Planning & Implementation of

Performance Management
Unit 2
 Performance Management
• Systematic outlining of the activities that the
manager is expected to undertake during a
specified period so that he is able to make his
best contribution to development and
organizational outcomes.
Purpose of Performance Planning
• Align job expectations with overall strategic plans,
departmental goals , job description
• Establish and agree upon performance criteria
• Clarify what the employee will be evaluated on
• Identify sources for feedback on the employee’s
performance.
• Set the stage for ongoing feedback and
counselling
• Create a mentoring relationship
• Annual stocktaking of performance
 Performance Planning includes
1. Setting performance criteria for employees
2. Identify the help required by employees from
their Managers
3. Identify potential barriers
4. Developing an understanding of the relative
importance of job tasks.
 Characteristics of Performance
Criteria
• Defining the purpose of performance criteria
• Creating base for observing performance
• Developing a Benchmark for describing the
performance rationally
 Principles of Setting Performance
Criteria
• Effective performance standards
• Serves as an objective basis for communicating about
Performance
• Enable the employee to differentiate between
acceptable and unacceptable behaviour and
results/outputs
• Increase job satisfaction because employees know
when tasks are performed well
• New employees are informed of expectations about
job performance
• Encourage an open and trusting relationship with
employees
 Performance Measurement
• Employee performance measurements can determine an
employee's -:
• compensation,
• employment status or
• opportunities for advancement.
• For these reasons, performance management programs
must consist of methods that enable fair and accurate
assessments of employee performance.
• To assist with measuring employee performance,
employers first establish performance standards.
• Performance standards define what it takes for employees
to meet or exceed the company's performance
expectations.
 Methods of Performance
Measurement
1. Graphic Rating Scales
2. Management by Objectives
3. Forced Ranking
4. Critical Incident Method
5. 360 Degree Feedback Method
6. BARS Method
7. Competency Mapping Method
 1.Graphic Rating Scales
• Graphic rating scales are ideal for production-oriented work
environments, for other workplaces that move at a fast pace, such
as those found in the food and beverage industry.
• A rating scale consists of
• a list of job duties,
• performance standards
• a scale usually from 1 to 5 for rating employee performance.
• This method for measuring employee performance can be
completed relatively quickly, which is a plus for supervisors who
manage large departments or competing assignments in an
environment that leaves little time for workforce management
duties.
• A Graphic Rating Scale lists a series of traits
that the company deems to be valuable for
effective performance.
• The rater rates the employee along a scale
depending upon how well the employee has
exhibited the trait.
• These types of appraisals are pretty easy to
design and use. They allow employers to make
quantitative comparisons between the scores
achieved by different employees.
 Management by Objectives
• Management by objectives, or MBOs, are useful for measuring
the performance of employees in supervisory or managerial
positions.
• MBOs start with identifying employee goals, and from that
point the employee and her manager list the resources
necessary to achieve those goals.
• The next section of MBOs consists of the timelines for
achieving each goal.
• Throughout the evaluation period, the employee and her
manager meet periodically -- quarterly is best -- to discuss the
employee's progress and to reset goals for which the
employee needs additional time or resources to complete.
• The employee's performance is measured by how many of her
goals she accomplished within the designated time frame.
 Forced Ranking Method
• Includes supervisors and managers ranking employees
into three groups.
• The top performers comprise roughly 20 percent of
the workforce, average performers 70 percent and the
lowest-performing employees make up about 10
percent of the workforce.
• Forced ranking measures employees' achievements
against those of their peers, instead of comparing the
employee's current evaluation period against the
employee's own past performance.
• For this reason, forced ranking lends itself to creating a
very competitive work environment.
 How does it work?
• There are several ways to administer forced
ranking, as long as associates' performances
are essentially ranked against one another, as
indicated in the image in the next slide.
• Managers are required to distribute ratings for
those being evaluated, into a pre-specified
performance distribution ranking .
• In theory, each ranking will improve the
quality of the workforce.
 Forced Ranking Method
• Managers rank workers into three categories:
• The top 20 percent are the “A” players, the people who will
lead the future of the company. They’re given raises, stock
options, and training.
• The middle 70 percent are the “B” players, steady-eddies
who are given smaller raises and encouraged to improve.
• The bottom 10 percent are the “C” players, who contribute
the least and may be meeting expectations but are simply
“good” on a team of “greats.”
• They’re given no raises or bonuses and are either offered
training, asked if they’d be happier elsewhere, or fired.
 Critical Incident Method

• Critical Incident Method records samples of an

employee's good performance and bad performance as
each relates to performance objectives that have been
previously set for the employee.
• This method is also referred to as work sampling.
• It requires careful observation and recording of a
representative sample of an employee's performance.
• If care is not taken to record a representative sample,
the results will be distorted and give an incorrect
impression of performance.
 BARS Method
• The last performance appraisal method discussed
during their meeting is the behaviorally anchored
rating scale (BARS) method.
• The BARS method takes aspects from both the Graphic
Rating Scales and the Critical Incident Method.
• The method consists of developing a set of
performance standards for a specific job based upon a
Job Analysis and behaviors identified in a Critical
Incident Analysis.
• Each standard is then assigned a scale with point values
based upon expert opinions. The unit of analysis is an
employee's behavior instead of an employee's traits or
characteristics.
 360 degree appraisal
• A 360 degree appraisal is a type of employee
performance appraisal in which subordinates,
co-workers, and managers all anonymously
rate the employee. This information is then
incorporated into that person's performance
review.
 What is 360 Degree Feedback?
•
360 Degree Feedback is a system or process in which
employees receive confidential, anonymous feedback from
the people who work around them. This typically includes
the employee's manager, peers, and direct reports.
• A mixture of about eight to twelve people fill out an
anonymous online feedback form that asks questions
covering a broad range of workplace competencies.
• The feedback forms include questions that are measured
on a rating scale and also ask raters to provide written
comments. The person receiving feedback also fills out a
self-rating survey that includes the same survey questions
that others receive in their forms.
• Managers and leaders within organizations
use 360 feedback surveys to get a better
understanding of their strengths and
weaknesses.
• The 360 feedback system automatically
tabulates the results and presents them in a
format that helps the feedback recipient
create a development plan.
• Individual responses are always combined
with responses from other people in the
same rater category (e.g. peer, direct report)
in order to preserve anonymity and to give
the employee a clear picture of his/her
greatest overall strengths and weaknesses.
Methods of Competency Mapping

• Past - Performance based Approach

• Job – focused Method
• Value – based Method
 1.Past- Performance based Approach

• Uses Behavioral Event Interview

• Adaptation of Critical Incident Interview
• It is an interview technique based on the premise that
the best predictor of future behavior is past behavior.
Steps followed
I. Identify the position to be mapped
II. Identify outstanding performers and below average
or average performers
III. Interviewing them
IV. Generating the list of competencies needed and not
needed
 2. Job-focused Method
• This approach takes the task, role, job-profile of
the incumbent as the central point.
• Makes used of position information
questionnaire which gathers information on the
incumbent’s position.
• Includes
I. Understanding the purpose of the job
II. Asking incumbents to list down the job’s major
activities and accountabilities
III. Mapping each accountability or major task
 3. Value – based Method
• Uses cultural and traditional values of the
organization to construct competencies
• Ranges from a very careful and structured
dialogue process involving top leadership to
simple pronouncements made by the CEO or
HR Group.
Job Description
 Job Descriptions
• Job descriptions are a communication tool to tell
coworkers where their job leaves off and the job
of another employee starts.
• They tell an employee where their job fits within
the overall department and the overall company.
• They help employees from other departments,
who must work with the person hired,
understand the boundaries of the person's
responsibilities.
• Finally, job descriptions are an integral piece of
the Performance Planning Process.
 Components of a
Job Description
• Using information from your job analysis and job design, you
• will be in a better position to develop a short (usually one to
• two page) job description containing the following
components:
• 1. Title
• 2. Job Summary
• 3. Job Tasks, Responsibilities, and Authorities
• 4. Job Qualifications
• 5. Supervision
• 6. Working Conditions
• 7. Salary and Benefits
 Organizational skills
• Organizational skills can be termed as a set of skills that
help you achieve your higher goals in life. These skill sets
help you plan, implement the procedures, monitor growth
and ultimately achieve your set goals.
• To put it the other way, organizational skills are kind of self-
discipline measures that differentiate a leader (and good
administrators) from the rest. These skills help an individual
to acknowledge a reason/purpose for each day. These skills
make an individual focus towards a higher goal in life.
• In a nutshell, setting up a goal is easy but to achieve the
said goal is tough. Organizational skills help individuals
plan & prioritize their actions and activities in a way that
makes them achieve the goal.
 List of Organizational Skills
• There may be many organizational skills like planning abilities and prioritization as
described above, but the top eight skills that are related to organization abilities
are:
1. Attention to details skills help you pay attention to any project details which an
employee is responsible for. (detail oriented personality)
2. Multi tasking skills make one work and deliver results on various projects at the
same time.
3. Analytical skills help one analyzing a situation and coming forward with a logical
solution.
4. Communications skills help one understand and put forward their point to the
others in the Organization.
5. Problem solving skills enable one to not get overwhelmed and solve the problem
systematically.
6. Decision making skills enable one to make tough decisions at the need of the hour.
7. People skills help in interacting with clients, higher authorities, peers and
subordinates.
8. Team skills enable one to adopt and function in diverse teams.
 Organization Skills: Examples of
Organizational Skills
• Some of the examples of organizational skills are:

1. Focus oriented: An individual builds a focus on a certain goal that he

wishes to achieve. He alienates himself from any distractions in between.
2. Prioritization: An individual prioritizes activities in a way that synergize the
effect in a fruitful manner. He/she puts forward smaller milestones and
prioritizes efforts accordingly.
3. Timelines driven: An individual marks time-lines to achieve/ complete
certain tasks. He tries his best to achieve it on time.
4. An individual documents the results/achievements and learning through
the entire process.
 Characteristics of Effective
Performance Metrics
• Should capture what is relevant to the
organization’s business model
• PM should be measurable
• PM should be cascaded down
 Defining Performance Standards
• Setting standard for Performance is the heart
of Performance Planning.
• If wrong standards are set , there would be a
failure of entire Performance Management
System.
• The standards should be specific, measurable,
attainable, result-oriented, Time-
based(deadlines to be met)
 Process of Setting Performance
Criteria
• There are 7 steps for effectively setting performance
standards-:
1. Specify Task and Result –
• organizational objectives should be broken into
managerial tasks and delegate them to the
employees.
• Specify that the accomplishments are linked to
successful performance.
• The performance goals must be realistic, competent
enough.
• All the resources should be provided for the work to
be done by the employee
2. Set Standards or Targets –
• Managers must clarify the level of performance required
so that employees know the acceptance level of
achievements to be considered as successful performance
• Goals should be jointly set by the managers and their
employees.
• Goals should be achievable.
• Managers can provide a specific feedback describing the
gap between expected and the actual performance.
3. Determine the measures - kohli n deb 143 , 144
1. Strategic. To create effective performance metrics, you must start at the end point-
-with the goals, objectives or outcomes you want to achieve--and then work
backwards. A good performance metric embodies a strategic objective. It is
designed to help the organization monitor whether it is on track to achieve its
goals. The sum of all performance metrics in organization (along with the
objectives they support) tells the story of the organization’s strategy.
2. Simple. Performance metrics must be understandable. Employees must know what
is being measured, how it is calculated, what the targets are, how incentives
work, and, more importantly, what they can do to affect the outcome in a positive
direction. Complex KPIs that consist of indexes, ratios, or multiple calculations are
difficult to understand and, more importantly, not clearly actionable.
• "We hold forums where we show field technicians how our repeat call metric
works and how it might impact them. We then have the best technicians meet
with others to discuss strategy and techniques that they use to positively
influence the metric," says a director of customer management at an energy
services provider.
3. Owned. Every performance metric needs an owner who is held accountable for its
outcome. Some companies assign two or more owners to a metric to engender
teamwork. Companies often embed these metrics into job descriptions and
performance reviews. Without accountability, measures are meaningless.
4. Actionable. Metrics should be actionable. That is, if a metric trends downward, employees
should know what corrective actions to take to improve performance. There is no purpose
in measuring activity if users cannot change the outcome. Showing that sales are falling
isn’t very actionable; showing that sales of a specific segment of customers is falling
compared to others is more actionable.
• Actionable metrics require employees who are empowered to take action. Managers must
delegate sufficient authority to subordinates so they can make decisions on their own
about how to address situations as they arise. This seems obvious, but many organizations
hamstring workers by circumscribing the actions they can take to meet goals. Companies
with hierarchical cultures often have difficulty here, especially when dealing with front-line
workers whose actions they have historically scripted. These companies need to replace
scripts with guidelines that give users more leeway to solve problems in their own novel
ways.
5. Timely. Actionable metrics require timely data. Performance metrics must be updated
frequently enough so the accountable individual or team can intervene to improve
performance before it is too late. Some people argue that executives do not need
actionable or timely information because they primarily make strategic decisions for which
monthly updates are good enough. However, the most powerful change agent in an
organization is a top executive armed with an actionable KPI.
6. Referenceable. For users to trust a performance metric, they must understand its origins. This
means every metric should give users the option to view its metadata, including the name
of the owner, the time the metric was last updated, how it was calculated, systems of
origin, and so on. Most BI professionals have learned the hard way that if users don’t trust
the data, they won’t use it. The same is true for performance metrics.
• 7. Accurate. It is difficult to create performance metrics that accurately measure an activity. Part of
this stems from the underlying data, which often needs to be scanned for defects, standardized,
deduped, and integrated before displaying to users. Poor systems data creates lousy performance
metrics that users won’t trust. Garbage in, garbage out. Companies should avoid creating metrics
when the condition of source data is suspect.
• Accuracy is also hard to achieve because of the way metrics are calculated. For example, a company
may see a jump in worker productivity, but the increase is due more to an uptick in inflation than
internal performance improvements. This is because the company calculates worker productivity by
dividing revenues by the total number of workers. Thus, a rise in the inflation rate, which artificially
boosts revenues—which is the numerator in the metric—increases worker productivity even though
workers did not become more efficient.
• Also, it is easy to create metrics that do not accurately measure the intended objective. For example,
many organizations struggle to find a metric to measure employee satisfaction or dissatisfaction.
Some might ask users in surveys but it’s unclear whether employees will answer questions truthfully.
Others might use the absenteeism rate but this might be skewed by employees who miss work to
attend a funeral, care for sick family members, or stay home when daycare is unavailable.
• 8. Correlated. Performance metrics are designed to drive desired outcomes. Many organizations
create performance metrics but never calculate the degree to which they influence the behaviors or
outcomes they want. Companies must continually refresh performance metrics to ensure they drive
the desired outcomes.
• 9. Game-proof. Organizations need to test all performance metrics to ensure that workers can’t
circumvent them out of laziness or greed or go through the motions to make a red light turn green
without making substantive changes. “Users always look for loopholes in your metrics,” says one BI
manager. To prevent users from “fudging” customer satisfaction numbers, one company hires a
market research firm to audit customer surveys.
• 10. Aligned. It’s important that performance metrics are aligned
with corporate objectives and don’t unintentionally undermine
each other, a phenomenon called “sub-optimization.” To align
metrics, you need to devise them together in the context of an
entire ecosystem designed to drive certain behaviors and avoid
others.
• 11. Standardized. A big challenge in creating performance
metrics is getting people to agree on the definitions of terms,
such as sales, profits, or customer, that comprise most of the
metrics. Standardizing terms is critical if organizations are going
to distribute performance dashboards to different groups at
multiple levels of the organization and roll up the results.
Without standards, the organization risks spinning off multiple,
inconsistent performance dashboards whose information
cannot be easily reconciled.
• 12. Relevant. A performance metric has a natural life cycle.
When first introduced, the performance metric energizes the
workforce and performance improves. Over time, the metric
loses its impact and must be refreshed, revised, or discarded.
 Performance Metrics

• Parameters along which information regarding

Efficiency and Effectiveness of various
processes is assessed within the organization
 Purpose of Performance Metrics
• Tracking Performance of Organizations and
Departments as well as Individuals.
• Taking corrective actions
• Determining Employee Compensation and
Rewards
• Provide right kind of information to Decision-
Makers
is the role of Performance Metrics
 Types of Metrics

• External Environment Metrics

• Internal Environment Metrics

 External Environment Metrics
Give information regarding External
Environment
• Info regarding different products and services
may be obtained from Customers.
• Information related to how a company’s
product compares with other competing
products
• How certain External Agencies rate the
product on it’s different characteristics
 Internal Environment Metrics
• Two practical examples -:
• Percentage rejects that help in the measure
of the quality of Production Process
• Number of unplanned plant shutdowns for
assessing the Plant Management
 Critical Success Factor
• The most critical information related to the
factors which drive an Organization’s success
• CSF highlights processes , tasks or outcomes that
need to be focused on so that the Organization
can be successful.
• An organization’s strategy is the starting point for
the development of Metrics which are deployed
as CSFs for the Organization.
• Eg : Domino’s differentiation is Home-Delivery
Pizza.
 Examples of CSFs for major industries
include:
• in the automobile industry - styling, an efficient dealer
network, performance
• in the food processing industry - new product
development, good distribution channels, health
aspects (e.g. low fat)
• in the life insurance industry - reputation, innovative
new policies
• in the supermarket industry - the right product mix
available in each store, having it actually available on
the shelves, pricing it correctly.
• Measured targets for CSFs are called key performance
indicators (KPIs).
 Key Performance Indicators
• These are quantified indicators that an
Organization uses to measure for achieving CSF
• To ensure that KPIs selected are aligned to the
Organization’s strategy , a tree structure is often
used to understand the different processes that
lead to a particular CSF and then KPIs are
developed for each process.
• Source- Chap 4 - Performance Management
Soumendra Narain Bagchi (Cengage Learning)
 Examples of CSF & KPIs
• An example:
• KPI = Number of new customers. (Measurable,
quantifiable) . 10 per week [KPI reached if 10 or
more new customers, failed if <10]
• CSF = Installation of a call centre for providing
superior customer service (and indirectly,
influencing acquiring new customers through
customer satisfaction).
• “what must we do to be successful?” (CSFs)
• “what indicates that we’re winning?” – (KPIs)
 Defining Performance Standards
• These are yardsticks designed to help people
understand to what extent the objectives of the
organization have been achieved.
• Standards provide raters with information about what
to look for to determine the level of performance that
has been achieved
• Standards can refer to various aspects of a specific
objective ,including quality, quantity and time.
• Quality : how well the objective has been achieved
• Quantity : how much has been produced , how many,
how often, and at what cost?
• Time : due dates, adherence to schedule , deadlines.
 Characteristics of Performance
Standards
• Related to the position : good standards are based on
the job’s key element and tasks, not on individual traits
or person-to-person comparisons.
• Concrete, specific and measurable : help in
distinguishing between different performance levels.
Concrete so that there should be no dispute over
whether and how well they were met.
• Practical to measure: provide necessary information
about performance in the most efficient way possible.
Created by taking into account the cost, accuracy ,
availability of needed data.
• Meaningful : standards are about what is
important and relevant to the purpose of
the job, to achievement of the
organization’s mission and objectives, and
to the user of the product.

• Realistic and achievable

• Reviewed regularly
 Competencies and Skills
• Measuring performance includes the
assessment of competencies
• Competencies are measurable clusters of
knowledge , skills and abilities that are critical
in determining how results will be achieved.
• Ex: written or oral communication, creative
thinking , dependability.
 Types of Competencies
• Differentiating Competencies

• Threshold Competencies
 Differentiating Competencies
• Those that allow us to distinguish between
average and superior performers
• Eg : for the position of IT Project manager,
differentiating comp is process management
ie ability to manage project activities.
 Threshold Competencies

• Those competencies that everyone needs to

display to the job to a minimally adequate
standard.
• Eg : for the position of IT Project manager,
Threshold comp is change management ie
knowledge of behavioral science, operational
and relational skills, sensitivity to motivators.
 Indicators
• To understand the extent to which an employee
possesses a competency , we measure indicators.
• Each Indicator is an observable behavior that
gives us information regarding the competency in
question.
• Indicators help in measuring Competency
• They tell whether the Competency is present or
not.
• A competency can have several indicators.
 Example
• A Professor teaching an Online course
• Indicator 1 – whether the professor shows up at
the chat room at the scheduled Date & Time
• Indicator 2 – whether the responses provided by
the Professor address the questions asked by the
students.
• Source : Performance Management
Chap 5
By Herman Aguinis (Pearson Education)