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Introduction to

Performance Management
& Performance Appraisal
Meaning of Performance

The action or process of carrying out or

accomplishing an action, task, or function can
be termed asperformance.
Why Perform?

• To reachorganizational mission andgoals

• Encourage and reward behaviors aligned with
organizational missionand goals
What are Performance
Performance Standards are the benchmark against
which performance is measured.
What is PM?
“It is a continuous process of identifying,
measuring and developing the performance of
individuals and teams and aligning
performance with the strategic goals of the

PM contains two major components:

1. It’s a continuousprocess
2. Alignment with strategic goals
Performance management(PM) includes
activities that ensure that goals are
consistently being met in an effective and
efficient manner.

Performance management focuses on the

performance of an organization, a
department, employee, or even the
processes to build a product or service or any
other areas inan organization.
First Phase
The origin of Performance Management can be traced in the
early 1960’s when the performance appraisal systems were in
practice. During this period, Annual Confidential Report (ACR)
was also known as Employee Service Records were
maintained for controlling the behaviours of the employees
and these reports provided substantial information on the
performance of the employees.
Second Phase
This phase continued from late 1960’s till early 1970’s,
and the key hallmark of this phase was that whatever
adverse remarks were incorporated in the performance
reports were communicated to the employees so that
they could take corrective actions for overcoming such
Third Phase
In this phase the term ACR was replaced by Performance
Appraisal. One of the key changes that were introduced in this
stage was that the employees were permitted to describe
their accomplishments in the confidential performance
reports, several new components were considered by many
organizations which could measure the productivity and
performance of an employee in quantifiable terms such as
targets achieved, etc.
Fourth Phase
This phase started in mid 1970’s and its origin was in India as
great business tycoons like Larsen & Toubro, followed by State
Bank of India focused on performance planning, review and
development of an employee by following a methodical
approach. In this process, the appraisee (employee) and the
reporting officer mutually decided upon the Key Result Areas
(KRAs) in the beginning of a year and reviewed it after every six
Fourth Phase
In the review period various issues such as factors affecting the
performance, training needs of an employee, newer targets and
also the ratings were discussed with the appraisee in a
collaborative environment.

This phase was a welcoming change in the area of performance

management and many organizations introduced a new HR
department for taking care of the development issues of the
Fifth Phase
This phase was characterized by maturity in approach of
handling peoples’ issues. It was more performance driven and
emphasis on development, planning and improvement. Utmost
importance was given to culture building, team appraisals and
quality circles were established for assessing the improvement
in the overall employee productivity.
Set company

Assign goals to
Take corrective
action as required
teams etc

Report goal
attainment to Continuously
management, asses goal
teams and attainment
Purpose of PM
• It serves the strategic purpose of the org.
• Provide information for reward system
• Facilitates HRdecisions
• Enabling employees to learn about their
performance as against orgexpectations
• Itserves as a developmental purpose
• Serves org maintenancepurpose
• Support HRdecision to meet legal
Contribution of PM in
• Motivation to perform is increased
• Increases selfesteem
• Managers gain insight about subordinates
• Jobs are simplified
• Organizational goals areclear
• Employees become morecompetent
• Differentiation b/n good & poor performance
• Performances arecommunicated
• Change can bepossible
Disadvantages of Poor PM

• Increased turnover
• Use of misleadinginformation
• Wasted time & money
• Lowered self esteem
• Damaged relationships
• Decreased motivation toperform
• Employee job burnout & dissatisfaction
PM Process
• Prerequisites
• Performance Planning
• Performance Execution
• PerformanceAssessment
• Performance Review
• Performance Renewal & Re-contracting

Two important prerequisites before PM

system are:
1. Knowledge of the org’s mission & strategic
2. Knowledge of the job in question (this is
done through jobanalysis)
Performance Planning
Employees should have a throughknowledge
ofthe PM System.
Planning discussion includes:
1. Results
2. Behaviours
3. Developmental issues
Performance Execution

At the execution stage, following factors

must beconsidered:
1. Commitment togoal achievement
2. Ongoing performance feedback & coaching
3. Communication
4. Collecting & sharing performance data
5. Preparing forperformance reviews
Performance Assessment
• It is important for employee as well as the
managers to take ownership of assessment
• It helps the org to use the information
obtained in a productive manner for the
future requirements.
• Inclusion of self appraisal is also beneficial in
all manner.
Performance Review

• Review stage involves meeting between

employees &the manager.
• This meeting is calledAppraisal Meeting.
• Review meeting helps employee and
manager to design developmental plans.
Renewal & Re-contracting

• Its identical to planning stage.

• Manager uses the insights & information
gained from other phases to reset
performance goals foremployees
Performance Appraisal

Performance Appraisal (PA) is a process of

evaluating employee’s performance on the

basis of pre-defined standards.

• Most employee’s base pay, promotion and
retention decisions on the employee’s
• Plays a central role in the employer’s PM
• Lets the manager and subordinate develop a
plan for correcting any deficiencies and to
reinforce the subordinate’s strengths
• Opportunity for communicate their
expectations from each other
• Appraisals enable the supervisor to identify if
there is a training need, and the remedial
steps required
Differences Between Performance Appraisal and Performance Management

Performance Appraisal Performance Management

Top-down assessment Joint process through dialogue

Annual appraisal meeting Continuous review with one or more

formal reviews

Use of ratings Ratings less common

Focus on quantified objectives Focus on values and behaviours as well

as objectives

Often linked to pay Less likely to be directly linked to pay

Bureaucratic - complex paperwork Documentation kept to a minimum

Owned by the HR department Owned by line managers