DGIM LAW COLLEGE

Course- MBA
Subject- Performance Management
 Unit I

Performance Management

Performance can be understood as the resultant outcome of utilizing

the knowledge and skills to complete any job in accordance with the
basic aims and objectives for which the task is being attended by the
job or task holder. Managing the performance of the job holder in
desired manner is known as performance management. Assessing the
performance of individual as per the standards is known as
performance appraisal .In present scenario every organization must
manage the performance of everyone who is the member of the
organization. Usually it’s easier task to manage the performance of
individuals who are working repetitive job at lower level in the
organizational hierarchy. Managing the performance of the employees
who are working at higher or managerial level this task of performance
management becomes difficult.

Concept

There are two basic tasks for the managers and team leaders who have
responsibility to manage the performance of the employees;

· Assigning the job based to right man (Right man is who, has the
required skill).

· Assess the job performance.

Based on above responsibilities, further fundamental concept of
performance management can be explained in following manner;

· Assigning the targets to the employee.

· Performing the job by the employee.

· Assessing the performance by the oppressors.

· Rewarding/Awarding the performance of the employee.

Thus, we can say that performance management is a systematic

evaluation of performance and

to understand the abilities of person for further growth &

development. It is a process of assessing , summarizing and developing
the work of an employee quantitatively and qualitatively.

Definitions

Performance Management can be defined in many ways. Some

definitions given by some authors are as following:

A. Edwin B. Flippo 'Performance appraisal is a systematic and periodic

rating of an

employee in methods containing to his present and future job. This

definition can be understood by breaking it in to phrases.· This is a
systematic process as it follows a pattern or definite series of the
activities.

These activities are as following.

(1) Assigning the job

(2) Performing the job

(3) Assessing the job

(4) Awarding for the performance

· Performance Management is periodic activity as this activity is

supposed to be completed within one financial cycle. Though this
period can differ in different economies as all the countries don’t
follow the same financial years. Some countries follow the financial
year form April to March and some countries follow the financial year
from January to December.· Based on the performance of employee
management gives some rating to employee. For example, outstanding
performance or dissatisfactory performance etc.· If employees perform
well, get rewarded. In the case of underperformance if need of training
is detected, these employees get trained and be prepared for the
future job.

B. Dale Yorder

"Performance Appraisal includes all formal procedures used to evaluate

personalities and contribution and potential of group member in a
working organization."

Scope of performance management

The PPM system is one that will:

 Validate the employee selection process

  Identify employee training needs
 Give performance feedback and constructive criticism when
necessary
 Determine employee reward and benefit
 Decide on the time and nature of promotion or demotion
All these are adequately represented in the performance management
cycle, which has evolved from the traditional, static form that ran as
long as a year to a more continuous model with broadly defined goals
that can be reviewed. It has four phases:
1. Planning
In the planning phase, both CPM and PPM are involved. The
management team initially meets to determine the overall goals of the
organization, and then the yearly or quarterly goals. This is then shaped
to the level of the employees, defining their roles and objectives. It also
considers the personal development goals of each employee. The
planning phase is a goal-setting phase. Getting the most out of this phase
is easy by using the SMART guide. Simply put, goals must be Specific,
Measurable, Achievable, Relevant, and Time-bound.
2. Monitoring
This phase falls under the scope of performance management and is
much more effective when done regularly. Studies have shown
that 63% of Gen Z employees want to receive frequent feedback from
their managers rather than just an end-of-the-year review. The
management checks in to understand the progress, roadblocks, existing
and surmounted problems, ideas, etc. In the monitoring phase, there is
also room for redefining goals set during the planning phase.
3. Reviewing
At the end of the cycle, management must evaluate performance. Were
goals met? Was there a waste of the company's resources? How
efficiently did employees achieve this goal? How can this process be
modified for better results? Did employees deliver an outstanding
performance or show leadership qualities? The reviewing phase is
easier when proper monitoring takes place.
4. Rewarding
Without mincing words, this is a phase that must not be relegated to the
backburner. It is crucial not just to the employee but also to the
employer in the long run. A reward system is a strong motivator of
better performance.

What Are the Objectives of Performance Management?

Performance management is a strategy used in human resource
management. There are several objectives of performance management
systems. When these are met, it creates a successful strategy, which
results in benefits for all involved. The objectives of performance
management include:

1. Defining the organization’s goals and objectives

Goal setting has proven to be a highly rewarding methodology in
organizations. The importance of goal setting goes beyond its impact on
the employee, but also affects management and the organization at
large. In setting goals, an effective performance management system
must ensure that realistic, achievable, and cost-effective goals are set. It
takes into consideration the strengths and weaknesses of the people
involved.
From the employees’ perspective, goal setting:

 Keeps them focused on the major objective/s

 Maximizes individual performance and abilities
 Merges employee and organization goals
 Identifies priority tasks
For the organization, goal setting is essential for:

 Identifying flaws and weaknesses when goals are not met

 Budgeting
 Conducting performance appraisal
 Reviewing general performance

2. Clarifying expectations for employees and managers

It is imperative that every organization makes its expectations known to
all involved. For example, expectations of monthly pay, working hours,
benefits, days off, etc., should be clearly defined. Beyond this, setting
expectations far above an employee's performance ability will only lead
to disappointment and burnout. However, there should be room for
growth and consistency. This clearly demonstrates the importance of a
performance management system.
When setting expectations:

 Define what is expected of the employee. There should be no

confusion or ambiguity.
 Document these expectations for easy reference.
 Explain how beneficial it will be to both the employee and the
organization if those expectations are met. This may be learning a
new skill, undergoing training, improving workflows, increasing
sales, etc.

3. Setting performance standards

One of the objectives of a performance management system is to set
performance standards. This can be done on a rolling basis, based on
previous employee performance, or based on the company's
expectations. Performance standards are necessary for proper work
evaluation. It's the backdrop against which employee work output can
be compared fairly. Without it, human resource performance
management might overlook suboptimal input, or may not recognize
exceptional performance, simply because there was nothing to compare
it with.

4. Facilitating worker training and development of new job skills

A good performance management system highlights the abilities and
weaknesses of each employee and provides targeted training aimed at
benefiting both the employee and the organization.
A good way to go about this involves employees in the process from
start to finish. Ask them what skills they lack to perform their jobs
optimally. Figure out how these fit into the budget and training
programs. Discuss the benefit and application of these new skills and
redefine set goals to accommodate these skills.

5. Identifying barriers to achieving organization goals

An effective system shows the weakness of existing structures in the
business. With constant monitoring, this can be detected early enough,
and intervention plans can be created.
For example, in an organization where the delivery of products
is outsourced, there is likely going to be a some delays, mix-ups, and
damaged goods. Overall, daily delivery goals may not be met. Over a
month, and with proper monitoring, this discrepancy can be reported, the
transportation barrier identified, and practical solutions offered.

6. Creating an administrative framework for decision-making

Without an adequate, well-documented performance management
system, organizational heads will keep running in circles in the dark.
However, when an effective system is put in place, there is a better
ability to make informed decisions, set strategic goals, and implement
effective policies for the good of all.

7. Boosting employee performance through an effective reward

mechanism
A primary objective of a performance management system is to achieve
growth and to ensure that employees are encouraged and motivated. This
can easily be accomplished by establishing an effective reward system.
Logically, monthly remuneration should be enough motivation.
However, when exceptional performance is especially rewarded, it
drives the entire team to try to exceed such standards.

8. Increasing job satisfaction and employee retention

Few things come close to the frustration of having to hire new
employees every three months for the same tasks. It results in constant
sub-optimal output because of all the time wasted in getting new hires
up to speed. Sound performance management will result in increased job
satisfaction, and the best employees will stay on. This means that you
will have a fine-tuned selection of capable, skilled, and loyal employees
in your organization.

9. Inspiring new ideas and suggestions

Oftentimes, the best ideas come from unexpected sources. Of course,
there may be employees, product managers, marketing teams, and others
responsible for idea generation. Sometimes, an employee in a different
department, such as the sales team or UI/UX developers, might have a
revolutionary idea for the organization.
Performance management sets the stage for this. A worker who knows
that his contributions, no matter how small, are valued, will be unlikely
to hoard ideas or be hesitant to express them. Effective human resource
performance management results in idea generation.

10. Encouraging friendly competition

In a world where everyone receives the same treatment irrespective of
effort, there will be a massive decline in productivity. One of the
objectives of performance management is to encourage friendly
competition among teams and individuals. It all boils down to a reward
and recognition system. No one wants to be left
out, or constantly reprimanded, and while some people may shy away
from the spotlight, everyone enjoys recognition. Implement all the
elements of a good performance management system to instill healthy
competition amongst co-workers.

What Is the Importance of Performance Management?

In the past, there was hardly any emphasis placed on performance
management in human resource management. Fortunately, this narrative
is changing rapidly as a culture of employee-centricity evolves. Let us
delve deeper to understand the importance of performance
management.

Why is performance management important?

Here are eight reasons why organizations must be intentional about it.
1. Drives financial gain
Without pretense, the primary aim of any organization providing goods
and services is to make a profit. At the end of the day, employees must
be paid, shareholders rewarded for their investment, and opportunities
for expansion realized. If the company’s human capital is at maximal
functional capacity (not overworked or underutilized), it will have a
direct implication on raising levels of profit.
For example, when a salesperson hits their target, or the advertising team
comes up with a campaign with good conversion rates, there is no doubt
that this will increase income flow and improve the bottom line.
2. Encourages and motivates employees via recognition and rewards
A key benefit of performance management is that it arouses the
employees’ desire to do more. From C-level executives, through middle
management, individual contributors, and support staff, everybody has a
need to be recognized for their value. When this is done, employees are
spurred on to do more.
3. Prevents overlapping roles
Most people function best in a defined and safe environment. A
company's human resource performance management must enable this.
It should be clear to every worker what his or her objectives are, how
they fit into the big picture, and why things must be done in a particular
way.
When more than one employee is assigned to a task, they must be
equally informed so that they are equipped to work together, achieving
the set target while avoiding interpersonal conflicts. On the other hand,
smaller goals and objectives should be assigned to individual members
of the team. This provides a deep sense of purpose and responsibility,
allowing him or her to work comfortably in their niche.
4. Increases employee engagement and productivity
The importance of a performance management system lies in that it
enhances engagement and productivity in employees. What does this
mean? Engagement in this context refers to how much the employee
interacts with the company and its structures. Productivity defines itself
in terms of increased outcomes and Return On Investment (ROI).
Consider a scenario where the HR manager shows interest in what the
social media manager does only at the end of the year. Compare it with
how much more of a concerted effort the social media manager would
put in when promoting the company under a modern performance
management system. The company's vision, aims, and goals will be
evident in each piece of content posted online in the second scenario.
Employee engagement should cut across every aspect of work, even
down to whether people contribute to team meetings or not. In fact,
employees whose managers are actively involved in performance
management are three times more engaged than others.
5. Makes room for idea generation
In a fast-tracked world, we can’t underestimate the importance of
generating new ideas. A company’s sole aim might be to provide
affordable housing. However, if there is no steady and inspiring stream
of ideas to sell to the public, there will be a plateau and eventual decline
in sales.
Now, with a functional performance management system, the burden of
idea generation no longer rests solely on the owner or product
management team. Ideas can flow more easily, and in the right direction,
because every worker knows that their inputs are welcome. Amazingly,
this is not just limited to consumer products. Idea generation could also
benefit the company, such as suggestions for a better working system,
etc.
6. Creates a platform for employee development
A consistent performance management system invariably results in an
active form of employee development. Discussing each employee’s role,
past performance, current efforts, strengths, and weaknesses gives you
an accurate understanding of what each employee can do. When
combined with a agile HR technology, it creates opportunities to steer
employees in a direction best suited to their abilities and the company’s
goals.
Performance management makes training targeted rather than
generalized, and most importantly, employee potential is optimally
utilized to the advantage of everyone involved.
7. Enables proper documentation and record-keeping
We are witnessing a rapid shift from paper and filing cabinets
documentation systems to faster, easier, and less burdensome digital
ones. There are several digital performance management solutions that
help track every aspect of HR.
These HR management tools provide a clear documentation process that
can be stored and revisited when needed. It means you have a record of
each employee's past performance at your fingertips. Promotions are
scheduled and timely rewards given, and even a history of errors with
administrative action is documented.

Principles of Performance Management

Organizations must keep a few vital principles in mind to set up a
successful performance management framework. The principles of
performance management are a set of rules and best practices that
govern an organization’s performance management strategy. They guide
the HR department, middle managers, and team leaders in making the
most optimal workforce-related decisions and help obtain leadership
approval for adopting the right technology to execute the plan.
These principles include:

 Incorporating a 360-degree feedback system: A 360-degree

feedback system moves away from the single-rater system that has
been a common practice for decades. It invites feedback on an
employee’s performance from juniors, seniors, and peers instead of
the manager alone.
 Reducing silos: Performance management can suffer due to both
interdepartmental silos as well as technology fragmentation.
Therefore, a fundamental principle of performance management is
to enable collaboration across stakeholders and technology
interfaces.
 Having frequent one-on-one conversations: A manager or team
leader must speak with an employee weekly or twice a month.
These one-on-one sessions drive two-way feedback between the
manager and the employee and maintain transparency in the
performance assessment process.
 Being proactive rather than reactive: A modern performance
management strategy must anticipate future needs. In addition to
looking back at past performance, identifying gaps or mistakes,
and fixing them, a strong performance management strategy will
help organizations plan for the future. It will help predict
improvement areas, plan for business requirements, optimize
existing talent, etc.
 Prioritizing employee development: Traditionally, the sole
purpose of performance management was to determine employees’
wages. Today, performance management covers a lot more.
Employee engagement and development have become a priority. A
good performance management strategy will help a business
nurture its existing talent and save on hiring costs.
 Adopting technology: Performance management must be
technology-driven to keep up with this complex set of objectives
and requirements. HR technology improves the efficiency of
performance management processes. For instance, analytics tools
can detect performance trends, online forums can drive feedback,
and data dashboards can aid decision-making.
 UNIT-II
Process of Performance Management/Appraisal
. It’s a cyclic process which occurs through out the year in a
systematic and planned manner. The process of performance
appraisal can be classified in to five steps.

1. Planning
2. Assigning the targets and goals
3. Performing the job
4. Monitoring the performance
5. Assessing the performance
6. Awarding the performance

As we discussed that the process of performance appraisal is cyclic

process and one process comes after the completion of previous
process.
1. Planning: This step has the primacy over the other steps of the
performance appraisal. Planning. Planning is the process to make
a bridge between present and future. Like ways performance
management planning helps the managers in identifying the
various job in the organization along with the detailed description
of the job. Tools like job analysis and job evaluation paly a vital
role in planning the performance of the employees. Tools like
competency mapping, balanced score card helps in identifying the
potential of the members of the organization and helps in setting
goals for the individual members. First planning is done at
corporate level and these planning are documented in the form of
policies. As policies are guidelines for the managers, departmental
heads use these policies to set the targets and annual goals to their
employees, to monitor the performance and at last to asses the
performance. Based on these assessments corporate or head office
award the performance of individual.
Two management jargons are more commonly being used at
workplaces; KRA & KPA. KRA is know as Key resultant areas
while KPA stands for Key performance areas.
a. Key resultant areas: Key resultant areas are the general
responsibilities of the member of the organization of department.
Sometimes these can be common responsibilities for all the
members of the department. For example, issues related to
human resources is common responsibly of all the human
resource managers. If any human resource manager dose
something significant in the area of human resource management,
this would be considered as KRA.
b. Key performance areas: KPAs are individual responsibilities
assigned to any employee as per the his or her competencies. Key
responsibility to complete such task lies upon the holder of the job
only. For example, for a Capex purchase manger, negotiating the

Planning the job

 Assigning the job

Performing the job

Monitoring the job

Assesing the job

Awarding the job

Annual Performance
Cycle (Financial
Years)

capital purchase proposals are KPA while cost avoidance in

service purchase proposals or participating in CFT (Cross
Functional Teams) are KRA. Employers are more concern about
KRAs instead of KPAs as KPAs are prime responsibilities of the
job holders while KRAs shows the dedication and job engagement
of the employees. Many organizations are using the new
terminologies instead of KPAs and KRAs like;
a. Performance Indicators: These indicators are key
responsibilities of the employees. For example, for purchase
managers, Savings and Cost Avoidance in purchase negotiations
are performance indicators.
b. Measurables: measurables are actual goals for the performance
indicators. For example, for a purchase manager target of saving
in purchase negotiations for any performance cycle is thirty
percent. It means if the manger is achieving the thirty percent
average savings on purchase proposals during any performance
cycle will be known as measurable.
c. Balances Score Card: Balanced score card is a matrix method
where goals and targets related to the performance indicators and
measurables of the department or any organization. These
balance score card may contain following elements. (A format for
balance Score card has been given at the last of the chapter as
annexure). Usually balance score card is used for the strategic
management, but this matrix is also used for the assessment of
the targets assigned to any organization & departments. These
matrices contain a detail information about the individual targets.
i. Financial
ii. Customers
iii. Internal Process improvement
iv. People & Organizational capacity
2. Assigning the targets and goals: After the completion of the
planning part for the performance management, next task is to
assign the targets to the job holders for the period of performance
cycle. During this activity job holders have one to one meeting
with the HODs or appraisers. HODs set the targets for the job
holders after consulting the job holders. These HODs consider
following elements while deciding the goals for the job holders.
i. Past performance of the employees
ii. Current capabilities and competencies of the employee.
iii. Level of job engagement of the employees.
3. Performing the job: This step is the main stage of the
performance management. Job holders perform the assigned job
and try to achieve their targets for the performance cycle. Job
holders perform their jobs considering the KPA, KRA, KPI and
Balance Score Card which we discussed in the planning part of the
Performance Management. Job holders divide the larger goals
and targets into smaller tactical goals and gradually try to achieve
the larger goals for the better performance.
4. Monitoring the performance: It is very crucial to monitor the
performance by the HODs and appraisers. Monitoring is a
systematic activity which involves the periodic pre- assessment of
the performance. Periodic pre-assessment depends on the
organizational policies. These monitoring can be as following;a.
Daily assessment meetings.
b. Weekly assessment meetings.
c. Fortnightly assessment meetings.
d. Monthly assessment meetings.
e. Half yearly assessment meetings (Mid Term Review)
f. Final Review Meeting.
During the midterm review assigned goals can be realigned for the
job holders with the consultation of the job holder. Sometimes
employees overestimate their potential and later realize that they
are not in the position to complete the targets successfully with in
given time period. During midterm review such targets can be
reassigned.
5. Assessing the performance: This Stage is known as final stage of
the performance assessment. During this stage assigned
performance is compared with the current performance. On
assessing the job employees are awarded as Outstanding, Good,
Average,Need to improve or Poor etc.
6. Awarding the performance: After the final assessment of the
performance of the employees its responsibility of the
management to award the jobs. Outstanding performerscan be
awarded with the promotion, pay hike while poor performers can
be punished with transfer, demotion etc. Sometimes management
take decision of rightsizing or downsizing based on the results of
the performance appraisals. After identifying the black sheeps in
the organization, employees can be shown to the exit door of the
organization. In simple words nonperformers are retrenched form
the organization.

Establishing the performance standards

Communicating the performance standards to the employees

 ↓

Monitor the performance of the employees

Realignment of performance standards

Compare the present performance with sit standards

Discuss the appraisal results with employees

Take corrective actions.

What is Performance Planning?
Performance planning is a systematic and structured approach to
successfully achieve the desired goals of an individual or team
throughout the assessment year. A plan is chalked out for the team or an
individual(s) keeping in mind the broader objectives of the organisation.
The performance planning is all about exploration of what individuals
need to do and know in order to improve their performance and develop
their skills and competences.
It is also about knowing how their managers can provide the support and
guidance they need. The whole process requires competence mapping
and potential development.

Performance planning is the key essential for an effective

performance management system because after proper planning
only, the organization can achieve the results. Objectives of
Performance Planning
To the success of any performance management system, the
development of an employee performance management plan is of
paramount importance. The plan establishes the development
researcher’s essential job tasks, responsibilities, and critical performance
objectives that need to be achieved or performed during the performance
period.

It is mutually developed during the planning conference and reflects the

individual aspects and nature of the employee’s job.

The key objective of performance planning as given as below:

1. Performance planning clearly defines the purpose of the organization.
The purpose is to establish realistic goals and objectives consistent
with that mission in a defined time frame within the organization’s
capacity for implementation.
2. After planning, the next task is to communicate those goals and
objectives to the organization’s constituents.
3. We have to ensure the most effective use of the organization’s
resources by focusing the resources on the key priorities.
4. Then to provide a base from which progress can be measured and
establish a mechanism for informed change when needed.
5. To listen to everyone’s opinions in order to build consensus about
where the organization is going and where to want to reach.
6. It provides a clearer focus for the organization, thereby producing
more efficiency and effectiveness.
7. It is used to clearly identify the performance metrics used to measure
employee’s success in meeting predetermined targets.
8. It produces great satisfaction and meaning among planners, especially
around a common vision which increases productivity from increased
efficiency and effectiveness.
9. It solves major problems in the organization by providing ongoing on-
the-job feedback.

Importance of Performance Planning

The coaches or mentors in any organization work with performance
plans or work plans to keep their employees motivated. They operate
with such plans in place for each and every one of their team members
to generate synergy.

The following points discuss the importance of performance

planning which are given below:
 Performance planning helps in aligning the individual goals with the
organizational goals and the concept behind this is mutuality for
survival and growth.
 This makes the process of performance management more
accountable and objective.
 It focuses on key results area and key performance area which must be
considered for gaining the competitive edge.
 Performance planning helps in maximum utilization of resources and
it is important to make clear in the role and responsibilities of
employees.

Barriers to Performance Planning

The barriers to performance planning can be categorized into two types
which are as follows:
 Organizational Barriers
 Individual Barriers
Organizational Barriers
Most of the traditional organizations are not in favour of performance
planning. According to this concept, the organizations spending time on
performance planning is just a wastage of time. These organizations
believe that they have a strong implementation strategy and due to this
only, it becomes the barrier.

For example, The Indian companies tend to spend 30% time on planning
and remaining 70% on implementation whereas the MNCs usually spend
70% time on performance planning and the remaining 30% time on
strategy implementation.

Individual Barriers
The lack of commitment in the organization’s employees or
management is another important barrier to performance planning.
Sometimes managers or employees or both show less commitment
towards the achievement of organizational goals and the reasons could
be personal, organizational, competitive or any other HR factor.

For example, Organizational politics, workplace bullying or high

conflict causes employees to show less interest in their job
responsibilities.

Process of Performance Planning

There are many advantages to both supervisors and employees in having
an effective performance planning and review process and the process
should identify clearly what is expected of the employee, which in turn
provides the opportunity to recognize good performance and identify
areas that need corrective action or added training. Four areas that must
be identified in a performance plan are:

1. Job responsibility: What has to be done?

2. Performance measure: How will this be checked or measured?
3. Performance standard: How well must it be done?
4. Target date: When will it be checked?
While building a performance plan, you need to obtain information in
these areas from the job description and you would also look to the
organization needs to clarify which duties have priority and the standard
they must be performed to.

An effective performance plan should outline results expected,

performance measures, standards to be achieved and target dates for
measurement.

The following are the key components of the performance planning

process:
 Preparation of Performance Plans
 Identification of Key Success Factors
 Setting Departmental and Individual Objectives
 Providing Regular Feedback
 Performance Review
 Action Planning

Methodologies of Performance Planning

The key methodologies of setting up a performance criteria can be
understood by following points and are as follows:

1. Key Performance Area

2. Key Results Area
3. Tasks and Target Identification
4. Goal Setting Exercises
5. Organizational Objectives and Strategy
6. Assessment of Organizational Performance Needs
7. Setting Organizational Performance Expectations
8. Establishing Performance Management Process
9. Measuring Effectiveness of Performance Management
Key Performance Area
The key performance area for any employee includes the identification
of priority area first. After identifying this, subsequent working on the
specified area is done. The process of key performance area involves the
following steps which are mentioned below:

 Identification of important tasks and activities.

 Determining the areas of priority.
 Setting goals in the identified area.
 Seeking the employee’s commitment to identified work.
 Making arrangements for required resources.
Key Results Area
The term key results area may be defined as general area of outcomes
for which a role is responsible and the major task is to identify them.
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.
 Communicate their role’s purposes to others.
 Set goals and objectives.
 Priorities their activities, and therefore improve their time work
management.
 Make value-added decisions.
Tasks and Target Identification
It involves the identification of roles, responsibilities, tasks and key
targets of the employees and by identifying these, each and every
employee should know their duties and key targets.

Goal Setting Exercises

An organization’s ultimate goals determine its strategy.

For example An organization intending to become the world’s largest

textile company in the shortest possible time which is ultimate goal of
any organization, will increase its production capacities either through
organic route such as setting up new manufacturing facilities, or by
acquiring other textile organizations.

Since acquisition helps increasing production capacities quickly, the

organization shall pursue acquisition as a strategy for faster growth but
acquisition strategy also involves turning around the performance of the
older acquired production units which essentially calls for improving
human performance for corporate success.

Organizational Objectives and Strategy

In order to understand organizational objective and strategy, we need to
undergo various points which are:

 The ultimate goal of organization.

 Its competitive position in market.
 To compare the organization’s strength with changing environment.
 To examine an organization’s critical issues.
 To analyze an organization’s opportunities.
 Exploring best approaches in view of organizational resources and
competencies.
Assessment of Organizational Performance Needs
After identifying objectives and strategy, there is a need to assess
performance criteria and for this, the below mentioned steps should be
carried out:

 Identifying competencies necessary for achieving organizational

objectives and strategy.
 Gathering information about critical issues related to the purpose.
 Determining new and future performance needs of the organization.
 Prioritizing organizational improvement measures.
 Recognizing core organizational values.
Setting Organizational Performance Expectations
Once the assessment is over, one need to set performance expectations
which can be done as follows:

 Determining required vs. desired performance.

 Determining the current performance status.
 Understanding, aligning and agreeing on performance expectations.
 Formulating key performance indicators.
 Evolving job objectives.
 Aligning individual goals with organizational strategy.
Establishing Performance Management Process
For establishing performance management process, several steps
mentioned below have to be considered.

 Designing a framework of performance management encompassing.

 To implement performance planning.
 To manage the performance.
 Conduct performance appraisal.
 Monitoring the performance.
Measuring Effectiveness of Performance Management
 Identifying opportunities for performance development against which
effectiveness will be measured.
 Providing performance counseling including 360-degree feedback as
per the requirement.
 Devising reward strategy and administering a reward system properly
§ Establishing performance management audit.
 Improvement in the competitive position of the organization.

What is Competency Mapping?

Competency Mapping is defined as the process of identifying the key
competencies, which have the ability to do something efficiently &
achieve the goals of the organization & make the organization
successful.
Competency is defined as a skill/quality that helps the organization in
job evaluation, training and recruitment.
Competency Mapping Process
The process of competency mapping is as follows:
1. First Stage
2. Second Stage
3. Third Stage
4. First Stage
5. To decide the competencies for the position they’re assigned to
according to their ability & skill
6. Second Stage
7. Identifying the location in which the competencies need to work at
the position in the organization structure, defining the relationships
with the superiors & subordinates, etc.
8. Third Stage
9. To identify the tasks that need to be accomplished, & to identify
the objectives of the function and the unit or the section where the
position is located.
Methods of Competency Mapping
There are various methods of competency mapping are:
1. Assessment Centre
2. Critical Incidents technique
3. Interview Techniques Competency Mapping
4. Questionnaire
5. Psychometric Tests

Assessment Centre
It is a certain function of identifying the skill & the potential for growth.
It uses a few methods to evaluate employees for human resource and
manpower purpose & decisions

Critical Incidents technique

A process of systematically identifying the behaviours that contribute to
the success or failure of the competencies in specific situations.

Interview Techniques Competency Mapping

Every organization has different techniques of interviewing the
competencies as a part of competency mapping.

Questionnaire
A certain technique that is followed by the organization that prepares a
list of questions that the users would fill in a return.

Psychometric Tests
The sole focus of psychometric assessment is that many organizations
use as this part of the selection process, where there’s a natural wariness
about the unknown.

Examples of Competency Mapping

1. Job Evaluation
2. Project Planning
3. Performance Appraisal
4. Success Planning
5. Recruitment

Building Competency Models

For building competency models, there are three ways in which the
models may be developed:

 Behavioral Indicators: By behavioral indicators, it describes the

behaviors, thought patterns, abilities and traits that contribute to
superior performance.
 Evaluation of Competency Levels: For building the competency
model, it is very much required to set exceptional competencies of
high performers as standards for evaluating competency levels of
employees.
Competencies Describing Job Requirements: When the
organizations are having multiple competency models, this
approach is useful. The competencies required in a particular job
are described and job specific competency models help in
structuring focused appraisal and compensation decisions.
Advantages of Competency Mapping
Advantages of competency mapping are:
 Aids the organizations to increase their standards of production and
work style.
 Avails the organizations to align their key strategies across different
departments to have common objectives and accurate results.
 It helps in understanding the scope & the requirements of a
specific role.
 Establishes expectations for performance at different positions of
the organizations.
 Forms an accurate work & job satisfaction for employees.
 Growth in the effectiveness of training & development as its main
motive is to succeed with more efficiency.

Unit - III
What is a Performance Appraisal?

A performance appraisal is a systematic and periodic process of

measuring an individual’s work performance against the established
requirements of the job. It’s a subjective evaluation of the employee’s
strengths and weaknesses, relative worth to the organization, and future
development potential.

Performance appraisals are also called performance

evaluations, performance reviews, development discussions, or
employee appraisals.

If you conduct a successful performance appraisal, you can get a handle

on what the employee does best and identify areas that require
improvement. Appraisals also come in handy for deciding how to fill
new positions in the company structure with existing employees.

What is a Performance Appraisal: The Types of Performance Appraisals

Performance appraisals can be broken down into four distinct significant

types:

 The 360-Degree Appraisal: The manager gathers information on the

employee’s performance, typically by questionnaire, from
supervisors, co-workers, group members, and self-assessment.
 Negotiated Appraisal: This type of appraisal uses a mediator to help
evaluate the employee’s performance, with a greater emphasis on
the better parts of the employee’s performance.
 Peer Assessment: The team members, workgroup, and co-workers
are responsible for rating the employee’s performance.
 Self-Assessment: The employees rate themselves in categories such
as work behavior, attitude, and job performance.
Note that some organizations use several appraisal types during the same
review. For instance, a manager could consult with the employee’s peers
and assign a self-assessment to the employee. It doesn’t have to be a
case of either/or.

How Performance Appraisals Work?

Human resources (HR) departments typically create performance

appraisals as a tool for employees to advance in their careers. They give
people feedback on how well they are doing in their jobs, ensuring that
they are managing and achieving the goals set for them and assisting
them if they fall short.

Performance evaluations assist in determining how to distribute a

company's limited budget for giving out incentives, such as raises and
bonuses. In addition, they give businesses a tool to identify the workers
who have made the most contributions to their expansion so that they
may appropriately reward their top performers.

Performance reviews also assist employees and their managers in

identifying areas for improvement and career advancement, as well as in
developing a strategy for the employee's development through extra
training and more responsibility.

What is a Performance Appraisal: The Methods of Performance

Appraisals

Performance appraisals come in many forms. Managers and human

resources staff responsible for these appraisals need to choose the best
methods based on the size of their organization and what sorts of
responsibilities the employees fulfill.
Methods of Performance Appraisals Include:

 720-Degree feedback: You could say that this method doubles what
you would get from the 360-degree feedback! The 720-degree
feedback method collects information not only from within the
organization but also from the outside, from customers, investors,
suppliers, and other financial-related groups.
 The Assessment Center Method: This method consists of exercises
conducted at the company's designated assessment center, including
computer simulations, discussions, role-playing, and other methods.
Employees are evaluated based on communication skills, confidence,
emotional intelligence, mental alertness, and administrative abilities.
The rater observes the proceedings and then evaluates the
employee's performance at the end.
 Behaviorally Anchored Rating Scale (BARS): This appraisal measures
the employee’s performance by comparing it with specific
established behavior examples. Each example has a rating to help
collect the data.
 Checklist Method: This simple method consists of a checklist with a
series of questions that have yes/no answers for different traits.
 Critical Incidents Method: Critical incidents could be good or bad. In
either case, the supervisor takes the employee’s critical behavior into
account.
 Customer/Client Reviews: This method fits best for employees who
offer goods and services to customers. The manager asks clients and
customers for feedback, especially how they perceive the employee
and, by extension, the business.
 Field Review Method: An HR department or corporate office
representative conducts the employee's performance evaluation.
 Forced Choice Method: This method is usually a series of prepared
True/False questions.
 General Performance Appraisal: This method involves continuous
interaction between the manager and the employee, including
setting goals and seeing how they are met.
 Human Resource Accounting Method: Alternately called the
“accounting method” or “cost accounting method,” this method
looks at the monetary value the employee brings to the company. It
also includes the company’s cost to retain the employee.
 Management By Objective (MBO): This process involves the
employee and manager working as a team to identify goals for the
former to work on. Once the goals are established, both parties
discuss the progress the employee is making to meet those goals.
This process concludes with the manager evaluating whether the
employee achieved the goal.
 Performance Tests and Observations: This method consists of an oral
test that measures employees' skills and knowledge in their
respective fields. Sometimes, the tester poses a challenge to the
employee and has them demonstrate their skills in solving the
problem.
 Project Evaluation Review: This method involves appraising team
members at the end of every project, not the end of the business
year.
 Ratings Scales: These ratings measure dependability, initiative,
attitude, etc., ranging from Excellent to Poor or some similar scale.
These results are used to calculate the employee's overall
performance.
What are Performance Appraisals Used For?

Performance appraisals serve a dual purpose for both organizations and

employees.

 For organizations: employee assessments provide insight into an

employee's contribution, enabling management to improve working
conditions, address behavioral issues, recognize employee talents,
support skill and career development, and improve
strategic decision-making.
 For employees: performance reviews are a way to recognize and
thank them for their achievements, find opportunities for promotions
or bonuses, help them get training or education to advance their
careers, find areas where they can improve, encourage and involve
them in their career development, and start conversations about
long-term goals.
Performance appraisal also aims to:

 Provide helpful information to help make decisions regarding

transfers, promotions, terminations, etc.
 Supply the necessary data to identify employee training and
development program requirements.
 Help make confirmation/acceptance decisions regarding employees
who have completed a probationary period.
 Help make decisions regarding raising an employee's salary, offering
incentives, or changing variable pay.
 Clarify expectations and facilitate communication between managers
and subordinates.
 Help employees realize their whole potential performance level.
 Collect relevant employee data and keep the records for various
future organizational purposes.

What is a Performance Appraisal: The Importance of Performance

Appraisals

Organizations need performance appraisals to accurately gauge every

employee's performance and confirm that they are working in the right
area and doing the job they were hired for. In addition, good
performance appraisals increase efficiency and help cut costs.

Regular performance appraisals also help assure that credit is given

where it’s due, which helps keep morale high.

The Benefits of Performance Appraisals

Here is a list of advantages that performance appraisals bring to

the table:

 They help supervisors plan promotions for solid, performing

employees and dismiss inefficient workers.
 They help the organization decide how to compensate the
employees best. Also, companies can use performance
appraisal records to help determine extra benefits and
allowances.
 They can call attention to employee weaknesses and help set
up training programs in-house.
 The performance appraisals can help make changes in the
selection process which inevitably help hire better employees.
 Performance reviews effectively communicate the employee's
performance status and provide a great way to give feedback
on how the employee is doing at their job.
 Performance evaluations are a great motivational tool, providing
a snapshot of the employee's efficiency. This snapshot, in turn,
can incentivize the individual to improve their performance.

Criticism of Performance Appraisals

Employees are encouraged to meet or surpass their goals

through performance reviews. Nonetheless, they are subject to a
lot of criticism.

 Differentiating between individual and organisational

performance in performance reviews can be challenging. It can
be harmful if an evaluation's design doesn't consider the
organisation or company's culture.
 Performance evaluations can result in adopting unreasonable
goals that demoralise employees or encourage them to engage
in unethical practices.
 Distrust of the appraisal can lead to problems between
subordinates and supervisors or a situation in which employees
tailor their input to please their employer.
 According to some labour analysts, the usage of merit- and
performance-based pay has decreased due to the use of
performance reviews.
 Employees may receive biassed evaluations due to
performance reviews focusing more on their likeability than
accomplishments.
 Unreliable raters can introduce a number of biases that tilt
assessment results towards desired traits or ones that reflect
the rater's preferences, which can result in managers giving
underperforming personnel a favourable evaluation in order to
preserve their connection.
 Performance reviews that are effective for one culture or job
function might not be applicable to another.

What Are Performance Appraisals Used For?

A performance appraisal has two purposes: to aid the

organisation's assessment of the value and productivity that
different employees bring and to aid the company’s employees in
growing in their respective jobs.

Company Benefit

Employee evaluations can influence an

organisation's performance. They enable firms to:

 Identify areas where management may enhance working

circumstances in order to raise productivity and work quality.
They give insight into how people are contributing.
 Deal with behavioural problems before they affect the efficiency
of your department.
 Assist employees in their skills and career development.
 Enhance strategic decision-making in scenarios that call for
layoffs, succession planning, or internally filling available posts.
 Motivate employees to contribute more by recognising their
talents and skills.
Employee Benefit

Performance reviews should benefit the employees who get them.

The knowledge obtained by evaluating and debating an
employee's performance can help you:

 Acknowledge and thank an employee for their accomplishments

and contributions.
 Be aware of the chance for a promotion or bonus.
 Recognize and advocate for the need for extra education or
training to advance one's profession.
 Identify the precise areas where skills might be strengthened.
 Encourage an employee to feel invested in and active in their
professional development.
 A candid discussion of a worker's long-term objectives.

UNIT-IV

Performance Management or Employee Development

What is employee development?
Employee development consists of activities that are initiated by an
organization that would help in the overall development of an employee.
An effective performance management system is one which gives high
priority for employee development. Employee development
encompasses the following activities:

1) Identify and conduct necessary training for employees. Proper

planned training programs would help employees to acquire the
necessary competencies needed for the job.

2) Give enough opportunities to employees by recognizing their

talent and giving them more responsibilities. This will help employees to
grow to leadership positions in their organizations.

3) Identify poor performing employees and put them under a

performance improvement plan so that they can be effectively guided
and groomed to become good performers.

4) Identify any other reasons for non-performance of an employee, like

non-availability of tools to perform their job or other external factors and
remove those obstacles so that employees are in a position to perform
their job well.

Benefits of employee development

When a performance management system focusses on employee

development as well, the return of investment from such a system would
be good due to the following reasons:

1) Well trained employees become more competent and execute their

responsibilities productively. They easily achieve the goals that are set
for them under performance planning activity.
2) Employees become happy as their development is taken as the prime
focus. This will lead to better employee engagement and reduces
attrition.

3) When leaders are groomed within the organization, it helps in

succession planning and reduces the associate costs and risks in hiring a
new employee.

4) When facilities are created for employees to do their job effectively

and obstacles are removed, it ensures that organization goals are met.

How do you convert your Performance Management System to

Employee Development System?
Most companies do performance appraisals once a year and use
performance management software for streamlining the process (self-
evaluation, 360 degree feedback, manager’s feedback & rating,
recommendation, etc.). Due to the volume of the work and stress
associated with this process, the process stops with the salary revisions.
Ideally, the HRs and managers should extend this process to identify the
training needs, strengths & weaknesses of the people/organization,
people development needs and put a clear roadmap for addressing them.
When the feedback obtained is used to address the ways to improve the
performance and capabilities of individuals, the system starts moving
towards the development management system. Conduct the feedback
process periodically (eg. Every quarter or month), in this way it is lot
easier to obtain/provide feedback to the team members. Managers need
not hold on to providing appreciations or weaknesses for yearly
appraisals.
And, best is to move onto continuous feedback and provide them then
and there. When this process is done on regular and close intervals, the
performance appraisal system starts to become a Development
Management System. Continuous mapping of performance,
competencies and aspirations clubbed with actions are the key.
Following are the steps:

1. Empower the managers to do the feedback cycles minimally, every

quarter.

2. Managers should provide feedback to their team members, review

the status of goals accomplished, listen to the team member’s feedback
and derive specific action items. These action items could be sending
the team member for any specific training, equipping the team member
with necessary skill sets, etc.

3. Department manager should be able to collate the feedback across

all the people and make sure that the action items are in place & acted
upon.

4. Maintain the scores in each cycle and use these cycle and finding
should be used in annual performance appraisal. (Theoretically, annual
performance appraisal score should be just an average of the scores
obtained during monthly/quarterly feedback cycles).

By doing the above, the amount of stress is reduced respectively during

the appraisal process. And, this process will really help managers, HRs
and employees as they really see true value of doing the above. That is
when “Pay for Performance” comes.

A performance development plan is a tool for improving

employee performance. The PDP process helps managers and
employees identify areas for improvement, set goals, measure
progress, and outline a strategy to achieve those objectives.
Performance development planning is usually held quarterly
(coinciding with regular quarterly performance reviews), allowing
employees and their managers to track progress and make
adjustments as needed.

360-Degree Feedback

360-degree feedback is a multidimensional performance appraisal

method that evaluates an employee using feedback collected from the
employee’s circle of influence namely managers, peers, customers,
and direct reports. This method will not only eliminate bias in
performance reviews but also offer a clear understanding of an
individual’s competence.

This appraisal method has five integral components like:

1. Self-appraisals

Self-appraisals offer employees a chance to look back at their

performance and understand their strengths and weaknesses.
However, if self-appraisals are performed without structured forms or
formal procedures, it can become lenient, fickle, and biased.

2. Managerial reviews

Performance reviews done by managers are a part of the traditional

and basic form of appraisals. These reviews must include individual
employee ratings awarded by supervisors as well as the evaluation of
a team or program done by senior managers.
3. Peer reviews

As hierarchies move out of the organizational picture, coworkers get a

unique perspective on the employee’s performance making them the
most relevant evaluator. These reviews help determine an employee’s
ability to work well with the team, take up initiatives, and be a reliable
contributor. However, friendship or animosity between peers may end
up distorting the final evaluation results.

4. Subordinates Appraising manager (SAM)

This upward appraisal component of the 360-degree feedback is a

delicate and significant step. Reportees tend to have the most unique
perspective from a managerial point of view. However, reluctance or
fear of retribution can skew appraisal results.

5. Customer or client reviews

The client component of this phase can include either internal

customers such as users of product within the organization or external
customers who are not a part of the company but interact with this
specific employee on a regular basis.

Customer reviews can evaluate the output of an employee better,

however, these external users often do not see the impact of
processes or policies on an employee’s output.
 Advantages of using 360-degree feedback:

 Increase the individual’s awareness of how they perform and the

impact it has on other stakeholders
 Serve as a key to initiate coaching, counselling, and career
development activities
 Encourage employees to invest in self-development and embrace
change management
 Integrate performance feedback with work culture and promote
engagement

Ideal for:
Private sector organizations than public sector organisations as peer
reviews at public sector organizations are more lenient.

Common reason for failure:

Leniency in review, cultural differences, competitiveness, ineffective

planning, and misguided feedback

Top private organizations like RBS, Sainsbury’s, and G4S are using
360-degree, multi-rater performance feedback to measure employee
performance.

Performance Linked Remuneration System/Pay for Performance .

Pay for Performance or Merit Pay is a method by which an
individual’s pay-increment schedule is linked to his/her assessed
individual performance and is evaluated as per the predefined
objectives. It provides financial rewards to every employee in the
form of increments in his/her basic pay and offers compensation
such. as cash bonuses. Such rewards are connected to the positive
assessment of an individual’s performance. Performance-Related
Pay has been quite popular among employees, as it seems to play
the role of an effective motivator. It is considered an evaluative
method of payment as it encompasses the simple rule of
‘rewarding a high level of performance’.
Objectives of Pay for Performance
Stimulating High Level of Performance by Connecting with
Performance to Pay Performance-related pay can be an important
tool for greater organisational change in cases where direct
incentives are quite limited or cannot be given to all employees.
The underlying developments in performance management have a
much greater impact than associated pay improvement.

 Embedding High-Performance Culture Across the

Organisations.
 View of Justice and Equality.
 Ethics in Performance Management
The ethical behaviour of an organization is a key essential for doing
business in today’s competitive market. This type of behaviour plays an
important role in the organization’s overall success and in this regard, an
ethics professor Brenner (1992) observed, ‘A corporate ethics
programme is made up of values, policies, and activities which impact
the propriety of organization behaviour.’
The organizations are defining a comprehensive ethics and compliance
program which includes six components:
 Written standards of ethical workplace conduct
 Means for an employee to anonymously report violations of ethics
standards
 Orientation or training on ethical workplace conduct
 A specific office, telephone line, e-mail address or website where
employees can get advice about ethics related issues
 Evaluation of ethical conduct as part of regular performance
appraisals
 Disciplinary action against employees who commit ethics violations

What is Ethics?
According to Dave Kinnear, Ethics may be defined as a process whereby
we choose between competing moral and/or economic values.

Concept of Ethics
For defining ethics, it is a system or code of moral standards of a
particular person, group or profession. It may be defined as the actions
an individual take on himself to ensure his continued survival across the
dynamics.

Ethics deals with whether to perform certain kinds of action or not in

line with what is acceptable to the society as a whole and therefore,
ethics is the process of deciding as to what is good for human beings and
also of rational thinking aimed at establishing ‘what values to hold and
when to hold them’?

Principles of Ethics in Performance Management

The key principles of ethical performance management are as follows:
 An ethical performance management system directs its employees to
respect the core values of the organization. Because the ethics
practiced by the organization is in conjunction with its environment.
On the other side, the organization respects its employees and provide
good working environment so that they will generate the result as per
the potential.
 This system is designed to make transparency in its operation and all
the parties involved in performance management system respect each
other’s needs, values, and preoccupations.
 It emphasizes individual responsibility for personal decision making,
behaviour, and action rather than collective responsibility.
 This system put emphasis on employees respecting and actively
considering the ethical concerns and issues of all stakeholders, rather
than focusing merely on shareholders alone.
 This seeks to build or change culture to a state in which the vision of
the organization includes its employees, its customers, and the society
at large.The values and norms of organization support employee’s
decision making, behaviour, andactions consistent with an ‘ethical’
vision.
 This system provide fair and free environment to itsemployees so that
employees can get the opportunity to scrutinize the basis upon which
the important decisions were made.

Ethical Issues and Dilemmas

Rushworth Kidder (1995) said that “An ethical dilemma is not a choice
between right and wrong, but a choice between two rights.”
In organizations, many managers talk about ethics but do not recognize
or act upon ethical issues in their day-to-day managerial responsibilities
and most ethical questions arise from people relationships within the
organizational settings. There are recent survey results in which one
large organization indicate that only 26% of managers believe they are
recognized and reinforced for their ethical decisions and behaviours.

Performance management is essentially a commitment-based system of

the organization. This seeks to align employee action and behaviour
towards the desired organizational goals. As employees are the key to
the organization, their beliefs, values, behaviours, and actions have a
profound impact on the organization’s outcomes and most organizations
understand that employees tend to engage in behaviour that is
recognized and rewarded, and avoid behaviour that is penalized.

For example: In ABC Ltd. performance-based reward system exists

where one of the employees has done an outstanding job all year, so he
deserves strong recognition. However, he is already paid at the top of the
salary range for his job grade. Due to this reason, ABC Ltd. has too
many people in the grade above him, so the company cannot promote
him.

Likewise, some of the ethical issues and dilemmas are listed below:
 Performance Appraisal
 Value Conflict
 Workplace Politics
 Employee Engagement
 Taking Unnecessary Credit
 Illegal and Unethical Practices
 Multiple Loyalties