1. Performance Management & Appraisal Systems Prof. Suman Singh

2. Why do we need Performance Management (PM)? A means of providing a more integrated & continuous approach to managing performance. PM is based on the principle of management by agreement / contract rather than by command PM emphasizes development and the initiation of self managed learning plans . PM also facilitates the initiation of integration of individual and corporate objectives . In fact PM plays a major role in providing for an integrated & coherent range of human resource management processes which are mutually supportive and contribute as a whole to improving organizational effectiveness

3. OVERVIEW Time as a resource is limited, work & life is fast paced & dynamic, multitasking is the norm To be effective one has to use the available time and resources to the best advantage. This is best done when one is clear about the expectations from self & what are we going to be held accountable for.

5. What is the Purpose Of Any Organization ? To Get Results By measuring the performance. How will it get to know whether the targeted results have been achieved or not?

7. WHAT IS PERFORMANCE MGT.? Successful Organizations happen by design !!! Set of activities to ensure that organizational goals are met consistently, efficiently & effectively. The focus is on achieving results – useful products, services for both internal as well as external customers.

11. Characteristics Of Performance Management A management tool for managing Driven by corporate purpose & values Focused on workable solutions Only interested in those things one can do something about and get a visible improvement Focus is on changing behavior rather than paperwork It’s about how we manage people – it’s not a system. Sears case

13. Performance Management Linkage Copyright © 2005 Thomson Business & Professional Publishing. All rights reserved.

14. The Meaning Of Performance – usually defined as achievement of results/objectives. But performance is a matter not only of what people achieve but also of how they achieve it. High performance results from appropriate behavior, especially discretionary behavior, and the effective use of the required knowledge, skills and competencies. Performance management must examine how results are attained because this provides the information necessary to consider what needs to be done to improve those results. Thus performance management covers the achievement of expected levels of competence as well as objective setting and review.

16. The meaning of alignment - This means that everything people do at work leads to outcomes that further the achievements of organizational goals. “ The real concept of performance management is associated with an approach to creating a shared vision of the purpose & aims of the organization, helping each employee understand and recognize their part in contributing to them, and in so doing , manage and enhance the performance of both individuals and the organization. Alignment can be attained by a cascading process so that objectives flow down from the top and at each level team or individual objectives are defined in the light of higher level goals. It should also be a bottom-up process , individuals and teams being given the opportunity to formulate their own goals within the framework provided by the defined overall purpose, strategy and values of the organization. Objectives should be AGREED not set, and this agreement should be reached through the open dialogues between managers and individuals throughout the year i.e. it should be a work of partnership in which responsibility is shared and mutual expectations are defined.

17. Managing Expectations - by creating shared understanding of what is required to improve performance and how this will be achieved by clarifying and agreeing what people are expected to do and how they are expected to behave. The agreements are used as a basis for measurement and review and the preparation of plans for performance improvement and development. Performance Management and discretionary behavior - PM is concerned with the encouragement of productive discretionary behavior. Discretionary behavior refers to the choices that people make about how they carry out their work and the amount of care , effort, innovation and productive behavior they display.

21. Performance Appraisal is like an Employee’s Annual Report Card !

23. The scope of PA is………. …… ..Past performance.

24. Performance Appraisal vs. Performance Management Performance Appraisal Performance Management Top-down assessment Joint process through dialogue Annual appraisal meeting Continuous review with one or more formal reviews Use of ratings Ratings less common Monolithic system Flexible process Focus on quantified objectives Focus on values & behaviors as well as objectives Often linked to pay Less likely to be a direct link to pay Bureaucratic-complex paperwork Documentation kept to a minimum Owned by the HR department Owned by line managers

25. OBJECTIVES OF PERFORMANCE APPRAISAL / MANAGEMENT SYSTEMS

27. PA/PMS – Strategic purpose Most important purpose is to help to management to achieve strategic business objectives. The PA & PM systems reinforce behaviors consistent with the attainment of organizational goals. This is managed by linking the organization’s goals with the individual goals and thereby communicating what are the most crucial business strategic business initiatives. link

29. Informational Purpose Performance appraisals serve as an important communication device for informing employees about how they are doing and provide them with information on specific areas that may need improvements. Performance appraisals also provide information regarding the organization’s and the supervisor’s expectations and what aspects of work the supervisor believes are most important.

30. Developmental Purpose Feedback forms an important part of effective performance evaluation process. Managers can use feedback to coach employees on an ongoing basis. Feedback allows for the identification of strengths and weaknesses. Feedback also identifies the causes of performance deficiencies Feedback can be useful for an employee to individualize their career paths, thus taking care of the individual long term goals

31. Organizational Maintenance Purpose The performance management / appraisal systems provide information to be used in workforce planning. Workforce planning comprises a set of systems that allows organizations to anticipate and respond to needs emerging within & outside the organization, to determine priorities, and to allocate human resources where they can do most good. Talent Inventory – an important component of any workforce planning effort. It is information on current resources(e.g. skills, , abilities, promotional potential, assignment histories). Other purposes served under this head are assessment of future training needs, evaluating performance achievements at the organizational levels, evaluating the effectiveness of the HR interventions at various levels.

33. The approach to Performance Appraisal impacts the objectives? 2 Approaches *The aim is to evaluate opportunity factors- physical environment, available resources and social processes e.g. leadership effectiveness. The objective is to appreciate the impact of work systems on individual performance. TRADITIONAL SYSTEMS* Guiding value Attribution to individual Attribution to System Primary goals Control, documentation Development, problem solving Leadership practices Directional, evaluative Facilitative, coaching Appraisal frequency Occasional Frequent Degree of formality High Low Reward practices Individual Orientation Group orientation

34. Issues and Problems in Performance Appraisal

35. Issues in Performance Appraisal WHO SHOULD DO PERFORMANCE APPRAISAL ? WHEN SHOULD PERFORMANCE APPRAISAL BE DONE? PROBLEMS IN PERFORMANCE APPRAISAL WHAT IS TO BE APPRAISED?

37. Samples Of Appraisal Factors Used In India. ITC A.C.C. LTD. I.O.C. Ltd. Sandoz (I) Ltd. U.C.I.L. 1. Ability to plan, delegate, control & Coordinate. 1. Ability to take decision 1. Job Knowledge 1. Quantity of work 1. Job knowledge 2. Knowledge of job 2.Leadership 2. Quality & dependability 2. Availability at work. 2. Work putput3.Drive 3. Clarity about objectives 3. Organizing ability 3. Quantity of work 3, Ability to learn 3. Drive 4. Cost consciousness & Result 4.Understanding & conformity of policy 4. Planning, Organizing & Controlling 4. Knowledge of work 4. Ability to handle people 5. Power of expression, written & verbal 5. Judgment 5. Developing people 5. Initiative 5. Judgment 6. Decision Making 6. Employee relationship 6. Cost consciousness 6. Dependability 6. Ability to communicate 7. Resourcefulness & industry 7. Delegation 7. Intelligence & decision making 7.Personality 7. Creativity 8. Cooperation 8. Ability to communicate 8. Leadership 8. Tidiness 8. Organizing abilty. 9. Manner & general Bearing 9. Sociability 9. Initiative & original thinking 9. Attendance 10. Dealings & relations with colleagues 10. Ability to run meetings 10. Attitude & cooperation 11. Leadership 11. Knowledge & execution of responsibilities 11. Integrity 12. Courage to disagree & to reason tactfully 12. Attitude to work 13. Comprehension 13. Loyalty 14. Use of discretion & judgment 14. Initiative

38. WHO EVALUATES ? PEER GROUP SUPERVISORY PANEL SUBORDINATES SELF -EVALUATION 360 0 FEEDBACK EXTERNAL

39. When To Appraise? Whenever the need is felt As per agreed interval On the anniversary date of joining

40. Challenges Of Performance Evaluation Determining Evaluation Criteria Create A Rating Instrument For the purpose of evaluation, the criteria selected should be in quantifiable or measurable terms Lack Of Competence Errors In Rating & Evaluation Resistance Many errors based on the personal bias like stereotyping, halo effect (i.e. one trait influencing the evaluator’s rating for all other traits) etc. may creep in the appraisal process They should have the required expertise and the knowledge to decide the criteria accurately. They should have the experience and the necessary training to carry out the appraisal process objectively. The purpose of the Performance appraisal process is to judge the performance of the employees rather than the employee. The focus of the system should be on the development of the employees of the organization. The appraisal process may face resistance from the employees and the trade unions for the fear of negative ratings. Therefore, the employees should be communicated and clearly explained the purpose as well the process of appraisal . The standards should be clearly communicated and every employee should be made aware that what exactly is expected from him/her.

45. INDIVIDUAL EXERCISE Write down a detailed Job analysis of a Bus driver / Primary school teacher/ nurse

46. JD for a Trailer Truck Driver Operates gasoline – or diesel-powered truck or truck tractor equipped with two or more driving wheels and with four or more driving wheels and with four or more forward speed transmissions, which may include two or more gear ranges. These vehicles are coupled to a trailer or semitrailer by use of a turntable (fifth wheel) or pintle (pivot) hook. Drives over public roads to transport materials, merchandise, or equipment. Performs difficult driving tasks such as backing truck to a loading platform, turning narrow corners, negotiating narrow passageways, and keeping truck & trailer under control, particularly on wet or icy highways. May assist in loading and unloading truck. May also handle manifest, bills of lading, expense accounts, and other papers pertinent to shipment.

47. the concept of speed of motion is a notion straight from calculus, It provides a way for us to construct relatively simple quantitative models of change, and to deduce their consequences. With this you get the ability to find the effects of changing conditions on the system being investigated. By studying these, you can learn how to control the system to do make it do what you want it to do. Calculus, by giving engineers and you the ability to model and control systems gives them (and potentially you) extraordinary power over the material world. Abpplication of calculus – Rate Control — The ability to time your movements or the movement of a piece of equipment in anticipation of changes in the speed and/or direction of a moving object or scene.

48. Historical Review Of Performance Appraisal The earliest traces of ‘performance review’ were discovered as early as AD 221-265 in China. The emperors of the Wei Dynasty had an ‘imperial rater’ whose task was to evaluate the performance of the official family. Centuries later, Ignatius Loyola (1491-1556) established a system for formal rating of the members of the Society of Jesus (the Jesuits) The first formal monitoring systems, however evolved out of the work of Frederick Taylor and his followers before World War I. Rating for the officers in the US armed services was introduced in the 1920s and this spread to the UK, as did some of the factory based US systems

49. Historical Review Of Performance Appraisal 1950s – Merit rating came to the fore in the USA and the UK. 1960s – Merit rating was sometimes rechristened performance appraisal . This period also saw the emergence of MBO. 1960s & 1970s – MBO could not settle down firmly. This era witnessed the simultaneous experimentations with the critical incident technique and the behaviorally anchored rating scales ( BARS). 1970s – saw the emergence of a revised form of results-oriented performance appraisal, which is still in existence. This decade also saw the first ever usage of the term performance management. 1980s – The latter half of this decade witnessed performance management becoming a recognized process.

51. 1. From System To Process In 1991 PM was regarded as a ‘system’, a sort of mechanistic set of techniques that could be applied rigidly to any organization, with the guarantee that it would deliver results in the form of improved performance. It is now generally seen as a integrated set of processes concerned with the ways of managing performance. The emphasis is much more on ‘how’ the management of performance is carried out- ‘what’ the people involved do and ‘how’ they do – than on a set of prescribed procedures and practices to be followed by all concerned.

52. 2. From Appraisal To Joint Review In the early 1990s performance management still carried the earlier baggage of the traditional performance appraisal scheme, in which the appraisal meeting was an annual event involving top-down and unilateral judgments by ‘superiors’ of their ‘subordinates’. However, since then this activity has come a long way and is now increasingly seen as a continuous process , involving reviews that focus on the future rather than the past, and for which key words are ‘ dialogue’, ‘shared-understanding’, ‘agreement’ and ‘mutual commitment’

53. 3. From Outputs To Inputs In 1991 the emphasis was still on objective –setting and the appraisal of results against goals i.e. outputs; a hangover from the discredited MBO system. The difference now is that there is a realization that a fully rounded view of performance must embrace how people get things done as well as what gets done i.e. inputs as well as outputs. This means using the mixed model of performance evaluation considering skills, competence as well as the results.

54. 4. From PRP To Development Personal development plan (PDPs) had not been heard of in 1991. Yet in 1997 – 1998 they became a major feature of the performance management processes. This should not give an impression that they are always effective as per expectation. However, the philosophy of planning personal development as part of the overall performance management process has now become firmly embedded in the policies and practices of a large percentage of the progressive organizations

55. 5. Less Prominence Given To Ratings. In the earlier days performance appraisal was synonymous with performance rating. The need for rating was often justified by the need to have a basis for PRP decisions. Yet a quarter of the organizations who participated in the IPD survey did not have any rating system. The focus group research revealed considerable hostility to ratings shared by people at all levels in the organizations concerned. Increasingly, people are realizing that ratings ‘denigrate the PMP’

56. 6. From Top-Down Appraisal to 360 0 Feedback. The use of 360 0 feedback is still fairly small (11% of the IPD survey respondents). However, the interest in 360 degree is growing as the value of obtaining feedback from a number of different sources is becoming recognized.

58. 8. From Monolithic To Flexible Traditionally PA has been a monolithic and bureaucratic system, imposed on line managers by the personnel departments. Elaborate forms, which once filled were soon forgotten. Today there is much less bureaucracy. PM is seen as a tool to be used in association with ones team members. The implementation /application of the system is unique and tailor made to suit each organization’s individual circumstances. it is desirable to define & communicate certain principles of the approach that is likely to produce best results. It is often desirable to provide structure and guidance built around some fairly simple forms & procedures. It is important to help everyone to learn about how they can gain the most benefit from PM.

59. 9. Ownership by HR To Ownership by The Line The best practice organizations when contacted all stressed that they were concerned with the management of performance as the responsibility of the line managers in conjunction with their teams.

60. Research Findings On Views About Performance Mgt. The field research conducted by means of FGDs and attitude surveys revealed much more positive attitudes to PM than the stereotyped academicians & commentators would lead us to expect. Both managers and individuals on whole liked the PRP. The phrase ‘quality time’ recurred frequently. They liked the opportunity it gives for structured discussion, the opportunity to get away together from the routine of everyday working lives. The FGD participants thought both parties were gainers. Very commented that they found the exercise a waste of time. However, there was hostility around the rating idea.

63. EVALUATION METHODS Graphic Rating Scale Forced Choice ACRs Critical Incident Techniques Behaviorally anchored Rating Scales Check Lists INDIVIDUAL EVALUATION MULTIPLE PERSON EVALUATION Ranking Paired Comparison Forced Distribution 360 degree Feedback Mgt. By Objective Assessment Centers Rating scales Check Lists Forced Choice Bars Forced Distribution Critical Incident ACRS Assessment Centers MBO 360 0

64. GRAPHIC RATING SCALE Oldest and the most commonly used. The rater is presented with a set of traits and is asked to rate employees on each of these traits. The number of traits vary from few to several dozen. The ratings can be in the form of adjectives or on a continuous scale The adjective ratings range from none to maximum and are assigned points. In some cases greater weight may be given to traits that are regarded as more important. … .contd.

65. GRAPHIC RATING SCALE - sample Name _____________________ Department_________________Date___________ CRITERIA OS GOOD S FAIR US Productivity (Volume of acceptable work under normal conditions) Work Quality (Thoroughness, neatness & accuracy) Job Knowledge ( clear understanding of the facts or factors pertinent to the job) Personal Qualities (Personality, appearance, sociability, leadership, integrity) Cooperation (Ability & willingness to work with associates, Supervisors & subordinates towards common goals Dependability (Conscientious, thorough, accurate, reliable with respect to attendance, lunch periods, reliefs etc.) Initiative (Earnestness in seeking increased responsibilities, self-starting, unafraid to proceed alone.

66. Individual Exercise Develop a guiding description for the following traits : Integrity Leadership Agile Organized Rating scales Check Lists Forced Choice Bars Forced Distribution Critical Incident ACRS Assessment Centers MBO 360 0

71. FORCED CHOICE (cont…) Instructions: Rank from 1 to 4 the following sets of statements according to how they describe the manner in which −−−−−−−−−−−− (Name of Employee) performs the job. A rank of 1 should be used for the most descriptive statement & a rank of 4 should be given for the least descriptive. No ties are allowed. _______________ Does not anticipate difficulties _______________ Grasps explanation quickly _______________ Rarely wastes time _______________ Easy to talk to _______________ Leader in group activities _______________ Wastes time on unimportant things _______________ Cool & calm at all times _______________ Hard worker

74. A BARS EXAMPLE FOR POLICE PATROL OFFICER Job Knowledge, Awareness of procedures, Laws & Court Rulings & changes in them. 1 2 3 4 5 6 7 8 9 VERY LOW VERY HIGH RATER _________________________________ RATEE______________________________ Could be expected to follow correct procedures for evidence preservation at the scene of crime. Could be expected to know, he could break down a locked door while in hot pursuit and thus arrest a fleeing suspect Could be expected to occasionally have to ask other officers about point of law Could be expected to misinform the public on legal matters through lack of knowledge

76. MANAGEMENT BY OBJECTIVES The concept of ‘Management by Objectives’ (MBO) was first given by Peter Drucker in 1954. It can be defined as a process whereby the employees and the superiors come together to identify common goals, the employees set their goals to be achieved, the standards to be taken as the criteria for measurement of their performance and contribution and deciding the course of action to be followed. The essence of MBO is participative goal setting, choosing course of actions and decision making. An important part of the MBO is the measurement and the comparison of the employee’s actual performance with the standards set. Ideally, when employees themselves have been involved with the goal setting and the choosing the course of action to be followed by them, they are likely to fulfill their responsibilities.

78. A SCHEMATIC DIAGRAM OF AN MBO PROCESS The superior & subordinate conduct mtgs. to define key tasks of the subordinate & to set a ltd. Number of goals The participants set objectives that are realistic, challenging, clear & comprehensive. The superior after consulting with the subordinates establishes the criteria for assessing the accomplishment of the objectives. Dates for reviewing immediate progress are agree d upon and used The superior & subordinate make the required modifications in the original objectives A final evaluation by the superior is made and a meeting is held with the subordinate in a counseling, encouraging session. Objectives for the next cycle are set by the subordinate after consulting with the superior , keeping in mind the previous cycle & future expectations

79. AN MBO SAMPLE Occupation In Organization Type Of Organization Objective Statement Sales representative Medium: Petrochemical firm Contact six new clients in West AVA region and sell to at least two of these new clients within the next semiannual cycle. Product Manager Large: Food processing plant Increase market share of creamy peanut butter by at least 3.5% before next objective meeting(nine months from today) without increasing costs by more than 2% Skilled machinist Small: Job shop Reduce flange rejects by 8% by August 15 Accountant Small: CPA firm Attend 2 auditing seminars to improve and update audit knowledge by the end of summer( September 15)

80. MBO SAMPLE (CONTD…) Occupation In Organization Type Of Organization Objective Statement Plant manager Medium: Assembly-line plant Decrease absenteeism of operating employees from 18.9% to under 10% by January 1. Engineer Large: Construction company Complete power plant tower project within 30 days of government-specified target date (November 10).

81. UNIQUE FEATURES & ADVANTAGES OF MBO The principle behind Management by Objectives (MBO) is to create empowered employees who have clarity of the roles and responsibilities expected from them, understand their objectives to be achieved and thus help in the achievement of organizational as well as personal goals. Some of the important features and advantages of MBO are: Clarity of goals – With MBO, came the concept of SMART goals i.e. goals that are: Specific Measurable Achievable Relevant and Time bound.

82. UNIQUE FEATURES & ADVANTAGES OF MBO The goals thus set are clear, motivating and there is a linkage between organizational goals and performance targets of the employees. The focus is on future rather than on past. Goals and standards are set for the performance for the future with periodic reviews and feedback. Motivation – Involving employees in the whole process of goal setting and increasing employee empowerment increases employee job satisfaction and commitment. Better communication and Coordination – Frequent reviews and interactions between superiors and subordinates helps to maintain harmonious relationships within the enterprise and also solve many problems faced during the period.

84. 360 0 Feedback/ Review

88. Self appraisal gives a chance to the employee to look at his/her strengths and weaknesses, his achievements, and judge his own performance. Superior’s appraisal forms the traditional part of the 360 degree performance appraisal where the employees’ responsibilities and actual performance is rated by the superior. Subordinates appraisal gives a chance to judge the employee on the parameters like communication and motivating abilities, superior’s ability to delegate the work, leadership qualities etc. Peers’ Appraisal Also known as internal customers, the correct feedback given by peers can help to find employees’ abilities to work in a team, co-operation and sensitivity towards others MULTI-RATER FEEDBACK (360 0 )

89. EMPLOYEE SUPERVISOR SUBORDINATE PEERS TEAM MEMBERS CUSTOMERS SUPPLIERS / VENDORS SCHEMATIC DIAGRAM OF 360 Degree Appraisal

90. Self assessment is an indispensable part of 360 degree appraisals and therefore 360 degree Performance appraisal have high employee involvement and also have the strongest impact on behavior and performance. It provides a "360-degree review" of the employees’ performance and is considered to be one of the most credible performance appraisal methods. 360 degree performance appraisal is also a powerful developmental tool because when conducted at regular intervals (say yearly) it helps to keep a track of the changes others’ perceptions about the employees. A 360 degree appraisal is generally found more suitable for the managers as it helps to assess their leadership and managing styles. This technique is being effectively used across the globe for performance appraisals. Some of the organizations following it are Wipro, Infosys, and Reliance Industries , Cummins India Ltd. etc. MULTI-RATER FEEDBACK (360 0 )