performance management - mrs nora bhatia

1. 1 Performance Management

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3. 3 Concept Performance management deals with improving organizational performance by improving employee performance Armstrong and Baron (2004) observe that performance management establishes a shared understanding about what is to be achieved and an approach to leading and developing people which will ensure that it is achieved.

4. 4 Linkage of Performance Management with Other Sub-systems Human resource planning job-person fitment criteria Industrial relations ? Joint goal setting results in improved performance � Training and development ?Basis for training needs identification ? Aids in performance improvement � Reward Management ? Identification of talents ? Effective career and succession planning ? Compensation management �

5. 5 Beginning of Performance Management System The first recorded use of the term �performance management� is in Beer and Ruh Their thesis was that �performance is best developed through practical challenges and experiences on the job with guidance and feedback from superiors�. Emphasis on both development and evaluation Use of a profile defining the individual�s strengths and development needs Integration of the results achieved with the means by which they have been achieved Separation of development review from salary review.

6. 6 Recognition�. By 1990 performance management had entered the vocabulary of HRM in the UK as well as in the USA.

7. 7 �Performance Management System�- characteristics It communicates a vision of its objectives to all its employees. It sets departmental and individual performance targets that are related to wider objectives. It conducts a formal review of progress towards these targets. It uses the review process to identify training, development and reward outcomes. It evaluates the whole process in order to improve effectiveness.

8. 8 THEORETICAL BASE OF PERFORMANCEMANAGEMENT SYSTEM Goal Setting Theory The theory postulates that the goals pursued by employees can play an important role in motivating superior performance. People examine whether their current behavior is sufficient to achieve the goals or not. If they find that their goals will not be achieved by their current behavior, they will either modify their behavior, or choose more realizable goals.

9. 9 Vroom�s Expectancy Theory MOTIVATION = VALENCE � EXPECTANCY � INSTRUMENTALITY Valence: means the attraction (or repulsion) or an outcome to the individual. (recognition V/s Cash) Expectancy: also referred to as the Effort-Performance Probability. completion of the task - probability is higher - more efforts to achieve Instrumentality (Performance-Reward Probability): Superior performance (First level outcome) will be instrumental in obtaining the desired promotion (Second level outcome).

10. 10 Porter and Lawler Model of Motivation This is a multivariate model which explains the relationship that exists between job attitudes and job performance. Elements of Porter Lawler Model The various elements of this model are as follows: Effort: Effort refers to the amount of energy which a person exerts on a job. Value of Reward: First of all people try to figure out whether rewards that are likely be received from doing a job are attractive A person who is looking for more money, for him for example, extra vacation time may not be an attractive reward. Perceived Effort Reward Probability: assess the probability of a certain level of effort - desired level of performance - kinds of rewards. Rewards: rewards namely extrinsic rewards and intrinsic rewards. Satisfaction:

11. 11 Persons outcomes Other�s outcomes Persons inputs <=> Other�s inputs

12. 12 Responses to Inequity Change Inputs: - may reduce his efforts, productivity or quality of work. Change Outcomes: salary increase or asking for a biggest office. Alter Perceptions of Self: overpaid - they may begin to �See� more responsibility and duty in their job. Underpaid - may reduce the perceived importance of the job - �it is just another job�. Change Comparisons: Specific Person creates feelings of inequity, choosing someone else for comparison purposes may result in less uncomfortable feelings. Leave Situation: permanent such as leaving the organization - increased absences or tardiness.

13. 13 WHY PERFORMANCE MANAGEMENT? (Significance / functions) clarifying the mission, vision, strategy, and values of the organization attracting and retaining talents Facilitates competency mapping, training and development needs identification, employees attain their full potential Improves organization's ability to change faster by highlighting the gap between potential capabilities and present ability.

14. 14 Strategic: Comprises the role of managing strategy implementation Communication: direction, providing feedback Motivational: Comprises the role of evaluating and rewarding behavior Purpose - PM

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17. 17 Organizational objectives and strategy Assessment of organizational performance needs Setting organizational performance expectations Establishing performance management process Measuring effective of performance management ORGANIZATION�S ULTIMATE GOAL

18. 18 E-PERFORMANCE MANAGEMENT At Nokia India, there are no performance appraisal forms. Performance criteria are set by employee in concurrence with his manager in the appraisal tool. Reviewing officer reviews the same. This tool helps to update the goal setting and achievements periodically. At PepsiCo, employees unload their performance targets on a global portal which is available to PepsiCo employees across the world. Mid-term review and final appraisals- guides employees in tracking their career plans by preparing Career Development Action Plan.

19. 19 GOAL WRITING AND GOAL PLANNING

20. 20 Identifying KRAs helps individual employees in a number ways as enumerated here: Clarify their roles. Align their roles to the organization�s business or strategic plan. Focus on results rather than activities. Priorities their activities, and therefore improve their time/work management. Make value-added decision.

21. 21 Individuals undertake the following steps to determine the KRAs for their roles: Enlist main day-to-day responsibilities/activities. For each activity, ask �Why do I do this?� Review the answers to �why� questions, looking for common themes or areas. Goal Writing and Goal Planning Identify KRAs from these themes. Share KRAs, preferably with those they report to, those they work along with, and with those who report to them.

22. 22 THE PERFORMANCE AND DEVELOPMENT PLAN Competency is underlying characteristics required to perform a given task, activity, or role. Thus competency relates to the cluster of related knowledge, attributes, skills, training, and other personal characteristics that Correlates with performance on the job Can be measured against well-established standards Can be improved via training and development

23. 23 PERFORMANCE DEVELOPMENT AND SUPPORT The emphasis should be on managing performance throughout the year - continuous monitoring and feedback and formal reviews CONTINUOUS MONITORING AND FEEDBACK continuous process of managing and developing performance standards which reflects normal good practices of direction setting, monitoring and measuring performance, providing feedback and taking action accordingly.

24. 24 PERFORMANCE STANDARDS Setting Performance Standards The quantity of outcome Its quality The time taken to produce the outcome The resources used or the cost incurred to produce it. � Two Challenging Problems Impact of environment in making achievement of targeted performance easy or difficult. Sustainability of performance standards in a dynamic, fast-changing context. � Parameters: It is sometimes easier to develop standards, which combine two or three of the parameters of quality, quality, time, and cost, e.g. twenty (quantity) corrected news columns (quality) to be composed by a Composer (cost) in a newspaper press, in a shift of eight hours (time).

25. 25 Smart Goals S: Specific M: Measurable and Mutual standard in terms of quantity, quality, time, cost, etc. A: Adjustable and Achievable.. R: Relevant and Realistic. T: Timely

26. 26 PERFORMANCE APPRAISAL: ASSESSING EMPLOYEEPERFORMANCE

27. 27 Reflecting on Performance Discussions Think about your last review: - What thoughts come to mind? What went right, what went wrong?

28. 28 DIFFERENCE BETWEEN PERFORMANCEMANAGEMENT AND PERFORMANCE APPRAISAL Performance Appraisal Systems Focus is on performance appraisal and generation of ratings. Emphasis is on relative evaluation of individuals. Annual exercise-normally though periodic evaluations are made. Emphasis is on ratings and evaluation. Rewards and recognition of good performance is an important component. Performance Management Systems Focus is on performance management. Emphasis is on performance improvements of individuals, teams and the organization. Continuous process with quarterly performance review discussions. Emphasis is on performance planning, analysis, review, development and improvements. Performance rewarding may or may not be an integral part.

29. 29 PLANNING THE APPRAISAL Before the Appraisal Establish key task areas and performance goals. Set performance goals for each key task area. Get the facts. Schedule each appraisal interview well in advance. During the Appraisal Encourage two-way communication. Discuss and agree on performance goals for the future. Think about how you can help the employee to achieve more at work. Record notes of the interview. End the interview on an upbeat note. After the Appraisal Prepare a formal record of the interview. Monitor performance. Feedback session � tell and listen, problem solving. Developing need based training program. Working out reward based incentives.

30. 30 APPROACHES TO PERFORMANCE APPRAISAL Personality-based systems: appraisal form - list of personality traits that presumably are significant in the jobs of the individuals being appraised. Such traits as initiative, drive, intelligence, ingenuity, creativity, loyalty and trustworthiness appear on most such lists. Generalized descriptive systems: Similar to personality-based systems, they differ in the type of descriptive term used. Often they include qualities or actions of presumably good managers: �organizes, plans, controls, motivates others, delegates, communicates, makes things happen,� and so on. Such a system, like the personality based system, might be useful if meticulous care were taken to define the meaning of each term in respect to actual results. Behavioral descriptive systems: feature detailed job analysis and job descriptions, including specific statements of the actual behavior required from successfully employees. Result-centered systems: sometime called work-centered or job-centered systems are directly job related.

31. 31 METHODS OF PERFORMANCE APPRAISAL Traditional Performance Rating Traditional rating involves a completion of a form by the immediate supervisor of the individual who is being evaluated. In some cases, attempts are made to accomplish the rating by a committee consisting of the immediate supervisor, the supervisor�s superior and one or two more officers of the company who are familiar with the rates.

32. 32 The Rank-order Procedure: It is effective where ten or lesser number of individuals are to be evaluated. Paired-comparison System: Under this, each individual is compared with every other individual. The appraiser is required to put a tick-mark against the name of the individual whom he consider better on the trait in question. The Forced Distribution Procedure: It is form of comparative evaluation in which an evaluator rates subordinates according to a specified distribution. Here judgments are made on a relative basis i.e., a person is assessed relative to his performance in the group he works. Newer Rating Methods

33. 33 The Forced Choice Technique: It forces to select from a series of several statements or traits, the one which best fits the individual and one which least fits, and each of these statements is assigned a score. The Critical Incident Method: This technique of performance appraisal was developed by Flanagan and Burns. Under this procedure, attempts are made to devise for each job a list of critical job requirements. The Field Review: It is an appraisal by someone outside the employee�s own department, usually someone form the corporate office or form the employee�s own human resources department. The field review process involves review of employee records, an interview with the employee, and sometimes with the employee�s superior. Newer Rating Methods

34. 34 Results-oriented Appraisal

35. 35 360-degrees Feedback or 360-degree Appraisal 360-degree appraisal has four integral components: 1. Self appraisal 2. Superior�s appraisal 3. Subordinate�s appraisal 4. Peer appraisal.

36. 36 Pitfalls of 360-Degree Feedback transparent and clear implementation of appraisal with employee accountability. Effective follow-up is the prime requirement of 360-degree feedback. Failure in follow-up may cause more harm than good. time consuming and cost consuming assessment trust and confidence Many consider this appraisal as tool for downsizing. 360-degrees Feedback or 360-degree Appraisal

37. 37 ERRORS IN PERFORMANCE APPRAISAL Halo Effect: Horns Effect: Leniency or Constant Error: Central Tendency: Spill-over Effect: Personal Bias:

38. 38 Keep the system simple, and keep the paperwork burden down. managerial tool - should not be punitive and unjust . Establish and maintain two entirely different performance appraisal systems: One geared to making pay decisions and the other designed to yield information about employee development. Once a system has been decided upon, apply it for several years; in other words don�t tinker with the system annually. Do not rely on formal performance appraisals to do the entire job in communicating on performance; day-to-day informal contacts must do the bulk of the job. Review performance formally at least once in a year and also whenever there has been a repetition of negative employee behavior PERFORMANCE APPRAISAL GUIDELINES

39. 39 POTENTIAL APPRAISAL The purposes of a potential review are: 1. To inform employees of their future prospects. 2. To enable the organization to draft a management succession program. 3. To update training and recruitment activities. 4. To advice employees about the work to be done to enhance their career opportunities.

40. 40 The following are some of the requirements and steps to be followed when introducing potential appraisal system etc. Role Description: Qualities Required: Indicators of Qualities: Organizing the System: Feedback: SELF APPRAISAL POTENTIAL APPRAISAL

41. 41 GIVING PERFORMANCE FEEDBACK

42. 42 Enhancing Interpersonal relations Johari window

43. 43 TWO TYPES OF FEEDBACK Positive/Praise Negative Feedback

44. 44 NEED FOR FEEDBACK AFTER PERFORMANCE In order to improve performance employees need: Feedback and also guidelines in reaching the next levels of performance Feedback has to be positive & corrective in nature Two important principles to be kept in view: Feedback should be given as close as possible in time to when the relevant performance occurs. The performance should be documented: performance as planned a start of the year. performance plan as modified during the year.

45. 45 Feedback session aims at development of appraise as well as appraiser. However, it focuses more on appraisee: Helping him to realize his potential as a manager or a leader etc. 2. Helping him to understand himself � his strengths and his weakness. 3. Providing him an opportunity to acquire more insight into his behavior and analyze the dynamics of such behavior. 4. Increasing his personal and inter-personal effectiveness by giving him feedback about his behavior and assisting him in analyzing his inter-personal competence. Objective/Importance of Feedback Discussion

46. 46 Timeliness Frequency Specificity Consistency Privacy Description first, evaluation second Pattern identification Confidence in the employee Advice and idea generation SUGGESTIONS TO ENHANCE FEEDBACK EFFECTIVENESS

47. 47 General climate of openness and mutuality: General helpful and empathic attitude of management: Sense of uninhibited participation by the subordinates in the performance review process Dialogic relationship in goal setting and performance review: Focus on work-oriented behaviour: Focus on work-related problems and difficulties: Avoidance of discussion of salary and other rewards:

48. 48 Different types of feedback interviews are: �Tell and Sell� �Tell and Listen� �Problem solving�. TYPES OF FEEDBACK INTERVIEWS

49. 49 PERFORMANCE COUNSELLING Conditions for Effective Counselling General Climate of Openness and Mutuality 2. General Helpful and Empathic Attitude of Management: 3. Sense of Uninhibited Participation by the Subordinates in the Performance Review Process: 4. Dialogic Relationship in Goal Setting and Performance Review: 5. Focus on Work-oriented Behaviour: 6. Avoidance of Discussion of Salary and Other Rewards:

50. 50 Counselling What Constitutes Counselling? Communication Listening Asking Questions and Responding Feedback Influencing Increasing Autonomy of the Person Helping Concern and Empathy

51. PERFORMANCE AND REWARDS/COMPENSATIONPROGRAM

52. It suggests basic reward on the value of human capital that peoplebring to organisation.

54. Enhanced Dignity and Satisfaction from Work Performed�we need you and appreciate your efforts.��Enhance Physiological Health, Intellectual Growth and Emotional Maturity�Promote Constructive Social Relationships with Coworkers

56. Organizational level: Profit, market share, customer satisfaction, employeesatisfaction,

58. How do Organizations Reward?

61. Factors Affecting Successful Variable Pay Plans�- Sufficient financial resources available- Consistent with organisation culture- Clearly separated from base pay- Clearly communicated- Performance results linked to payouts- Current, updated plans- Measurable performance- Clear, understandable plan details- Results in desired behaviours- Linked to organisational objectives.

65. 65 There are four types of team � Parallel teams supplement the regular organisation structure and perform problem solving and work improvement tasks � examples, quality circles, survey feedback teams, etc. Work teams are responsible for producing a product or providing a service and are self-contained, identifiable, work units that control the processes involved in transforming inputs into measurable outputs. They are found most frequently in manufacturing setting � examples, assembly teams, insurance claim processing teams, etc. Project teams typically involved a diverse group of knowledge workers, such as, design engineers, process engineers, programmers and marketing manager who are brought together to conduct projects for new product development etc. Management teams are the least frequently used and most poorly understood type of team. There are obvious advantages of a team of well-trained managers.

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67. 67 Gainsharing is a formula based organisation or factory wide bonus plan which provides for employees to share in the financial gains made by a company as a result of its improved performance.

68. 68 Gain sharing differs from profit sharing in at least three ways : under gain sharing, rewards are based on a productivity measure rather than profits. The goal is to link pay to performance outcomes that employees can control. gain sharing plans usually distribute any bonus payments with greater frequency (e.g., monthly or quarterly versus annually), gain sharing plans distribute payment during the current payment rather than deferring them as profit sharing plans often do.

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70. 70 Typically, goalsharing plans establish three, four, or more goals in areas such as quality, customer satisfaction, delivery time, cost, and sometimes profitability. They then tie specific bonus amounts to achieving one or more levels of performance on each of these measures. The plans typically last for a year; at the end of the year a different set of measures and standards may be established as part of a �new� plan, or the old plan may continue.

71. 71 Profit Sharing There are three basic requirements for profit sharing schemes: 1. That the profit sharing reward should bear a direct relation to the effect/result 2. That the payment should follow immediately after the efforts 3. That the method of calculation should be simple and transparent.

72. 72 Cash: A proportion of profits is paid in cash direct to employees. This is the traditional and still the most popular approach. Stock: A proportion of profits is paid in shares. Approved profit sharing share schemes (PSSS): The company allocates a proportion of profit to a trust fund, which acquires shares in the company on behalf of employees. Mixed schemes: A PSSS scheme is sometimes offered in addition to a cash scheme, or the latter is made available to staff before they are eligible for PSSS shares, or as an alternative to PSSS shares.

73. 73 An employee stock purchase plan (ESPP) is a little similar to a stock option plan. It gives employees the chance to buy stock, usually through payroll deductions over a three-27-month �offering period�. The price is usually discounted up to 15 percent of the market price. Frequently, employees can choose to buy stock at a discount either at the beginning or the end of the ESPP offering period �Phantom equity� refers to plans such as phantom stock or Stock Appreciation Rights (SARs) that provide employees with a payout, usually in cash, based on the increase in the company�s stock value. (Employees may receive stock instead of cash, and phantom stock can include phantom dividends, etc., but the basic idea is a bonus based on the company�s stock performance.)

74. 74 INTERNATIONAL COMPENSATION Objectives of the Compensation Attract and retain employees qualified for service abroad. Facilitate transfers between foreign affiliates and between home country and foreign affiliates. Establish and maintain a consistent and reasonable relationship between compensation of all of the employees of any affiliate, whether posted at home or abroad, and between affiliates. Arrange reasonable compensation, in the various locations, in relation to the practices of leading competitors. Compensation for reasonable foreign services, tax equalization, reimbursement of reasonable cost. Be cost-effective.

75. 75 Elements of Expatriate Compensation Basic Pay: Benefits: Benefits can include housing facilities, educational facilities, utilities, car, club subscriptions etc. Allowances: ?? Cost of Living Allowance (COLA): ?? Relocation Allowance: ?? Hardship Allowance: ?? Separation Allowance: ?? Clothing Allowance: Especially in extremely cold areas. ?? Added Responsibility Allowance or Status Allowance ?? Home Leave Allowance: Trips back to home country each year to renew family and business ties. ?? Spouse Assistance Allowance: To make up for spouse's loss of income.

76. COMPETENCY BASED PERFORMANCE ASSESSMENT

77. Competency It is derived from the Latin word �Competere�, which means to be suitable. The concept was orginally developed in Psychology denoting Individual�s ability to respond to demand placed on them by the environment.

78. Competencies defined A collection of characteristics (i.e. skills, knowledge and self-concept, traits, behaviour, motivation, etc.), that enables us to successfully complete a given task.

79. Iceberg Model of Competencies

80. 80 Potential Assessment Centre for Competency Mapping Group Exercises For potential assessment, the following group exercises are conducted: ?? Assigned Role Exercises: ?? Unassigned Role Exercises: Individual Exercises ?? In-Basket Exercises: Used to assess ability to plan, organize, decide, manage and delegate; ?? Learning skill Inventory/Psychometric Inventories: Used to assess ability to learn, leverage knowledge and indicate behavioral patterns; and ?? Interpersonal Effectiveness Module: Used to assess interpersonal effectiveness, excommunication skills, patience and interpersonal skills.

81. 81 Competency Gap

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83. 83 PERFORMANCE MANAGEMENT PROCESS: PITFALLSAND OTHER CONCEPTS

84. 84 COMMON PITFALLS IN PERFORMANCEMANAGEMENT PROCESS AND WAYS TO AVOID THEM Implementing performance management as a 'fad': Nobody is accountable for the process: Not integrating all aspects of performance management: Avoiding single point accountability in the process: Not planning, creating performance targets properly: Not providing adequate development support for staff: Not monitoring performance outcomes effectively: Setting unrealistic targets:

86. Perspectives

88. Thank you ! 88