Performance Management System & Performance Related Pay adopted by

Performance Management System & Performance Related Pay adopted by 30th May 2011 Chandigarh

The Agenda Performance Management System (PMS) Remuneration Committee Performance Related Pay (PRP)

Performance Management System – The Journey • Manual Appraisal Process in place – Year end Activity • 2005 – Performance Linked reward based on Corporate Performance & Individual Performance • 2007 – Introduction of new online Role based PMS • 2010 - Introduction of Role based Competencies in PMS

The Role based PMS Purpose To set up as a robust & transparent performance measurement system to reward individual performance and establish visible linkage with other HR systems

The Role based PMS Characteristics • Unique Role based • Formal goal setting process at the beginning of the year (KRAs) • Periodic review and feedback • End year assessment • Creation Individual development plan • Web based online process (in-house software) • Sharing of appraisal • Separate rating scales for Performance & Potential Smooth and timely implementation of DPE guidelines on Variable pay/PRP

Employee Categories

The PMS Framework Performance Management System Potential Performance KRAs BRs Competencies Function Based KRAs Project Based KRAs (if applicable) Behaviourial Function Based BRs Project Based BRs (if applicable)

Relative Weights for KRAs and BRs Performance Overall Rating (Performance & Potential)

The PMS Process Jan - March Organization Performance Planning Session Assessment on project associations completed within the first half of performance cycle (if applicable) Assessment on project associations completed within the performance cycle and the one’s with ongoing associations for more than three months (if applicable) Metrics and Target setting Individual Performance Planning and Potential Planning Session (KRA, BR, key factors,) IInd and IIIrd week of April Final Assessment & feedback – KRA, BR, Key Factors Mid year review & feedback – KRA, BR, key factors Identification of Development Areas IInd and IIIrd week of October Ist and IInd week of April Ongoing Project Performance Planning and Final Review Ensuring equal focus on both employee performance and potential

Performance Planning • Coming to agreement on the individual’s key job responsibilities • Develop a common understanding of the goals and objectives that need to be achieved • Discuss on the most important competencies that the individual must display in doing the job • Creating an appropriate individual development plan

Key Result Areas (KRAs) KRAs are the objectives/ goals (specific & time-bound). What a role holder is expected to achieve in this aspect of the role. Each KRA can have one or more Performance Measure KRAs have quantifiable/ measurable Performance Measures

Performance Measures • Quantifiable standards used to evaluate and communicate performance against expected results. • Focus on outputs, outcomes that can be clearly defined and for which evidence can be made available; • Outputs (measurable quantifiably) - meeting or exceeding a quantified target - financial measures – income, shareholder value - units produced or processed - time measures • Outcome (result of an effort cannot necessarily be measured in quantified terms) • - reaching a agreed standard of performance • - delivering a agreed level of service • - changes in behaviour • - acquisition and effective use of additional knowledge & skills

Baseline Responsibilities (BRs) • The essential duties (tasks & activities) that an individual must perform in his / her role in the organisation. • The same are critical for performance in the role, however they may not necessarily be directly cascaded from the Unit/ Business Sector MOU. • This would include significant responsibilities against which target setting would be difficult.

Performance Plan - Illustration

Potential (Competencies) Factors • Knowledge, skills and abilities described in behavioral terms that are coachable, observable and critical to successful individual or corporation performance. • They form the foundation of “what” capabilities are required for the successful execution of roles and responsibilities, thereby driving functional, unit and organization’s performance. • Critical Competencies for each role and their weightages have been defined through a Competency Mapping exercise.

Competencies Framework & Levels

Potential (Competencies) - Illustration • Communication • The ability to plan, deliver the intended oral and written communications with focus, clarity, effective articulation of thoughts, ideas and give feedback to create impact through formal and informal network. • Intermediate (3) • Responds timely to flow of relevant information • Actively listens and ensures no misinterpretation • Gives honest feedback • Adapt the style of communication to suit the target audience • Foster two way communication • Advanced (4) • Identifies and presence information on data that may have strong affect on others • Present several different arguments to support an idea • Listens and thinks about diverse ideas before responding • Encourages open expression of ideas and opinion • Sees non verbal clues • So patient during compelling argument • Expert (5) • Gives positive and critical feedback at the right time • Communicates strategically to achieve specific objectives • Encourages straight talk and knowledge sharing • Uses varied communication vehicle • Fosters a work environment with continuous open communication

Potential (Competencies) - Illustration

Personal Development Plan Personal development plan is a learning action plan for which the Appraisees are responsible & with the support of their supervisors and the organization. It may include formal training but, more importantly, it will incorporate a wider set of development activities such as self-managed learning, project work, job enlargement and job enrichment.

The Roles in the PMS process Appraisee Appraiser Reviewer Acceptor HR An individual who is assessed as part of the performance cycle An individual who assesses the performance of one or more appraisees that (functionally) report to him/her An individual who is responsible for reviewing the entire performance process and typically is appraiser’s appraiser An individual who typically is appraiser for a group of Reviewers and is the final signing off authority HR to function only as a facilitator in the entire process The key driver of the process Helps manage performance & provides continuos feedback and coaching Will ensure objectivity, transparency & consistency. Any escalated grievances would be settled by him/her Will ensure objectivity, transparency & consistency and resolve grievances across various Reviewer groups Will facilitate the process

Performance Related Pay Identification of High Performers Promotion Training & Development PMS Outcomes

Appraisal Review Process Appraisal are reviewed by Appraisal Review Committees (ARCs) to ensure rating distribution as the bell curve of 10 to 15% executives as ‘Excellent/ Outstanding’ and 10% graded as ‘Below Par’. Appraisal are reviewd Level wise/ Division Wise by the Committee comprising of Directors/ EDs / GMs

REMUNERATION COMMITTEE MEMBERS Note: Remuneration Committee will recommend the annual bonus/variable pay pool and policy for its distribution across the executives and Non- Unionised Supervisors, within the prescribed limits.

ELIGIBILITY FOR PRP • Executives who actually work for not less than 30 days in a financial year. • On pro-rata basis to executives who work partially during FY due to new joining/resignation/LWP /superannuation/death etc. or under suspension (not exonerated) for the applicable period. • Not admissible to executives removed due to disciplinary action.

COMPUTATION OF CORPUS REQUIRED • Admissible PRP for individual officer is computed by multiplying actual percentages as per the scheme. • Distributable PRP is as under: • 60% of PRP within a ceiling of 3% of previous year’s PBT (FY 2008-09). • 40% of PRP from 10% of incremental profit. • Total PRP limited to 5% of previous year’s PBT. Actual PRP payable: Annual BP (or pro-rata, as applicable) x MOU factor x Level factor x Rating factor x Availability factor

LEVEL-WISE CEILING Percentage ceiling of PRP increases progressively from junior level to senior level as under: TABLE 1

DISTRIBUTION OF PRP FOR 2007-08, 2008-09 & 2009-10

Thank You !

CORPUS AVAILABLE & CORPUS REQUIRED

EMPL0YEE INCENTIVE SCHEME FOR GGSR PROJECT The above incentive could not be distributed to employees due to restrictions of DPE for payment of 5% of PBT. EIL’s contract with HMEL provides for payment of incentives upto Rs.27.5 Crores based on progress on milestones achieved. Break-up of incentive amount as under: -Incentive to employees working on project: Rs.15 Crores -Incentive to balance EIL employees: Rs.10 Crores -Fees payable to EIL (10% of above): Rs.2.5 Crores

LINKAGE WITH MOU RATING The percentage eligibility levels at different MOU ratings shall be as under: TABLE 2

LINKAGE WITH INDIVIDUAL RATING OF OFFICER The eligibility of PRP, based on individual Performance Rating shall be as under: TABLE 3

Rating Scale for Evaluation of Performance (BRs) 5: Consistently Exceeds Expectations - Consistently exceeded the expectations beyond a point which deserves special mention. This is the highest rating and is given when the results put in by an individual is truly outstanding. 4: Meets/Occasionally Exceeds Expectations – Meets/Exceeded most of the set expectations by a reasonable margin This rating is to be used when a majority of the set expectations were met or exceeded and outcomes and efforts were above average. 3: Partlymeets expectations – Partly met all the set expectations as per target This rating is the average rating, when an employee partly delivers what s/he is bound to deliver. Needs to be given only when the expectations were partly met. 2: Somewhat below expectations - Met most of the set expectations When an employee misses some of the expectations, this rating is applicable. 1: Significantly Below Expectation - Failed to meet most of the expectations. When a majority of the expectations are not met, this rating is applicable Note : The use of fractions is not permitted.

Rating scale for evaluation of Potential The Rating Scale to be used for evaluation of key factors is a 5 point scale. Rating to be supported by critical incidents where the behavior was exhibited/ not exhibited Expert Encourages & influences others to display the skill 5 Advanced Almost always demonstrates behavior/ skill 4 Intermediate Often demonstrates the behavior/skill. 3 Elementary Sometimes demonstrates the behavior/ skill 2 Beginner Has not yet demonstrated the behavior/skill. 1

Road Ahead Establishment of Assessment Centre for assessing Competencies

Performance Management System & Performance Related Pay adopted by