Performance Management and Reward Systems

INTRODUCTION: PMSR-1,2

Caselet
One of the employees, who reports to you, Sunamika, is over confident and seems to think she is destined for great things at the company where you work. The problem is that you don t agree with Sunamika s assessment of her potential. Nor does your boss. Sunamika has an outgoing personality and generally gets along well with people. However, she has a tendency to get on everyone s nerves in the department with her hour-long personal phone calls. She also has a tendency to blow events out of proportion. For example, she was quite upset with the comments you made during her last performance review. You reviewed a number of her shortcomings concerning missed deadlines and substandard work, yet she had an excuse for every example offered. Since that discussion, she has avoided talking to you on matters that do not require your direct approval. Recently another staff member has informed you about what Sunamika has been spreading about you to others that you feel threatened by her and have reacted by giving her an unfair performance review. You are concerned about the news and feel that it is just another example of Sunamika s lack of readiness for promotion. Of particular concern is that of late her work has been slipping and she no longer is motivated to do her best.

Caselet: Siemens Standard Drives

Employs 430 people in the Electronic Control equipment business (design & manufacturing) Its change programme involved process re-engineering over a 9 month period.

The new management team and HR manager restructured the organisation Operations are now based on 9 production teams of 20 people each Each of the 9 teams is accountable for its output and operation
If a team member is under-performing, the team leader is empowered to remedy the situation (counselling dismissal). 10% of employees left voluntarily The team leader s role is vital. They are in charge of: team building running quality meetings and morning briefing meetings selection, training & appraisal of team members Team working values: openness, honesty, trust, respect.

Siemens Standard Drives-Contd.

The team leader s job involves performance management
setting individual performance objectives for team members two way dialogue explains to each member how they can make progress through the performance-related pay structure Employees who do not add value are held accountable: disciplinary procedures (including dismissals) are seen to operate

Efficiency & customer responsiveness have improved.

Even today:
Majority of organizations employ a basic process This approach produces significant organizational gaps: Historically organizations defined strategy and objectives and the measurement of employee and organizational performance as completely separate processes Little connection between learning and developmental functions and the people management processes

Integrated Performance Management System is a key component of emerging requirement to tie the strategy and organizational processes to HR processes

 Annual Performance Appraisal of workers began with advent of Industrial Revolution in late 18th century, when idea of division of labor was recognized Gained prominence from Scientific Management perspective Sole purpose of performance appraisal was to assess the productivity of a worker retrospectively with a view to find ways of improving individual performance PA process was primarily judgmental and practical in natureno attention paid to human aspect of worker Approach changed after Hawthorne studies, which established that the relationship between fellow workers played a significant role at work

Gradually, it was felt that productivity of workers can be increased by skillfully maneuvering both: External factors, including organizational structure Internal factors- the psychological wellbeing of workers MBO approach advocated by Peter F. Drucker gained much popularity- as it took both factors
into consideration and claimed to have overcome the trait rating problem

1970S- Renewed interest in revising performance appraisal process- practitioners frustrated by negative effect of both: Merit rating- focused on aspects that individual could not change,(such as personality traits) MBO (focus on the end results-objectivity)
On account of subjectivity, inconsistency etc and exclusion of the process in between such as communication, and training

Nickols (2000)- advocated the scrapping of the formal performance appraisal system because an honest, fair, valid and objective assessment of all employees is literally impossible Concept of Performance Management(M. Beer and R. A. Ruh-1976) gradually evolved, addressing both performance appraisal and consequently training and development measures

Conceptual evolution of performance management between 1991 and 1997

FROM TO

System Appraisal outputs Reward oriented Ratings common Top down Directive Monolithic owned by HR professionals Profession/cadre based

Process Joint review Outputs/inputs Development oriented Less rating 360 degrees feedback Supportive Flexible owned by users Service based

Adapted from: Armstrong and Baron (2000)

Performance Management

Performance management is a means of getting better results from the organization, teams, and individuals by managing performance in line with organizational strategy It requires:
Knowing what priorities managers and their employees should be focusing on Having clear targets and goals that focus on priorities Measuring actual performance against agreed targets and goals Identifying and remedying performance problems

Employees were forced to endure a once-a-year paperwork exercise of performance appraisals Not very effective Dreaded by employees and managers alike According to Healthfield(2000)- Second only to firing an employee, managers cite performance appraisal as the task they dislike the most Healthfield believes that the process of performance appraisal, as traditionally practiced, is fundamentally flawed for the following reasons:
Incongruence with value based, vision driven, participative work environment Smacks top down, autocratic mode of management Biased mostly with recent events Mostly based on hunches and opinions Managers usually delay appraisals because they find it uncomfortable- subordinates feel de motivated because their annual rise, normally tied to appraisals gets delayed o Managers avoid giving honest feedback, because they will need to justify both way extremes, which they find uncomfortable o The appraisee becomes defensive because he views his performance, normally much above than actually appraised o Tendency of managers to rate mostly outstanding , because performance appraisals tied to salary increases o o o o o

Employees and managers were evaluated on traits such as:

yDependability yPunctuality yLoyalty

not on their accomplishments

Stephen Mouten: Performance Appraisals are administered by human beings, most of whom are not experts in giving and receiving feed back His reasons, why performance reviews are so disliked by managers and managees alike:
1) 2) 3) 4) 5) Fundamental premise: PA system based on work of behavioral scientists conducting tests on rats, dogs and pigeons. Unlike the animals, people think, develop their own logic, have their own views of life- there is no comparison one size fits all : one or two forms- do not fit for all kind of skills and job situations The rating system: higher ratings given to maintain a positive work group climate Supervisor as judge and jury: natural resistance of people to be judged by others They are waste of time

 Other common problems and complaints:

 Appraisal events take away too much of the appraiser manager s productive time- not seen as part of normal managerial function, but as imposition from HR department  Appraisals are poor instruments for managee comparison- making HR decisions and actions inconsistent and inequitable- an arguments gets rooted that personnel appraisals are carried out subjectively  Value and biases of appraising managers tend to function as standards  Managees don t know what constitutes performance- what precisely is expected of them

Performance Appraisal versus Performance Management

Performance Appraisal
Periodic process of evaluating how well employees perform their jobs and then communicating that information to the employees

Performance Management
Ongoing porocesses used to identify, encourage, measure, evaluate, improve, and reward employee performance

Personality trait rating forms have been replaced with more objective measures of performance focusing on jobrelated outcomes and behaviors Employees and supervisors jointly list specific objectives to be accomplished during the appraisal period Performance measurement levels (Meet and Exceed) are defined

How PfM is different from appraisals?

Pfm operationalizes supervisory role of a manager to maximize performance Not something that line managers have to do in addition to normal chores Properly implemented, it saves managerial time

THE NEW APPROACH

What is new in PfM?

PfM is another way of envisioning the totality of manager s function oProvides systematic dimension to managerial activities- highlighting their mutual interrelatedness and interdependence PfM: oHolistic as a system oRelevant sub systems are in place and accepted oOrg. philosophy and human environment is conducive of high morale oManager is oriented and equipped with high performing attitudes and leadership skills oRepresents concrete form of participating dyadic relationship Effective PfM can set into ,motion: oA tremendous ripple effect releasing productive managee enthusiasm oHigh retention oImproved client satisfaction

Performance means outcomes achieved or accomplishments at work- the actual contribution of an individual or teams to organization s strategic goals
oLike shareholders satisfaction oClean image oEconomical sustainability

J.V.Campbell (1990) believes that performance as behaviors, should be distinguished from its outcomes, which can be facilitated or hindered by systemic factors G.B. Brumbach (1988): o views performance by encompassing both behavior and results
oConsiders behaviors and outcomes in their own right, which can be judged apart from results. Performance is an impact

Manager s role can be seen in three parts: oBeing: concerns the competencies of managee relevant to performance- means
managee has prepared his/her mind oDoing: focuses on managee activities that are variably effective at different levels in the organization
Ideas are funny little things. They won t work unless you do

oRelating: emphasizes the nature of relationships with members, the role networkvertical, horizontal or otherwise

Performance: realizing one s potential

Performance Framework
Managee Potential- is determined when a set of tasks is allocated to a managee, or certain performance expectations are otherwise set Task related activities and contents: are what a managee or her supervisor indulge in to achieve the allocated tasks or meet the expectations in the given task environment Managee performance or effectiveness, is what the managee actually achieves. Performance in a role is the extent to which a managee achieves the purpose for which the role has been created

Framework to Understand Role Performance

 According to Carkhuff(1983): The great source of an age of Productivity is human processing or thinking. Human productivity will expand in direct proportion to the processing capabilities of the human brain. Human processing emphasizes not only what we knew but how we come to know it and we grow by sharing it. An organization s productivity is a function of integration between organizational productivity systems and individual performance systems

Performance management is the process through which managers ensure that employee s activities and outputs contribute to organizational goals - (Louis R.
Gomez & David B. Mejia 1999)

Performance management is a strategic and integrated process that delivers sustained success to organizations by improving the performance of the people who work in them and by developing the capabilities of individual contributors and team - (Michael Armstrong 2000) Performance management involves thinking through various factors of performance, identifying critical dimensions of performance, planning, reviewing, and developing and enhancing performance and related competencies - ( Dr. T.V.Rao
2004)

Performance management may be defined as a planned and systematic approach to managing the performance of individuals ensuring their personal development and contribution towards organizational goals- (Ronnie Malcom 2007) Competency based Performance Management System may be defined as a preferred strategy that critically assess competencies and links competencies, enable assessment of skills required for the successful performance of a given job and helps managers to conduct better evaluation by rating specific behaviors

 It is the systematic process by which an agency involves its employees, as individuals and members of a group, in improving organizational effectiveness in the accomplishment of an agency s mission and goals. It is about performing-not just appraising- emphasizes the reality of a manager s work life, rather than concepts of management Most organizations have begun to define and assess managee performance through measurable indices and visible behaviors that spell high performance They also emphasize development of managee potential in terms of systematically analyzed competencies that are essential for effective job performance- present as well as future

Performance Management
PfM is an integrated set of techniques designed to improve employees performance through: 1. Setting clear objectives for individual employees that link to strategic goals 2. Formal monitoring and review of progress toward these objectives 3. (a) Reinforcing desired behaviour through rewards (b) Identifying training & development needs

The Performance Management Cycle

Stage 1. Set objectives

Stage 2. Measure performance Stage3. Feed back results Stage 4. Process outputs (e.g. training & development, rewards)

 Continuous: having three subsystems:

Planning managee performance and development Monitoring managee performance and mentoring managee development Annual stocktaking, sequentially feeding, sometimes overlapping each other

Flexible: Manager and managee have sufficient flexibility to design their own process Future oriented: rather than retroactive Participatory: to address performance as well as development needs Aim at measuring manager s delivered performance against planned: targets, standards and performance measures or indicators Developmental: concerns with manager s personal attributes and behavior as critical inputs to performance process Provides framework- in which managers must support their managees to succeed and to win

Performance Planning
Identifying relevant accountabilities and standards Selecting measures and indicators Setting performance criteria (or objectives or expectations or standards ore goals or targets) Communicating expectations Getting employee commitment Refers to setting performance criteria (or objectives or expectations or standards or goals or targets) Refining indicators and defining measures Assessing organizational resource allocation Ensuring optimal utilization of organizational resources Refers to working towards the performance expectations determined at performance planning level. Means resources required to perform as per planning , is available and ensuring optimal utilization of organizational resources Analyzing performance data Evaluating performance of employees against performances plans Administration of performance based rewards Refers to systematic evaluation of the employee s performance on the job and his potential for development. An objective method of judging the relative worth or ability of an individual employee in performing his task against performance plans Providing feedback and counseling Problem solving Developing a regular reporting and monitoring cycle Providing appeal mechanism Annual stock taking Refers to continuous overseeing of employee performance, giving feedback of results, and providing support and carrying out correctional and developmental activities in order to ensure continual alignment with set performance objectives as identified at planning level

Performance Managing

Performance Appraisal

Performance Monitoring

The Performance Management Process

Parts of PfM: - occur in definite sequence

    Planning: done at beginning of the year Managing: measurement, resource allocation Monitoring and mentoring: right through the year Stock taking/apprising: at end of the year

All of the phases are dynamic and they continuously interact- they also work in action research mode
 Plans are made at the outset- reviewed periodically to be reality- tested for relevance and feasibility in changing context  Criteria and standards used during appraisal, while stocktaking, are largely developed and rehearsed during the year

   

Individual roles, their description, indices for monitoring performance and performance standards naturally cascade from organizational mission, goals, strategy and operational plans Since PfM attempts to improve quality of collaboration among people in the organizationrole wise performance plans and expectations must flow from both Managee performance and development plans feed into the monitoring and mentoring activities Managee s potential for the assigned role reveal itself on performance: here manager can determine, what combination of individual managee s unique competencies and skills will help him develop and grow in the organization and where the critical gaps or opportunities for helping the managee realize full potential, are

 Ties individual performance objectives to the Organization s goal Promotes partnership between supervisor and employee Promotes ongoing open communication Promotes professional development Establishes framework for future growth Provides employee with ongoing written feedback

Performance Management System (PMS)

Consistent with the strategic mission

Effectively documents performance

Beneficial as a development tool

Effective Performance Management System

Viewed as fair by employees Useful as an administrative tool

Is legal and job related

Performance Management Linkage

Purposes of Performance Management

Three broad purposes include: Strategic purposes: helps the organization achieve its business objectives Administrative purposes: the ways in which the organization uses the system to provide information for day-to-day decisions about salary, benefits, and recognition programs Developmental purposes: serves as a basis for developing employees knowledge and skills

What thoughts, questions, challenges, or ideas do you have?