / SBG HR after IC / SBG budget is finalized

• Participants
o IC / SBG Head
o Department Heads
o Section Heads and
o Others as required

• Department Heads of support functions also to be involved in the workshop in

order to address interdependencies.

• Methodologies such as Balance Score Card, X matrix, Hoshin Kanri, MBO., etc.
to be used for cascading during workshop

• Outcomes to be consolidated and to be made available to Department Heads.

• Immediate Superiors to help subordinates formulate goals aligned with targets

in the consolidated list.

• Following parameters, as applicable, to be considered while individual goals are

formulated:

o Improvement Parameter (quantitative)

o Financial / Functional Parameter (quantitative)
o Development of Successor / Subordinate (quantitative / qualitative)
o Espousing Corporate Values and Vision (qualitative)
o Internal process
o Resource management
o Digital initiatives
o Customer Relations
o Safety

▪ The sum total of the Functional and / or Financial goals should

have a weightage of 50% or more for all employees.
▪ The weightage for “Digital Initiatives” should have a weightage
of 10% or more for all employees.
▪ The weightage for “Espousing Corporate Values and Vision” will
not exceed 20% for any employee.

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 Annexure C

Sample Goals

Mandatory Goals- Subordinate Development

Any employee who has a subordinate reporting to him/her will be assessed on the
focus on ensuring competency development of his/her subordinate (as per the
Development Goals set for subordinate). In other words, an IS will be assessed on the
extent to which he/she has aided his/her subordinate in implementing the
Development Goals

At the end of the Development Goals cycle, the filled in forms are sent to the Next
Superior. This is to assist the NS in appraising the IS against the Subordinate
Development Goals.

Sample Goals- Strategic Parameter

An example of strategic Goal could be to increase business in the International

markets by 20% in next two years. Action plans to reach this Goal could be setting up
offices abroad, investing in technology, developing new products and platforms

Note: Strategic parameters need to be suitably broken down into annual activities and
the annual goals will be worked out on this basis.

Sample Goals- Functional Parameter

Execution Goals
• Reduce delivery time
• Increase project execution efficiencies
• Reduce Working Capital as a percentage of Revenues

Manufacturing Goals
• Reduce cost of Rework from 5% to 1%
• Reduce time overruns of major items from 10% to 2%

Materials and Purchase Goals

• Reduce inventory from 60 days of consumption to 30 days consumption by
end of the year

Sales and Marketing Goals

• Control outstanding as per the monthly budgeted targets
• Earn a contribution of `100 lakhs during the year

Human Resource goals

• Filling the critical positions through external recruitment, where internal talent
is not available.

Safety

Reduction of near misses by 25%

No fatalities and/or serious injuries

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 Participating as Internal Faculty in IPM and LDA
Participating in DCs as an internal Assessor

Sample Goals- Development of Successor

• No. of Critical Positions Identified

• Identification of critical positions across the IC / SBG taking into account:

o The Value added by that position in the organization

o The Growth and Future Prospects of the Business concerned,
including International competence
o Position criticality. Implication of keeping vacant

• Operating span & impact of decisions

• Identification of ‘Successor-in-Making’

• Development Goals & Mentorship for successor

Sample Goals- Espousing Corporate Values and Vision

• Institutionalizing adequate monitoring mechanism to ensure adherence to laid

down Internal Control processes, SOPs, guidelines including Corporate
Authorization guidelines, Circulars etc. within the area of operations
• Participation in DCs as an internal Assessor
• Propagation of Company’s values and vision in GET/MT campuses
• Participation in initiatives like coaching as a transformation coach
• Building brand image of the company by participation in initiatives like Campus
Ambassador.

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 Sample Goals/Evaluation Criteria for Service Departments:

SN. Examples of Assignment/task Frequency/time Evaluation criteria

/ number
1. Country risk studies (Pertinent to Need-based or Timeliness
Finance/Legal Department) say, 6 countries Feedback from concerned
officials
2. Routine jobs viz., Frequency is pre- Timeliness
Data Base Management determined for Feedback from other user
Policy evaluation each of these departments (if possible)
Forex View studies
(Procurement departments)
3. Information provider to other Need-based Feedback from concerned
departments (All Service departments) departments
Timeliness.
4. Ad-hoc assignments for management Need/situation Timeliness
Presentations based Feedback directly from
Speeches concerned member of
Representations to industry management
associations/ ministries
Write-ups
(All Service departments)
5. Exhibitions/ advertisements To be decided Timeliness
(Pertinent to CCD Department) with reporting Reporting authority or user
authority department to comment on
usefulness.
Surveys/ Media reports
6. Training (Pertinent to Human Based on HR Number of training programs
Resource Department) department needs in a particular period/
and can be Budgets allocated for training
discussed with programs/ ROI / feedback
department. from trainees.

7. Recruitment (Pertinent to Human Need based Number and time in which

Resource Department) vacancies are filled.
Performance of recruits
reflects the quality of
recruitment.
8. Cost savings (pertinent for say CCD Not applicable Not applicable
or Admin) Travel costs could be a
sub-criteria here.

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 Annexure D
Aspects of Feedback
To Employee

Sr. Midterm Annual

Aspects Ongoing
No. Review Review
Performance review incl. achievement of
1 Y Y Y
targets / change of goals
Needs for training, job rotation &
2 Y Y Y
development
3 Stretch element in goals Y Y Y
4 Anytime Performance Conversation Y Y Y
5 Facilitating / Hindering factors Y Y Y
Strengths & weaknesses incl.
6 Y Y N
competencies
Leadership competencies & Team
7 Y Y N
behaviours
8 Career path/growth N Y N
Being open for feedback from the
9 Y Y N
employee
10 Immediate Superior Rating N N N
11 MVG Rating Category N Y N

From Employee
Sr. Ongoing
Aspects of feedback
No. Review
1 Job content Y

2 Role clarity Y
3 Resources Y
4 Recognition Y
5 Departmental Support / Team work Y
6 Learning & Growth Opportunities Y
7 Other Facilitating / Hindering Factors Y

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 Annexure E

Format of Report to IC Head/ CHR

For the Quarter June 30th 2020

Number Number %age

Activity
Scheduled Completed Completed

Performance Planning Workshops

Employees who have completed Goal
Setting

Employees trained on FAIR *

No. of IS’s trained on giving/

receiving feedback *
Employees who have completed Mid-
Year Review with development
discussion *
Completion of appraisal by employee
and Immediate Superior
Employees for whom rating has been
finalized by MVG
Employees for whom feedback
session has been completed

*Status Report to be published every quarter.

The percentages given

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 Annexure F

Rating Distribution (will be sent subsequently)

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 Annexure G

Attributes of effective Internal Controls behaviour - Rating

evaluation for employees in Tier 3 & above

• Is aware of laid down Internal Control processes in form of SOPs, guidelines

including Corporate Authorisation guidelines, Circulars, IFC (Internal Financial
Controls) documentation, etc. within their area of operations and has
institutionalized adequate monitoring mechanism to ensure adherence of the
same
• Respects and encourages behavior for the effective implementation of Internal
Controls.
• Has helped and motivated the team to abide by laid down Internal Controls
processes and thereby strengthen the overall control framework within the area
of operation
• Has taken action to resolve internal audit observation and ineffective IFC
controls (if any) in their areas of operations
• Has taken action to Institute adequate preventive controls to ensure that
similar observations are not repeated in future, where applicable
• Has suggested ideas to strengthen Controls beyond his area of operation for
the benefit of the IC / Business Unit

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 Annexure H

Legend

FAIR : Framework for Linking Appraisals with

Incentives and Rewards

IS : Immediate Superior

NS : Next Superior

DH : Department Head

MVG : Macro View Group

PPW : Performance Planning Workshop

KRAs : Key Result Areas

KBIs : Key Behavioural Indicators

APC : Anytime Performance Conversations

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 Annexure I

Explanatory Note on Internal Financial Controls

Companies Act, 2013 has mandated the listed enterprises to implement and adopt
Internal Financial Controls (IFC) including Internal Control over Financial
Reporting (ICFR) in all its sphere of operations.

‘Internal Financial Controls’ (IFC) has been defined as “policies and procedures
adopted by the company for ensuring orderly and efficient conduct of its
business, including adherence to company’s policies, safeguarding of assets,
prevention and detection of frauds and errors, accuracy and completeness of
accounting records, and timely preparation of reliable financial information.”

Internal Financial Controls (IFC) covers, (i) Internal Controls over Financial
Reporting (ICFR), (ii) Internal Controls over Operations and (iii) Internal controls
for Fraud prevention.

Listed enterprises have to maintain accurate and complete financial records while
adhering to all the statutory accounting and reporting standards for presenting the
financial performance at the end of each quarter reliably. The controls which are
required to be instituted in all the above processes constitute Internal Control over
Financial Reporting (ICFR)

Board of Directors, in the Directors’ Responsibility Statement, is required to certify

the adequacy and operating effectiveness of IFC. They are also required to devise
proper systems to ensure compliance with the provisions of all applicable laws and
certify the adequacy and operating effectiveness of such systems.

Audit Committee is required to evaluate the IFC systems & processes.

In addition, responsibility is cast on various bodies to verify and validate the

controls.

Independent Directors are required to satisfy themselves on the integrity of

financial information and also ensure that financial controls and the systems of risk
management are robust and defensible.

Statutory Auditors are required to report on the adequacy and operating

effectiveness of ICFR across the Company.

Presenting reliable financial information is a key responsibility of the Management

of every listed enterprise. Management’s ability to fulfil this responsibility depends
on the design and effectiveness of the business processes (orderly & efficient
conduct of its businesses) and the safeguard it has put in place over accounting
and financial reporting of transactions.

In this respect, all process owners need to design suitable control framework and
institutionalize adequate monitoring mechanism to ensure Internal Financial
Controls.

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