Performance management system
Conceptual aspects of Performance System -Theoretical base for PMS
Performance = (Motivation X Ability X Environment)
i.e. Outcomes of work; what employees do
Determinants of Performance
- Declarative Knowledge – An understanding of the given tasks
- Procedural Knowledge & Skills – Knowing how to do things
- Motivation – Level of effort given to perform a task
Performance Management: It is a process of planning performance, evaluating performance, giving its feedback and counseling the employees for further improvement of their performance.
Performance Appraisal: It is a process to measure the employees’ current performance against the standard required level of performance. It focuses on the growth and development.
Three activities involved in appraisal:
- Set the performance standards
- Assess the employees’ performance
- Offer feedback to the employee further development
Objectives and Importance of Performance Management System
- It helps to identify the performance level of employees based on their actual performance achieved
- Assess the areas of improvement for employees after comparing their performance with the expected standards of performance
- Provides a clarity for further growth & development of employees based on the discussions during the appraisal interview
- Based on the result of the appraisal the training needs required for the employees are assessed.
- Succession planning can be done after identifying the top performers in an organisation
- Compensation decisions/ changes can be made based on the actual performance achieved
- Promotion of employees can be decided for the top performers after the appraisal process
- The hiring decisions can be validated and identified after the appraisal based on the group appraisal
- Sustainable improvement in the organisational performance can be achieved through PMS
- Enables employees to identify and develop their abilities and achieve their full potential
- Develop constructive and open relationship between the employees and their supervisors through the process of continuous assessment
- Provide an accurate measurement and assessment of employee performance in relation to their agreed targets and standards
- Provides a platform for the employees to express their career aspirations and concerns about their work related issues
- Provides a basis for rewarding employees financially and non- financially in relation to their contribution
An Ideal PMS – Characteristics
Strategic Alignment: The PMS should be aligned to the organisational goals, strategy and culture. If the organisation emphasizes on customer service, then its PMS should assess how well its employees are serving the customers.
Thoroughness: The system should be thorough in all dimensions such as all employees should be evaluated, all major job responsibilities should be evaluated, performance throughout the year should be included and feedback should be given not only on the positive points of the employees but also cover the areas of improvements
Practicality: The PMS should include targets which are achievable in reality, should not be too expensive and time consuming, user friendly appraisal forms designed and should evaluate the actual performance of the employees.
Meaningful: The system should be designed as such which is meaningful and useful to the employees and employer. The standard and evaluations conducted for each job should be considered relevant and important.
Specificity: The data recorded during to the appraisal should be specific to a particular job or function and not vague. If the measure fails to point out the employee positive and negative areas of performance, it is almost impossible to the supervisor and the subordinates to understand their levels of performance.
Inclusiveness: All parameters for evaluating an employee must be considered. Judgement based on only one or few criteria will be considered as bias way of conducting the appraisal.
Acceptability and fairness: Employees should consider the PMS system as acceptable, valid and reliable. It should be perceived by the employees as a fair tool of performance evaluation.
Openness: All employees should be disclosed about the entire process openly so that there is no doubt about the evaluation system. Transparency in evaluation must be maintained to gain the trust of the employees in the PMS.
Disadvantages of Performance Management System
Risk of Internal Competition: Competition starts cropping up within a team when employees are compared with each other within the same parameters. This leads to internal politics pulling down the overall performance of the team.
Favoritism: Mangers are also human beings who at times fall into the prey of doing favoritism with their subordinates which lead to internal cold war within the team
Time Consuming: The entire appraisal process needs an eye for detail in understanding every employee current performance, reason behind their drawbacks, career aspirations which delays the process.
Expensive: Implementation of technology for driving the PMS results into high expense of an organisation.
Manager’s Dilemma: Sometimes the manager’s get into dilemma in taking decision between two best performers in a team which may lead to serious dis-engagement and politics starts arising.
Job Dissatisfaction: When the employee does not get the desired hike in salary after the appraisal process, it leads to dissatisfaction in their job. This happens primarily because of the manager’s inability to convince and justify the ratings given to an employee.
Unjustified Demands of managers and employees: At times, unjustified, impractical demands or expectations are made not only from the manager but also from the employees during administering the appraisal process due to which unfair standards and ratings are given which have an adverse effect on the performance
Damaged relationship: If the appraisal interviews are not conducted properly justifying the pros and cons of an employee, it leads to an argument thereby damaging the relationship of a manager and an associate.
Increased Turnover: Increasing internal competition, manager’s favoritism and not fulfilling the expectation of the employee’s leads to dis-engagement resulting into increase in staff turnover.
System of Performance Appraisal
- Set/establish the performance standards
- Communicate the standards set to the employees
- Prepare the appraisal calendar
- Coach the appraisers
- Measure the actual performance
- Compare with the standards
- Collate the ratings
- Prepare the vitality curve(Normalize)
- Prepare the revised compensation structure i.e performance liked pay
- Provide the feedback & manage the grievances
- Take corrective actions
Detail Process of Performance Appraisal:
Stage 1 – Pre-requisites
- Knowledge of the organisation mission and strategic goals
- Knowledge of the job
Stage 2 – Performance Planning
- Finalize the performance standards (KRA’s)
- Process (SOP) for doing the job is finalized
- Goals to be achieved in each KRA ( KPI)
Stage 3 – Performance Execution
- Commitment to goal achievement
- Communicating openly and regularly with the manager
- Collecting & sharing performance data
- Observation and documentation
- Updates & feedback
- Provide resources
Stage 4 – Performance Assessment
- The subordinate completes a self appraisal and submits to the manager
- The manager also completes an assessment of the subordinate’s performance ( gets it reviewed by Senior management & HR)
Stage 5 – Performance Reviews
The supervisor and employee meet to discuss the employee’s performance and potential goals for upcoming appraisal period.
Stage 6 – Performance Renewal & Re contracting
The manager and the subordinate plan the next year’s objective and revisions necessary to take into account. Here the process begins again.
Ways to collect data for appraisal:
- Supervisors Observation
- Self Appraisal
- Customers Served
- Coaching log
Conducting an Appraisal Interview
- Encourage the employee to talk/praise
- Don’t get personal
- Be Prepared
- Interviewing skills
- Listening Skills
- Counseling skills
- Negotiation skills
Problems of Performance Appraisal
- Judgement Errors (Bias and judgement Errors)
- Poor Appraisal forms designed
- Lack of rates awareness due to improper training
- In effect organization policies/practices
- Disagreement and defensiveness
- Multiple purpose
- Halo Effect – Single factor of performance
- Strictness/ Leniency
- Recency Bias
- Personal Bias
- Contrast Effect(One after another)
Top Tips for Conducting Appraisals
- Be Prepared before the appraisal
- Give the appraisee plenty of time to prepare
- Organize the environment in which the meeting will take place
- Think about the employee’s development
- Imagine what issues they might raise
- Decide how to open the meeting
- Finish the appraisal in such a way that this relationship is developed, not irrevocably damaged
- Keep to the facts and evidence that will be the background to your discussion. Focus on the actual results that have been achieved not on emotional issues
- Seek practical, cost effective solutions that will increase the performance and motivation of your staff.
- Do not raise any issues that cannot be solved
- The appraisal should result in action points and ideas for developing the skills and performance of the staff
Methods of Performance Appraisal
Balance Score Card (BSC) : It is a performance management tool which measures the complete balanced view of the performance of the employee.
4 perspective are covered in BSC:
- Financial Measures ( Return on Investment or About Stake holders)
- Customer Measures( Customer satisfaction)
- Internal Business Measure(Process improvement)
- Innovation & Learning Perspective(Improve and create value)
360 degree appraisal: It is an appraisal method where the performance of an employee is reviewed by all stakeholders with whom the employee deals/interacts during the course of his work on a day to day basis.
The various stakeholders who reviews in a 360 degree appraisal are:
- Self Appraisal
- Superior Appraisal
- Subordinate Appraisal
- Peer Appraisal
Ranking Method – The appraiser rates the employees from to worst on the basis of their overall performance. Rating is based on either specific traits or on overall performance. E.g. Rank 5, 4, 3, 2,1
Checklist Method – The rater is given a checklist of the behaviour of the employee on job. The checklist contains a list of statements on the rater tick marks Yes or No
Field Review Method – A senior member of the HR department discusses and interviews the supervisor to evaluate and rate their respective subordinates
Graphical Ratings – The employees’ quality and quantity of the work is assessed in a graphical scale indicating the performance as below Average, average or above Average.
Paired Comparison Method – Employees are compared with each other E.g. 5 employees A B C D E. “A” compared with BCDE, the same is repeated with others. (N (N-1))/ 1 , where N is the number of persons to be compared
Critical Incident Method – Identifying and describing specific events( or incidents) where the employee did something really well or something that needs improvement
Group Appraisal – Evaluation of employees by a group of people having knowledge of the job and performance standards.
Confidential reports – The superior appraises the performance of his subordinates based his observation, judgement & intuition.
BARS(Behaviorally Anchored Rating Scales): It is a combination of rating scales and critical incidents method. These are rating scales with examples of job behaviours used to define points on the scale, objectively.
Assessment Centers: It typically involves the use of methods like tests, exercises, assignments, role playing, case studies etc which is given to a group of employees to assess their competencies to take higher responsibilities in the future.
Forced Distribution Method: Here the rater is asked to appraise the employee according to the pre-determined scale. The evaluator is asked to distribute the employees in some fixed categories of ratings like on a normal distribution curve. The rater chooses the appropriate fit for the categories on his own discretion.
MBO(Management by Objectives): The employees and the managers mutually set the goals and evaluation is done on the basis of accomplishment of these objectives.
Strategic Management and Performance Appraisal
Understanding the strategic objectives in performance appraisals can help an organisation to adapt performance evaluations to meet the business needs
The appraisal system of an organisation is aligned to the organisational philosophy. For example if the focus of the organisation is more towards customer service than only sales, in such case the incentive of the employees will be based on the exceptional service rendered towards the clients/customers. Whereas if an organisation values more into innovation, the key result areas of employees will be drafted in the areas of innovation.
Data collection on Performance information
Performance evaluation is the outcome for data collection in the performance management process. Supervisors are encouraged to gather data regarding employee performance in a systematic manner throughout the year. There are several methods of employee performance data collection.
Questionnaire: In this method the employees easily express themselves in writing about their data regarding their job performance in their own words. This method is best suited to clerical workers but it is a time consuming and laborious process to analyze the data. A large amount of data can be gathered in this process and it is a cheapest way too.
Interview: Here few representatives from the current job holders are selected to share their views, opinions either in a group or individually who share the current performance, conditions and hindrances in the work. The data is collectively organized to get a clear picture about the performance level and condition of the employees at the job.
Observation: This method is followed on the job while the employees are performing their work. The actual reality of the employee’s performance under any normal condition can be captured. This process of data collection is ideal for manual operations where work conditions and hazards can also be better described.
Self Recording of Diary: Here the employees are asked to record their daily activities in a particular diary or log book from where detail information can be availed with regards to their performance. But this method is very time consuming.
Participation: Here the reviewer performs the job himself to get a firsthand experience of conducting the job and understanding the process better.
Technical Conference: Information about the job is collected from the expert who shares the characteristics of the job.
Critical Incident: In this method, the supervisor is asked to provide instances of on-the-job behaviors of people which he considers to be note worthy. Such instances can be good or bad on the job behavior. The number of such instances can be as many as the supervisor can recall.
Checklist: This method requires the worker to check the task he performs from a long list of possible task statements. The checklists are easy for the incumbent to respond to which can be administered to large groups and easy to tabulate.
Design of appraisal forms
The appraisal forms are critical for the success of the entire performance management system. The performance appraisal is used for various purposes:
- Probationary appraisal
- Quarterly or mid-year review
- Annual appraisal
Parts of a Performance Appraisal Form
Performance appraisal forms vary widely in design. A comprehensive traditional performance appraisal will have the following components:
- Personal particulars
- Goals or Deliverable or Key Result Areas or Responsibilities
- Skills or Competencies or Performance Factors or Performance Categories
- Professional Development Plan or Development Goals
- Supervisor and Employee Comments
- Overall Ratings
Characteristics of an appraisal form design:
Simplicity: Forms must be simple to understand, easy to fill up and quick to administer. When the forms are deigned to lengthy, it becomes complicated.
Relevancy: Good appraisal forms include information related directly to the tasks and responsibilities of the job otherwise it will look as an additional administrative burden and not a tool for performance improvement.
Descriptiveness: The form should be sufficiently descriptive so that all the reviewers has a clear understanding of the performance information required.
Adaptability: This feature allows and encourages the form to be used for multiple purposes such as probationary, mid-year review, annual appraisal, potential appraisal etc
Comprehensiveness: It should include all the major areas of performance for a particular position for the entire review period.
Definitional Clarity: Desirable competencies and results should be clearly defined for all raters so that everyone evaluates the same attributes which enhances the consistency of the ratings
Conducting individual staff appraisals
Be prepared: Prepare by referring to a list of agreed objectives and notes on performance throughout the year.
Create the right atmosphere: A successful meeting depends on creating an informal environment in which a full, frank but friendly exchange of views can take place. It is best to start with a fairly general discussion before getting into any detail.
Work to a clear structure: The meeting should be planned to cover all the points identified during preparation with time allowed for individuals to fully express their views.
Use positive feedback: Where possible, reviewers should begin with praise for some specific achievement, but this should be sincere and deserved. Praise helps people to relax – everyone needs encouragement and appreciation.
Let the employee do the talking: This enables them to get things off their chest and helps them to feel that they are getting a fair hearing. Use open questions to encourage people to be expansive.
Invite self-appraisal: This is to see how things look from the employee’s point of view and to provide a basis for discussion many people underestimate themselves.
Performance, not personality: Always refer to actual events, behavior and results.
Encourage analysis of performance: Do not just hand out praise or blame. Analyze jointly and objectively why things went well or badly and what can be done to maintain a high standard in the future.
Don’t deliver unexpected criticisms: Feedback on performance should be immediate. It should not wait until the end of the year. The purpose of the formal review is to reflect briefly on experiences during the review period and to look ahead.
Agree measurable objectives and a plan of action: The aim should be to end the review meeting on a positive note.
Conducting team appraisals
It’s difficult to use the typical performance appraisal to evaluate a team. Evaluating a team requires an appraisal that measures numerous other factors such as group dynamics, leadership, interpersonal relationships, logistics and coordination. The disadvantage is that team appraisals have to be done on a regular basis to justify implementing an evaluation method that meets the needs of the supervisor who’s rating the team’s performance.
Implementation of a team appraisal system requires training for both supervisors and employees. Training prepares supervisors to measure the areas on which the team is evaluated — how the group responds to the employee who assumes a leadership role, the effectiveness of group communication, communication among individual team members and dynamics that appear only in group situations.
Conducting the actual team appraisal saves time off the entire process. Supervisors can conduct a team appraisal effectively and efficiently, provided they have all the materials they need to review the team’s performance. For example, supervisors need documentation about the origin of the project, employee roles, cost estimates, deliverables and outcomes and the amount of effort made by every employee on the team. The benefit of a team appraisal is that the company can establish set raises based on group performance and alleviate the headache of determining the percentage that individuals receive as a result of their performance.
Role of team leader/manager in Performance Management
Managers are expected to develop a high performance culture in an organization by ensuring the following:
- By communicating an organization’s mission and values to its customers and employees.
- By clearly defining the work expectations and communicating to everyone for ensuring success in the achievement of business goals and facilitating an overall performance improvement.
- By keeping the employees informed about their progress towards the achievement of goals and suggesting corrective actions for non-achievement of performance.
- By establishing a shared belief amongst the employees regarding the importance of continuous improvement in performance
- Documenting individual performance to support compensation and career planning decisions
- Providing individuals and teams with clear, constructive feedback
- Reviewing performance and delivering incentives in a fair and consistent manner
- Providing relevant learning and development opportunities
- Recognizing and rewarding strong individual and team performance
- Identifying clear career progress routes for employees
Performance Appraisal Review Checklists for Managers
In advance of the formal review meeting:
Set up the Meeting:
- Set a date for the evaluation.
- Ask employee to complete a self-evaluation (optional).
- Forward a copy of the organization’s mission, vision, guiding values and goals in advance.
- Schedule enough time for the meeting (usually one hour).
- Notified the employee of the meeting and logistics, preferably not in your office.
Prepare for the meeting:
- Review employee’s self-evaluation (optional) and job description.
- Review employee’s previous year’s goals.
- Review employee’s performance record (See Performance Observations).
- Create draft performance review in the online system.
- Draft goals to be discussed in the online system.
- Prepare a list of expectations to discuss.
- Review organizational objectives.
- Share draft appraisal with your manager for input (optional).
- Refresh memory about the employee including:
- Length of service with the department/University.
- Educational background.
- Experience background.
- Level of technical skills.
- Current projects.
- Projects the employee has completed during the review period.
- Attendance records.
The day of the performance review:
- Arranged for all calls, visitors, and interruptions to be avoided.
- Make the room comfortable, seating, lighting, and air temperature, etc.
- Employee job description.
- Draft performance review.
- List of goals and objectives created during the last review.
- Performance documentation.
- List of expectations to be discussed.
- Draft goals for next year.
- Paper and pen for taking notes
During the Evaluation
- Provide employee with a listing of your expectations for their position.
- Discuss employee’s progress toward goals and assessment of competencies.
- Identify work related goals.
- Ask employee about undocumented contributions to the unit.
- Ask employee about obstacles toward progress.
- Verify employee has resources needed to achieve goals.
- Listen to the employee, watch body language.
- Discuss the employees professional career goals
- Discuss the employees work goals
- Modify performance review if needed in the online system
- Update job description if needed and communicate changes to ER/HR
- Finalize and sign the employee performance form
- Route updated performance review to the employee for her/his signature
- Route updated and signed performance review to your manager for final signature and logging the appraisal into the performance appraisal database.
Managers are responsible for providing employees with constructive feedback on a regular basis. Throughout the evaluation period, managers give their employees ongoing support, feedback and counseling on performance issues and disciplinary and corrective action. When employee performance suffers, managers are the first ones to observe the decline. It’s their responsibility to address performance issues and determine whether an employee needs skills training or corrective action to return her to an acceptable performance level.
Quick Tips on Effective Performance Management
- Correlated with the organization’s philosophies and mission
- Cover assessment of performance as well as potential for development
- Look after the needs of both the individual and the organization
- Regular Feedback: The best way to manage performance to discuss it on a regular and informal basis, and then use these formal meetings merely to confirm and record what has been discussed regularly throughout the year
- Help create a clean environment
- Rewards linked to achievements
- Generate information for personnel development and career planning
- Suggesting appropriate person-task matching
An effective performance management system should embrace:
- Performance improvement (i.e. supporting individual, team and organizational effectiveness)
- Development (i.e. supporting the continuous development of individuals and teams resulting in continuous performance improvement)
- Managing behavior (i.e. ensuring that people are supported and encouraged to adopt behaviors that promote better working relationships)
Performance Management and Employee Development
Performance and development reviews can be conducted formally or informally which are considered as learning events and opportunities.
Prior to Reviews: Before the reviews, employees can be encouraged to think about their work experience and their future wherein they can be asked to think about any specific training from which they believe they could benefit and develop.
During the Review: During the review, employees can share to the reviewer about their aspirations in learning further, Here developmental needs can be analysed and reviewed and agreed upon based on the priority areas.
After the Review: Nominating the team members to various training programs, courses, seminars based on the agreed review can be done which will provide them an opportunity to develop and contribute significantly to the organisation.
Preparation of an employee development plan – Steps
- Identify the development needs of an employee
- Set goals for meeting these needs (personal development objectives)
- Prepare action plans for meeting the development needs
- Implement the plans
- Evaluate the effectiveness of such plans and review further
Employee developmental activities:
- On the job training
- Subscribing to courses
- Self Guided reading
- Nominating for conferences
- Upgrade the employee’s academic degrees
- Job rotation
- Sponsored membership in professional or trade organisations
Providing help and support to the employees to face and sail through the difficult times in life. At many points of time in their life or career, people come across problems either in their work or in their personal life, which starts influencing and affecting their performance by increasing the stress levels of the individual.
Counseling is guiding, consoling, advising and sharing and helping the employees to resolve their problems whenever the need for the same arises.
Benefits of Counseling
- Helping the individual to understand and help himself
- Understand the situations and look at them with a new perspective and positive outlook
- Helping in better decision making
- Alternative solutions to problems
- Coping with the situation and the stress
Mentoring and Coaching:
It is an activity of guiding an employee by a senior manager within a organisation wherein guidance towards better performance is given. The mentor/coach analyses the current and past performance of the mentee and tries to improve the performance by giving suitable guidance. The mentor also gives direction for the mentees future growth and development.
Mentoring/ Coaching Process
- Set developmental goals
- Identify developmental resources and strategies
- Implement strategies
- Observe and document developmental behavior
- Give Feedback
Performance Related Pay: Performance-related pay (PRP) is a way of managing pay by linking salary progression to an assessment of individual performance, usually measured against pre-agreed objectives. It is also known as individual PRP or merit pay. Performance-related pay or pay for performance is a salary paid relating to how well one works or performs.
Competency- based pay is when an organization pays for the extent of knowledge and variety of skills possessed by the employee, rather than for the position held by the individual within the company.
It is predominantly of two types – Pay for Knowledge and Skill Based Pay.
In the Pay for Knowledge Pay plans, the employee gets rewarded for acquiring organizationally relevant knowledge.
For example: Microsoft pays new programmers more as they learn the nuances and intricacies of Windows 7.
Skill-based pay on the other hand is more applicable in the context of manual workers.
For example: A carpenter gets paid more as he becomes more adept at making and completing storage lockers.
The significant difference in this method compared to the traditional job evaluation-based pay plans are that this is more person-oriented rather than job-oriented and employees build job competencies through experience on the job.
Team Based Pay: In a team based pay compensation structure, a portion of an employee’s wages or bonus is tied to the success of team goals, with all team members typically receiving the same or similar incentive pay. Team-Based Pay is the only way to ensure that the team is working together with shared goals that all lead to extraordinary customer satisfaction. Here the employee bonuses are based on the work of a group of employees rather than on individual contributions.
One advantage of team-based incentive pay plans is that employees are motivated to work together in a collective fashion toward a common goal. Employees have the potential to encourage one another, participate in brainstorming sessions and support each other in their efforts. This approach also has the potential to effectively use the talents of individual staff members in a group setting. The advantage is the full utilization of collective staff knowledge and experience.
Building and Managing High Performance Teams/ Creative Performance Strategies
High Performance Culture:
- Rigorous recruitment and selection procedures for check the cultural and aptitude fit
- Extensive and relevant training for continuous upgrade of skills
- Management development activities
- Incentive pay systems for teams and individual employees
- Transparent performance management systems
- Development of career ladders
- Employees commitment level building
- High level of functional flexibility
- Potentially rigid job descriptions
- Reduction of hierarchy system
- Ending of status differentials
- Heavy reliance on team structure
- Enhancing problem solving capabilities
- Building quality circles
- Innovative forms of assessment and compensation systems
- Effective information sharing between managers and members
- Developing values among the teams
- Focus towards organization’s objectives
- Achieving mutual understanding
- Providing framework for managing
- Developing people
Performance Management Prism
The Performance Management Prism is an approach to performance management which aims to effectively meet the needs and requirements of all stakeholders. It takes stakeholder requirements as the start point for the development of performance measures rather than the strategy of the organisation. It recognizes the need to work with stakeholders to ensure that their needs are met. The Performance Prism allows organisations to develop strategies, business processes and measures geared to the specific needs of all important stakeholder groups.
The Performance Prism poses five questions. The answers to these questions form the starting point for defining performance measures.
- Stakeholder Satisfaction: Who are our stakeholders and what do they want and need?
- Strategies: What strategies do we need to satisfy these wants and needs?
- Processes: What processes do we need to execute these strategies?
- Capabilities: What capabilities do we need to operate our processes more effectively and efficiently?
- Stakeholder Contribution: What do we want and need from our stakeholders if we are to develop and maintain these capabilities?
The Performance Management Prism at DHL
- What do DHL’s regular customers want and need?
Delivery Speed, Confidence in DHL, Relationship and Information Accessibility
- What strategies DHL has adopted to ensure that these wants and needs are satisfied?
Local Contact, proactive availability of information, promotes superiority of core service.
- What processes had DHL put in place to ensure that these strategies are delivered?
Customer Service Strategy, Proactive Traces, Local sales and courier network, customer access tools
- What capabilities does DHL require to ensure that these practices can be operated?
Team Work, Technology, robust network, and skills
- What does DHL want from its stakeholders to allow the above strategies to happen?
Empowerment, confidence in data and People based culture
Competency-based performance management system
Assessing competencies as a part of performance management is an important means of assisting employees in understanding performance expectations and enhancing competencies. Integrating competencies within the performance management process supports the provision of feedback to employees not only on “what” they have accomplished (i.e., performance goals), but also “how” the work was performed, using competencies. Employers who use competency-based performance management systems can quantify and qualify the work done by employees.
Integrating Competencies in the Performance Management Process
By defining the competencies needed to perform each Performance Goal / Objective: In this case, the manager and employee identify the key competencies required to achieve each performance goal / objective (typically 1 to 3 competencies per goal / objective). At the end of the performance cycle, the employee’s performance is evaluated in relation to the performance goals / objectives as well as the key competencies associated with each goal.
Implementation of Competency-based performance management system
- Implementing a competency-based performance management system typically begins by analyzing the business environment and listing the job roles needed to achieve strategic goals.
- By identifying the skills and behavior required to perform these jobs, effective HR professionals develop competency models.
- They publish these models on intranet pages, distribute newsletters and run workshops to explain how these frameworks can be used by employees for career development.
- Then, employees create their development plans aligned with the company’s mission.
- When managers conduct performance reviews and enter data into the performance management system, they can evaluate each employee fairly and consistently. Many systems also permit employees to conduct a self-assessment.
Challenges of using Competency-based performance management system
- Defining the skills and behavior required to complete a task successfully requires time, effort and coordination between multiple sources.
- Getting agreement on the relevancy of a particular competency, such as business acumen, communication or team management may require numerous meetings and discussions to get consensus among multiple company executives.
- Defining the process for assessing individuals against the model may also take time.
- Additionally, conducting competency-based performance reviews tends to be time-consuming.
Electronic PMS: Performance management with the help of electronic systems.
It is a system wherein the performance management activity can be carried out by the help of online medium. Many companies have the appraisal system online by the help of internal software where the employees can fill in the self appraisal followed by the manager’s review and submission which can be accessed by the HR team to collate for the final rating across the organisation.
An electronic/online system will offer automated workflows and approvals, making the process simpler and quicker for employees and managers to complete.
An electronic/online performance management system, if set up well, can encourage employees and managers to review performance progress regularly and ensure that objectives are updated to stay relevant throughout the year
The ‘internet generation’, now making up an increasing percentage of the workforce, typically manages their lives online. Organisations wishing to present themselves as an employer of choice to these individuals will struggle if they are still using paper-based forms, or even Word documents, to manage their processes.
Electronic performance appraisals allow a company to use one rating system for all employees, putting all the forms into a main database that allows the business to rank or cross-reference employees. They might be quicker to fill out than a paper form, which can require having a supervisor answer questions from a human resources team member.
Challenges of E-PMS:
Electronic performance appraisals are impersonal, especially if the employee receives the results on her computer with no face-to-face explanation from a supervisor. Without this personal interaction, a critical rating can seem much worse than the reviewer intended, or alternatively, a serious problem might not come across that way to an employee.
Electronic performance appraisals leave a paper trail that can be subpoenaed if there’s a lawsuit, and if company files are hacked, the possible resultant data-sharing could lead to an invasion of privacy and create liability for the company that administered and kept them.
Although the E-PMS is less time consuming but at the same time, the cost of introducing the system, managing and maintaining the system is huge. Renowned ERP software such as SAP and Peoplesoft has PMS as their modules inbuilt but to install an ERP is process centric cost driven tool.
Potential appraisal and HRM
The potential appraisal refers to the appraisal i.e. identification of the hidden talents and skills of a person. The person might or might not be aware of them. Potential appraisal is a future – oriented appraisal whose main objective is to identify and evaluate the potential of the employees to assume higher positions and responsibilities in the organizational hierarchy. Many organisations consider and use potential appraisal as a part of the performance appraisal processes.
A good potential appraisal system provides opportunities continuously for the employee to know his strengths and weaknesses. These are done through periodic counseling and guidance sessions by either the personnel department or the managers concerned. This should enable the employee to develop realistic self-perceptions and plan his own career and development.
The purposes of a potential review are:
- to inform employees of their future prospects;
- to enable the organisation to draft a management succession programme;
- to update training and recruitment activities;
- to advise employees about the work to be done to enhance their career opportunities.
Techniques of potential appraisal:
- Self – appraisals
- Peer appraisals
- Superior appraisals
- Psychological and psychometric tests
- Management games like role playing
- Leadership exercises etc.
Emerging trends in performance appraisal
Performance Management Redefined: Today, Performance Management is one of the principle tools executives, line managers, and employees are able to use to achieve their collective goals. The change in application of Performance Management has been enabled by software that provides management with a way to achieve its operational and strategic goals. Performance Management has been redefined and now receives much greater buy-in from line management as it assists them in achieving the collective goals of the organisation and their own departmental goals.
Full time Performance Management: It provides a mechanism where both managers and employees are able to make relevant notes on performance related issues throughout the year. This function is often referred to as a Performance Diary. When the appraisal is conducted, both are better prepared and have a full record of achievement (or areas for development and coaching) throughout the year. This feature also promotes an ongoing dialogue between managers and employees and ensures that both are on track to achieve their goals for the year
Low Administration Performance Management: Today, Performance Management applications can be fully integrated with the payroll system which means data entry is only required in payroll. All changes made to payroll are automatically made to the Performance Management application. This substantially reduces costs related to administration, enabling HR to assist line management with more strategic issues and matters of compliance.
Increased Integration of HR Functions: There is a clear movement to integrate HR functions into more holistic, strategic approaches to human capital management. Some integration opportunities are Aligning employee goals (ECM) with corporate goals (CPM), Linking reward and recognition programs to performance, Targeting learning and development toward performance gaps and Identifying skills and competencies of top performers for retention and succession planning.
Retention: Organisations have now made the link between Performance Management and retention. In the war for talent, employees want to be: i) appreciated – Regular more frequent reviews address this need. ii) Developed – Development planning addresses this issue.
Given that automated Performance Management systems help to ensure compliance, employees see reviews and development planning happening regularly and managers can no longer defer these activities indefinitely.
Succession Planning: Once organisations have Performance Management systems in place, they can leverage the data collected to implement Succession Planning systems. These systems allow HR to identify Successors for critical and non critical roles and High Potential staff who are then put through accelerated learning and development programs
360 Degree Appraisal: Organisations are increasingly using feedback from various sources such as peer input, customer feedback, and input from superiors. Different forms with different formats are being used to obtain the information regarding the employee performance.
Team Performance Appraisal: The recent strategy adopted by the companies is to measure both the individual and the team performance. Sometimes, team based objectives are also included in the individual performance plans.
Automation of PMS: Connecting the traditional PMS system into automated version leads to elimination and duplication of data, and streamlining reporting processes is a priority for many organizations. An online performance management system helps the managers and employees to access systems anytime, anyplace, on-demand and connects with other HR systems such as payroll etc.
Legal issues associated with performance appraisals
The appraisal system is a common target of legal disputes by employees involving charges of unfairness and bias. An employee may seek the legal recourse to obtain relief from a discriminatory performance appraisal.
Appraisals should not be used to discriminate against employees on the basis of race, religion, age, gender, disability, marital status, pregnancy, or sexual preference.
- Documentation of poor performance, in and of itself, is not sufficient protection. Along with the documentation, there needs to be evidence of COMMUNICATION with the employee. That’s why any documentation needs to be signed by the employee, as an acknowledgement that he or she has been suitably informed.
- Performance appraisal results should be fair, accurate and supported by evidence and examples. For instance, if an employee has poor interpersonal skills and is harming morale and group performance, the supervisor might keep a log of incidents. Co-workers may be interviewed and their views and reactions recorded. The nature and effects of the employee’s behavior should be documented.
- An employee should have the opportunity to comment on their appraisal result, to express their agreement or otherwise, and to appeal the result or at least request a review by supervisors.
- Appraisals results should not be used as the sole basis for promotion, remuneration or termination decisions. A broad range of information should be considered, in which the employee’s appraisal results may be significant but not necessarily conclusive
- Appraisals should be balanced, recording information on both the good and the bad aspects of an employee’s performance (as far as possible).
- Employees who receive a poor performance appraisal result should be given a reasonable chance to improve. Generally speaking, it is a bad idea to dismiss, demote of otherwise penalize an employee because of a single adverse appraisal result (depending of course on the nature and seriousness of the conduct that underlies the poor result).
- Retain records. If an employee believes they have been dealt with unfairly, they may have rights to instigate legal action years later. In the case of poor performers, or persons dismissed or demoted, or those who resign or leave in less than happy circumstances, it is suggested that their appraisal records, together with critical incident logs and other relevant documents.
- Managers and supervisors required to conduct staff appraisals should be trained in appraisal principles and techniques. Conducting performance appraisals is one of the most demanding of all supervisory activities. It is a sensitive and sometimes controversial task which, if mishandled, can cause serious damage to employee relations and morale.
- Inconsistency comes into play during the design of the performance evaluations. If different forms are used for every employee, the room is opened for discrimination claims. Instead, consideration of using the same form and the same standards, if not the same goals, for every employee that occupies the same position is safest.
- Appraisal results should be treated as private and confidential information. Record storage should be secure and controlled. Only people with an approved need to know should have access to an employee’s performance appraisal information.
Managing Virtual Employee’s Performance
Virtual Employees: These employees are physically not present in the premises of the organisation. It is the best alternative to hiring a local employee. It provides low-cost and skilled virtual employees who work from a remote location.
With advancements in technology, it is possible to outsource many of the responsibilities that an organisation to someone in another part of the world. The remote worker can handle these tasks and make sure that the job is being taken care in the way the parent organisation would have managed them.
Ways to manage virtual employees:
Setting the ground rules: In order to ensure efficient employee performance from the virtual workers, it is important that to set the groundwork from day one. Employees should have a dedicated working space and working hours. Within that space and hours, they are expected to be within reach of their phones or computers. Transparent goals and deadlines are essential to share a common expectation. This allows the virtual employee the flexibility to get their work accomplished within your guidelines.
Some firms allow more flexibility than others, but the company’s policy needs to be clearly stated so that employees can be held accountable. Most of the policies in the handbook should be all inclusive for both virtual workers and in-house staff.
Provide some “face time”: For both the sanity of the employee and the manager, there needs to be some “face time” throughout the week. Since many of the employees may be scattered throughout the world, this face time does not need to be in person.
Instead webcams and video conferences can be sued for meetings and make it a requirement. General communication tends to be through email. In a typical office setting, walking to the next door of the co-workers is possible for clarification on an email. This is not easy with a virtual employee. Instead brief meetings via webcam can be scheduled to get any clarification that is needed. Webcams allow you to see expressions and overall tones that might have been lost in translation. Skype is widely used by many for webcam conferencing which is free of cost. It also has the ability to have multiple people on webcams at the same time sharing their cameras.
Reporting: Adequate reporting measure must be established since monitoring on a spontaneous basis is not possible. “Basecamp” software is used for project management system to track the flow of projects as well as to track time. The employees (and contractors) log their time and their tasks into Basecamp and link any critical files with those tasks. This puts everything into a central place and allows for easier managing. Google Documents is also a great place to share and setup report templates. Dropbox is an additional tool that can be used for file sharing. The staff “drops” their daily reports and files into a folder. Those files are then immediately uploaded to their manager’s computer. Daily, weekly and monthly reporting is absolutely essential. Getting consistent reports eliminates any worries that someone may not be putting in their time.
In-person meetings: This is the one that is most often overlooked and is a cause for concern if overlooked for too long; in-person meetings. Having virtual employees is great, but spending at least a few days a year meeting and bonding in-person is essential.
Many people also work behind computers and webcams to make the final work into a success, hence such in-person meetings helps to appreciate the partners. Yearly company retreat somewhere fun focusing on team-building and bonding helps the virtual employees feel bonded with the company.
Forget Micromanaging: Building trust among the virtual workforce without micromanaging is essential which means no constant phone calls, hourly progress reports or frequent requests for updates. The faith in their abilities, confidence upon the virtual employees will allow each worker to do their job without your interference.
Training for virtual employees: Virtual employees must be trained correctly in the area of organisation values, mission, goals as well as the standard operating procedure. In case of a technical upgrade, investment in the proper equipment for them to their job is essential. Even though the virtual employees work in another location or from home, they are still part of the core team and must be availed with the same conveniences as the parent organization’s staff.
Participative Management: The virtual workers complete the organization’s team. Including them in all decisions creates a sense of belonging among them towards the organisation. Their input and opinions are an integral part of the core business.
Be Aware of Cultural Differences – The virtual employees may reside in another country. Understanding the various cultural nuances such as dealing with the Chinese New Year, a Filipino “yes”, or the Indian circular head nod is essential to manage a business across the globe.
Six sigma and bench marking
Six Sigma is a disciplined, data-driven approach and methodology for eliminating defects in any process. It was introduced by engineer Bill Smith while working at Motorola in 1986. Jack Welch made it central to his business strategy at General Electric in 1995. Six Sigma seeks to improve the quality output of process by identifying and removing the causes of defects (errors) and minimizing variability in manufacturing and business processes. A six sigma process is one in which 99.99966% defect free products or service carried out (3.4 defective features / million opportunities).
Benchmarking is the process of comparing one’s business processes and performance metrics to industry bests or best practices from other industries. The benchmarking process consists of identifying the best firms in the same industry, or in another industry where similar processes exist and comparing the processes of those studied to processes within one’s own business.
Benchmarking is the process of comparing current methods against a standard (ex ISO 9001), then measuring against world class performers and then combining your process and theirs to create the best possible performance.
Six Sigma Benchmarking is the most practical and cost-effective way of introducing best practices to an organization. The idea behind this is to improve overall customer satisfaction, and increasing the quality of company practices and methods is one step toward achieving this goal.
The Six Sigma Benchmarking Process
- Determine current practices
- Select the problem area.
- Identify key performance indicators.
- Understand how your process work and how other group’s processes work
- Select performance criteria based on priorities
- Identify best practices
- Measure performance
- Determine a world class leader
- Find an external partner
- Analyze best practices
- Collect information & data
- Evaluate & compare
- Model – make significant changes to improve current practices