Performance Management System

1. Objective of the Policy

The objective of the Performance Management System ( PMS) is to link Performance to pay by aligning
Organizations performance to Divisional performance. PMS shall be used for

o In assessing individual performance

 Determining salary increments
 Determining Individual bonus and Divisional bonus
 Promotion and separation
 Identifying training needs of the employee.
 Identifying high performing employees who can be provided training or opportunities for larger roles &
responsibilities in the organization.
 To align individuals with Organizations Values.

2. Scope
The scope of this system is limited to evaluations of Staff & above grade employees .

3. Evaluation Cycle
The frequency of evaluation for all permanent employees would be as follows:

GRADE MEASURE EVALUATION CRITERIA MONTH

OF EVALUATION
Managers and KPI & KRA Quarterly April, July, Oct, Jan
Above
Dy Managers to KPI & KRA Half Yearly Oct, Apr
Executives
Staff Personality Traits Yearly Apr
Personality Traits of Executives and above grade will be assessed in April

Employees on contract would be evaluated either by this system or by a specific evaluation method to suit their
specific role & responsibility they have been contracted for . Trainees are excluded form the evaluations.

4.1 .Target Setting

A. Key Performance Indicators ( KPI )

Key Performance indicators are the mandatory business results the division has to achieve in that financial
year. These are derived from the divisional targets, decided once a year, at the beginning of the year ( in
April) . Four main KPI’s for any division would be Sales, Collections, Profitability, Order Booking.
Additional KPIs could be like Adherence to Production cycle, Rework Index , Customer Satisfaction,
Activites related to Business Excellence etc. The fixing of number of KPI’s for each grade depends on the
role and performance expectations of that role.

They are finalized as under.

o Divisional Budget will be finalized in consultation with the top management.
o Divisional budget shall be the basis of fixing KPI for that division.
o All KPIs are to be measurable & supported by documents.
o The Divisional KPIs will be set during beginning of the financial year in the month of April. The annual
divisional KPI will be broken in quarterly KPI, wherever applicable.
o Divisional KPI will be broken down to Departmental KPI.
o Departmental KPI form a base to set individual KPI. Individual KPI will be set after discussions with
individuals by the HODs.
 Parameters KPI/ Target Period Bands Corresponding
KRA rating
Sales KPI 150cr Apr – Jun o 45 cr o 5
Annually, o 42 cr o 4
40 cr for Qtr o 40 cr o 3
o 38 cr o 2
o below 36 o 1
cr
Reduction in Production costs KPI 5 % reduction Apr – Jun o 5% o 5
over the o 7% o 4
budget o 10% o 3
o above
10%
Adherence to production cycle KPI As per defined Apr – Jun o 100% o 5
time cycle time. o 95% o 4
o 90% o 3
o 85% o 2
o below o 0
80%
Examples of – KPIs for Head Manufacturing

B. Key Result Areas ( KRA )

These are the key initiatives to be taken by the department for improvements, growth, knowledge up
gradation, etc, which can change quarter to quarter, depending on the focus area for that
department/individual. KRA’s will be defined on time bound basis. i.e quarterly. And can continue for the
succeeding quarters. Examples: Completion of MOST implementation in Production, Cycle time reduction
in winding, reducing non moving inventory stock, internal customer satisfaction, NCRs etc. All KRA’s have
to be measurable within a predefined period and supported by documents. The fixing of number of KRA’s
for each grade depends on the role and performance expectations of that role.

KRA’s would be set on the basis of the following factors

o Specific initiatives that would result into time or cost saving.
o Specific initiatives /improvement opportunities for individuals.
o All KRA’s have to be measurable.

Parameters KPI/ Target Period Bands Corresponding

KRA rating
Training on MOST implementation KRA For Production Apr- Jun o Completed o 5
supervisors o Not o 0
Completed
Readiness of complete material KRA 4 days from Apr- Jun o 4 days o 5
including accessories for dispatch the completion o 5 days o 4
of testing o 5 days o 3
o 7 days o 2
o Above 7 o 0
days
 Examples of KRA’s for Head Manufacturing

C. Values
The company has defined certain values, which it wishes to live by. Personality traits will primarily reflect how
an employee performs on those values, which in turn build the organizational values.

o Personality traits will be evaluated annually.

o Evaluators will ensure that improvement areas are communicated to the employees during the
evaluation.

Parameters V Definition Period Bands Corresponding

rating

Anticipates and meets customer needs,

delivers what has been promised and o Excellent o 5
create a rewarding experience in each o Good o 4
Customer Centric V1 customer interaction. Apr- Mar o Average o 3
o Poor o 2
o Fails to o 1
meet
expectatio
ns

Dependability to complete tasks with o Excellent o 5

Reliability V2 promptness and accuracy and minimum Apr- Mar o Good o 4
follow up. o Average o 3
o Poor o 2
o Fails to o 1
meet
expectatio
ns

Example of PTs for Head Manufacturing

4.2.Data Capturing
Data capturing for KPI and KRA would be done through automated system on the company’s intranet. It would
be the responsibility of divisional Heads and HODs to ensure that the accuracy and timeliness of KPI/KRA
review. Supporting documents should be given to HR after evaluation for their record and for internal audit.

5.1.Performance Evaluation :
Performance Evaluation are meant for continuously tracking the performance of the business and the
individuals. Performance Evaluation will be done as per the Evaluation Cycle for different grades. HR
department would facilitate the evaluation of employees across the organization.. During the first week of each
Quarter, HR department would fix evaluation schedule with Divisional & dept heads to evaluate the KPI &
KRAs for Manager and similarly for Dy. Managers on Half yearly basis.
It will also be responsibility of the HODs, Divisional Heads and individual employees to ensure that evaluations
are completed within the first two weeks of the first month of the Quarter.
o The evaluation forms would be available in the system and evaluators would need to enter the employee
code & password to get their homepage in the system.
o After completing evaluation of the previous quarter, the evaluators will set new KRA’s for the next
quarter, however KPI ’s would continue remain same for all quarters.
o Evaluators would then enter the actual data & select the bands against each parameter in form and
system would automatically calculate the corresponding ratings based on band defined for each
measure.
 o MIS of actual data which is entered in the system is collected by HoD and sent to HR for record and
sudit.
o Once the evaluation is done by the evaluator it shall be approved by ( one level higher than evaluator)
for approval. After completing evaluation of the previous quarter the evaluators will set new KRA’s for
the next quarter, however KPI’s would continue remain the same for all quarters.
o In case the form is not approved by the approver ( one level higher than the evaluator) for approval then
they should discuss the issue and accordingly modify the ratings and approve it. Once the form is
approved it would be submitted to HR department for further processing.
o HR department would then use the different report options available in the system to generate the
required MIS.
o Top Management will review the performance of the Divisional Heads. Divisional heads will review
performance of Departmental heads.. Departmental Heads will review the performance of individuals on
KPI and KRAs
o These meetings would form the basis of understanding the key points for achievement and non-
achievement of targets.
o All KPI & KRAs evaluated will go for approval to one level higher . Similarly KPI & KRAs set for the
next quarter need to have approval from one level higher authority of evaluator.
o Staff grades are assessed on Personality Traits basis annually and are not part of the Performance linked
increments and Variable Bonus.
o The process of evaluating and setting KPI KRA is online, where the system has all data and ratings on
parameters can be noticed online.
o The detailed procedure on how the online system operates is explained in the software system.
o Top management decision or view is final

5.2.Evaluation Scale
Employee performance will be graded on the ratings on a scale of 1to 5 ( 1 lowest to 5 highest) Based on the
rating employee will be classified as
o From 4.5 to 5.00 - ‘ A’ Grade
o From 3.5 to 4.49 - ‘ B’ Grade
o From 2.5 to 3.49 - ‘ C’ Grade
o From 0 to 2.49 - ‘ D’ Grade
6.Critical Reviews
If an employee gets “D” grade on his/her KPI and KRA measures consecutively for two quarters he/she will be
up for critical review. Divisional Head or Management will conduct critical reviews. The meetings will be
concluded with the defined action plan for improvement to to monitor the progress of the employee. A written
communication to the concerned employee will be given by HOD & HR. who will be under purview of critical
review. Four consecutive critical reviews may lead to recommendation for separation from HOD and HR.
Management would then take appropriate decisions on such employees.

7.Training Needs Assessment

Training needs assessment would be conducted using the performance of employees during the year. Training
needs at the organizational would be identified at the beginning of the financial year by the management based
on the overall business objectives of the year.
HR would collate the areas of improvement in the performance where key KPIs have not been achieved and also
the list of employees who have less than 2.5 rating on personality traits. HR along with HODs and Divisional
Heads would then finalise the training programs and training calendar for the next financial year.
Leadership development training would be applicable for people identified as fast tracker in the organization.
HR at the beginning of the financial year would decide the list of programmes and the people who would attend
the programs.

8. Linkage of Performance Evaluation to Pay System

The performance evaluation process is linked with the reward system. The reward system consists of following three
components and is applicable to Executives and above grade only.
 8.1 Increment Pay
  Increment Pay
Rating Calculation 50% of KPI rating + 30% of KRA rating + 20% of Personality Traits
Payments Annually
Increment Range 5% to 20% of salary

* Salary is combination monthly pay components appearing in salary slip excluding perks.

(Increment Pay Chart)*

Ratings Grade % Increment
Between 4.5 & 5.00 A 20%
Between 3.5 & 4.49 B 15%
Between 2.5 & 3.49 C 10%
Up to 2.49 D 5%

8.2 Bonus Pay

  Bonus Pay
Rating Calculation 70% of KPI rating + 30% of KRA rating
Payments Annually
Bonus Range 3% to 15% of yearly salary depending on the grade
Pay Eligibility Yearly Average KPI rating should be min 2.5 out of 5

(Bonus ratings chart)*

Level Ratings Upto President DGM to Dy.Mgr Executives

< 2.49 0.0% 0.0% 0.0%
2.50 to 2.99 7% 5% 3%
3.00 to 3.49 9% 6% 4%
3.50 to 3.99 11% 7% 5%
4.00 to 4.49 13 % 8% 6%
4.50 to 5.00 15% 10% 7%

8.3 Divisional Bonus Pay

Over and above the individual bonus, the top management may decide to offer additional bonuses to the entire
division, if the division exceeds the targeted profitability. This will be the sole discretion of Top management to
decide if the division deserves an additional divisional bonus. The amount, the mechanism, the distribution
would be decided by top management.

9. Other Performance Related Queries

 9 .1 Linkage of Performance Evaluations to Promotion Decisions
o Promotion decisions will be based on the rating of employees on the Performance Evaluation
System which will be considered during April.
o The promotions will happen in a span of 1 year to 5 year in which employees should have
outstanding rating in KPI, KRA and personality Traits. Priority will be given for “A” grade
employees in the evaluation scale.
o The number of years for eligibility of promotion is defined keeping in view that even a good
performer will require time to attain confidence and maturity to move to the next level in the
organization.
o Years of promotion eligibility are indicative in nature. The excellent performer may get promoted
in shorter duration. All promotion decisions will be taken by Divisional Heads , HR &Top
Management.

9.2 Incase of Transfer of Employee

Incase of transfer of employee from one department to another, the ratings would be carried forward. And
where an employee has spent more than 3 quarters would be considered.
Bonus is entitled for those employees who has continuously worked for 2 qtrs. Increments would be paid to
such employees who has served for minimum of 3 quarters in the company.

9.3 Incase of New Joinee

Incase of new joinee, it would be the responsibility of HOD to ensure that the KPI and KRAs for the new
joinee are finalised within 1 month of joining. The approver who will be one level higher than the HOD
should approve the KPI/KRA, which are set by HOD.

The new joinee should be evaluated for the quarter only if he/she has served at least 2 months in that
quarter. Otherwise he/she should be eligible for the evaluation from the next quarter. The new joinee would
be eligible for individual bonus only he/she has worked minimum 6 months in the organization.

9.4 Target Revision

o Any revision in the targets for KPIs will be done only after approval from Management.
o Any revision in the KRA targets would be done only after the approval from Divisional Heads.
o Management has right to change the targets of KPI & KRA.

9.5 Revision in Bonus , Increment and Divisional Payout

o Management has right to revise the increment, bonus and divisional payout percentages and ratings
required for the eligibility of different payout.

Links to Performance Evaluation website:

At Mumbai
Outside Mumbai
Detailed Guidelines on PMS only at
intranet