Module III

Performance Management
System
Road Map…

● Introduction and Overview of Performance

Management Systems
● Designing Performance Management
Systems
● Performance Appraisal Methods
● Employee Development and Coaching
● Role of Technology in Performance
Management
Learning Objectives

• Explain the key concepts, purpose and components of

performance management systems.
• Identify the essential steps and factors involved in
designing a performance management system that aligns
with organizational goals and enhances employee
performance.
• Compare and evaluate various performance appraisal
methods
• Discuss the role of employee development and coaching
in performance management.
Performance Management Systems
• It's a tool that helps businesses measure and improve employee
performance.
• It is used by HR teams to ensure that employees are working towards
the company's goals.
• It tracks employee performance over time, compares employee
performance to the company's goals, It provides feedback to
employees, It helps employees develop their skills.
 Concept of Performance Appraisal

• PA is the method of evaluating the behavior of the

employees in the job it includes both quantitative
and qualitative aspects of job performance.
• It is a systematic and objective way of evaluating
both work-related behavior and potential of
employees.
• It is a process that involves determining and
communicating to an employee how he or she is
performing the job and ideally, establishing a plan
of improvement.
 Purpose/ objectives of Performance Appraisal

• Compensation Decision- Pay raise (Performance evaluations determine salary,

wage increments, and other benefits. It also guarantees that those who work
harder are rewarded more.)
• Promotion decision- Level raise (Appraisals provide organizations with objective,
data-driven tools to help them make better promotion decisions.)
• Training and development programs- Enhance performance. (During an appraisal,
individual talents are assessed. This also helps employees in determining whether
they require additional skills and knowledge to contribute to the firm. It also
assists a company in organizing upskilling training for its staff.)
• Personal development- self actualization need.
• Improving Overall Business Performance: performance appraisals will assist the
organisation in learning more about its employees and their needs. It will assist
employees in determining where they fall short or where they excel.

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 What is to be appraised?

1. Behaviour of the employee -for eg : Doctor’s behaviour

with the patient.
2. Objectives of the organization- market share , profit
contribution, strategy alignment.
3. Traits in performing the job- the precision, time taken by
the employee to perform any job.

Real life eg: Zepto,Swiggy service, online shopping,Salon rating, etc. ( On what
parameters do we rate them?)
 Who will appraise?

• Supervisors
• Peers
• Subordinates
• Self appraisal
• Customers
• Consultants
 Case Study: Performance Management System at Infosys
Background
Infosys, a leading global IT services company, has implemented a robust Performance Management System (PMS) to
enhance employee productivity, engagement, and career development. The company employs over 300,000 professionals
worldwide and relies on an effective PMS to align individual goals with organizational objectives.

Performance Management Approach

Infosys transitioned from an annual performance review model to a continuous feedback system known as iCount. This
system emphasizes real-time feedback, goal setting, and career development.

Key Features of Infosys’ PMS:

1. Continuous Feedback: Managers provide ongoing performance feedback rather than waiting for annual reviews.
2. Objective Goal-Setting: Employees set SMART (Specific, Measurable, Achievable, Relevant, Time-bound) goals
aligned with business objectives.
3. 360-Degree Feedback: Employees receive feedback from peers, managers, and subordinates to ensure a holistic
performance evaluation.
4. Learning and Development: The system integrates training programs to upskill employees based on performance
gaps.
5. Rewards and Recognition: High performers are rewarded with incentives, promotions, and career advancement
opportunities.

Impact on Infosys

● Increased employee engagement and productivity.

● Reduced attrition as employees feel valued and supported.
● Improved alignment between individual and company goals, enhancing business outcomes.

Conclusion
Infosys’ performance management system fosters a culture of continuous learning and development. The iCount system has
successfully replaced traditional annual reviews with a more dynamic, employee-centric approach, making performance management
more effective and transparent.
Case Study: Performance Management System at Google

Google's Performance Management System (PMS) is designed to foster innovation, growth, and
accountability within its workforce. The company’s approach to performance management is centered
around its philosophy of continuous feedback, employee empowerment, and clear communication of
expectations.

Google utilizes a system called "OKRs" (Objectives and Key Results), which helps employees align their
personal goals with the company’s broader mission. OKRs are set on a quarterly basis, allowing for agility
and the ability to adapt to changes. Managers and employees collaboratively define specific, measurable
goals, and the progress towards these goals is reviewed regularly.

In addition to OKRs, Google uses peer reviews as part of its performance appraisal system. Employees are
encouraged to provide feedback on each other's performance, fostering a culture of transparency and
openness. This system not only focuses on individual contributions but also values teamwork and
collaboration, recognizing that employees grow when they help one another succeed.

The feedback process at Google is continuous, with employees regularly receiving input from their
managers and peers. This helps them track their progress and identify areas for improvement. Google’s
performance management system is designed to be both motivational and developmental, focusing on
growth rather than solely on assessment.

Overall, Google’s PMS has been highly successful in fostering a culture of high performance, innovation,
and employee satisfaction, making it one of the most admired companies in the world for talent
management.
Performance Appraisal Process
• Setting up Performance Standards: The first step in the process of performance appraisal is the setting up of
the standards which will be used to as the base to compare the actual performance of the employees.

• Communicate Performance Expectations to employees : It is also vital for you to clearly communicate
the performance standards to your employees and make sure that they understand their roles and all that is
expected of them.

• Measure Actual Performance: After communicating the performance standards to your employees, it is
important to also measure their progress. You can regularly analyze employee performance on a regular basis by
tracking their attendance weekly (if that is a standard they are aiming to meet), and review their sales goals
monthly etc. However, if you are noticing that they are falling behind, you can have more frequent follow-ups,
and step in to give them a reminder to stay on top of their goals (keep them accountable for their progress).

• Compare Actual performance with Standards : comparing one progress to the goals that they set
according to the performance criteria

• Discuss Appraisals/ Take corrective actions if any : Performance appraisals is the optimal time for you to
provide regular feedback to your employees. Discuss their actual performance, and offer constructive feedback
rather than negative feedback. Reward what each employee achieved and encourage them to keep up the good
work for a successful future performance.
 METHODS OF PA

• Individual Evaluation method- Under the individual evaluation

methods of merit rating, employees are evaluated one at a time
without comparing them with other employees in the organization.

• Group evaluation Method- one employee is compared with others

• Modern methods- these are new methods and research is still

carried on.
Methods of Performance Appraisal
Confidential Report-
•Commonly used in government organizations, the manager or
the evaluator is expected to submit a detailed review of their
subordinate in a sealed enclosure.
•The feedback is kept confidential and helps the organization
make important decisions like promotion, transfers, and
incentives.
•Because there is no transparency, this method is subject to
judgments and subjective opinions. No feedback is offered to
employee.
•Prepared at the end of the year.
•Strength and weaknesses of employee are taken.
Essay Evaluation-
• It’s a non quantitative subjective analysis
• Strong and weak points of employee are rated.
Parameters are-
o Understanding of programs, policies, objectives etc.
o Job knowledge of emps.
o The employees relations with other coworkers and superiors.
o The employee general ability of planning, controlling, organizing etc.
o General perception of the employee.
Critical Incident technique-
•The manager prepares the lists of
statements of every effective and ineffective
behavior of the employee.
•These rated incidents represents the
outstanding or poor behavior of the
employee.
•The Critical Incidents method of
performance appraisal evaluates the
performance of employees based on their
response to critical incidents. Because this
method is based on the employee’s
behavior, it is highly prone to subjective
judgments.
•The manager maintains the log book
wherein the critical incidents are reported
periodically and considered at the time of
appraisal.
•Generally negative incidents may be more
noticeable than positive incidents.
Checklists:
▪A checklist is the set of objectives or descriptive statements about the
employee and his behavior.
▪In the checklist method, the questions are based on the traits of an
employee. The manager or supervisor awards a “Yes” or “No” to every
question.
▪It is easy, straightforward, and less time-consuming when compared to
other methods. It is not so effective because it takes extra effort and time to
comprehend why a particular response is made.
▪The rater marks the characteristics which employee possess rest are kept
blank. The checklist method has a serious limitation. The rater may be biased
in distinguishing the positive and negative questions.
Graphic rating scale-
•A printed form is used to evaluate the performance of the employee .
•The appraisal process evaluates employees based on their traits and
attributes, including consistency, attendance, and so on. A five-point rating
scale is used, with “one” representing the lowest and “five” representing the
highest.
•A variety of traits are judged on the scale and summarized.
•For eg: Quality of work- Clear understanding of the factors connected with the
job rated on a scale extremely poor, bad, average, good, excellent.
Ranking method-
• The employees are compared based on a specific criteria, such as skills,
responsibilities, working style, etc. The relative position of each
employee is expressed in terms of his numerical rank.
•This is a relatively easy method of performance evaluation. Under this
method, the ranking of an employee in a work group is done against that
of another employee.
•While using this method, the evaluator is asked to rate employees from
highest to lowest on some overall criterion. Though it is relatively easier
to rank the best and the worst employees, it is very difficult to rank the
average employees.
• It's simple, quick, and inexpensive whereas, it can become difficult to
sustain in large organizations.
Paired comparison method

•Ranking becomes more reliable and easier under the paired comparison method.
Each worker is compared with all other employees in the group; for every trait,
the worker is compared with all other employees.
•Though it is a more effective and strategic method than the straight ranking
method, it gets more complex in large organizations.
•For instance, when there are five employees to be compared, then A’s
performance is compared with that of B’s and decision is arrived at as to whose is
better or worse. Next, B is also compared with all others. Since A is already
compared with B, this time B is to be compared with only C, D and E. By this
method, when there are five employees, fifteen decisions are made
(comparisons).
Forced Choice Method
• In the Forced Choice method of Performance appraisal, the evaluator assesses the
employee’s performance based on a set of positive and negative statements. Each
of them carries a weight, and the evaluator has to choose a “True” or “False” as an
answer to the statement.
• Also called as Linear Rating Scale.(LRS)
• This method makes use of several sets of paired phrases. Two which are positive
and two are negative. The rater has to rate as least applicable most applicable.
Actually, the statement items are grounded in such a way that the rater cannot
easily judge which statements apply to the most effective employee.
• The phrases are non uniformly divided so the chances of biases are not visible. It is
less flexible due to predetermined questions.
Forced Distribution Method-
•In this method, the employees are categorized under high, average, and poor on
the bell curve based on their performance. Those brought under high are usually
eligible for rewards, incentives, promotions, and bonuses, and those rated as poor
should work on improving their performance or be terminated.
•The scope of bias is limited, and the method is relatively simple. While this is an
advantage, there is no room to understand why an employee is slotted under a
particular category.
•Also called as ‘Bell curve’ method.
•Mostly used in large organizations.
Group Appraisal-
• Employee appraised by group of appraisers
• It is a bias free method as performance is evaluated by multiple raters. But it is a
very time consuming process.
• In this method, an employee is appraised by a group of appraisers. This group
consists of:
- the immediate supervisor of the employee,
- other supervisors who have close contact with the employee’s work,
- manager or head of the department and,
- consultants.
Field review method

• Here the HR department representative goes to the field and assist line
supervisors .
• In this method, a trained, skilled representative of the HR department goes
into the ‘field’ and assists line supervisors with their ratings of their respective
subordinates.
• The HR specialist requests from the immediate supervisor specific information
about the employees performance.
• Based on this information, the expert prepares a report which is sent to the
supervisor for review, changes, approval and discussion with the employee
who is being rated.
BARS- Behaviorally Anchored Rating Scale
• It is a combination of the rating scale and critical incident techniques of employee
performance evaluation. The key focus of BARS is behavior; behavior ratings are
collected according to specific work criteria. These ratings can be on a five, seven, or
nine-point scale.
• A behaviorally anchored rating scale (BARS) is a quantitative method of evaluating
employee performance.
• Here the employee behavior is evaluated and rated on a scale ranging from
“Outstanding” and “Excellent” to “Average” and “Unsatisfactory.” Assume that an
employee is required to submit a report within a week. BARS evaluation for this
deliverable is based on the time of delivery.
• If the employee makes the submission beforehand, then they are rated outstanding.
If they submit on the last day, they are awarded excellent. If they submit right at the
last minute, they are awarded a good, and so on. It limits the scope for bias, and the
method is easy to interpret.
• The critical incidents are selected and rated on the scale which has 6-8 defined
performance dimension.
• While these examples are a great insight into the effectiveness of the BARS method,
not everything about Behaviorally Anchored Rating Scales is perfect.
Pros of behaviorally anchored rating scale (BARS) :
• A behaviorally anchored rating scale can be an effective tool because it provides both
descriptive and numerical data.
• By combining traditional ranking scales with behavioral observations, companies are able to
provide meaningful feedback that strategically improves their staff’s performance.
• Moreover, BARS focuses on behavior instead of outcomes. That’s helpful for creating a working
environment that values learning and improvement over strictly measuring results.
Cons of behaviorally anchored rating scale (BARS) :
• It takes a long time to complete. Creating a behaviorally anchored rating scale can be time-
consuming. Especially if you have a rapidly growing company or fairly specialized roles across
teams
• BARS as an evaluation tool requires intense effort from managers as well as an in-depth
understanding of their employees.
• Developing a behaviorally anchored rating scale often requires the help of experts, especially
when applying job analysis techniques.
MBO (Management by objective)

• MBO requires the management to set specific, measurable goals with each
employee and then periodically discuss the latter's progress towards these
goals.
• This technique emphasizes participatively set goals (that are agreed upon by
the superior and the employee) that are tangible, verifiable and measurable.
• MBO focuses attention on what must be accomplished (goals) rather than
how it is to be accomplished.
This kind of goal setting and appraisal programme involving six steps:
1. Set the organization's goals: Establish an organisation wide plan for next year and set
company/org goals.
2. Set departmental goals: Departmental heads at this stage take the broader company
goals (such as improving profits by 20 per cent, increasing market share by 10 per cent
etc.) and, with their superiors, jointly set goals for their departments.
3. Discuss departmental goals: The departmental goals are now put to discussion in a
departmental meeting with subordinates. The departmental heads would require the
subordinates to set their own preliminary individual goals, focusing mostly on what
they can do to achieve the department's goals.
4. Define expected results: In the next step, the departmental heads and their
subordinates agree on a set of participatory set short term, and individual
performance targets.
5. Performance review: Departmental heads compare each employee's actual and
targeted performance, either periodically or annually. While periodic review is
intended to identify and solve specific performance problems, the annual review is
conducted to assess and reward one’s overall contribution to the organisation.
Because employees are evaluated on their performance results, MBO is often called a
result-based performance appraisal system.
6. Provide feedback: Both parties now discuss and evaluate the actual progress made in
achieving goals, where things have gone off the track, how best to rectify the mistakes
made in the past, and how the employee could meet the targets next time, focusing
attention on his strengths.
Human Resource Accounting/ Cost Accounting Method.
• It is a system that calculates and tracks the total cost incurred by an organization to
recruit, hire, train, and develop its employees
• When competent and well trained employee leaves an organization, the human
asset of the organization get decreased. Under this method performance is judged
in terms of costs and contributions of employees. It helps companies understand
how investments in employees affect their overall performance.
• The HRA process shows the investment the organisation makes; the acquisition
cost of employee is compared to the replacement cost from time to time.
• Employee performance can be measured in terms of employee contribution to the
organisation. Employee performance can be taken as positive when contribution is
more than the cost and performance can be viewed as negative if cost is more than
contribution.
• When qualified, competent people leave an organisation, the value of human
assets goes down. In this method, employee performance is evaluated in terms of
costs and contributions of employees.
360 Degree feedback system

• The system involves overall appraisal of the employees . All the employees are
part of the performance appraisal.
• Employees are evaluated based on feedback from several stakeholders like
supervisors, peers, subordinates, and themselves. The ultimate objective here is
to assess the employee’s skill sets and determine training needs. As there is more
than one evaluator involved in the 360-degree Feedback method, there is limited
bias, and the feedback is holistic.
 720 degree
•720 degree feedback is a holistic performance
evaluation tool. It is carried out in two phases over a
pre-decided duration.
• The first phase collects responses from multiple
sources like peers, subordinates, clients, supervisors,
etc. The results are used to formulate individual
development plans.
•720 degree feedback, also known as 720 degree
assessment or 720 survey, is a type of multi rater
performance evaluation method. It involves 360
degree assessment carried out twice.
•In the first round, the multi rater responses are used
to formulate individual development plans for the
employee.
•After a certain interval, the second round of 360
degree feedback is initiated. The results from the
second round help evaluate the success of the
individual development plans, and to identify further
areas of improvement.
Assessment Center

• This method of appraising was first applied in German Army in 1930. Later
business and industrial houses started using this method. This is not a
technique of performance appraisal by itself. In fact, it is a system or
organisation, where assessment of several individuals is done by various
experts using various techniques.
• These techniques include the methods discussed before in addition to in-
basket, role playing, case studies, simulation exercises, structured in sight,
transactional analysis, etc.
• The employees are assessed for interpersonal skills, conflict resolution skills,
change management behavior, and so on. As it is more complex than the
other methods, it is expensive and time-consuming.
• In this approach, individuals from various departments are brought together
to spend two or three days working on individual or group assignments
similar to the ones they would be handling when promoted. Observers rank
the performance of each and every participant in order of merit
Employee development and Coaching

It’s a process where an organization actively supports its employees in growing

their skills and capabilities through personalized guidance and mentorship, often
provided by a designated coach, to help them achieve their professional goals
within the company; essentially, it's about fostering individual growth and
performance improvement through a collaborative approach.

• Individual coaching: One-on-one sessions between a coach and an employee

to address specific performance needs.
• Team coaching: Coaching focused on improving team dynamics and
collaboration.
• Executive coaching: Coaching specifically designed for senior leaders to
develop strategic thinking and leadership skills.

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 Role of Technology in Performance Management

● Improved Accuracy: can lead to more objective and fair

performance evaluations.
● Increased Employee Engagement: Continuous feedback and
transparent performance tracking can enhance employee
engagement and motivation.
● Streamlined Processes: Personalized development plans based on
data analysis can lead to more targeted employee training and
career progression.

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https://trackhrapp.com/the-impact-of-technology-on-performance-
management/