Performance Management

System
Performance management system

A performance management system is a mechanism for tracking the

performance of employees consistently and measurably. It allows the
company to ensure that employees and departments across the
organization are working effectively towards achieving the business’
strategic goals.
 Key definitions
Goals: These describe the overall aim of an organization or department or
employee. Goals are more often set for an organization.
Objectives: There are measurable components that help drive the organization
to its overall goal.
Key Result Areas: KRAs are defined objectives that are vital to the performance
of an individual employee, a department, or an organization.
Key Performance Indicators: A KPI is a quantifiable metric that helps assess
whether an organization, department or employee is meeting certain objectives.
KPIs are often the “proof points” associated with Key Result Areas.
 Examples
KRAs and KPIs for Sales Representatives
Examples of KRAs for sale representatives include the following:
Increase number of sales from previous period.
Increase sales revenue from previous period.
Increase outreach to prospective customers.
Examples of KPIs for sales representatives include the following:
Number of new sales contracts signed
Dollar value for new sales contracts
Growth or decline, in net sales from previous period
Monthly outreach contacts
 Example contd..
KRAs and KPIs for Human Resources Managers
Examples of KRAs for human resources managers
Improve job vacancy by advertising to attract more qualified candidates.
Increase rate of acceptance for job offers made.
Decrease HR costs per new hire.
Decrease employee turnover.
Examples of KPIs for human resources managers
Qualified applications received per advertised job vacancy
Rate of acceptance of job offers
Total HR costs per hire
Employee turnover rate
NTPC LIMITED
PERFORMANCE MANAGEMENT SYSTEM
 Objectives of NTPC’s PMS -
P A C E – Performance And Competence for Excellence

To accomplish overall organisational vision and mission by linking individual

performance to company objectives
To facilitate fulfilment of individual aspirations
To build a culture of performance
To encourage two-way communication between appraiser and appraisee
To evaluate the potential of the appraisee to assume higher responsibilities in
the organisational hierarchy
To translate future skill requirements of the organisation into individual
development plans
To identify high performers and recognise them through rewards and
incentives
Organizational and departmental goals
 PACE is a five-step process
• Identify KPAs, • Joint review of
constituents, performance
weightages, • Document
Step 1
measures and changes in
Step 2
targets KPAs if any
• Identify Performance Mid-year • Document
functional and Planning Review mid-year
managerial review
competencies for discussions
the appraisee

PMS • Assessment of
Process KPAs,
• Communicatio Competencies,
Annual
n of score Feedback Values and
Assessment
• Developmenta Potential by
l feedback appraiser
Step 5 • Training and
Step 3
Normalisation Development
Process Plans
• Review by
Step 4 reviewing officer
PACE Cycle (Important Dates)

Stages of PACE E1 to E5 E6 & above

Performance Planning 1st to 25th January 1st to 25th April
Mid Year Review 1st to 15th July 1st to 15th October
Annual Assessment 15th Dec to 7th Jan 1st to 25th April
Normalization 15th to 31st January 1st to 25th May
Communication of scores 7th February 31st May
 Step #1: Performance Planning
KPA Setting Process Process Steps
Set KPAs
Corporate Plan MOUs • KPA setting for all appraisees in
Company consultation with the reporting
Goals officer (appraiser)
• KPAs to be set by referring to the
Initiatives Unit Goals
KPA Directory and taking inputs
Functional / from the MoU targets, functional
Departmental Goals plans, individual responsibilities
and cascading of KPAs from the top
Special Tasks Individual Goals • The KPAs, once finalised, to be
signed off by the appraiser and the
appraisee
Why is it critical?
Identify Competencies
 Parameters for performance measurement are pre- • Functional competencies for the
defined appraisee to be identified and
 Objectives are prioritized written in the PMS form by
 Individual performance is enhanced by clear referring to the Competency
Directory
definition of deliverables
• Managerial competencies to be
 Role of individuals is clarified within overall identified from the prescribed set
organizational context on the PMS form
 Type of KPAs Define Job Families Define Roles Develop KPAs

Numeric
◦ PLA, Availability, Profit, Cost, Inventory
Time/ Deadline
◦ Projects, Clearance, Maintenance, Land Acquisition, Accounts, Budgets,
Engineering
Negative
◦ Complaints, Grievance, Accidents, IR problems, man days lost, Rejection,
etc.
PMS would comprise assessment on four parameters with different
wieghtages for various levels
SNo. PMS Parameter E1-E3 E4 E5 E6-E8 E9
1. KPA 80 75 65 50 50

2 (a) Functional 10 10 10 10 5
Competency
Assessment
2 (b) Executive/Managerial 05 05 10 15 15
Competency
Assessment
3 Core Values 05 05 05 15 20
Assessment
4 Potential Assessment Nil 05 10 10 10

Total 100 100 100 100 100

• For executives in lower grades, there is higher weightage on KPAs and functional competencies as the
there is higher focus on achieving the immediate functional tasks
• The weightage on managerial competencies and values increases for an executive as the grade increases
because the role requires achieving business goals by managing work of other employees
Performance Management System

adopted by
Indian Oil Corporation Ltd

15
 Appraisal Cycle

Performance
Planning

April - June

April-May

Mid Year review &

Feedback and Review
feedback

October
Ongoing monthly review
and feedback

Final Performance
Appraisal
April

16
System Design
The relative weightages are as follows:
 HI grades
KRA Competency Value Potential
45% 20% 15% 20%

 G grade
KRA Competency Value Potential
50% 20% 15% 15%
 DEF grades
KRA Competency Value Potential
55% 20% 10% 15%
 ABC grades
KRA Competency Value Potential
60% 15% 10% 15%
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Stretch in target setting
Dimensions of Stretch
• Target relative to previous years achievement
• Dependence of uncontrollables
• Complexity
• Skill requirements
• Need for Innovation

18
Performance Appraisal-Soft Skills
 Values

19
Performance Appraisal-Soft Skills
 Potential
•Ability
to shoulder higher responsibilities
Junior Management Senior Management

Adaptability to change Managing Change

Collaboration Boundary Management
Cost Consciousness/ Entrepreneurial
Resource utilisation Leadership
Dependability Enhancement of Quality
Quality of Work / Output and Output

20
Calculation of Final Score – An
Illustration
PMS Calculation Sheet
DGM Level
KRA Weight Rating Stretch Individual KPI Score
50% (weight * rating * stretch)
KPI 1 20% 3.5 0.85 0.595
KPI 2 30% 4.7 0.75 1.058
KPI 3 40% 4.2 0.95 1.596
KPI 4 10% 2.0 0.60 0.120
KPI Score 3.369

Competency Weight Rating Individual Competency Score

20% (weight * rating)
Competency 1 33% 3 0.990
Competency 2 33% 4 1.320
Competency 3 33% 3 0.990
Competency Score 3.300

Values Weight Rating Individual Values Score

15% (weight * rating)
Values 1 33% 4 1.320
Values 2 33% 3 0.990
Values 3 33% 4 1.320
Values Score 3.630

Potential Weight Rating Individual Potential Score

15% (weight * rating)
Potential 1 33% 4 1.320
Potential 2 33% 5 1.650
Potential 3 33% 4 1.320
Potential Score 4.290

Overall score 3.532

Overall Score= (KPI rating * KPI weight + Competency rating * Competency weight + values rating * Values
weight + Potential rating * Potential weight ) 21
Thank You